Unemployment has sunk to 6.4% as the job recovery begins hitting its pre-pandemic stride

Australian jobs are in growing supply. (Robert Alexander, Getty Images)
  • Australia’s unemployment rate has improved again, falling from 6.6% to 6.4% in January.
  • It come off the back of the creation of 59,000 full-time roles and a falling underemployment rate.
  • While the improving jobs market will give the federal government confidence to cut JobSeeker at the end of March, economists anticipate job shedding to occur as a result.
  • Visit Business Insider Australia’s homepage for more stories.

Australia’s labour recovery is running along at an hopeful clip, as the economy starts to create the kind of jobs the country needs.

In January, unemployment dipped more than expected, falling to 6.4%, its lowest level since April last year, according to the latest ABS figures.

Significantly, it was the creation of 59,000 full-time roles that helped slash the unemployment rate, with the all important underemployment falling from 8.5% to 8.1%, besting its pre-pandemic figure.

“This means that close to 93% of jobs lost due to COVID-19 at the height of the national lockdown — April [and] May 2020 — have now been regained. This is an impressive rebound,” AMP Capital senior economist Diana Mousina said.

“In comparison, only around 56% of US jobs have been recouped which shows that Australian fiscal policy has worked to keep people employed along with good management of the virus which helps to keep mobility higher than otherwise which lifts economic activity.”

Given record stimulus, it’s not surprising to see the rebound come far sooner and sharper than during previous recessions.

Some 29,000 part-time jobs disappeared over the month, as the economy appears to shed some of the growth in insecure work seen last year.

Curiously, a further 108,000 employees, or around 0.8% of the labour market, are working zero hours still as they likely receive wage subsidy payments in shut down sectors.

“We expect jobs growth to be positive from here as the economy ‘normalises’ but employment growth is likely to be slow, especially after the end of the JobKeeper scheme,” Mousina said.

“In our view, modest jobs growth will keep the unemployment rate around 6 to 6.5% over this year, which means that it will be difficult for wages growth to lift significantly from here.”

This of course all depends on how quickly mobility within Australian normalises and border restrictions ease, with Mousina conceding progress could come quicker than expected.

Victoria’s Christmas boom

Coming off its second, longer lockdown, it was Victoria that appeared to drive much of that early 2021 growth. While a positive for the state, where employment is now just 0.4% from its pre-pandemic levels, it still poses a concern for the national recovery, according to Indeed Asia-Pacific economist Callam Pickering.

“The lack of momentum elsewhere is potentially a cause for concern, as it indicates that the overall recovery will slow considerably once the impact of Victoria’s re-opening diminishes,” he said. “We’d be more confident in Australia’s economic outlook if we saw a broader growth base.”

Either way, it would be an encouraging sign for policymakers in Canberra who are set to cut income support measures in the coming weeks.

“The economy is now better placed to absorb the impact of removing JobKeeper and JobSeeker at the end of March,” Pickering said.

The elimination of JobKeeper in particular could set off another job upheaval, as businesses have to again pick up the full wage bill for around one million Australian workers.

“The end of the JobKeeper program is unlikely to be disastrous for the economy or derail the recovery, but some job shedding may occur, particularly for small businesses that have lagged the recovery in the jobs market,” Mousina said.

With that, there won’t really be a clean read of the job figures until May, when the Australian economy will have to largely support itself for the first time in more than 12 months.

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