The Australian labour market has greeted the new year with various challenges, particularly around employment growth, unemployment and wage growth. Here’s a snapshot of the current state of events and outlook for 2020.
Employment growth has slowed, and unemployment is rising
According to the ABS, in 2019, Australian employment increased by an average of 22,200 people per month, which equates to an annual employment growth of 2.1%. But it has not been enough to bring the unemployment rate down, which now hovers around 5.2%.
That’s because the participation rate (i.e. the number of people working or actively seeking work) has never been higher. It currently sits at a record high (circa 66%) reflecting two key trends:
Higher participation among women - Over the past 5-6 years, women’s participation in the workforce has increased across the board, but particularly among those between the ages of 35-44, 55-59 and 60-64. That is, in part, due to greater flexibility around hours and work conditions, which helped mothers and other women returning to the workforce.
Higher participation amongst older Australians - More and more older Australians are remaining in, or re-entering the workforce. For instance, in January 2018, Australians over the age of 65 had a participation rate of 13% compared with 8% in 2006. This upward trend is mainly due to improvements in health, workplace flexibility and a reduced number of the working population that working in physically intensive jobs.
Wage growth has stagnated
Wage growth in Australia has slowed significantly over the past five years. The Wage Price Index (WPI) is currently growing at an annual average of 2.2%, which is low by any means, but particularly when compared to the yearly growth of 3.3% in the five year lead up to December 2013.
The bleak outlook for wages is unlikely to change anytime soon, with the Reserve Bank of Australia forecasting wage growth to remain at this level for the next couple of years.
Current annual wage growth is barely keeping ahead of the inflation rate, which increased to 1.7% in the September quarter of 2019 and is projected to jump to 1.9% over 2020. However, though many sectors are experiencing pay increases of less than 2%, the Healthcare and Social Assistance sector is experiencing relatively strong pay growth, with wages in the industry rising by 3.2% in 2019.
Youth unemployment at historically high level
The Youth Unemployment Rate in Australia sat at an average of 11.5% across November and December 2019, down from a high of 12.5% in October. But this is still double the overall population’s average of 5.2%. This rate is unlikely to change over the next 12 months, due to insufficient opportunities and fierce competition for entry-level jobs.
Young men are having a particularly tough time finding work. In October 2019, their unemployment rate of 13.2% sat nearly three percentage points higher than that for young women (10.6%). However, young women are more likely to be underemployed, with 20% of the young female population citing that they are dissatisfied with their hours.
PwC's Chief Economist, Jeremy Thorpe, said "Employers need to find new avenues to bring young people into the workplace, new apprenticeship models are emerging, they provide opportunities for their business to find talent, but also for people to gain those skills which will set them up for life."
Four sectors will drive employment growth in the Australian Labour Market
According to the Department of Jobs and Small Business, total employment is forecasted to increase by a further 1,075,000 (or 8.3 %) by May 2024. However, the distribution of this growth will be heavily weighted across four industries:
Healthcare and Social Assistance - forecasted to provide an extra 252,600 jobs thanks to The National Disability Insurance Scheme and Australia’s ageing workforce.
Professional, Scientific and Technical Services - predicted to contribute circa 172,400 jobs, reflecting the demand for the services of qualified and highly educated workers.
Education and Training - expected to add over 129,300 new jobs, supported by increases in the school-aged population, and the strength of the international education sector and in adult and community education.
Construction - forecasted to add around 113,700 jobs off the back of Australia’s infrastructure boom and non-residential upturn.
These four industries alone are predicted to provide around 62.1% of Australia’s total employment growth to May 2024.
Source: ABS
