What’s really going on with unemployment?

Australia's official unemployment rate fell last month from 7.5 per cent to 6.8 per cent.

The result surprised basically most economists, including those at Treasury and the Reserve Bank, who were expecting the unemployment rate to deteriorate again.

So what happened?

According to the Bureau of Statistics, the number of employed persons increased by 111,000 in August.

But data shows the jobs growth was entirely driven by a surge in "non-employees" — self-employed people (owner-managers) with no employees who work in an unincorporated enterprise (e.g. a sole trader).

The percentage of underemployed people, who wanted to work more hours than they did, remained steady at 11.2 per cent.

Total hours worked rose 1.6 per cent last month but is still down 5.1 per cent on August last year

According to Roy Morgan Research, in August 13.8% of the workforce (1.98 million Australians) were unemployed.

This represents an increase of 194,000 on July caused by two drivers – fewer jobs and more people looking for work.

Although there were fewer people employed overall in August than July (down 89,000 to 12,376,000), the positive news is there were more full time workers (up 138,000 to 8,013,000) and fewer part-time workers (down 227,000 to 4,225,000).

In addition to those who are unemployed 1.29 million Australians (9% of the workforce) are under-employed – working part-time but looking for more work.

This is down 208,000 on a month ago driven by the reduction in part time employment.

In total 3.27 million Australians (22.8%) were either unemployed or under-employed in August, an improvement of only 14,000 on July according to the latest Roy Morgan employment estimates.

In August, unemployment increased in every State except locked down Victoria.

On a State based level the biggest increases in unemployment in August were in the States which have enforced the toughest border restrictions – Queensland, Western Australia and Tasmania. The unemployment rates in all three States increased by 3% points or more in August to at least 16%.

Compared to early March, before the nation-wide lockdown, there are now an additional 1.1 million Australians either unemployed or under-employed (+7.2% points).

Latest Roy Morgan employment series data for August shows:

• The workforce in August was 14,356,000 – comprised of 12,376,000 employed and 1,980,000 unemployed Australians looking for work. The workforce total is up 105,000 since July driven by a large increase in unemployed Australians;
• 12,376,000 Australians were employed, down 89,000 from July including 8,013,000 employed full-time, up 138,000, and 4,225,000 employed part-time, down 227,000;
• 1,980,000 Australians were looking for work, up 194,000 from July, driven by a surge in the number looking for part-time work which was up 233,000 to 1,212,000 while 768,000 were looking for full-time work, down 39,000 – the fourth straight months of declines for this indicator since peaking in April over 1 million;
• Roy Morgan’s unemployment figure of 13.8% for August is significantly higher than the current ABS estimate for July 2020 of 7.5%. However, the ABS figure for July estimated a large decline in the size of the workforce since March which they said was down 267,000. The ABS also counted an additional 109,000 Australians who were working zero hours in July as ‘employed’; people who ‘had no work, not enough work available, or were stood down’. If these non-workers are added the ABS unemployment estimate for July increases to 1.39 million (10.1%).

NSW has lowest unemployment while biggest increases are in Queensland, WA and Tasmania

A look at the trends on a State-based level shows unemployment increasing in all States except Victoria – which spent the entire month of August in Stage 3 or 4 lockdown with residents confined to their homes.

Despite a small increase, NSW again has the lowest unemployment of any State in August just below locked down Victoria. Both States have unemployment well below the national average at around 12% while South Australia was up only slightly with an unemployment rate in line with the national average.

The big changes in August were in the three States with the strictest border closures, with unemployment increasing by at least 3% points in Queensland, Western Australia, and Tasmania. All three of these closed border States now have unemployment of at least 16% and well above the national average.

Roy Morgan Unemployment & Under-employment (2019-2020)

Source: Roy Morgan Single Source January 2019 – August 2020. Average monthly interviews 4,000.
Note: Roy Morgan unemployment estimates are actual data while the ABS estimates are seasonally adjusted.

Expert Commentary

Michele Levine, CEO Roy Morgan, says unemployment has increased in August as Australians re-joining the workforce as restrictions ease around most of the country can’t all find new jobs:

“Roy Morgan’s unemployment measure for August shows 1.98 million Australians were unemployed (13.8% of the workforce) with an additional 1.29 million (9%) under-employed. In total a massive 3.27 million Australians (22.8%) were unemployed or under-employed – down 14,000 on a month ago.

“The rise in unemployment was due to people starting to look for work again as most of Australia continued to open up in August However, there were not jobs available for everyone re-joining the workforce and unemployment increased in every State except locked down Victoria.

“On a State based level the biggest increases in unemployment in August were in the States which have enforced the toughest border restrictions – Queensland, Western Australia and Tasmania. The unemployment rates in all three States increased by 3% points or more in August to at least 16%. In each of these states there were fewer jobs in August than July, but the increase in unemployment was mostly driven by people starting to look for work again.

“New South Wales, which has only closed its border to Victoria, again has the lowest unemployment of any State at 12%, up slightly on July. The success of NSW in managing low level community transmission of COVID-19 over the last two months without re-entering a lockdown is a model other States should analyse closely as emergency measures to support the economy are withdrawn.

“At the end of September the JobKeeper wage subsidy is set to be lowered by $300 to $1,200 per fortnight for full-time workers and cut in half to $750 per fortnight for those who were working less than 20 hours per week in the pre-pandemic period. The JobSeeker payment for the unemployed is also set to be reduced by $300 at the end of the month.

“The reductions of these payments next month will put pressure on States to open up their economies and reduce the border restrictions that are hampering businesses and slowing growth. States such as Queensland and Tasmania, which rely heavily on tourism and have amongst the highest rates of unemployment in the country, are set to feel the most pressure to open up as Government support is progressively reduced.

“The reductions in payments will also put pressure on employers, and employees and unemployment and under-employment are likely to increase again, as JobKeeper dependent employers reduce their employee numbers or close altogether, and JobKeeper dependent employees start to look for more work.”

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.