Summary: Unemployment rate well below forecasts; job losses slightly more than expected; participation rate drops as former workers give up; underemployment rate skyrockets.
Australia’s period of falling unemployment came to an end in early 2019 when the jobless rate hit a low of 4.9%. It then averaged around 5.2% through to March 2020, bouncing around in a range which extends from 5.1% to 5.3%. Recent leading indicators such as ANZ’s April Job Ads survey and NAB’s March capacity utilisation estimate suggested the unemployment rate will soon rise substantially.
The latest Labour force figures have now been released and they indicate the number of people employed in Australia fell by more than economists had expected. The report showed the total number of people who held a job according to ABS definitions dropped by 594,300 in April, while the unemployment rate jumped from 5.2% to 6.2%.
Westpac senior economist Justin Smirk said, “The main point here is the issue that many JobKeeper recipients are considered employed.” ANZ senior economist Catherine Birch touched on the similar theme, saying the unemployment rate’s 1% rise “masks a rise in shadow unemployment – those who want to work but are unavailable…or have not actively looked.”
Market expectations prior to the report’s release were for 550,000 positions to be lost and for the unemployment rate to rise to 8.3%. Domestic Treasury bond yields fell across the curve, falling harder than their US counterparts had in overnight trading. By the end of the day, the 90-day bank bill rate remained unchanged at 0.09%, the 3-year ACGB yield had slipped 1bp to 0.23%, the 10-year yield had lost 6bps to 0.89% while the 20-year yield finished 7bps lower at 1.54%.
Prices of cash futures contracts moved to reflect a slight hardening of rate-cut expectations in spite of the commonly-held view the cash rate is already at the “effective lower bound”. By the end of the day, June contracts implied a rate cut down to zero as a 54% chance, unchanged from the previous day. July contracts implied a 65% chance of such a move in that month, also unchanged. Contract prices of months in the remainder of 2020 and through to mid-2021 implied probabilities ranging between 52% and 70%.