Under the employment hood

As Houses & Holes reported earlier, the Australian Bureau of Statistics (ABS) this morning released the labour force data for the month of January and it was very good.

In seasonally adjusted terms, total employment increased 46,300 (0.4%) to 11,463,000. Full-time employment increased 12,300 persons to 8,063,100 and part-time employment increased 34,000 persons to 3,400,800.

The below chart shows the changes in these components since April 2008. As you can see, this month’s employment gain of 46,300 persons more than offset the prior two month’s job losses (41,100 persons):

The total level of employment in Australia has now reached an all-time high, surpassing the previous peak reached in March 2011:

Importantly, January’s strong employment numbers have reversed the downtrend that developed in the second half of 2011, whereby 27,400 jobs were lost, 21,800 of which were full-time. The calender year to December 2011 was the first time in 19 years that the Australian economy has shed jobs, so the reversal in this month’s numbers moves the rolling annual jobs growth into positive territory:

Despite the creation of 46,300 jobs – and increase of 0.4% – the headline unemployment rate only fell by 0.1% to 5.1%. This is because the labour force participation rate also rose by 0.1%, helping to offset some of the employment gain (see below chart).

This is a welcome development. The increase in the labour force participation rate in January helps to offset a downtrend that has developed since October 2010, presumably due to discouraged job seekers leaving the workforce:

One blemish on the otherwise strong figures is that the aggregate number of hours worked actually fell by 23.1 million hours in January – the largest fall since February 2009 (see below charts). This might indicate that employers are ‘hoarding’ workers, but actually giving them less hours and/or that contractors are working less.

Turning to the state-by-state breakdown, the resource states of Western Australia and Queensland led the way, each generating 20,000 jobs. By contrast, Tasmania (-4,100) and Victoria (no change) were laggards:

Reflecting its status as Australia’s resources capital, Western Australia has by far the lowest unemployment rate in the nation (4.2%), well below the other mainland capitals (ranging between 5.1% and 5.4%). Tasmania has the worst unemployment in the nation at 7.0%:

So overall it’s a strong result, with the caveat that aggregate hours worked fell very sharply. Moreover, with the relentless announcements of job losses across the financial sector, retailing and manufacturing, as well as the sharp divergence between the official ABS figures and the Roy Morgan numbers, unemployment still looks set to rise. The question is how quickly and how high.

Further, while there’s a long time between now and the next RBA decision on interest rates, and anything can happen between now and then, you would have to think that this strong jobs result would make the RBA less inclined to cut interest rates next month, irrespective of the banks’ recent out-of-cycle rises.

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  1. > This might indicate that employers are ‘hoarding’ workers, but actually giving them less hours and/or that contractors are working less.

    I agree. In a downturn contractors are usually the first ones to be shown the door.

    > the RBA less inclined to cut interest rates next month

    Yes, the RBA will buy into these figures, for sure. Since Federal Labor came to power, there has been great emphasis “expert advice” or the “official position”. The official family — the RBA, Treasury and the Federal Government — will be even more emboldened by what the ABS says.

    But the stockmarket isn’t buying it (down 77 as I write) and rightly so. if we work less hours, we’ll earn less, and we’ll spend less. The hours worked is consistent with the previous retail sales report (-0.1%).

  2. Something smells fishy here. Appreciate the figures but not going to jump on the bull band wagon. Probably majority are mining jobs.

  3. Has anyone done or come across any anaylsis of the usefulness of the Roy Morgan numbers? Have they historically been a valid lead for official unemployment measures? They seem to be given a lot of importance on MB.

    • The “importance” is the fact that the ABS composition is not that good and way behind historically.

      Alternate measures are required to get a rounded picture.

      However, as long as the market (political as well) use ABS, it is THE measure of unemployment, just like CPI is THE measure of inflation, when we know its nothing of the sort.

      • Many thanks for the link. Would be very interesting to see some analysis using seasonally adjusted RM data, as well as some correlations at various leads and lags.

