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Economics & Markets

Labour market recovery continues through January, but for how much longer?

By Diana Mousina
Economist - Investment Strategy & Dynamic Markets Sydney, Australia

The January instalment of ABS’s labour force data shows employment continuing to rebound strongly despite continued uncertainty around the pandemic. Despite recent outbreaks and lockdowns in all of the mainland states, the number of Australians in employment rose by 29,000 through the period, and is now less than 46,000 shy of January 2020 figures.

This is a startling turnaround, considering that in May 2020 there were 800,000 fewer Australians employed compared to the beginning of the pandemic. Close to 93% of jobs lost to COVID-19 have now been regained. The numbers make for a strong comparison not only with our overseas counterparts (56% of jobs in the US have been recovered, as an example), but also with our two most recent recessions.

The unemployment rate now sits at 6.4%, a little more than 1% higher than in early 2019. In contrast, during the 1981 recession unemployment took almost two years to rebound to an equivalent point; in 1990 it took almost four years. The unprecedented levels of fiscal support and discrete lockdowns has allowed the labour market to progress much faster than previous recessions.

Source: Bloomberg, AMP Capital
Source: Bloomberg, AMP Capital

On a state-by-state basis it is worth noting that January’s employment growth was strongest through the period in Victoria, which has now recorded four consecutive months of improvement out of the back of lockdowns through late 2020.

Early gains give way to long road to full recovery

The extraordinary measures undertaken by the Federal Government last year to keep businesses open and Australians employed have clearly worked in allowing the labour market adjustment to occur faster than usual, but the road back to “normal” pre-COVID levels of unemployment is likely to be much slower from this point.

Underemployment declined to 8.1%, its lowest level since January 2019, suggesting there has been a reduction in spare capacity in the labour market, which should help further lower the unemployment rate.

However, the phasing out of JobKeeper in March which is currently supporting about 1.1 million Australians, is expected to put some downward pressure on employment growth.

We expect the unemployment rate to level out at around its current rate through the rest o the year. A faster recovery is possible, but would be contingent on the success of the vaccine rollout and the continued good management of COVID-19, as well as a complete easing in mobility restrictions to allow for a sharper normalisation in economic activity.

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Diana Mousina, Economist - Investment Strategy & Dynamic Markets
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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. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.


This article is not intended for distribution or use in any jurisdiction where it would be contrary to applicable laws, regulations or directives and does not constitute a recommendation, offer, solicitation or invitation to invest.

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