Today (January 18, 2024), the Australian Bureau of Statistics released the latest data – Australian workforce – December 2023, which tells us where we will be at the end of the year. This looks like the first real sign of a slowdown, although the considerable swings in participation rates suggest there is some sampling variability, and the December 2023 rotation group does have lower participation rates than the outgoing group. Job growth has been unusually strong over the past few months, but has now turned negative. Without the sharp drop in the participation rate, the official unemployment rate would be 4.5% rather than the 3.9% officially recorded – a difference of 98,300 workers. While we will see next month whether the data will be revised, a large number of workers who may have lost their jobs or are about to lose their jobs left the labor force in December as the demand side weakened. Still, 10.4% of the working-age population who are available and willing to work are being wasted in one way or another—either unemployed or underemployed. While mainstream commentators claim Australia is not close to full employment, it is difficult to describe it as a “tight” labor market.
ABS December 2023 labor force (seasonally adjusted) estimates are summarized below:
- Employment decreased by 65,100 (-0.5%) – full-time employment fell by 106,600 and part-time employment increased by 41,400. Part-time jobs account for 30.5% of the total.
- The unemployment rate fell by 800 to 573,600.
- The official unemployment rate held steady at 3.9%.
- The participation rate fell 0.4 percentage points to 66.8%.
- The employment-to-population ratio fell by 0.2 percentage points to 64.4%.
- Total monthly hours worked decreased by 10.4 million hours (-0.54%).
- The underemployment rate remained stable at 6.5% (-3,800 people). In total, there are 963,700 underemployed workers. Total labor underutilization (unemployment rate plus underemployment) held steady at 10.4%. The total number of unemployed or underemployed workers was 1,537,200.
Released in ABS Media – Unemployment rate remained at 3.9% in December – ABS states:
The unemployment rate held steady at 3.9% in December as employment fell by 65,000 and the number of unemployed people fell slightly (1,000).…
As employment and the unemployment rate both fell in December, the seasonally adjusted participation rate fell 0.4 percentage points to 66.8%, back to levels last seen around September. The employment-to-population ratio also fell by 0.4 percentage points to 64.2%. This is the lowest employment-to-population ratio since May 2022, but is still 1.9 percentage points higher than in March 2020…
The underutilization rate, which combines the unemployment and underemployment rates, also remained at 10.4%.
Bottom line: After two months of strong job growth, payrolls fell sharply — making it difficult to know where the trend is.
Employment decreased by 65,100 people in December 2023 (-0.5%)
1. The number of full-time employees decreased by 106,600 (-1.1%), and the number of part-time employees increased by 41,400 (0.9%).
2. The employment-to-population ratio dropped by 0.2 percentage points to 64.4%.
The chart below shows the month-over-month growth in total employment, full-time employment and part-time employment using seasonally adjusted data for the 24 months to December 2023.
The following table 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 January 2008, the time of the global financial crisis.
In December 2023, the ratio fell by 0.2 percentage points to 64.4%.
Despite the RBA's attempts to suppress employment growth, the chart shows that the relationship between employment and the working-age population has been very stable during periods of interest rate increases, and this is a period when population growth is accelerating.
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, and as the lockdown eased, the average employment change in 2021 was 36,700.
2. In 2022, the average monthly change will be 44,100.
3. In 2023, the average change will be 31,700.
The chart below shows the average monthly change in full-time and part-time employment since 1980 (in thousands).
In December 2023, total monthly working hours decreased by 10.4 million hours (-0.54%)
The relatively large decline in hours worked reflects a large decline in full-time employment.
The chart below shows monthly growth (in percent) over the past 24 months (omitting the period of pandemic restrictions).
The dark linear line is a simple regression trend of monthly changes.
Unemployment rate fell by 800 to 573,600 in December 2023
The unemployment rate fell this month despite job growth turning negative, as the labor force participation rate fell sharply (-0.4 percentage points), meaning the implicit unemployment rate may have risen by at least a few percentage points.
The chart below shows the national unemployment rate from January 1980 to December 2023. Longer time series help to develop some perspective on what is happening now.
In December 2023, the overall labor utilization rate was stable at 10.4%
1. The underemployment rate remained stable at 6.5% (-3800).
2. There are a total of 963,700 underemployed workers.
3. The total labor underutilization rate (unemployment rate plus underemployment) remained stable at 10.4%.
4. The total number of unemployed or underemployed workers is 1.5372 million.
This means that 10.4% of available and willing workers are in some way out of work (unemployed or underemployed), which makes a mockery of claims by economic commentators and policy officials that Australia is close to full employment or has a tight workforce. market.
The chart below plots Australia's seasonally adjusted underemployment rate between April 1980 and December 2023 (blue line) and the overall underutilization rate for the same period (green line).
The difference between the two lines is the unemployment rate.
Total participation rate fell 0.4 percentage points to 66.8% in December 2023
This is a significant decrease.
Given the sharp decline in employment in December, if the participation rate had not declined, the unemployment rate would have risen by several percentage points.
This is the calculation result.
The labor force is the portion of the working-age population (15 years and older). The ratio of the working-age population to the labor force is called the labor force participation rate. Changes in the labor force are therefore likely to affect the official unemployment rate, so changes in the latter need to be interpreted carefully. Rising unemployment may not signal a recession.
The labor force may expand due to overall population growth and/or increases in labor force participation (or vice versa).
The table below shows a breakdown of changes in the main aggregates (labour force, employment and unemployment) and the impact of the decline in the participation rate.
Changes in the labor force in December 2023 are the result of two independent factors:
- Base population growth added 32,400 workers to the labor force.The impact of population growth on the total labor force is relatively stable from month to month; and
- The decline in the participation rate means that 98,300 fewer workers entered the labor market (relative to a situation where the participation rate had remained constant).
- The net result was a reduction of 65,900 in the labor force.
Evaluate:
1. If the participation rate does not fall in December 2023, taking current employment levels into account, the total number of unemployed people will be 671,900 instead of the official figure of 573,600 recorded by the Statistics Office, a difference of 98,300 ('Participation Effect ').
2. If the participation rate had not risen, the official unemployment rate would have been 4.5% (rounded) instead of the current official figure of 3.9%.
Youth labor market worsens in December 2023
The overall number of youth employment decreased by 13,500, of which the number of full-time employees decreased by 8,200 and the number of part-time employees decreased by 5,300.
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 over the past 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 decreased by 1.3 percentage points quarterly.
2. The proportion of women decreased by 0.5 percentage points quarterly.
3. The overall youth employment population decreased by 0.9 percentage points month-on-month.
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. This looks like the first real sign of a slowdown, although the considerable swings in participation rates suggest some sampling variability, and the December 2023 rotation group does have lower participation rates than the departing group .
2. Employment growth, which had been unusually strong in previous months, has now turned negative.
3. Without the sharp drop in the participation rate, the official unemployment rate would be 4.5% rather than the 3.9% officially recorded – a difference of 98,300 workers.
4. Although we will see whether the data will be revised next month, as the demand side weakens, a large number of workers who may have been unemployed or about to lose their jobs in December have left the labor market.
5. There are still 10.4% of the working-age population who are available and willing to work and are being wasted in one way or another – either unemployed or underemployed.
6. Although mainstream commentators claim that Australia is not close to full employment, it is difficult to describe it as a “tight” labor market.
That's enough for today!
(c) Copyright 2024 William Mitchell. all rights reserved.
