The recovery in the Australian labour market from the pandemic crisis continued into the turn of the year with a further 29.1k jobs added back to the economy in January. With more people than usual taking annual leave in the month and the disruptions associated with a cluster of virus cases in Sydney, hours worked and labour force participation declined. The national unemployment rate fell by more than expected to 6.4% and broader rates of underutilisation were eroded further.
Labour Force Survey — January | By the numbers
- Employment (on net) increased by 29.1k in January, broadly matching the median estimate of 30.0k after rising by 50.0k in December.
- National unemployment declined from 6.6% to 6.4%, outperforming market expectations for a smaller fall to 6.5%, and is now more than 1ppt lower than its pandemic peak of 7.5% in July.
- The participation rate eased from its record high of 66.2% to 66.1%.
- Total hours worked fell sharply by 4.9% in the month to 1.667bn hours, with full-time hours contracting by 5.7% and part-time hours down 1.3%, as the annual pace deteriorated to -5.7% from -1.5%.
Labour Force Survey — January | The details
In another solid outcome, Australian employment broadly met consensus expectations rising by 29.1k in January after a 50.0k increase in the month prior. Over recent months we have been highlighting the improving momentum in the full-time segment as a sign of a broadening in the overall recovery and this trend remained intact in January with another 59.0k rise, while part-time employment fell (-29.8k). After January's outcomes, total employment was 0.5% down on its pre-pandemic level compared to its crisis trough of -6.7%. Full-time employment was 0.6% lower than its level in March, while part-time employment, which had earlier exceeded pre-pandemic levels, slipped back below that baseline on January's weak outturn (-0.1%).
In an unusual outcome, despite the rise in employment hours worked declined sharply with a 4.9% fall in the month (-5.7%yr). The ABS attributed this to more people taking annual leave than would usually be the case in January (ie having a much larger effect than the Bureau's seasonal adjustments could account for) after the disruptions of shutdowns and border closures earlier in the year.
There are two points to highlight here. Firstly, full-time hours (-5.7%) fell much more sharply than part-time hours (-1.3%), which points to the effect of annual leave entitlements.
And secondly, there was an outsized fall in hours worked in New South Wales of -7.8%, likely pointing to the disruptions associated with the cluster of virus cases and local shutdown in the Northern Beaches over the Christmas/new year period. Hours worked fell in the other states in January, but by smaller magnitudes; Victoria -2.9%, Queensland -4.5%, South Australia -4.6%, Western Australia -1.9% and Tasmania -4.9%.
While on the state theme, Victoria led the way in terms of employment in January (43.6k) in a continuation of what has occurred over recent months as it has reopened from its extended shutdown, while outcomes have been mixed in the other states.
In terms of spare capacity, the unemployment rate declined from 6.60% to 6.35% in January, which matches its level from April when it spiked from 5.22% at the onset of the pandemic, but it is now well down from its crisis peak (7.48%). Underemployment fell from 8.54% to 8.15% to be at its lowest since February 2019, while underutilisation (combining unemployment and underemployment) declined from 15.14% to 14.5%, though it is still above pre-pandemic levels.
Participation in the labour force was slightly weaker in January, falling from 66.16% to 66.11% but has fully recovered its pandemic collapse. However, reflecting that the recovery still has some way to go, the employment to population ratio is around 0.5ppt below where it was before the onset of the pandemic.
Labour Force Survey — January | Insights
The labour market recovery continued into 2021 with employment keeping pace with expectations over the past two reports. While hours worked were down sharply in January, this should rebound next month given people would have returned to work after the summer holidays and with the virus concerns in New South Wales coming under control. The effect of Victoria's snap 5-day shutdown on hours worked will likely miss the February survey. Overall, while there are concerns about the tapering of fiscal support at the end of March, provided there are no significant and extended disruptions from shutdowns, there should be a level of confidence that enough momentum in the economy has been established to withstand this period.