Job market: Aussie hiring frenzy
Employment rose by 50,000 in December (consensus: +50,000) after increasing by 90,000 jobs in November. Full-time jobs rose by 35,700 and part-time jobs rose by 14,300.
The unemployment rate fell from 6.8 per cent to 6.6 per cent in December (consensus: 6.7 per cent).
Hours worked rose from 1.752 million hours to 1.753 million hours (up 0.1 per cent) but were down 1.5 per cent over the year.
Participation rate: The participation rate lifted from 66.1 per cent to a record high 66.2 per cent in December.
Spare capacity: In December, the underutilisation rate fell from 16.2 per cent to 15.1 per cent. The underemployment rate fell from 9.4 per cent to 8.5 per cent.
Unemployment across states in December: NSW 6.4 per cent (November: 6.5 per cent); Victoria 6.5 per cent (7.1 per cent); Queensland 7.5 per cent (7.7 per cent); South Australia 6.4 per cent (6.2 per cent); Western Australia 6.2 per cent (6.4 per cent); Tasmania 7.0 per cent (7.9 per cent); Northern Territory 5.4 per cent (5.9 per cent); ACT 3.7 per cent (4.0 per cent).
Employment across states in December: Most jobs were added or reinstated in Queensland (+36,600), followed by Victoria (+14,500), Northern Territory (+900), Tasmania (+800) and Western Australia (+400). But jobs were lost in NSW (-17,100), ACT (-3,600) and South Australia (-500).
A raft of companies is affected by the employment data but especially those dependent on consumer spending.
What does it all mean?
• The Aussie hiring surge continued at the end of last year with a further 50,000 jobs added in December. The final month of each year is typically strong for recruitment with casual workers hired ahead of Christmas trading and the summer holidays. This year was no exception with the number of part-time jobs increasing by 14,300 on top of the massive 35,700 increase in full-time workers. Of course, labour demand in Victoria has strengthened as the post-lockdown recovery gains traction. In December, Victoria added 14,500 jobs after 74,000 positions were re-instated or created in November. But Queensland was the stand-out with job gains of 36,600.
• The recovery in Australia’s labour market has been stunning. Hiring and consumer sentiment have strengthened as health authorities have managed to limit Covid-19 outbreaks to isolated flare ups. After 877,600 jobs were lost at the height of the national lockdown between March and May, a net 784,500 jobs have been added or reinstated in the second half of 2020. The participation rate hit a record high 66.2 per cent in December. Despite the lift in workforce participation, strong employment growth has placed downward pressure on the unemployment rate. In fact, the jobless rate likely peaked at 22-year highs of 7.5 per cent in July and has since eased to 6.6 per cent in December.
• Encouragingly, the reduction in JobKeeper wage subsidy payments has not resulted – so far – in a negative shock to employment or employer hiring intentions. High-frequency indicators of the labour market point to near-term employment gains. Amazingly, job ads, as measured by ANZ, hit an 18-month high in December to be up 4.1 per cent on pre-pandemic levels in February. And in December, the National Skills Commission’s Internet Vacancy Index was 11.1 per cent (or 17,100 advertisements) above the level recorded in December 2019. Recruitment activity was 2.4 times higher in December 2020 than the April 2020 series low point.
• But it’s not all good news. Around 912,000 Aussies were still jobless in December – just below the record high of 1 million people in July. Total employment is still 93,100 below pre-pandemic levels in February. Also, unemployment rates remain at or above 7 per cent in Tasmania and Queensland and NSW shed 17,100 jobs in December. And the labour force survey was taken in early December with the ABS’ weekly payrolls data pointing to a seasonal fall in hiring later in the month.
• Can the blistering pace of job gains continue? It is likely that job gains will slow in early 2021. The reintroduction of state borders and temporary Covid-19 lockdowns in Greater Brisbane and Sydney’s Northern Beaches in late December and early January pose downside risks to hiring activity. Note that employment usually drops in January due to summer holidays and business closures. But the roll out of Covid-19 vaccines from February could still quicken the jobs recovery.
• Significant slack in the labour market remains with the underemployment rate at 8.5 per cent and the underutilisation rate at 15.1 per cent in December. Commonwealth Bank (CBA) Group economists expect the unemployment rate to ease to 5.75 per cent by the end of 2021 which means that the Reserve Bank will likely leave its policy settings unchanged for most of this year. That said, economists will be very interested to hear from the Reserve Bank when it returns from hibernation in early February. In particular, the Board’s plans for its yield curve control strategy and bond buying (quantitative easing, ‘QE’) program will come into sharper focus with the post-pandemic economic recovery expected to gain traction.
Published by Ryan Felsman, Senior Economist, CommSec