News Service from House Harris

Weak labour market the inevitable result of slow economy

By Garry Shilson-Josling, AAP Economist
Fri Sep 11 01:05:23 EST 2009
Thu Sep 10 15:05:24 UTC 2009

SYDNEY, Sept 10 AAP - The latest jobs figures confirm the weakness that is the inevitable outcome of slow economic growth.

The unemployment rate was unchanged in August, at 5.8 per cent for the third month in a row, the Australian Bureau of Statistics (ABS) said on Thursday.

That does not mean the labour market is becoming less hostile to jobseekers, though.

The aggregate number of hours worked fell by four million in seasonally adjusted terms to 1.508 billion in August, a drop of 0.3 per cent.

In the past year, that measure of work done has fallen by 38.6 million hours or 2.5 per cent.

At the same time, the number of people with jobs has fallen by a much smaller proportion, just 35,600, or only 0.3 per cent.

That involved a move toward part-time work, with full-time employment down by 217,400 (4.8 per cent) in the past year and the part-time workforce up by 181,900 (6.0 per cent).

There has also been less overtime worked by those classified as full-time employees.

Data released last month showed ordinary time earnings of full-time workers rose 5.5 per cent over the year to May, while their overtime earnings fell by 15 per cent over the same interval.

Even though the brunt of weaker demand for labour has been borne by hours worked rather than numbers employed, it has not been enough to stop unemployment from rising.

The number fitting the ABS definition of unemployed numbered 663,600 in August, up from 460,300 a year before.

And that was despite a fall in the proportion of the working-age population participating in the labour force, either employed or actively seeking work and ready to start.

The participation rate was 65.1 per cent in August, having reached as high as 65.6 per cent in late 2007 and early 2008.

The subsequent decline has taken around 100,000 out of the labour force.

All these indicators - weakness in total employment, slumping full-time employment, fewer hours worked, less overtime hours on offer, part-time work substituting for full-time jobs and falling labour force participation - are symptomatic of a weak labour market.

And they are all the inevitable result of the slowdown in economic growth.

Growth in non-farm gross domestic product, probably the best macro-economic indicator of likely employment growth in the following six months to a year, peaked at 4.8 per cent over the year to June 2007, but slowed to zero over the year to March 2009.

The long-run average growth rate is a bit over three per cent, so growth went from well above average to way below it.

Employment growth was always going to follow suit.

The cutbacks in working hours have softened the blow, but annual growth in the number of people with jobs has still slowed from 2.9 per cent in early 2008 to minus 0.3 per cent at last count.

The latest GDP figures offer some hope of an improvement, with annualised growth of 3.1 per cent on the non-farm sector over the first half of 2009, but that will have to be sustained for a while before demand catches up with supply in the labour market.

Ahead of the labour force figures on Thursday, the Westpac-Melbourne Institute survey of unemployment expectations was released.

The survey's index measure, which shows how worried householders are about becoming unemployed, fell in September for the seventh month in a row.

However at 131.56 points, it was still above average.

And, given the still-sluggish state of the economy, they are right to be concerned that unemployment will rise further.