The ABS released its March employment report yesterday. It was a poor one on all fronts – a decline in the number of employed persons coupled with an increase in the total number of unemployed persons. As a result, the labour force declined and the unemployment rate for March 2013 increased to 5.6%. All the data I have quoted is seasonally adjusted, unless otherwise stated.
I know that one month does not make a trend. Given the quite strong February report, it’s fair to question whether this months report could be an anomaly as well. But the data has been pointing to a soft employment environment for quite a while – below par growth in total employed, the shift in growth towards part time jobs, above par growth in total unemployed, declining employment to population ratio and slowing growth in hours worked.
March Summary
Source: ABS
Change in employed persons -36k (-0.31%)
- This decline was predominantly driven by the loss of 28.7 part time jobs (-0.82%)
- Full-time jobs declined (-7.3k), but at a much slower pace. This is the only slight bright spot in the report.
- Over the last 10 years, the average changed between the months of March & February has been +21k jobs, so this is a disappointing result, especially given the strong result in February of +71k jobs added.
The overall trend for employment growth remains weak. In the 12 months to March 2013, the economy added 108k jobs – the average over the last ten years is +227k. Adding further weight to the argument that Australian employment is in a weak position is the fact that of the 108k jobs added in the last 12 months, just over 66% have been part time jobs.
Source: ABS
Its clear on this chart (circled in green) just how lacklustre jobs growth and jobs recovery has been in Australia since the 08/09 downturn (compared to previous ‘recoveries’).
Change in unemployed persons +25.9k (+3.9%)
- The total number of unemployed persons has now exceed the total number unemployed during the ’08/09 downturn, with 686k persons now unemployed (we have more people in the labour force compared to that time which is why we have a lower unemployment rate).
- Hardest hit this month were unemployed males looking for full time work, which saw a jump of +26.9k (+9%)
- Total unemployed was slightly off-set by a reduction in unemployed persons looking for part time work – a reduction of -5k.
-
Over the last year, we have added 61k to the total number unemployed – the average annual change in unemployed persons in March over the last ten years has been a meagre -300 persons. Again, this just highlights the weak state of our employment situation.
Is this trend likely to continue? The high Australian dollar continues to impact local businesses (exporters & retailers alike), with interest rate cuts providing only a small shot in the arm of retail sales recently. Neither the RBA, nor the Government (Liberal or Labor) are proposing any policy action to stem the losses as a result of the strong Aussie dollar. At least, not at this stage.
Labour force change -10.2k persons (-0.8%)
- This was as a result of -36k in employed persons and the +25k in unemployed persons (the labour force is measured as total employed + total unemployed & looking for work)
- The average change in the labour force for March over the last ten years is +23k, so again, a below average performance.
Employment to Population Ratio
This is probably one of the better illustrations of the current state of employment in Australia;
Source: ABS
The employment to population ratio is at historical highs – this is definitely a good thing. But these levels have been flattening out recently – the very recent decline (during ’11) has slowed down, but we are not far from the lows reached in the 08/09 downturn. We hit those lows (in ’09) in a highly visible and global panic. The lift in the ratio during 09/10 is likely due to co-ordinated fiscal and monetary policy responses to address the slowing economy. Yet this current decline has been a slow grind (tell that to an unemployed person though). We have had a more loose monetary policy response, but are not likely to see any fiscal response to this issue (again, not yet). But clearly, monetary policy has not been enough to improve the situation (to date).
The concern is that over the last thirty years or so, there appears to be a correlation between economic downturns and a decline in the employment to population ratio (early 80’s, early 90’s, ’87, 2000 and ’08).
Hours Worked
I really like this series of data because it looks behind the headline changes in employment numbers. Whilst there might be growth in the number of jobs gained, the hours worked provides some insight into how strong those gains are – people working more hours is generally good (assume growth in income), people employed but working less hours, not so good (assume there is less income & less activity).
Again, I feel like there is some slightly disturbing data here for Australia. Back in my December 2012 employment wrap-up, I highlighted that growth in both Full Time (FT) and Part Time (PT) hours was slowing down. I was particularly interested in this because our history showed that during any of the downturns, PT hours actually grew faster (see green highlights in chart below). Yet, at December 2012, we had growth in both metrics slowing down.
So with a few more months of data, we can see that we now have growth in FT and PT hours diverging with a spike up in growth of PT hours:
Source: ABS
It appears that there is a relationship between PT and FT hours in the chart above – especially during the down turns (the areas circled). Broadly speaking, it appears that growth in FT hours are replaced with growth in PT hours. Currently, growth in FT hours has slowed to 0% and has bounced around this level for about 5 months now. On the other hand, PT hours have gone from -0.1% growth in Sept 2012 to +2.4% growth in March 2013.
I hope this current spike in growth in PT hours is not a sign of things to come.
The Macroeconomic Project 