The Australian Bureau of Statistics released its latest labour force figures today (17 March 2022) – Australian workforce – March 2022. The labor market has stabilized after a sharp rebound last month as Covid restrictions were largely lifted. Employment growth was moderate. There are still 1.43 million Australian workers who are in some way unemployed (officially unemployed or underemployed). We’re seeing the effect of flat population growth on growing demand for workers, which is why the unemployment rate is falling so fast. The base (“hypothetical”) unemployment rate is closer to 6.4%, not the official 4%.
The summary of the ABS labor force (seasonally adjusted) estimate for March 2022 is:
- Employment rose by 17,900 (0.1%) – full-time employment rose by 20,500 and part-time employment fell by 2,700.
- Unemployment fell by 12,100 to 551,300.
- The official unemployment rate was steady at 4%.
- The participation rate was steady at 66.4%.
- The employment-to-population ratio was stable at 63.8%.
- Total monthly hours worked decreased by 10 million hours (0.6%).
- The underemployment rate fell 0.3 percentage points to 6.3 percent (down 12,400). In total, there are 882,300 underemployed workers. Total labor underutilization (unemployment plus underemployment) fell 0.3 percentage points to 10.3 percent. A total of 1,433,500 people were unemployed or underemployed.
In its– media release – ABS notes:
The unemployment rate fell slightly in March as payrolls increased by 18,000 and the unemployment rate fell by 12,000, but remained at 4.0% rounded up…
Employment rose for the fifth straight month, rising by about 18,000 (0.1%) in March. About 220,000 people (1.7%) above the June 2021 pre-Delta high…
With flooding in NSW and Queensland, a higher-than-usual number of people reported working hours were cut due to severe weather in March. This is in addition to a large number of people unable to work due to the disease, which reflects further disruption of the Omicron variant,
Things stabilized in March after a sharp rebound last month following the easing of Covid restrictions.
Employment increased by 17,900 in March 2022
1. Job growth was very slow (after a sharp rebound in February) – just 0.1%.
2. The number of full-time employment increased by 20,500, and the number of part-time employment decreased by 2,700.
3. In February 2020, employment in Australia was 394,500 (net) jobs (3%) above pre-pandemic levels.
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 March 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 March 2008 (last cycle low unemployment rate).
It fell with the onset of the global financial crisis, recovered on the boost provided by the fiscal stimulus package, but then fell back again on the federal government’s foolish attempt to run a fiscal surplus in 2012 with fiscal austerity.
There are two forces at work here – the denominator (population) clearly provides favorable pressure as the lack of immigration due to external border closures slows population growth.
This has forced employers to work harder to find workers already in Australia, rather than discriminating against the unemployed.
The numerator (employment) is clearly stronger as restrictions are eased.
The ratio remained stable in March 2022.
Looking at the current monthly performance, the graph below shows the average monthly employment change for the calendar year from 1980 to 2022 (so far).
1. The labor market weakened substantially in 2018, and the situation deteriorated further in 2019.
2. Average employment change in 2020 was -8,400, rising to 33,300 in 2021 as lockdowns eased.
3. The average monthly change is 41,200 through 2022, but this number will decrease significantly over time.
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.
This crisis is different, however, as most of the job losses are the result of lockdowns and forced business closures in sectors dominated by part-time employment.
Actual and Trend Employment
Australia’s labour market is now larger than it was in March 2020. But if it continues to expand on its previous trend, it still has a long way to go.
The graph 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 March 2020.
March 2022, Gap Increase Due to slow employment growth, 740 to 223,500 jobs were added.
Work hours decreased by 10.2 million hours in March 2022 (-0.56%)
The decline was due to flooding in Queensland and NSW and more workers out of work due to Covid-19.
The chart below shows the monthly growth rate (percentage) over the past 24 months.
The dark line is a simple regression trend of monthly changes (influenced by the February results).
