Economics Professor Bill Mitchell’s report on the ABS’ labour market survey for June noted that the collapse in immigration has played a key role in lowering Australia’s unemployment rate to a 10-year low of 4.9%:
Given the variation in the labour force estimates, it is sometimes useful to examine the Employment-to-Population ratio (%) because the underlying population estimates (denominator) are less cyclical and subject to variation than the labour force estimates. This is an alternative measure of the robustness of activity to the unemployment rate, which is sensitive to those labour force swings.
The following graph shows the Employment-to-Population ratio, since February 2008 (the low-point unemployment rate of the last cycle)…
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This is partly due to the slower population growth as a result of the lack of immigration due to the on-going external border closures.
This is forcing employers to search harder for workers already in Australia rather than discriminate against the unemployed.
The following graph shows Australia’s working age population (Over 15 year olds) from January 2015 to June 2021.
With the external border closed, immigration has shrunk to virtually zero and the impact is very clear.
This flattening out has forced employers to work harder to get workers and is one of the reasons unemployment is falling quite quickly, given the circumstances…
The official unemployment rate fell 0.2 points to 4.9 per cent even though the employment growth was relatively weak.
The labour force grew by just 7 thousand with participation stable. This is the result of the slowdown in the working age population due to the restrictions on the external border.
Marcel Thieliant, senior Australia and New Zealand economist at Capital Economics, also noted that the size of the labour force increased by just 7,000 people in June, because border closures have restricted immigration.
And with the participation rate remaining steady, that helped the unemployment rate to decline to its lowest level in a decade, which will soon translate into accelerating wage growth:
“With the border set to remain closed until at least the end of the year, labour force growth will remain muted, so even small employment gains will result in a further decline in the unemployment rate”.
“The upshot is that wage growth should start to accelerate in earnest before long”…
As did Stephen Koukoulas:
Labour data show how closed borders for visa workers is driving an extraordinary drop in unemployment. Local employers are hiring locals & bidding up wages.
This is great news & a result that is hopefully not undermined by excessive use of foreign workers when borders reopen
— Stephen Koukoulas (@TheKouk) July 15, 2021
As noted on Friday, the reduction in migrant workers has already sent youth unemployment to a 12-year low, whereas youth underemployment is also tracking 2.3% below its pre-COVID level:
Business’ inability to import migrant workers is also providing greater employment opportunities for older Australian workers, as the next article highlights:
ANZ is looking at recruiting older workers and pensioners to help combat labour shortages…
ANZ chief executive Shayne Elliott, who visited one of Australia’s biggest backpacking regions, Mildura, last week, said labour shortages were also emerging in the office as well as on the land.
And at ANZ, older workers have become sought after, with the bank finding mature aged employees were more empathetic and suited to helping customers particularly those who have gone through hardship such as losing their job, going through a divorce or financial difficulties…
“What we found in the data is a lot of people, particularly women, who were older and who had worked in tech in the past for whatever reason had moved out of the workforce and then somehow felt they weren’t worthy or capable of coming back.
“So we’ve got a program to bring people back to the workforce and it has been enormously successful. So look, I think there are opportunities for that.”
Fancy that. Closing the tap to cheap foreign workers has magically opened up employment opportunities for Australia’s unemployed. Who would have thought!
Isn’t it amazing that in June 2021 Australia had its tightest labour market in a decade a year after its first recession in three decades? All that was needed was government stimulus combined with a sharp reduction in immigration.
Obviously the planned rebooting of immigration back to pre-COVID levels will undue this good work. Going back to importing circa 180,000 additional workers every year will necessarily drive unemployment back up and crater wage growth. It’s that simple.
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