August AU Labour Force Survey: A Big Improvement


In August, the Australian unemployment rate dropped to its lowest level in almost six-years but it was the improvement in the broader measures of unemployment that stole the show.

The August jobs report was jam-packed with positive developments. The unemployment rate fell, participation improved and employment growth was strong. But it was the decline in the underutilisation rate that will have policymakers grinning ear-to-ear this month.

The underutilisation rate dipped to 13.4% in August, from 13.9% in May, and is now at its lowest level since May 2013. The underutilisation rate, which includes not just those who are unemployed but also employed people seeking more hours, is regarded as the best measure of labour market conditions in Australia.

It is also the measure of unemployment most highly correlated with wage growth. A lower underutilisation rate should directly translate into higher wage growth over the remainder of the year. Good news for the millions of households across the country.

At 13.4% the measure is still excessively high. The improvement is welcome but labour market slack remains high across the country. Prior to the global financial crisis, the underutilisation rate dropped as low as 10%. So we still have a long way to go.

Employment rose by 29,000 people in August on a trend basis and has increased by an average of 22,600 people per month this year. That is well below the 33,800 people who found work each month last year, but if replicated over the remainder of the year, we’d conclude that it has been a very good year for the Australian labour market.

Particularly welcome has been the recent improvement in full-time employment. Full-time roles were a little scarce towards the beginning of this year but have certainly improved in recent months. Full-time roles have accounted for around three-quarters of employment growth over the past three months.

A further positive is the ongoing improvement in labour market outcomes for younger Australians. The unemployment rate among 15 – 24 year olds has declined to 11.2%, from 12.4% at the beginning of the year, with the decline particularly impressive since it has coincided with a sizable increase in participation.

Total hours worked across the Australian economy increased by 1.8% over the past year. This is somewhat disappointing because over the same period employment rose by 2.5%. Consequently, hours worked per person continues to tumble. This largely reflects the fact that an increasing share of the Australian workforce is in part-time or casual roles, despite the recent strength in full-time employment growth.

Finally, at the state level the unemployment rate in New South Wales and Victoria remains slightly below 5%. Labour market slack in the other states is somewhat higher, with the two mining states, Queensland and Western Australia, at 6.3% and 6.2%, respectively.

Back to top

Subscribe to Indeed Hiring Lab Australia

Keep up with the latest