Dr Brendan Rynne, KPMG Chief Economist comments on the ABS payroll data

This week’s labour force data from the ABS represent a stark reminder of how virus outbreaks and subsequent lockdowns impact the recovery in Australia’s labour market.  Today’s employment figures show there was no employment growth in New South Wales, and virtually none in Queensland, while Victoria achieved a relatively strong increase in the number of people employed; a result that closely mirrors the stringency of government policies adopted during January in response to the virus outbreak in Sydney.

ATO payroll data released by the ABS earlier this week suggests that Victorian businesses, particularly those in the front line of the services sector, have developed processes over the past 12 months to be able to “turn-down” and “turn-up” their operations quickly –  both in terms of shedding staff and hiring staff – in response to Government imposed restrictions.  This would suggest that while the Victorian lockdown just ended is likely to have an impact on the labour market in the state.

Overall, the ABS labour force data indicates that the Australian economy is recovering well from the worst of the COVID-19 induced recession, despite the effects of the Sydney ‘Northern Beaches’ lockdowns that occurred in the first month of 2021. The unemployment rate fell to 6.4% in January, down from 6.6% in December 2020, with nearly 30,000 finding work during the month.

But the number of people classified as unemployed (ie actively seeking work and unable to find any) fell by slightly more, due to the participation rate also notching down by 0.1% during the month – this probably reflects the fact that workers lost a bit of faith in being able to secure employment during another lockdown.  This fall in the number of unemployed was particularly noticeable in WA – 0.8%, higher than any other state – and in the ACT. We can only speculate but it might be that the WA border closure had an effect on that state.

Underemployment fell by 0.4% between December 2020 and January 2021 which will be a further boost to the momentum of Australia’s economic recovery.  KPMG is anticipating the unemployment rate to fluctuate during the remainder of this year once government support programs, like JobKeeper, are stopped and businesses re-assess their ongoing short term viability.  Overall however we still anticipate the unemployment rate to hover around mid-6%’s for the next couple of quarters before falling relatively rapidly to mid-5%’s in the early- to mid- part of 2022.

The ATO data shows the Australian labour market, and hence the Australian economy, took a slight pause in its recovery during January in response to the additional lockdown procedures implemented over Christmas. The challenge in analysing the ATO data is that it is in its ‘original’ form, meaning the normal seasonal fluctuations haven’t been adjusted for.  Nonetheless what it shows that the pickup in the labour market that usually happens as each week of January progresses was not as strong as last year – recognising that last year much of the eastern seaboard in Australia was dealing with the bushfire disasters.

Change in ATO Payroll Index from Start to End of January
Jan-20 Jan-21
New South Wales 5.60% 5.20%
Victoria 6.20% 4.60%
Queensland 6.10% 6.80%
Australia 5.70% 5.50%

When the ATO payroll data is analysed over the past year – with lockdowns highlighted – it shows Victoria’s labour market has shown a propensity to adjust more rapidly in times of shutdowns. This would suggest that Victorian businesses have adapted to uncertainty that lockdowns bring and have learned to adjust their demand for labour almost immediately.


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