Number in jobs collapses, along with participation rate

The number of people in jobs fell by 227,200 in May, with the total number of people in work falling to 12.154 million, the lowest number since April 2017. The participation rate collapsed to 62.9% - the lowest in more than 25 years – and has plunged a huge 3.0% in two months, as many people give up hope of finding any work. There is no bright news on the employment front.

Employment is the cornerstone of most stable and developed economies. It is the framework upon which households consume, acquire housing and undertake their retail sales. Right now, employment in Australia is under enormous stress, both at the individual level for many, and at the aggregate level for the nation.

The decline in employment to 12.154 million persons shown below, is the first indicator of stress. Compared with a year ago, there has been a decline of 5.4% in the number of people who are employed.

The huge fall in the participation rate is a good second point to consider. Normally, it moves up and down by the smallest amounts – a 0.3% change is very significant, let alone one that is ten times that magnitude over just two tumultuous months.

Fig. 19

To go straight to the dashboard and take a closer look at the data, click here.

A moment’s thought has to be given to part time employment here. In The Guardian, Greg Jericho observed that:

“The history of past recessions shows that while it can take many years for the employment rate to recover, the level of people working fulltime never does…”

Jericho’s long run chart is reproduced below because it emphasises the point that whatever a recovery may look like, in terms of employment, there will be less of the traditional full-time employment.

Fig. 20

 

There was some optimism in early June that a ‘jobs recovery’ had commenced. But by early July, the consensus was that the jobs recovery had stalled, as John Kehoe wrote in the Australian Financial Review.

Although the data on jobs week-by-week can be very volatile, Kehoe was able to point to other trends, including that 6.5% of women had lost their jobs, compared with 5.8% of men, that younger people were receiving higher wages on average, “…despite a 15 per cent decline in jobs for the younger cohort, thanks to the $1500 fortnightly JobKeeper wage subsidy.”

Looking at this data, we also need to examine the unemployment situation – the flipside of employment.

If we were unhappy with the employment data and can find little joy, there is no joy to be found in the chart below. The unemployment rate lifted to 7.1% in April, up from 6.4% in April and a pretty clear under-estimate of the actual level of unemployment. Compared to a year ago, the unemployment rate is 30% higher.

But the red line is just a percentage and the blue bars are people and households with lower incomes, and that is what makes the unemployment data real.

 

Fig. 21

To go straight to the dashboard and take a closer look at the data, click here.

Even more real is that many people are underemployed. The underemployment rate came in to 13.1% in May (from 13.8% the prior month), but that is cold comfort, because, as we show below, the combination of unemployment and underemployment means that labour utilisation is a perilous 20.2%. That is, one fifth of the workforce has no work or insufficient work, where the latter includes those on the JobKeeper stimulus program.

Fig. 22

To go straight to the dashboard and take a closer look at the data, click here.

There are two charts that put the impact into its most stark relief.

The first displays the monthly change in employment and hours worked. As can be seen here, in April and May, employment fell by 4.7% and 1.8% respectively, but the hours worked fell on average by 9.5% and 0.7% respectively. So, while many people lost their jobs, many more hours were lost. That is consistent with anecdotes, commentary and stories it is impossible to miss.

Fig. 23

To go straight to the dashboard and take a closer look at the data, click here.

The second chart shows the per capita impact of this. Prior to the pandemic, the average monthly hours worked was pretty much consistent with the long-term average. But when the pandemic struck, average hours worked fell dramatically, to 77.7 in April and further, to 77.1 in May.

Fig. 24

To go straight to the dashboard and take a closer look at the data, click here.

Neither households nor the economy can sustain this jobs and work crunch. We need a way out, and it is required soon, but to be clear: there is no short-term solution. Writing in The Guardian, Greg Jericho pointed out that recovery to pre-pandemic employment levels would take around three years on normal (2% per annum) growth rates.

This is front of brain for every household, business and government in Australia right now.