Wednesday, November 30, 2022
HomeEconomyAustralian Labour Market - Slowing to Stasis - Bill Mitchell - Modern...

Australian Labour Market – Slowing to Stasis – Bill Mitchell – Modern Monetary Theory


The Australian Bureau of Statistics (ABS) released its latest labour force figures today (20 October 2022) – Australian workforce – September 2022. The labor market slowed markedly in September 2022, with little or no gain in employment (0.01%), and the unemployment rate rose slightly as labor force growth outpaced employment. With a constant participation rate, this is a sign that things are getting worse. The base (“hypothetical”) unemployment rate is closer to 6.1%, not the official 3.5%. There are still 1.3468 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. But that is changing as immigration increases. Overall, the situation is slightly worse than in September.

The summary of the ABS labor force (seasonally adjusted) estimate for September 2022 is:

  • Employment rose by 900 (0.01%) – full-time employment rose by 13,300 and part-time employment fell by 12,400.
  • Unemployment rose by 8,800 to 499,400.
  • The official unemployment rate remained at 3.5%.
  • The participation rate remained unchanged at 66.6%.
  • The employment-to-population ratio fell 0.1 percentage point to 64.2%.
  • Total monthly hours decreased by 1.853 billion hours (-0.6%).
  • The underemployment rate remained unchanged at 6% (up slightly by 9,400). In total, there are 847,400 underemployed workers. Total labor force underutilization (unemployment plus underemployment) rose 0.2 percentage points, or 9.6%. A total of 1.3468 million were unemployed or underemployed.

In its– media release – ABS states:

Seasonally adjusted unemployment rate held at 3.5% in September 2022…

In September 2022, seasonally adjusted employment increased by 1,000 (0.01%), less than the increase in the population aged 15 and older (0.08%)…

On a seasonally adjusted basis, the participation rate held steady at 66.6%, in line with relatively small changes in employment and unemployment…

While job growth has slowed in recent months, nearly half a million people are still employed each month, with roughly the same number of monthly departures.

As a result, net job growth has fallen sharply, which could be a harbinger of worse as the effects of rising interest rates and government spending cuts begin to interact.

Employment increased by 900 (0.01%) in September 2022

1. The number of full-time employees increased by 58,800, and the number of part-time employees decreased by 25,300.

2. The employment-population ratio was 64.2%, down 0.1 percentage points.

3. In February 2020, employment in Australia was 596,800 (net) jobs (4.6%) 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 September 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).

The ratio fell by 0.1 percentage points to 64.2% in September 2022 – a sign that the situation is deteriorating.

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 36,300 in 2021 as lockdowns eased.

3. The average monthly change is 31K through 2022 and decreases as the month progresses.

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.

Work hours decreased by 1.853 billion hours in September 2022 (-0.6%)

Substantial reduction as activity slows

The chart below shows the monthly growth rate (percentage) over the past 24 months.

The dark linear line is a simple regression trend (subject to several outlier results) for monthly changes.

Actual and Trend Employment

The Australian labour market is now larger than it was in February 2020. But if it continues to expand on its previous trend, it still has some 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 September 2022, the shortfall increased by 24,690 jobs to 171,600 due to a slowdown in employment.

Population Slowdown – “What-If” Unemployment Analysis

The graph below shows Australia’s working-age population (15+) from January 2015 to September 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 following Covid restrictions on immigration.

By September 2022, the civilian population was 534,100 less than when pre-Covid trends continued.

The graph below shows the evolution of the actual unemployment rate from January 1980 to September 2022, the dotted line is the “what if” rate, calculated by assuming the most recent peak participation rate (recorded in June 2022 = 66.7%) out), extrapolated working-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 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 unemployment rate in September 2022 will not be 3.5%, but 6.1%.

The finding raises a rather different perspective on what has happened since the onset of the pandemic.

Unemployment rises by 8,800 to 499,400 in September 2022

Unemployment rose because net job growth (0.9 million) was lower than labor force growth (9.8 million).

With a constant participation rate, this shows that things are improving.

Also keep in mind the “what-if” analysis above, and see the impact of declining engagement below.

The graph below shows the national unemployment rate from April 1980 to September 2022. Longer time series can help form some perspective on what is going on right now.

In September 2022, broad labor underutilization increased by 0.2 percentage points to 9.6%

1. The underemployment rate remained unchanged at 6% (a slight increase of 9,400).

2. There were 847,400 underemployed workers.

3. The total underutilization of the labor force (unemployment plus underemployment) increased by 0.2 percentage points, or 9.6%. Unemployment and underemployment both rose, resulting in an increase of 0.2 percentage points.

4. The total number of unemployed or underemployed workers was 1.3468 million.

The graph below plots Australia’s seasonally adjusted underemployment rate from April 1980 to September 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.

Teen labor market improves in September 2022

Both full- and part-time employment for teens rose in September, albeit at an overall slowdown.

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 4.2 percentage points since April 2008, a month-on-month decrease of 0.8 percentage points. It is now 4.6 percentage points above March 2020 levels.

2. The proportion of women is 4 percentage points higher than the April 2008 level. It fell 0.9 percent for the month. It is now 8.3 percentage points above March 2020 levels.

3. The overall employment-to-population ratio of young people has dropped by 0.2 percentage points since April 2008, and decreased by 0.8 percentage points month-on-month. It is now 6.4 percentage points above March 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 slowed markedly in September 2022, with almost no growth in employment (0.01%), and the unemployment rate rose slightly as labor force growth outpaced employment.

2. With the participation rate unchanged, this indicates that the situation is deteriorating.

3. The base (“hypothetical”) unemployment rate is closer to 6.1%, not the official 3.5%.

4. There are still 1,346,800 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. But that is changing as immigration increases.

Enough for today!

(c) Copyright 2022 William Mitchell. all rights reserved.



Source link

RELATED ARTICLES

Most Popular

Recent Comments