LABOUR FORCE COMMENTARY DECEMBER 2015


NATIONAL ESTIMATES

Australia's trend estimate of employment increased by 27,500 persons in December 2015, with:

• the number of unemployed people decreasing by 9,900,
• an unemployment rate of 5.8 per cent, a decrease of 0.1 percentage points,
• the participation rate increasing less than 0.1 percentage points (based on unrounded estimates) to 65.2 per cent, and
• the employment to population ratio increasing 0.1 percentage points to 61.4%.

The trend unemployment rate remained at 6.1 per cent from March 2015 to September 2015, before declining over subsequent months to its current level of 5.8 per cent. The trend employment to population ratio, which expresses the number of employed persons as a percentage of the civilian population aged 15 years and over, increased steadily from 60.8 per cent in May 2015 to 61.4 per cent in December 2015.

Over the past 12 months, trend employment has increased by 312,200 (or 2.7%), above the average year-on-year growth over the last 20 years of 1.8%. Over this period trend unemployment has decreased by 37,300 (or 4.8%), with the trend unemployment rate decreasing from 6.2 per cent to 5.8 per cent. The participation rate (up 0.5 percentage points) and employment to population ratio (up 0.8 percentage points) both increased over this period.

The trend employment increase of 27,500 persons represents a monthly growth rate of 0.23% which is above the monthly average over the past 20 years (0.15%). This continues the trend in relatively strong employment growth seen since December 2014.

The trend series smooth the more volatile seasonally adjusted estimates.

The seasonally adjusted unemployment rate for December 2015 was 5.8 per cent (down 0.1 percentage points, based on unrounded estimates) and the labour force participation rate was 65.1 per cent (down 0.1 percentage points, based on unrounded estimates).

Seasonally adjusted full-time employment increased by 17,600 persons to 8,228,700 while part-time employment decreased by 18,500 to 3,673,600 persons in December 2015. The decrease in total seasonally adjusted employment of 1,000 persons to 11,902,300 resulted from:

• a decrease in female part-time employment, down 10,200 persons
• a decrease in male part-time employment, down 8,300 persons
• an increase in female full-time employment, up 3,000 persons
• an increase in male full-time employment, up 14,500 persons.

Seasonally adjusted monthly hours worked in all jobs increased 0.3 million hours (less than 0.1%) in December 2015 to 1,645.2 million hours.

The seasonally adjusted employment to population ratio decreased 0.1 percentage points to 61.4% in December 2015.

STATE ESTIMATES

Trend employment growth in December was strongest in absolute terms in New South Wales (up 13,400 persons), and also in relative terms (up 0.4%). The largest annual growth rates in trend employment were in New South Wales (4.8%) and Queensland (2.8%).

In seasonally adjusted terms, the largest absolute decreases in employment in December 2015 were in Victoria (down 12,900 persons) and New South Wales (down 5,400 persons). The largest absolute increases in seasonally adjusted employment were in Western Australia (up 8,100 persons) and Queensland (up 6,700 persons).

The trend unemployment rates decreased slightly in four states and territories, changed by less than 0.1 percentage points in three, and increased slightly in Tasmania.

The largest decreases in the seasonally adjusted unemployment rates were in Victoria and Western Australia (both down 0.2 percentage points). The largest increase was in Tasmania (up 0.2 percentage points).

The trend participation rate decreased slightly in Tasmania and the Northern Territory, changed by less than 0.1 percentage points in three states and territories, and increased slightly in three.

In seasonally adjusted terms, the largest decreases in the participation rate were in Tasmania (down 0.8 percentage points) and Victoria (down 0.5 percentage points). These follow reasonably large increases in participation in November, particularly in the case of Victoria. The largest increase in the seasonally adjusted participation rate was in Western Australia (up 0.2 percentage points).

Seasonally adjusted estimates are not published for the territories and the ABS recommends using trend estimates to analyse the underlying behaviour of the series.

