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Economics | August 13, 2020

Jobs up but recovery to remain bumpy Labour Force, Average weekly earnings Employment rose by 114,700 in July after rising by a record 228,400 jobs in June (previously reported as a

210,800 increase). Full-time jobs rose by 43,500 and part-time jobs rose by 71,200. Economists had tipped a 30,000 lift in jobs.

The unemployment rate rose from 7.4 per cent to 7.5 per cent in July - the highest jobless rate in 22 years but well below economist’s forecasts of 7.8 per cent.

Hours worked rose by 1.3 per cent in July but are down by 5.0 per cent over the year.

Participation rate: The participation rate rose from 64.1 per cent to 64.7 per cent in July.

Spare capacity: In July, the underutilisation rate fell from 19.1 per cent to 18.7 per cent. The underemployment rate decreased from 11.7 per cent to 11.2 per cent.

Unemployment across states in July: NSW 7.2 per cent (June 6.9 per cent); Victoria 6.8 per cent (7.5 per cent); Queensland 8.8 per cent (7.7 per cent); South Australia 7.9 per cent (8.8 per cent); Western Australia 8.3 per cent (8.7 per cent); Tasmania 6.0 per cent (6.9 per cent); Northern Territory 7.5 per cent (5.7 per cent); ACT 4.6 per cent (5.1 per cent). Biggest job gains occurred in New South Wales (up 56,800); Victoria (up 22,900); and Western Australia (up 19,100).

Average weekly earnings: Average weekly ordinary time earnings rose by 4.8 per cent in the year to May to $1,713.90 – the strongest annual growth rate in 7 years. The average annual wage is $89,123.

A raft of companies is affected by the employment data but especially those dependent on consumer spending. The wage data is important for consumer-focussed industries including retailers.

What does it all mean? In tough times they say you should celebrate the small victories the hardest. And that is the case today. Jobs rose

more than expected. The number of hours worked rose. The jobless rate just inched higher rather than leaped. Underemployment and underutilisation both fell. And even average annual earnings hit 7-year highs.

But we know that there is a long way to go, especially incorporation of the effects of both stage 4 and stage 3

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Economic Insights. Jobs up but recovery to remain bumpy

lockdown restrictions in Victoria. Tightening of border rules will also constrain the economic recovery in some regions. The Reserve Bank is still tipping a 10 per cent jobless rate peak. Commonwealth Bank (CBA) Group economists are tipping a 9 per cent peak. Here’s hoping we are both wrong and JobKeeper works even better-than-expected in keeping the jobless rate down.

The quicker that the jobless rate peaks and starts falling, the less damage and scarring will be done to the longer-term health of the economy.

There is a lot of noise in the latest labour force release. If we were to literally believe the figures, the Victorian and Tasmanian jobless rates slumped in July while soaring in Queensland and Northern Territory. Smoothing out the results over three or four month averages may be a better approach to tracking trends.

The fact that people are putting in more hours or work and more people on JobKeeper and JobSeeker are slowly returning to work should be celebrated. But as always, now we move on. It is a very fluid situation.

The latest job data coincides with more data on job ads from SEEK, showing another 2.3 per cent lift in vacancies in July.

What do the figures show? Labour force – July

Employment rose by 114,700 in July after rising by a record 228,400 jobs in June (previously reported as a 210,800 increase). Full-time jobs rose by 43,500 and part-time jobs rose by 71,200. Economists had tipped a 30,000 lift in jobs.

The unemployment rate rose from 7.4 per cent to 7.5 per cent in July - the highest jobless rate in 22 years but well below economist’s forecasts of 7.8 per cent.

Hours worked rose by 1.3 per cent in July but are down by 5.0 per cent over the year.

The ABS notes “Hours worked rose 1.3 per cent in July, and increased more for females (2.3 per cent) than males (0.6 per cent). Hours worked for females were around 4.9 per cent below March, compared to 5.9 per cent for males.”

Participation rate: The participation rate rose from 64.1 per cent to 64.7 per cent in July.

Spare capacity: In July, the underutilisation rate fell from 19.1 per cent to 18.7 per cent. The underemployment rate decreased from 11.7 per cent to 11.2 per cent.

Unemployment across states in July: NSW 7.2 per cent (June 6.9 per cent); Victoria 6.8 per cent (7.5 per cent); Queensland 8.8 per cent (7.7 per cent); South Australia 7.9 per cent (8.8 per cent); Western Australia 8.3 per cent (8.7 per cent); Tasmania 6.0 per cent (6.9 per cent); Northern Territory 7.5 per cent (5.7 per cent); ACT 4.6 per cent (5.1 per cent).

Biggest job gains occurred in New South Wales (up 56,800); Victoria (up 22,900); Western Australia (up 19,100); South Australia (up 8,600); Tasmania (up 7,000); and ACT (up 1,400). Small decreases were seen in Queensland (down 3,700 people) and the Northern Territory (down 500 people).