        I can’t really see a clear lead from the RM data in Steve’s charts. And the RM UE rate looks very seasonal.

  4. Importantly, January’s strong employment numbers have reversed the downtrend that developed in the second half of 2011, whereby 27,400 jobs were lost, 21,800 of which were full-time.

    What downtrend? You people are seeing things. Total employment has been flat as a tack for more than a year now, and its still flat.

    Odds on this number gets revised down (quietly) next month. One thing’s for sure, Chris Joye won’t be posting on the revision.

    BTW, has anyone looked at whether December was revised up or down? The previous month’s revision can make a huge difference to the headline number.

  5. Unemployment is counted by the ABS, using a (global) standard of measure. The rate of unemployement is determined by what a CentreLink recipient has ticked, not ticked, and stated on their benefits claim. This can go three ways;

    1 – Unemployed.

    2 – Not Unemployed (yet still receive entitlements).

    3 – Not considered apart of the workforce (yet still receive entitlements).

    Then comes JobServices Providers inconjuction with DEEWR, to help people “get off” from being unemployed. Don’t they just do that! This is acheived by either;

    1 – Finding employment for the receipient.

    2 – Paying (with help from DEEWR and CentreLink) for the receipient to do a resume coarse, people skill coarse, …etc. Your not counted an unemployed if you engage in such a coarse. (Still receive entitlements).

    3 – TAFE Coarse (Paid by the JobService Provider, DEEWR, CentreLink). (Still receive entitlements).

    4 – Work for the Doll. That is your consigned to a CentreLink Office for a while writing CentreLink Newletters (Still receive entitlements).

    Points 2,3,4 will take you off the Unemployment count. Not forgetting that 1 hour/week also takes you off the count.

    In conclusion, today’s news is a continuation of the Bullshicial Rate story, and Roy Morgan is being conservative.

    The only thing going BOOM in this country is my ar$e.

      • Thanks Alex, ‘my ar$e’ is correctly ‘my arse’.

        In the modern world of today, spell checkers have placed spelling skills with horseshoe makers. It was how once things were done.

        • “In the modern world of today, spell checkers have placed spelling skills with horseshoe makers.” I know, and as an old codger, it grieves me considerably.

        • Spell checkers are also all American. Everyone says loose when they mean LOSE!!!Then they try to put z in everywhere there is an ‘se’ Ah well that’s progress!

  6. I’d say this is almost entirely due to the seasonal adjustments.

    The total employment picture in Raw terms fell by 212,000. It’s only after seasonal adjustment that the figures look good. Normally, the monthly change would be at least -240,000.

    But, December’s figures were shocking, with only 115,000 hired, compared to normally around 150,000 up to 200,000. The narrative here is that not too many temporary (< 25 years) workers were hired, so not too many had to be fired when School/Uni goes back.

    As Lorax says, it's a flat (or at least unchanged) trend. The ABS advise to use the trend as well, which is revised for another 6 months as it's a 13 month weighted average.

  7. A quick question: What do the hours worked figures include and are they seasonally adjusted?
    My point is that half of my workforce had half of January off and therefore worked less hours.
    Even if full timers holidays are counted as hours worked the casuals would not.

  8. Damn it can’t anyone here come out and say the numbers are good without trying to invent some negative spin and hyperbole – really is that so hard to accept?

    • Good point Peter.

      Compared with – well everywhere else – unemployment in Australia remains low.

      It can certainly improve (especially underemployed) and structurally there are significant problems, but right now, the official numbers look very good indeed.

    • No because each monthly employment survey taken in isolation is almost completely meaningless.

      If this survey influenced the RBA’s decision last week it is deeply troubling that senior policymakers know so little about statistics.

      Show me 3 months of improving data and 100,000 more people employed and then I’ll tell you the numbers are good.

      • Lorax – I remember when you were much cheerier – the dollar isn’t going to reduce for a long long time, perhaps not in our lifetime given the mess that other nations are in – the $AUD looks positively sensational in comparison to most currencies. It’s the Cinderella amongst so many ugly sisters.

