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Unemployment is down but more tough times ahead

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The Australian economy generated 111,000 new jobs in August, lowering the unemployment rate to 6.8% from its 22 year high of 7.5% in July.

The shock result sees full-time employment lift from 36,200 to 8.58 million people, while part-time employment has increased from 74,800 to 3.99 million people.

All states and territories contributed net positive figures to the jobs number except for Victoria, which lost 42,400 jobs to put its unemployment rate at 7.1%.

coronavirus applying for newstart jobseeker allowance
People queueing to ask Centrelink for financial assistance in Melbourne in March. Photo: Quinn Rooney/Getty Images.

"There is no doubt that this is a stunning set of job figures - especially considering that nation's second largest economy was in lockdown throughout the month," says Craig James from CommSec.

"The cherry on top was a drop in the youth jobless rate from 16.3% to 14.3%.

employment graph abs
Source: ABS

James points to JobKeeper and JobSeeker as being instrumental in supporting the job market.

However, "the programs have made it more difficult in working out what is going on, specifically in the job market. But these are extraordinary times and the job programs are similarly remarkable".

Despite the fall in unemployment, hours worked increased a mere 0.1%.

"Even more so than in April, the shutdown in Victoria had a larger impact on hours worked than it had on employment," says Justin Smirk from Westpac.

The result makes the Reserve Bank of Australia's forecast unemployment peak of 10% by the end of this year seem unlikely.

"To achieve this employment would have to collapse between 400,000 to 500,000 by December," says Smirk.

"This would be a very extreme situation and suggests an aggressive unwinding of support packages such as JobKeeper, which while it has been modified it has also been extended to March 2021."

James cautions investors not to get ahead of themselves, however. The effective rate of unemployment, which also includes those who have left the workforce or had their hours reduced, is estimated to be up around 9.3%.

"Getting the right balance between health and economic issues will be critical in the months ahead. NSW is showing the way with the most jobs created or reinstated in the past three months while keeping its borders open for business and implementing effective virus testing and tracing to keep the virus in check."

The job gains may also be fleeting.

A report by Deloitte Access Economics commissioned by the Australian Council of Social Services found that cuts to the coronavirus supplement for people on JobSeeker, Youth Allowance and parenting payments would see 145,000 full-time jobs lost over the next two years.

"Our analysis clearly shows that the Government's plans to reduce income support would set back the economy even further," says Nicki Hutley from Deloitte.

"We also know that this would take a serious toll on the wellbeing of millions of people who are without paid work, especially those in regional communities.

Australian Council of Social Service CEO Cassandra Goldie said: "There are a lot of things that are not in our control in this pandemic but one thing that the Government does have control over is ensuring that everyone has enough to cover the basics of life, including a safe place to live."

We're cutting through the confusion to help you manage your money during the coronavirus outbreak. Click here for more on how COVID-19 could affect your job, budget, super and investments.

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David Thornton is a journalist at Money magazine. He previously worked at Your Money, covering market news as producer of Trading Day Live. Before that, he covered business and finance news at The Constant Investor. David holds a Masters of International Relations from the University of Melbourne.
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