The Reserve Bank of Australia’s minutes are due Tuesday and could add to its early-June meeting presser that indicated hope the pandemic recovery path might be a bit better than expected. China’s data dump is due today (Monday), and in addition to ongoing domestic recovery, we expect the recent theme of a strong industrial rebound to continue (with industrial production rising to 5% from 4% in May) but a cautious consumer (with retail still weak at -2.5% after -7.5%). Similarly, US May retail sales on Tuesday are expected to rebound 7-8% (after -16.4%) but remain well below levels of a year ago (-16% after -22%).

However, the domestic highlight this week will most certainly be Thursday’s jobs report for May. In April, while almost 5% of the workforce lost their jobs (-594,000), the unemployment rate, as shown in our chart today (from UBS and the ABS), jumped only 1% from 5.2% to 6.2%. This was mostly because a large number of people fell out of the workforce. However, a potentially more accurate measure of the situation, underemployment, jumped to 20% (also shown in the chart), above its level during the GFC and the previous 1990s recession.

This week, consensus expects another 125,000 job losses (taking the two-month sum to about -720,000), with the unemployment rate rising another 1% to about 7%. If participation were unchanged over three months, unemployment would be well over 10%. Given the relatively early-month timing of the jobs survey, with the prior survey early April and this one early May, there is a chance the unemployment rate could spike higher than expected.

However, with recent surveys showing some improvement through May for job ads and employment intentions, it will be interesting to see whether, despite a highly likely further jump in unemployment, that the measure of underutilisation pulls back from 20% and flags a potential improvement in the jobs market, consistent also with improving mobility statistics. This would be similar to the better- -than-expected trend in US jobs for May.

Australian unemployment rate to jump – but could under-utilisation show improvement?

Source: Australian Bureau of Statistics, Reserve Bank of Australia and UBS.

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