Rising unemployment has hit 7% again – and it's 'better than we could have hoped for'

Victoria’s reopening is creating a ton of new jobs. (Diego Fedele, SOPA Images, LightRocket via Getty Images)
  • Australian unemployment rose to 7% in October despite 178,000 new jobs being created, due to more people looking for work.
  • The latest ABS data rates as the biggest improvement in the labour market since the pandemic began, with more than half of all new positions being full-time ones.
  • Victoria’s reopening was largely responsible, with the state expected to help create plenty more jobs throughout November as well.
  • Visit Business Insider Australia’s homepage for more stories.

The Australian labour force is looking more and more like its old self even as the actual unemployment rate rises.

The latest ABS figures shows 178,000 Australians were ushered into work in October, including 97,000 full-time positions.

However, despite the frankly surprising jobs growth, the unemployment rate still managed to climb higher to 7%, as more people begin looking for work.

“The labour market figures for October are better than we could have hoped for,” Indeed Asia-Pacific economist Callam Pickering said.

“Job gains were strong, participation has almost returned to pre-crisis levels, which indicates that Australia’s economic recovery is on firm footing.”

With that in mind, the actual rise in the headline unemployment figure isn’t so significant. For months, it has been distorted by a hundreds of thousands of Australians moving out of the workforce altogether.

Victoria was unsurprisingly the key driver after it finally reopened. Nearly half of all jobs were created in the Garden State, with hours worked ticking up more than 5% while they fell slightly across the rest of the country.

It goes to show that the health of the economy remains tied to the state of the virus.

“We expect hours worked to increase further again in Victoria in November with further restrictions being eased,” Commonwealth Bank senior economist Belinda Allen said.

“We would expect the opposite in South Australia with the strict 6 day lockdown currently underway.”

As more begin to search for work, and government stimulus begins to transition into hiring credits, there will likely upward pressure on the unemployment rate, despite growing employment.

Significantly, underemployment dropped from 11.4% in September to 10.4%, indicating more Australians are able to find sufficient hours. For comparison, the rate was 8.8% at the beginning of the year when the labour force was still considered relatively weak.

A long way to go

So while progress has been made, Australia is not out of the woods just yet.

“There is still a long way to go” Pickering noted with most new jobs created up before October being casual or part-time positions. The gig economy for example has created plenty of jobs, but not the ones that Australia needs.

“Broader measures of unemployment are still elevated. Employment is 1.7% below its peak and employment gains have overwhelmingly been part-time,” he said. “Full-time employment has accounted for just 17% of the 648,000 jobs added over the past five months.”

“Policy-makers need to be mindful that merely getting people back in jobs isn’t enough, a full recovery only occurs when both unemployment and underemployment return to normal levels.”

The RBA expects that to take two years at a very minimum, although the Commonwealth Bank remains more optimistic.

“There is plenty of evidence creeping into the data that signals strong outcomes next year are more likely than not,” Allen said.

“We now expect the unemployment rate to be 5.75% at end‑2021 – versus 6.5% previously – and we forecast the unemployment rate to be 5% at [the end of] 2022.”

So while this month’s jobs figures rate as the best in months, they mark the start, not the end, of a long recovery.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.