Employment and Labor - Australia - August 2024
Paul Young
Experience Senior Financial Planning, Analysis and Reporting SME seeking P/T or F/T job.
The level of employment increased by +47.5k (0.3%) in August, slightly above Westpac’s forecast for a +35.0k gain, but well above the consensus forecast of +26.0k. This marks yet another above-trend gain in employment. Employment growth has slightly outstripped population growth over the past five months, seeing the employment-to-population ratio rise from 64.0% in March to 64.3% in August.August’s increase in employment was driven entirely by part-time employment (less than 35hrs/wk), with full-time employment (at least 35hrs/wk) holding mostly flat. While the split between full-time and part-time is often volatile month-to-month, such a result may reflect increased hiring in anticipation of a lift in household demand following recent income tax cuts. This may also be behind the rise in the underemployment rate – which measures those that are able and willing to work more hours – from 6.3% to 6.5%, given recent reports suggest that actual demand has shown little response to date. If this is the case and demand remains subdued, there is a risk that the recent increase in headcount could unwind in the coming months.
As expected, the participation rate held at its current high of 67.1%. This saw the size of the labour force increase by 37k – less than the increase in employment – implying there was a –10.5k fall in the level of unemployment. This drove a 0.08ppt fall in the unemployment rate, from 4.24% in July to 4.16% in August. Despite holding flat at 4.2% to one decimal place, the result was on the borderline of Westpac’s forecast for 4.1%, which was consistent with our expectation for firmer employment growth.The rising employment-to-population alongside robust population growth and sustained highs in labour force participation implies that labour demand is still able to absorb increases in labour supply. That is consistent with a relatively tight labour market, albeit one that is gradually becoming more balanced. August job vacancies data due out next week will be an important gauge of how this shift is evolving. It is worth emphasising that the gradual uptrend in unemployment since late 2022 has mainly come via stronger growth in labour supply rather than a lift in firing. This is a desirable scenario from a policy perspective – almost the very definition of a ‘soft landing’.
While the labour market has been fairly resilient at an aggregate level, experiences across the economy are varied. Industries at the coalface of the discretionary spending slowdown, such as retail trade and manufacturing, are reporting stalling/declining employment, while other sectors, such as essential services, are providing an offset to that weakness. Next week, we will get more important colour on the industry-level detail.Overall, today’s data once again highlights that the labour market remains an important pillar of support in what is otherwise a challenging economic backdrop. This is unlikely to materially change the RBA’s perspective on the state of the labour market, which it currently views as “tight relative to full employment” and as moving into “better balance”. There are risks in the detail that bear close monitoring over the period ahead, particularly with respect to the unevenness of labour market conditions across sectors.?
Source - Westpac
Paul Young CPA CGA (1996)
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Paul is a former IBM Customer Success Manager that has deployed over 300 data and AI solutions across industry and geographies for the past 8 years. Paul is a Financial Planning, Analysis, and Reporting SME working with data including integration of macro and micro indicators as part of the integrated business planning and reporting cycle.
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