And unfortunately, this sort of jobs bloodbath has been the norm for the last few months: between March and May, Australian Bureau of Statistics (ABS) labour force data showed 835,000 fewer people were employed.
According to CoreLogic Australia head of research Eliza Owen, surging unemployment will also have an impact on property prices, but not as might be expected.
“As with the GFC, structural changes in the economy amid Covid-19 are likely to see the unemployment rate elevated for some time,” Owen said.
“Businesses are likely to struggle to re-hire staff in the short term as their liquidity is increasingly constrained, and a period of social distancing may have forced businesses to transition to less labour-intensive operations.”
Essentially, businesses that have discovered they can operate with fewer staff members will not be incentivised to re-hire team members, Owen said.
“This suggests that over the next year or so, lasting, loosened conditions in the labour market could dampen demand for housing. With the cash rate now at a record low, recovery in incomes and jobs will be necessary to increase purchasing capacity.”
But the breakdown of unemployment figures also suggests the blow to the property market could be limited.
That’s because the majority of those who lost work (59.7 per cent) are in part-time work, with people between 15 and 24 also making up 40 per cent of the new jobless.
As Owen noted, most first-home buyers are between 25 and 34, a group less impacted by the unemployment wave.
“Additionally, ABS analysis of payroll data suggests the biggest declines in employment by sector are across tourism, accommodation and the arts. Workers with these characteristics are less likely to hold mortgage debt than older workers in industries such as professionals, service workers and trades,” Owen added.
She said that while the economic impact will be significant, it will impact the housing market indirectly, even if those in the most-affected industries are less likely to own a home.
“That is because they are more likely to rent. So the current declines in employment will likely have an indirect impact on housing prices, through weaker rental demand and downside risk for higher rental vacancies, lower rents and deteriorating yields,” Owen said.
The Reserve Bank has indicated on multiple occasions that improvements in the employment market won’t be as simple as waiting it out, she added.
“Re-employing those who have lost jobs will require greater innovation and education reform. Based on recent data, such policies will also play an important role in increasing housing demand.”
CoreLogic will release its housing data for June next Wednesday 1 July. Home values fell 0.4 per cent across Australia in May, the first decline in 11 months.