Commentary and analysis of labour force data releases.

Australian labour market rebounds from Omicron (perhaps) – but it is not as good as the media is claiming

The Australian Bureau of Statistics released the latest labour force data today (March 17, 2022) – Labour Force, Australia – for February 2022. Last month the labour market took a dive as workers became increasingly sick from Omicron and the relaxation of the lockdowns and restrictions. This month a rebound. Next month? Floods and a new variant – stay tuned. Employment growth was very strong this month but it won’t last. Unemployment is down to the pre-GFC levels which is good as employers continue to face a restricted labour supply. When they get around to offering higher wages given their booming profits is another question. Participation is at peak levels which is good and underemployment is falling. All these are signs of an improving situation for workers but only within this weird bubble we are in – not much external migration yet and a Covid roller coaster of sickness, new variants, not to mention the floods. The flat population growth as external borders remain largely closed (or there is a slow take-up of international travel opportunities from foreign tourists) has helped keep the unemployment rate low. But it is a temporary reprieve I think. My ‘What-if’ unemployment rate of 6.4 per cent is closer to the mark of where we are at present once things normalise (whatever that means).

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UK unemployment rate is more like 5.6 per cent rather than 3.9 per cent

I have very little time today but there was one question I get asked on a regular basis that I thought I would this space to quickly answer. People wonder who the participation rate affects the official measure of unemployment. For example, the UK Office of National Statistics released data yesterday (March 15, 2022) – Labour market overview, UK: March 2022 – which showed the official unemployment rate had fallen to 3.9 per cent – a decline of 0.2 points. They said this was the result of employment rising by 275,000 in February (the employment to population ratio rose by 0.1 points). They also said that the inactivity rate for those between 16 and 64) had risen by 0.1 points to 21.3 points and was 1.1 points above the pre-pandemic level. So the question I get asked is whether things are really getting better? So here is how it works.

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US labour market improves but slack still remains with no wage pressures emerging

Last Friday (March 4, 2022), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – February 2022 – which reported a total payroll employment rise of only 678,000 jobs and a rise in the participation rate. Fortunately, employment growth was strong enough to drive the unemployment rate down by 0.2 points to 3.8 per cent. The US labour market is still 2,105 thousand jobs short from where it was at the end of February 2020, which helps to explain why there are no wage pressures emerging. Real wages continued to decline. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data.

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External border closures in Australia reduced the unemployment rate by around 2.7 points

The debate continues as to whether the population growth slowdown instigated by the Covid border restrictions imposed by the Federal government has been responsible for the rapid decline in the unemployment rate in Australia. The mainstream view is that migration is good for the economy and adds more in net terms to overall spending (and labour demand) than the extra workers add to labour supply, meaning that it does not put upward pressure on the unemployment rate. I have always contested that view – as a general statement. The reality is that depending on the stage of the cycle and the strength of labour demand, the rate at which new entrants enter the labour force, and the size of the unemployment pool at any point in time, immigration can undermine the employment prospects of local workers. Based on some reasonable estimates, if the external border had not been closed, the unemployment rate would be around 6.9 per cent now, rather than the official rate of 4.2 per cent. The rapidity of the recovery in the unemployment rate is due to the border closures and that should condition appropriate visa policies.

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The year Australian progressives abandoned the national commitment to full employment

At present, the unemployment rate in Australia is 4.2 per cent and falling. If the rate of new immigrants remains low for a while as our external borders open, then it is likely the unemployment rate will fall into the 3 per cent range soon. What people are learning is that the claims made by mainstream economists that full employment was anything between 5 and 8 per cent (at various times to suit their arguments) was a lie. It just suited their ideological agenda and flawed theoretical framework to maintain that narrative. Of course, underemployment is still very high, which means that even if the unemployment rate falls further, we are still a way from being at full employment. But with prices accelerating at present, we are seeing calls for government to pursue an austerity fiscal approach, which would prevent the unemployment rate falling further. We have been here before. Today, I document a major turning point in Australian politics, when the Labor government became the first to abandon the national government’s commitment to full employment, a policy approach that had defined the post Second World War period of prosperity. So … back to 1974 we go.

