How COVID-19 is affecting the Australian employment market and what it means for your job
The coronavirus outbreak has had a major impact on Australians’ livelihoods. Many working Australians have needed to adjust to a loss of income resulting from working from home, reduced working hours, and in some cases loss of employment as government restrictions have taken hold.
Let’s look at the state of play in the Australian job market and the outlook as we start to plot our way out of the COVID-19 crisis.
Different states, different rates
The situation continues to change rapidly across the country. States experiencing lower infection rates are starting to ease restrictions earlier.
And looking around the world, our restrictions have been less severe than some of those in Europe and the US.
AMP Senior Economist Diana Mousina says there is some welcome news on financial markets.
“At the time of writing in early May, Australian and global share markets have been rallying on news around huge fiscal and monetary stimulus, a peak in infections and expectations of an easing in lockdown measures.”
At home, stood down or terminated
Investors might be seeing some green shoots, but Diana says working Australians are feeling the effects of the government restrictions across many industries.
“Around 79% of industries will feel some negative impact from the coronavirus disruption through reduced hours, wage cuts, temporary absences or permanent staff reductions. This leaves around 21% of jobs likely to get a boost in the healthcare, public administration and communication sectors.”
“In terms of specific jobs, the jobs at low risk of being lost or terminated include essential jobs (30% of total jobs), jobs that can be done from home (21% of jobs) and a baseline level of jobs (9%) that are needed for basic industries to function – for example in agriculture, manufacturing, mining and construction.”
“This means 41% of all jobs or just over 5 million jobs are at high risk of seeing a reduction in work hours, being stood down or completely terminated,’ says Diana.
And this appears to be what’s happening, with Australian Bureau of Statistics figures indicating weekly payroll jobs declining 1.5% in the week to 18 April. Since 14 March (the start of the big lift in COVID-19 cases in Australia) payroll jobs have declined by 7.5%.
Diana says, “This fall in jobs would translate to around 980,000 job losses in April or an unemployment rate of around 12%.
“The total wages bill (which includes changes in wage costs and changes in jobs) was down by 1% over the week to 18 April but 8.2% below its mid-March levels. We expect annual wages to be flat over the year to December.
“As expected, the industries with the largest falls in jobs were in accommodation and food services, arts and recreation, and other services since 14 March and across the states the biggest falls have been in Victoria, Tasmania and South Australia.”
“But it doesn’t mean all these people will become unemployed. Some employees may be on other payrolls, some may take leave and some may start another job, while the majority of these employees should receive the government’s JobKeeper Allowance wage subsidy which is scheduled to go for six months, with payments starting from 1 May.”
What COVID-19 means for the unemployment rate
AMP Capital expects the Australian unemployment rate to peak at around 10% in the June quarter.
To put this into historical context, this would be lower than the Australian recession of 1991 that reached a high of around 11% and well below the unemployment rate of around 20% during the Great Depression.
Diana says the situation isn’t likely to return to normal anytime soon.
“Travel restrictions and social distancing requirements will keep employment in some industries under pressure for all of 2020 as it is unclear when things can get back to completely normal, with the same numbers of people in restaurants, bars and theatres,” says Diana.
‘It’s difficult to see a big lift in new hiring while corporate profit growth is negative. At AMP Capital, we project the unemployment rate to end the year at around 8.5%.”
JobKeeper keeping Australians afloat
Diana gives the Federal Government a big tick for its JobKeeper Allowance wage subsidy program.
“Without the government’s JobKeeper subsidy the unemployment rate would probably shoot up to 20%.”
“The JobKeeper program has been cleverly designed to keep employees attached to their jobs which will cap the increase in the unemployment rate.”
“Most stood-down workers should receive the JobKeeper payment and will not be classified as unemployed as they would have received some wage payments.”
Coronavirus hangover likely to last
Not surprisingly, job advertisements on seek.com.au were down more than 60% over April as the coronavirus restrictions took hold.
Diana says falling job numbers can lead to a vicious circle with “participation rate declining as people become discouraged from looking for a job.”
“A falling participation rate cushions the rise in the unemployment rate, and it’s AMP Capital’s expectation that the participation rate will fall to around 63% from its current rate of 66%.”
But she sees some light at the end of the coronavirus tunnel
“Further out in 2021, the continuing easing of social restrictions and the opening of international borders (hopefully) should see a resumption back to stronger levels of economy activity, supported by the very low interest rate environment. “
“But some ‘hangover’ from the coronavirus pandemic via the hit to profits is unlikely to see the unemployment rate decline back to its pre-coronavirus levels at just over 5% until after 2022.”
“Hours worked are expected to tumble which will lead to a rise in underemployment and increase labour market underutilisation (unemployment plus underemployment) which is already at 14% of the labour force. It will be difficult for wages growth to rise while labour underutilisation is high.”
But we’re in better shape than many other countries around the world.
“The Australian labour market is expected to fare better compared to other countries because of the wage subsidy program and a faster drop in infection rates so far.”
Support is available
Our dedicated COVID-19 support hub may provide you with some help through these challenging times with financial insights and tips, including ways to access support if you’re affected by COVID-19.
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