Australia enjoys record jobs growth in November
Employment bounced back very strongly in November, taking the market by surprise with an all-time monthly record of 366,100 jobs created.
However, this only gets employment back to its pre-Delta level and it is still 3 per cent below the pre-pandemic trend, says Paul Bloxham, HSBC’s chief economist, Australia, New Zealand and global commodities.
The unemployment rate fell to 4.6 per cent – almost back to the lows reached in August 2021 (4.5 per cent) prior to the Delta-related lockdowns.
Bloxham says these levels of the unemployment rate are the lowest levels in over a decade. The underemployment rate also fell to 7.5 per cent in November, almost as low as it was pre-Delta, It was 7.4 per cent in August. These are around the lowest levels since 2014.
Ryan Felsman, senior economist at CommSec attributes the rise in jobs to Australian employers embarking on a hiring blitz after an easing of Delta Covid-19 restrictions in Australia’s south-east.
Indeed, employment in NSW (+179,700) and Victoria (+141,000) jumped as businesses resumed “normal” operations from October.
“The job surge was also driven by the return to work of people with jobs who were not previously counted as employed as social distancing measures prevented them from attending workplaces. In fact, 296,800 workers returned to the workforce in November,” says Felsman.
He notes that other measures of labour demand also rebounded with the number of hours worked rising sharply (+4.5 per cent) as employees returned to work.
In addition, the participation rate rose sharply to 66.1 per cent, regaining the highs reached just prior to the Delta shock and in the immediate pre-pandemic period. It was 64.7 per cent last month.
Felsman says: “Of course, the November labour force survey – conducted between October 31 and November 13 – could understate the actual rebound in employment with some workers unlikely to have been employed until December, given lags between the end of lockdowns and the commencement of new jobs.”
However, Bloxham notes: “A more cautious interpretation is that the figures only delivered the labour market back to where it was pre-Delta, and employment (and hours worked) are still well below the pre-pandemic trends. That is, like GDP, the jobs figures are showing the economy is still markedly smaller than it would have been without the pandemic.”
He adds that the rapid tightening of Australia's labour market when lockdown restrictions are released partly reflects that the closed international border has heavily constrained labour supply.
“On our estimates, Australia has had around 400,000 fewer available workers due to the closed borders. But the border has now re-opened to skilled migrants and international students (as of this week),” says Bloxham.
"If we were not able to generate sufficient wages growth when the border was closed, it may get even harder as foreign labour starts to, once again, become available."
Shane Oliver, head of investment strategy and chief economist at AMP Capital, says strong levels for job postings and hiring intentions point to a continuing tightening in the labour market.
“While a further rise in labour force participation may slow the decline in unemployment, we expect it to fall to 4 per cent by the end of 2022,” he says.
“This is likely to see wages growth pushed up to a 3 per cent or greater pace and along with our expectation for underlying inflation of 2.5 per cent or slightly more through next year, this underpins our expectation that the Reserve Bank of Australia will start raising interest rates in November 2022.”