• The unemployment rate dropped 0.2% in April to 5.5%, according to the Australian Bureau of Statistics.
• Yet the development is shaded by a decline in Australia’s participation rate, and the impact of JobKeeper’s demise.
• Describing the figures as a “mixed bag”, Indeed APAC economist Callam Pickering said Australia “shouldn’t get too excited about the decline in the unemployment rate.”
• Visit Business Insider Australia’s homepage for more stories.

The unemployment rate fell to 5.5% in April, according to the Australian Bureau of Statistics (ABS), but a declining participation rate and the impact of JobKeeper’s demise should mute excitement over the topline figure.

In its April labour force figures, released Thursday, the ABS states the unemployment rate declined by 0.2% from revised March levels.

The unemployment rate is now just 0.2% over the pre-pandemic rate, suggesting the Australian jobs market has strongly rebounded from the crushing industry shutdowns which drove unemployment to 7.5% in June 2020.

Yet the participation rate — the percentage of Australians working or looking for work — dropped from March’s record high level of 66.3% to 66%. It was led by a fall in women’s participation, which declined 0.6% to 61.3% over the month.

“This was one of those situations where the unemployment rate declined because workforce participation also declined,” said Callam Pickering, APAC economist at Indeed. “So we shouldn’t get too excited about the decline in the unemployment rate.”

“The fall in the participation rate highlights the increased fluidity of the labour market, a trend that has materialised in recent years,” said Sarah Hunter, chief economist for BIS Oxford Economics.

Whereas working-age Australians were once overwhelmingly likely to transition from employment to unemployment, or the other way around, a shift in the way people enter and exit the labour market has now altered the formula, Hunter said.

“This structural shift means that the [Reserve Bank of Australia], government and others will be monitoring a range of indicators to assess how tight labour market conditions are, and what this will mean for wages growth and inflation.”

The total number of employed people fell by 30,600, corresponding with the end of the JobKeeper wage subsidy, which drew to a close at the end of March.

While the Treasury once estimated the end of the scheme could carve as many as 150,000 jobs out of the economy, the ABS is reticent to assign last month’s dip purely to JobKeeper winding down.

“Some of the 31,000 fall in employment may relate to the end of JobKeeper, but it could also reflect usual month-to-month variation in the labour market and some larger than usual seasonal changes similar to those we saw earlier in the year,” Bjorn Jarvis, ABS head of labour statistics, said.

And the decline in hours worked — down 13 million from April’s 1.86 billion hours worked — could be the result of workers finally having a chance to take their banked-up annual leave over the Easter break.

“Like we saw in January, the number of people taking leave over the Easter public and school holidays was also higher than in the past,” Jarvis added.

The downturn in employment is hardly what policymakers would have wanted to see during Australia’s emergence from the pandemic recession, but it alone is unlikely to shake the overall optimism, Pickering said.

“I don’t think April’s employment decline will fundamentally alter their thinking around the economy or monetary policy,” he said.

“The Reserve Bank would have anticipated some disruption in April and May from the end of JobKeeper and would be more interested in how the jobs market performs in the months that follow.”

Elsewhere, the underemployment rate, derived from the number of working-age Australians who are eager to take on more hours, dropped by 0.3% over the month. Youth unemployment has also tumbled 1.1% to 10.6%, its lowest level since January 2009.

“We haven’t seen a labour market this strong for young people since the GFC began,” Pickering said.

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