Labour Force Survey — December | By the numbers
- Total employment increased by 21,600 in December, outpacing an expected rise of 18,000 (prior revised: 39,000 from 37,000)
- The unemployment rate fell by 0.1ppt to 5.0%, which was an upside surprise to the market expectation for no change from 5.1% (unrevised from the previous month)
- Measures of spare capacity decreased in December; underutilisation rate fell by 0.2ppt to 13.3%, and the underemployment rate declined by 0.1ppt to 8.4%
- The participation rate fell by 0.1ppt to 65.6%, against an expectation for it to hold at 65.7% (unrevised)
- Hours worked were a fraction higher in December, rising by 0.1% to 1.759bn hours (+1.5%Y/Y). (Prior revised: -0.3%m/m, +1.1%Y/Y)
Labour Force Survey — December | The details
Analysis of December's data shows that the rise in employment of 21,600 came entirely from the part-time category, which increased by 24,600, while full-time work declined by 3,000. In Q4, total employment lifted by 87,300 led by part-time at 58,500 compared to 28,800 gain in full-time. However, in 2018, total employment increased by a solid but not spectacular 268,600, which was driven by full-time at 162,000, with part-time adding 106,600.
Australia's labour force increased marginally by around 7,500 in December, which equated to a decline in the nation's participation rate of 0.1ppt to 65.6%. This followed a large increase of 49,900 in the previous month that saw the participation rate jump by 0.2ppt to 65.7%.
With the 21,600 gain in employment outpacing the 7,500 new entrants to the labour force, the total of unemployed fell by 14,100 to 666,700. To 2-decimal places, the national unemployment rate eased from 5.09% to 4.98% on a seasonally-adjusted basis — its lowest since June 2011. Though if taken at the standard 1-decimal place, the unemployment rate fell by 0.1ppt to 5.0%, taking it back to level from October. In trend terms, the unemployment rate remained at 5.0%, which is also its lowest since June 2011.
Importantly, while employment growth slowed notably in 2018 it remains at a robust pace of 2.1% in annual terms and exceeds the rate of growth in the working-age population of around 1.7%Y/Y. Forward-looking indicators from private surveys continue to point to employment rising by around 20,000 per month, which is broadly sufficient to prevent the nation's unemployment rate from increasing.
Despite a positive near-term outlook for the unemployment rate, measures of excess capacity remain elevated and have proved harder to bring lower. However, both the unemployment rate (includes those employed but wanting more hours) and the underutilisation rate (includes the underemployed and the unemployed) improved marginally in December. Lowering excess capacity is key to generating a faster pace of wages growth.
At the aggregate level, hours worked ticked up by 0.1% in December and by 1.5% over 2018. Though, after adjusting for the increase in employment, average hours worked at an individual level continues to trend lower at 138.3 hours in the month.
Across the states, Victoria was the standout as its unemployment rate fell by 0.3ppt in December to 4.2% — its lowest since August 2008. Victoria also led employment growth in 2018, accounting for 120,200 of the 268,600 new positions added nationwide. In New South Wales, the unemployment rate held at 4.3%, while the state contributed 94,300 to total employment in 2018.
Both Queensland (-0.2ppt to 6.1%) and Western Australia (-0.2ppt to 6.3%) saw much-needed declines in their unemployment rates. Employment was fairly solid in Queensland in 2018 but fell in Western Australia. South Australia's unemployment rate spiked from 5.3% to 5.9% and Tasmania's edged up to 5.9%. In 2018, employment growth in South Australia lifted by 1.6% and fell by 1% in Tasmania.
Labour Force Survey — December | Insights
Australia's labour market performed solidly in 2018. In particular, Q4 was much stronger than anticipated with employment rising by 87,300 — an outperformance of a little above 29,000 relative to market expectations over the quarter. Strength in the labour market is a bright spot in the domestic economy amid a range of other indicators pointing towards a slowing growth outlook in 2019. This could weigh on the pace of employment growth over 2019 due to a likely slowing in residential construction activity, while the upcoming federal election could also create uncertainty. As it stands, however, employment growth remains solid and above growth in the labour force, which will help to maintain the nation's unemployment rate around its existing level over the near term.
