A different approach to gauging Labour Market strength

Regular readers will be well aware that there are a variety of ways that we can measure the strength of a Labour Market. A standard approach might be to track the unemployment rate (either seasonally adjusted or, preferably, Trend) but this measure can often hide nuances; the impact of increasing (or decreasing) rates of Participation can distort the unemployment rate as people join (or leave) the labour force (we call this the “Participation effect”).

We might decide instead to track employment, but this too comes with difficulties when we consider that anyone employed for an hour or more is counted as “employed”. Considering the split between full-time (35 or more hours a week) and part-time (1-34 hours a week) can help but still the “employed” number tells us nothing about whether, as an example, someone in the “gig economy” is working three different 10 hours-a-week jobs (one part-time employed doing 30 hours-a-week) or the same jobs are being done by three different people (three part-time employed doing 10 hours-a-week each).

One way around the participation problem can be to study the ratio of employment to working population (civilian population over 15 years); this removes the “Participation effect” but relies upon using “employment” as a genuine measure of labour market strength which, as we have seen, comes with its own issues.

The ABS provide us with monthly data (down to State level) on total hours worked in all jobs and this would appear to be a good place to start to look for a better indicator; as a labour market strengthens we would expect to see total hours worked increase as more people join the labour force, more jobs become full-time (rather than part-time) or people take on more available jobs. Nevertheless, the simple total hours worked data would also increase along with population growth; as our working population grows we need to create more jobs for people to do; an increase in hours worked per se does not equate to a “stronger” labour market. It could simply be attributable to stronger population growth while the labour market fails to keep pace. In such a case a declining Participation Rate could lead to a stable (or even falling) unemployment rate which would effectively mask the weakness at heart.

We therefore need to adjust the total hours worked data for changes in the size of the working population. A total hours worked per capita of working population should remove issues around increasing population levels, excludes the “Participation effect” and captures work done across all jobs whether those jobs are full-time, part-time or multiple. Changes in this measure will give us, in our opinion, a more robust measure of the actual strength of a labour market. So what do these various measures tell us?

The unemployment rate is Queensland (Trend) currently sits at 5.9%, where it has been for 5 months having slowly declined from a recent high (end 2014) of 6.7%. However, this story hides the fact that over that period we have seen Participation fall sharply until end 2016 before starting to recover; it has now returned to where it was at the end of 2014. The falls in the unemployment rate from end-2014 to early-2016 came primarily from increases in employment. However, the period through 2016 (when the unemployment rate remained relatively stable around 6.0-6.2%) was marked by a steady decline in Participation which masked the impact of declines in employment: During 2016 the state lost 29,500 employed while the working population grew by 60,100, surely a far weaker labour market than suggested by a relatively stable unemployment rate.

Since then we have seen the unemployment rate move lower, participation has increased (although it remains well below historical highs) and we have seen solid employment growth. But how does this measure up against the growth of the working population?

The chart below plots the same unemployment rate (inverted on the right hand axis) and the employment to working population measure. This confirms that during 2016 (when the unemployment rate remained steady) the “Participation effect” was masking a rapid, and dramatic, decline in the strength of the labour force as jobs created failed to keep up with population growth. Likewise it suggests that the recovery since 2016 has more than accounted for increases in population, although as we can see the measure remains well below pre-GFC levels. While this picture gives us a better insight than the simple unemployment rate it still does not account for the issue of the quality (number of hours work) over quantity (number of people employed). For that we must look further.

The chart below measures the total number of hours worked (per month) per capita of working population. Again it highlights the actual weakness in the market during 2016 as hours worked per capita fell sharply although the unemployment rate remained stable. It also shows a solid resurgence in total hours worked per head since the end of 2016 (as shown above); but the difference here is that the graph suggests that a significant gap has opened up between the level of the unemployment rate and the hours worked per capita. Why might this be? Quite simply it comes about from the fact that total hours worked have not increased as fast as the employment numbers would suggest they might have done. This could be a result of a large number of part-time jobs being created, or the fact that even those working full-time are doing fewer hours than previously. At this current level of unemployment (5.9%) history would suggest that total hours worked per capita would be around 1-2 hours per month (or about 1.7%) higher than they presently are. Or, to look at it another way, at these levels of hours worked per capita we might expect the unemployment rate to be closer to 6.1%.

