Lockdowns play havoc with job market data
What happened? Employment fell by 146,300 in August after rising by 3,100 in July. Full-time jobs fell by 68,000 and part-time jobs fell by 78,200. The participation rate fell from 66 per cent to 65.2 per cent. Hours worked fell by 3.7 per cent. Hours worked fell sharply in five economies, largely reflecting lockdowns, and led by NSW, down 6.5 per cent. The national unemployment rate fell from 4.6 per cent to a 12½-year low of 4.5 per cent in August.
Implications: Delta has had a huge impact on the August jobs data. But the main message is that the job market remains tight. Employers are keen to hold on to staff in the current environment. So as soon as lockdowns end across the South East, businesses will be wanting staff back on the premises. Also CBA data indicates that at an aggregate level the reduction in household income from job losses to date in NSW and Victoria has been more than offset by an increase in government support payments. So conditions for retailers and other consumer-focussed firms are well supported.
The monthly jobs data is pivotal for determining monetary policy settings. If more people have work, this can translate to more spending, influencing retail conditions.
What does it mean?
• The August jobs data from the Australian Bureau of Statistics (ABS) is a seemingly complicated picture. Employment fell, the jobless rate fell, fewer hours were worked across the nation and fewer people were looking for work. It seems that many people across the lockdown regions said that they weren’t in the job market at present – they didn’t meet the technical definition as ‘employed’ but at the same time they weren’t unemployed and thus actively looking for work – they were effectively in hibernation.
• The unemployment rate fell from 4.6 per cent in July to 4.5 per cent in August – the lowest level since November 2008. But this reflected the 0.8 percentage point drop in workforce participation due to lockdowns with the labour force shrinking more than the decline in employment.
• The good news is that while people were away from their jobs, the government assistance payments have been important in helping people to cope with the dislocation and to hold on to their jobs.
• We now look forward to so-called ‘freedom days’ across the South East. Because the quicker that vax rates lift, the quicker some normality can return, and the quicker that economies bounce back. The longer that people are not working, the harder it will be to get the job market and the economy back to pre-Delta or even pre-Covid days.
• When releasing the June jobs data two months ago the ABS noted “Hours worked data continues to provide the best indicator of the extent of labour market impacts from lockdowns.” Lockdowns mean that some people can’t work (especially retail and other services) and that shows up in reduced hours worked, but people may not have lost their jobs. Of course, some people can work (such as office workers) but they work remotely – and perhaps work longer hours.
• It’s important to note some of the differences from the lockdowns that occurred in the first half of 2020. Job ads and consumer confidence are holding up a whole lot better. That’s because the focus is on the new end-game being the vaccination route to ‘freedom’. And job ads haven’t plummeted because the focus has been on businesses wanting their staff back at work and workers wanting to go back to work. We’ve learnt much over the past 15 months.
• Outside the ‘Delta South East’ job markets remain tight – a clear influence being the closure of state and foreign borders. Just how tight the job market is won’t be revealed until lockdowns end.
Definition of employment
• There are a number of criteria for a person to be judged as employed, but for the purposes of lockdowns the key points are that there were: “Were employees who had a job but were not at work and were: either away from work for less than four weeks up to the end of the reference week; or away from work for more than four weeks up to the end of the reference week and received pay for some or all of the four week period to the end of the reference week. Were owner managers who had a job, business or farm, but were not at work.”
• The ABS Head of Labour Statistics, Bjorn Jarvis, said that the surveying period for the August labour market survey covered the two weeks to August 14. He also noted the lockdowns that affected the period:
Greater Sydney was in lockdown for the whole of the period, with some others parts of NSW in lockdown from 5 August and 9 August;
Victoria was recovering from an earlier lockdown and then went back into lockdown from 5 August, with restrictions easing in regional Victoria from 10 August;
South-East Queensland started the period in lockdown, which ended on 8 August;
Cairns and Yarrabah, in North Queensland, were in lockdown from 8-11 August; and
The ACT was in lockdown from 12 August.
What do you need to know?
Labour force – August
• Employment fell by 146,300 jobs in August after rising by 3,100 jobs in July. Full-time jobs fell by 68,000 and part-time jobs fell by 78,200.
• The unemployment rate fell from 4.6 per cent to a 12½-year low of 4.5 per cent.
• Hours worked fell by 3.7 per cent or 66 million hours to 1,714 million hours. Hours worked are still up 1.6 per cent on a year ago.
• Participation rate: The participation rate fell from 66.0 per cent in July to 65.2 per cent in August.
• Spare capacity: The underutilisation rate rose from 12.9 per cent to 13.8 per cent. The underemployment rate rose from 8.3 per cent to 9.3 per cent.
• Youth jobless rate: The youth jobless rate rose from 10.2 per cent to 10.7 per cent, but was still down from 11.6 per cent in March 2020.
• Unemployment across states in August: NSW 4.9 per cent (July: 4.5 per cent); Victoria 4.1 per cent (4.4 per cent); Queensland 5.3 per cent (5.2 per cent); South Australia 5.0 per cent (4.6 per cent); Western Australia 4.6 per cent (4.6 per cent); Tasmania 5.5 per cent (4.6 per cent); Northern Territory 3.4 per cent (4.6 per cent); ACT 3.5 per cent (4.3 per cent).
• Employment across states in August: NSW -172,800; Victoria +29,100; Queensland -29,800; South Australia ‑2,800; Western Australia +12,300; Tasmania -600; Northern Territory +600; ACT -400.
• Hours worked across states in August (long-term average is +0.1 per cent): NSW -6.5 per cent; Victoria -3.4 per cent; Queensland -5.3 per cent; South Australia +1.6 per cent; Western Australia +1.6 per cent; Tasmania -0.2 per cent; Northern Territory +1.5 per cent; ACT -2.5 per cent.
Published by Craig James, Chief Economist, CommSec