The Australian Bureau of Statistics (ABS) released its latest labor force data today (20 October 2022) – Australian workforce – October 2022. The labor market improved in October 2022, with employment rising by 32,200 (0.2%), supported by strong full-time employment growth. Employment growth led to a decline in both the unemployment rate and the official unemployment rate due to sluggish labor force growth (due to below-average growth in the working-age population) and unchanged participation rates. Growth in full-time jobs has also reduced underemployment. However, the underlying (“hypothetical”) unemployment rate is closer to 6.1%, rather than the official unemployment rate of 3.4%. There are still 1,313,800 Australian workers who are unemployed in some way (officially unemployed or underemployed). The only reason the unemployment rate is so low is that underlying population growth remains low after the borders closed for the past two years. But that is changing as immigration increases.
A summary of the ABS labor force (seasonally adjusted) estimates for October 2022 is:
- Employment rose by 32,200 (0.2%) — full-time employment rose by 47,100 and part-time employment fell by 14,900.
- The number of unemployed fell by 20,600 to 477,600.
- The official unemployment rate fell 0.1 percentage point to 3.4%.
- The participation rate remained unchanged at 66.5%.
- The employment-to-population ratio rose 0.1 percentage point to 64.3%.
- Total monthly hours increased by 43 million hours (2.3%).
- The underemployment rate fell 0.1 percentage point to 5.9% (a small decrease of 10,100). Overall, there are 836,200 underemployed workers. The overall labor force underutilization rate (unemployed plus underemployment) fell by 0.2 percentage points, or 9.3%. A total of 1,313,800 people were unemployed or underemployed.
In its– media release – The ABS states:
The number of employed people increased by about 32,000, the number of unemployed fell by 21,000, and the unemployment rate fell by 0.1 percentage points to 3.4%. …
The participation rate is 0.2 percentage points below the June 2022 record of 66.7%, but 0.7 percentage points higher than the pre-pandemic…
While the number of people whose hours have been lost due to illness is about one-third higher than it typically was in October, it is no longer two to three times as high as it was in early 2022. October is the first month of October with a population of less than half a million (467,000) by 2022.
Conclusion: Moderate job growth in the absence of a change in the participation rate is strong enough for net job growth to fall sharply, which could be a harbinger of worse as the effects of rising interest rates and government spending cuts start to interact.
Employment increased by 32,200 (0.2%) in October 2022
1. Full-time employment increased by 47,100, while part-time employment decreased by 14,900.
2. The employment-to-population ratio increased by 0.1 percentage points to 64.3%.
3. Employment in Australia is 624,200 (net) jobs (4.8%) higher than the pre-pandemic level in February 2020.
The chart below shows the monthly growth in full-time (blue bars), part-time (gray bars) and total employment (green line) for the 24 months to October 2022, using seasonally adjusted data.
The table below provides an accounting summary Labor market performance over the past six months Provides a longer-term perspective, breaking through monthly changes and better assessing trends.
Given changes in workforce estimates, sometimes check Employment Population Ratio (%) Because the underlying population estimate (the denominator) is less cyclical and subject to change than the labor force estimate. This is another measure of the robustness of economic activity to the unemployment rate, which is sensitive to fluctuations in the labor force.
The graph below shows the employment-to-population ratio since April 2008 (ie since the global financial crisis).
In October 2022, the rate increased by 0.1 percentage point to 64.3%, indicating an improvement.
For perspective, the chart below shows the average monthly employment change over the calendar years from 1980 to 2022 (so far).
1. Average employment change of -8400 in 2020, rising to 36400 in 2021 as lockdown eases.
3. From 2022 to now, the average monthly change is 30,600.
The graph below shows the average monthly change (in thousands) of full-time and part-time employment (bottom graph) since 1980.
In October 2022, hours worked will increase by 43.2 million hours (2.3%)
The chart below shows the monthly growth (in percent) over the last 24 months.
The dark linear line is the simple regression trend for monthly variation (slope by the two outlier results).
Actual and Trend Employment
The Australian labor market is now larger than it was in February 2020. But if it continues to expand according to the previous trend, it still has a distance.
The graph below shows total employment (blue line) and what it would have been if growth had continued at the average rate from 2015 to April 2020.
The employment gap decreased by 6.7 million to 169,700 by October 2022 due to a slowdown in employment.
