It’s now clear that the strong jobs growth the government has presided over since 2016 is coming to an end. The question is whether we’re entering a significant slowdown, or merely reverting to the lower, but still solid, level of growth that preceded it. Neither outcome is good news for wages growth.
Last week’s March jobs data from the Australian Bureau of Statistics showed that trend employment increased by 14,000 in March. That’s an increase of 0.11%, which was below the monthly average growth rate over the past 20 years of 0.16%, and the lowest monthly growth rate observed since December 2016. In December 2017, the ABS recorded 25,000 new trend jobs. In January this year, 23,000, February 18,000. Now 14,000 — the pattern is obvious. Trend full time jobs have fallen more noticeably — from 16,600 last December to just 1,000 in March. Trend part time work has risen from 8,800 new jobs in December to 13,000 last month.
Things aren’t much better if you look at the seasonally adjusted numbers. In the latest figures, the ABS revised its initial estimate of seasonally adjusted jobs in February from a rise of 18,000 jobs, to a loss of 6,300 for that month in the March figures.
Only longer-term figures will confirm this, but it’s possible that the relative slowdown reflects the fact that the dramatic surge in health and social care jobs in 2017 — which along with education has provided much of the massive jobs growth of which the government is so proud — couldn’t last and had to revert to more levels of growth. Health and social care is by far the biggest employing sector of the economy and now employs nearly one in seven people in the workforce. In 2016, however, it marked time, growing by just 8000 jobs between November 2015 and November 2016. But in the subsequent 12 months, it more than made up for it, growing by a whopping 133,000 jobs.
That shift is probably partly the combination of coincidence in recruitment patterns in state-run healthcare systems and statistical noise — but it’s a big reason why jobs growth has been so strong over the last twelve months. Those statistical and on-the-ground factors surely had to normalise and bring growth back to more usual levels — in the quarter to February, growth in the sector was “only” 20,000. If that turns out to be the case, jobs growth in the wider economy will also slow.
But even if we’re seeing a mere reversion to the mean rather than an actual downturn in jobs growth, any pressure on wages growth is likely to disappear just as optimistic commentators were declaring — wrongly — “the corner has been turned”. NAB Chief economist, Alan Oster said last week in relation to the bank’s business conditions index that it “provides a warning that wages growth might have shifted down to a lower level; so while we expect to see some improvement in the future, wages growth at the levels seen pre-GFC seem a long way off”.
The good news, however, is that the persistent strong jobs growth has lured more people back into the workforce, with trend participation hitting an all-time high of 65.7% (much of which is due to health and social care being dominated by women — female participation hit 60% in August 2017, for the first time ever). The higher participation rate has helped push the jobless rate from 5.4% at the end of December to 5.6% in March, but that’s the price you pay for getting people back into the jobs market, and one well worth paying. Participation was last persistently strong in 2010, when it reached 65.6%, but it began what appeared to be a permanent slide after that. The jobs boom may come and go, but the government can be proud that it has reversed that.
Apart from the direct employment of public servants and more likely, contractors/consultants, the government can no more claim credit for jobs growth than I can claim for the earth going around the sun.
And with continued high immigration, there is no pressure to increase wages. Record employment is barely enough to soak up the existing and entering, so our official unemployment rate is intractable locked just under 6%, and our real unemployment/underemployment rate is a serious problem, hidden in the figures.
Trend unemployment is still higher than what it was during the 6 years Labor were in office…..& they had a GFC to contend with.
According to this site below, peak participation rates occurred under Labor, when they hit 65.6%-65.8% for three consecutive months. Indeed, participation rates remained above 65% for the bulk of 2008-2013. Again, in spite of a GFC.
By contrast, most of the period of 2014-2017 saw participation rates of *below* 65%…..yet still unemployment rates remained higher than 5.5%. So much for the “better economic managers”
https://tradingeconomics.com/australia/labor-force-participation-rate
With low wage growth and higher housing costs, is it any wonder that participation rates have grown? The government might be pleased by increased employment participation, but we should all be concerned about its cause…
“The jobs boom may come and go, but the government ‘can be proud that it has reversed that'”. Proud of which part – reversing the coming or the going?
I am not sure I would have called a ‘jobs boom’ when the underemployment and the unemployment is still so high; with employment threshold still at only an hour per week, the hours being worked, in spite of more jobs, have not increased by much, and the jobs growth is mainly in one sector which in turn was a sector – NDIS – that was initiated by Labor.
The available job numbers are increasing (and the percentage of those unemployed decreasing) because of the increase in population. The people leaving the work force – retirement etc. – also contribute to the number of jobs ‘created’.
The main contribution from ‘immigration’ is from the massive number of people coming on temporary 457 work visas where, supposedly, there are no Australian workers with the training to do the jobs. (All an employer has to do in interview a few people and claim no one was suitable and then employ people from overseas at a lower salary – again another way to keep salaries/wages low)