Small Area Labour Markets (SALM), September quarter 2021
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 September quarter 2021.
Introduction
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
Explanatory Notes
page.
Caution:
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 September quarter 2021 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.
The September quarter 2021 SALM estimates capture the majority of the recent lockdowns that have occurred in response to Delta outbreaks in large parts of the country. That said, it is worth bearing in mind that the smoothed SALM series, which is created by averaging four quarters of unsmoothed SALM data, lags actual changes in labour market conditions. It also means that the smoothed estimates for a given quarter are an average of four quarters in which considerably different labour market conditions may have prevailed.
• For example, the September quarter 2021 smoothed estimates reflect three quarters of the strong recovery in labour market activity that occurred following the initial lockdown in 2020, and one quarter where there was a sharp downturn in the labour market, due to the Delta outbreaks and associated lockdowns in large parts of south eastern Australia.
It is also worth noting that the labour market’s adjustment to COVID-19 has not been fully reflected in changes in the level of unemployment and the unemployment rate. At various times since March 2020, lockdowns implemented to control the spread of COVID-19 have tended to result in a large number of people leaving the labour force. As these people were no longer participating in the labour force, they were not counted as unemployed by the Australian Bureau of Statistics (ABS), leading to a much smaller increase in the unemployment rate than would have otherwise been expected, given the significant fall in employment that has occurred during the lockdowns.
Given both the large number of people who left the labour force at different times during the pandemic, and the lag from the smoothing process, care should be exercised when interpreting SALM data from the June quarter 2020 onwards.
Data backcast to reflect updated population figures
In August 2021, the ABS released its annual Regional Population by Age and Sex publication. The publication included revised Estimated Residential Population (ERP) estimates for June 2019 and new estimates for June 2020.
As a result of including these new ERP estimates, there have been revisions to SALM labour force and unemployment rate estimates from the March quarter 2019 onwards. Revisions to unsmoothed data for the 2019 calendar year were minor, as were revisions to the vast majority of Statistical Area Level 2s (SA2s) from the March quarter 2020. In a small number of SA2s that have experienced significant percentage changes in ERP over the year to June 2020, however, results for the March quarter 2020 onwards were revised more heavily.
Please see page 5 of the SALM PDF publication (available on the SALM Estimates
page) for a more detailed explanation of the impact that ERP revisions can have on SALM estimates.
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. Accordingly, and given the ERP revisions noted above, 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.
Changes to SA2s included in the publication
In previous quarters, SALM estimates were published for those SA2s with a labour force of 100 or more as at the June quarter 2019. This minimum threshold is examined each year when new ERP data become available.
In light of the above, and as a result of 2020 ERP data being available for the production of the latest SALM estimates, smoothed estimates will be now published for the SA2 of Banksmeadow in Sydney, going forward. Smoothed data for this SA2 will be available from the December quarter 2020 onwards.
Mutual obligation requirements suspended in large parts of Australia
Mutual obligation requirements are tasks and activities that people agree to do while they are receiving certain types of income support, including the JobSeeker Payment and Youth Allowance (other) payment.
Mutual obligation requirements were suspended during the September quarter 2021 in areas affected by the Delta variant and associated lockdowns. While mutual obligation requirements were reinstated in October 2021, the suspension during the September quarter may have had an impact on the SALM data. This is because the ABS only considers someone to be unemployed if they are actively looking for work. It is possible that some job seekers may not have undertaken the job search that they normally would have, in which case they would be considered to be not in the labour force rather than unemployed.
For more information on mutual obligation requirements, please see the Services Australia
website.
Using unsmoothed 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 is clear that some users, seeking to understand better the impact of COVID-19 on conditions at the small area level, may prefer to analyse data in the unsmoothed SALM series. While the unsmoothed data are likely to better reflect changes in labour market conditions during a period of considerable flux, 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.
The geographical structure used for SALM
As of the June quarter 2019 edition of SALM, the SA2 estimates are based on the 2016 Australian Statistical Geography Standard (ASGS)
. Accordingly, the geographical structure used in SALM is 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 were also a small number of amalgamations and other breaks.
As the production of smoothed SALM data requires four consecutive quarters of unsmoothed estimates, smoothed data for those SA2s and LGAs that experienced a break in the unsmoothed series (between the March and June quarter 2019) are only available starting from the March quarter 2020. Between the June and December quarters 2019, the only available estimates for these SA2s are from the unsmoothed series.
For more information on the ASGS changeover, please see the SALM 2016 Changeover User Guide, available on the Further Information
page on the
Labour Market Information Portal (LMIP)
. Similarly, unsmoothed SALM estimates can be downloaded from the
SALM Explanatory Notes
page.
Looking ahead, while the ABS released the 2021 (Edition 3) ASGS in July 2021, the National Skills Commission will continue to produce SALM estimates based on the 2016 ASGS until such time as the data used to produce SALM are available on the updated 2021 geographic structure. Accordingly, it is likely that SALM will remain on the 2016 ASGS until 2023.
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
Explanatory Notes
page. Examining figures from unsmoothed data should be made with significant care as they exhibit far greater volatility than the smoothed series.
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.
Labour Market Developments
The latest available smoothed SALM estimates show that 63.6 per cent of SA2s recorded a decrease in their unemployment rate over the year to the September quarter 2021.
In the September quarter 2021, 53.4 per cent of SA2s recorded an unemployment rate of less than 5 per cent while 9.2 per cent of SA2s recorded an unemployment rate of 10 per cent or more.
Contact Details
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 email: SALM@skillscommission.gov.au