The Australian Bureau of Statistics (ABS) released its latest labor force data today (15 December 2022) – Australian workforce – December 2022. My overall assessment is that the labor market is beginning to enter a recession – albeit slowly in December 2022, with employment falling by 14,600 (-0.1%), and while full-time employment continues to grow, the decline is partly more than that of over-time employment. The participation rate fell by 0.2 percentage points, meaning that the reduction in the labor force lessened the increase in the unemployment rate due to the decline in employment. However, the underlying (“hypothetical”) unemployment rate was closer to 5.4%, rather than the official rate of 3.5%, suggesting that the labor market remains weak. There are still 1,361,700 Australian workers who are unemployed in some way (officially unemployed or underemployed).
A summary of the ABS labor force (seasonally adjusted) estimates for December 2022 is:
- Employment fell by 14,600 (-0.1%) – full-time employment rose by 17,600 and part-time employment fell by 32,200.
- The number of unemployed rose by 5,800 to 499,800.
- The official unemployment rate remained at 3.5%.
- The participation rate fell 0.2 percentage points to 66.6%.
- The employment-to-population ratio fell 0.2 percentage points to 64.3%.
- Monthly total hours decreased by 9 million hours (-0.5%).
- The underemployment rate rose by 0.2 percentage points to 6.1% (+32,100). Overall, there are 862,900 underemployed workers. The overall labor underutilization rate (unemployed plus underemployment) rose 0.3 percentage point to 9.6%. A total of 1,361,700 people were unemployed or underemployed.
In its– media release – The ABS states:
Employment decreased by a seasonally adjusted 15,000 (0.1%) in December 2022, following a gain of 58,000 in November and an average monthly gain of about 40,000 between August 2022 and November 2022. …
Despite the increase in working hours in 2022, more people than usual are still working fewer hours due to illness.
In December, we saw the number of people whose hours were reduced due to illness increase by 86,000 to 606,000, more than 50% higher than what we typically see this time of year…
Conclusion: Employment growth has declined slowly, and the decline in the participation rate implies that the unemployment rate has not risen significantly.
This slack appears outside the official workforce in the form of hidden unemployment and internally as rising underemployment.
Employment falls by 14,600 in December 2022 (-0.1%)
1. Full-time employment increased by 17,600, while part-time employment decreased by 32,200.
2. The employment-to-population ratio decreased by 0.2 percentage points to 64.3%.
3. Employment in Australia is 759,900 (net) jobs (5.9%) above February 2020 pre-pandemic levels.
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 December 2022, using seasonally adjusted data.
I took the observations from September to December 2021 – they were outliers due to the Covid wave at that time.
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 January 2008 (ie since the global financial crisis).
In December 2022, the ratio decreased by 0.2 percentage points to 64.3%.
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 -880 in 2020, increasing to 36,000 in 2021 as lockdown measures eased.
3. The average monthly change in 2022 is 37,700.
The graph below shows the average monthly change (in thousands) of full-time and part-time employment (bottom graph) since 1980.
9 million fewer hours worked (-0.5%) in December 2022
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 (sloped upward by the two outlier results).
In fact, hours worked have not grown much over the past six months.
Actual and Trend Employment
The Australian labor market is now larger than it was in February 2020, with employment now close to returning to pre-pandemic trends.
But it’s still below where it would be if the trend holds.
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 job gap increased by 40,100 to 80,500 by December 2022.
Population slowdown – “what-if” unemployment analysis
The graph below shows Australia’s working-age population (15+) from January 2015 to December 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 December 2022, the civilian population is 368,700 fewer than the December 2022 population, if pre-pandemic trends continue.
The graph below shows the evolution of the real unemployment rate from January 1980 to December 2022, the dashed line is the “assumed” rate assuming the most recent peak participation rate (recorded in November 2022 = 66.8%), 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 December 2022 unemployment rate is not 3.5%, but 5.4%.
The finding skews sharply different from what has happened since the pandemic began.
Unemployment rises by 5.8 million to 499,800 in December 2022
The unemployment rate rose as a net decline in employment (-14,600) outweighed a decline in the labor force (-8.8 million), which was due to a 0.2 percentage point drop in the participation rate.
That means slack is being pushed out of official labor force estimates, which means the official unemployment rate is largely unchanged even as hidden unemployment rises.
Again, keep in mind the “what-if” analysis above, and look at the impact of declining engagement below.
The chart below shows the national unemployment rate from January 1980 to December 2022. Longer time series help to form some perspective on what is happening now.
Broad labor underutilization rate rises 0.3 percentage points to 9.6% in December 2022
1. The underemployment rate rose by 0.2 percentage points to 6.1% (an increase of 32,100).
2. The total number of underemployed persons is 862,900.
3. The total labor force underutilization rate (unemployed plus underemployment) increased by 0.3 percentage points to 9.6%.
4. A total of 1,361,700 people were unemployed or underemployed.
The chart below plots Australia’s seasonally adjusted underemployment rate (blue line) from April 1980 to December 2022 and the broad underemployment rate (green line) for the same period.
The difference between the two lines is the unemployment rate.
Teen labor market worsens in December 2022
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 graph 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 describing the change in employment relative to each cohort’s underlying population.
Judging from recent developments:
1. The proportion of males increased by 0.3 percentage points from the previous month.
2. The proportion of women dropped by 2 percentage points.
3. The overall youth employed population decreased by 0.8 percentage points compared with the current month.
4. This reverses the recent trend of female adolescents achieving better grades than 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. The labor market begins to enter a recession – albeit slowly declining in December 2022, with employment falling by 14,600 (-0.1%), although full-time employment continues to grow, outweighed by a decline in part-time employment.
2. The participation rate fell by 0.2 percentage points, which means that the reduction in the labor force reduced the increase in the unemployment rate due to the decline in employment.
3. However, the underlying (“hypothetical”) unemployment rate was closer to 5.4%, rather than the official unemployment rate of 3.5%, suggesting that the labor market remains weak.
4. There are still 1,361,700 Australian workers who are unemployed in some way (officially unemployed or underemployed).
Enough for today!
(c) Copyright 2023 William Mitchell. all rights reserved.
