Data Wrap - labour market conditions relatively stable prior to coronavirus impact
In today's edition of the Data Wrap, we review the latest labour market and population growth data for South Australia and consider recent national data on consumer confidence and retail sales which provide insight into the emerging impact of coronavirus on economic activity.
Unemployment falls slightly
Labour market conditions in South Australia remained relatively stable in February in the face of major headwinds in the form of the coronavirus outbreak and lingering effects of the summer bushfires. The latest labour market report from the ABS, released yesterday, indicates that the trend unemployment rate for South Australia fell by 0.1 percentage points to 5.8 per cent. The number of employed persons and total hours worked remained virtually unchanged, while unemployment fell by about 600 persons.
At the national level the trend unemployment rate remained unchanged at 5.1 per cent in February. South Australia’s unemployment rate of 5.8 per cent was the highest of any state or territory, just eclipsing Queensland’s rate of 5.7 per cent. The states with the next highest unemployment rates were Tasmania (5.5 per cent) and Western Australia (5.4 per cent). Unemployment was broadly in line with the national average for Victoria (5.2 per cent) and quite low in New South Wales (4.5 per cent).
As we have noted in our previous analysis of labour market data, unemployment has recently fallen in South Australia in response to people leaving the labour force. This ‘discouraged worker’ effect continued in February with the labour force participation rate falling by 0.1 percentage points to 62.3 per cent.
The deterioration in labour force participation has been quite pronounced over the past year with the participation rate falling by 0.8 percentage points. This decline contributed to a small fall in the state’s unemployment rate over the past 12 months (down 0.2 percentage points) even though total employment levels actually fell slightly over this period (down 0.2 per cent). And with employment levels failing to grow let alone keep pace with population growth, underemployment in South Australia has risen significantly over the past year, by 1.0 percentage points to 9.8 per cent.
In summary, while the latest monthly labour force results for South Australia are somewhat reasonable in the face of various headwinds, the recent shocks have come at a time when labour market conditions had already weakened noticeably.
Population growth picks up
Following several years of slow growth, South Australia’s population growth rate has picked up over the last 18 months. The ABS estimates that annual population growth accelerated from a previous low of 0.6 per cent in the September quarter of 2017 to 0.9 per cent in the September quarter 2019. In comparison, Australia’s population rose by 1.5 per cent in the most recent year.
Stronger population growth for South Australia has been brought about by increased gains from net overseas migration and natural increase, and a moderation in interstate migration outflows. South Australia lost approximately 4,200 people through interstate migration in the year to September 2019, down from approximately 4,600 people in the year to September 2018. Gains through net overseas migration rose from 13,500 to 14,200 people between these periods.
Australian retail sales rebound in February
In order to provide governments and the community with more timely information on the economic impact of coronavirus, the ABS on Wednesday released ‘preliminary’ estimates of retail sales for February, some two weeks earlier than usual. The estimates are subject to revision and no state-level detail was reported.
The value of Australian retail sales in seasonally adjusted terms rose by 0.4 per cent in February 2020, which follows falls over the previous two months. While no sectoral results were published, the ABS did advise that the rise in February was mainly driven by food retailing, while “offsetting weakness was seen in the clothing, footwear and personal accessory retailing”.
Consumer confidence falls to five year low
Beyond the preliminary retails sales data and movements in stock and currency markets (the Australian dollar reached an 18 year low yesterday), measures of consumer and business confidence provide some of the most useful and timely insight into future developments in economic activity.
Consumer sentiment in Australia, as measured by the Westpac-Melbourne Institute Index of Consumer Sentiment, continued to deteriorate in March. The Index fell by 3.8 per cent to 91.9 points, reaching a five year low. The global spread of coronavirus, a sharp downturn in financial markets, and general weakness in economic conditions, both overseas and domestically, contributed to the further erosion in consumer confidence.
While consumer sentiment is now quite weak, the Index remains well above the levels reached during the Global Financial Crisis when the index fell to a low of 79. However, the latest report is based on surveys conducted before the World Health Organisation declared on 11th March that COVID-19 can be characterised as a pandemic and more stringent social distancing measures were implemented by the Australian Government.
In terms of business sentiment, in late February we reported that confidence among tourism businesses in South Australia had deteriorated sharply in response to bushfires and the emerging threat posed by coronavirus.