        You need to re-invent your wheel or take it offshore. What’s the use of being principled if you lose the game – where is the benefit for you or anyone else?

        Send me a postcard from Mumbai.

      • Lorax, for once I’m with Peter that this is good news (even though I continue to believe it won’t last).

        Relatively we’re still doing very well.

    • Not sure if you mean me but to be sure, here are some quotes from my article for you to consider:

      “…the Australian Bureau of Statistics (ABS) this morning released the labour force data for the month of January and it was very good.”

      “Importantly, January’s strong employment numbers…”

      “So overall it’s a strong result…”

      The only negative thing I reported was the large jump in the number of hours worked.

      • Peter Fraser is just having a whinge about doomsters (like me) always picking holes (no pun intended) in our fabulous Quarry Australia economy.

      • The Prince is correct, I was referring to the general comments – I wasn’t picking anyone out – sorry if it looked that way.

        It is clear that anyone with a reasonable command of the language and some modest technical knowledge can colour the results either way even if it is simply damming with feint praise – we all do it occasionally.

        But the reality is the numbers look good – next month they may not, but right here and now they look good even if the result doesn’t match the expectation.

        • im with peter on this. taken at face value the numbers are not too bad (except tasmania–which is becoming basketcase). fall in aggregate hours trend does however point to something not so pleasant.

    • Peter Martin gets it…

      Officially employment surged in January after going sideways (falling slightly) throughout 2011.

      The jump of 46,300 jobs in January sounds good, but is doing little more than reversing a slide of 35,700 jobs in December (revised down from a slide of 29,300).

      The truth is jobs growth is a lot less spectacular than it now looks and a bit better than it did look.

      Using smoothed trend figures and going back to the start of the financial year the Bureau of Statistics believed 11,900 jobs were created in seven months, not enough to stop the number of people identifying as unemployed climbing 19,000.

      The more important point is that these are small numbers in the context of the total number of Australians in work – 11.4 million.

      Employment is going sideways. The mid-year budget update foresaw that total growing 1 per cent, around 114,300 jobs. Seven months into the financial year we have scarcely scratched the surface.

      The Bureau says the trend rate of jobs growth right now is 1700 jobs per month. At that rate it would take five years to accumulate extra the jobs forecast for this financial year. The unemployment rate would steadily rise from 5.1 per cent to the upper fives.

      Maybe jobs growth will take off. But we can’t be sure that it has taken off yet.

      The Reserve Bank is as unlikely to be persuaded that the labour market spluttered into life in January as it was that jobs growth really stopped in 2011.

      A good figure is better than a bad one, but it is unlikely to dissuade the Reserve Bank from cutting rates next month if that’s what it is minded to do in order to offset private bank rate increases.

      And Pete doesn’t even mention the MoE on the survey, which is like 110,000 (!)

    • No Peter, we are waiting for the Japanese banks to come in to hand out cheap(er) mortgages before we put a positive spin on anything.

        • That was just a flippant comment directed at Peter’s own irrational exuberance and glee about the credit bubble continuing as they did for the last 10 years.

          • I answered your Japanese comment yesterday on another thread re. credit.

            Was there a part of the answer that was difficult for you to interpret?

    • Peter, I hate hyperbole in either direction, and while these numbers aren’t bad, they’re not great either. The trend is unchanged, although that’s better than I expected 🙂

  9. “One blemish on the otherwise strong figures is that the aggregate number of hours worked actually fell by 23.1 million hours in January – the largest fall since February 2009”

    That’s a very good point. To support it, I’ll let the ABS speak for itself:

    “(…) Aggregate monthly hours worked (…) can SOMETIMES be more revealing of what is happening in the labour market, PARTICULARLY IN A WEAKENING ECONOMY WHERE A FALL IN HOURS CAN USUALLY BE SEEN BEFORE ANY FALL IN THE NUMBER OF PEOPLE EMPLOYED.”

    http://www.abs.gov.au/ausstats/[email protected]/Latestproducts/6202.0Main%20Features999Jan%202012?opendocument&tabname=Summary&prodno=6202.0&issue=Jan%202012&num=&view=

    • Well I wanted to avoid a discussion on finer points, but…

      In January everyone in construction, and importantly building material manufacturing is away on holidays – they completely shut down, and so does their opportunity to work overtime.

