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Part time jobs lead unemployment down

Australia’s unemployment rate in January shifted down to 5.7% in January 2017, with 19,300 fewer people being unemployed than the month before. However, the headline data also showed that part time employment delivered much of the growth. As a result, the number of unemployed people fell to 720,200, which was 4.9% lower than in January 2016. It is hard to set aside the growth in part time employment as a factor, especially the underemployment of the nation’s most precious resource.

The first chart shows the unemployment rate and the number of unemployed people each month. It is clear that the unemployment rate is tracking towards the bottom of its likely range. There is always a level of unemployment that is essentially unavoidable. People between jobs, students returning to school, full time carers and those whose skills are not matched with the opportunities in regional economies are all examples of those who can make up the inevitable minimum level of unemployment.

fig21

To go straight to the dashboard and take a closer look at the data, click here.

While the focus is on the unemployment rate, at an economic level, as much as at a social level, emphasis has to be applied to under-employment. In economic terms this is no new concept, but in modern consideration, it’s a more prevalent social issue than at any time since the industrial revolution.

Underemployment means that people in employment want more hours of work than are available to them. The individuals are counted as employed, but some of their available hours are unemployed.

This manifests itself in two ways.

First, this cohort is obviously employed on a part-time basis, and so we can examine the part-time employment data to see some elements of the under-employment challenge.

Second, the participation rate tells us how many people have become discouraged and dropped out of employment or the search for employment.

Looking at the chart below, we can see that part time employment (the blue bar) is on the rise. In January, part-time employment totaled 3.872 million Australians were in part-time work, up 5.3% on January 2016.

Additionally, we can see that over that same period, the participation rate (the green line) has fallen from 65.1% to 64.6%. That is, over the year, 0.5% of the working age population exited work or the search for work.

fig22

To go straight to the dashboard and take a closer look at the data, click here.

The RBA reports that part-time work has “…accounted for all of the increase in employment since the beginning of the year and more than two-thirds of the increase since 2013…” [Monetary Policy Statement, February 2017]

There is no doubt that greater flexibility in organisations has changed the shape of Australian society. Part time work contributes to household management opportunities and has assisted in increasing women’s participation in the paid workforce in particular. But it isn’t for everyone and it isn’t working equally in Australia’s productive sectors.

As the RBA’s chart below shows, some sectors, like Household services, experience employment growth that is almost entirely part-time in nature, but that is less the case in some other sectors.

fig23

But even in the declining ‘Goods related’ sector, where full time employment has been dropping away (think of the decline in mining employment and some manufacturing, for instance), part time employment has been growing.

It is easy to imagine many of those in part time employment wanted more hours, but the jobs just were not there.

The kicker here is that, as the RBA says, “….the recent strength in part-time employment is more likely to have been driven by weaknesses labour demand than changes in employee preferences.” As evidence it uses the following chart, which shows the ratio of underemployment on a sector basis.

fig24

What all the data points to is that despite Australians having jobs, there are plenty of people with less work than they want or need. Moreover, that situation is expanding in key value-adding sectors like the Goods related sectors described above. That’s a personal problem for those caught in the under-employment trap of some part-time work.

But, just as significantly and probably more so in the medium term, that’s a challenge at an economy wide level because achieving sustainable economic growth relies upon household consumption to a large extent. Households without enough work consume less of everything, even wood products.

Posted Date: February 24, 2017

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