Australian Employment – Improves in Q1 2014

First quarter 2014 employment data indicates a change in trend in the labour market.

Whilst annual growth in employment remains below historical averages, there has at least been a positive shift in direction over the last few months. That positive shift has been from Part Time (PT) to Full Time (FT) employment growth and a halt in the decline of the participation rate. For the moment, unemployment continues to grow, albeit at a slower pace. The two main states driving growth in employed persons are NSW and QLD, whilst employment conditions in VIC remain a concern. 

National Summary

The annual employment indicators still paint a grim picture of the labour market. But the improvement is evident across all indicators of employment over the last quarter. The National summary (below) highlights the main improvement of the last few months –higher growth in FT rather than PT employed persons.

Source: ABS

Growth FT employed persons has exceeded the growth in PT employed persons for the third month in a row.

Whilst growth in PT employed persons has slowed, I’d argue that this isn’t such a bad thing – at least conditions are such that businesses are committing to FT employment rather than PT. The main advantage of higher FT employment is of course higher incomes.

The trends underlying the annual growth figures really come to life when viewed on a month by month growth basis. The chart below shows the monthly change in total employed, total unemployed and the participation rate over the last 12 months to March 2014.

Source: ABS & The Macroeconomic Project

Employment growth has been improving since October 2013, and now the decline in the participation rate has also started to reverse.

The labour force grew by +136.8k over the last year, which is the sum of all the red and blue bars in the chart above. Just for clarity – annual growth in total employed persons +75.168k plus +61.645k growth in total unemployed persons (see National summary chart).

I have also calculated the change in the labour force based on the month on month movement in the participation rate (month on month change in participation rate*Working Age Population (WAP)). At Mar 2014, the annual change in the participation rate was -0.4% pts – which, based on current WAP estimates, equals -75.391k persons leaving the labour force over the year. The sum of the green bars (above) represents that total annual change in the labour force due to changes in the labour force participation rate (-75.391k persons).

If the participation rate had at the very least, stayed the same as the year prior, the labour force would have instead grown by +212k persons (+136.8 plus +75.391k).

Total Employed Persons

The annual growth in total employed persons remains low, but the trend is no longer in steep decline.

Source: ABS

The ten year average for growth in total employed persons in March is +207k persons. At March 2014, annual growth in total employed persons was +75.1k persons – still well below the longer term average. To get an understanding of how low growth has been, the current annual rate of growth is the second lowest over the last 10 year period, only lower during the GFC.

Underlying this low growth was further evidence of weak conditions in the economy. The trend over much of 2013 (which started all the way back at the start of 2010) was higher growth from PT employed persons than FT. In fact the proportion of PT to total employed persons reached a peak of 30.47% only recently in Feb 2014. Whilst PT employment growth is better than no employment growth, the implication is lower incomes.

But since Dec 2013, the change in FT employed persons has improved from -41k to -2.5k in Mar 2014 – almost a return to positive growth.

Source: ABS

Over the month Mar 14 v Feb 14, FT employed persons grew faster than PT: +0.14% versus +0.09% for PT employed persons. Total employed persons grew by +0.12%.

Total Unemployed Persons

Whilst there has been improvement in the composition of employment growth, there has also been a slowing in the growth of total unemployed persons. The current annual growth in total unemployed persons has slowed slightly to +61k persons. Just to be clear, total unemployed persons is still growing, but at a decreasing rate. In Mar ’14, month on month growth in total unemployed persons was +0.45%.

Source: ABS

Underneath this data is a slightly different picture for male versus female unemployment change, which again, you need to see on a more micro month versus month basis to see the change in trends.

Source: ABS

The rate of growth in total unemployed males has been slowing down for most of 2013, but that slow down accelerated during the last quarter of 2013. Growth in total unemployed females, on the other hand accelerated at the same time, but appears to have slowed recently as well (good signs).

Total Labour Force and Participation Rate

Growth in the Labour Force continued to slow in March 2014, with annual growth of +136.8k persons – the lowest annual growth since Feb 2012.