In conclusion, total hours worked per capita of working population improves on the unemployment rate as a measure of labour market strength by seeing through the “Participation effect” but it also accounts for changes in the structure of employment (the mix between full-time and part-time and the number of hours worked). Studying the two together confirms the improvements in the Queensland labour market during 2017 but also highlights that the market remains somewhat weaker than other measures would suggest as total hours worked have failed to keep up with the “employment” data.

As an interesting aside, the second chart below demonstrates that this underlying weakness would appear to not exist at the national level.

 

 

Overseas Arrivals running at 8% growth. QLD suffering as others states surge.

The release from the ABS of the Overseas Arrivals and Departures data for Nov shows short-term arrivals into Australia rose 8% for the year. Visitors from China continue to grow strongly; up 7.8% (seasonally adjusted) and up 13.7% (Trend). Short-term departures of residents (which are only provided on an original, unadjusted basis) are up 6% y/y.

Such impressive increases in international visitors should translate into healthy numbers for those states attracting the international tourists, and yet data suggests that Queensland has been doing poorly in this regard. As we have been highlighting for some time, Queensland performance in the international visitor market has been poor recently (see here). The International Visitor Survey (IVS) from Tourism Research Australia is only produced quarterly with the most recent, covering the Sept quarter, released just a few weeks ago. Nevertheless this monthly Arrivals and Departures data from the ABS does provide original, unadjusted numbers for the state of intended stay of short-term visitors and, when used correctly, this data can tell us something about what we might expect from the Dec IVS when we get hold of it in March.

By Trending the original ABS data we can see that the worrying trend in the performance of Queensland has continued beyond the most recent IVS data. In the two months since the Sept quarter this data would suggest that visitor numbers to Queensland have fallen 0.8% (while they are up 0.6% across the nation as a whole) and are down 4.8% from their highs in April 2017.

It is important to note that this is a very different data set to the IVS from Tourism Research Australia (which has reported international visitor numbers to QLD growing, albeit at a much slower rate than at a national level) so we would not suggest that this analysis suggests international visitor numbers in QLD are about to contract, but it does demonstrate the relatively poor recent performance of the state.

Strong jobs numbers (again) but QLD disappoints (again)

Today’s data for the December labour force is a strong set for Australia with employment up another 34,700 (sa), or +25,000 (Trend), after the very strong data for November was revised up slightly. The market had been looking for an increase around the 15,000 level.

However, an increase in participation saw the employment improvement coupled with a small tick-up in the headline unemployment rate (from 5.4% to 5.5%), but a slight tick-down in the Trend rate (from 5.5% to 5.4%)…so let’s call that no change.

Over the year we’ve seen a total of 393,400 increase to employment (Trend) with a thumping 321,600 of those positions being full-time (or an impressive 81.7%). Employment growth now sits at 3.3% y/y (a level not seen in more than 12 years).

Unfortunately, despite a nation leading employment growth rate of 4.6% y/y, the picture in Queensland is less rosy. Employment rose just 3,600 in December which is the weakest growth since Nov 2016 and the Trend unemployment rate remains at 5.9% (after Nov was revised up from 5.8%). Unlike at the national level, participation didn’t move higher, and November’s number was actually revised slightly lower. On the positive side full-time employment was up 7,300 in December and is up 73,400 for the year. However, this equates to just 67.4% of the total increase in employment (108,900) which is well below the rate nationwide. As the chart below demonstrates, the surge in employment has slowed markedly in recent months, although the string of 14 consecutive months of employment growth is the best since the GFC. As the lower data from the end of 2016 and early 2017 starts to drop out of the y/y calculations in coming months expect to see QLD’s impressive employment growth rate slide quickly (unless we see a return to some strong monthly numbers in early 2018).

The ABS regional labour force data will be released next week at which time we shall be updating the Conus Trend data series.

 

QLD employment and the Public Sector

Once again the question of the impact that Public Sector hirings are having on the labour market in QLD has raised its head again; this time by way of an article in today’s Australian by Sarah Elks. On the back of the recently released QLD Quarterly Work Force Profile for the Sept 2017 quarter (available here), we thought we might update a post we originally made just before the state election (see here).

When Campbell Newman’s LNP came to government in March 2012 the Public Sector headcount stood at 244,135, which equaled 10.7% of the State’s Trend employment number at that time. By the end of 2013 that percentage had fallen to a low of 9.9%, with headcount at 227,836 (a reduction of 16,299), on the back of the much-discussed “sacking” of public servants.

