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Australia's official unemployment rate fell last month from 7.5 per cent to 6.8 per cent, the result surprised basically all economists, including those at Treasury and the Reserve Bank, so what's up?

Source : PortMac.News | Independent :

Source : PortMac.News | Independent | News Story:

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Unemployment fall caused by return of gig economy jobs ?
Australia's official unemployment rate fell last month from 7.5 per cent to 6.8 per cent, the result surprised basically all economists, including those at Treasury and the Reserve Bank, so what's up?

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).

It's the 'gig economy'

Some economists suspect practically all those "non-employees" were working in the gig economy.

That means the surprise surge in employment wasn't what it seemed.

"Delivery drivers, and riders, of major online delivery services are not employed by their respective delivery companies," Deutsche Bank economist Phil O'Donaghoe wrote in a note to clients.

"They are, in effect, 'self employed' contractors, and would be classified as such by the ABS.

"Indeed, the Fair Work Ombudsman definitively ruled that to be the case in the middle of last year.

"There will have been a significant increase in demand for such workers, especially in Victoria during the month, given lockdown conditions.

"So in hindsight it is not surprising that we have seen a rise in the number of individuals 'signing up' to operate as delivery contractors in the month.

"So it is not all bad news."

Danielle Wood, the chief executive of the Grattan Institute, noticed the same thing.

"Buried amongst the surprisingly good jobs figures today ... almost all the increase in employment was for the self-employed," Ms Wood tweeted.

"Big rise in the gig economy is my guess."

Disconnect between jobs and hours worked

One issue with 'gig economy' employment is the disconnect between employment and hours worked.

That was starkly apparent in the ABS data — despite an increase in employment of 111,000 persons — hours worked rose just 0.1 per cent last month.

"So a surge in employment, but not via employees in a typical business structure, and it is fair to infer that many of those new workers hardly worked for many hours (given the paltry rise in overall hours worked)," Mr O'Donaghoe said.

"That leaves us describing this as a poor employment print, despite the headline."

Why did economists think unemployment rate would rise?

Leading up to Thursday's jobs data, economists knew the latest payroll jobs index had decreased by 1.2 per cent last month.

The fall in the index suggested there had been a large number of job losses in August.

However, gig economy jobs aren't captured in the payroll jobs index.

Gig workers aren't on any company's payroll because they are self-employed contractors.

That's why the surge in gig economy jobs caught everyone off guard.

It has to do with how the ABS classifies payroll jobs

The ABS classifies payroll jobs as 'employee jobs' for which a payment is reported to the Australian Taxation Office through the Single Touch Payroll system.

'Employee jobs' include the jobs held by employees and by owner-managers of incorporated enterprises.

Owner-managers of unincorporated enterprises — the largest component of the employment growth in August — are not covered by the payroll jobs definition.

That's why gig economy jobs slipped through the cracks.

In the payroll job index, there is also lower coverage of small businesses (<20 employees) than large and medium businesses.

"As a result, the increase in owner-managers of incorporated enterprises without employees is also less likely to be reflected in the payroll jobs series," the ABS said.

What will happen to unemployment from here?

Citi economists Josh Williamson and Faraz Syed say, despite the surge in the number of sole traders in August, the employment data was promising.

"The August data shows that jobs growth remained solid mid-way through the third quarter," they said.

"This shows that official forecasts for the unemployment rate have been too pessimistic, a point we have made over recent months.

"That said, the recovery is still nascent and comes with a number of caveats."

They said the economy needed to see growth in employee jobs, not non-employee jobs.

"This is because we expect further gains in labour force participation in coming months as more JobSeeker recipients return to the labour force and in the long-run from a return of international migrants of prime-working age," they said.

"The demand side of the labour market needs to move from creating jobs when people create businesses to employing labour as these businesses grow.

"We believe this will occur if governments continue to re-open state economies and allow demand growth to naturally increase.

"The large gain in part-time employment alongside the type of employment generated in August could also have implications for wages growth, which may be lower than if the employment was from more traditional employee job creation."


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