AMW: How quickly will activity rebound?

High vaccination rates should give consumers confidence to resume economic activity as restrictions ease.

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Analysis:  How quickly will activity rebound – very quickly if job ads are a guide

  • Lockdown restrictions are set to be eased in NSW, VIC and the ACT in coming weeks as vaccination rates reach the 70% and 80% re-opening thresholds (NSW reached 70% today). Note final vaccination rates will be even higher than this given NSW first doses are running at 89.0% and several NSW LGAs have first doses running closer to 95%. VIC is following a similar trajectory so far, with first doses already at 83.6%.
  • High vaccination rates should give consumers confidence to resume economic activity as restrictions ease. Household balance sheets have also been insulated with household deposits lifting during lockdown months of July/August (+$41bn) and since February 2020 have risen by a cumulative $183bn equivalent to 11% of income.
  • In this Weekly we look at job ads data in Australia, which show business is gearing up for a sharp rebound in activity. SEEK Job Ads for September rose 6% m/m, led by a remarkable 20.6% m/m rise in NSW, which is set to re‑open from Monday 11 October. Job ads were also strong in non-lockdown states (e.g. WA +1.5% and SA +5.2%).
  • Industries that have been heavily impacted by the COVID-19 lockdowns drove the rise with job ads up strongly in Hospitality & Tourism (28.5% m/m) and in Retail & Consumer Products (+20.6% m/m). Business are clearly anticipating a strong rebound in in-person activity which was also picked up in the RBA’s business liaison program.
  • The sharp rise in job advertising suggests labour demand remains strong, which should see employment recover sharply. Nevertheless, given the drop in the participation rate associated with lockdowns the unemployment rate may initially rise before resuming its downward trend.
  • Looking offshore, high frequency data in the UK, US, Israel and Singapore reinforces that mobility picks up quickly once restrictions ease, and this was also Australia’s experience coming out of the lockdowns in 2020. These four countries also illustrate some of the risks associated with re-opening that Australia will need to navigate:
    • How will Australia to react to a likely pick-up in hospitalisations driven by the unvaccinated. Israel and Singapore re-imposed some restrictions in response, while the UK did not tighten restrictions with the hospitalisation curve quickly flattening after an initial rise given the UK’s very high vaccine penetration.
    • Should fully vaccinated people be forced to isolate if they are close contacts and/or become infected? Ongoing isolation requirements in the UK upon re-opening in July saw a vast swathe of people forced to isolate – termed the ‘ping-demic’.  NSW has indicated isolation requirements will be waved at 80%.
    • The risk of restrictions being re-imposed should hospital systems become overwhelmed as Australia starts to live with the pandemic. Australia has relatively low community protection from previous infection, but the key difference to overseas though is that vaccination rates are on their way toward 90% of the eligible population.

Chart 1: SEEK job ads lift strongly in September, driven by a surge in NSW ahead of re-opening on October 11

(Note this week’s Weekly was delayed due to the public holiday in NSW on Monday and the RBA on Tuesday. Usual Monday timings of the Weekly resume next week)

 

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