Employment Remains A Mixed Picture

The ABS reported their monthly employment data today, showing that trend full-time employment increased for the 10th straight month in July 2017 but both the trend unemployment rate in Australia was steady at 5.6 per cent in July 2017, and the labour force participation rate remained at 65.0 per cent.

Let’s be clear 5.6% hardly a great result as The New Daily highlights, bearing in mind the unemployment rate in the US, is 4.3%, 4.5% in the UK, 3.9% in Germany and 2.8% in Japan.  Note also that wages are depressed in these countries too. We should not get deflected by the rising number of jobs, which is where the Government would like us to look.  We should be doing better. This does not reflect “full employment”.

Full-time employment grew by a further 29,000 persons, while part-time employment decreased by 3,000 persons, underpinning a total increase in employment of 26,000 persons. The trend monthly hours worked increased by 5.2 million hours (0.3 per cent) to 1,696.4 million hours in July 2017.

Over the past year, trend employment increased by 259,000 persons (or 2.2 per cent), which is above the average year-on-year growth over the past 20 years (1.9 per cent).

The rate of employment growth (2.2 per cent) was greater than the growth in the population aged 15 years and over (1.6 per cent), which was reflected in an increase in the employment to population ratio (which is a measure of how employed the population is). This ratio increased by 0.4 percentage points since July 2016, up to 61.4 per cent, the highest it has been since April 2013.

“Full-time employment has now increased by around 220,000 persons since September 2016, and makes up the majority of the 250,000 person increase in employment over the period,” Chief Economist for the ABS, Bruce Hockman, said.

Over the past year the three states and territories with the strongest growth in employment were Tasmania (4.0 per cent), Victoria (3.1 per cent) and Queensland (2.7 per cent).

Trend series smooth the more volatile seasonally adjusted estimates and provide the best measure of the underlying behaviour of the labour market.

The seasonally adjusted number of persons employed increased by 28,000 in July 2017. The seasonally adjusted unemployment rate was 5.6 per cent and the labour force participation rate was 65.1 per cent.

Will Wages Rise Any Time Soon?

On of the drivers of mortgage stress, which continues to rise, is flat and falling income growth. This phenomenon is hitting other economies too, such as the UK.

So, today’s speech from RBA Governor Philip Lowe is timely –  The Labour Market and Monetary Policy. This speech covers trends in employment and wages in Australia, and the impact of these on monetary policy decisions. It describes developments in the labour market in Australia, including the growth of employment in the services sector, and in part-time jobs. The speech then explores the reasons behind subdued wages growth in Australia and other advanced economies, and the challenge this poses for monetary policy. It restates the Bank’s approach to making monetary policy decisions within the framework of a medium-term inflation target, in way that supports sustainable economic growth and serves the public interest.

He makes the point that if some of the long standing links between income growth and monetary policy are not working as they did, more monetary stimulus may encourage investors to borrow to buy assets, which poses a medium-term risk to financial stability.

In comments after the speech, he also made the point that surging asset prices has led to a growth in inequality across Australia.

Whilst unemployment looks reasonable,

… under utilisation is a real issue.

The persistent slow growth in wages is creating a challenge for central banks. It is contributing to an extended period of inflation below target. In years gone by, the more standard challenge was to keep wage growth in check, so as to stop upward pressure on inflation, which could lead to restrictive monetary policy. No advanced economy faces this challenge at present.

It is possible that things could change in the not too distant future, particularly in those countries at, or near, full employment. It may be that the lags are just a bit longer than usual. If so, we could hit a point at which workers, having had only modest pay increases for a run of years, decide that it is time for a catch-up. If such a tipping point were reached, inflation pressures could emerge quite quickly. In this scenario we could see a period of turbulence in financial markets, given that markets are pricing in little risk of future inflation.

This scenario can’t be completely discounted. It would seem, though, to have a fairly low probability in Australia, especially in light of the continuing spare capacity in our labour market. The more likely case here is that wage growth picks up gradually as the demand for labour strengthens.

Globally, an alternative scenario is that the period of slow wage growth turns out to be much more persistent, partly for the reasons that I discussed earlier. In this scenario, wages growth eventually picks up, but it takes quite a while longer. If so, inflation stays low for longer, although there are other factors that could push inflation higher.

This scenario is one in which the Phillips Curve is flatter than it once was. It is one in which inflation is harder to generate. We can’t yet tell though whether the Phillips Curve in Australia has become flatter, given that we have experienced relatively little variation in the unemployment rate over recent times.

