September Labour Force Survey. Total employment: –29.5k from +129.1k (revised from +111.0k). Unemployment rate: 6.9% from 6.8% (unrevised 6.8%). Participation rate: 64.8% from 64.9% (revised 64.8%)
Total employment fell -29.5k in September, a bit less than our -50k forecast and the market median of –35k. Full-time employment fell –20.1k while part-time fell –9.4k with both representing a –0.2% decline in the month.
In the month unemployment rate only increased to 6.9% from 6.8% (6.94% from 6.85% at two decimal places) due to a fall in participation from 64.9% to 64.8% (64.87% to 64.76% at two decimal places). The decline in participation drove a –18.3k contraction in the labour force.
We have been watching just how dynamic participation has been in the current cycle, due in part to the job losses being more concentrated in female employment. Females tend to be less attached to the labour force than males so tend to enter and leave the workforce more often given stronger or weaker labour market conditions. This can be demonstrated by female unemployment at 6.7% being lower than male unemployment of 7.1%. In a normal growth phase of a cycle male unemployment tends to be lower than female unemployment.
However, in September both appeared to be more equally affected as male employment fell –0.3% and female employment fell –0.2% while both reporting a 0.1ppt decline in participation and a 0.1ppt rise in unemployment. It is this dynamic in participation that has held the unemployment rate down compared to the official family forecasts for peak unemployment (but not Westpac) and is likely to continue for the near term hence the recent downward revisions to the Treasury forecast peak in unemployment.
Hours worked did lift 0.5% in the month suggesting we are continuing to see any improvement in labour demand be used by firms to work underutilised workers harder than grow their workforce.
The September report also provided further insights into the impact of the Stage 4 restrictions in Victoria. Employment fell –35.5k in Victoria following a –37.2k in August while hours worked fell a further –2.1% following a –4.6% decline in August. However, the weakness this time was expressed in falling participation, down 1ppt (which is an unusually large decline) to 63.0% which resulted in a 43.3k decline in the labour force and a –0.5ppt decline in the unemployment rate to 6.7%. Yes a –35.5k decline in employment in Victoria was associated with a meaning full in unemployment. It appears a large number have given up hope, at least until the Stage 4 restrictions are lifted, of finding a job in Victoria.
As we saw in August, it is decline participation in Victoria than is putting downward pressure on the national participation rate and again limiting the rise in the national rate of unemployment.
Nationally, the underemployment rate lifted 0.1ppt to 11.4% while the underutilisation rate, which combines unemployment and underemployment, rose 0.2ppt to 18.3%. Westpac’s estimate of the effective unemployment rate (which assumes that the participation rate is still at pre-COVID levels plus adds in those who are working zero hours for economic reasons) lifted 0.3ppt to 10.2%.
Today report is still consistent with the unemployment rate drifting higher from here. Westpac is forecasting 7.8% by end 2020.