By the time the LNP lost the January 2015 election Public Sector headcount had risen again. This data is only provided on a quarterly basis so we can either consider the number from Dec 2014 (235,336, 10.2%) or from March 2015 (240,372, 10.4%) {The new ALP Government were sworn in on Feb 14th 2015, so we are assuming headcount of 237,854. 10.3% of total Trend employment at that time}

The new Government went about replacing those Public Sector employees and by June 2016 the headcount had risen to 252,870 (or 10.7%). It has since increased to 261,224 (Sept 2017) which remains at 10.7% of Trend employment. So since the ALP Government came to power we have seen an increase, since mid-Feb 2015, of 23,370.

Since Feb 2015 (to Sept 2017) Queensland has added 123,800 to Trend employment.

Let’s consider what the Public Sector headcount would have been under three alternative scenarios,

Scenario 1. Public Sector headcount remains at the same percentage level as when the ALP came to power in Feb 2015 (i.e. 10.3%)

Public Sector headcount would sit at 251,917; this would mean the sector headcount would be 9,307 lower than now

Scenario 2. Public Sector headcount as a percentage of employment fell back to the lows seen under the previous LNP government (i.e. 9.9%)

Public Sector headcount would sit at 242,134; or 19,090 lower than now

Scenario 3. Public Sector headcount returned to the same percentage level as when the LNP took over from the ALP in 2012 (i.e. 10.7%)

Public Sector headcount would now sit precisely where it actually is, 261,224.

The “extra” Public Sector headcount can therefore be said to lie somewhere in the region between zero and 19,090; or between zero and 15% of the total increase in Trend employment to Sept 2017. The suggestion that “all the jobs increases are in the Public Sector” is plainly inaccurate. Indeed it is worth noting that this variance has decreased since our first post; for the June data we considered the spread of variance to be between 2% and 24%.

How long does it take to get a job in QLD?

I was spurred into action this week by an article from John McCarthy in the Courier Mail  (see here) in which he discussed the ABS data for the median length of time job seekers are spending looking for work. It’s not a data set that I’ve previously looked at much but John’s article got me to take a closer look.

The first thing that became clear was that the ABS data is presented on a monthly, unadjusted original basis and, as such, is extremely volatile. Comparing one month’s worth of data really doesn’t make much sense in this scenario. In order to try and get a better, clearer picture I spent some time seasonally adjusting the data at the state and territory level and at the SA4 regional level in QLD and have created the Conus Trend Search for Job series. The results are quite interesting.

Firstly it’s clear that since the impacts of the GFC took hold in 2008-09 we’ve seen a steady increase in the median number of weeks that people are out of work. However, in more recent times (since mid-2017) the nation as a whole, and NSW and Victoria in particular, have seen a sharp and significant reduction. Queensland, on the other hand, despite witnessing country-leading jobs growth in 2017, has seen a sharp move up in the length of time taken to find work. In his article John suggests that this might have something to do with the pick-up in interstate migration that we’ve seen into Queensland during 2017.

When we look at Queensland more closely we see the move up has been replicated across both the capital and the regions; although the scale of the increase has been far more dramatic in Greater Brisbane. This could be seen as further evidence of the impact of inter-state migration as more of these migrants are likely to settle in the Greater Brisbane area (at least initially) than the regions. Within the regions it would certainly appear that the closer to Brisbane one is the shorter the wait with Darling Downs – Maranoa (10 weeks), Gold Coast (11 weeks) and Sunshine Coast (16 weeks) the best performers.

In our own region we see a similar pattern of increases since the GFC, although search duration has declined over the past year as the local labour market has improved. Mackay, a region that the Courier Mail article highlighted, has also seen sharp falls during 2017 which tallies with the Conus Trend Jobs data showing the region’s employment growth at 6% for the year to November. This graph also includes the original, unadjusted ABS data just so that readers can see quite how volatile this data set is!

QLD industry sectors in past 10 and 5 years

I love the charting that my friends at CCIQ have done previously looking at the relative scale (in Gross Value Added and employment terms) of the various industry sectors in Queensland. The Conus Trend Industry Jobs data has been one of the inputs used so, with some help from the CCIQ Economist Stephen Gosarevski, I’ve updated the charts with the latest available Conus Trend Industry Jobs data for November 2017. The first chart shows the change over the decade from 2007-2017  in terms of relative size (circle radius is relative GVA, while y-axis is number employed) and compound annual growth rates (x-axis).

