The Australian Bureau of Statistics (ABS) released its latest labour force figures today (14 July 2022) – Australian workforce – June 2022. The labor market improved in June after rising in May after months of weakness. Strong full-time employment growth is a good sign, as is an increase in participation rates. This especially benefits young workers. The official unemployment rate fell to its highest level since 1974, but the base (“hypothetical”) unemployment rate was closer to 5.7% instead of the official 3.5%. However, underemployment rose sharply, and while the unemployment rate fell by 54,300, the number of part-time workers looking to work more hours rose by 49,700. In other words, employment growth is skewed towards the lower end of the working hours distribution. There are still 1.3509 million Australian workers who are in some way unemployed (officially unemployed or underemployed). The only reason unemployment is so low is that potential population growth remains low after border closures for the past two years. Stay tuned for a deterioration in the labor market in the coming months as the rate of coronavirus infections rises rapidly and some 780,000 workers are already working a few hours longer than usual due to illness.
The ABS labor force (seasonally adjusted) estimate summary for June 2022 is:
- Employment rose by 88,400 (0.7%) – full-time employment rose by 52,900 and part-time employment rose by 35,500.
- Unemployment fell by 54,300 to 493,900.
- The official unemployment rate fell 0.4 percentage points to 3.5%.
- The participation rate rose 0.1 percentage point to 66.8%.
- The employment-population ratio rose 0.3 percentage points to 64.1%.
- The total number of hours per month has not changed.
- Underemployment increased by 0.4 percentage points to 6.1% (+49,700). In total, there are 857,000 underemployed workers. Total labor force underutilization (unemployment plus underemployment) remained unchanged at 9.6%—the rise in underemployment was offset by a decline in the official unemployment rate. A total of 1,350,900 people were unemployed or underemployed.
In its– media release – ABS states:
Unemployment fell 0.4 percentage points to 3.5% as employment rose by 88,000 and unemployment fell by 54,000…
This is the lowest unemployment rate since August 1974, when the unemployment rate was 2.7%, and the survey is conducted on a quarterly basis…
The sharp drop in the unemployment rate this month reflects more people entering the workforce than usual and fewer people out of work than usual. Together, these movements reflect an increasingly tight labor market, high demand to hire and retain workers, and ongoing labor shortages…
The number of unemployed in June 2022 (494,000) is almost the same as the number of vacancies…
The number of people cutting hours due to illness continued to remain high amid a high number of COVID-19 cases in June. This reflects the continued disruption associated with Omicron variants and flu cases…
In June 2022, around 780,000 people were working less than usual due to their illness, almost double the usual number we see at the start of winter.
Employment increased by 88,400 in June 2022
1. Employment growth continued to be strong, up just 88,400 (0.7)%.
2. The number of full-time employment increased by 52,900, and the number of part-time employment increased by 35,500.
3. Employment in Australia was 598,400 (net) jobs (4.6%) higher than pre-pandemic levels in February 2020.
The chart below shows month-over-month growth in full-time (blue bars), part-time (grey bars), and total employment (green lines) for the 24 months to June 2022 using seasonally adjusted data.
The table below provides an accounting summary Labour market performance over the past six months Provides a longer-term perspective, with monthly changes, to better assess trends.
Given changes in workforce estimates, sometimes check Employment-to-population ratio (%) Because the underlying population estimates (the denominator) are less cyclical and variable than the labor force estimates. This is another measure of the robustness of activity to the unemployment rate, which is sensitive to labor force fluctuations.
The chart below shows the employment-to-population ratio since April 2008 (ie, since the global financial crisis).
There are two forces at work here – the denominator (population) is clearly driving the ratio down as population growth slows and it takes a while for external borders to open to affect inflows.
This has forced employers to work harder to find workers already in Australia, rather than discriminating against the unemployed.
The numerator (employment) is obviously positive.
By June 2022, the ratio increased by 0.3 percentage points to 64.4% – a strong result.
For perspective, the graph below shows the average monthly employment change for the calendar year from 1980 to 2022 (so far).
1. Average employment change in 2020 was -8,400, rising to 33,300 in 2021 as lockdowns eased.
3. From 2022 to the present, the monthly average change is 49,400.
The graph below shows the average monthly change (in thousands) in full-time and part-time employment (below graph) since 1980.
The interesting result is that during recessions or slowdowns, most of the adjustment is full-time employment. Even if full-time employment growth is negative, part-time employment typically continues to grow.
Actual and Trend Employment
The Australian labour market is now larger than it was in April 2020. But if it continues to expand on its previous trend, it still has a long way to go.
The chart below shows total employment (blue line) and what employment would have been if it continued to grow at the average growth rate from 2015 to April 2020.
In June 2022, the employment gap decreased by 62,900 jobs to 97,300 due to stronger-than-usual job growth.
No change to working hours in June 2022
The chart below shows the monthly growth rate (percentage) over the past 24 months.
