Abstract
In the aftermath of the covid-19 pandemic, the prevention of further decline in aggregate employment and turning it around are high on the agenda of policymakers. To this end, it is imperative to have a disaggregated model of employment, given the unequal effects of covid-19 on employment in different sectors of the economy. In this paper we develop a multivariate time series model of employment in 19 sectors of the Australian economy. We provide the predictions of this model conditional on various scenarios that are based on the most recent quantitative information about sectoral employment in Australia. We estimate that the drop in total employment in the second quarter of 2020 will be in between 7 and 13 percentage points, compared to the second quarter of 2019. We also use this model to determine the long-run effect of a 1% increase in economic activity in any chosen sector on aggregate employment. Our findings point to manufacturing and construction sectors as those that might generate the largest positive spillovers for the rest of the economy. Moreover, we provide an interactive web-based app as well as an interactive spreadsheet that produce our model’s 5-year forecasts based on any user-specified scenario for the current and following three quarters. As the covid-19 pandemic evolves and some restrictions are safely lifted or other restrictions become necessary, the sectoral employment multipliers together with the interactive tools produced here will provide useful information for policymakers.
Highlights
The introduction of policy measures designed to contain the covid-19 pandemic has had profound effects on economies around the world, and with the advent of social distancing policies, many countries have experienced sharp and substantial falls in employment
The analysis provided in the paper is up-to-date at the time of writing, but we provide an online interactive tool, https://ebsmonash.shinyapps.io/Employment/, that allows the user to enter in the latest sectoral employment data as it becomes available and obtain updated predictions from our model for the future path of employment growth in the Australian economy
Ludvigson et al (2020) construct a disaster time series for the USA from the estimated costs of events such as Hurricane Katrina and the 9/11 terrorist attacks, and use the response of indicators of economic activity to previous disasters to predict the effects of covid-19
Summary
The introduction of policy measures designed to contain the covid-19 pandemic has had profound effects on economies around the world, and with the advent of social distancing policies, many countries have experienced sharp and substantial falls in employment. In Australia, the workforce numbered around thirteen million when the global pandemic was announced, and within two weeks, preliminary estimates made by the Australian Bureau of Statistics (ABS, 2020a) suggested job losses of 1.6 million. Employment has long been used by economists as a coincident indicator of economic activity because of its sensitivity to changes in economic conditions (Burns and Mitchell, 1946; Stock and Watson, 1993). Economic policy makers in Australia and elsewhere have been implementing policies to avoid employee separation from their jobs, raising questions such as ”What initial and long run effects will the covid-19 pandemic have on employment?” and ”What can be done to get employment (and output) back to its pre-covid 19 state?”
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
