Aussie jobs market: The calm before the storm

Labour Force

Employment rose by 5,900 jobs in March – after increasing by 25,600 in February (previously estimated at +26,700). Full-time jobs fell by 400 with part-time jobs up by 6,400. Economists had tipped a decrease in total jobs of around 30,000 and a jobless rate near 5.4 per cent.

The unemployment rate rose from 5.09 per cent (to two decimal places) in February to 5.23 per cent in March in seasonally adjusted terms. In trend terms, the jobless rate was steady at 5.2 per cent in March.

Hours worked rose by 0.5 per cent in March – the biggest monthly lift in 14 months – to be up by 0.7 per cent over the year. In trend terms, hours worked were up by 0.8 per cent on the year – the slowest annual growth rate in 5 years.

Participation rate: The participation rate was steady at 66.0 per cent in both seasonally adjusted and trend terms. Economists had tipped a decrease to 65.9 per cent.

Spare capacity: In March, the underemployment rate increased by 0.1 percentage points to 8.7 per cent in trend terms. The underutilisation rate increased by 0.1 percentage points to 13.9 per cent. In seasonally adjusted terms, the underemployment rate increased by 0.1 percentage points to a 37-month high of 8.8 per cent. And the underutilisation rate increased by 0.2 percentage points to a 23-month high of 14.0 per cent.

Unemployment across states in March: NSW 4.8 per cent (February 4.6 per cent); Victoria 5.2 per cent (5.3 per cent); Queensland 5.7 per cent (5.6 per cent); South Australia 6.2 per cent (5.8 per cent); Western Australia 5.4 per cent (5.2 per cent); Tasmania 5.0 per cent (5.0 per cent). In trend terms, Northern Territory 5.5 per cent (5.5 per cent); ACT 3.0 per cent (3.0 per cent).

A raft of companies is affected by the employment data but especially those dependent on consumer spending.

What does it all mean?

• The Aussie labour force survey will surprise most. A modest near 6,000 jobs were added during March – defying market expectations for a 30,000 loss of jobs. In a surprising development, hours worked rose by 0.5 per cent in seasonally adjusted terms – the biggest lift in 14 months. And the trend female jobless rate was steady at 11-year lows of 5 per cent. But some cracks have already begun to appear due to coronavirus (COVID-19) shutdowns. Measures of spare capacity – underemployment (37-month high) and underutilisation (23-month high) – both lifted in March.

• But we won’t really know the full extent of the impact of COVID-19 disruptions to the Aussie jobs market until next month and beyond. Today’s labour force survey only captured the first two weeks of March – a period where government travel bans were enforced primarily on Chinese and Iranian tourist arrivals. But a full international travel ban, the curtailment of mass gatherings, stay-at-home orders, and widespread social distancing restrictions and business shutdowns didn’t take effect until after March 20.

• With the tourism, airline and hospitality sectors all severely impacted by early virus disruptions, job losses were inevitable in the survey period (full-time jobs down by 400). And while the Federal government’s $130 billion ‘JobKeeper’ wage subsidy – tying workers to their employers through fortnightly payments – will stem the flow of job losses, leading indicators of job hiring intentions have deteriorated significantly due to the COVID-19 economic shutdown.

• According to SEEK, job ads declined by 12.6 per cent in the week ended March 8 from a year ago. Subsequent weekly declines in job vacancies accelerated thereafter – down 17.3 per cent (March 15); down 41.3 per cent (March 22); and down 64.6 per cent (March 29) when compared to the same week last year.

• And more recent data from recruitment website Indeed shows that Aussie job postings are 50 per cent lower as of April 10 than their trend point last year. Declines are widespread with ads 82 per cent lower for workers in the hard-hit hospitality and tourism sectors, followed by childcare (down 79 per cent), sports and recreation (down 77 per cent) and education (down 69 per cent). Of course, hiring activity is holding up best for essential workers, such as nurses (down -32 per cent) and truck drivers (down 25 per cent).

What do the figures show?

Labour force – March

• Employment rose by 5,900 jobs in March – after increasing by 25,600 in February (previously estimated at +26,700). Full-time jobs fell by 400 with part-time jobs up by 6,400. Economists had tipped a decrease in total jobs of around 30,000 and a jobless rate near 5.4 per cent.

