Today (November 16, 2023), the Australian Bureau of Statistics released the latest data – Australian workforce – October 2023. Employment rose by 55,000 and the unemployment rate rose by 27,900 as the participation rate rose 0.2 percentage points – usually a sign of health. But special monthly factors (referendums and elections) that have a positive impact on employment growth make it difficult to assess the state of the labor market. My guess is that job growth will fall sharply in November and the participation rate will fall again. In October, taking into account special factors, employment growth in September was not enough to absorb the growth in the labor force, and the participation rate increased by 0.2 percentage points. If there was no change in the participation rate, the official unemployment rate would be 3.4% rather than the official 3.7%. Ten percent of the working-age population who are available and willing to work are being wasted in one way or another—either unemployed or underemployed. Despite claims from mainstream commentators, Australia is not yet close to full employment.
The ABS October 2023 labor force (seasonally adjusted) estimates are summarized below:
- Employment increased by 55,000 (0.4%) – full-time employment increased by 17,000 and part-time employment increased by 37,900. Part-time jobs account for 30.5% of the total.
- The unemployment rate increased by 27,900 to 547,800.
- The official unemployment rate rose 0.2 percentage points to 3.7%.
- The participation rate increased by 0.2 percentage points to 67%.
- The employment-to-population ratio increased by 0.1 percentage points to 64.5%.
- Total monthly hours worked increased by 8.9 million hours (0.46%) after two months of decline.
- The underemployment rate held steady at 6.4% (+1700). In total, there are 931,000 underemployed workers. The total labor underutilization rate (unemployment rate plus underemployment) rose 0.1 percentage point to 10%. The total number of unemployed or underemployed workers was 1,478,800.
Released in ABS Media – Unemployment rate rebounded to 3.7% in October – ABS states:
The unemployment rate rose 0.2 percentage points to 3.7% in October (seasonally adjusted)…
The number of employed people increased by 55,000, the number of unemployed people increased by 28,000, and the unemployment rate rose to 3.7% in October. This is back to July and August levels…
Looking at the past two months, these increases amount to an average monthly job gain of about 31,000, slightly lower than the 35,000 average monthly gain since October 2022…
The participation rate fell 0.2 percentage points to 66.7%…
The employment-to-population ratio increased by 0.1 percentage points to 64.5%. The participation rate also increased by 0.2 percentage points to 67.0%.
Conclusion: There have been some sampling fluctuations over the past two months, with October’s results (strong employment growth and rising participation) due to an increase in temporary employment due to “the temporary impact of the referendum and election”.
However, as the Australian Bureau of Statistics points out, “if a person takes temporary work as a side job”, this will not affect overall employment growth.
But overall, employment growth was strong but not enough to absorb the increase in labor force growth as participation rates rose.
Given that the above-mentioned special factors will not materialize, I suspect job growth in November will be much lower.
Employment increased by 55,000 in October 2023 (0.4%)
1. The number of full-time employees increased by 17,000 (0.2%), and the number of part-time employees increased by 37.9 million (0.9%).
2. The employment-to-population ratio increased by 0.1 percentage points to 64.5%.
The chart below shows the month-over-month growth in full-time (blue bars), part-time (grey bars) and total employment (green line) over the 24 months to October 2023, using seasonally adjusted data.
I pulled out observations from September to January 2021 – they were outliers due to the COVID-19 pandemic at the time.
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 October 2023, the ratio increased by 0.1 percentage points to 64.5%.
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.
To put things into perspective, the chart below shows average monthly employment changes over the calendar years from 1980 to 2023 (so far).
1. The average employment change in 2020 was -9,000, rising to 36,300 in 2021 as lockdowns eased.
2. In 2022, the average monthly change will be 43,000.
3. Average change so far in 2023 is 36,500.
The chart below shows the average monthly change (in thousands) in full-time and part-time employment (below) since 1980.
In October 2023, total monthly hours worked increased by 8.9 million hours (0.46%)
This reversed two consecutive months of decline.
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 increased by 27,900 to 547,800 in October 2023
Despite strong job growth, the unemployment rate rose this month as the participation rate rose – meaning the labor force grew faster than the number of people employed (see analysis below).
The chart below shows the national unemployment rate from January 1980 to October 2023. Longer time series help to develop some perspective on what is happening now.
In October 2023, the broad labor underutilization rate increased by 0.1 percentage points to 10%
1. The underemployment rate remained stable at 6.4% (+1700).
2. There are a total of 931,000 underemployed workers.
3. The total labor underutilization rate (unemployment rate plus underemployment) increased by 0.1 percentage points to 10%.
4. The total number of unemployed or underemployed workers is 1.4788 million.
This means that 10 per cent 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.
The chart below plots Australia’s seasonally adjusted underemployment rate between April 1980 and October 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 increased by 0.2 percentage points to 67% in October 2023
The unemployment rate rose because growth in the labor force (82,900) exceeded employment (55,000) as the participation rate rose to 67%.
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 October 2023 are the result of two independent factors:
- Base population growth added 36,800 people to the labor force.The impact of population growth on the total labor force is relatively stable from month to month; and
- The increase in the participation rate means that 46,100 workers entered the labor market (compared to a situation where the participation rate had remained constant).
- The end result was an increase in the labor force of 82,900 people.
Evaluate:
1. If the participation rate does not rise in October 2023, taking current employment levels into account, the total number of unemployed people will be 501,800 instead of the official figure of 547,800 recorded by the Statistics Office, a difference of 46,100 (‘participation effect’ ).
2. If the participation rate had not risen, the official unemployment rate would have been 3.4% (rounded) instead of the current official figure of 3.7%.
Youth labor market worsens in October 2023
The number of teenagers employed fell overall in September, with full-time employment falling by 7,200 and part-time employment increasing by 3,100.
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 the last 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 1.2 percentage points quarterly.
2. The proportion of women increased by 0.5 percentage points from the previous month.
3. The overall youth employment-to-population ratio decreased by 0.4 percentage points from the previous 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. Special monthly factors (referendums and elections) have a positive impact on employment growth, making it difficult to assess the state of the labor market.
2. My guess is that job growth will fall sharply in November and the participation rate will fall again.
3. In October, taking into account special factors, employment growth in September was not enough to absorb the growth of the labor force, and the participation rate increased by 0.2 percentage points.
4. If there is no change in the participation rate, then the official unemployment rate will be 3.4%, not the official 3.7%.
5. Today 10% of the working-age population who are available and willing to work are being wasted in one way or another – either unemployed or underemployed.
6. Despite what mainstream commentators claim, Australia is not close to full employment.
That’s enough for today!
(c) Copyright 2023 William Mitchell. all rights reserved.