The combination of a flatter Phillips Curve and inflation below target raises a challenge for central banks: how hard to press to get inflation up?

For a central bank with a single objective of inflation, the answer is relatively straightforward. Inflation is too low, so you do what you can to get inflation up. If inflation doesn’t increase, you need more monetary stimulus.

This approach does carry risks, though. A flatter Phillips Curve means that the monetary stimulus has relatively little effect on inflation, at least for a while. At the same time, however, the monetary stimulus is likely to push asset prices higher and encourage more borrowing. Faced with low inflation, low unemployment and low interest rates, investors are likely to find it attractive to borrow money to buy assets. This poses a medium-term risk to financial stability.

 

Trend full-time employment growth continues

Monthly trend full-time employment increased for the ninth straight month in June 2017, according to figures released by the Australian Bureau of Statistics (ABS) today. The trend unemployment rate in Australia decreased by less than 0.1 percentage points to 5.6 per cent in June 2017.

This is good news, in that more people are employment, but of course household income growth is still sluggish and underemployment remains a continuing issue.

Full-time employment grew by a further 30,000 persons, while part-time employment decreased by 4,000 persons, underpinning an increase in total employment of 26,000 persons.

The state by state data (based on original stats) shows an improvement in SA, but a fall in ACT. The smaller states tend to be more volatile.

“Full-time employment has increased by around 187,000 persons since September 2016, with particular strength over the past five months, averaging around 30,000 persons per month,” Chief Economist for the ABS Bruce Hockman said. “Full-time employment now accounts for about 68 per cent of employment, however this is down from around 72 per cent a decade ago.”

Over the past year, trend employment increased by 227,000 persons (or 1.9 per cent), which is the same as the average year-on-year growth over the past 20 years. It has increased since December 2016, when the year-on-year growth was at 0.8 per cent and reflected relatively low employment growth through most of 2016.

The trend monthly hours worked increased by 6.2 million hours (0.4 per cent) to 1,691.5 million hours in June 2017. Most of this increase was hours worked by full-time workers.

The trend unemployment rate in Australia decreased by less than 0.1 percentage points to 5.6 per cent in June 2017.

Trend series smooth the more volatile seasonally adjusted estimates and provide the best measure of the underlying behaviour of the labour market.

The seasonally adjusted number of persons employed increased by 14,000 in June 2017. The seasonally adjusted unemployment rate remained steady at 5.6 per cent, after the May 2017 number was revised up to 5.6 per cent, and the seasonally adjusted labour force participation rate increased to 65.0 per cent.

Australian underemployment is the highest in modern times

From The New Daily.

Underemployment is at its highest level since records began in the 1970s, but you won’t have heard it on the TV.

Thursday’s headlines were instead dominated by news that Australia’s official unemployment rate had fallen from 5.7 per cent in April to a four-year low of 5.5 per cent in May, based on the popular ‘seasonally adjusted’ measure.

Economists and politicians seized on this unexpected surge in full-time employment as a sign that the labour market and the broader economy were improving.

“Fifty-thousand Australians went out to get a job in May and they got one under the economic policies of the Turnbull government,” Treasurer Scott Morrison told Parliament.

“The unemployment rate now has fallen to 5.5 per cent, lower than what we inherited from the Labor Party back in 2013.”

Mr Morrison was using the seasonally adjusted measure, the usual number quoted by politicians and journalists.

However, the measure preferred by the Australian Bureau of Statistics – trend – had the unemployment rate unchanged at 5.7 per cent.

Worse still, the ABS itself drew special attention to the fact that the share of workers wanting more hours was at the highest level since modern records began in 1978. This was widely ignored.

underemployment chart abs

The trend estimate of underemployment worsened from 8.7 per cent in December-February to 8.8 per cent in March-May, which means 1.1 million Australian workers are crying out for more hours.

ABS chief economist Bruce Hockman said this figure was an important reminder of “spare capacity” in the labour market.

“The underemployment rate is an important indicator of the spare capacity of workers in Australia, and has risen for the sixth consecutive quarter to a historical high of 8.8 per cent,” Mr Hockman said.

The ABS prefers trend estimates because it says they are less volatile than seasonally adjusted numbers.

Thursday’s record-high underemployment was a symptom of growing casualisation, which many believe has deleterious effects on wages, job security and conditions.

The ABS defines a person as underemployed if they are part-time and want more hours, or if they are usually employed full-time but were forced for economic reasons to work part-time the week they were surveyed by the bureau.

