Unemployment set to plunge as job ads surge again

Job ads climbed again in May, the 12th straight monthly gain, pointing to further large falls in the unemployment rate, ANZ says.

The number of job vacancies climbed for the 12th consecutive month in May, according to the ANZ data.

Economists are increasingly confident unemployment will end the year below 5 per cent after job ads surged again in May, rounding out a year of continuous monthly increases that leaves ­vacancies 40 per cent above pre-pandemic levels.

ANZ senior economist Catherine Birch said the nearly 213,900 job ads last month – 7.9 per cent higher than in April – was “now consistent with an unemployment rate of around 5 per cent”.

“This points to continued rapid tightening in the labour market,” she said.

ANZ economists expect the key jobless measure to drop to 4.8 per cent by the end of this year – 12 months ahead of federal budget forecasts, which predicted unemployment would only fall below 5 per cent “by late 2022”.

Melbourne residents are suffering through their second week of severe restrictions aimed at crushing the recent Covid-19 outbreak, at an estimated economic cost over the two weeks of $1.8bn, KPMG says.

 

But Ms Birch said the lockdown was “unlikely to derail the state’s labour market recovery”.

RBC Capital became the first bank to upgrade its growth forecast for this year, following national accounts figures last week that showed stronger than expected GDP growth over the first three months of the year, and that the economy was now larger than it was before the health crisis.

Su-Lin Ong, the chief economist in Australia for the Canadian bank, said the economy would expand by 5.2 per cent this year, from a previous forecast of 4.7 per cent.

“We are still likely to see some moderation in activity in the current quarter (from the) Victorian lockdown and uncertainty ...” she said. Ms Ong “tweaked” her unemployment forecasts lower, predicting the key jobless measure would end this year at 4.8 per cent and drop more slowly to 4.5 per cent by the end of 2022.

Employers in some sectors reliant on foreign workers on temporary visas, such as hospitality and horticulture, are complaining of severe labour shortages. There are also similar reports in industries such as construction, amid a home-building boom.

The surge in job vacancies was “unlikely to fully translate into employment due to skills mismatches and restricted labour mobility”, Ms Birch said.