Australian employment was down a further 138k in September, falling to its lowest level since the turn of the year as lockdowns continued to impact the labour market. In an encouraging development, hours worked lifted in the month ahead of the reopening in New South Wales, indicating the recovery should recommence from October. With labour demand as indicated by job vacancies holding up at high levels through the lockdowns, there is reasonable optimism for a strong recovery over the summer.
Labour Force Survey — September | By the numbers
- Employment (on net) fell by 138k in September, more than the market consensus of -110k. The ABS kept August's decline of 146.3k unchanged in today's release.
- Australian unemployment posted its first rise in 11 months, ticking up from 4.5% to 4.6% but coming in lower than the 4.8% expected.
- Labour force participation declined from 66.2% to 64.5% — contracting by 1.7ppts over the quarter to be at its lowest since June last year.
- Hours worked posted a 0.9% lift for the month supported by rebounds in New South Wales and Queensland but fell by 3.1% nationally for Q3.
Labour Force Survey — September | The details
With Delta lockdowns continuing in New South Wales and Victoria and restrictions tightening in the ACT, the Australian labour market deteriorated further in September as employment fell by another 138k. After the 146.3k decline in August, national employment has fallen to its lowest level since the start of the year, retracing below pre-pandemic levels.
Whereas in August both full-time (-68k) and part-time employment (-78.2k) declined, this month saw a much more uneven composition. There was a rapid acceleration of job losses in the part time segment to -164.7k but full-time employment lifted by 26.7k. Part-time employment was hit very hard in Victoria (-101.7k) as the lockdown tightened while New South Wales saw further weakness (-26.4k). Employment in the full-time segment was boosted by a reopening in Queensland (56.3k) and a modest rebound in New South Wales as firms positioned for restrictions easing (18.3k).
Ahead of the Delta lockdowns, the participation rate was sitting just off record highs but the stay-at-home mandates and the design of income support payments have driven a significant decline, down another 0.65ppt in September to 64.5%, its lowest since June 2020. Participation in New South Wales has fallen below the depths of last year, now at a 17-year low at 61.8%, while participation in Victoria (65%) is at its weakest in nearly a year. Meanwhile, with similar restrictions imposed in the ACT, its participation rate at 68.2% has plunged to its weakest since 1983.
In an upside surprise, hours worked lifted by 0.9%m/m in September after falls of 0.2% and -3.7% in the past two months. That left hours worked down by 3.1% for the quarter, giving a reasonable guide to the decline in GDP over the period. In August, total hours had fallen to 2.9% below pre-pandemic levels but September's rise has reduced that to -2%.
With hours in New South Wales (2.7%m/m) moving off the lows ahead of the reopening now underway, the worst of the Delta impact on the Australia labour market should be behind us. That said, Victoria is likely to see further weakness come through next month. Across the other states, a sizeable boost came from Queensland (5.4%) as the south-east region rebounded from a lockdown in the month prior, with other rises coming through in South Australia (0.2%), Western Australia (0.7%), Tasmania (0.5%) and the NT (3%). These gains were pared by a 10.5% fall in the ACT as the lockdown crunched hours worked to a 6-year low.
As with the first wave of the pandemic, the Delta lockdowns (in many cases more restrictive than in 2020) have had a larger impact on hours worked than employment, highlighting the importance of the role income supports have played over the period. However, the impact to both has been less severe than seen at the outset of the pandemic given that some states have remained open this time around, while firms and workers in states under lockdown have become more accustomed to new ways of operating despite the restrictions. Difficulties in finding labour have probably also made firms more reluctant to reduce staff levels over recent months.
There was a small uptick in the national unemployment rate, from 4.5% to 4.6%, making this its first increase since October 2020. Despite the significant weakness in employment over the past three months (-281.2k), the unemployment rate has been mechanically held down by a 334.4k contraction in the labour force over the period. Measures factoring in the impact of the loss of hours worked have risen materially since the Delta lockdowns, giving a more accurate reflection of conditions.
Labour Force Survey — September | Insights
Today's report should confirm that the low point of the Delta setback for the Australian labour market is in. The lift in hours worked was supported by a rise in New South Wales and with that state now reopening, activity will start to rebound. However, the recovery will be weighed by Victoria until restrictions ease there, expected to be later this month or early November. Further optimism for the rebound in the labour market comes from the RBA's liaison program and high-frequncy indicators tracking job openings that have shown many firms are looking to hire ahead of a wider easing of restrictions over the summer.