We can see that the start performer for the decade has been the Health Care sector which is not only the top employing sector but also has enjoyed the fastest growth rate. Manufacturing is the only sector that has seen negative growth over the decade

The second chart shows the same data but for the five year period from 2012-2017. Here we see two more sectors join Manufacturing that have contracted over the period (Construction and Agriculture) while Mining has been the best growth performer.

Regional Labour Force and Industry Jobs data

Our catch-up of regional data continues with the November regional labour force numbers and the quarterly industry jobs numbers. Both of these data sets we prefer to analyse through the lens of the respective Conus Trend series. For the regional monthly jobs data we prepare the Conus Trend using the original unadjusted ABS data while for the quarterly industry jobs numbers we deconstruct the 4-quarter averages that the ABS supply and then create Trends from those quarterly numbers. Both these data sets provide, in our opinion, more timely and useful data than that available directly from the ABS. In particular the Conus Trend Industry Jobs provides a much more timely indication of where jobs are being created (and lost) at a regional level than the very lagged 4-quarters average.

However, given the differences in the time-frames and original data sources used for each Trend series we should stress that direct comparison between the two is unwise. Despite the deconstruction and trending of the quarterly industry jobs data, the Conus Trend Industry Jobs will still lag the monthly Conus Trend Jobs data.

Looking at the industry data first we can see some significant differences between the Greater Brisbane and Rest of Queensland industry changes over the year.

Some differences worth noting are in the Retail Trade sector where the Greater Brisbane region has seen an extra 14,000 jobs while the Rest of Queensland have lost 3,100 (for previous comments on this issue see here).

Public Administration has seen jobs increase in Rest of Queensland by 5,700 while they have eased slightly (down 300) in Greater Brisbane. This would appear to reflect Govt policy emphasis on regional jobs with increases seen in most regional SA4 areas.

Healthcare and Social Assistance saw solid jobs growth across most regions with both Greater Brisbane and the Rest of Queensland recording sizeable increases.

Education and Training fell 1,600 in the regions (led mainly by falls in Cairns, Mackay and Wide Bay) but was up 9,900 in Greater Brisbane (gains across most SA4 areas).

Construction was another strong performer for the state but Greater Brisbane accounted for almost two-thirds of those gains (up 7,100) with just 3,800 coming from the Rest of Queensland. This should be of little surprise given the unit-building boom underway in the capital.

Within our own region Cairns saw solid industry jobs growth in Construction (+2,500), Accommodation & Food (+2,100), Healthcare (+1,900) and Arts and Recreation (+1,800) with losses in Retail Trade (-2,100) and Education & Training (-1,800).

Townsville, not surprisingly given the strength of the labour market recovery seen in the past year, saw gains in almost every sector. Of particular note are Healthcare (+3,400), Education & Training (+1,800), Accommodation & Food (+1,300) and Public Administration (+900).

Turning to the monthly labour force data for November we see the performance of Greater Brisbane, which had been lagging the regions only a few months ago, now taking the lead once again. Across the nation Trend employment growth for the year to November stood at +3.1%, Queensland did better at +4.8% while we now see Greater Brisbane overtaking the regions (+4.9% versus +4.7% for Rest of Queensland).

In our own region Trend employment is growing at 3.1% in Cairns, up 3,600 employed for the year with the Trend unemployment rate lifting slightly to 5.9% (from a downwardly revised 5.8% in Oct). The Trend unemployment rate in Cairns now appears to be settling at a level similar to the state-wide average and we can expect to see any future moves down tied to declines across the state more widely.

Townsville’s employment, which has seen very strong jobs growth over the year from a very weak base, is now growing at 11.6% (the strongest in the state) with an extra 11,100 employed over the year. However, the Trend unemployment rate sits at 9.0% (up from 8.5% in October) which, barring the Outback, is still the highest in the state. Clearly there remains ample scope for further improvements in this region and some of the more recent announcements for Townsville should see employment growth continue. Perhaps some declines in a strong Participation Rate will also help to drive the unemployment rate lower.

The graph below “sees through” the participation impact on unemployment rates and shows us that both Cairns and Townsville have weakened slightly in recent months having recovered strongly since 2nd and 3rd quarters 2016.

The full Conus Trend Regional Jobs data is available for download below. Please feel free to use this data (for non-commercial purposes) but we would appreciate yo acknowledging Conus when you do so.

Conus Trend Regional Jobs QLD – Nov 2017

 

SALM data supports improving picture in the North

On Friday the Dept of Employment released the latest Small Area Labour Market (SALM) data at the Local Government Area level for the quarter to Sept.

