The Australian Bureau of Statistics (ABS) released its latest labour force figures today (18 June 2022) – Australian workforce – May 2022. The labor market improved markedly 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 is unchanged, but the base (“hypothetical”) unemployment rate is closer to 6.1% instead of the official 3.9%. There are still 1,355,500 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.
The summary of the ABS labor force (seasonally adjusted) estimate for May 2022 is:
- Employment rose 60,600 (0.5%) – full-time employment rose 69,400 and part-time employment fell 87,000.
- Unemployment rose by 7,800 to 544,100.
- The official unemployment rate held steady at 3.9%.
- The participation rate rose 0.3 percentage points to 66.7%.
- The employment-population ratio rose 0.3 percentage points to 64.1%.
- Total monthly hours increased by 17 million hours (0.9%).
- The underemployment rate fell 0.4 percentage points to 5.7 percent (down 50,100). In total, there are 807,300 underemployed workers. Total labor underutilization (unemployment plus underemployment) fell 0.3 percentage points to 9.6 percent. A total of 1,355,500 people were unemployed or underemployed.
In its– media release – ABS states:
Employment rose by 61,000 in May compared to 4,000 in April, coinciding with Easter, school holidays, the impact of flooding and ongoing disruptions related to the Omicron variant…
Employment rose for the seventh straight time in May 2022, following the easing of lockdown restrictions at the end of 2021…
As the number of COVID-19 cases rose in May, the number of people cutting hours due to illness continued to remain high. This reflects continued disruptions associated with variants of Omicron and increasing cases of influenza…
The number of people working less than usual due to their own illness rose to about 781,000 in May, nearly double the normal number for the month.
Employment increased by 60,600 in May 2022
1. After two weak months, employment growth was even stronger — up just 60,600 (0.45)%.
2. But this total masks a major shift from part-time to full-time work (with the consequences of underemployment – see below).
2. The number of full-time employees increased by 69,400, and the number of part-time employees decreased by 87,000.
3. In February 2020, employment in Australia was 510,000 (net) jobs (3.9%) 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 line) for the 24 months to May 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 play 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 May 2022, the ratio increased by 0.3 percentage points to 64.1% – 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 41,600.
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 May 2022, the employment gap decreased by 35,200 jobs to 160,000 due to stronger-than-usual job growth.
Working hours increased by 17 million hours (0.9%) in May 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 May 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 May 2022, the civilian population was 487,700 fewer than when pre-Covid trends continued.
The graph below shows the evolution of the actual unemployment rate from January 1980 to May 2022, the dotted line is the “what if” rate, calculated by assuming the most recent peak participation rate (recorded in February 2022 = 66.5%) 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 unemployment rate in May 2022 will not be 3.9%, but 6.1%.
The finding raises a rather different perspective on what has happened since the onset of the pandemic.
Unemployment rises by 7,800 to 544,100 in May 2022
Despite strong job growth, the unemployment rate rose this month as the participation rate pushed to a new high, bringing more workers into the labor force.
The official unemployment rate is 3.9%. 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 May 2022. Longer time series can help form some perspective on what is going on right now.
Broad workforce underutilization fell 0.3 percentage points to 9.6% in May 2022
Results for May 2022 (seasonally adjusted):
1. The underemployment rate fell by 0.4 percentage points to 5.7% (down 50,100) – the result of an increase in full-time jobs.
2. There were 807,300 underemployed workers.
3. Total labor force underutilization (unemployment plus underemployment) decreased by 0.3 percentage points to 9.6%.
4. The total number of unemployed or underemployed workers was 1.3555 million.
The graph below plots Australia’s seasonally adjusted underemployment rate (blue line) for the period April 1980 to May 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 as soon as 2012 saw a “fiscal surplus” mania, 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 youth labor market in May 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 3.8 percentage points since April 2008, and increased by 2.6 percentage points month-on-month. It is now 5.1 percentage points above April 2020 levels.
2. The proportion of women is 4.1 percentage points higher than the April 2008 level. It rose 2.3 percent this month. It is now 8.4 percentage points above April 2020 levels.
3. The overall employment-to-population ratio of young people has dropped by 0.1 percentage points since April 2008, and increased by 2.4 percentage points month-on-month. It is now 6.7 percentage points above April 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 improved markedly 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 is unchanged, but the base (“hypothetical”) unemployment rate is closer to 6.1%, not the official 3.9%.
4. There are still 1,355,500 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.
