Sectoral Employment Dynamics in Australia and the COVID‐19 Pandemic

• Author: Giovanni Caggiano,Benjamin Wong,Farshid Vahid,Heather Anderson
• DOI: http://doi.org/10.1111/1467-8462.12390
• Published date: 01 September 2020
• Date: 01 September 2020

The Australian Economic Review, vol. 53, no. 3, pp. 402–414 DOI: 10.1111/1467-8462.12390

Sectoral Employment Dynamics in Australia and the COVID‐19

Pandemic

Heather Anderson, Giovanni Caggiano, Farshid Vahid and Benjamin Wong*

Abstract

We develop a multivariate time series model

of employment in 19 sectors for Australia. We

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 construc-

tion sectors as those that generate the largest

positive spillovers for the aggregate economy.

Moreover, we provide an interactive web‐

based app that produces our model's forecasts

based on any user‐specified scenario. As the

restrictions associated with the COVID‐19

pandemic evolve, the sectoral employment

multipliers together with these interactive

tools will provide useful information for

policymakers.

1. Introduction

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. Many businesses have closed

their doors for an indefinite period of time,

while others are working with reduced hours

or with skeleton staff structures. In Australia,

the workforce numbered around 13 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). Further, employment is an

important indicator of wellbeing, allowing

workers to earn a living and prosper. Not

surprisingly, economic policymakers in

Australia and elsewhere have been imple-

menting policies to avoid employee separa-

tion from their jobs, raising questions such

as ‘What initial and long run effects will

the COVID‐19 pandemic have on employ-

ment?’and then ‘What can be done to get

employment (and output) back to its

pre‐COVID 19 state?’

A focus on labour and employment is

appropriate to monitor the state of the

economy, since a pandemic does not destroy

* Anderson, Caggiano, Vahid and Wong: Monash

University, Victoria, 3800, Australia. Corresponding

author: Vahid, email <farshid.vahid@monash.edu>.

© 2020 The University of Melbourne, Melbourne Institute: Applied Economic & Social Research,

Faculty of Business and Economics

Published by John Wiley & Sons Australia, Ltd