Population Slowdown – “What-If” Unemployment Analysis
The graph below shows Australia’s working-age population (15+) from January 2015 to March 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.
With foreign borders just beginning to open, net migration remains low.
This flattening is forcing employers to work harder to recruit workers, which is one reason the unemployment rate has fallen so quickly under the circumstances.
The graph below shows the evolution of the actual unemployment rate from January 1980 to March 2022, the dotted line is the “what if” rate, calculated by assuming the most recent peak participation rate (recorded in March 2022 = 66.4%) out), extrapolated working-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 working-age population trajectory followed past trends.
In this blog post – Australia’s external border closures cut unemployment by around 2.7 percentage points (March 28, 2022), I provide a detailed analysis of how I calculate the “hypothetical” unemployment rate.
So, given employment performance since the pandemic, the unemployment rate in March 2022 will not be 4%, but 6.4%.
The finding raises a rather different perspective on what has happened since the onset of the pandemic.
State and territory employment trends
Major flooding on the East Coast and a growing wave of new Omicron variants combined to dampen a rebound in the labor market after lockdowns were lifted.
The chart below shows the evolution of employment by state and territory since March 2020.
Employment levels in NSW (102.1) and Victoria (101.2) returned to March 2020 levels (index of 100).
Queensland (106), South Australia (102.9), Western Australia (106.3) and Tasmania (101.4) were also above pre-pandemic levels.
But regions – ACT (98.3) and NT (96.7) – were lower.
Unemployment down 12,100 to 551,300 in March 2022
The official unemployment rate is steady at 4% (but keep in mind the “what if” analysis above).
The graph below shows the national unemployment rate from March 1980 to March 2022. Longer time series can help form some perspective on what is going on right now.
In March 2022, widespread labor underutilization decreased by 0.3 percentage points to 10.3%
Results for March 2022 (seasonally adjusted):
1. The underemployment rate fell by 0.3 percentage points to 6.3% (down 32,900) – the result of an increase in full-time jobs.
2. There were 882,300 underemployed workers.
3. Total labor force underutilization (unemployment plus underemployment) decreased by 0.3 percentage points to 10.3%.
4. The total number of unemployed and underemployed workers was 1.4335 million.
The graph below plots Australia’s seasonally adjusted underemployment rate (blue line) for the period from March 1980 to March 2022 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.
Teen labor market continues to improve in March 2022
The gains have been especially pronounced for teens as worker shortages continue to influence employers’ choices. Employers are forced to hire available workers whose ability to indulge in discriminatory behavior and prejudice (“they are too young” or “too inexperienced” etc.) is greatly reduced.
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 scale (relative to their size in the population), the graph below shows employment to population ratio As of June 2008, for males, females and the total number of 15-19 year olds.
You can interpret this graph as describing job losses relative to the base population of each cohort. We expect (at least) that this rate should be constant, if not rising (depending on school participation rates).
1. The proportion of males has dropped by 4.9 percentage points since March 2008, and increased by 1.8 percentage points month-on-month. It is now 3.9 percentage points above March 2020 levels.
2. The proportion of women is 2.7 percentage points higher than the March 2008 level. It gained 1.6 points this month. It is now 6.9 percentage points above March 2020 levels.
3. Since March 2008, the overall ratio of youth employment to population has decreased by 1.2 percentage points, and the chain has increased by 1.7 percentage points. It is now 5.4 percentage points above March 2020 levels.
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 stabilized after a sharp rebound last month as COVID-19 restrictions were largely lifted.
2. Employment growth is moderate.
3. There are still 1.43 million Australian workers who are in some way unemployed (officially unemployed or underemployed).
2. We see the effect of flat population growth on growth in worker demand, which is why unemployment has fallen so fast.
4. The base (“hypothetical”) unemployment rate is closer to 6.4%, not the official 4%.
Enough for today!
(c) Copyright 2022 William Mitchell. all rights reserved.