The dark linear line is a simple regression trend of monthly changes (sloped by a pair of outlier results).
Population Slowdown – “What-If” Unemployment Analysis
The graph below shows Australia’s working-age population (15+) from January 2015 to June 2022. The dotted line is the projected increase if pre-pandemic trends continue.
The difference between the two lines is the decline in the working-age population due to Covid restrictions.
By June 2022, the civilian population was 310,600 less than when pre-Covid trends continued.
The graph below shows the evolution of the actual unemployment rate from January 1980 to June 2022, the dotted line is the “what if” rate, calculated by assuming the most recent peak participation rate (recorded in June 2022 = 66.8%) out), extrapolated working-age population (based on growth rates from 2015 to April 2020), and actual employment since April 2020.
It shows what the unemployment rate would be given real job growth if the working-age population trajectory followed past trends.
In this blog post – Australia’s external border closures cut unemployment by around 2.7 percentage points (April 28, 2022), I provide a detailed analysis of how I calculate the “hypothetical” unemployment rate.
So, given employment performance since the pandemic, the June 2022 unemployment rate will not be 3.5%, but 5.7%.
The finding raises a rather different perspective on what has happened since the onset of the pandemic.
Unemployment down 54,300 to 493,900 in June 2022
Despite the rise in participation, the unemployment rate fell this month as job growth was strong enough to absorb growth in the labor force.
The official unemployment rate is 3.5%. Also keep in mind the “what-if” analysis above and the drop in engagement (see below).
The graph below shows the national unemployment rate from April 1980 to June 2022. Longer time series can help form some perspective on what is going on right now.
In June 2022, widespread labor underutilization increased by 0.4 percentage points to 6.1%
Results for June 2022 (seasonally adjusted):
1. The underemployment rate rose by 0.4 percentage points to 6.1% (+49,700).
2. There were 857,000 underemployed workers.
3. Total labor force underutilization (unemployment plus underemployment) remained unchanged at 9.6% – the rise in underemployment was offset by a decline in the official unemployment rate.
4. The total number of unemployed and underemployed workers was 1.3509 million.
Given that the number of hours worked per month has not changed, but employment growth has been strong, and the underemployment rate has risen, it is clear that many of the new jobs are at the lower end of the working hours distribution, while the jobs that have been laid off are at the higher end. , given this net result.
The graph below plots Australia’s seasonally adjusted underemployment rate from April 1980 to June 2022 (blue line) and the broad underemployment rate (green line) over the same period.
The difference between the two lines is the unemployment rate.
The three cyclical peaks correspond to the recessions of 1982, 1991, and more recently.
Another difference now from the previous two cycles is that the recovery sparked by the fiscal stimulus of 2008-09 did not last, and once there was a “fiscal surplus” mania in 2012, things quickly reversed.
The earlier two peaks were sharp but steadily declined. The last peak disappeared after stimulation, but reappeared when the stimulation was withdrawn.
Stronger teen labor market in June 2022
The table below shows the distribution of net job creation by full-time/part-time status and age/gender category (15-19 and others) for the last month and the past 12 months.
To put youth employment in a context of size (relative to their size in the population), the graph below shows employment-to-population ratios for men, women, and the general population aged 15-19 since June 2008.
You can interpret this graph as describing job losses relative to the base population of each cohort.
1. The proportion of males has dropped by 3.1 percentage points since April 2008, and increased by 0.6 percentage points month-on-month. It is now 5.7 percentage points above April 2020 levels.
2. The proportion of women is 4.3 percentage points higher than the April 2008 level. It rose 0.2 percent for the month. It is now 8.6 percentage points above April 2020 levels.
3. The overall employment ratio of young people has increased by 0.5 percentage points since April 2008, and increased by 0.4 percentage points month-on-month. It is now 7.1 percentage points above April 2020 levels.
4. So relatively speaking, female adolescents perform better than male adolescents.
in conclusion
My standard monthly warning: Given how the workforce survey is constructed and implemented, we always have to carefully interpret monthly changes.
My overall assessment is:
1. The labor market improved in June after rising in May after months of weakness.
2. Strong full-time employment growth is a good sign, as is an increase in participation rates. This especially benefits young workers.
3. The official unemployment rate fell to the highest level since 1974, but the base (“hypothetical”) unemployment rate was closer to 5.7%, not the official 3.5%.
4. However, the underemployment rate rose sharply, and while the unemployment rate fell by 54,300, part-time workers looking to increase their hours rose by 49,700. In other words, employment growth is skewed towards the lower end of the working hours distribution.
4. There are still 1350,900 Australian workers who are in some way unemployed (officially unemployed or underemployed). The only reason unemployment is so low is that potential population growth remains low after border closures for the past two years.
Enough for today!
(c) Copyright 2022 William Mitchell. all rights reserved.
