Jobs surge: Employment back at pre-pandemic levels

Labour Force

• Employment rose by 88,700 in February (consensus: +30,000) after increasing by 29,500 jobs in January. Full-time jobs rose by 89,100 and part-time jobs fell by just 500 positions.

• The unemployment rate fell from 6.3 per cent to an 11-month low of 5.8 per cent in February (consensus: 6.3 per cent).

• Hours worked rose from 1,665 million hours to 1,767 million hours (up 6.1 per cent) to be up 0.2 per cent over the year.

• Participation rate: The participation rate was steady at a record-high 66.1 per cent in February (consensus: 66.1 per cent).

• Spare capacity: In February, the underutilisation rate fell from 14.5 per cent to 14.4 per cent. But the underemployment rate rose from a 2-year low of 8.1 per cent to 8.5 per cent.

• Unemployment across states in February: NSW 5.6 per cent (January: 6.0 per cent); Victoria 5.6 per cent (6.3 per cent); Queensland 6.1 per cent (7.0 per cent); South Australia 6.8 per cent (7.1 per cent); Western Australia 6.0 per cent (6.2 per cent); Tasmania 5.7 per cent (5.9 per cent); Northern Territory 4.9 per cent (5.6 per cent); ACT 4.1 per cent (4.4 per cent).

• Employment across states in February: Most jobs were added or reinstated in NSW (+42,000), followed by Victoria (+26,600), Queensland (+23,800), South Australia (+6,700), Tasmania (+3,800), the ACT (+2,700), Western Australia (+1,800) and the Northern Territory (+400).

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 market exhibited extraordinary resilience in February with a massive 88,700 jobs added in the month – smashing consensus expectations for the addition of 30,000 – despite snap Covid-19 lockdowns in both Melbourne and Perth. Encouragingly, full-time jobs surged by 89,100 in February with job gains across all states and territories. Employment recovered sharply in NSW (up 42,000) following the successful containment of the virus flare-up on Sydney’s Northern Beaches. Impressively, Victoria added another 26,700 jobs with 23,800 positions created in Queensland.

• The ‘V’-shaped recovery in the labour market has been remarkable with employment in February up 876,400 from the May 2020 low; just 1,800 positions shy of a year ago; and 3,600 jobs higher than pre-pandemic levels in March 2020 (pre-Covid-19 lockdowns). The unemployment rate has fallen to an 11-month low of 5.8 per cent. The female jobless rate fell to 5.5 per cent with the male unemployment rate at 6.1 per cent. And national workforce participation remained elevated with the participation rate at a record high of 66.1 per cent in February.

• The total number of hours worked by Aussies bounced-back by a record 6.1 per cent in February to pre-pandemic levels after plunging 4.9 per cent in January, implying a strong improvement in underlying labour demand. Full-time workers took an unusually large amount of holidays at the beginning of the year as annual leave balances built-up due to government stay-at-home directives. Hours worked in February however remained below pre-pandemic levels, suggesting that spare capacity remains in the labour market.

• Of course, further progress is required in order to erode slack in the labour market. Importantly, a key measure of spare capacity – underemployment – rose back to 8.5 per cent in February after hitting 2-year lows at 8.1 per cent in January. And the the underutilisation rate is still above the March 2020 level at 14.4 per cent, while the number of unemployed Aussies remains elevated at 805,200.

• Leading indicators of the labour market point to further near-term employment gains. ANZ’s February job advertisements measure rose to a 28-month high of 174,010 available positions, up 13.4 per cent from a year ago. The National Skills Commission’s Internet Vacancy index was 24.8 per cent above the level recorded a year ago with recruitment activity at 9-year highs in February. SEEK’s measure of hiring intentions was 12.4 per cent higher than a year ago in February. And the NAB employment conditions index continues to improve.

• Of course, there are two key uncertainties on the horizon for the labour market. The JobKeeper wage subsidy expires at the end of March – and despite the Federal Government’s announced $1.2 billion tourism relief package – jobs could be lost in the food & accommodation services and education sectors with international borders still closed. But on the flip side, an extended period of border closures could tighten the labour market with skills shortages already emerging in some key industries, like residential building.

What do you need to know?

Labour force – February

• Employment rose by 88,700 in February (consensus: +30,000) after increasing by 29,500 jobs in January. Full-time jobs rose by 89,100, but part-time jobs fell by just 500 positions.

• The unemployment rate fell from 6.3 per cent to an 11-month low of 5.8 per cent in February (consensus: 6.3 per cent).

• Hours worked rose from 1,665 million hours to 1,767 million hours (up 6.1 per cent) to be up 0.2 per cent over the year.

• The participation rate was steady at 66.1 per cent in February (consensus: 66.1 per cent).

• Spare capacity: In February, the underutilisation rate fell from 14.5 per cent to 14.4 per cent. But the underemployment rate rose from a 2-year low of 8.1 per cent to 8.5 per cent.

• Unemployment across states in February: NSW 5.6 per cent (January: 6.0 per cent); Victoria 5.6 per cent (6.3 per cent); Queensland 6.1 per cent (7.0 per cent); South Australia 6.8 per cent (7.1 per cent); Western Australia 6.0 per cent (6.2 per cent); Tasmania 5.7 per cent (5.9 per cent); Northern Territory 4.9 per cent (5.6 per cent); ACT 4.1 per cent (4.4 per cent).

• Employment across states in February: Most jobs were added or reinstated in NSW (+42,000), followed by Victoria (+26,600), Queensland (+23,800), South Australia (+6,700), Tasmania (+3,800), the ACT (+2,700), Western Australia (+1,800) and the Northern Territory (+400).

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?

• In recent communication Reserve Bank Governor Philip Lowe said, “we still have a long way to go” with the pandemic economic recovery. He added, that unemployment is “too high” and “inflation and wages growth are also both lower than we would like. While we are expecting further progress to be made towards full employment and the inflation target, it is going to take some time before we reach our goals.” In other words, a jobless rate closer to 4 per cent is needed to push wage growth above 3 per cent to stoke inflationary pressures. Policymakers won’t tighten monetary policy until these conditions are met.

Important Information

The information presented in this email is an extract of a CommSec Economic Insights report. The full report is published on the CommSec website (under Market News > The Markets). The extract and report are approved for distribution in Australia only and must not be directed or distributed to any person or entity outside Australia, except with the prior approval of your Business Unit Compliance team.

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Published by Ryan Felsman, Senior Economist, CommSec