November AU Labour Force Survey: Australia’s Underemployment Problem

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A somewhat mixed labour force report to end the year, with participation reaching a new record high but no improvement in underemployment or the underutilisation rate.

In November, the Australian labour maintained the strong employment gains that have come to characterise 2018. Participation in the Australian labour force reached a new record high but there was no improvement in the underutilisation rate, which increasingly appears the key to generating higher wage growth.

The unemployment rate dipped slightly to 5.1% in November, from 5.2% in October. Yet the improvement was overshadowed by a rise in the underemployment rate to 8.4%. That might not seem noteworthy but underemployment is an increasingly important part of Australia’s economic narrative: one of the main reasons why wage growth remains disappointing is due to the army of part-time workers who desperate seek greater opportunity.

While a little progress has been made, largely due to strong growth in full-time opportunities over the past two years, there is still much progress that needs to be made before wage growth begins to improve in a meaningful way.

Employment rose by 28.800 people in November on a trend basis, slightly above its average of 24,300 people a month this year. Almost 70% of employment growth this year has been in full-time roles with full-time opportunities climbing across most occupations during that time. This has been sufficient to bring the unemployment rate down and push participation to a record high but hasn’t had much impact on the level of underemployment across the country.

Australian workers are also working fewer hours per month. Annual employment growth at 2.4% continues to outstrip total hours worked across the Australian economy at 1.9%. This reflects a combination of factors including a stronger preference for greater flexibility and work-life balance, as well as economic factors that have forced workers into part-time roles.

At the state level, New South Wales and Victoria continue to distance themselves from the pack. The unemployment rate in New South Wales and Victoria is around 4.5% compared with 6.3% in the two mining states, Western Australia and Queensland.

Employment has increased by 3.2% over the past year in both New South Wales and Victoria. Around 90% of employment growth in Victoria over the past year has been in full-time roles, compared with a little over half for New South Wales.

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