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Unemployment falls below 5%

John McDonnell

Unemployment fell for the eighth month in a row and is now at 4.9%, the lowest rate in a decade.

"The Australian labour market had exceptionally strong momentum at the end of 2020/21," said Gareth Aird, head of Australian economics at the Commonwealth Bank.
"But things of course have taken a dramatic turn in NSW due to the lockdown of Greater Sydney.
"Labour market outcomes from here will be heavily impacted by the length of the lockdown ... and any shifts to tighten or loosen restrictions."

However, the Delta outbreak in NSW and fresh lockdowns in Victoria have made the economic outlook far less certain in the near term.

"A lockdown of seven weeks in Greater Sydney could see a significant number of NSW workers stood down," Mr Aird said.
"Based on what happened over April and May last year, employment could fall by 200,000 and unemployment may increase by 50,000 in coming months.
"On balance, we are likely to see a two-speed labour market emerge over the next two months in the data - NSW and the rest of Australia.
"Government stimulus payments will facilitate a sharp rebound in employment when the lockdown ends, but at this stage the date at which restrictions are eased is unknown."

The impact of the NSW lockdown on the national economy will be commensurately larger because the NSW economy is such a large part of the national economy.

"The size of the New South Wales economy makes up around 35 per cent of Australia's GDP, so Sydney has a very large share of the national economy.
"We think each week that Sydney is in lockdown costs the Australian economy around $700 million to $1 billion a week, and factoring in a lockdown of around six to eight weeks potentially means you get a negative bout of economic activity in the third quarter."

Dr Sarah Hunter, Chief Australia Economist for BIS Oxford Economics, said the two-week lockdown in Victoria in late May and early June led to an 8.4 per cent fall in hours worked in the state, but employment in the state only declined by 0.3 per cent month-on-month.

"This suggests that the majority of employers retained their workforce through the lockdown and were able to snapback and re-open when restrictions were eased.
"While the lockdown in NSW has already lasted longer (and will extend at least another two weeks), today’s data suggests that the impact on employment will hopefully be limited," she said.

Treasurer Josh Frydenberg said the southwest Sydney outbreak showed Australia had not fully emerged from the pandemic.

"As the lockdown in NSW indicates, and the increasing cases here in Victoria and elsewhere across the country, we are by no means out of this pandemic," Mr Frydenberg said.
"There is still a long way to go to secure our economic recovery.
"But Australia's economy is resilient, it is strong, and today's job numbers underline that very fact."

Employment Minister Stuart Robert conceded Australia-wide lockdowns are giving uncertainty to the economy.

"The risk of ongoing outbreaks of COVID-19 in the months ahead present a degree of uncertainty," Mr Roberts said.
"Recent lockdowns are expected to have an impact on employment over coming months."

The underemployment rate jumped to 7.9 per cent, up by half a percentage point.