The Australian Bureau of Statistics (ABS) released its latest labor force data today (June 15, 2023) – Australian workforce – May 2023. The May result reversed two straight months of weak results from labor force surveys. Employment rose by 75,900 (a strong monthly result), the participation rate rose 0.1 percentage point to a record high, and the number of unemployed fell by 16,500. But one month is not a trend, and it should be emphasized that 10% of the working-age population available and willing to work is being wasted in one way or another – unemployed or underemployed. Despite what mainstream commentators claim, this level of slack means Australia is not really close to full employment. I’m waiting for the RBA chief to claim that falling unemployment justifies further rate hikes. No, but since when logic and facts get in the way of his agenda.
A summary of the ABS labor force (seasonally adjusted) estimates for May 2023 is:
- Employment rose by 75,900 (0.5%) — full-time employment rose by 61,700 and part-time employment rose by 14,300.
- The number of unemployed fell by 16,500 to 515,900.
- The official unemployment rate fell 0.1 percentage point to 3.6%.
- The participation rate rose by 0.1 percentage point to 66.9%.
- The employment-to-population ratio rose 0.2 percentage points to 64.5%.
- Total monthly hours decreased by 36 million hours (-1.8%).
- The underemployment rate rose 0.3 percentage points to 6.4% (+45,200). Overall, there are 936,600 underemployed workers. The overall labor underutilization rate (unemployed plus underemployment) rose 0.2 percentage point to 10%. A total of 1.4525 million people were unemployed or underemployed.
In its– media release – The ABS states:
…the unemployment rate fell 0.1 percentage point to 3.6% (seasonally adjusted) in May. …
The strong job gains in May followed a small decline in April around Easter, when employment fell more than is usually seen during the holiday…
Looking back over the past two months, employment has increased by an average of about 36,000 per month. That’s still an average of 39,000 per month over the past year.
Conclusion: After a relatively weak April, the May data showed a strengthening trend.
Employment increased by 75,900 (0.5%) in May 2023
1. Full-time employment increased by 61,700, and part-time employment increased by 14,300.
2. The employment-to-population ratio increased by 0.2 percentage points to 64.5%, a record high.
The chart below shows full-time (blue bars), part-time (gray bars) and total employment (green lines) growth month-over-month using seasonally adjusted data for the 24 months to May 2023.
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).
The ratio rose by 0.2 percentage points to 64.5% in May 2023, 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 -890 in 2020, rising to 36,300 in 2021 as lockdown measures eased.
2. The average monthly change in 2022 is 40,300.
3. The average change until 2023 is 44,000 and rising.
The graph below shows the average monthly change (in thousands) of full-time and part-time employment (bottom graph) since 1980.
36 million fewer hours worked (-1.8%) in May 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).
Actual and Trend Employment
The Australian labor market is now larger than it was in March 2020, with employment numbers now exceeding 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.
Population slowdown – “what-if” unemployment analysis
The graph below shows Australia’s working-age population (15+) from January 2015 to May 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 civilian population in May 2023 is 179,100 fewer than if pre-Covid trends continued.
The graph below shows the evolution of the real unemployment rate since January 1980 to May 2023, the dashed line is the “assumed” rate assuming the most recent peak participation rate (recorded in May 2023 = 66.9%), 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 about 2.7 percentage points (April 28, 2022), I provide a detailed analysis of how I calculated the “hypothetical” unemployment rate.
Therefore, given the employment performance since the pandemic, the unemployment rate in May 2023 should be 4.2%, not the current 3.6%.
Unemployment falls by 16,500 to 515,900 in May 2023
The reversal of last month’s relatively poor results – employment growth was strong and outpaced growth in the absorption labor force, driven by growth in the underlying working-age population and higher participation rates.
All good results.
The graph below shows the national unemployment rate from January 1980 to May 2023. Longer time series help to form some perspective on what is happening now.
Broad labor underutilization rate rises 0.2 percentage points to 10% in May 2023
1. The underemployment rate rose by 0.3 percentage points to 6.4% (an increase of 45,200).
2. The total number of underemployed workers is 936,600.
3. The total labor underutilization rate (unemployment plus underemployment) rose by 0.2 percentage points to 10%.
4. The total number of unemployed and underemployed workers is 1.4525 million.
The chart below plots Australia’s seasonally adjusted underemployment rate (blue line) from April 1980 to May 2023 and the broad underemployment rate (green line) for the same period.
The difference between the two lines is the unemployment rate.
Teen labor market loses full-time jobs in May 2023
Net youth employment was 880,000 in April, with full-time jobs down 90,000 and part-time jobs up 970.
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 increased by 0.6 percentage points from the previous month.
2. The proportion of women increased by 0.2 percentage points.
3. The employed population of teenagers increased by 0.4 percentage points compared with the previous 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. Data for May reversed two consecutive months of weak labor force surveys.
2. Employment rose by 75,900 (strong monthly data), the participation rate rose 0.1 percentage point to a record high, and the number of unemployed fell by 16,500.
3. But a month is not a trend, and it should be emphasized that 10% of the working-age population available and willing to work is being wasted in one way or another – unemployed or underemployed.
4. 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.
