Analysis of trends in the Australian labour market

Labour market conditions

Labour market conditions strengthened between June 2015 and June 2016. The level of employment increased by 225,000 (or 1.9 per cent) to stand at 11,939,600 in June 2016, above the annual average growth rate over the past 10 years. It is worth noting, however, that employment growth was particularly strong in the second half of 2015, up by 181,600 (or 1.5 per cent), compared with a very modest increase of 43,400 (or 0.4 per cent) in the first half of 2016.

Female participation accounted for around 60 per cent of employment growth. In 2015‑16, female employment was up by 136,200 compared with 88,800 for males.

The pace of trend employment growth also softened, going from a peak of 31,000 jobs a month in October 2015 to just 8,300 in June 2016.

The increase in employment between June 2015 and June 2016 was due primarily to strong growth in part-time employment, which rose by 134,400 (or 3.7 per cent) to stand at a record high of 3,740,700 in June 2016. On the other hand, the level of full-time employment increased by a more modest 90,600 (or 1.1 per cent) over the period, to 8,198,900 in June 2016. This shift towards part-time employment is also reflected in aggregate monthly hours worked, which rose by a modest 0.6 per cent between June 2015 and June 2016.

Against this background, the level of unemployment in Australia fell by 23,100 (or 3.1 per cent) between June 2015 and June 2016, and the unemployment rate declined, from 6.1 per cent in June 2015 to 5.8 per cent in June 2016. The fall in the unemployment rate occurred in conjunction with a 0.1 percentage point increase in the participation rate over the period, to 64.9 per cent in June 2016.

The improvement in labour market conditions between June 2015 and June 2016 reflects, in part, the ongoing structural shift towards the more labour-intensive services sector. Strong growth was recorded in a number of service-based industries. Employment increased in 12 of the 19 broad industries between May 2015 and May 2016 (latest available data). The largest increases were in health care and social assistance (up by 71,600 or 4.9 per cent), construction (up by 44,300 or 4.3 per cent) and retail trade (up by 40,700 or 3.3 per cent).

By contrast, large declines were recorded in wholesale trade (down by 20,400 or 5.2 per cent), professional, scientific and technical services (down by 19,700 or 2.0 per cent) and manufacturing (down by 15,400 or 1.7 per cent). Employment in mining rose modestly over the period (up by 2,400 or 1.1 per cent). However, this increase should be viewed in the context of the large decline in mining employment (by 47,300 or 17.3 per cent) since its peak in August 2012, resulting from lower commodity prices and the ongoing transition away from the labour-intensive construction phase to the production phase of the cycle.

Reflecting the overall strengthening in the labour market, conditions for young people improved somewhat between June 2015 and June 2016. The youth unemployment rate declined marginally over the period, to stand at 13.2 per cent in June 2016, although it remains more than double the rate recorded for all persons. While the level of youth employment increased over the period by 22,300 (or 1.2 per cent), this was due entirely to a rise in part-time employment (up by 30,400 or 3.2 per cent). By contrast, the level of youth full-time employment declined (by 8,700 or 1.0 per cent). However, this occurred in conjunction with a 0.6 percentage point increase in the proportion of youth participating in full-time education, which rose to a record high of 52.4 per cent in June 2016.

Notwithstanding the general strengthening in labour market conditions between June 2015 and June 2016, a number of risks to the labour market outlook remain. These include a further moderation of growth in China as its economy transitions away from investment-led growth, and uncertainty around commodity prices, which have fallen considerably from their historic highs in 2011. That said, the Treasury’s forecasts in the 2016 Pre-election Economic and Fiscal Outlook are for employment to increase by 1.75 per cent over both 2016–17 and 2017–18. The unemployment rate is expected to decline to 5.5 per cent in 2016–17, and remain at that rate in 2017–18.

Labour force participation rate and employment-to-population ratio for people aged 15 to 64 years

The labour force participation rate is the proportion of the workforce-age population (15- to 64-year-olds) that is employed or actively looking for work. It is a good indicator of the total supply of labour, although it does not include those who are marginally attached to the labour force (people who want to be working but are not actively looking for work), such as discouraged job seekers.

The employment-to-population ratio is the proportion of the workforce-age population that is employed. This ratio is influenced by both labour demand and labour supply factors. It is also a good summary indicator for measuring Australia’s labour market performance relative to other countries, particularly those in the OECD.

Over the year to June 2016, Australia’s trend employment-to-population ratio for workforce-age people increased by 0.3 percentage point to 72.4 per cent. The trend workforce-age labour force participation rate increased slightly over the same period to 77.0 per cent.

Figure 8 Labour force participation rate and employment-to-population ratio, people aged 15 to 64 years, trend data, February 1978 to June 2016
Figure 8 Labour force participation rate and employment-to-population ratio, people aged 15 to 64 years, trend data, February 1978 to June 2016
Source: Australian Bureau of Statistics 2016, Labour force, Australia, June 2016, catalogue no. 6202.0, Table 18.

Figure 8 description

Labour force participation showing an upward trend, starting at 68.8 per cent in February 1978 and data ending at 77.0 per cent in April 2016.

Employment-to-population ratio showing an upward trend, starting at 64.3 per cent in February 1978 and data showing rates of 72.4 per cent in April 2016. Major dips in the graph appear in 1983 (dropping to 61.6 per cent) and then in 1993—dropping from a high of 68.7 per cent in 1990 to a low of 64.4 per cent in 1993, before again sharply rising.

Labour force participation rates for males and females aged 15–64 years

The gap between male and female labour force participation rates narrowed by 1.1 percentage points over the year to June 2016. This will help Australia to achieve the G20 goal of reducing the gap in participation rates between men and women of workforce age by 25 per cent by 2025.

The workforce-age male labour force participation rate decreased by 0.5 percentage point to 82.2 per cent over the year to June 2016; the female labour force participation rate increased 0.6 percentage point to 71.7 per cent over the same period. The notable increase in female labour force participation could be due to the growth of industries that employ a higher proportion of women during Australia’s transition from resource-intensive to more broad-based economic growth, although it is not entirely clear at this stage.

Figure 9 Labour force participation rate of males and females aged 15 to 64 years, trend data, February 1978 to June 2016
Figure 9 Labour force participation rate of males and females aged 15 to 64 years, trend data, February 1978 to June 2016
Source: Australian Bureau of Statistics 2016, Labour force, Australia, June 2016, catalogue no. 6202.0, Table 18.

Figure 9 description

Male participation showing a slight downward trend, starting at 87.1 per cent in February 1978 and data ending at 82.4 per cent in April 2016.

Female participation showing an upward trend, starting at 50.2 per cent in February 1978 and data showing rates of 71.6 per cent in April 2016.