Using the unsmoothed (original) SALM data, which is tucked away in the explanatory notes section, we have created a Conus SALM Trend series of unemployment rates and derived employment for all the QLD LGAs.

This shows us that the Queensland LGA with the highest Trend unemployment rate (excluding Aboriginal councils) was Charters Towers Regional Council at 10.9% (which is down from 13.2% a year earlier) with Isaac Regional Council the lowest at 1.7% (down from 2.2% a year earlier).

While the SALM data does not explicitly provide employment data it can derived from the Labour Force and Unemployment data that is provided (although we acknowledge that the different methodologies used for the estimation of unemployment and Labour Force data make such a derivation problematic we consider that the estimated Trend based on this derivation provides a useful, albeit limited, indicator for employment trends). Once we create a Conus Trend for this derived data series we can compare this to the Conus Trend Jobs series (based on the monthly ABS Labour Force Survey data) to get an idea of where, within the SA4 region, we are seeing jobs growth.

For the Cairns SA4 region this analysis suggests that jobs growth for the year to Sept 2017 has been made up in the following proportions from the various LGAs within the region (these proportions are broadly inline with the population make-up of the region so suggest that employment growth across the region has been evenly spread throughout the various LGAs).

  • Cairns Regional Council – 64%
  • Cassowary Coast Regional Council – 12%
  • Tablelands Regional Council – 10%
  • Mareeba Shire Council – 7%
  • Douglas Shire Council – 6%
  • Yarrabah Council – 1%

The Conus SALM Trend unemployment rates across the region in Sept were (with June in brackets)

  • Cairns Regional Council – 5.9% (5.8%)
  • Cassowary Coast Regional Council – 5.2% (5.7%)
  • Tablelands Regional Council – 6.7% (6.6%)
  • Mareeba Shire Council – 9.2% (9.4%)
  • Douglas Shire Council – 4.4% (4.7%)
  • Yarrabah Council – 44.9% (45.9%)

Townsville City Council sees the Trend unemployment rate at 8.2%, which is a reduction from 8.7% in June (although this was revised up from 8.2%).

Strong labour force data as Participation hits 80 month high

November saw another strong month for labour force data. Employment (seasonally adjusted) jumped by 61,600 (expectations had been for around 19,000) with 41,900 of those being full-time. Over the course of the past 12 months employment has increased by 383,300 of which 79.5% have come in the full-time jobs. The headline unemployment rate remained stable at 5.4%, despite the surge in employment, on the back of a sharp uptick in the Participation Rate to 65.5, its highest level since March 2011. On a Trend basis employment growth now sits at 3.1% pa.

The data for Queensland, whilst positive, is rather more prosaic. Seasonally adjusted employment rose by 7,200 (after the increase for Oct was revised slightly lower) with 11,700 more full-time positions. Again, an increase in the Participation Rate saw the unemployment rate remain stable to 5.9% (after Oct was revised down from 6.0%). The less volatile Trend series sees the unemployment rate at 5.8%, also unchanged after a downward revision to the Oct number. Over the course of the past 12 months employment has increased by 95,300, although slightly less than 50% of these have been full-time positions. Trend employment growth sits at 4.8% pa in Nov.

Next week will see the release of the regional monthly labour force data, as well as quarterly industry employment data. Our office will be closed for our Christmas break at that time so the Conus Trend series will therefore be updated once we return to the office in early January. Happy Christmas to all our readers.

IVS highlights problems for QLD and TNQ

The Sept 2017 International Visitor Survey from Tourism Research Australia (available for download here) makes for unhappy reading for the Queensland and the TNQ region in particular.

While total international visitors to Australia rose by 7.3% for the year to Sept 2017, the increase was just 3.0% for Queensland and a very lack-lustre 1.5% increase in the TNQ region. Even more disturbingly, trip expenditures rose 9.8% for the nation as a whole, were up 2.5% in Queensland (barely keeping up with inflation), and fell by 1.3% in TNQ.

With the Sunshine State losing market share we now see just 32.9% of all international visitors coming to Queensland (the lowest level ever recorded) and TNQ’s share falling to 11.1%, which is the lowest since Dec 2011 (before the flood of Chinese visitors really took off). We are awaiting more detailed breakdown of data for TNQ from TRA (which is not published in the usual channels) and will update once we receive this from them.

The stand out performance came from Tasmania which saw total visitor numbers rise by 17% and expenditure jump by 33%. Other states and territories to do well included NSW, Victoria and the ACT (see graphic below taken from the TRA IVS).