Notable highs for the jobless rate: NSW (highest since August 1998); Western Australia (highest since June 2000); Northern Territory (highest since September 2004).

“The participation rate for 15-24 year olds (who are often referred to as the "youth" group in the labour market) increased 2.7 pts to 66 per cent in July 2020. Employment for 15-24 year olds increased by 55,600 people (3.2 per cent). The unemployment rate for this group decreased by less than 0.1 pts to 16.3 per cent.”

Average weekly earnings – May

In seasonally adjusted terms, average weekly ordinary time

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Economic Insights. Jobs up but recovery to remain bumpy

earnings (AWOTE) rose by 4.8 per cent in the year to May, to $1,713.90 and up from 3.3 per cent in the year to November. It was the strongest annual growth rate in 7 years.

Ordinary time wages for full-time female workers rose by 4.9 per cent over the year with male wages also up by 4.9 per cent – also the strongest annual growth rates in 7 years.

Across States & Territories over the year to May: NSW (up by 5.1 per cent); Victoria (up by 6.3 per cent); Queensland (up 4.3 per cent); South Australia (up by 3.2 per cent); Western Australia (up by 3.4 per cent); Tasmania (up by 4.8 per cent); Northern Territory (up by 0.7 per cent); ACT (up by 2.9 per cent).

The average wage in May was $89,123.

Across states & territories, we have calculated average annual wages as follows: NSW $90,943; Victoria $89,050; Queensland $85,805; South Australia $79,248; Western Australia $95,722; Tasmania $77,381; Northern Territory $88,483; and the ACT $96,918.

By industry, wages rose most over the year to May in Rental, Hiring and Real Estate Services (up 10.1 per cent), followed by Manufacturing (up 6.6 per cent), Construction (up by 6.1 per cent), “Other Services” (up 5.7 per cent), Public Administration & Safety (up 5.3 per cent) and Retail Trade (up 5 per cent).

Wages were weakest over the past year to May in Arts & Recreational Services (down 2.8 per cent), followed by Accommodation & Food Services (down 2 per cent) and Administrative & Support Services (up 0.8 per cent).

The highest average annual wage can still be found in the Mining sector at $140,270 per year. Next highest is Information Media & Telecommunications ($105,737), Finance & Insurance Services ($104,822) and Professional, Scientific & Technical Services ($102,216).

The lowest average annual wage is obtained by workers in the Accommodation and Food Services sector ($59,244), followed by Retail Trade ($65,510) and “Other Services” ($69,644).

According to the ABS, “This release shows the compositional impact of COVID-19 restrictions on jobs and earnings.

Lower paid jobs and industries were particularly impacted by COVID-19 restrictions, accounting for a high share of jobs lost.

This fall in lower paid jobs led to an increase in average earnings for all employees because the remaining jobs had a higher earnings profile.

In recent years, the six-monthly increase in average earnings for all employees has been around 1 per cent. The 3.8 per cent increase to mid-May highlights the extent of the major compositional change in jobs and earnings during this difficult period.

The increase in average earnings was more pronounced in the private sector, given the extent of lower paid job losses in the sector. However, the level of average earnings in the public sector remained higher.”

What is the importance of the economic data? The Labour Force estimates are derived from a monthly survey conducted by the Bureau of Statistics. The

population survey is based on a multi-stage area sample of private dwellings (currently about 22,800 houses, flats, etc.) and a sample of non-private dwellings (hotels, motels, etc.). The survey covers about 0.24 per cent of the population of Australia and includes all people over 15 years of age, except defence personnel.

The ABS publishes the Average Weekly Earnings (AWE) series on a six-monthly basis. While the Wage Cost Index allows analysis of wage movements from quarter-to-quarter, the AWE series is best seen as a measure of actual dollar figures for wages. But average weekly earnings figures can be distorted by changes such as the relative growth of high-paid to low-paid jobs and the cashing out of bonuses in ordinary earnings.

What are the implications for investors? Australia continues to do well. The ABS notes that the US

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Economic Insights. Jobs up but recovery to remain bumpy

jobless rate was 10.2 per cent in July and the jobless rate was 10.9 per cent in Canada. Estimates for Australia on a similar basis were 7.8 per cent and 8.3 per cent.

The resilience of the Aussie job market is providing support for retailers. While challenges lie ahead, many retailers have adapted well to the new environment, especially the focus on online sales.

The average wage in Australia is above $89,000 – and even higher in the ACT, Western Australia and New South Wales. If you’re a miner in the Pilbara or a public servant in Canberra it appears that you’ve largely been unaffected by the pandemic. But lower paid jobs in the hard-hit Arts & Recreational and Accommodation & Food Services industries have actually seen wages go backwards over the year to May due to the bushfire tragedy and pandemic restrictions. COVID-19 is certainly having a huge compositional impact on Aussie jobs and earnings.

Craig James, Chief Economist, CommSec Twitter: @CommSec

Ryan Felsman, Senior Economist, CommSec Twitter: @CommSec