A volatile run of employment numbers continued in December

Labour force – December 2022

A volatile run of employment numbers continued in December

There was a lot of noise in the December labour force numbers released today. In seasonally adjusted terms employment fell by 14.6k from a revised gain of 58.3k in November (originally reported as +64.0k). Consensus and CBA were expecting +25k.

As the facing chart shows the change in employment in seasonally adjusted terms was volatile throughout 2022 as the economy reopened from the covid lockdowns of 2021. Looking at the trend numbers provides a clearer picture. Employment growth slowed over the second half of 2022 from very high levels earlier in 2022. Trend employment growth was +26.5k in December, around the same level of employment required each month to keep the unemployment rate steady.

Full time employment rose by 17.6k in the month while part time employment fell by 32.2k. This continues the trend over the past three years where full time employment growth has outpaced part time growth.

The unemployment rate held steady at 3.5% (was revised up from 3.4% in November). The unemployment rate has averaged 3.5% since May 2022 and suggests the labour market is neither tightening nor loosening. An increase in the supply of labour has occurred to meet rising demand over the course of the last year.

This balance though is expected to shift over 2023. The rapid return of net overseas migration as noted here, when combined with a slower economy and reduced demand of labour should push the unemployment rate higher. Job vacancies are falling, albeit remain at an elevated level.  We expect the unemployment rate to lift to grind higher to ~ 4¼% by end 2023 as the economy grows below trend.

The participation rate fell from a record high of 66.8% to 66.6% in December. The underemployment rate rose to 6.1% in the month, from 5.8% in November. Hours worked fell by 0.5% in December and the annual pace of hours worked continued to slow, down to 3.2%/yr.

The number of people working reduced hours due to illness rose in December as another wave of covid occurred.  There was a 50% higher number of people working lower hours than in a normal December this month.

By state employment losses were largely contained to NSW (‑13.8k) and Victoria (‑13.2k). There were smaller losses in QLD (‑4.2k) and Tasmania (‑1.9k). NSW continues to have the lowest unemployment rate of all the states at 3.1% (ACT lower at 2.8%). QLD has the highest at 3.8%. There were small employment gains in SA (+2.9k) and WA (+4.0%).