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Data for March 2021 shows that the labour market has continued its remarkable recovery: employment and hours worked have both returned to (and surpassed) pre-COVID levels. The unemployment rate continues to fall, reaching 5.6% in March, the participation rate has increased to an historic high of 66.3%, while underemployment has also fallen to the lowest it’s been since 2014 (7.9%).
This increasing strength in the labour market is great news for the economy and provides reassurance that the end of JobKeeper last month may be less disruptive than previously expected. This is supported by positive forward indicators, with online job ads hitting a 12-year high in March, jumping nearly 20% in the month.
It is also important to note that Australia’s labour market recovery is world-leading. Employment in the US and Canada is still well below where it was in February last year. Australia has also outpaced Japan and the UK in recovery, even though both countries experienced significantly smaller employment shocks through 2020. It appears Australia’s more restrictive COVID measures have sped up our return to normality, while other countries still grapple with ongoing heavy restrictions to mitigate COVID transmission.
Chart 1: Change in employment from February 2020
Further, strong jobs growth is good news for consumers and the economy. Consumer confidence is the highest it’s been since August 2010, while business confidence continues to rise off the back of supportive business conditions. Confidence has been supported by the strong jobs rebound, fewer snap lockdowns more recently, and strong growth in the housing market. So far, consumer confidence has not been affected by Australia’s slow vaccine rollout, which remains behind most of the world, though clearly that remains a risk going forward which may weigh on consumer confidence.
Chart 2: Australian consumer confidence index
Deloitte’s Global Consumer Survey provides a range of additional perspectives on the Australian consumer confidence story. Alongside general consumer sentiment rising on the back of economic performance, moderating personal safety and health concerns are a positive aspect. Australians feel more at ease ‘going to the store’ and ‘engaging in person-to-person services’ as seen below – an improvement that is supporting the recovery in sectors such as food and accommodation which were hurt significantly by restrictions and state lockdowns. That should assist with not only greater willingness by consumers to dip into the savings they have accrued through 2020, but also to broaden their patterns of spending to incorporate a greater amount of spending on services.
Figure 1: Deloitte Global Consumer Survey – Australian response, March 2021
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.
Harry joined Deloitte Access Economics in January 2017 after completing a Bachelors of Arts and Commerce, with honours in Econometrics and Business Statistics from Monash University. Harry’s area of focus is data analytics and econometric modelling, having conducted a range of research surrounding mental health, prescription drug use, labour markets and ageing populations.