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Highlights
- The latest data from the ABS suggests an improvement in labour market recovery in November.
- As businesses resumed operations in a slowly opening economy, the labour market recorded an increase in employment numbers.
- Slowly rising wages could become a deterrent in the central bank’s interest rate hike decision.
The Australian labour market has been subject to a number of changing parameters over the last few months. The Delta variant and supply chain constraints acted as barriers for companies, halting business temporarily while opening a new can of worms for the labour market and economy alike. However, shortly after the domestic restrictions were eased, job listings shot up, with pent up demand working as magic in the background. Consequently, November turned out to be the tipping point for the Australian labour market, with the unemployment rate recording a fall after rising for two consecutive months.
The latest data from the Australian Bureau of Statistics (ABS) suggests that the unemployment rate plummeted to 4.6 per cent in November 2021 from 5.2 per cent in October 2021. This marks a total reduction of 69,400 individuals from the unemployed workforce within a month. The data further shows that the underemployment rate plummeted to 7.5 per cent in November from its significant value of 9.5 per cent in October.
The results for November came in higher than the median forecast of 5 per cent by experts. The new data could stir some policy changes in the coming months, as the Reserve Bank of Australia (RBA) aims to eventually reduce the unemployment rate to around 4 per cent in the coming years. For the government, the forthcoming policy decisions could turn out to be consequential when the May election takes place.
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State-wise diversion
New South Wales and Victoria were at the centre point of the labour market analysis as both these states include the businesses with the high shares in the Australian GDP. These states saw rising employment in November, fuelled by reduced mobility restrictions in the regions.
In November, employed people rose by 4.6 per cent in New South Wales and 4.3 per cent in Victoria, with both these states emerging as standout performers in terms of employment hike. The employment results were higher for all states except Northern Territory, where employed people reduced by 1.8 per cent in November. Interestingly, Western Australia was the state with the lowest unemployment rate of 3.8 per cent in November. Despite these improving statistics, households and businesses across states have turned more cautious in recent weeks as Omicron scares lurk in the backdrop.
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Is the wait finally over for those unemployed?
Labour market recovery has been slow and highly sensitive to lockdowns. Despite many businesses shifting online, the impact of the lockdowns was felt far and wide in the labour force. However, much of this pressure has cooled off from the market as businesses resumed operations sometime in mid-November.
With the Omicron variant raising eyebrows yet again, many suspect that its effect could be damper than the Delta variant. However, as the impacts of the new variant unfold, the markets seem to be full of uncertainty. On a brighter note, the Australian economy seems well-positioned to take a head-on challenge this time around. Demand-side pressures have been a stimulant for businesses in recent months and could ultimately push the economy higher.
Overall, the impact of the Omicron variant could be layered, creating a mixed bag of changes for the labour market, which may not be fully grasped for months to come. The unemployment rate could fall further, but the quick rise in employment might be pushed back by a slower improvement in wages. Thus, one can expect interest rates to not rise for some more time to come, even as inflationary pressures rise.
