As we have been noting for some time, the Participation Rate (that proportion of the working aged population in the labour force, i.e. either employed or counted as unemployed) has been falling for some time. On the latest data for Oct the Trend figure fell to 63.8 which is its lowest post in 23 years. The reasons for shifts in participation are many and varied but include demographic changes as well as changes in the relative strength of labour markets and people’s propensity to leave the labour force when job opportunities are poor, and return when they pick up again.
In yesterday’s MYFER the Queensland Treasury revised down their forecast for employment growth next year to +0.75% from +1.5%; and yet they left their unemployment rate forecast (6.25%) unchanged. Assuming that Treasury haven’t changed their projections on population growth (and there is no indication that they have) then these two facts must mean that the Participation Rate (PR) forecast has been revised lower. Indeed, Treasury acknowledge precisely that in the Review;
“The unemployment rate has remained relatively stable, reflecting a lower participation rate. While employment growth is expected to strengthen over the forecast period, this is expected to be matched by an increase in the participation rate, holding the unemployment rate to around recent levels.”
But how much do these forecasts suggest PR is set to fall? Given that the PR at the end of the 2015-16 year was 64.6 (and assuming that the original Budget forecast didn’t change that) and that the unemployment rate was 6.25% then we can calculate the original Budget forecast saw 2016-17;
- Employment grow from 2,347,800 to 2,383,000
- Unemployment lift from 156,500 to 158,900
- Labour force grow from 2,504,300 to 2,541,900
- and therefore working aged population increase from 3,878,600 to 3,934,800
By changing employment growth but keeping the forecast unemployment rate unchanged MYFER is rather now forecasting for 2016-17;
- Employment at 2,365,400 (down 17,600 from Budget forecast)
- Unemployment at 157,700 (down 1,200 from Budget forecast)
- Labour force at 2,523,100 (down 18,800 from Budget forecast)
- which, given an unchanged working age population of 3,934,800, sees a PR of 64.1 (down from 64.6)
The reality is that by the time of the MYFER Treasury knew that PR had already fallen steeply since July so their forecast is essentially acknowledging that the recent declines are unlikely to be unwound and that as a result there are likely to be 17,600 fewer Queenslanders in work by the end of 2016-17 than previously forecast. The focus on jobs (particularly regional jobs) the Government has made with the measures announced yesterday attests to that prediction.
Also worth noting that the MYFER maintains the target of Public sector employment growth at 1.5%, which means that the actual growth in Private sector jobs is forecast to be even slower (actually +0.65%). Of the 17,600 new jobs forecast, the Public sector will account for almost 3,800.