Australian labour market – stronger than October but some statistical artifacts involved

Last Thursday (November 12, 2024), the Australian Bureau of Statistics released the latest – Labour Force, Australia – for November 2024. I was unable to get the data in time due to where I was when it was released so I held over my. usual report until today. The latest data release shows that employment rose in net terms by 35,600 (+0.2 per cent) reversing the weakness that was recorded in October. With the participation rate falling by 0.1 points, the combination of growing employment and shrinking labour force saw unemployment decline by 27,000 and the rate fall by 0.2 points to 3.9 per cent. There was zero growth in monthly hours worked, which was surprising given the strength in full-time employment growth and the declining part-time employment. The improved overall employment growth in November after a fairly weak period in October was, in part, explained by the ABS “In November we saw a higher than usual number of people moving into employment who were unemployed and waiting to start work in October. This contributed to the rise in employment and fall in unemployment.” Underemployment fell by 0.1 point and the overall labour underutilisation rate (the sum of unemployed and underemployed) fell to 10 per cent overall. The mainstream commentators try to equate that level of wastage to a state of full employment but it just makes a mockery of the concept.

The summary ABS Labour Force (seasonally adjusted) estimates for November 2024 are:

• Employment rose 35,600 (0.2 per cent) – full-time employment rose 52.6 thousand (0.5 per cent) and part-time employment fell by 17 thousand (0.4 per cent). Part-time share of total was 30.6 per cent.
• Unemployment fell 27,000 to 595,300 persons.
• The official unemployment rate fell 0.2 points to 3.9 per cent.
• The participation rate fell 0.1 point to 67 per cent.
• The employment-population ratio rose 0.1 point to 64.4 per cent (rounded).
• Aggregate monthly hours were stationary.
• Underemployment rate fell 0.1 point to 6.1 per cent – underemployment fell by 21 thousand. Overall there are 919.5 thousand underemployed workers. The total labour underutilisation rate (unemployment plus underemployment) fell 0.3 points to 10 per cent. There were a total of 1,514.8 thousand workers either unemployed or underemployed.

Employment rose 35,600 (0.2 per cent) in November 2024

1. Full-time employment rose 52.6 thousand (0.5 per cent) and part-time employment fell by 17 thousand (0.4 per cent).

2. The employment-population ratio rose 0.1 point to 64.4 per cent.

The following graph show the month by month growth in total, full-time, and part-time employment for the 24 months to November 2024 using seasonally adjusted data.

The following table provides an accounting summary of the labour market performance over the last six months to provide a longer perspective that cuts through the monthly variability and provides a better assessment of the trends.

Given the variation in the labour force estimates, it is sometimes useful to examine the Employment-to-Population ratio (%) because the underlying population estimates (denominator) are less cyclical and subject to variation than the labour force estimates. This is an alternative measure of the robustness of activity to the unemployment rate, which is sensitive to those labour force swings.

The following graph shows the Employment-to-Population ratio, since April 2008 (that is, since the GFC).

The employment-to-population ratio is still demonstrating stability with minor fluctuations around the current level.

For perspective, the following graph shows the average monthly employment change for the calendar years from 1980 to 2024.

1. The average employment change over 2020 was -10.5 thousand which rose to 36.3 thousand in 2021 as the lockdowns eased.

2. For 2022, the average monthly change was 45.1 thousand, and for 2023, the average change was 31 thousand.

3. So far in 2024, the average monthly change is 35.8 thousand (and falling as the year progresses).

The following graph shows the average monthly changes in Full-time and Part-time employment in thousands since 1980.

Aggregate monthly hours were stationary

The following graph shows the monthly growth (in per cent) over the last 48 months (with the pandemic restriction period omitted).

The dark linear line is a simple regression trend of the monthly change.

Unemployment fell 27 thousand to 595,300 persons in November 2024

The relatively strong employment growth and the declining participation rate combined to cause the lower unemployment level and rate.

The following graph shows the national unemployment rate from April 1980 to November 2024. The longer time-series helps frame some perspective to what is happening at present.

Broad labour underutilisation fell 0.3 points to 10 per cent in November 2024

1. Underemployment rate fell 0.1 point to 6.1 per cent – underemployment fell by 21 thousand.

2. Overall there are 919.5 thousand underemployed workers.

3. The total labour underutilisation rate (unemployment plus underemployment) fell 0.3 points to 10 per cent.

4. There were a total of 1,514.8 thousand workers either unemployed or underemployed.

Assessment:

Underemployment fell because of the stronger than usual growth in full-time employment and the fall in part-time employment.

That combination does make the ABS claim that working hours were unchanged appear mysterious – expect a revision next month.

The following graph plots the seasonally-adjusted underemployment rate in Australia from April 1980 to the November 2024 (blue line) and the broad underutilisation rate over the same period (green line).

The difference between the two lines is the unemployment rate.

Teenage labour market deteriorates marginally in November 2024

Overall teenage employment rose by3.6 thousand but full-time employment fell by 5 thousand.

The following Table shows the distribution of net employment creation in the last month and the last 12 months by full-time/part-time status and age/gender category (15-19 year olds and the rest).

To put the teenage employment situation in a scale context (relative to their size in the population) the following graph shows the Employment-Population ratios for males, females and total 15-19 year olds since July 2008.

You can interpret this graph as depicting the change in employment relative to the underlying population of each cohort.

In terms of the recent dynamics:

1. The male ratio fell 0.3 points over the month.

2. The female ratio rose 0.6 points over the month.

3. The overall teenage employment-population ratio rose 0.1 point over the month.

Conclusion

My standard monthly warning: we always have to be careful interpreting month to month movements given the way the Labour Force Survey is constructed and implemented.

My overall assessment is:

1. Employment growth improved somewhat in November after a fairly weak period in October. The ABS noted that:

In November we saw a higher than usual number of people moving into employment who were unemployed and waiting to start work in October. This contributed to the rise in employment and fall in unemployment.

Which helps explain the results for the last two months.

2. Employment growth improved as participation fell, which is why the unemployment rate fell by 0.2 points. Overall the labour market is holding up.

3. We should not disregard the fact that there is still 10 per cent of the working age population (over 1.6 million people) who are available and willing but cannot find enough work – either unemployed or underemployed and that proportion is increasing.

5. Australia is not near full employment despite the claims by the mainstream commentators and it is hard to characterise this as a ‘tight’ labour market.

That is enough for today!

(c) Copyright 2024 William Mitchell. All Rights Reserved.