(Bloomberg) -- Australian unemployment surged in May and another swathe of jobs were lost as ongoing restrictions to stem the spread of the coronavirus kept large parts of the economy shuttered.
The jobless rate advanced to 7.1% from a revised 6.4% in April vs economists’ median estimate of 6.9%, data from the statistics bureau showed in Sydney Thursday. Employment plunged by 227,700 in May after falling an upwardly revised 607,400 in April. The participation rate fell to 62.9%. Economists had penciled in 63.6%.
The Australian dollar slumped on the data and was trading at 68.42 U.S. cents at 11:41 a.m. in Sydney.
The result comes as the Reserve Bank of Australia highlights the potential for the economic downturn to be “shallower than earlier expected” as lockdown restrictions are relaxed and a staged reopening of the economy unfolds. The key question looming is how many workers will be kept employed when the government subsidy keeping workers tied to firms expires in September.
The central bank said this month that while job losses and fewer hours for those still in work had reduced income, government support had provided a considerable offset.
“Households that were already receiving welfare payments had received additional payments, and the JobKeeper program and increased JobSeeker payments had supported incomes for others,” the RBA said in minutes of its June policy meeting released Tuesday.
Yet there is a lot of slack in the labor force to absorb in the months ahead. Qantas Airways Ltd. in March furloughed most of its 30,000-strong workforce and rival Virgin Australia Holdings Ltd. stood down 80% of its workforce. Star Entertainment Group Ltd. furloughed 90% of its 9,000 employees.
The initial closure of swathes of the economy had a dramatic impact on consumer and business confidence, with both plummeting. Sentiment among firms has regained some ground in the subsequent months, while that of households is almost back to pre-Covid levels.
Part of the improved outlook is the authorities’ success in flattening the curve of new infections that’s allowing it to relax lockdown restrictions early. The government is aiming to reopen the much of economy by next month, while international borders will remain closed.
©2020 Bloomberg L.P.