Unemployment rate, States and Territories, November 2015 and December 2015
	Trend		Seasonally Adjusted
	November	December	November	December
	%	%	%	%
New South Wales	5.4	5.2	5.2	5.2
Victoria	6.0	5.9	6.1	5.9
Queensland	6.0	5.9	5.9	5.8
South Australia	7.4	7.3	7.3	7.2
Western Australia	6.4	6.4	6.6	6.3
Tasmania	6.5	6.6	6.6	6.8
Northern Territory	4.2	4.1	np	np
Australian Capital Territory	5.2	5.2	np	np
Australia	5.9	5.8	5.8	5.8
np not available for publication but included in totals where applicable, unless otherwise indicated

INSIGHTS FROM THE ORIGINAL DATA

The Labour Force Survey sample can be thought of as comprising eight sub-samples (or rotation groups), with each sub-sample remaining in the survey for eight months, and one rotation group "rotating out" each month and being replaced by a new group "rotating in". This replacement sample generally comes from the same geographic areas as the outgoing one, as part of a representative sampling approach. To understand movements in the original estimates, it is important to consider the contributions from the three components of the sample:

• the matched common sample (survey respondents who responded in both November and December),
• the unmatched common sample (respondents in December but who did not respond in November, or vice versa), and
• the incoming rotation group (who replaced respondents who rotated out in November).

Starting with the December 2015 estimates, the ABS has improved the analysis of the relative contribution of the three components of the sample to changes in aggregate employment (in original terms). The improved approach considers the contribution of each component to each month's estimate individually and, by extension, their contribution to the movement between the two months. This approach can be replicated using the previous month weighted estimate and comparing it to the current month weighted estimate, both of which are available in data cube GM1. This improved analysis replaces the approach previously used, which was based on drawing inferences from matched sample data in table 17 and calculating a residual contribution from the unmatched common sample.

Based on this improved analysis:

• 9,598,800 of the 11,919,100 November 2015 estimate of employment was from the December 2015 matched common sample
• 831,500 of the 11,919,100 November 2015 estimate was from the December 2015 unmatched common sample
• 1,488,800 of the 11,919,100 November 2015 estimate was from the November 2015 outgoing rotation group

• 9,782,000 of the 12,007,500 December 2015 estimate of employment was from the December 2015 matched common sample
• 802,000 of the 12,007,500 December 2015 estimate was from the December 2015 unmatched common sample
• 1,423,600 of the 12,007,500 December 2015 estimate was from the December 2015 incoming rotation group.

This reveals that the 88,400 increase in employment, in original terms, from November 2015 to December 2015 was the result of:

• A positive contribution to employment of 183,200 (that is, 9,782,000 - 9,598,800) from the matched common sample
• A negative contribution to employment of 29,500 (that is, 802,000 - 831,500) from the unmatched common sample
• A negative contribution to employment of 65,300 (that is, 1,423,600 - 1,488,800) from the change in rotation groups.

Had this improved approach been used in previous commentary, the 69,600 increase in employment, in original terms, from October 2015 to November 2015 would have been attributed to:

• A negative contribution to employment of 94,600 from the matched common sample
• A positive contribution to employment of 111,500 from the unmatched common sample
• A positive contribution to employment of 52,700 from the change in rotation groups.

The above data is available in a table upon request, and will be included in future issues.

In considering the three components of the sample, it is important to remember that the matched common sample describes the change observed for the same respondents between November and December, while the other two components reflect differences between the aggregate labour force status of different groups of people.

While the rotation groups are designed to be representative of the population, the outgoing and incoming rotation groups will almost always have somewhat different characteristics, as a result of the groups representing a sample of different households and people. The design of the survey, including the weighting and estimation processes, ensures that these differences are generally relatively minor and seeks to ensure that differences in characteristics of rotation groups do not affect the representativeness of the survey and its estimates.

The rotation group which was new to the sample in December 2015 (the incoming rotation group) displayed a stronger tendency towards both participation and employment than the group it replaced (the outgoing rotation group in November), with a higher participation rate and moderately higher employment to population ratio. The effect on the estimates of the incoming rotation group having an increased tendency towards participation and employment was partially offset by the incoming rotation group also representing a lower share of the population than the group it replaced.

In looking ahead to the January 2016 estimates, it is important to note that the outgoing rotation group in December 2015, which will be replaced by a new incoming rotation group in January 2016, has a relatively low employment to population ratio (59.7% in December). If the new incoming rotation group has an employment-to-population ratio that is more similar to the average (61.9% for all rotation groups in December 2015), or is relatively higher than the average, there is likely to be some degree of contribution to employment growth from this rotation group change. This will be summarised in the January 2016 issue.

As the gross flows and rotation group data are presented in original terms they are not directly comparable to the seasonally adjusted and trend data discussed elsewhere in the commentary.