Australia
© Youtube/Sunrise
Sunrise, an Australian morning television program
The official 6.2 per cent unemployment rate conceals the full pain being felt by workers and the damage that COVID-19 restrictions have done to the economy.

The "devastating" stress in the labour market that Prime Minister Scott Morrison speaks of is exposed by the number of hours worked falling twice as fast as the decline in the number of people employed.

Of the 2.7 million individual workers affected by job losses or reduced hours in April, 1.8 million people worked fewer hours, including 750,000 who were still employed but worked no hours at all, the Australian Bureau of Statistics estimates.

Officially, the total number of employed people fell by a record 594,000 last month, pushing up the unemployment rate a full percentage point from 5.2 per cent in March.

But if it wasn't for almost half a million people giving up looking for work or not being available as governments shut down businesses and schools in response to the coronavirus, the unemployment rate would have jumped to 9.6 per cent.

People must be searching for a job to be defined as unemployed.

Moreover, Australia's unemployment rate would be 11.7 per cent if stood-down or temporarily laid-off staff - such as workers now on JobKeeper wage subsidies - were officially designated as jobless like they would be in the United States and Canada, the ABS noted.

Now 6 million employees are on the $1500 fortnightly JobKeeper payments.

The shutdown of so-called non-essential businesses and strict social distancing rules in response to COVID-19 forced many full-time workers to shift to part-time or zero hours.

Hours worked plunged 9.2 per cent in April, the largest fall ever recorded in the labour force survey time series dating back to 1978.

Some 17.4 per cent of employed women worked zero hours last month, as disruptions to hospitality, retail and tourism hit the female workforce hard.

Extended school holidays and the closure of classrooms may have also contributed to women cutting back on their hours.

The total reduction in hours was greater for women, with female hours cut 11.5 per cent, compared with a 7.5 per cent reduction in male hours worked.

The slashing of hours caused the underemployment rate to spike to a record high 13.7 per cent to 1.8 million people who wanted to work more.

Mr Morrison said the fall in hours worked showed "an even deeper impact" on the labour market than the almost 600,000 people who lost their jobs last month.

Some 900,000 people left employment, while about 300,000 moved into jobs.

'Worse than it looks'

The government's JobKeeper wage subsidies will be paid to employed people regardless if they work any hours.

JPMorgan economist Tom Kennedy said the labour market was "worse than it looks".

"JobKeeper is intended to preserve employer-employee relationships, which means many individuals may work significantly reduced or zero hours, but still identify as employed within the parameters of the ABS survey," he said.

The Reserve Bank of Australia is forecasting the number of hours worked to fall a "staggering" 20 per cent in the first half of this year, because the most affected industries are labour-intensive.

Economists believe the number of hours worked will be a better guide to the labour market's performance during the coronavirus downturn, because the official unemployment rate will be artificially suppressed by people giving up looking for work and stood-down workers on JobKeeper.

The participation rate, which measures the number of people who are employed or searching for a job, fell by 490,000 or an unprecedented 2.4 percentage points to 63.5 per cent.

Hence, the plunge in the participation rate stopped the unemployment rate jumping by more.

The RBA's statement on monetary policy this month said many firms had cut the hours of their employed, rather than laying them off entirely.

"More of the labour market adjustment is likely to occur through hours worked rather than job losses in economies with more comprehensive wage subsidy programs," the RBA noted.

"Hours worked are likely to have declined across all industries, but the decline will be most acute in hospitality, entertainment and tourism-related industries and for casual workers.

"In some industries such as finance, weekly wages have declined much more than jobs, suggesting more of the adjustment has come through a reduction in either hours worked or wages than through job losses."