Source: ABS

The continued slowing of the growth in the labour force at March 2014 is an issue of timing. The annual data doesn’t highlight that the relatively weaker employment conditions of the last year are only just starting to abate. Below is the same chart from earlier in this post – the factors that affect changes in the labour force – change in employed persons, unemployed persons and participation.

Source: ABS, The Macroeconomic Project

The message from this chart is that despite the slowing growth in the labour force on an annual basis, the trend in its components are improving. If this continues, we will start to see growth in the labour force accelerate.

Labour Force Participation Rate (LFPR)

Since Dec 2010, there has been a decline in the LFPR. You can read about the reasons behind the declining participation rate here.

Source: ABS

Over the last four months, the participation rate has stopped declining, and has ever so slightly increased over the last two months. This has been due to improvement in both male and female participation.

The chart below is the same measure of the impact of the change in participation on labour force growth – calculated as the monthly change in participation*WAP but this time split out by gender. On a monthly basis, male participation has stabilized – the chart below clearly shows that there has been greater negative impact on male participation over the last twelve months.

Source: ABS & The Macroeconomic Project

State by State

The state by state data points to fairly uneven contribution to employment growth. On an annual basis, QLD and WA have been the main contributors to employment growth, but this has started to shift.

Source: ABS

On a monthly basis, QLD and now NSW especially, have been the main contributors to growth in employment. Most of the growth in total employed persons in NSW in the latest month is FT in nature. In QLD, most of employment growth over the last year and in the latest month, has been PT.

In TAS, NT, NSW, ACT and WA, growth in FT employment is starting to replace growth in PT employment. The same is happening in QLD, but this is still in the early stages. In VIC and SA, both FT and PT employment growth has been slowing.

The turnaround in NSW is also evident in the slowing of growth in total unemployed persons. Growth in total unemployed persons in NSW peaked at over 30k persons and growth has now slowed to below 10k on an annual basis.

Source: ABS

Unfortunately, growth in total unemployed persons in VIC has reached a new peak and growth in WA and QLD has started to increase as well.

It would seem that the bigger improvements over the last few months are due in part to improvement in NSW.

Employment by Industry

I wanted to marry-up the changes in employment and unemployment growth over the latest quarter with industry based movements to get a sense of what industries are driving this current bout of employment growth.

The data used here is slightly different to the employment report data above. It’s collected on a quarterly basis and is supplied in original format.

In the latest quarter to Feb 2014, employed males grew by +48k and employed females declined by -27k (qtr Feb 14 v qtr Nov 13). This is how that growth & decline is split by industry – note that the data is ‘change in thousands of persons’.

Source: ABS 6291.0.55.003

Growth in male employed persons in the latest quarter has been driven fairly evenly between Info Media, Other Services (mostly ‘Repair & Maintenance’), Construction, Manufacturing and Health Care & Social Assistance. Notably absent is growth in Mining employment over the latest quarter.

This is what the longer term trend looks like for total employed persons in the 3 biggest mining segments – coal mining, metal ore mining and oil & gas extraction (given the importance of gas exploration and extraction as the next opportunity).

Source: ABS

It appears that the high growth in employed persons in metal ore and coal mining of recent years has started to slow. There has been a distinct pick up in employment in Oil and Gas Extraction, but this is a much smaller group.

Growth in total employed females has been hardest hit by declines in Retail, Accommodation & Food Service and Education. The decline in Retail was made up of -42k PT employed females and +3k FT employed females. Is the decline in retail saying something about the future (retail sales have been reasonable over the latest quarter)? Its possible that it is a seasonal layoff of staff after Christmas/New Year, but that doesn’t appear to be a regular trend.

Whilst all the short-term trends have improved, it’s unclear whether this is part of a more fundamental improvement or just a short-term bounce with another leg down to come. Other indicators of employment (job ads, business conditions etc) suggest that low growth in employment is likely to remain.

 

 

 

 

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