Uneven market recovery
Overall employment could return to its pre-pandemic level from as early as the first quarter of 2021. This would be a much faster recovery than ANZ Research was expecting, even late last year. But if the employment recovery for the middle and second-lowest quintiles continues to lag, this would not only impose hardships on affected workers and households and contribute to inequality, but it could also have macro-level effects.
The Reserve Bank of Australia (RBA) has confirmed bringing down the unemployment rate is an “important national priority” and getting it sustainably below the pre-COVID rate of around 5 per cent is necessary to achieve higher wage growth and inflation.
But if demand for labour in occupations in the middle and second-lowest quintiles does not pick up materially over the next few quarters (without workers being able to find jobs in higher quintiles), this could leave many workers unemployed or underemployed, preventing underutilisation from falling as quickly as it would otherwise. This scenario could also mean a higher long-term unemployment rate.
A return to positive job vacancy growth for these two occupation groups in November suggests a stronger recovery in 2021 but given there are still 178,000 fewer workers in these groups compared with pre-pandemic, ANZ Research think vacancies will need to strengthen further before it can be sure.
Either way, the disproportionate shock from the pandemic, added to the longer-term challenges, emphasises the importance of the relevant policies in place, such as the JobTrainer fund. But the shock also highlights the need to further reduce barriers to education and training and upskilling for these workers at risk.
Catherine Birch is Senior Economist at ANZ