The latest employment figures were a pleasant surprise, but we have a long way to go

The latest labour force figures were that weird occurrence of the unemployment rising being met with applause. And yet while the jobs growth in October was much better than expected, nothing in the figures suggest the recovery is close to completed.

Usually when the unemployment rate rises, as it did in October from 6.9% to 7.0%, it is a bad sign. And yet when the ABS released the October labour force figures generally the response was positive.

While the unemployment rate rose, employment increased by 1.4% - some 178,800 more people employed. The unemployment rate rose because the number of people returning to the labour force surged due to people in Victoria being able to both get back to work, and start looking for work.

The number of unemployed in Victoria rose by nearly 32,000, but in the rest of the country the number of unemployed fell by six and half thousand.

It’s why when we exclude Victoria, Australia’s unemployment rate actually fell in October from 7.0% to 6.9%:

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Either way though it is not overly great, and these bad figures generated a positive response only because the most recent payroll job numbers suggested employment in October would be at best flat, and possibly would fall.

That it didn’t is most likely due to the methodological differences of both measurements, and reminds everyone that we should in this period of great turmoil treat monthly and weekly data with care.

But even when we look at just employment, it is clear that things still have a long way to go before we are fully recovered.

The amount of hours worked on average by all adults remains at levels last seen during the depths of the 1990s recession:

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Overall hours worked remained weak – boosted only by Victoria easing its restrictions. The growth of hours worked in Victoria increased by 5.6%, in the rest of the country it fell 0.2%.

And this weakness reflects that this recession has seen a big shift from full-time to part-time work.

Excluding Victoria there is now more part-time employment than there was in March, but full-time employment is down nearly 3%:

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The boost of jobs in October was not only mostly due to Victoria but it was also not evenly spread across gender and ages. While men under 35 make-up just on 20% of all employed, they accounted for 41% of all new employment in October:

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That does suggest the government’s hiring credit for workers under 35 has had an instant impact, but oddly it is not working for women under 35.

But to show just how deep a hole we remain in, it is worth revisiting the underutilisation measure of recessions.

This compares the average underutilisation rate (which include unemployment and underemployment) of the past three months with the lowest rate of the past year. If the difference is above 1.5% points that is a strong indicator we are in a recession.

Right now for men the difference is at 5.3 and for women it is at 3.8 – the worst ever recorded for both genders:

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The good thing about this measure of recession (which is adapted from US economist Cluadia Sahm’s unemployment recession indicator) is it allows us to compare across states to see which areas are struggling the most, and because it considers past performance it adjusts for those states that might as a rule have higher or lower underutilisation than others:

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It shows that Western Australia was in recessionary territory for much of 2017 and 2018, but is now the state closest to recovering. Similarly South Australia entered the crisis after experiencing recession conditions during 2019, but is now recovering better than Queensland and New South Wales.

This measure also allows us to look at the impact across ages and genders:

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It reveals how tough it was for young men last year to get work, but also that both young and older women workers were the first to suffer the impact of the virus.

When we compare the recession measures in February, July (the low point) and in October, we see that men aged 25-34 are the ones hardest hit relative to their previous experience:

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But while those men remain the worst hit, the plight of men aged 45-54 is next in line – showing that this is definitely not just about youth.

Overall the best recovered are women aged 35 to 54. However, even their situation is not as great as it may seem. The recession indictor for women aged 35-44 is currently at 2.7; the worst it reached during the GFC was 2.5.

All states, ages and genders are very much experiencing a recession, and about the best you can say is that those who are recovering most strongly are still in a worse position than they were during the GFC.

The October employment figures were a pleasant surprise, but there are still more than a quarter of a million more people unemployed than there were in February and 357,000 fewer people working full-time.

We have a long way to go and both federal and state governments and the Reserve Bank will need to continue to respond accordingly.