Australia’s labour force data for November provided mixed signals, though underlying conditions appear to remain solid. While employment growth was stronger than anticipated, the nation’s unemployment rate ticked up to 5.1% and broader measures of spare capacity also increased.
Labour Force Survey — November | By the numbers
· Total employment increased by 37,000 in November, well ahead of the market forecast for a 20,000 addition (prior revised: 28,700 from 32,800)
· The unemployment rate increased by 0.1ppt to 5.1%, while the market had expected it to remain at the 6-year low rate of 5.0%
· The participation rate increased by 0.2ppt to 65.7%, which was ahead of the market forecast for 65.6% (prior revised: 65.5% from 65.6%)
· Spare capacity increased in November with the underutilisation rate lifting by 0.3ppt to 13.6% and the underemployment by 0.2ppt to 8.5%
Labour Force Survey — November | The details
The headline addition to employment of 37,000 is, on face value, a strong outcome and near double the around 20,000 outcome that is generally required to keep the nation’s unemployment rate from rising. Volatility, however, was evident throughout this release.
According to the disaggregated data, full-time employment fell by 6,400 in November, but part-time employment posted a gain of 43,400 — its strongest rise since January. The net result equating to the headline 37,00o increase. This can be attributed to sample volatility, which can occur from month-to-month depending on the characteristics of the incoming group relative to those of the group it is replacing.
As a result, employment growth in the full-time category fell from 2.77% to 2.12% on an annual basis, and part-time growth jumped from 1.85%Y/Y to 2.7%Y/Y. On an overall basis, national employment growth remains at a robust pace of 2.3%Y/Y, though it has slowed from a very strong rate around 3.5%Y/Y at the start of the year. (click charts to expand)
Still, employment growth continues to run ahead of growth in the working-age population (1.68%Y/Y to November) and with output growth tracking at around-trend pace despite slowing in Q3, these factors are supportive of the unemployment rate remaining around its present level. This is consistent with the latest NAB Business Survey, which pointed to employment growth continuing to run at an around-20,000 pace per month.
Workforce participation remains at a historically strong level and increased further in November. The trend figure is at a record high of 65.7% and the seasonally-adjusted rate of 65.7% is just off the record mark. In absolute terms, workforce participation increased by 49,530 in the month to outpace the 37,000 increase in employment. As a result, the unemployed total lifted by 12,520 to explain the rise in the national unemployment from 5.03% to 5.11% (to two decimal places).
However, of more concern was that the underemployment rate (employed workers wanting more hours) increased from 8.3% to 8.5% and the underutilisation rate (including the underemployed and unemployed) increased from 13.3% to 13.6%. This could also reflect statistical volatility noting that these measures have been steady over the past couple of months. In any case, spare capacity remains elevated in the labour market, which is negative to the outlook for wages growth. This highlights the importance of robust employment growth continuing into 2019.
Another curious aspect from the report was that hours worked fell by 0.2% in the month despite employment rising, which slowed annual growth from 2.0% to 1.1%. Adjusting for the rise in employment, average hours worked per employee in the month fell by 0.5% to 138.6 hours, which is 1.1% lower compared to a year earlier.
Turning to the state-based data and the detail was disappointing — again, though, this can often be affected by volatility. Across the states, the change in the unemployment rates were; New South Wales -0.1ppt to 4.4%, Victoria +0.1ppt to 4.6%, Queensland +0.1ppt to 6.4%, South Australia -0.1ppt to 5.3%, Western Australia +0.8ppt to 6.5% and Tasmania +0.6ppt to 5.8%.
In terms of employment growth, Victoria led in the month rising by 30,900, with Queensland next best at +21,800. The only other state to post an increase in November was Western Australia at a modest 1,600. Employment declined for the remaining states; New South Wales -12,600, South Australia -2,200 and Tasmania -2,500.
Labour Force Survey — November | Insights
There were mixed signals throughout these data for November, though for the moment that appears to be impacted by statistical volatility. On the positive side, the economy added nearly twice the number of jobs expected in the month and the pace of employment growth remains robust. On the downside, spare capacity lifted as the pace of wages growth remains persistently slow. The fall in hours worked and weakness in the state-based outcomes were the other negatives.