Australian Unemployment May Have Reached 10.8% Already

(Bloomberg) -- Australia's jobless rate may already have risen as high as 10.8%, based on government data on welfare recipients and unprocessed claims.

The number of Australians receiving unemployment benefits soared to 1.3 million as of April 24, from 800,000 at end-2019, Department of Social Security figures released Thursday to a parliamentary panel showed. There were a further 300,000 applications yet to be processed. Based on these numbers, the jobless rate would have jumped to 8.8%, or 10.8% if unprocessed claims are incorporated.

“The number of people receiving or seeking unemployment benefits has doubled since the end of February, with the rapid surge revealing the swift and severe hit to Australia's labor market,” said James McIntyre, Australia economist at Bloomberg Economics. “This equates to unemployment pushing above 11% over the next few months. By comparison, Australia's rate peaked at 11.2% following the early 1990s recession.”

These data suggest the Reserve Bank of Australia's expectation for the jobless rate to reach 10% by June is likely to be met, as the economy nosedives during the second quarter. The government's JobKeeper initiative, which keeps workers attached to their employers during the shutdown, and a slump in the participation rate, are likely to suppress the official level of unemployment.

Aware of this, RBA Governor Philip Lowe said last week his key focus in the labor market will be on total hours worked, which he expects to fall by 20% over the first half of the year.

A separate government survey released Friday showed almost one-in-three people reported their household finances had worsened between mid-March and mid-April.

Australia's government and central bank have assembled a massive fiscal-monetary injection worth 16.4% of gross domestic product to aid households and firms as much of the nation's services industry is shuttered to contain the coronavirus.

Some 28% of Australian adults said they received the first one-off A$750 ($485) support payment, announced in March as part of the stimulus package, the Australian Bureau of Statistics said in its special survey of household impacts of the virus.

“Around half of persons who received the economic support payment added it to savings, with persons aged 65 years and over more likely to do so than persons aged 18 to 64,” said Michelle Marquardt, ABS program manager for household surveys.

In a report Thursday, Goldman Sachs Group Inc. estimated Australia's effective unemployment rate -- adjusted for the sharp fall in hours worked and participation -- is likely to hit around 19% by mid-year.

The ABS will release its new weekly payroll jobs and wages in Australia report on Tuesday.

©2020 Bloomberg L.P.