September – employment continues to disappoint

Overall, there was a continued deterioration in labour market conditions in September.

Despite the recent issues surrounding the collection and reporting of the labour force survey, the results using trend data have remained consistent. I’ve been using the trend series data in my labour market updates for a while now and the pattern of the September data is very much in line with recent trends, albeit slightly worse.

Given my recent post on employment growth, this will be a shorter-than-usual employment update.

The key metrics of employment and unemployment growth continued to weaken in the latest month:-

Source: ABS

The number of people employed Full Time (FT) continued to decline in September and the overall employment growth number was again ‘saved’ by Part Time (PT) employment growth across all time periods.

Unfortunately, the growth in the number of unemployed persons surpassed the growth in FT employed persons in the last month, the last 6 months and in the last year. That’s the state of our labour market at the moment.

Below is the trend of the monthly change in total employed persons that makes up that annual growth figure of +133k growth (figure from chart above) in employed persons – this also highlights a concerning trend.

Source: ABS

The growth in the number of FT employed persons has been slowing all year, after what was quite a promising start to 2014. The growth in PT employed persons has offset these declines in FT employed persons over the last four months, but even the growth in PT employed persons slowed this month. A small positive is that the decline in FT employed persons was slightly smaller than the previous month.

On an annual basis employment growth is not keeping pace with the increase in the labour force due to population growth –

Source: ABS, The Macroeconomic Project

To double check, the 33.9k persons that left the labour force is also calculated by the annual change in the LFPR*estimate of the Working Age Population (WAP) at Sept. The decline of 33.9k persons from the labour force was made up of a -44k decline in males and +11k increase in females.

There remains a deficit between employment growth and the growth in the labour force due to population, especially for what is supposed to be a non-recessionary period – this trend has been in place for several years now:-

Source: ABS, The Macroeconomic Project

As a result, firstly, the number of unemployed persons continues to grow at a fairly consistent pace. There hasn’t been an acceleration in the rate of growth in total unemployed persons, but growth has remained constant.

Source: ABS

This is the 38th month where there has been an annual increase in total unemployed persons. The only time in our history that was longer was the recession of the early 90’s – which was 43 months. Given the current trends, we are likely to surpass that record.

Secondly, the labour force participation rate (LFPR) also declined in Sept, led lower by the continued deterioration in male participation. Since the peak in male participation in Feb 2008, the male participation rate has declined by 2% points. Male participation in now lower than it was ten years ago.

Source: ABS

The growth in hours worked is consistent with these results, with FT hours worked actually declining in Sept v Aug 14 (for the 3rd month in a row) and PT hours growth slowing as well in September.

Source: ABS

The total number of hours worked in the September quarter grew by 0.11%, slower than the June ’14 quarter growth of +0.26%. This slower growth in hours worked suggests that output activity in the domestic economy may have also slowed in the quarter.

At a quick glance, there appears to be a degree of correlation between the change in hours worked and the change in Gross National Expenditure (GNE). The GNE measure is an indicator of domestic output/expenditure activity – its calculated as GDP excluding net exports. I’ve used GNE here specifically because it’s a measure of domestic expenditure activity – which is why there should, in theory, be some correlation with hours worked in the economy.

Using hours worked as a guide, it’s possible that we will see a slow-down in domestic growth in the next quarter:-

Source: ABS

The overall impact on GDP will then depend on the performance of net exports (the external sector) during this quarter.

What this last chart also highlights is how much slower growth in hours worked has been over the last several years, compared to pre-GFC.

All these measures point to slower economic activity in the domestic economy.

 

 

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