In my last blog on manufacturing employment (November 2016), I reported that Australian manufacturing was experiencing a limited but very welcome jobs recovery in the first half 2016. This was in line with the results of Ai Group’s Australian PMI®, which has been showing modest expansion in most months since late 2015, albeit with a very concerning slow patch in Q3 of 2016.
The jobs numbers are now in for the latter half of 2016 (released by the ABS at the end of December 2016) and they confirm that 2016 has indeed been a year of recovery for manufacturing employment, across a surprisingly large range of sectors and specialisations.
The ABS estimates that 101,000 jobs were added to manufacturing in the year to November 2016 (up 12% p.a.), with growth occurring in all four quarters of the year (seasonally adjusted data). This took the total number of manufacturing jobs back up to 947,000, about the same as in 2012. As a share of the workforce, manufacturing recovered to 7.9%, up from a record low of 7.1% in Nov 2015.
The scale and speed of this turnaround in manufacturing jobs is surprising. In trend terms (the smoother less volatile employment data series that the ABS recommends), it represents the recovery of more than one third of the manufacturing jobs lost since 2008, in just one year (up by 61,000 or 7% p.a. in the year to November 2016, compared to 190,000 manufacturing jobs lost over the previous seven years, see chart 1). The sheer size of this growth relative to previous trends means it is possible that some of it will be revised downwards in future ABS employment estimates.
Chart 1: Australian manufacturing employment and hours worked (trend data)
In the meantime, this surprising recovery means that in an otherwise lacklustre year for national jobs growth (up just 0.7% in the year to November 2016), manufacturing added the largest number of new jobs and had the strongest growth rate of any of Australia’s 19 major industry categories. The education industry came in at second place, with 46,000 new jobs (up 5.0% p.a.) while food and accommodation services (hospitality) was third, with 37,000 new jobs (up 4.5% p.a.) in 2016.
In comparison to the large services industries (education, healthcare, retail trade and hospitality) however, more manufacturing jobs are full-time rather than part-time (classified by the ABS as less than 35 hours per week). In November 2016, just 16% of manufacturing workers worked part-time, versus 32% across all industries and more than 40% in each of these large services sectors (with 60% working part-time in hospitality). Put another way, each manufacturing worker was employed for an average of 36.6 hours per week in November 2016, versus an average of 33 hours across all industries but less than 30 hours per worker per week in each of the four largest services sectors.
So, although manufacturing accounted for only 7.8% of jobs in November 2016, it accounted for 8.8% of actual hours worked across the economy. Indeed, total work hours in manufacturing were up by 14% from a year earlier, when they had accounted for a record low of 7.8% of total hours worked across the economy.
An interesting benefit of longer work hours in manufacturing is that it boasts lower rates of ‘underemployment’ than most other industries. The ABS estimates that the ‘underemployment ratio’ (that is, the proportion of the workforce who are willing and available to work more hours) was just 4.8% in manufacturing, versus 9.1% across the whole economy, over 10% in education and healthcare and up to 20% in the hospitality industry.
Further detail in the ABS labour force data shows that manufacturing jobs recovered across most sectors in 2016, excepting wood products, petroleum products and textiles clothing footwear (see table below, in original unadjusted terms). Employment in transport equipment was broadly stable, despite the inclusion of automotive assembly in this sector in a year in which major shrinkage is occurring as the auto assembly sector moves closer to exiting from Australia. November’s estimate shows an especially big jump in jobs in manufacturing ‘not further defined’, which could possibly indicate growth in new product categories that are difficult to classify.
|Nov 2016 (original unadjusted data)||‘000 people||% share of manufac.||000 change p.a.||% change p.a.|
|Beverage & Tobacco||34.3||3.6||0.0||0.0|
|Textile, Leather, Clothing & Footwear||26.2||2.7||-7.9||-30.3|
|Pulp, Paper & Converted Paper||17.4||1.8||3.0||17.1|
|Printing & Recorded Media||42.1||4.4||8.3||19.7|
|Petroleum & Coal Products||4.7||0.5||-2.2||-46.6|
|Polymer & Rubber Products||39.5||4.1||7.0||17.7|
|Non-Metallic Mineral Products||33.7||3.5||-0.3||-0.9|
|Machinery & Equipment||122.7||12.8||16.2||13.2|
|Furniture and Other||65.2||6.8||12.9||19.8|
|Manufacturing not further defined||65.0||6.8||33.6||51.8|
|Manufacturing (original data)||957.0||102.2||10.7|
|Manufacturing (seasonally adjusted)||947.6||101.7||12.0|
Looking at the outlook for manufacturing employment, the Federal Department of Employment’s industry projections (last published in March 2016 and updated annually) indicate a further 45,000 jobs are likely to be lost from Australian manufacturing over the five years to 2020 (-5% from 2015 levels). This loss is likely to include:
- 7,000 jobs out of textiles, clothing and footwear (down to around 26,000 by 2020);
- 3,000 jobs out of primary metals and 5,400 jobs out of fabricated metals;
- 27,500 out of motor vehicle manufacturing and assembly (down to around 20,000 by 2020).
Employment in all other manufacturing sub-sectors is projected to remain at current levels or to grow slightly in the five years from 2015 to 2020. The experience of 2016 indicates there is already good reason for optimism across the many growth sectors in Australian manufacturing.
The ABS will release the next quarter of data about manufacturing employment in late March, for the February quarter of 2017.