The Australian Bureau of Statistics (ABS) released its latest labor force data today (15 December 2022) – Australian workforce – November 2022. The labor market continued to improve in November 2022, with a relatively strong increase in employment of 64,000 (0.5%) supported by strong growth in full-time and part-time employment. The participation rate also rose by 0.2 percentage points, meaning that the change in the labor force was greater than the change in employment, so the official unemployment rate rose. There is some evidence that more people are taking on extra work to cope with cost of living pressures. While all of this points to a fairly tight labor market, the underlying (“assumed”) unemployment rate is closer to 5.1% rather than the official 3.4%. There are still 1,325,500 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 November 2022 is:
- Employment rose by 64,000 (0.5%) – full-time employment rose by 34,200 and part-time employment rose by 29,800.
- The number of unemployed rose by 740 to 491,700.
- The official unemployment rate was little changed at 3.4%.
- The participation rate rose 0.2 percentage points to 66.8%, returning to a record high.
- The employment-to-population ratio rose 0.1 percentage point to 64.3%.
- Total monthly hours decreased by 8.5 million hours (-0.45%).
- The underemployment rate fell 0.2 percentage points to 5.8% (-15,700). Overall, there are 829,800 underemployed workers. The overall labor force underutilization rate (unemployed plus underemployment) fell by 0.1 percentage point, or 9.3%. A total of 1,321,500 people were unemployed or underemployed.
In its– media release – The ABS states:
The participation rate rose 0.2 percentage points in November to 66.8%, returning to the all-time high we saw in June 2022. 1.0 percentage points higher than before the pandemic…
November’s job growth was in line with other labor market indicators showing continued growth through 2022, such as employment data. Hours worked are also well above pre-pandemic levels as employment continues to be strong…
Despite relatively strong growth in hours worked in 2022, higher-than-usual reductions in hours due to illness continue to…
In November we saw an increase of 50,000 in the number of people whose hours were reduced due to illness, to over 500,000 (520,000), which is still about a third higher than what we typically see for this time of year… …
Conclusion: Strengthening job growth and increased participation are counteracting RBA rate hikes.
However, there is some evidence that people are working multiple jobs in response to cost-of-living pressures.
Employment increased by 64,000 (0.5%) in November 2022
1. Full-time employment increased by 34,200, and part-time employment increased by 29,800.
2. The employment-to-population ratio increased by 0.2 percentage points to 64.5%.
3. Employment in Australia is 782,600 (net) jobs (6%) 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 November 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 November 2022, the ratio increased by 0.2 percentage points to 64.5%, a record high.
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 -9k in 2020, rising to 35.9k in 2021 as lockdown measures eased.
3. From 2022 to the present, the average monthly change is 41,800.
The graph below shows the average monthly change (in thousands) of full-time and part-time employment (bottom graph) since 1980.
8.5 million fewer hours worked (-0.45%) in November 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 (slope by the two outlier results).
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
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 November 2022, the gap has narrowed by 38,600 to 32,100.
Population slowdown – “what-if” unemployment analysis
The graph below shows Australia’s working-age population (15+) from January 2015 to November 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 November 2022, the civilian population was 378,100 fewer than the November 2022 population.
But the gap is narrowing as border restrictions are lifted.
The chart below shows the evolution of the real unemployment rate since January 1980 to November 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 unemployment rate in November 2022 is not 3.4%, but 5.1%.
The finding skews sharply different from what has happened since the pandemic began.
Unemployment rises by 740 to 491,700 in November 2022
The unemployment rate rose as net employment gains (64,000) outpaced gains in the labor force (71,300), and the participation rate rose by 0.2 percentage points.
That’s a good sign – net job growth and more people returning to work – although there is some evidence that some people are taking on extra work to cope with rising cost-of-living pressures.
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 January 1980 to November 2022. Longer time series help build some perspective on what’s happening right now.
Broad labor underutilization rate fell 0.1 percentage point to 9.3% in November 2022
1. The underemployment rate decreased by 0.2 percentage points to 5.8% (a decrease of 15,700 people).
2. The total number of underemployed persons is 829,800.
3. The total labor underutilization rate (unemployed plus underemployment) fell 0.1 percentage points to 9.3 percentage points.
4. The total number of unemployed and underemployed workers was 1.3215 million.
The chart below plots Australia’s seasonally adjusted underemployment rate (blue line) from April 1980 to November 2022 and the broad underemployment rate (green line) for the same period.
The difference between the two lines is the unemployment rate.
Youth labor market improves in November 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 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 0.1 percentage points month-on-month.
2. The proportion of women increased by 2.8 percentage points.
3. The employment population of teenagers increased by 1.3 percentage points compared with 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. The labor market continued to improve in November 2022, with a relatively strong increase in employment of 64,000 (0.5%), driven by strong growth in both full-time and part-time employment.
2. The participation rate also rose by 0.2 percentage points, meaning that the change in the labor force was greater than the change in employment, so the official unemployment rate rose.
3. There is evidence that more and more people are taking on extra work in response to cost-of-living pressures.
4. While all of this points to a fairly tight labor market, the underlying (“assumed”) unemployment rate is closer to 5.1% than the official 3.4%.
5. There are still 1,325,500 Australian workers who are unemployed in some way (officially unemployed or underemployed).
6. The only reason the unemployment rate is so low is that underlying population growth has remained low after border closures for the past two years. But that is changing as immigration increases.
Enough for today!
(c) Copyright 2022 William Mitchell. all rights reserved.
