This blog is part of a series relating to the economic and social impacts of the COVID-19, novel coronavirus outbreak of 2020.
As we move further into the year, the impacts of COVID-19 on the Australian economy are becoming more evident.
New data released by the ABS showed that employment dropped by 594,300 in April, making the total number of people employed approximately 12.4 million. As a result of this, however, unemployment only increased by 104,500, driving the unemployment rate up from 5.2% in March to 6.2% in April – the highest it has been since July 2015. This is due to the 489,800 people who left the work force during this time, bringing the labour force participation rate down 2.5%. These people are neither employed nor unemployed, as they either didn’t or couldn’t look for work. Across the board, 2.7 million people were affected by either job loss or a reduction of work hours between March and April.
As market expectations forecasted April’s unemployment rate to hit 8.3%, it would appear from the new ABS data that the jobless rate is doing better than expected. This is, however, due to the Government’s JobKeeper Payment scheme. People receiving JobKeeper payments are not counted as unemployed, regardless of the fact that many of these people are working few or no hours. If taking into consideration the 1.4 million people receiving JobKeeper payments, the unemployment rate would sit at an alarmingly high 11.7%, an increase in 6.5 percentage points in just one month. This rate is closer to that of the United States and Canada, where unemployment is at 14.7% and 13%, respectively. As the official unemployment rate is expected to hit 10% during the June quarter, we can expect this unofficial rate to substantially increase as well.
(Source: The Conversation)
There is also the issue of underemployment, which includes part-time workers who would like to work more hours and full-time workers who were unable to work their full hours due to economic reasons. Underemployment hit a record high of 13.7% in April, up 4.9 points from March. The numbers of hours worked dropped by a staggering 9.2% from March to April. By comparison, during the major recessions of the 1980s & 1990s, total work hours dropped by 6% over 18 months. The underutilisation rate, which combines unemployment and underemployment, rose 5.9 points to an all-time high of 19.9%.
The labour force participation rate, which captures the Australian economy’s active workforce, dropped 2.4 points to 63.5%. For people aged 15-64, the participation rate decreased by 2.7 points, down to 76.0%. The decrease in participation rate was most significant among 15-24 year olds (known as the ‘youth’ bracket) which saw a drop of 5.6 points to 62.9%. Employment in this group decreased by 10.8% between March and April and unemployment rose by 2.2 points to 13.8%. For comparison, employment dropped only 3.4% for workers aged 25-54 and 4.3% for those over the age of 55. This is especially significant because, according to the Melbourne School of Population and Global Health, “population ageing is one of the biggest challenges to Australia’s future economic sustainability”. We rely on younger workers to offset the fact that a larger proportion of the population is ageing out of the workforce at an unprecedented rate. Significant decreases in the participation rate and employment rate of youth workers will further exacerbate the already dire consequences that the coronavirus pandemic is having on the Australian economy.
The impacts of COVID-19 on the economy disproportionately affected women, with an additional 2.9% of women having left the labour force compared to an additional 2.1% of men. Over 18% of women employed are working zero hours, compared to 11.2% of men. Furthermore, women’s total hours worked reduced by 11.5% compared to the 7.5% drop experienced their male counterparts, and a higher proportion of women reported working fewer hours than usual due to have no or little work or being stood down.
The dire economic impacts of the coronavirus pandemic are not unique to Australia. The IMF has predicted that the global economy will drop by 3% during 2020; for comparison, the global financial crisis caused only a 0.1% decrease during 2009. Treasurer Josh Frydenberg announced last week that the Australian GDP is expected decrease by 10% during the June quarter, which would be the largest drop in history. Household consumption is anticipated to drop by 16%, and both dwelling and business investments to drop by 18% during the June quarter.
As restrictions begin easing across the country, we will hopefully see a shift in consumer spending and, by extension, employment and participation rates. According to data collected by illion & AlphaBeta, the combination of stimulus packages and eased restrictions has already had a positive impact on total consumer spending. While businesses such as cafes, public transport and pubs are still faced with severe loss of income, other areas such as supermarkets, food delivery, pet care and online shopping are experiencing slight economic boosts. As discussed in a previous blog, casual workers make up over half of the employees in the accommodation and food services industry, and nearly 40% of all casual employees are under the age of 25. As pubs, restaurants and cafes are among some of the first businesses to experience eased restrictions there is the possibility that these changes will begin to help restore the employment and participation rates of youth workers.