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Australian labour market – as Covid spreads, workers get sick and hours or work falls dramatically

The Australian Bureau of Statistics released the latest labour force data today (February 17, 2022) – Labour Force, Australia – for January 2022. The situation is this: most states have now abandoned Covid restrictions and the virus has spread quickly and is now impacting significantly on the availability of workers. One standout in today’s data is the dramatic fall in monthly hours worked (-8.8 per cent). This puts paid to the notion spread by economists that there is a trade-off between the economy and the health of workers. Employment growth was modest to say the least and full-time jobs growth was negative. The unemployment rate was unchanged. The flat population growth as external borders remain largely closed (or there is a slow take-up of international travel opportunities from foreign tourists) has helped keep the unemployment rate low as employment growth slows dramatically. The falling fiscal support is not helping however.

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US labour market – employment and participation up, but still no obvious wage pressures

Last Friday (February 4, 2022), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – January 2022 – which reported a total payroll employment rise of only 467,000 jobs in December and a rise in the participation rate – which often leads to a rise in the unemployment rate as marginal workers outside the labour force sense their opportunities for work are now better. Employment growth accelerated in January 2022 which reverses the recent trend. 0.3 points decline in the official unemployment rate to 3.9 per cent, while participation was unchanged at 61.9 per cent. While the US labour market is still creating work – it is doing so at a declining rate and there are unequal patterns across the industrial sectors. The US labour market is still 2,875 thousand jobs short from where it was at the end of February 2020, which helps to explain why there are no fundamental wage pressures emerging. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data.

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Australian labour market continues to improve but Omicron overshadows all

The Australian Bureau of Statistics released the latest labour force data today (January 20, 2022) – Labour Force, Australia – for December 2021. The situation is this: most states have now abandoned Covid restrictions. The December survey was taken a few weeks after the ‘opening up’ and before Omicron got settled at parties, events, restaurants and wherever else it is lurking. Infections are now very high but the data only captures the opening up effect (with some Omicron impact). Employment growth slowed but was still strong and unemployment and underemployment fell significantly. We are seeing the impact of flat population growth coming up against growing demand for workers and that is the reason the unemployment rate has fallen so quickly. It is good for workers but that won’t last long because the government is already trying to lure foreign workers to fill so-called labour shortages. This will stop the wages growth that would benefit domestic workers from occurring. Overall, this is an improving situation although whether it will last is another question given the rapidly rising infection rate. It is certainly time for the Federal government to take advantage of the strengthening situation in the non-government sector and target some really good job creation initiatives in the regions and demographic cohorts that are still lagging behind.

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US labour market cannot be healthy with rising numbers of sick people

Last Friday (January 7, 2022), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – December 2021 – which reported a total payroll employment rise of only 199,000 jobs in December and a 0.3 points decline in the official unemployment rate to 3.9 per cent, while participation was unchanged at 61.9 per cent. While the US labour market is still creating work – it is doing so at a declining rate and there are unequal patterns across the industrial sectors. The US labour market is still 3,572 thousand jobs short from where it was at the end of February 2020, which helps to explain why there are no fundamental wage pressures emerging. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data. The failure to introduce a renewed fiscal stimulus will definitely leave the economy worse off, especially with the renewed virus onslaught from Omicron.

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Australian labour market rebounds strongly after lockdown ends but still 1.6 million (12.1 per cent) without enough work

The Australian Bureau of Statistics released the latest labour force data today (December 16, 2021) – Labour Force, Australia – for November 2021. With most states now abandoning most Covid restrictions just as the new variant arrives, which evades the vaccine coverage and infection numbers soar to record levels (go figure), the labour market certainly rebounded emphatically. Employment growth was very strong and resulted in sharp falls in unemployment and underemployment. Participation also rose, which prevented the unemployment rate from falling more. Overall, this is an improving situation although whether it will last as infection numbers start to rise rapidly is another question. It is certainly time for the Federal government to take advantage of the strengthening situation in the non-government sector and target some really good job creation initiatives in the regions and demographic cohorts that are still lagging behind.

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