Australia’s unemployment rate has jumped to its highest level since 2001 following coronavirus-related lockdowns and economists say the deterioration in conditions means the job market will take a long time to return to normal.
The unemployment rate rose to a seasonally-adjusted 7.1 per cent in May, with 227,700 jobs lost during the month, figures from the Australian Bureau of Statistics showed on Thursday.
This included a decrease of 89,100 jobs in full-time work and 138,600 people in part-time employment.
The Australian economy lost 835,000 jobs combined in April and May, the ABS data showed.
The rise in the unemployment rate – from a revised 6.4 per cent in April – reflects the ongoing impact of strict social distancing measures imposed from late March that led to widespread business closures.
Economists had, on average, expected the unemployment rate to jump to 7.0 per cent, with about 100,000 jobs lost in the month.
While steep, the unemployment rate masks the extent of the impact of coronavirus, given the ABS data’s focus on including people looking for work.
Weak job market conditions meant the participation rate – or the percentage of people looking for work – dropped another 0.7 percentage points to 62.9 per cent, the lowest level since January 2001.
The jobless rate would have been even higher at 9.6 per cent had people not stopped looking for work, the ABS said.
“The number of people formally unemployed is understating how many people are available for work,” said Dr Sarah Hunter, chief economist at BIS Oxford Economics.
“There are signs that May will be the worst month for the labour market. But the scale of the job losses means it will likely be years before the labour market has fully recovered.”
This was underlined by an underemployment rate of 13.1 per cent, down 0.7 percentage points and an under-utilisation rate – or the rate of people looking for more working hours – rising 0.1 percentage points to 20.2 per cent.
The ABS estimated that a combined 2.3 million people – or one in five employed people – were affected by either job loss between April and May or had fewer hours than usual in May.
All states reported a rise in unemployment.
The biggest jump was in Western Australia, where the jobless rate rose to 8.1 per cent from 6.1 per cent.
Queensland and South Australia hit 7.9 per cent, Northern Territory rose to 7.4 per cent while NSW ticked up slightly to 6.4 per cent, from 6.3 per cent.
Victoria’s unemployment rate also rose to 6.9 per cent from 6.0 per cent.
Economists said some of the impact has been capped due to the federal government’s JobKeeper wage subsidy program under which businesses keep workers on their books during the crisis with a fortnightly payment of $1500.
But they agreed the worst of the decline is over.
“On a number of key measures, the worst is likely behind us although we caution that the fourth quarter brings renewed challenges amid the scheduled cessation of a number of key government support measures and reprieve in mortgage/business loan repayments,” RBC Capital Markets strategist Su-Lin Ong said in a client note.
The Australian dollar slipped after the data was released to as low as 68.36 US cents. It was trading at 68.73 US cents by 1415 AEST but is still down from 69.09 US cents at the close of trade on Wednesday.