Hours worked in the national accounts
The shutdown of non-essential services and trading restrictions due to COVID-19 occurred late in the March quarter. This economic shock affected the demand for goods and services of many businesses, resulting in changes to business practices and consequently a reduction in hours worked.
Hours worked is the key measure of labour input into the economy. A fall in average hours worked in a quarter may lead to lower production and therefore gross domestic product. The hours worked data presented in the National Accounts is collected in the ABS monthly Labour Force Survey.
Changes to the hours worked estimate
There was a sizeable fall in hours worked in the last week of March as strict COVID-19 restrictions were implemented. An estimate of hours worked in the final week of the March quarter was derived using the hours worked in both the March and April Labour Force Surveys, supplemented with industry information from Single Touch Payroll (STP) data. This estimate has been incorporated in the national accounts and will also be incorporated in the upcoming labour accounts release.
National accounts estimate of hours worked
Hours worked fell 0.8% in the March quarter, with significant impacts on key national accounts aggregates including GDP per hour worked and unit labour costs.
Figure 1: GDP per hour worked, seasonally adjusted
With the decline in hours worked greater than the decline in GDP, the result was 1.4% growth in GDP per hour worked through the year.
A rise in GDP per hour worked, equivalent to a rise in labour productivity, could be a consequence of an increased capital contribution or to a compositional change in activity. In this context, it is also of interest to examine unit labour costs, the average cost of labour per unit of output produced in the economy.
Unit labour costs
Unit labour costs (ULC) slowed to 2.4 per cent through the year, indicating growth in average labour productivity (GDP per hour worked) outpaced average cost of labour. Historically, a steep decline in hours worked and associated economic downturn (for example, in 1990-91 and 2008-09), tend to coincide with a decline in the ULC.
Figure 2: Unit labour costs and hours worked, seasonally adjusted, through the year