The Australian labour market approached the withdrawal of the JobKeeper wage subsidy and other income support measures full of running with employment rising by a much stronger-than-expected 70.7k in March following on from the 88.7k surge in the month prior. The national unemployment rate has declined to a pandemic low of 5.6% after hitting a peak of 7.5% during the worst of the crisis.
Labour Force Survey — March | By the numbers
- Employment (on net) increased by 70.7k in March, topping the range of estimates for the second consecutive month and was double the 35.0k rise expected. February's outcome was unrevised by the ABS at 88.7k.
- National unemployment declined from 5.8% to 5.6%, outperforming expectations for a smaller fall to 5.7%.
- Australia's participation rate rose to a record high at 66.3%, up from 66.1% in February, which comes 10 months the nadir where the shutdown had crunched the rate to a 21-year low.
- Hours worked advanced by 2.2% in the month to 1.8bn hours adding to the 5.8% rebound in February (revised from 6.1%). Total hours worked have now risen back above their pre-pandemic level.
Labour Force Survey — March | The details
Having been restored to its pre-pandemic level in the month prior, employment made further gains rising by a net 70.7k in March. In a shift from what has been taking place over recent months, the composition of this gain came entirely from the part-time segment (91.5k) as full time employment recorded its first decline since September (-20.8k). Overall, total employment is 0.5% above its pre-pandemic level, with the part-time segment 1.9% higher and full-time broadly in line with this benchmark.
Reopening effects, rolled back restrictions and the earlier stimulus measures have ramped employment growth up to a rapid pace, averaging 62.9k per month over the past 3 months. Forward-looking indicators of labour demand suggest that strong employment will be maintained beyond the reopening phase, even as fiscal support is withdrawn. Strength in employment conditions would have been a contributing factor to the participation rate reaching a record high in March at 66.3%, encouraging people back to the labour force.
Strong employment growth at a time of very low growth in the working-age population (0.4%yr), due mostly to the closure of the international border, is helping policymakers to make inroads into spare capacity in the labour market. Unemployment fell to 5.6% in March, well down from the July 2020 peak of 7.5%, but still above where it was pre-pandemic (5.2%) and much higher than the RBA's full employment estimate (high 3s to low 4s). Broader rates of spare capacity have come down sharply, with underemployment falling to 7.9% from 8.5% and underutilisation printing at 13.5% from 14.4%. But all measures can be pushed much lower and this will remain the focus for the RBA.
Hours worked increased by 2.2% in March to 1.8bn hours, which is 1.2% above its pre-pandemic level. But the recovery has been uneven with part-time hours (5.6%) rising much higher than full-time hours (0.3%) on their year-ago levels. Overall, total hours lifted by 0.4% in the quarter, though this most likely understates the pace of activity in the economy due to an unusually large decline in the month of January (-4.9%) associated with more workers taking annual leave then.
For the states, employment is now either in line with or above pre-pandemic levels in all states outside of South Australia. However, unemployment rates are mostly higher than was the case a year earlier, particularly in Victoria (6.1% compared to 5.2%). South Australia at 6.3% has the same level of unemployment than it had prior to the pandemic, while in Western Australia unemployment is at a 7-year low of 4.8%; well down from 5.4% a year ago. In terms of hours worked, only Victoria (-1.2%) remains below its pre-pandemic level, still in recovery mode from its winter shutdown.
Labour Force Survey — March | Insights
As a final snapshot of conditions ahead of the withdrawal of fiscal support, the labour market appears well-positioned to weather the transitional effects, on aggregate. Notwithstanding this, there will still be significant impacts on the industries hardest hit by the pandemic as this occurs. The positive is that forward-looking indicators of labour demand are strong and this should help the transition. With this still to play out, and with measures of spare capacity still high, policy efforts by the RBA will remain focused on supporting the labour market.