Small Area Labour Markets (SALM), December Quarter 2020
The National Skills Commission produces quarterly regional estimates of unemployment and the unemployment rate at the Statistical Area Level 2 (SA2) and Local Government Area (LGA) level. The latest available estimates are for the December quarter 2020.
SALM presents regional estimates of unemployment and the unemployment rate at two small area levels:
• Approximately 2,200 ABS SA2s, on a State/Territory and Metropolitan/Non-metropolitan basis. Estimates for the Capital City and the Rest of State are provided for the States and the Northern Territory.
• For approximately 540 Australian LGAs.
The SALM Estimates
have been smoothed using a four-quarter average to minimise the variability inherent in small area estimates. A description of the methodology used to prepare the estimates in this publication is available on the
Highly disaggregated estimates of unemployment and the unemployment rate at the SA2 and LGA level can display significant variability and should be viewed with caution, particularly in regions where the SA4 level unemployment data are showing considerable volatility. As a result, quarter-to-quarter comparisons may not indicate actual movements in the labour market so we recommend using year-on-year comparisons. Even then, large movements in the SA2 and LGA data should be viewed with caution.
Impact of COVID-19 on the December quarter 2020 estimates
The COVID-19 pandemic began to have a significant negative impact on the Australian labour market from March 2020, when Australia recorded its 100th COVID-19 case and the initial shutdown of non-essential services and trading restrictions took effect, and this became increasingly evident in the December quarter 2020.
The December quarter 2020 Small Area Labour Markets (SALM) estimates reflect much of the negative impact that COVID-19 has had on the labour market since March 2020. That said, as the smoothed SALM series is created by applying a four-quarter average to unsmoothed SALM data, the December quarter smoothed figures are an average that includes: the quarter prior to the onset of the pandemic (March quarter 2020); a quarter reflecting a very sharp downturn in labour market conditions (June quarter 2020) and; two quarters of gradual recovery (the September and December quarters 2020).
Accordingly, it will only be when the March quarter 2021 estimates are released that the SALM smoothed series will fully reflect the post-March 2020 labour market (i.e. the impact of COVID-19 on small area labour markets). Even then, the March quarter 2021 smoothed figures will be an average over four quarters, during which significantly different labour market conditions were prevailing, depending on COVID case numbers and lockdowns at that time.
It is also worth bearing in mind that the labour market’s adjustment to COVID-19, and associated Government measures that were implemented, has only been reflected partially in changes in the level of unemployment and the unemployment rate. To a large extent, particularly in the early months of the pandemic, record numbers of people left the labour force, leading to a much smaller increase in the unemployment rate than would have otherwise been expected, given the significant fall in employment that occurred immediately after March 2020.
The large movements out of the labour force make assessing the magnitude of the impact of COVID 19 on the labour market extremely difficult, particularly at the small area level. Accordingly, care should be exercised when interpreting SALM data from the June quarter 2020 onwards.
Interpreting SALM data during the COVID-19 pandemic
The National Skills Commission continues to recommend that SALM users analyse the smoothed SALM data, given the high degree of volatility that is inherent in small area estimates. That said, it understands that some users, seeking to understand better the impact of COVID-19 on conditions at the small area level, will prefer to analyse data in the unsmoothed SALM series. While the unsmoothed data are likely to be more responsive to changes in labour market conditions, the data are also subject to high levels of statistical variability, which may be exacerbated during the COVID-19 pandemic. Accordingly, analysis conducted on the unsmoothed SALM series should be undertaken with a high degree of caution, as any movements could reflect statistical variability rather than actual changes in labour market conditions.
Regular revisions to reflect updated population data
The ABS rebenchmarks its Labour Force Survey estimates on a quarterly basis to ensure that they are based on the most up-to-date population information. As a result, there are small revisions to recent SALM estimates. SALM users are encouraged to always use the current SALM publication, as the SALM estimates published in previous quarters may not match those published in the latest edition.
Change in Unemployment Benefit Payments
On 20 March 2020, Newstart Allowance was discontinued and was replaced by the JobSeeker payment. While there are some minor changes to the population covered by JobSeeker, compared with Newstart, analysis undertaken by the National Skills Commission indicates that this has not had a material impact on the viability of using this payment as part of the methodological process used to produce the unemployment and unemployment rate estimates in SALM.
Changes to the Geographic Structure
As of the June quarter 2019 edition of SALM, the Statistical Area Level 2 (SA2) estimates are now based on the Australian Bureau of Statistics (ABS) 2016 Australian Statistical Geography Standard (ASGS). The geographical structure used in SALM is now aligned with the most recent ABS Census of Population and Housing 2016 Australian Statistical Geography Standard (ASGS)
. The geographical structure used in SALM is now aligned with the most recent ABS Census of Population and Housing.
Due to changes in the ASGS between the 2011 and 2016 editions, there were a number of breaks in series at the SA2 level. These were due, largely, to SA2s being split into multiple, smaller SA2s but there was also a small number of amalgamations and other breaks. For more information, please see the SALM 2016 Changeover User Guide, available on the
Smoothed Estimates Not Available for All SA2s and LGAs
Due to the breaks in series noted above, and because the production of smoothed estimates requires four consecutive quarters of unsmoothed data, smoothed estimates for SA2s or LGAs that experienced a break in the unsmoothed series between the March and June quarters 2019 are only available starting from the March quarter 2020. For the June quarter 2019 to the December quarter 2019, the only available estimates are from the unsmoothed series, available on the
page. Examining figures from unsmoothed data should be made with significant care as they exhibit far greater volatility than the smoothed series.
Labour Market Developments
The December quarter 2020 SALM estimates show that around four in five (79.8 per cent) SA2s for which smoothed estimated are available recorded an increase in their unemployment rate over the year to the December quarter 2020.
In the December quarter 2020, 40.1 per cent of SA2s recorded an unemployment rate of less than 5.0 per cent while 13.0 per cent of SA2s recorded an unemployment rate of 10.0 per cent or more.
This report was prepared by the Labour Market Analysis and Advice Section within the National Skills Commission’s Labour Market Research and Analysis Branch. For further information, please contact Joel Meehan on (02) 6240 5358 or email: SALM@skillscommission.gov.au