Unemployment figures beat expectations, but highlight need for more stimulus

Euan Black
Nov 19, 2020, updated Nov 20, 2020

The economy is on the road to recovery, but there's a long way to go. Photo: TND/Getty

Official figures show almost 180,000 Australians regained employment in October.

But economists say it’s too early to pop the champagne and more stimulus is needed.

The latest unemployment figures released by the Australian Bureau of Figures on Thursday showed 178,800 Australians regained work in October as restrictions eased and businesses consequently reopened.

Driven by the gradual easing of restrictions in Victoria, the large jump in employment was much better than economists had expected.

It took the number of employed Australians to 12.77 million, which is roughly 226,000, or 1.7 per cent, less than before the pandemic.

The strong increase in employment was also accompanied by a large rise in hours worked – but economists spotted several worrying trends hidden in the detail.

Indeed APAC economist Callam Pickering said the figures were “better than we could have hoped for”, as job gains were “strong” and labour market participation had almost returned to pre-crisis levels.

But he said there’s still a long way to go.

“Broader measures of unemployment are still elevated,” he said.

“Employment is 1.7 per cent below its peak and employment gains have overwhelmingly been part-time.

Full-time employment has accounted for just 17 per cent of the 648,000 jobs added over the past five months.”

Mr Pickering said many businesses will have responded to reduced demand for their goods and services by changing full-time roles into part-time positions.

He said we have to be mindful that Australia is “generating insufficient full-time opportunities” and that a full recovery “only occurs when both unemployment and underemployment return to normal levels”.

“Inadequate full-time job creation is also evident in hours worked,” he said.

“Full-time hours worked are down 4.5 per cent compared with March this year, compared with a 0.4 per cent gap for part-time workers.”

Tweet from @CallamPickering

The ABS data shows that roughly 75 per cent of the jobs lost during the pandemic have been recovered, but about 675,000 Australians are working fewer than their usual hours due to economic reasons.

Blueprint Institute chief economist Dr Steven Hamilton said the data highlighted the need for extra government stimulus.

Although the large rise in employment was better than expected, he said it was “realistically a pretty small increase of just over 1 per cent”.

More than one in 10 Australians – as measured by the underemployment rate – have jobs but cannot get the hours they need, he said.

And although the creation of 81,600 jobs in Victoria was welcome and better than expected, the experience of other states less affected by the pandemic suggests that jobs recover quickly when restrictions are eased but return much more slowly down the track.

“The states that are not suffering big direct effects of the pandemic – you want to see a more rapid recovery there, but we aren’t seeing it. So that’s a concern for me,” said Dr Hamilton, making a note of a Queensland’s stubbornly high unemployment rate in particular.

“The plateau is the big question: How far below the pre-crisis level is the plateau?

“Victoria will still be on that very sharp V-shaped recovery, because they’ve only just reopened. But the question is where does that top out?

“And it seems, in places like Queensland, to be fairly significantly below the pre-crisis level.”

Dr Hamilton said this is why governments need to announce more stimulus – a sentiment shared in recent months by economists at non-partisan think tank, the Grattan Institute.

“It doesn’t have to be this way. The looseness in the job market is a function of government policy,” he said.

“We can still do a lot more than we are doing.”