How is Australia’s jobs rebound affecting ASX shares?

We investigate how the Australian jobs rebound is affecting ASX shares and the overall economic recovery post JobKeeper.

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The Australian economic recovery to the COVID-19 pandemic recession has been swift and sudden. Australia’s jobs rebound has led to the fastest six months of economic expansion ever recorded, according to ABS data. This, in turn, has positively affected growth on the ASX.

Seek data showed that new job advertisements are now back to pre-COVID-19 levels, with some analysts predicting the job market is about to hit fever-pitch. This could also lead to wage growth – which has been meagre for a long time now – as Australia’s lack of immigration levels create extra demand for Australian workers.

ANZ economist Felicity Emmett told the ABC that “the unemployment rate has dropped like a stone. We weren’t expecting the unemployment rate to get to 5.8 per cent until the end of the year.”

While Commonwealth Bank economist Kristina Clifton said “The jobs lost in the early months of the coronavirus pandemic have now been fully replaced. The next test for the labour market will be the expiry of the JobKeeper program.”

How is the jobs rebound affecting ASX shares?

The ASX didn’t respond exactly like you may have expected, actually falling when the ABS released its most recent jobs data report. But overall, the proof is its long-term results. The S&P/ASX 200 Index (ASX: XJO)has gained 43% over the past 12 months, rising in value from 4,832 points in May 2020 to 6,780 today.

The S&P/All Ordinaries Index (ASX: XAO) is up 47% over the past 12 months, and 2% year-to-date. Its rise since March last year has been equally impressive, from 4834 points to today’s value over 7,000. 

The S&P/ASX All Technology Index (ASX: XTX) has been far-and-away the strongest performer of the three, adding 117% over the past 12 months. This index has doubled in value since the COVID-19 pandemic first hit Australia around March last year, rising from 1,300 to more than 2,700 today.

What will JobKeeper’s end mean for ASX share prices?

JobKeeper is scheduled to end on 28 March. While specific industries, like aviation, will be catered for with prolonged wage subsidies, many others will not. As many as 100,000 workers may find themselves unemployed at the end of this month, which could push Australia’s unemployment rate back up above 6%.

The effect this will have on ASX share prices is currently unclear, but many economists are still holding their breath as to the outcome this may have on the ASX’s strong recent gains.

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Motley Fool contributor Lucas Radbourne-Pugh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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