Second phase of lockdown hits Australia’s payroll jobs even harder than the first time

Huge drops in payroll jobs, nearly 9% have been recorded in Greater Sydney as it is under its second lockdown which began from June 26th. Construction jobs have been particularly hit with a slump of more than 22% across New South Wales. SEEK’s July Employment report also shows that last month, job ad figures in Australia shrank to 4.1% on a month-on-month basis.

Justin Smirk, Westpac Economist stated that Sydney has been hit as badly as it was in early 2020. In the last two weeks, the contraction in Sydney payrolls was registered at 4.9% in comparison to 8.9% recorded at the beginning of the lockdown. The Sydney payrolls dropped to 8% in early 2020.

Nevertheless, he also mentioned that economists need to exercise caution while analysing payroll data in the purview of the disaster relief payments changes made by the government to alleviate people from the lockdown crisis. According to the ABS classification, the payroll jobs have been defined as employee jobs for which a payment is recorded through the Single Touch Payroll system to the Australian Tax Office. Thereby, it means that payroll data keeps a count of jobs and not employees. It is in contrast to ABS’s monthly labour force survey which keeps track of the number of people employed rather than the number of jobs. 

The lockdown conditions of the previous year and current year are also very different. During the 2020 lockdown, workers were being paid or given economic assistance from the government via employers through the payroll system courtesy the JobKeeper scheme. That is why they were present in payroll series and were considered to be employed. In direct contrast, in the 2021 lockdowns, workers are being given Covid-19 disaster payments directly and not via employers. This creates a state of ambiguity in the payroll data as the workers receiving the emergency payments will drop out of the payroll series but could still be termed as employed if they have not lost their jobs. Despite the incorrect comparisons of jobs vs people employed, Smirk said that Greater Sydney and New South Wales are the worst affected cities by the lockdown, noting significant drops in payrolls. 

Smirk revealed that in NSW, construction payrolls fell 14.5% in the last two weeks to be down 22.8% since the start of the lockdown. In early 2020, NSW construction payrolls fell 4.9%. Food services nosedived 32.8% and retail payrolls descended 11.4% respectively. These figures are devastating in comparison to the 14.4% and 1.2%  decline in 2020 in both sectors respectively. 

Bjorn Jarvis, the head of labour statistics at the ABS, noted that accommodation and food services, retail trade, and construction accounted for the greatest share of payroll job losses across Australia among the larger employing industries. He added that  accommodation and food services, retail trade and construction industries documented job losses of 44.3% and 45.4% in New South Wales across Australia, in the second half of July. 

Lockdowns in Victoria, South Australia and New South Wales and border restrictions across all states and territories are the biggest contributors of these drops. The ABS stated that the largest share of national job losses in all three industries (accommodation and food services, retail trade and construction industries) was recorded in New South Wales. The city oversaw around half of payroll jobs lost in accommodation and food services, around two thirds in retail trade, and around three quarters in the construction industry.

The payroll job losses was concomitant with the counterintuitive fall in the official unemployment rate. Registering a 13 years low, the national unemployment rate dropped from 4.9% to 4.6%. This happened because the labour markets were deserted by thousands of workers which contributed to the smaller proportions of unemployed people nationally. However, economists hinted that official unemployment will increase in the coming months due to recession. Commonwealth Bank's economics team expects the national unemployment rate to jump from 4.9% in June to 5.6% in October.

Ironically, Australian Employment Minister Stuart Robert had raised last week that more than 150 occupations in Australia are currently facing skill shortages, most commonly for technicians, trade workers, machinery operators, and drivers. Border restrictions are again the culprit, with local skill pools are unable to fill in the gap left by the absence of thousands of migrant workers.