Since early 2020, the Australian labour market has been significantly affected by COVID-19 and the subsequent policies that have been used to help businesses and households. This article briefly considers some of the key changes in the labour market over this period.
The chart below shows that total employment fell by 6.8% from February 2020 to May 2020 as a result of widespread shutdowns in the Australian and global economies. This was the largest fall in Australian employment in many decades. Since the May 2020 trough, employment has recovered rapidly reflecting factors such as less onerous restrictions on activity and large policy responses. Employment is now around 69,000 higher than its pre-COVID peak in February 2020.
The pace of the job market recovery has been much quicker than the Reserve Bank of Australia (RBA) had originally predicted. In May 2020, the RBA forecast that the unemployment rate would peak at 10% (red chart). However, since July 2020, when it hit 7.5%, the unemployment rate has been on a steady decline reaching 5.6% in March 2021. This decline reflects the stimulus from the Government, RBA, as well as a relatively successful strategy in managing the pandemic.
COVID-19 has impacted different industries disproportionately. During the initial phase of lockdowns, there were industries (e.g. Arts and Recreation Services) where the people employed fell by more than 30% (green chart). While some of these industries are still significantly impacted, they have generally improved since mid-2020.
Looking ahead, there are signs of business resilience. Firstly, according to the National Australia Bank business survey, business confidence reached an all-time high in March 2021. Secondly, the latest job vacancies survey from ABS was very strong, with February 2021 vacancies 26.8% higher than a year ago. And finally, despite the end of JobKeeper, the RBA has continued to lower its unemployment forecasts, predicting that the unemployment rate will revert to pre-pandemic levels later this year. While there is still considerable uncertainty created by the pandemic, the rapid recovery in the Australian labour market has been a very welcome development.