October Labour Force Survey. Total employment: 178.8k from -42.5k (revised from -29.5k), unemployment rate: 7.0% from 6.9% (unrevised 6.9%), participation rate: 65.8% from 64.9% (revised 64.8%).
Total employment surged 178.8k (1.4%) in October, significantly larger than Westpac’s and the market’s –30k forecast and still much larger than the top of the market forecast of +30k. Employment is now just 1.7% less than what it was in March 2020, a rather surprising recovery in employment.
Full-time employment lifted 97.0k/1.1% while part-time lifted 81.8k/2.0%.
In the month unemployment lifted 0.1ppt to 7.0% (7.00% from 6.91% at two decimal places) due to a strong rebound in participation from 64.9% to 65.8% (65.81% to 64.86% at two decimal places). This was a significant jump in participation and it drove a 204.3k surge in the labour force. This is a significant lift as it take participation back to with range of the pre-COVID peak of 66.2% in August 2019. This is not something we expected to see so soon but in all fairness, we have been arguing that participation has been very dynamic with employment this time so it should not be surprising that a strong rise in employment has been associated with a strong gain in participation.
But it does raise the question, can we see a new record high in participation sometime in the next year, not something we had expected to see, which can hold unemployment around 7% even if we get stronger than expected employment gains? And how much will it dip if we get a soft patch though 2021 preventing a meaningful rise in unemployment?
Victoria did stand out with a 81.6k gain in employment but NSW added 36.4k, Qld added 25.3k and WA added 15.3k. But it is worth noting that up to October Victoria was holding back the national participation rate, this month it underpinned the surge. Participation leapt from 63.0% to 65.0% which saw the unemployment rise 0.7ppt to 7.4% despite the very robust gain in employment. Contrast with NSW where participation only lifted 0.2ppt to 65.6% the unemployment rate fell 0.6ppt to 6.5%. NSW has the lowest unemployment rate for any state while SA as the lowest participation rate.
The underemployment rate did ease back 1ppt to 10.4% while the underutilisation rate, which combines unemployment and underemployment, fell 0.9ppt to 17.4%. 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) also improved significantly with a -79.6k decline in the number of people working zero hours for economic reasons. Westpac’s effective unemployment rate fell 1.8ppt to 8.3%. It peaked at 14.7% in April.
We have been watching hours worked more closely than usual as to date any improvement in labour demand has been used by firms to work underutilised workers harder rather than add to their workforce. In October total hours worked rose 1.2%, a bit softer than the 1.4% rise in employment, suggesting that this month there was more of a focus on lifting the number of employees than working the existing staff a bit harder.
