Deloitte Access Economics Employment Forecasts: here comes the market slowdown
The Australian labour market barely missed a beat in the first half of 2023. Despite a pullback in July, the past three months have seen the number of employed Australians grow by 93,200 workers and the unemployment rate remain low at just 3.7%.
How has it remained so strong? In short, labour supply has been increasing. Record net migration over the year has helped fill unmet labour demand, with job vacancies consistently falling for the past year. Even with the fall, the total number of vacancies remains high, suggesting there are still many opportunities in the labour market.
However, Deloitte Access Economics’ latest edition of Employment Forecasts warns of a labour market slowdown – recent indicators suggest that broader economic weakness is finally creeping into the labour market.
Australia’s underutilisation rate has been increasing since the latter half of 2022. Currently sitting at 10.1%, this has been driven by an upward trend in the underemployment rate which sits at 6.4%. It is estimated that underemployed workers are willing to work an additional 12 hours a week.
Deloitte Access Economics expects the labour force participation rate will have peaked by the end of 2023, and unemployment will rise to 4.5% by mid-2024.
Looking ahead, Deloitte Access Economics expects pockets of growth in the human services and white collar workforces through 2023-24. Human services are anticipated to have the strongest growth of 2.3% (117,800 workers) followed by growth in white collar jobs of 1.8% (91,400 workers).
The high share of blue collar workers in the construction industry means the blue collar workforce will likely bear the brunt of the labour market slowdown, with a decline of 0.5% (18,800 workers) in 2023-24.
Chart 1: National employment outlook
Source: Deloitte Access Economics Employment Forecasts August 2023 Edition
Of late, many Australians have taken advantage of tight labour market conditions to deal with cost-of-living pressures.
Currently, 6.6% of all employed persons (almost 950,000 workers) are working more than one job, the highest rate on record. Typically, the average multiple job holder works an additional 5.0 hours per week compared to single job holders.
However, a slowing labour market suggests there may be fewer opportunities for workers to negotiate the labour market benefits that have helped to offset cost-of-living struggles.
Keeping people employed has been vital in helping to alleviate cost-of-living
pressures. The Federal Government’s pending Employment White Paper will commit the country to achieving full employment - albeit an official definition of full employment is still to be decided. This will be ambitious and if achieved, could deliver significant and ongoing social and economic benefits.
However, striking the right balance is tricky. The difference between achieving an unemployment rate of 4.5% and the current rate of 3.7% would mean an additional 114,600 Australians becoming unemployed, holding the labour force constant. The white paper needs to be ambitious and not discount the pain created by unnecessarily high unemployment.
This blog was co-authored by Rhiain Powell, Graduate Economist at Deloitte Access Economics.
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