I normally wouldn’t do a labour market update in consecutive months, but it’s important to set the record straight this month.
The ABS has released the October Labour Force data which now shows a significantly different view of the performance of the labour market during 2015. In my Sept update, I had characterised the labour market as having lost is growth momentum during 2015. Some of the trends I highlighted, in a somewhat sobering labour market update in Sept, have been reversed in the latest data for Oct 2015. It’s not an issue of one ‘outlier’ month of data, it’s that the 2015 YTD data was revised in most cases. For clarity, I am using the trend data series.
The main point from my last two posts was that the annual figures hid some emerging negative trends in the monthly growth statistics. The October data has mostly reversed those more concerning monthly trends. The result is that employment growth is higher and, while employment growth is not accelerating, it has remained consistent throughout 2015 to date. Importantly, employment growth is now higher than that of the labour force, so we are starting to see declines in the level of unemployment. Improvement in participation is still resulting in more workers added to the labour force, but at a slowing rate, due mostly to slowing growth in female participation. There are still a few pockets of concern on a state basis, but nothing as severe as what the Sept data was pointing to.
I’m revisiting the points from my last two posts using the revised data in order to highlight the significance of the change in the ABS data between Sept and Oct and to ensure the analysis reflects the most up to date information.
The Sept data highlighted that on a monthly basis, employment growth had halved since Feb 2015
According to the latest Oct data, employment growth has been averaging 22k a month since Dec 2014. This is far cry from the situation in the Sept data where employment growth had halved since Jan 2015. The chart below compares the same employment growth data from the Sept and Oct releases – the accelerating slow-down in employment growth that was evident in the Sept data is no longer evident in the Oct data.
The growth in FT employed persons was upgraded by +26k persons YTD, whereas growth in PT employed persons was upgraded by 9k persons for the YTD.
Growth in FT employed persons had also more than halved since Feb 2015
The data released in Oct now shows that growth in FT employed persons has been growing at a much higher level > 10k/month since late 2014.
The trend still does look like its slowing, but nowhere near the level of deceleration that was evident in the Sept data.
Note that there are still a few states where FT employment is declining in the qtr to Oct 2015 – QLD, SA, NT & ACT.
In Sept, improving levels of unemployment was more a function of labour force growth slowing faster than employment growth
This was the chart I posted in my previous update. I didn’t think that the underlying reasons for the slow-down in unemployment growth, where the labour force growth is slowing faster than employment growth, was a positive indicator. From my previous post:
“This chart also highlights that the overall dynamic of the market is negative – it’s based on slowing growth. To be confident that the economy is growing strongly enough to reduce unemployment, employment growth should be accelerating and be above labour force growth – we aren’t seeing that happen at the moment”
Fast forward to October. I’ve replicated the chart above using the new data. The new data shows stronger and more consistently high employment growth which is now above growth in the labour force.
What the new data is telling us is the decline in unemployment is now due to higher employment growth versus the labour force, rather than due to both slowing. But the data does still suggest that this is being helped along by slowing labour force growth. Employment growth isn’t accelerating, but it is still quite high. If participation and population were growing at an increasing rate, then we may not see these improvements in unemployment.
Male employment growth in the short-term looked poor
Using the Sept data, male employment growth had slowed fairly significantly during 2015, especially FT employment growth which had averaged <2k/mth growth since April.
The chart below highlights how this has now changed in the Oct data. Rather than slowing, growth in FT employed males has been accelerating since May 2015 and is well above PT employment growth. This is a complete turnaround from the situation outlined in Sept – with the exception that male PT employment growth has continued to slow.
Using the Oct data, the employment situation is looking much better for males. Over the YTD 2015, male participation has improved, employment is growing and unemployment is declining.
NSW driving overall employment growth, especially in the Sept qtr
Even in the revised data, NSW is still the main driver of overall employment growth in Australia. Comparing both the Sept to Oct data for the Sept qtr highlights where the major revisions have occurred.
The two biggest turnarounds in trend have been in VIC and WA. Employment growth in both states is now starting to accelerate rather than slow or decline.
Employment has grown by a larger degree in the Sept qtr in NSW, VIC, QLD and WA.
Employment growth is still declining in SA and ACT. Employment growth in NT has turned negative in the Oct data release.
The biggest trend change was in VIC. The chart below compares the difference between the two data releases. The latest data (blue line) now has VIC employment growth accelerating. This was a fairly major point from my previous post, given how big and important this state is to the National picture.
Whilst the level of employment growth in VIC is still low, the trend has improved.
National labour force summary – October 2015
The upshot is that the labour market is looking stronger as of October. Importantly, growth in FT employment is higher than PT across all time periods. The other important feature is that for the first time in 50 months, unemployment is declining on an annual basis.
The monthly growth trend shows that employment growth remains high, but underlying that remains a slow-down in FT employed persons. It appears that overall employment growth has slowed over the last two months – and this could be a function of the ‘trend’ data series.
A similar pattern is always evident in the population data in the latest month or two. It usually takes more than two months to establish whether this part of a new trend. The chart below is a good example.
In the latest two months, “what population growth is adding to the LF” (the blue bars) appears to be slowing quickly. But over the YTD, you can see that this component has been fairly stable. We know that population growth is slowing and if we looked at the same chart over a longer time period, slowing population growth is evident since early 2012. But there is no broader market reason for a precipitous decline during the last 2 months.
The other factor impacting growth of the labour force is the change in participation. For the moment, it is slowing growth in female participation that is driving this lower level of contribution of participation to labour force growth.
Slowing population growth and a slow-down in what participation growth is adding to the labour force is helping to improve unemployment.
The revisions to the labour force data do raise ongoing questions about the data. These issues have been well documented in the past and it seems that the fixes will continue to take time to take effect. The current fluidity of the data highlights the need to benchmark the labour market indicators more broadly.