Australia’s labor market remains strong in the face of COVID-19 lockdowns

Australian labor market

A man reads job ads in a newspaper at a cafe in Sydney, Australia, May 9, 2016. REUTERS FILE PHOTO

SYDNEY – Australian job ads expanded their record-breaking run in June as labor demand remained strong despite a round of coronavirus lockouts across the country, a sign that the economy is likely to be volatile.

Other data on Monday showed that retail sales topped forecasts in May with an increase of 0.4%, while sales of new vehicles held steady in June in a promising sign of consumption.

Approvals to build new homes fell 7.1% in May from the previous month, but it followed months of gains that still left approvals up 53% compared to a year earlier.

Figures from Australia and New Zealand Banking Group showed that job ads rose 3.0% in June from May, when they jumped 6.8%. It was the 13th straight month of gains and showed a growth of 129% compared to a year earlier when the labor market was recovering from a national pandemic.

“Recent history shows that workers who have been fired or sat down during lock-in tend to be reintroduced or quickly find new jobs when restrictions are lifted given the underlying strength of the labor market and overall demand,” said ANZ senior economist Catherine Birch.

The survey came hot on the heels of government data on vacancies last week, which showed a huge increase of 23% in the three months to May.

“Vacancies are twice as high as the pre-pandemic, and there are now 1.9 vacancies per vacancy, which is easily the lowest ratio recorded,” said Birch. “This suggests that unemployment is falling much longer.”

Unemployment has already fallen much faster than politicians expected, hitting 5.1% in April, down from a 7.5% pandemic peak reached in July last year.

The Australian Reserve Bank aims to reduce unemployment to 4% or even lower in hopes of finally lifting wage growth and inflation after years of lukewarm gains.

The central bank will hold its political meeting in July on Tuesday, and the resilience of employment must give confidence to temper its massive stimulus program.

Analysts expect that it will not extend its three-year yield target to the end of 2024, but will announce a new round of bond purchases, perhaps in a more flexible way.

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