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Deloitte Access Economics recently released its latest Employment Forecasts, looking at the expected path to jobs recovery over time.
Australia’s COVID-19 lockdown has certainly been very costly in terms of jobs – ABS labour force data suggests there were around 600,000 fewer jobs in April compared with March. And more recent data, based on payroll information, suggests the figure may have risen to around 7.3% of jobs (or around 950,000 workers) by early May.
Not all areas of the economy have been hit equally. In general, those hardest hit have been:
There will be a recovery, but the timeline is a long one and it varies significantly across industries as well as regions.
The chart below shows the peak in expected short-term rates of job losses across industries as well as when, if ever, we expect sectoral employment levels to return to their pre-pandemic levels.
Timeline to recovery – industry outlook
Source: Deloitte Access Economics Employment Forecasts
At a broad industry level, the key losers in terms of jobs losses in the short term (seeing greater than 50% declines) are expected to be accommodation, arts, recreation and other services – and they may take five or six years to recover all the losses seen. Sectors such as property and professional services, education and telecommunications are less impacted now, and may be back in a solid growth phase by early 2022.
However, a couple of sectors have a moderate decline now, but may take an extended period to return to early 2020 employment levels. Key here is the finance sector, which may see a longer period of weak performance than similar industries. The finance sector is part of the defence against the COVID-19 downturn, with many loans being deferred. But over time banks can expect to see a sharp rise in non-performing loans, while it may be some time before businesses are ready to invest again at significant scale, implying a sharp hit to credit demand.
Note that the chart doesn’t include health – a sector that doesn’t see a decline in employment in the next year. In addition, three industries at the far right of the chart (manufacturing, farming and mining) never return to the early 2020 peaks – although that reflects longer term trends of declining employment. For these sectors the ‘decline’ measure is the scale of the falls over the next year.
One of the factors that has made the COVID-19 downturn different to other modern downturns is the extent to which it is changing not just the level of employment, but where much of that work is carried out – particularly through the move from office-intensive employment in our CBDs to working from home.
This suggests that, in general, CBD employment will be slower to recover than overall white collar employment, also hampered by the delayed rebound in financial services. The emergency has given both employers and employees time to observe the costs and benefits of working remotely, while businesses have been forced to overcome previous barriers by investing in technologies and rapidly developing new work methods.
In the near term (and certainly prior to a vaccine), it is likely that the tendency to work from home will remain above pre-crisis levels. Social distancing will undoubtedly restrict office density (even as restrictions begin to lift), reversing the decades long trend towards smaller workspaces.
Importantly however, businesses are unlikely to completely abandon the office. Both employers and employees recognise the advantages of in-person collaboration and the wellbeing benefits of social interaction with colleagues more generally, especially after months of social distancing and isolation.
Underpinning these shifts will be economic momentum – and employment growth in Australia’s metropolitan areas will continue to positively underpin future office demand.
David is a macro economist with extensive experience in applied economic and quantitative analysis of the Australian economy, along with considerable experience in labor market analysis. David is a regular commentator on macroeconomic trends, and prepares a weekly economic briefing newsletter.