Population slowdown – “what-if” unemployment analysis
The graph below shows Australia’s working-age population (15+) from January 2015 to October 2022. The dashed line is projected growth if the pre-pandemic trend continues.
The difference between the two lines is that the working-age population fell after Covid immigration restrictions.
By October 2022, the civilian population will be 540,500 fewer than if pre-Covid trends continued.
This gap widens in October 2022.
The chart below shows the evolution of the real unemployment rate from January 1980 to October 2022, the dashed line is the “assumed” rate assuming the most recent peak participation rate (recorded in June 2022 = 66.7%), extrapolated labor Age population (based on growth rates from 2015 to February 2020) and actual employment since February 2020.
It shows what the unemployment rate would be given real job growth if the trajectory of the working-age population followed past trends.
In this blog post – Australia’s external border closure cut unemployment by around 2.7 percentage points (April 28, 2022), I provide a detailed analysis of how I calculated the “hypothetical” unemployment rate.
So, taking into account employment performance since the pandemic, the October 2022 unemployment rate is not 3.4%, but 6.1%.
The finding skews sharply different from what has happened since the pandemic began.
Unemployment falls by 20,600 to 477,600 in October 2022
The unemployment rate fell as net employment gains (32,200) outpaced gains in the labor force (11,700).
With the participation rate unchanged, this suggests that things are improving.
Labor force growth, however, remained low, reflecting sluggish underlying growth in the working-age population due to slow immigration following prolonged border closures.
Again, keep in mind the “what-if” analysis above, and look at the impact of declining engagement below.
The graph below shows the national unemployment rate from April 1980 to October 2022. Longer time series help to form some perspective on what is happening now.
Broad labor underutilization rate declines 0.2 percentage points to 9.3% in October 2022
1. The underemployment rate decreased by 0.1 percentage points to 5.9% (a small decrease of 10,100).
2. The total number of underemployed persons is 836,200.
3. The total labor underutilization rate (unemployed plus underemployment) fell 0.2 percentage points to 9.3 percentage points.
4. The total number of unemployed and underemployed workers was 1.3138 million.
The graph below plots Australia’s seasonally adjusted underemployment rate (blue line) from April 1980 to October 2022 and the broad underemployment rate (green line) for the same period.
The difference between the two lines is the unemployment rate.
These three cyclical peaks correspond to the 1982, 1991 recession and the most recent recession.
Another difference now from the previous two cycles is that the recovery sparked by the fiscal stimulus of 2008-09 did not last, and once the “fiscal surplus” superstition started to kick in in 2012, things quickly reversed.
The first two peaks are sharp, but decline steadily. The last peak fell back on the back of stimulus, but turned again after the stimulus was withdrawn.
Teenage labor market worsens in October 2022
Teens lost a net 7,000 full-time jobs in October, despite an overall rise in full-time employment.
Part-time compensation is on 2400 jobs.
The table below shows the distribution of net employment by full-time/part-time status and age/gender category (15-19 and others) for the past month and the past 12 months.
To put teen employment in context of size (relative to their size in the population), the chart below shows the employment-to-population ratios since June 2008 for males, females, and the total population ages 15-19.
You can interpret this graph as depicting job losses relative to each cohort’s base population.
1. The proportion of males decreased by 0.9 percentage points month-on-month.
2. The proportion of females was flat in October.
3. The employed population of teenagers decreased by 0.5 percentage points compared with that of the current month.
4. Relatively speaking, female adolescents outperform male adolescents.
in conclusion
My standard monthly caveat: Given the way labor force surveys are constructed and conducted, we always have to interpret monthly movements with caution.
My overall rating is:
1. In October 2022, the labor market improves due to moderate job growth (concentrated in full-time jobs) and slow labor force growth.
2. With the participation rate constant, the unemployment rate falls and an increase in the concentration of full-time jobs reduces underemployment.
3. The underlying (“hypothetical”) unemployment rate is closer to 6.1%, not the official unemployment rate of 3.4%.
4. There are still 1,313,800 Australian workers who are unemployed in some way (officially unemployed or underemployed).
5. Given the relatively tepid job growth, the only reason the unemployment rate is so low is that underlying population growth has remained low after border closures over the past two years. But that is changing as immigration increases.
Enough for today!
(c) Copyright 2022 William Mitchell. all rights reserved.