      Retail is also coming off the Xmas high – has anyone checked to see whether a drop in hours is a normal feature in January?

      How do total hours worked compare with previous January’s?

      Wouldn’t that be a more relevant measure?

      • Pete. The figures are seasonally adjusted, which should take account of all those things you describe. And yes, the January drop in aggregate hours worked was far larger than other January’s, as shown very clearly in my chart. In fact, it was the largest drop in nearly 3 years.

        Yesterday you lambasted readers for being too negative on the results, which were good. By the same token, you are being too positive by failing to acknowledge the large drop in aggregate hours worked, which were the result’s only, albeit important, blemish. You need to get your head out of the sand and start being more balanced. A perma bull is just as bad as a perma bear.

        • UE I’m hardly even a bull at the moment.
          I have often said that I expect falls in Victoria, in fact I can provide a list state by state if you like.

          In my post that you replied to I asked questions, I made no claims.

          My earlier point was that some commenters here could find a negative in a Lotto win.

          Where are your posts on the falling unemployment levels in the USA or the falling mortgage default levels in the USA – a drop from 10% down to 7.5% is a massive fall of 25% in the default rates – that’s significant.

          Where are your comparisons to similar resource economies, who also seem to be having a correction in housing at the moment. That would be more relevant that trying to compare Australia ti Ireland as many here do.

          Is the USA not a major consumer globally, and regardless of whether the goods are produced in China or Bangladesh, Australia will be a source of raw materials for Asia, which has rapidly become the centre of global manufacturing. I don’t see that changing in our lifetime unless we see a military conflict, and I certainly don’t want that – partly because we would likely to lose the conflict.

          I’m not blind to problems in states like Greece, but the Greek economy is a drop in the bucket when compared to US states like California.

          We are seeing a healthy correction in housing in this country, but some of that is driven by the avalanche of negative sentiment from the USA and Europe where we have strong cultural ties. What do you think will happen when the USA home market rebounds in late 2012 or early 2013 and sentiment gradually reverses, especially if demand for consumer goods increases as USA consumers relax and reduce savings levels.

          Do we not usually experience elevated house prices during a mining boom. The difference this time is that it looks like being a protracted boom, so I don’t know of an historical precedent to look at. How long did the gold boom last in Victoria during the 19th century – how many of the stately homes in Victoria were built during the Gold Rush?

          Didn’t we have a post gold rush depression?

          Frankly I expect housing here to remain subdued for some years, but I just don’t see the drivers for the Steve Keen crash scenario of 40%. For that you need a groundshift in unemployment numbers.

          We are seeing a lot of headlines predicting job losses in the corporate sector, but the loss numbers have to come from small business before we will see any major structural shift, and a fall in hours in one months data doesn’t do it for me.

          When my local butcher and newsagent start reducing staff numbers I will become concerned.

          • Fair enough. I might have mis-interpreted your comment, which was a response to Magpie’s. I thought Magpie’s reference to the ABS comment on aggregate hours worked was insightful and has certainly made me a bit more circumspect about yesterday’s employment figures. Yesterday I though they were “very good” now I view them as only “good”. Still a lot better than bad, mind you, and much better than expected.

            We’ll have to wait and see about the commodity boom. I am a student of economic history and am generally a cautious person. So I start to squirm whenever I hear people argue that the boom will be ongoing. The commodity market is inherently volatile experiencing many boom/bust cycles over the past 200 years. If it continues for decades, awesome. But you are betting against 200 years of history, which always makes me nervous.

          • Well I understand how easy the boom will be to unwind, but in the last 200 years we haven’t seen roughly 3 billion people coming out of poverty with the massive construction of better housing, roads, rail, hospitals, and all of the usual infrastructure that goes with that.

