Wayne Cole

SYDNEY, (Reuters) – Australian employment fell by a shocking margin in October. The jobless rate also jumped due to coronavirus lockdowns that continued to affect the labor market. However, all indications point to a quick recovery now that the economy has reopened.

The Australian Bureau of Statistics (ABS), which released data on Thursday, showed that employment declined by 46,300 between October and November, despite analysts’ predictions of an increase of 50,000.

Although the 5.2% unemployment rate was higher than 4.6% forecasted, it rose less than predicted to 64.7% participation. However, many are still ineligible to seek work.

It is likely that the surprise result was due to the timing and content of the jobs survey. This was between Sept. 26-Oct. 9, during which restrictions in New South Wales had just been eased, while Victoria was still under lockdown.

As a consequence, employment in NSW rose 22,000, but it dropped 50,000 in Victoria, which dragged down the national results. Others indicators have also been stronger due to the gradual lifting of stay-at-home restrictions.

Sarah Hunter, chief Australia economist for BIS Oxford Economics said that the spike in unemployment rates confirms there will be frictional unemployment over the coming months.

However, vacancies are still at an all-time high and this should make the fallout largely temporary.”

The market was slightly less hopeful about an immediate rise in interest rates at the Reserve Bank of Australia (RBA) after the soft report sent the local currency down 20 ticks.

Futures are pricing in an initial rise of 0.25% to June, and rates at least 0.75 by next year. However, the central bank has stated that any rate increase in 2022 would be “extremely unlikely”.

WAGES – CENTRE ON THEM

Surveys by businesses show that demand for skilled workers is strong in the recent month. A survey of consumers this week shows that worries about unemployment have dropped to their lowest point since the mid-1990s.

SEEK, an online job portal reported that there was a 10% increase in the number of ads posted in October. This puts them at 54% higher than they were before December 2019, when the pandemic struck.

There were almost 49% fewer applications than pre-pandemic, which is an indication of how tight the labor market has become. International migration must also be re-started.

This imbalance has produced some wage heat but there is not yet the wide-based pickup that policymakers would love to see.

The third quarter wages data are due Nov. 17. Any surprise on the high end would be a strong argument for a quicker start to tightening policy.

Analysts predict annual wage growth will rise to 2.1% in 2019, from 1.7% during the second quarter. However, this is still well below what the RBA wants to see at 3% or more.

Further progress is unlikely, the central bank claims. The last time that wages rose at least 3% was early 2013, and firms have been in contact with them to show an ingrained unwillingness to pay more.