Australian employment +5.9k in March; unemployment rate 5.2%

Australia's labour market report for March was expected to reveal the early-stage impacts from the COVID-19 outbreak, though this ended up being obscured by timing issues as the narrative pivoted to one which highlighted that conditions were softening ahead of the crisis. 

Labour Force Survey — March | By the numbers

• Net employment lifted by 5.9k (seasonally adjusted) in March going against an expected fall of 30.0k. February's initially reported increase of 26.7k was revised down to 25.6k. 

• The national unemployment rate lifted from 5.1% to 5.2%, though it had been expected to rise to 5.4%.
• Both the underutilisation rate (from 13.8% to 14.0%) and the underemployment rate (from 8.7% to 8.8%) increased in March. 

• Participation in the workforce in March remained unchanged at 66.0%, whereas the median estimate looked for an easing to 65.9%. 

• Aggregate hours worked lifted by 0.5% in March to 1.78bn hours after declining in the two months prior, while annual growth ticked up from 0.6% to 0.7%.

Labour Force Survey — March | The details

As highlighted in our preview, the reference weeks for March's Labour Force Survey occurred over the first half of the month — before the implementation of more stringent government-mandated social distancing measures that resulted in the closure of restaurants and cafes, licensed premises and sporting venues. The ABS produced a useful diagram to help articulate the constraints it had in not being able to capture these and other factors such as the government's wage subsidy policy announcement in March's survey (see below).  

Source: ABS

However, while these impacts were not reflected in March's report, labour market conditions were clearly weakening going into the crisis. A closer look at the details shows that the labour force increased by 26.2k in the month and with employment rising by 5.9k, the total of unemployed lifted by 20.3k. 

As a result, the national unemployment rate (at two decimal places) lifted by 0.14ppt from 5.09% to 5.23%, which mostly unwound its 0.2ppt decline achieved in February. For context, forecasts by Treasury earlier this week revealed that COVID-19 crisis is expected to see the national unemployment rate rise to a peak of around 10.0% in Q2. An elevated level of spare capacity has persisted in the nation's labour market over recent years and this incresed a little further in March with underutilisation lifting by 0.24ppt to 14.01% to a two-year high and underemployment increasing by 0.1ppt to 8.77% to its highest since February 2017. 

         

Not only was spare capacity on the rise ahead of the COVID-19 crisis; employment had also entered a period of materially slower growth. The chart, below, highlights this point with employment lifting by a net 44.3k in the March quarter following a soft Q4 in 2019 of 39.1k; both well down from an average increase of 76.7k over the preceding 4 quarters. 

Looking further into March's 5.9k increase in employment, this was driven entirely by a 6.4k rise in the part-time segment as full-time work declined by -0.4k. As a snapshot of where the situation stood before the COVID-19 crisis, employment growth in annual terms was tracking at a three-year low of 1.8%, amid a bifurcation between the part-time segment at 3.4%yr and a full-time space that had slowed to a 36-month low of 1.0%.

Aggregate hours worked were expected to show signs of deterioration in March but in the event, it actually lifted by 0.5% to 1.78bn hours. Meanwhile, annual growth was little changed at 0.7%. Adjusting for the 5.9k increase in employment, average hours worked per employee advanced by 0.4% to 137.1 hours. 

       

Turning to the states, employment outcomes were mixed in March with advances in Victoria (+13.3k), South Australia (+3.5k) and New South Wales (+1.5k) as Western Australia (-6.2k), Queensland (-5.6k) and Tasmania (-2.7k) declined. In a modest Q1, employment was led by Western Australia (+12.0k) and Queensland (+11.8k) with smaller gains coming from South Australia (+7.9k), Victoria (+7.1k) and New South Wales and Tasmania each recording a 2.1k rise. Victoria led employment growth over the year to March contributing 73.8k jobs to the national total of 227.7k.   

   

Victoria was the only state to record a decline in its unemployment rate in March falling from 5.3% to 5.2%. Tasmania's held steady at 5.0% but all other states recorded increases, with New South Wales +0.2ppt to 4.8%, Queensland +0.1ppt to 5.7%, South Australia +0.4ppt to 6.2% and Western Australia +0.2ppt to 5.4%. 

Labour Force Survey — March | Insights

As March's survey was taken too early to reflect the early stages of the COVID-19 impact, the main takeaway from today's data is that intial conditions in the Australian labour market were softening ahead of the crisis with spare capacity becoming more elevated and employment growth slowing. It also means we need to steel ourselves for what will be an even more severe deterioration in April's data that could show the unemployment rate surging up by several percentage points. Also expect hours worked to decline sharply to reflect lower employment and disruptions to working arrangements.