April 8, 2021

Diana Mousina
Economist – Investment Strategy & Dynamic Markets
(AMP Capital)

In February, almost as many people were employed in Australia than were in work the year prior, before the onset of the pandemic.

That means 99.8% of the jobs lost between March and May last year have been regained in only nine months. It’s a remarkable performance, and one that makes the path out of similar crises in the past seem pretty sluggish in comparison. Robust February numbers were the icing on the cake for this recovery, with a net gain of 88,700 jobs, well above consensus expectations of 30,000 jobs.

Source: ABS, AMP Capital

Unemployment fell by 0.5% to 5.8%, which is still higher than pre-COVID levels of around 5% but it has been falling steadily since October 2020. We expect unemployment to level out following the phasing out of JobKeeper, holding within a band between 5.5% and 6% for the remainder of the year. That said, the strength of February’s performance came as a surprise to many (including the RBA). Nonetheless, we should get a final read on JobKeeper’s effectiveness when March’s labour force numbers are released next month, before the April instalment tells us what our future holds without it.

The end of the “pink-collar recession”?

Almost 65,000 more women than men were unemployed by May 2020 as a result of the pandemic. This disparity narrowed considerably before widening again in October and November 2020. In February 2021, female employment surged by 74,100 jobs, against 14,600 male jobs over the same period. There were actually more women in employment in February 2021 than in February 2020. There doesn’t appear to be a specific reason why female employment rose to such an extent in February, and there’s no saying that these gains will withstand following the withdrawal of JobKeeper.

Another category hit particularly hard by COVID-19 was part-time employment, which fell again for the second consecutive month, one of the few less-than-positive takeaways from February.

Labour force participation remained steady at levels marginally higher than pre-COVID (66.1%), and although the underemployment rate was slightly higher than in January (up 0.4% to 8.5%), it is still broadly in line with pre-COVID conditions.

The number of hours worked jumped by 6.1% (seasonally adjusted), after falling in a January where more people took leave than has been the case in previous years. Only 93% of these hours have been recovered since the height of the pandemic, which means that at this stage, this metric lags significantly behind the headline employment figures.

Looking within those missing hours, the number of people working fewer hours for economic reasons – because there is no work, not enough work or because they have been stood down – is significantly higher than usual for this time of year, at around 167,500 people, or 1.3% of those employed. These are the workers who would seem most at risk after JobKeeper expires.

Source: ABS, AMP Capital

On the whole, though, the prospect of a large spike in unemployment from April onwards is unlikely. The unemployment rate could potentially drift back up to be above 6% if employment growth is low or slightly negative, but given the broad strength in the economy it should remain well below the worst of what we experienced during the pandemic, which was itself quite benign by global standards.

Important notes

While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455)  (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs.