Small Area Labour Markets - Methodology

Jobs and Skills Australia produces quarterly Small Area Labour Markets (SALM) estimates of unemployment and the unemployment rate at the Statistical Area Level 2 (SA2) and Local Government Area (LGA) level - for more information on what SA2s and LGAs are, see the geography section below.

This page outlines the methodology used to produce the SALM estimates. The latest SALM data are available from the main Small Area Labour Markets page.


Overview

Small Area Labour Markets (SALM) presents estimates based on the Structure Preserving Estimation (SPREE) methodology.

The purpose of SPREE is to produce small area unemployment, unemployment rate and labour force estimates that reflect the regional disparities of the Centrelink data, while being consistent with ABS Labour Force Survey estimates.

Given the level of disaggregation involved, the small area figures produced by SPREE are smoothed (i.e., averaged) over four quarters, to dampen the variability inherent in the small area estimates.


Source data

Three primary data sources are used to produce the SA2 and LGA estimates in SALM:

  1. Current recipients of Youth Allowance (other), and current recipients of Newstart Allowance or JobSeeker Payment who are not on a zero rate of payment, by SA2.
  2. ABS Labour Force Survey data by ABS Statistical Area Level 4 (SA4).
  3. Participation rate data at the SA2 level from the Census of Population and Housing. The latest SALM estimates use 2016 Census data. Estimates prior to the March quarter 2014 use 2011 Census benchmarks.

How SALM estimates are produced

Estimating unemployment

SALM produces unemployment estimates using an iterative process.

  • Step one apportions ABS unemployment at the SA4 level across each of the SA2s within that region based on the distribution of Centrelink JobSeeker/Newstart and Youth Allowance (other) beneficiaries at the SA2 level by sex.
  • Step two benchmarks the estimates produced in step one to ABS unemployment estimates by age, sex and marital status at the Greater Capital City Statistical Area (GCCSA) level.

These steps are repeated until the SALM unemployment estimates for the SA2s in each SA4 match the published ABS unemployment figures, and the age/sex/marital status groups in each GCCSA, for those regions and groups.

Estimating the labour force

Labour force size estimates are produced by:

  • taking the participation rate for each SA2 from the Census. If an SA2 does not have a participation rate, the participation rate for the SA3 is used as a proxy;
  • applying this to the latest available ABS estimated resident population (ERP) data for persons aged 15 and over for the SA2, to produce a labour force weighting for the SA2 within the SA4; and then
  • allocating the total labour force for each ABS SA4 to the SA2s within that region according to the labour force weighting.

By using Census participation rates and the latest available ERP, the SA2 labour force estimates reflect any changes in the distribution of population within each SA4 that have occurred since the last Census.

Calculating the unemployment rate

Consistent with ABS methodology, unemployment rate estimates are produced by calculating the level of unemployment as a proportion of the labour force.

Producing LGA estimates

LGA estimates are produced by apportioning SA2 unemployment and labour force estimates using the latest available SA2 to LGA correspondence from the ABS.

Employment should not be derived from SALM

The SALM data are synthetic estimates based on ABS unemployment, Centrelink JobSeeker and Youth Allowance (other) beneficiary numbers, labour force data from the Labour Force Survey, and the Census. As the production of SALM does not involve the use of any sources of, or attempt to estimate, the level of employment in an SA2 or LGA, employment estimates should not be derived from these statistics. For more information, please email the SALM inbox at SALM@skillscommission.gov.au.

Greater disaggregations not available

Due to the significantly more pronounced variability of the data disaggregated below the SA2 or LGA level, it is not possible to derive reliable estimates for smaller population groups.

Accordingly, it is also not possible to estimate reliable unemployment and unemployment rate estimates for particular groups, such as sex or age cohorts, within an SA2 or LGA.


Estimates are not available for all SA2s and LGAs

Most SA2s and LGAs have a complete time series of data, with smoothed SALM estimates available from the December quarter 2010 onwards. For some regions, however, the available time series is shorter, while for other regions no estimates are available at all.

There are 3 reasons why data are not available for every SA2 and LGA:

  • A break in series: some SA2s and LGAs have a ‘break in series’ so that only a partial time series is available. Most of these series breaks were the result of SALM moving from the 2011 to the 2016 version of the Australian Statistical Geography Standard (ASGS).
  • The SA2 is considered too small: There are around 100 SA2s which JSA considers have too small a population for the production of reasonable estimates.
  • Other factors: rarely, even though the region has a sufficiently large population, the methodology used in SALM will not produce estimates considered appropriate for publishing. This is why no estimates have been published for the SA2 and LGA of Aurukun since the June quarter 2017.

Smoothed estimates are not always available for published SA2s and LGAs

Four quarters of consecutive data are required to produce a smoothed SALM estimate at the SA2 or LGA level. Breaks in series, such as those referred to above, can result in a number of quarters for which a smoothed estimate is not available for an SA2 or LGA, even if it would otherwise be published. 

In particular, smoothed estimates for SA2s or LGAs that experienced a break in the unsmoothed series between the March and June quarters 2019, due to the changeover to the 2016 ASGS (see below) are only available starting from the March quarter 2020.

For the June quarter 2019 to the December quarter 2019, the only available estimates for these SA2s or LGAs that have experienced a break are from the unsmoothed series. As is always the case for unsmoothed data, significant caution should be exercised when examining these figures, as they exhibit far greater volatility than the smoothed series.


Unsmoothed SALM estimates

The smoothed SA2 and LGA estimates, found here, are Jobs and Skills Australia’s official estimates of unemployment and the unemployment rate at those levels. It is recognised, however, that some advanced users may need access to the unsmoothed estimates, which are used to produce the official figures, and these are provided, below.

The unsmoothed series can exhibit very high levels of variability. Accordingly, we advise exercising extreme caution when using the unsmoothed series, whether it is using point-in-time estimates or interpreting quarter-to-quarter (or even year-to-year) changes.

Excel document
SALM Unsmoothed SA2 Datafiles (ASGS 2016) - June quarter 2022.xlsx

(1.84 Mb)

Excel document
SALM Unsmoothed SA2 Datafiles (ASGS 2016) - June quarter 2022.csv

(1.96 Mb)

Excel document
SALM Unsmoothed LGA Datafiles (ASGS 2022) - June quarter 2022.xlsx

(478 Kb)

Excel document
SALM Unsmoothed LGA Datafiles (ASGS 2022) - June quarter 2022.csv

(494 Kb)


Impact of changes to payment types

The number of people in receipt of certain Centrelink payments are a key input to the SALM process. Accordingly, changes to Centrelink payment types can have an impact on SALM estimates.

Newstart Allowance was discontinued and was replaced by the JobSeeker payment on 20 March 2020.

While there are some minor differences in the populations covered by these payments, analysis undertaken by Jobs and Skills Australia found that the impact of this was negligible and did not reduce the viability of the SALM estimates.


Geography

Statistical Area Level 2 (SA2)

There are around 2,300 SA2s in Australia.

  • The SA2s are a geographical unit that aggregate to the Statistical Area Level 4s in the Australian Bureau of Statistics’ (ABS) 2016 Australian Statistical Geography Standard (ASGS).
  • ABS Labour Force Survey data are based on the ASGS.

SA2 boundary changes

The SA2 structure used in SALM will always be based on the same edition of the ASGS on which the ABS Labour Force Survey’s regional (SA4) data are based.

The ABS generally changes SA2 boundaries every five years, during Census years. SALM currently uses the SA2 structure from the 2016 ASGS.

A year or two after the boundaries change, the ABS Labour Force Survey usually transitions to the new ASGS for its regional estimates at the SA4 level. SALM usually transitions to the new SA2 boundaries after this has occurred.

Looking ahead, while the ABS released the 2021 (Edition 3) ASGS in July 2021, Jobs and Skills Australia 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.

The transition to the 2016 ASGS

SA2 estimates are based on the 2016 ASGS, as of the June quarter 2019 edition of SALM.

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. There were also a small number of amalgamations and other breaks.

More information is available in the SALM 2016 ASGS Changeover User Guide - 2022 Update, which can be downloaded from the link below.

PDF document
SALM 2016 ASGS changeover user guide - 2022 update.pdf

(1021 Kb)

Local Government Areas (LGAs)

There are around 540 LGAs in Australia.

  • LGAs are based on the boundaries of the smallest government units (local councils) in Australia.
  • JSA produces the SALM LGA estimates using the latest available SA2 to LGA correspondence from the ABS.

