Today (March 21, 2024), the Australian Bureau of Statistics released the latest data – Australian workforce – February 2024, suggesting that the soft trend we observed during the holidays has reversed, likely due to changes in traffic behavior during the holidays since the pandemic. As I noted in my January analysis, changes in holiday behavior that have become apparent (many people now work zero hours in January) make it difficult to pinpoint February's results, albeit very good ones. Employment growth was strong as zero-hour workers returned to work, with net job creation easily outpacing the rise in the participation rate. Falling unemployment rates and falling underemployment are both a boost. Yet, 10.3 percent of the working-age population who are available and willing to work are wasted in some way—either unemployed or underemployed—and this proportion is growing. While mainstream commentators claim Australia is not close to full employment, it is difficult to describe it as a “tight” labor market. The unemployment rate is back at 3.7% – a level that has been remarkably stable since mid-to-late 2022, making economists who believe that raising interest rates always push unemployment higher are scoffing. With the decline in unemployment and inflation, the current unemployment rate cannot be lower than a certain NAIRU, which also makes the research and policy logic claimed by the RBA fall into mockery. The reality is that as supply factors weaken and inflation has fallen, there is no need to raise interest rates.
ABS February 2024 labor force (seasonally adjusted) estimates are summarized below:
- Employment increased by 116,500 (0.8%) – full-time employment increased by 78,200 and part-time employment increased by 38,300. Part-time jobs account for 30.6% of the total.
- The unemployment rate fell by 52,000 to 548,300.
- The official unemployment rate fell to 3.7% (-0.4 points).
- The participation rate increased by 0.1 percentage points to 66.7%.
- The employment-to-population ratio increased by 0.3 percentage points to 64.2%.
- Total monthly working hours increased by 53 million hours (+2.8%).
- The underemployment rate fell 0.1 percentage points to 6.6% (-12,500). There are a total of 974,500 underemployed workers. Total labor underutilization (unemployment plus underemployment) fell 0.5 percentage point to 10.3%. The total number of unemployed or underemployed workers was 1,522,700.
Released in ABS Media – Unemployment rate drops to 3.7% as more people go to work – ABS states:
The seasonally adjusted unemployment rate fell 0.4 percentage points to 3.7% in February…
The number of employed persons increased by approximately 116,000, the number of unemployed persons decreased by 52,000, and the unemployment rate fell to 3.7%. This was about six months ago…
More people than usual were waiting to start or return to work in December and January, leading to a sharp increase in employment in February. This means there were more people employed in February than usual, and even more than last February.
Conclusion: The results are good, but it's difficult to make a clear assessment of what's going on because holiday patterns have changed since the pandemic, so the December and January data deviate from normal traffic behavior.
In January, a large number of people working part-time said in a survey that they would return to work in February.
This appears to have occurred despite significant and substantial growth in employment, leading to a significant fall in the unemployment rate and a corresponding rise in the employment-to-population ratio.
Employment increased by 116,500 in February 2024 (0.8%)
1. The number of full-time employees increased by 78,200 (0.8%), and the number of part-time employees increased by 38,300 (0.9%).
2. The employment-to-population ratio increased by 0.3 percentage points to 64.2%.
The chart below shows the month-over-month growth in total employment, full-time employment and part-time employment over the 24 months to February 2024, using seasonally adjusted data.
The table below provides an accounting summary Labor market performance over the past six months Provides a longer-term perspective, smoothing out month-to-month variations and better assessing trends.
Given changes in labor estimates, it is sometimes useful to check labor force estimates Employment-to-population ratio (%) Because the underlying population estimate (the denominator) is less cyclical and easier to change than the labor force estimate. This is another measure of how robust economic activity is to the unemployment rate, which is sensitive to labor fluctuations.
The chart below shows the employment-to-population ratio since February 2008, the time of the global financial crisis.
The employment-to-population ratio remains stable, fluctuating slightly around current levels.
The chart below shows average monthly employment changes for calendar years from 1980 to 2023.