• The unemployment rate rose from 5.09 per cent (to two decimal places) in February to 5.23 per cent in March in seasonally adjusted terms. In trend terms, the jobless rate was steady at 5.2 per cent in March.

• Hours worked rose by 0.5 per cent – the biggest monthly lift in 14 months – in March to be up by 0.7 per cent over the year. In trend terms, hours worked were up by 0.8 per cent on the year.

• The participation rate was steady at 66.0 per cent in both seasonally adjusted and trend terms. Economists had tipped a decrease to 65.9 per cent.

• In March, the underemployment rate increased by 0.1 percentage points to 8.7 per cent in trend terms. The underutilisation rate increased by 0.1 percentage points to 13.9 per cent. In seasonally adjusted terms, the underemployment rate increased by 0.1 percentage points to a 37-month high of 8.8 per cent. And the underutilisation rate increased by 0.2 percentage points to a 23-month high of 14.0 per cent.

• Unemployment across states in March: NSW 4.8 per cent (February 4.6 per cent); Victoria 5.2 per cent (5.3 per cent); Queensland 5.7 per cent (5.6 per cent); South Australia 6.2 per cent (5.8 per cent); Western Australia 5.4 per cent (5.2 per cent); Tasmania 5.0 per cent (5.0 per cent). In trend terms, Northern Territory 5.5 per cent (5.5 per cent); ACT 3.0 per cent (3.0 per cent).

• State/Territory jobs: In March 2020, the largest increases in employment were recorded in Victoria (up 13,300 people) and South Australia (up 3,500 people). The largest decreases were in Western Australia (down 6,200), Queensland (down 5,600) and Tasmania (down 2,700).

• The working age population rose by 37,200 in March to 20.82 million. Over the year, the working age population rose by 317,200 or 1.55 per cent (record 2.36 per cent annual growth in December 2008).

• Chief Economist at the Bureau of Statistics (ABS), Bruce Hockman, said: “Today’s data shows some small early impact from COVID-19 on the Australian labour market in early March, but any impact from the major COVID-19 related actions will be evident in the April data.”

• And, “Given the expected unseasonal change in key labour market indicators in the current COVID-19 context, the ABS will increase the focus on seasonally adjusted over trend data estimates for April and subsequent months,” Mr Hockman said.

What is the importance of the economic data?

• The Labour Force estimates are derived from a monthly survey conducted by the Bureau of Statistics. The population survey is based on a multi-stage area sample of private dwellings (currently about 22,800 houses, flats, etc.) and a sample of non-private dwellings (hotels, motels, etc.). The survey covers about 0.24 per cent of the population of Australia and includes all people over 15 years of age, except defence personnel.

What are the implications for investors?

• Headline job numbers will remain volatile in the coming months as the hit to labour demand intensifies. Economists will increasingly become fixated on underlying measures – such as hours worked, workforce participation and underutilisation – as social distancing restrictions and government policy intervention make it more difficult for government statisticians to measure employment trends.

• In fact, government statisticians have already advised that people who are paid through the ‘JobKeeper’ wage subsidy program – payments have already begun landing in bank accounts this week – will be classified as “employed” regardless of how many hours they “work”. Therefore, those attached to hibernated businesses through ‘JobKeeper’ will be considered by the ABS to be “employed”.

• To get a better handle on the COVID-19 impact on the labour market, the ABS have announced three new products with two – “Household Impacts of COVID-19 Survey” and “Weekly Payroll Jobs and Wages in Australia” – scheduled for release next week.

• Earlier this week, the International Monetary Fund (IMF) forecast that Australia’s jobless rate would average 7.6 per cent this year – close to CommBank Group economists’ forecasts for a 7.8 per cent unemployment rate in the June quarter – before lifting to 8.9 per cent next year. Should this materialise, it would be the highest unemployment rate since December 1994.

• But forecasts are just that. There are a lot of moving parts in this health and economic crisis. Australia’s early success in fighting the pandemic means that it appears on track to ease some containment measures in the coming months. An earlier-than-anticipated return to work for some businesses – supported by additional government stimulus – is critical in the economic recovery phase. But confidence remains very fragile – and until a COVID-19 vaccine is found – the economy will likely be susceptible to rolling stoppages as virus outbreaks re-occur, impacting consumer spending and job hiring intentions.

Published by Ryan Felsman, Senior Economist, CommSec