LGA boundary changes

LGA boundaries are determined by the governments of the states and the Northern Territory.

While there are often only minor, if any, changes year-to-year, sometimes there can be more substantial adjustments to this structure.

SALM transitions to a new LGA structure when a correspondence between SA2s and the new LGA structure is available from the ABS.

Boundary changes usually only lead to a small proportion of LGAs having a break in series. Smoothed data are not published for regions with a break in series until the fourth quarter after the break.

Revisions to LGA series breaks

The June quarter 2022 edition of SALM introduced the 2022 LGA structure, which has meant the use of new SA2 to LGA correspondences. These correspondences, provided by the ABS, used a new approach to population weighting than those used in previous editions of SALM.

This meant that, in some cases, the correspondence weights used in the SA2 to LGA correspondences, required to produce SALM LGA estimates, changed. As a result, there have been a number of changes to which LGAs had a break in the unsmoothed series between the March quarter 2019 and June quarter 2019.

For more information and a list of the affected LGAs please see the SALM 2016 Changeover User Guide – 2022 Update, linked above.

2011 ASGS SA2 and LGA estimates

JSA maintains SALM SA2 and LGA estimates, based on the previous (2011) ASGS.

The more recent 2011 ASGS estimates (up to the March quarter 2019) will continue to be revised for a number of quarters, going forward, to ensure the estimates are consistent with population benchmarks used in the ABS Labour Force Survey (which continue to be revised for some time after the initial data for a particular quarter are released).

Estimates for SA2s that have not had a break in series are included in the data files available online. The complete set of the most up-to-date 2011 ASGS SA2 and LGA data, which include SA2s that have experienced a break in series between the 2011 and 2016 ASGS, are available on request by emailing the SALM inbox at SALM@skillscommission.gov.au


Revisions to previously-released data due to updated ERP estimates

In August 2022, the ABS released its annual Regional Population by Age and Sex publication. Due to the integration of new data from the 2021 Census, the publication included revised Estimated Residential Population (ERP) estimates back to June 2017.

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 2017 onwards. Revisions to unsmoothed data for the vast majority of SA2s were minor. In a small number of SA2s that have experienced significant percentage changes in ERP over the year to June 2021, however, results for the March quarter 2021 onwards were revised more heavily.

To demonstrate the impact that ERP revisions can have on SALM estimates, the SA2 of Taylor (a relatively new suburb in the Australian Capital Territory) is provided as an example below.

Table 1: Change in ERP between June 2020 and June 2021 for the Taylor SA2

SA2 name

SA2 code

ERP (15+)

Change in ERP – Jun-20 to Jun-21

Jun-20

Jun-21

Persons

(%)

Taylor

801041121

923

1551

628

68.0

Source: ABS, Regional population by age and sex, 2021

As shown in Table 1, above, the ERP in the Taylor SA2 increasing substantially over the year to June 2021. Due to the way in which SALM labour force estimates are produced (see the discussion on this page for more information), the Taylor SA2 was allocated a larger share of the SA4 (Australian Capital Territory) labour force for the March quarter 2021 onwards to reflect its larger share of the SA4’s population (see Table 2, below).

Table 2: Change in March quarter 2022 SALM labour force and unemployment rate for the Taylor SA2

 

March quarter 2022 publication

June quarter 2022 publication

Difference

(%)

Labour force (persons)

493

1114

126.0

Unemployment rate (%)

10.3

4.6

-5.7 pts

Source: Jobs and Skills Australia, Small Area Labour Markets

While the level of unemployment in the Taylor SA2 in the June quarter 2020 was unchanged compared with the previous release, the estimated labour force increased significantly, to reflect the latest population estimates. Accordingly, the March quarter 2022 unemployment rate for the Taylor SA2 was revised down considerably in the June quarter 2022 publication.

In addition to the ERP revisions noted above, there are some small revisions to recent SALM unemployment estimates, reflecting the ABS’ regular, quarterly rebenchmarking of its Labour Force Survey estimates.

Given both of the revisions described above, SALM users are encouraged to always use the current SALM publication.


SALM queries and updates

SALM Queries

The SALM estimates are prepared by Jobs and Skills Australia ’s Labour Market Research and Analysis Branch.

For more information about SALM, please email: SALM@jobsandskills.gov.au

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