Australia’s jobless rate dropped to the lowest in more than 13 years as the economy burst out of the post-lockdown gates in late 2021, generating momentum that has prompted one of the nation’s big four banks to bring forward its prediction of the first hike in official interest rates.
The economy added 64,800 jobs in December, lowering the unemployment rate to 4.2% from a previously reported 4.6% in November when a record number of extra positions were taken up, the Australian Bureau of Statistics said.
The survey, though, carried a qualification that it only captured the 28 November-11 December period. That preceded the worst of the disruptions of soaring numbers of Omicron Covid cases.
Even so, “this is the lowest unemployment rate since August 2008, just before the start of the global financial crisis and Lehman Brothers collapse, when it was 4%”, the ABS labour economist Bjorn Jarvis said. “[F]or a rate below 4% we need to look back to the 1970s when the survey was quarterly.
“Recovery in New South Wales and Victoria continued to have a large influence on the national figures, with employment in these two states increasing by 32,000 and 25,000 people between November and December,” Jarvis said. “Their employment was around where it had been in May, having fallen 250,000 and 145,000 during the lockdowns [respectively].”
The latest figures underscore the strength of the economy at the end of 2021. The huge fiscal stimulus by states and the federal government, household savings topping $200bn and record-low official interests all combined to stoke economic activity before Omicron disrupted supply chains and prevented many thousands from working because of infections or being in close contact with Covid-positive people.
However, Westpac signalled it’s seen enough strength in the economy to advance the timing of when it expects the first move by the central bank to lift its official annual cash rate from 0.1%.
The sinking jobless rate was part of its calculus, and if the bank is right, mortgage holders will have to fork out more on their burgeoning loans sooner than they may have expected. Financial markets have been tipping a June 2022 move by the Reserve Bank of Australia.
Since June 2021, Westpac had pencilled in the first RBA rate rise to come in February 2023. It has now shifted its expectation to this August.
Then the central bank will raise the official rate by 15 basis points, or 0.15 percentage points, to 0.25%, and will follow up with a full quarter-point rate rise to 0.5% by October, Westpac predicted.
“We are more optimistic about the unemployment rate than the [RBA’s] latest forecasts,” Westpac said in a briefing note this morning.
“Currently the [RBA] expects the unemployment rate to reach 4.25% by end 2022 and 4.5% by the month of June 2022 – our same forecasts are 3.8% and 4.1%, respectively.” Westpac said.
“The [RBA] Board would probably view around 4% as full employment – an objective the Bank does not expect to achieve until end 2023 but which we expect by June 2022.”
Economists have been monitoring how much consumer sentiment has been dimmed by Omicron-triggered distortions at work and as supermarkets and others struggle to supply meat, cheese and various other products.
The Commonwealth Bank’s latest Household Spending Intentions index, also released on Thursday, ended 2021 at its highest level since the series began in July 2017.
The gauge tracks actual spending on 12 consumer categories but also Google search data to identify planned purchases. It registered strong gains for retail, travel and transport prior to the Omicron impacts showing up.
Notably, the home buying sub-index extended its recent falls, dropping 17.3% in December compared with the previous month.
“It is a generally weak month seasonally for home-loan applications and was compounded by falls in Google searches for real-estate listings,” the report said.
Employers, meanwhile, were struggling to fill a historically high number of job vacancies at least as of 11 December, the ABS said, noting the number of people in the employment market had steadied after a jump during the previous month.
“[T]he participation rate remained steady in December, at 66.1%,” Jarvis said. “This was in contrast to what we saw in November, when a large number of people who were attached to a job re-entered the labour force, which drove the participation rate up by 1.4 percentage points.”
The participation rate remained 0.2 percentage points higher than just prior to the start of the pandemic and only 0.2 percentage points below the historical high in May and June 2021, he said.
Andrew McKellar, the chief executive of the Australian Chamber of Commerce and Industry, said today’s labour data offered “a rear-view observation of employment”.
“With labour and skills shortages across many sectors, already strong labour force figures make clear that further emphasis is needed from government to boost workforce participation, invest in skills and [vocational training], and establish an ambitious skilled migration program,” McKellar said.
“Whilst we can expect Omicron to disrupt these strong gains in early 2022, these pressures are likely to quickly re-emerge as case numbers begin to fall.”
Among the states, South Australia – which goes to the polls in March state elections – saw its jobless drop to a seasonally adjusted 3.9%, or the lowest since the series began in 1978. Western Australia was even lower at 3.4%, while NSW sat at 4%, Victoria 4.2%, Queensland 4.7%, Tasmania 3.9%, the ACT 4.5% and the Northern Territory at 4.2%.
