Unemployment fell to 4.2%, we did not expected to see it that low till May.
The very solid update in November has been followed by a sound gain December highlighting a labour market continues to significantly outperforming expectations.
The December Labour Force Survey reported a solid 64.8k/0.5% gain in employment, stronger that Westpac’s +30k but on par with market expectations of +60k.
Recovery in NSW and Vic continued to have a large influence on the national figures, with employment in these two states increasing by 32k and 25k respectively. Their employment is back around where it was May having fallen 250k and 145k during the lockdowns.”
Total employment is well above where it was back in June 2021, pre the latest round of lockdowns, and now has a clear upwards trend.
The report continues the story of solid gains in full-time employment with a 41.5k/0.5% lift by this group but part-time workers did not miss out with a 23.3k/0.6% gain. In the year full-time employment is up 4.1% while part-time employment is up 0.5%.
Hours worked gained a solid 1.0% continuing the recent trend of hours worked outperform the gains in employment suggesting economic activity was continuing to grow to this point in time.
The reference period was the two weeks to 18th December so it misses the impact of the Omicron outbreak.
Given the growth in hours worked it should be no surprise that underemployment has also continued to fall, down 0.9ppt to 6.65%, the lowest level of underemployment since November 2008. This is significant as we find underemployment a more power explanator for wages growth than unemployment.
What was surprising is we did not jump in workers returning to the labour force. At just +2.5k this saw the participation rate flat at 66.1%. Flat participation is why there was an outsized fall in the unemployment rate to 4.2% from 4.6%. We have not expected the unemployment rate to hit 4.2% May this year. It is also the lowest rate since August 2008, just before the GFC.
Underutilisation, that is unemployment plus underemployment, fell from 12.1% to 10.8% the lowest level since November 2008.
It is worth noting that for the last three months, the ABS estimate of the working age population contracted slightly again. The closure of the international borders are still biting and it will be interesting see where this goes in 2022 as the borders reopen.
The ABS noted that the easing of restrictions in NSW and Vic had a large influence on the national figures, with employment in the two states increasing by 180k and 141k. Employment in those states is only 52k and 4k (respectively) below May, having fallen by 250k and 145k during the lockdowns.
While the focus is on NSW and Vic it would be remiss not to mention the other states. Employment gained 6.5k in Qld but fell -0.7k in WA -1.9k in SA and -1.0k in Tas. In terms of unemployment, it fell from 4.6% to 4.0% in NSW, 4.7% to 4.2% in Vic, down just 0.1ppt in Qld to 4.7%, down to 3.4% from 3.8% in WA and down from 4.6% to 3.9% in SA.
