Australia Unemployment Unexpectedly Falls as Hours Take Hit

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Australia Unemployment Unexpectedly Falls as Hours Take Hit
Credit: © Reuters.

(Bloomberg) -- Australia’s unemployment rate unexpectedly fell further as a decline in hours worked and fewer people seeking jobs cushioned the blow from Sydney’s lockdown in response to an outbreak of the delta variant of coronavirus.

The jobless rate declined to 4.6% in July, compared with economists forecasts for a rise to 5%, Australian Bureau of Statistics data showed Thursday. The economy added 2,200 positions, versus a forecast 43,100 drop, while the participation rate fell to 66%.

“The labor market changes in New South Wales between June and July had a large influence on the national figures,” Bjorn Jarvis, head of labor statistics at the ABS, said in a statement. “There were big falls in New South Wales in both employment and unemployment, with the labor force reducing by around 64,000 people. In addition, hours worked in New South Wales fell by 7%.”

The Australian dollar edged lower and was trading at 72.17 U.S. cents at 12:06 p.m. in Sydney. 

The resilience is unlikely to last as coronavirus outbreaks have emerged all along the east coast, forcing lockdowns and curtailing activity in Australia’s most populous region. Even so, the Reserve Bank plans to push ahead with its tapering of bond buying next month, wagering the economy will roar back from an expected contraction this quarter.

“Businesses in the travel, hospitality and retail sectors are particularly exposed to domestic travel restrictions, which will weigh on employment in the months to come,” said Sarah Hunter, chief economist for BIS Oxford Economics. “Overall, employment and GDP are set to record a substantial contraction in the September quarter, and momentum will not return until the government’s vaccination targets are reached and restrictions can be materially eased.”

A slow nationwide vaccine rollout is Australia’s biggest obstacle to getting the economy back to normal and reopening borders that were closed in early 2020. 

At one point in July, half of Australia’s population was under stay-at-home orders as South Australia joined Victoria and New South Wales in lockdown down.

Among other details in today’s report:

  • Monthly hours worked fell by 0.2% in July
  • Under-employment increased by 0.4 percentage point to 8.3%; and
  • Under-utilization rose 0.1 percentage point to 12.9%
  • Full-time roles fell by 4,200 while part-time positions increased 6,400

The RBA has said it would be prepared to respond to further bad news on the health front, should that lead to “a more significant setback” for the economy’s recovery. 

(Adds details from report.)

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