Yesterday, the Australian Bureau of Statistics (ABS) released labour market data for April, which revealed that Australia’s unemployment rate (3.9%) fell to its lowest level since August 1974, whereas the underemployment rate (6.1%) fell to a fresh 14-year low:
While stimulus prevented the economy from sliding into a deep recession, it has merely filled the hole left by COVID lockdowns/restrictions and has failed to put the jobs market on a higher trajectory. This is illustrated clearly by the fact that employment growth is tracking below the pre-COVID trend:
However, full-time jobs are booming, up 5.3% over the pandemic versus a 1.7% fall in part-time jobs:
The collapse in the unemployment and underemployment rates have have also not been driven by people giving up looking for work. Australia’s participation rate in April was just below March’s all-time high:
The same applies for Australia’s employment-to-population ratio, which is tracking just below the prior month’s record high:
The only explanation for why Australia’s unemployment/underemployment rates have fallen so heavily is because labour supply has grown much more slowly, thanks to negative immigration over the pandemic:
As shown in the next chart, Australia’s civilian population aged over 16 has gone from growing strongly (circa 25,000 people a month pre-pandemic) to growing only slowly:
Therefore, the new jobs created have gone to unemployed Australians rather than migrants.
Had immigration continued at its pre-COVID level, Australia’s civilian population aged over 16 would be roughly 450,000 larger than it is currently. In turn, both unemployment and underemployment would be significantly higher and the employment to population ratio would be much lower (due to an increase in the denominator).
The same forces are benefiting Australia’s youth labour market.
While the number of youth jobs has flatlined over the pandemic:
Youth unemployment is tracking close to its lowest level since 2008 (8.8%), despite close to the highest participation rate since 2008:
The reason why is obvious: the 15-24 civilian population has shrunk by 164,000 (-5.1%) over the pandemic after temporary migrants went home:
In turn, more jobs have been made available for young Australians.
If you don’t believe my analysis go read Professor Bill Mitchell’s take, who is the Chair in Economics and Director of the Centre of Full Employment and Equity (CofFEE), an official research centre at the University of Newcastle. He has come to exactly the same conclusion and estimates that Australia’s unemployment rate will be around 2.7% higher if immigration had continued at its pre-pandemic level. “So instead of an unemployment rate of 3.9 per cent, the rate would have been 6.4 per cent in April 2022, given the employment performance since the pandemic”:
Any economist still claiming that the collapse in Australia’s unemployment and underemployment rates have little to do with the sharp reversal in immigration is deluded. The proof is undeniable.