            It won’t happen overnight, and it will have some splutters along the way.

            If we don’t have some idiotic reaction from a state like North Korea or Iran we could be looking at a version of the industrial revolution on steroids. Scary isn’t it? If we don’t get smarter in this country we will just end up being a big version of Nauru.

            The issues we now face will be miniscule compared to the ones that we will face in 2152. In many ways we may be better off in 2152 if it all ends now, but what do you see stopping it?

          • Plenty could stop China in its tracks, including:
            1. Rapidly ageing population following the one child policy: China’s demographic profile is terrible and expected to worsen sharply mid-decade;
            2. Hard landing in Europe: Europe is China’s largest export market.
            3. Full blown housing crash: Hard to say how this would play-out, but it would obviously impact growth significantly, sending commodity prices lower (at least for a year or so).
            4. Sharply rising non-performing loans impacting the banking sector and credit growth: China has sunk large sums of capital into questionable fixed asset investments with dubious returns. These projects have been commodity intensive and a boon for Australia, but there is only so long that an economy can build ‘roads to nowhere’.

            These are just a few risks that come to mind and are by no means predictions. But should a combination of these eventuate, they’d obviously negatively impact on commodities prices and Australia.

          • And if I may, China could end up like Japan – not a bad thing for the country itself (i.e low to zero GDP growth, deflation of asset prices, but stable economy overall with modest unemployment), but the peripheral countries, like Australia may not manage that transition well.

            Therein lies the risk IMO.

          • Japan took approx 40 years to get to it’s current position (1948 to 1988) until then it was rapid growth that seemed unstoppable at the time.

            Sure there is downside risk, but there is upside risk as well. What is your strategy if China handles it problems. The USA grew for over a two centuries even with a couple of depressions thrown into the tapestry of their economic history. Is it now considered impossible for a nation to experience similar growth?

            Funnily enough Prince I expect the Japan scenario to happen to China, but the run will be over a much longer time frame due to the numbers and land mass involved, with India and co hanging on their coat tails.

            Lets reconvene in 2052 and exchange notes.

  10. I hired at least a dozen people in Jan for a mining operation in WA. I have another 30 or so positions still to fill. That give you an idea of where the jobs are?

    • @GSM: What have you got for a very reliable 59 year old with a HR truck licence and an interest in stock market and economics? I can bring a good looking nurse consultant too if the money is good! And a maybe young and good looking buyer/administrator!

    • In the last 12 months there have been 30,000 new jobs in Australia. Of these 37,000 were in WA. Another 25,000 were in Qld. That leaves the rest of Australia with increased unemployment.

    • Are you planning on recruiting ex-auto workers, ex-steel workers, ex-Air stewardess, ex-aircraft maintenance workers or ex-middle management/back-office bank workers? Because these are the people getting fired left, right and centre.
      Mining bot was saying that they are not wanted in the mines.

      • Mining BoganMEMBER

        You know, very few jobs here need defined skills. Some do, yes. A lot need minimal training. Minimal training seems to be something that the mining companies do well. Even something like my role that took years of training in a manufacturing world takes about five months here. Get them trained and do it quick.

        Anyone you described above could do it. Most jobs. Not all.

    • GSM,

      does mining hire many part-time positions? I would have thought that most mining jobs are full-time by definition.

  11. The monthly change might be a positive one, but the 12 month SMA is still falling and looking at the history you would have to say that YOY = flat is what a pragmatist would call pre-recession levels. Australia is about 50/50 to a recession, if not in resources and GDP in high employing sectors.

    There have already been 2 blips up on the downtrend of growth. maybe this is really a turning point, but more likely in my view after reading the first 2 weeks headlines it will just be a blip in the downtrend.

    Look at the charts of employment and YOY change back through a couple of recessions and you’ll quickly see what I mean.

    In the US YOY employment growth less than 1.3% is a strong indicator of recession highly likely.

    For the majority of people it’s not two quarters of negative GDP it’s falling employment and rising unemployment.