After America’s 20.5 million surge in jobless numbers, the focus for Australia this week will be on jobs data for April to be released on Thursday.
Economists forecast a record 750,000 drop in employment thanks to the COVID-19 lockdowns – this resulting in unemployment rising to around 10%.
“This is consistent with a collapse in job ads, survey hiring plans, and ABS payroll data with a decline in workforce participation partly muting the rise in unemployment,” the AMP’s Chief Economist, Shane Oliver wrote at the weekend.
“Were it not for the JobKeeper wage subsidy program, unemployment would likely be nearer 15%,“ he added.
“Given the lagged nature of most data we will likely be seeing bad news for a while yet with June quarter GDP data which is expected to show a 10% plus slump in the US, Europe and Australia not due for another three months and not due till early September in Australia,“ Dr. Oliver said.
But he sounded a small note of optimism saying at the weekend “However, there are signs from high-frequency data that activity may have hit bottom and markets will mostly focus on this.”
“Our weekly economic activity trackers for the US and Australia based on high-frequency data for things like restaurant bookings, confidence, retail foot traffic, box office takings, credit card data, mobility indexes & jobs data are showing signs of stabilisation,” Dr. Oliver wrote.
The Treasurer will also provide a statement to parliament tomorrow regarding the impact on the economy from the shutdown and the Government’s response but this won’t add much to a speech he made in the last week (which in turn added very little new knowledge to our current understanding).
In its second Statement On Monetary Policy for the year on Friday, the Reserve Bank predicted the economy will suffer its biggest economic contraction on record and again said it was committed to supporting jobs and incomes as governments announced plans to relax pandemic-related restrictions over the next three months.
The RBA repeated previous estimates that the economy would shrink by 10% in the first half of the year, which will be the first recession in three decades.
The RBA expects annual gross domestic product to shrink 6% this year, the unemployment rate to hit 10% by June (9% by the end of 2020) and remain around 7.5% through 2021.
Consumer prices are expected to turn negative in the June quarter before returning to modest inflation by year-end.
Household spending is tipped to be down by 15% by the end of June while housing investment is expected to be even worse, down by 17% over the same period. It will not be back in positive territory until at least the middle of next year
The RBA sees business investment is dip to minus 13% by December. It won’t reach a positive level until the final quarter next year and even then it will still be well short of where was at the end of 2019.
RBA Governor, Philip Lowe said in the overview of the economy in the monetary policy statement:
“Official unemployment rates, including in Australia, will not capture the full extent of the decline in labour demand. Lockdowns, school closures and other restrictions on activity have meant that many workers who have been laid off will not be actively searching for another job for a time and therefore not be counted as unemployed, while other workers will have left the labour force.
“In addition, many firms have cut the hours of their employees rather than laying them off entirely. More of the labour market adjustment is likely to occur through hours worked rather than job losses in economies with more comprehensive wage subsidy programs.
“And by preserving employment relationships over the period of lockdowns, these programs should also hasten the subsequent recoveries in activity and employment,” Dr. Lowe said.