Does South Australia have an unemployment problem?

Darryl Gobbett

We examine the veracity of the view that the recent increase in South Australia’s unemployment rate is due to increased numbers of people looking for work as workers’ confidence in the South Australian economy has increased.

For this purpose we will set aside:

• analysis of the slowdown in employment growth in SA through 2019 in contrast to lifting employment growth nationally; and
• the decline in business and employer confidence in SA in early 2019.

We assume no changes to the population growth or employment estimates by the ABS for South Australia. We use the ABS estimate of the Labour Force participation rate as the measure of people looking for work. All estimates are based on the ABS trend estimates.

If the female labour force participation rate in July 2019 was the same as in July 2018, i.e. 57.7 per cent rather than 59.1 per cent, the female labour force and number unemployed would have each been around 10,400 lower. This would put the female unemployment rate at 3.4 per cent, 2.3 per cent lower than the actual ABS estimate.

Following the same approach, if the male labour force participation rate in July 2019 was the same as in July 2018, i.e. 67.6 per cent rather than 67.8 per cent, the male labour force and number unemployed would have each been around 1,400 lower. This would put the male unemployment rate at 6.7 per cent, 0.3 per cent lower than the ABS July 2019 estimate although almost 1 per cent higher than in July 2018.

The aggregate unemployment rate on unchanged labour force participation rates for each gender would have been 5.1 per cent.

So the Premier is quite correct in ascribing the recent rise in unemployment to an increased proportion of the working age population looking for work. It should be noted this increase is principally a result of increased female labour force participation.

Then the question is whether this is due to increased confidence in finding work or pressures on household budgets of stagnant male employment, with trend full-time male employment in July 2019 being 5,000 lower than the recent January 2019 peak and the lowest since September 2018; very low private sector wages growth; and rising household costs?

Or does it simply represent a natural, but incomplete, recovery in labour market conditions after the South Australian labour market stagnated from 2011 to 2016? This period was characterised by a failure to grow total employment levels and a significant decline in labour force participation as people were discouraged from looking for work. Even with the recent improvement, the state’s actual participation rate in July 2019 (63.4 per cent) was still below the previous peak reached in November 2008 (63.8 per cent). In contrast, the Australian participation rate reached an all-time high of 66.1 per cent in July 2019.

In addition, while SA’s trend employment growth lifted in the six months to July to an annualised 2.0 per cent, this is still well under the pace in NSW (3.8 per cent), Victoria (2.5 per cent), Queensland (2.6 per cent) and Western Australia (2.5 per cent).

The Economic and Social Indicators section of the SACES website provides some comparative measures of the South Australian and Australian labour markets.

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