Yesterday we had wage data. Today the Australian Bureau of Statistics (ABS) released the latest labor force data (May 18, 2023) – Australian workforce – April 2023. The April result was the second straight month of weak data. Employment fell by 4.3 million, the participation rate fell 0.1 percentage point, and the number of unemployed rose by 18,400, although a decline in job seekers put some pressure on the situation. The unemployment rate rose from 3.5% to 3.7%. All major aggregates are now falling – employment falling (also relative to population), participation falling and unemployment rising. With yesterday’s wages data still showing only modest wage growth and real wages continuing to slash, today’s figures suggest the economy is deteriorating. The underlying (“assumed”) unemployment rate is close to 4.9%, suggesting that the labor market remains weak. The broad underutilization rate rose by 0.1 percentage points to 9.9%, meaning that 1,409,900 Australian workers were still unemployed in some way (officially unemployed or underemployed).
A summary of the ABS labor force (seasonally adjusted) estimates for April 2023 is:
- Employment fell by 4,300 (-0.0) – full-time employment fell by 27,100 and part-time employment rose by 22,800.
- The number of unemployed rose by 18,400 to 528,000.
- The official unemployment rate rose 0.2 percentage points to 3.7%.
- The participation rate fell 0.1 percentage point to 66.7%.
- The employment-to-population ratio fell 0.2 percentage points to 64.2%.
- Total monthly hours increased by 49 million hours (2.6%).
- The underemployment rate fell 0.1 percentage point to 6.1% (-12,000). Overall, there are 881,900 underemployed workers. The overall labor force underutilization rate (unemployed plus underemployment) rose 0.1 percentage point to 9.8%. A total of 1,409,900 people were unemployed or underemployed.
In its– media release – The ABS states:
…the number of employed fell by about 4,000, the number of unemployed rose by 18,000, and the unemployment rate rose to 3.7% …Similarly, the employment-to-population ratio fell 0.2 percentage points to 64.2%, and the participation rate fell 0.1% percentage points to 66.7%.
Conclusion: All major aggregates are now falling – employment falling (also relative to population), participation falling and unemployment rising.
With yesterday’s wages data still showing only modest wage growth and real wages continuing to slash, today’s figures suggest the economy is deteriorating.
The RBA should be happy to force people out of work for no good reason.
Employment falls by 4,300 in April 2023
1. Full-time employment decreased by 27,100, while part-time employment increased by 22,800.
2. The employment-to-population ratio decreased by 0.2 percentage points to 64.2%.
Overall deterioration.
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 April 2023, using seasonally adjusted data.
I took observations from September 2021 to January 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 April 2023, the ratio decreased by 0.2 percentage points to 64.2%.
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 -890 in 2020, rising to 36,300 in 2021 as lockdown measures eased.
2. The average monthly change in 2022 is 40,300.
3. By 2023, the average change is 28,100, and the rate of decline is very fast.
The graph below shows the average monthly change (in thousands) of full-time and part-time employment (bottom graph) since 1980.
49 million more hours worked (2.6%) in April 2023
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).
Why did hours worked increase while overall employment decreased?
The ABS states:
This is because fewer people are working fewer hours than usual over Easter
Actual and Trend Employment
The Australian labor market is now larger than it was in March 2020, and employment is on the verge of returning to pre-pandemic trends.
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.
By April 2023, the gap narrows to just 13,200 jobs.
Population slowdown – “what-if” unemployment analysis
The graph below shows Australia’s working-age population (15+) from January 2015 to April 2023. 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.
The April 2023 civilian population is 266,300 fewer than the April 2023 civilian population, if pre-pandemic trends continue.
The chart below shows the evolution of the real unemployment rate since January 1980 to April 2023, 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 March 2020) and actual employment since March 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.
Therefore, taking into account employment performance since the pandemic, the unemployment rate in April 2023 would be 4.9%, rather than the current 3.7%.
So despite the RBA’s claim that the labor market is “tight”, the reality is different.
Unemployment rises 18,400 to 528,000 in April 2023
Even with the decline in the participation rate (fewer people looking for work), the unemployment rate rose as the labor force rose by 14.1 thousand, driven by underlying population growth, while employment fell by 4.3 million.
The graph below shows the national unemployment rate from January 1980 to April 2023. Longer time series help to form some perspective on what is happening now.
Broad workforce underutilization rate rises 0.1 percentage point to 9.8% in April 2023
1. The underemployment rate decreased by 0.1 percentage points to 6.1% (-12,000).
2. The total number of underemployed workers is 881,900.
3. The total labor underutilization rate (unemployed plus underemployment) rose 0.1 percentage point to 9.8%.
4. A total of 1.4099 million people were unemployed or underemployed.
The chart below plots Australia’s seasonally adjusted underemployment rate (blue line) from April 1980 to April 2023 and the broad underemployment rate (green line) for the same period.
The difference between the two lines is the unemployment rate.
Apr 2023 Overall teenage labor market is on a downward trend
Teens lost a net 4,000 jobs in April, with full-time jobs gaining 10,200 and part-time jobs falling by 14,200.
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 describing the change in employment relative to each cohort’s underlying population.
Judging from recent developments:
1. The proportion of males decreased by 0.4 percentage points from the previous month.
2. The proportion of women decreased by 0.4 percentage points.
3. The overall youth employed population decreased by 0.4 percentage points compared with the current month.
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 April result was the second consecutive month of weaker data. Employment fell by 4.3 million, the participation rate fell 0.1 percentage point, and the number of unemployed rose by 18,400, although a decline in job seekers put some pressure on the situation. The unemployment rate rose from 3.5% to 3.7%.
2. All major aggregates are now falling – employment falling (also relative to population), participation falling and unemployment rising.
3. While yesterday’s wage data still showed modest wage growth and continued deep cuts in real wages, today’s data suggests the economy is deteriorating. The underlying (“assumed”) unemployment rate is close to 4.9%, suggesting that the labor market remains weak.
4. The broad underutilization rate rose by 0.1 percentage point to 9.9%, meaning that 1,409,900 Australian workers were still unemployed in some way (officially unemployed or underemployed).
5. Despite what mainstream commentators claim, the large slack workforce means Australia is not really close to full employment.
Enough for today!
(c) Copyright 2023 William Mitchell. all rights reserved.
