Summary: Total employment drops by 138,000 in September, fall larger than expected; sets basis for better outcome through latest lockdowns; participation rate falls by 0.7ppt to 64.5%; more jobseekers, smaller available workforce, sends jobless rate to 4.6%; fewer part-time but more full-time jobs; aggregate work hours rises 0.9%; part-timers often first to be laid off, represent higher share of workforce in hardest-hit sectors; underemployment rate down from 9.3% to 9.2%.
Australia’s period of falling unemployment came to an end in early 2019 when the jobless rate hit a low of 4.9%. It then averaged around 5.2% through to March 2020, bouncing around in a range from 5.1% to 5.3%. Leading indicators such as ANZ’s Job Ads survey and NAB’s capacity utilisation estimate suggested the unemployment rate would rise in the June 2020 quarter and it did so, sharply. The jobless rate peaked in July 2020 but fell below 7% a month later and then continued to trend lower.
The latest Labour force figures have now been released and they indicate the number of people employed in Australia according to ABS definitions dropped by 138,000 in September. The fall was larger than the expected 120,000 decrease but slightly smaller than August’s revised fall of 146,300.
“Overall, the September survey was better than expected with a modest fall in employment, a modest rise in unemployment and a modest lift in hours worked. It has set the basis for a much better outcome for the labour market through the latest round of lockdowns,” said Westpac senior economist Justin Smirk.
Domestic Treasury bond yields had a mixed day. By the close of business, the 3-year ACGB yield had inched up 1bp to 0.73%, the 10-year yield had shed 2bps to 1.64% while the 20-year yield finished 3bps higher at 2.27%.
In the cash futures market, expectations of any material change in the actual cash rate, currently at 0.03%, remained fairly soft. At the end of the day, contract prices implied the cash rate would not exceed the RBA’s 0.10% target rate until July 2022 and then rise to 0.43% by February 2023.
The participation rate fell markedly for a second month, this time from 65.2% to 64.5%, as the total available workforce decreased by 129,100 to 13.51 million. The number of unemployed persons rose by 8,900 to 626,000; the higher unemployment number in conjunction with fewer people in the workforce led to a rise in the unemployment rate from 4.5% to 4.6%.
The aggregate number of work hours across the whole Australian economy increased as 164,700 residents lost part-time positions and 26,700 residents gained full-time positions. In percentage terms, the total number of work hours rose by 0.9% in September after dropping by 3.7% in August. On a 12-month basis and after revisions, aggregate hours worked increased by 2.3% as a result of having 139,300 fewer part-time employees but 442,800 more full-time employees than in September 2020.
Smirk noted part-time employees “are often the first to be laid off and [they] represent a higher share of the workforce for the hardest-hit sectors.”
In recent years, more attention has been paid to the underemployment rate, which is the number of people in work but who wish to work more hours than they do currently. Despite a net loss in jobs, the underemployment rate ticked down from August’s rate of 9.3% to 9.2%.
The underutilisation rate, that is the sum of the underemployment rate and the unemployment rate, has a strong correlation with the annual growth rate of the ABS private sector wage index when advanced by one quarter. September’s underutilisation rate of 13.9% corresponds with an annual growth rate of about 2.6%.