A further net 50.0k jobs were added back to the Australian economy in the month of December with the recovery in the labour market from the pandemic crisis carrying strong momentum into year-end. The unemployment rate fell by more than expected to 6.6% from an earlier peak of 7.5%, while the participation rate lifted to a record high at 66.2%.
Labour Force Survey — December | By the numbers- Employment (on net) lifted by 50.0k in December, in line with consensus, after adding 90.0k in the month prior.
- Australia's unemployment rate continues to fall coming down by a further 0.2ppt to 6.6% (exp 6.7%) from its pandemic peak of 7.5% in July.
- The participation rate lifted to a record high of 66.2% after rising by 0.1ppt in the month; a remarkable feat given in had plunged to a 21-year low just 7 months ago.
- Total hours worked were broadly flat in the month (0.1%) at 1.753bn hours, with the part-time segment down 0.9%, widening the decline over the year to -1.5% from -1.2%.
Labour Force Survey — December | The details
Labour market conditions continue to repair from the damage inflicted by the disruptions stemming from the onset of the pandemic, with employment rising by a further 50.0k and spare capacity continuing the descent from peak levels around the middle of the year; the unemployment rate falling to 6.6% from an earlier high of 7.5%, while underemployment is now at 8.5% and, remarkably, lower than it was pre-pandemic after peaking at 13.8%, and underutilisation has reduced by 5 percentage points to 15.1% over the past 8 months. Encouragingly, this has occurred alongside participation in the labour force surging back to what is now a record high level.
All in all, these developments reflect the level of dynamism in the economy, with activity being enabled to recover as a result of the pandemic being kept under control by the public health authorities and the very strong response from the monetary and fiscal authorities. Testament to this was a strong 3.2% lift in hours worked over Q4. Total employment is now 0.7% below its pre-pandemic level from an earlier trough of -6.7%, while hours worked are still down by 1.4% on their level from immediately before the crisis after collapsing by as much as 10.4% as of May. The effects of the Federal government's wage subsidy scheme and other income support measures have meant that the pandemic has had a comparatively larger impact on hours worked than employment.
For the third straight month, full-time employment led the way rising by 35.7k compared to a smaller 14.5k increase in the part-time segment. Early on in the reopening effort, part-time employment rebounded very quickly as the easing of restrictions allowed activity in the most affected sectors to resume. But as the year went on, the recovery broadened out and this was the key theme in the December quarter with full-time employment rising 218.7k over the period compared to a 101.7k lift in part-time work. But despite the progress, employment (-1.3%) and hours worked (-1.9%) in the full-time segment are still below their pre-pandemic levels whereas they have more than fully recovered in the part-time space (employment +0.6% and hours worked +1.4%) so there is still some way to go in the recovery.
Victoria's reopening from its second shutdown that overlapped Q2 and Q3 was key to driving employment over the December quarter, rising overall by 170.3k to account for a little more than half of the increase nationally (320.4k). Pleasingly, the gains in employment were broad-based across the nation for the most recent quarter as the chart (below) shows, though a weak outcome in New South Wales in December (-17.1k) cut back some of the contribution from that state.
Meanwhile, hours worked have recovered to be around or a little above their pre-pandemic levels in Queensland, Western Australia, South Australia and Tasmania, though the two largest states by population, which have also had the highest case counts, in New South Wales (-1.2%) and Victoria (-4.5%) are holding things back.
Labour Force Survey — December | Insights
The recovery had established strong momentum into the end of the year with jobs being added back to the economy at a faster pace than people were returning to the labour force in both November and December. With participation now at a record high, the key will be to sustain a strong pace of employment growth to make further inroads into the level of spare capacity that is still elevated. But, as long as the pandemic remains under control requiring fewer restrictions to be left in place, there is reason to be optimistic that this trend can continue.
