Huge drop in Participation throws unemployment rate forecasts out the window

The release of the April Labour Force survey today was always expected to throw up some surprises. This is the first monthly data set that reveals the true extent of the COVID-19 impacts on the labour market. Market expectations around the level of employment losses had been remarkably similar (given the underlying volatility and degree of uncertainty at present) at about 450-600k. In actual fact the result came in at a reduction of 594,300, so towards the top end of expectations but within the ball-park.

Where the real surpise came was in the unemployment rate. This had been forecast anywhere from about 8-9% (with some outliers even suggesting as high as 10%). The reality was a rather more pedestrian, and very surprising, lift to just 6.2%. The culprit for the wide miss was the fact that the Participation rate (the proprtion of the working age population who are either in work or looking for work) fell a record 2.5 ppts to just 63.5. Had the PR remained at its previous level of 66 then the unemployment rate would have risen to 9.7%.

Queensland saw employment drop by 129,600 and the unemployment rate lift to 6.8%.

We shoudl also note that, because of the high level of volatility in these recent numbers, the ABS have suspended the provision of Trend estimates. All figures quoted are therefore seasonally adjusted.

While the decline in the participation rate might appear to be masking the full COVID-19 impact on the labour market a quick look at the hours worked data provides a much better understanding of the scale of what has happened. One of our favourite indicators has always been hours worked per capita of working age population as it ‘see through’ issues around participation and the mix of full and part-time work (and now the reality of JobKeeper recipients who will be counted as mployed whether they are actually working any hours or not). A glance at the chart below should tell you all you need to know! Hours worked per capita has fallen by 8.6% in Queensland in the past 2 months and by almost 10% cross the nation in the same period.

Next week will see the relaese of the original ABS regional labour force data at which time we will be releasing the Conus/CBC Staff Selection Regional Employment Trend series for Queensland. 

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