Recent volatility in WA’s unemployment rate suggests longer-term issues for the state’s labour market.
The March unemployment data released by the Australian Bureau of Statistics in mid-April was, on face value, an incredible result for the local economy.
As Australia-wide unemployment fell from 6.1 per cent to 5.8 per cent, Western Australia recorded a whole percentage point reduction in unemployment to 4.9 per cent.
However closer inspection of the underlying ABS data reveals a picture that is not quite as rosy as the headline figures might suggest.
While the number of unemployed persons in WA fell by 14,400 on a seasonally adjusted basis in March, not all of those people gained employment.
The number of people employed in WA increased by only 6,900 in comparison, and most this increase was not due to full-time job creation. The number of full-time jobs actually fell over the month of March by 8,100, with the overall increase in employment resulting from 15,000 new part-time positions.
The figures indicate that there are two factors at play – a move from full-time to part-time employment, and a large proportion of the unemployed dropping out of the workforce.
Over the long term, a falling participation rate is a trend that we expect to persist, as baby boomer retirements accelerate and Australia undergoes a fundamental demographic shift.
In addition, as the WA economy continues to transition into the production phase of the mining boom, the types of jobs required will continue to change, requiring a level of labour market flexibility and a close eye from government and business to ensure this transition is without any major hiccups.
The WA participation rate fell by 0.5 per cent in March, due to a shrinking labour force and growing working-age population.
A trend of lower participation rates in WA can be explained by a number of recent developments, including weaker job growth through the economic transition discouraging workers, and encouraging them to exit the labour force altogether.
Secondly, lower interest rates have also meant that second income earners, whose incomes have been needed to help meet mortgage payments, have been under less pressure to remain in the workforce.
Where to now?
Over the short to medium term, WA’s unemployment rate is expected to rise, with Deloitte forecasting an average 6.1 per cent rate of unemployment in 2014-15 (see chart).
But while Australia will peak at a similar level and at a similar time, the WA labour market is projected to recover at a much quicker rate, reflecting the positive medium term growth outlook for the state on the back of export-led growth.
While we expect the resources sector to continue to provide steady (but not spectacular) employment prospects over this period, it will be other industries that are the real job growth drivers for the state economy, including health, education, hospitality and information technology.
The occupational mix in the resources sector is expected to shift in favour of those who are in greater demand during the operational phase of resources projects. Thus we can expect solid employment growth for trade workers, machinery operators and labourers.