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Tuesday, October 4, 2022

Australia labor supply dependent on increasing women’s participation – Action Forex

Fourth consecutive upward surprise on employment. However, the growing labor supply has become dependent on the increasing participation of women. Total employment: 28.3k to 77.4k (revised from 12.9k); Unemployment rate: 4.2% to 4% (unrevised 4.2%); Participation rate: 66.2% to 66.4% (unmodified 66.2%).

January was the fourth consecutive upside surprise for employment. Employment grew by 77.4k, significantly stronger than the market forecast of +37k and even stronger than Westpac’s top of the range forecast of +60k. It was followed by 28.3k in January (revised from 12.9k), 70.8k in December and 372.5k in December. There was also an expected strong reversal in working hours, which lifted 8.9% after Omicron hit -8.6% in January, when an untimely high number of people were sick or on leave.

Even Westpac expected a strong growth in participation from 0.2ppt to 66.4% (markets were looking for a soft 0.1ppt increase) which led to a 58.9k increase in the labor force. As such, the unemployment rate was a larger than expected drop from 4.2% to 4.0% – both the market and Westpac were projecting an unemployment rate of 4.1%.

February saw the lowest unemployment rate since August 2008 and only the third time in the history of the monthly survey that unemployment was as low as 4.0% percent (February 2008, August 2008, February 2022). The unemployment rate was low in November 1974 but this was when the survey was conducted quarterly.

This is a very strong update on the labor market, not only in terms of strong labor demand but also strong gains in labor supply with the participation rate reaching a record high of 66.45% by two decimal places.

Labor demand indicators continue to paint a very strong picture for employment growth, particularly in the near term, with limited growth in the working-age population due to closed borders (by only 0.5% a year but in Improving) 0.2.% growth over last three months) 0.8% three-month annual growth to new record highs will be crucial to provide the labor needed to meet rising participatory demand.

If participation does not grow as expected and projected employment growth is achieved, we will see a very low unemployment rate which is forecast at 3.8%. It is also possible that if participation does not increase as expected, firms may not be able to attract workers who are suitable for their needs and hence supply constraints may put the brakes on strong employment growth. If that were the case, we could still see an expected 3.8 percent reduction in unemployment, even less than the expected increase in employment.

Women are driving growth in employment (3.9% a year versus 2.3% a year for men) and the labor force (2.1% a year versus 0.2% a year for men). So even though male unemployment declined more than females in the year (-1.8ppt to -1.7ppt respectively) this is due to a 0.2ppt drop in male participation in the year. In contrast, female participation rose 0.95ppt in the year to a new record high of 62.35% – male participation still exceeds 70.71%, but is far from its record high of 79.49% in 1978.

The recent strong demand for labor appears to have been able to halt the declining trend in male participation, but it is not enough to lift it. Noting that, if we are to get the supply of labor needed this year, female participation will have to continue to rise to new record highs; We estimate this to increase to over 65.50% sometime around mid-year.

It is also worth noting that female unemployment, at 3.8%, is lower than male unemployment at 4.2%. For women, 3.8% is the lowest since May 1974. Meanwhile, 4.2% for men is the second lowest level since November 2008 and just above the 4.1% print of December’s 4.1%.

The unemployment rate fell 0.1ppt in February to 6.6%, 2.2ppt lower than in March 2020 (8.8%) and the lowest since November 2008.

The low utilization rate, which combines unemployment and underemployment, fell 0.3ppts to 10.6%, 3.4ppts lower than in March 2020 (14.1%) and the lowest since October 2008.

Australia Labor Supply Dependent On Increasing Women'S Participation - Action Forex

Australia Labor Supply Dependent On Increasing Women'S Participation - Action Forex Australia Labor Supply Dependent On Increasing Women'S Participation - Action Forex

World Nation News Desk
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