Female underemployment rate hits 7-year low

Labour Force

Employment rose by 29,100 in January (consensus: +30,000) after increasing by 50,000 jobs in December. Full-time jobs rose by 59,000, but part-time jobs fell by 29,800.

The unemployment rate fell from 6.6 per cent to 6.4 per cent in January (consensus: 6.5 per cent).

Hours worked fell from 1.753 million hours to 1.667 million hours (down 4.9 per cent) to be down 5.7 per cent over the year.

Participation rate: The participation rate eased from a record high 66.2 per cent in December to 66.1 per cent in January (consensus: 66.2 per cent).

Spare capacity: In January, the underutilisation rate fell from 15.1 per cent to 14.5 per cent. The underemployment rate fell from 8.5 per cent to a 2-year low of 8.1 per cent. The female underemployment rate fell from 10.9 per cent to a 7-year low of 10.2 per cent.

Unemployment across states in January: NSW 6.0 per cent (December: 6.4 per cent); Victoria 6.3 per cent (6.5 per cent); Queensland 7.0 per cent (7.5 per cent); South Australia 7.1 per cent (6.4 per cent); Western Australia 6.2 per cent (6.2 per cent); Tasmania 5.9 per cent (7.0 per cent); Northern Territory 5.6 per cent (5.4 per cent); ACT 4.4 per cent (3.7 per cent).

Employment across states in January: Most jobs were added or reinstated in Victoria (+43,600), followed by Tasmania (+3,000), Queensland (+2,300) and Northern Territory (+1,400). But jobs were lost in Western Australia (-13,400), South Australia (-12,200), ACT (-4,700) and NSW (-1,200).

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

What does it all mean?

• The recovery in Australia’s labour market continued at the beginning of 2021 with a further 29,100 jobs added in January. Strengthening labour demand and the sharp rebound in workforce participation imply that there are fewer ‘discouraged workers’ in this economic recovery when compared to previous cycles. In fact, the participation rate is a smidgen below record highs of 66.2 per cent in December with January’s 66.1 per cent reading still above pre-Covid-19 levels in February 2020.

• The slight easing of the participation rate and solid job gains drove the unemployment rate down from 6.6 per cent to 6.4 per cent in January. The jobless rate to two decimal places at 6.35 per cent is broadly in-line with the jobless rate at the time of the national lockdown in April 2020. The unemployment rate peaked at 22-year highs of 7.5 per cent in July 2020. But employment is now up 813,600 from the May 2020 low and just 64,000 positions shy of pre-pandemic levels in February 2020.

• Regionally, labour demand was strongest in Victoria with 43,600 jobs added in January. But employment did fall sharply in Western Australia (-13,400) and South Australia (-12,200). And 1,200 jobs were shed in NSW possibly due to the virus lockdown on Sydney’s Northern Beaches and associated holiday cancellations because of state border closures.

• Unusually, hours worked nationally fell by 4.9 per cent in January with the Bureau of Statistics reporting, “After a tough 2020, more Australians than usual took leave in the first two weeks of January, particularly full-time workers.”

• Encouragingly, leading indicators of the labour market point to further near-term employment gains. ANZ’s January 2020 measure of job ads were 5.3 per cent above pre-pandemic levels in February 2019. The National Skills Commission’s Internet Vacancy index was 11.1 per cent above the level recorded a year ago with recruitment activity at 19-month highs in January. And SEEK’s measure of hiring intentions showed job vacancies up 4.0 per cent in January to be 6.5 per cent higher than a year ago. SEEK reported, “Traditionally, we would see a drop in new job ad growth throughout December, and into the start of January. Pleasingly, in 2021, businesses have been looking to hire from the very first week of the year.”

• In recent communication, Reserve Bank policymakers have highlighted that the labour market’s performance has exceeded their expectations. Importantly, a key measure of spare capacity – underemployment – has fallen back to 2-year lows at 8.1 per cent in January. Female underemployment hit 7-year lows of 10.2 per cent in the month. That said the underutilisation rate is still above the March 2020 level at 14.5 per cent and the number of unemployed Aussies remains elevated at 877,600. With significant slack remaining in the labour market – keeping a lid on both wages and inflation – significant monetary stimulus from the Reserve Bank will continue until underlying measures of labour demand – including hours worked – lift sufficiently to tighten the job market.

What do you need to know?

Labour force – January

• Employment rose by 29,100 in January (consensus: +30,000) after increasing by 50,000 jobs in December. Full-time jobs rose by 59,000, but part-time jobs fell by 29,800.

• The unemployment rate fell from 6.6 per cent to 6.4 per cent in January (consensus: 6.5 per cent).

• Hours worked fell from 1.753 million hours to 1.667 million hours (down 4.9 per cent) to be down 5.7 per cent over the year.

• The participation rate eased from a record high 66.2 per cent in December to 66.1 per cent in January (consensus: 66.2 per cent).

• Spare capacity: In January, the underutilisation rate fell from 15.1 per cent to 14.5 per cent. The underemployment rate fell from 8.5 per cent to 8.1 per cent.

• Unemployment across states in January: NSW 6.0 per cent (December: 6.4 per cent); Victoria 6.3 per cent (6.5 per cent); Queensland 7.0 per cent (7.5 per cent); South Australia 7.1 per cent (6.4 per cent); Western Australia 6.2 per cent (6.2 per cent); Tasmania 5.9 per cent (7.0 per cent); Northern Territory 5.6 per cent (5.4 per cent); ACT 4.4 per cent (3.7 per cent).

• Employment across states in January: Most jobs were added or reinstated in Victoria (+43,600), followed by Tasmania (+3,000), Queensland (+2,300) and Northern Territory (+1,400). But jobs were lost in Western Australia (­13,500), South Australia (-12,200), ACT (-4,700) and NSW (-1,200).

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?

• Victoria’s snap third lockdown is over but it could yet weigh on business hiring, upending progress on the jobs front. After exiting its lengthy second lockdown, Victoria added or reinstated 213,800 jobs, driving national job gains over the past four months.

• Virus-sensitive industries – such as tourism, food & accommodation, international education and arts & recreation – could shed jobs when the JobKeeper wage subsidy ends in late March. But we expect broader hiring momentum elsewhere with the roll out of vaccines boosting economic activity along with the take-up of the JobMaker Hiring Credit scheme. Commonwealth Bank (CBA) Group economists estimate that the national unemployment rate will fall to 5.7 per cent by year-end.

Published by Ryan Felsman, Senior Economist, CommSec