Even during the 1990s recession the underemployment rate never exceeded 7 per cent.

And despite the headlines welcoming the creation of “50,000” new full-time jobs, the long-term trend of destruction of full-time positions saw no abatement in the latest quarterly data.

full time jobs vanishing

Since the late 1970s, the share of men with full-time jobs has fallen from 95 per cent to 80 per cent. Women have suffered too, with their share of full-time jobs falling by roughly the same amount, from 66 to 53 per cent.

You won’t have heard that in Question Time.

Trend Unemployment Unchanged, Again, But…

The May 17 trend unemployment remained at 5.7% according to ABS figures released today. Full time employment grew again, and participation was higher, but the trend underemployment rate, which is a quarterly measure of employed persons wanting more hours, increased from 8.7 per cent to 8.8 per cent between February and May 2017. Further pressure on household incomes.

Significant state variations remain, with trend unemployment in SA at 7.1% and NT at 3.2%; the former rising, the latter falling.

Monthly trend full-time employment increased for the eighth straight month in May 2017, according to figures released by the Australian Bureau of Statistics (ABS) today. Full-time employment grew by a further 19,300 persons, while part-time employment increased by 5,900 persons, underpinning an increase in total employment of 25,200 persons.

“Full-time employment has increased by around 124,000 persons since September 2016, with particular strength over the past five months, at around 20,000 persons per month,” said Chief Economist for the ABS, Bruce Hockman.

Over the past year, trend employment increased by 194,200 persons (or 1.6 per cent), which is still below the average year-on-year growth over the past 20 years (1.8 per cent). It has increased since December 2016, when the year-on-year growth was at 0.8 per cent and reflected relatively low employment growth through most of 2016.

The trend monthly hours worked increased by 2.9 million hours (0.2 per cent) to 1,677.7 million hours in May 2017. Most of this increase was hours worked by full-time workers.

The trend unemployment rate in Australia remained at 5.7 per cent in May 2017. The trend underemployment rate, which is a quarterly measure of employed persons wanting more hours, increased from 8.7 per cent to 8.8 per cent between February and May 2017.

“The underemployment rate is an important indicator of the spare capacity of workers in Australia, and has risen for the sixth consecutive quarter to a historical high of 8.8 per cent,” Mr Hockman said.

The trend underutilisation rate, which includes both unemployment and underemployment, remained at 14.5 per cent in May 2017.

Trend series smooth the more volatile seasonally adjusted estimates and provide the best measure of the underlying behaviour of the labour market.

The seasonally adjusted number of persons employed increased by 42,000 in May 2017. The seasonally adjusted unemployment rate decreased by 0.2 percentage points to 5.5 per cent, and the seasonally adjusted labour force participation rate increased slightly to 64.9 per cent.

“The trend unemployment rate has been relatively stable over the past 18 months, at around 5.7 to 5.8 per cent, while the seasonally adjusted rate has also been relatively constrained, between 5.5 and 6.0 per cent,” Mr Hockman said.

Significant state variations remain, with SA at 7.1% and NT at 3.2%.

US Unemployment Rate Was 4.3 Percent in May 2017

From The US Bureau of Labor Statistics.

The US unemployment rate was 4.3 percent in May 2017, down from 4.8 percent in January. Among the unemployed, the number of job losers and persons who completed temporary jobs declined by 211,000 to 3.3 million in May, or 2.1 percent of the total labor force. In comparison, job leavers made up 0.5 percent of the labor force. These are people who quit or voluntarily ended their jobs and began searching for a new job.

Unemployed reentrants to the labor force made up 1.3 percent of the labor force in May 2017. Reentrants are people who previously worked but were out of the labor force before they began their job search. Unemployed new entrants made up 0.4 percent of the labor force in May.

These data are from the Current Population Survey. For more information, see “The Employment Situation — May 2017″

US Employment Data Mixed In May

According to the US Bureau of Labor Statistics, total nonfarm payroll employment increased by 138,000 in May, and the unemployment rate was little changed at 4.3 percent. Job gains occurred in health care and mining. The labor force participation rate declined by 0.2 percentage point to 62.7 percent.

The unemployment rate, at 4.3 percent, and the number of unemployed persons, at 6.9 million, changed little in May. Since January, the unemployment rate has declined by 0.5 percentage point, and the number of unemployed has decreased by 774,000.

