Labour Force explainer to all those screaming “fake news!”

Posted on March 28, 2018 by Pete Faulkner - Jobs, Uncategorized

There is little doubt that the labour market in Australia has been doing quite well in the past 12 months; how well tends to depend on your political leaning, but most people agree there’s been some strength. However, where we get into muddy waters is when pollies (and some commentators in the media) get confused, or perhaps deliberately misleading, when discussing the ABS employment data.

The ABS Labour Force Survey once a month asks a (small) slice of our civilian population over the age of 15 whether they have worked this last week (employed), or if they did not work, were looking for work and were available for work (unemployed). If they are neither of these then they are “not in the Labour Force”. The Survey also asks about how many hours were worked in total; 35 or more hours done in the week counts as full-time and anything less is part-time.

A worker who did 38 hours in one job is employed full-time; but so is a worker who did 20 hours each in two jobs. A part-time worker in the previous month could become a full-time worker this month by, for instance, taking on another few hours of part-time work to tip them over the 35 hour threshold. When people (pollies usually) say things like “we have created 290,000 full-time jobs this year” what they actually mean is “290,000 more people worked 35 hours or more this year”. The suggestion that the increase came about from 290,000 “new full-time jobs” is nonsense; and leads to confusion when people respond with “show me where”.

There is a spectrum of possibilities about how the change might have come about all the way from, at one end, 290,000 people who were working 34 hours a week (and therefore part-time) doing an extra one hour and becoming full-time. At the other end would be 290,000 brand new full-time jobs; and it’s this end of the spectrum that people tend to assume is reality when clearly it almost certainly isn’t. Reality is likely to lie somewhere in the middle with some people transitioning from part-time to full-time jobs, some part-time workers taking on more part-time work to exceed 35 hours, and some new full-time jobs.

So in the face of all the screams of “new full-time jobs” and “fake news!” let’s take a look at the actual numbers and what they are really telling us (all data is Trend).

In the past 12 months the Working Population (civilians over 15) has increased by 314,400 people +1.6%. The Labour Force (those employed plus unemployed) has grown by 389,500 +3.0%. That tells us that more people are joining the workforce; people previously not in the labour force have joined it either as employed or unemployed (this is measured by the Participation Rate which has increased from 64.8 last year to 65.7 in Feb).

The number employed (note…NOT jobs) has increased by 399,600 +3.3%. That tells us that people are being employed at a faster rate than they are entering the labour force. That in turn means that the number unemployed must be falling; in fact unemployment has fallen by 10,100 -1.4%. The unemployment rate has fallen from 5.8% to 5.5%.

Of those employed the number working 35 or more hours a week and thus full-time employees (note…NOT “full-time jobs”) has risen by 293,100 +3.6% while those working less than 35 hours (part-time) has grown by 106,500 +2.8%. What this really tells us about JOBS is nothing. It simply tells us that the growth of people working more than 35 hours is at a faster pace than general employment growth. That is likely to be because at least some people are getting full-time jobs, but we cannot know how many.

The average number of hours for each member of the Working Population (whether employed, unemployed or not in the labour force) in the month of Feb is about 56 minutes more than a year ago; that’s a 1.1% increase and clearly demonstrates that the labour market is stronger, even allowing for population growth, shifts in participation rates or the split between full-time and part-time employment. However, as the chart below demonstrates things are still well off their highs and have actually drifted lower in the past 4 months. There is some strength but it would be a long bow to call the market “roaring”.

There’s a fairly simple way to try and clear up some of the confusion inherent in this topic. Stick to the facts and don’t conflate “employment” with “jobs”…they are NOT the same thing.

p.s. Monthly regional employment, and quarterly industry employment, data will be released later this morning at which time we will be updating our Conus Trend data-series.