1. The average employment change in 2020 was -8,900, rising to 36,600 in 2021 as lockdowns eased.
2. In 2022, the average monthly change will be 44,000, and in 2023, the average monthly change will be 31,000.
3. As of 2024, the change is 65,900.
The chart below shows the average monthly change in full-time and part-time employment since 1980 (in thousands).
Total monthly hours worked increased by 53 million hours in February 2024 (+2.8%)
The strong results in February reversed January's downward trend, which was driven by behavioral changes in holiday time – more people now worked zero hours in January than before, a reversal seen in February.
The chart below shows monthly growth (in percent) over the past 48 months (omitting the period of pandemic restrictions).
The dark linear line is a simple regression trend of monthly changes.
Unemployment rate fell by 52,000 to 548,300 in February 2024
Strong job growth far outstripped rising participation rates, so the official unemployment rate fell sharply.
The chart below shows the national unemployment rate from February 1980 to February 2024. Longer time series help to develop some perspective on what is happening now.
In February 2024, the broad labor utilization rate fell by 0.5 percentage points to 10.3
1. The underemployment rate fell by 0.1 percentage points to 6.6% (-12,500).
2. There are a total of 974,500 underemployed workers.
3. The total underutilization rate of the labor force (unemployment rate plus underemployment) decreased by 0.5 percentage points to 10.3%.
4. The total number of unemployed or underemployed workers is 1.5227 million.
While the broad-based underutilization rate has fallen sharply to 10.3%, which is welcome, it still means that 1,522,700 people who are available and willing to work are not working in some way (unemployed or underemployed), making the claim a A laughing stock. Economic commentators and policy officials believe Australia is close to full employment or a tight labor market.
The chart below plots Australia's seasonally adjusted underemployment rate from April 1980 to February 2024 (blue line) and the overall underutilization rate for the same period (green line).
The difference between the two lines is the unemployment rate.
Youth labor market improved in February 2024
The overall number of youth employment increased by 12,600, with full-time employment increasing by 15,900 and part-time employment decreasing by 3,300.
The table below shows the distribution of net job creation by full-time/part-time status and age/gender category (15-19 and other) last month and the last 12 months.
To put youth employment into a scale (relative to their size in the population), the chart below shows the employment-to-population ratio for men, women and the total population aged 15-19 since July 2008.
You can interpret this graph as describing changes in employment relative to the underlying population for each cohort.
Judging from recent developments:
1. The proportion of men increased by 1.4 percentage points from the previous month.
2. The proportion of women decreased by 0.3 percentage points quarterly.
3. The overall youth employment-to-population ratio increased by 0.6 percentage points from the previous month.
The chart shows that despite an increase in February, employment opportunities for the growing teen population have continued to deteriorate since November 2022.
The Reserve Bank of Australia's deliberate desire to create unemployment in Australia may hurt this group of people more than anyone else.
As the population ages, this group is the workers of the future and we will rely on them to increase productivity.
Sabotaging their job opportunities at an age when they are about to gain skills and experience is smart policy (not!).
in conclusion
My standard monthly caveat: Given the way labor force surveys are constructed and administered, we always have to be cautious in interpreting monthly changes.
My overall rating is:
1. As I noted in my January analysis, changes in holiday behavior have become apparent (many people now work zero hours in January), making it difficult to pinpoint February's results, although they were very good.
2. Employment growth is strong as zero-hour workers return to work, with net job creation easily outpacing rising participation rates.
3. Falling unemployment rates and falling underemployment are both driving factors.
4. Yet, 10.3% of the working-age population who are available and willing to work are being wasted in one way or another – unemployed or underemployed, and this proportion is increasing.
5. Although mainstream commentators claim that Australia is not close to full employment, it is difficult to describe it as a “tight” labor market.
6. The unemployment rate returned to 3.7% – a very stable level since mid-to-late 2022, making economists who believe that raising interest rates always push up the unemployment rate laugh.
With the decline in unemployment and inflation, the current unemployment rate cannot be lower than a certain NAIRU, which also makes the research and policy logic claimed by the RBA fall into mockery.
The reality is that as supply factors weaken and inflation has fallen, there is no need to raise interest rates.
That's enough for today!
(c) Copyright 2024 William Mitchell. all rights reserved.