Among the unemployed, the number of job losers and persons who completed temporary jobs declined by 211,000 to 3.3 million in May. The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged over the month at 1.7 million and accounted for 24.0 percent of the unemployed.

The labor force participation rate declined by 0.2 percentage point to 62.7 percent in May but has shown no clear trend over the past 12 months. The employment-population ratio edged down to 60.0 percent in May.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed at 5.2 million in May. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.

In May, 1.5 million persons were marginally attached to the labor force, down by 238,000 from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 355,000 discouraged workers in May, down by 183,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining  1.1 million persons marginally attached to the labor force in May had not searched for work for reasons such as school attendance or family responsibilities.

Establishment Survey Data

Total nonfarm payroll employment increased by 138,000 in May, compared with an average monthly gain of 181,000 over the prior 12 months. In May, job gains occurred in health care and mining.

Employment in health care rose by 24,000 in May. Hospitals added 7,000 jobs over the month, and employment in ambulatory health care services continued to trend up (+13,000). Job growth in health care has averaged 22,000 per month thus far in 2017, compared with an average monthly gain of 32,000 in 2016.

Mining added 7,000 jobs in May. Employment in mining has risen by 47,000 since reaching a recent low point in October 2016, with most of the gain in support activities for mining.

In May, employment in professional and business services continued to trend up (+38,000). The industry has added an average of 46,000 jobs per month thus far this year, in line with the average monthly job gain in 2016.

Employment in food services and drinking places also continued to trend up in May (+30,000) and has grown by 267,000 over the past 12 months.

Employment in other major industries, including construction, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, financial activities, and government, showed little change over the month.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in May. In manufacturing, the workweek also was unchanged at 40.7 hours, while overtime edged up by 0.1 hour to 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged down by 0.1 hour to 33.6 hours.

In May, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.22. Over the year, average hourly earnings have risen by 63 cents, or 2.5 percent. In May, average hourly earnings of private-sector production and nonsupervisory employees increased by 3 cents to $22.00.

The change in total nonfarm payroll employment for March was revised down from +79,000 to +50,000, and the change for April was revised down from +211,000 to +174,000. With these revisions, employment gains in March and April combined were 66,000 less than previously reported. Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors. Over the past 3 months, job gains have averaged 121,000 per month.

The Growing Skill Divide in the U.S. Labor Market

The St. Louis Fed On The Economy Blog has highlighted a polarization in the labor market, between skilled employees capable of performing the challenging tasks in the cognitive nonroutine occupations and entry-level employees that are physically strong enough to perform the manual nonroutine tasks.

Over the past several decades, the skill composition of the U.S. labor market has shifted. Employers are hiring more workers to perform nonroutine types of tasks (such as managerial work, professional services and personal care) and fewer workers for routine operations (such as construction and manufacturing). This shift in the type of skills in demand is referred to as job polarization.

One way to see evidence of job polarization is to look at employment growth in certain occupational classifications. The figure below divides occupational employment growth into four groups:

  • Cognitive Nonroutine: managers, computer scientists, architects, artists, etc.
  • Manual Nonroutine: food preparation, personal care, retail, etc.
  • Cognitive Routine: office and administrative, sales, etc.
  • Manual Routine: construction, manufacturing, production, etc.

average annual employment growth

The black lines represent the average growth rate across all occupations within a group, while the bars represent the growth rate in that particular occupation.

The fastest growing occupational groups are cognitive nonroutine and manual nonroutine, both growing about 2 percent every year on average since the 1980s. Cognitive routine and manual routine occupations are growing significantly slower, less than 1 percent on average (or shrinking, in the case of production occupations).

Physical Demands of Work

One of the implications of job polarization is a shift in the type of work required to be performed by the average employee. A new survey from the Bureau of Labor Statistics—the Occupational Requirements Survey—gathers data on the type of work performed in each occupation.

The figure below looks at two physical task requirements:

  • The percentage of hours in an eight-hour day spent standing or walking
  • The percentage of workers required to perform pushing or pulling tasks with one or both hands

physical task requirements

The most physically demanding occupational groups are manual nonroutine and manual routine. In both of these groups, on average more than half of the employees are required to push or pull with their hands, and over half of their day is spend standing or walking.

In contrast, less than 35 percent of workers in the cognitive nonroutine and cognitive routine groups push or pull with their hands. These groups also spend much less time standing/walking.

Decision-Making at Work

The last figure looks at two cognitive task requirements:

  • The percentage of workers where decision-making in uncertain situations or conflict is required
  • The percentage of workers whose supervision is based on broad objectives and review of results

These requirements are easier to think about in terms of a spectrum. For example, occupations that require less cognitive activity either lack decision-making entirely or involve straightforward decisions from a predetermined set of choices.

Similarly, occupations with a greater cognitive requirement usually involve broad objectives with end-result review only, while more manual occupations require detailed instructions and frequent interactions with supervision (for example, a consultant’s quarterly performance review versus daily quality control checks in a factory).

cognitive task requirements

By a large margin, the cognitive nonroutine occupations involve more challenging decision-making and less frequent interactions with supervision. The other occupational groups all have fewer than 10 percent of employees engaging in these types of cognitive tasks.

Job Growth According to Skill Requirements

The figures above show a stark contrast between the skill requirements in the two occupational groups growing the fastest. The cognitive nonroutine group requires complex decision-making, independent working conditions and less physical effort, while the manual nonroutine group still requires quite a bit of physical effort and does not involve a high level of cognitive tasks.

Unemployment Rate at 5.8 per cent for the Fourth Consecutive Month

The latest employment data from the ABS does not look too bad on first blush, it beat expectations, especially if you go for the wobbly seasonally adjusted series. However the continued rise in part-time employment (up 3.6%) compared with full-time (up 0.1%) highlights the problem with low take home pay, and when added to the falling wage growth in real terms, it explains why household finances are taking a battering, and why mortgage stress is up again.  Also significant differences if you compare WA with NSW.

Trend employment increased by 19,900 persons to 12,071,300 persons in April 2017, according to figures released by the Australian Bureau of Statistics (ABS) today. Total employment growth over the year was 1.3 per cent, which remains below the average growth rate over the past 20 years of 1.8 per cent.

Over the past year there was a larger increase in trend part-time employment (102,800) than full-time employment (49,300) – around two-thirds of the total increase in employment. This was considerably more pronounced in the trend hours worked, which grew by 3.6 per cent for the part-time employed, and 0.1 per cent for those employed full-time.

Australia’s trend unemployment rate remained at 5.8 per cent for the fourth consecutive month.

“For almost 18 months, the trend unemployment rate has been relatively stable, at around 5.7 to 5.8 per cent” said Bruce Hockman, General Manager of the ABS Macroeconomic Statistics Division. “We haven’t seen this stability since the May 2007 to October 2008 period, when it remained around 4.2 to 4.3 per cent.”

The trend participation rate increased by less than 0.1 percentage points to 64.8 per cent.

Trend series smooth the more volatile seasonally adjusted estimates and provide the best measure of the underlying behaviour of the labour market.

The seasonally adjusted number of persons employed increased by 37,400 in April 2017. The seasonally adjusted unemployment rate decreased 0.2 percentage points to 5.7 per cent, and the seasonally adjusted labour force participation rate remained steady at 64.8 per cent.

The comparison between the numbers in WA and NSW (the last and first placed states from an economic perspective) tells an interesting story.

Unemployment has been falling in NSW, and has turned the corner in WA, after a steady climb. However the participation rate in WA is significantly higher and is rising, whilst it is lower and falling in NSW. This reflects a range of factors, including demographic distribution, industry mix and part time work options.  The falling rate in NSW should be regarded as a warning of trouble ahead when it comes to looking at household finances.

Trend employment growth strengthens in March

Trend employment increased by 16,500 to 12,033,400 persons in March 2017, according to figures released by the Australian Bureau of Statistics (ABS) today. Total employment growth over the year was 1.0 per cent, just over half the average growth rate of the past 20 years (1.8 per cent).

“We have seen strengthening in full-time growth over recent months, following falls in full-time employment recorded through much of 2016” said the Acting General Manager of ABS’ Macroeconomic Statistics Division, Jacqui Jones.

The trend monthly hours worked decreased by 0.4 million hours (0.02 per cent), with decreases in total hours worked by both full-time and part-time workers.

The trend unemployment rate in Australia increased by less than 0.1 percentage points, to 5.9 per cent in March 2017. The trend participation rate also increased slightly, to 64.7 per cent.

Trend series smooth the more volatile seasonally adjusted estimates and provide the best measure of the underlying behaviour of the labour market.

The seasonally adjusted number of persons employed increased by 60,900 in March 2017. The seasonally adjusted unemployment rate remained steady at 5.9 per cent, and the seasonally adjusted labour force participation rate increased 0.2 percentage point to 64.8 per cent.