Employment Forecasts: Labour market resilience

The Australian labour market has remained resilient – further highlighted by today’s Labour Force Survey release for May 2023. Since the end of last year total employment has grown by more than 219,900 workers (with 75,900 workers added in the month of May alone), the unemployment rate is very low at 3.6% and the labour force participation rate reached an all-time high at 66.9%.

The strong performance is against the backdrop of a broader economic slowdown as policy makers continue to test the limits of the economy (a retail recession, extremely low consumer confidence and growing business failures, especially in construction). Much of the continued strength is due to better access to workers than what was experienced during the pandemic.

In the year to May 2023 Australia’s civilian population aged 15 and above grew by 2.7% – the fastest annual rate on record. Recent growth is due to strong migration, with the Commonwealth Budget estimating net overseas migration of 400,000 people this financial year and 315,000 people in 2023-24 – well above pre-COVID rates. This additional labour supply has gone into reducing unmet labour demand – with national job vacancies falling for the third straight quarter.

However, labour market strength will be put to the test in the coming months. The economy is in a slow growth period – the burden on consumers is arguably still getting tighter and business failures may continue to ramp up. So that means slower employment growth in the year ahead.

Deloitte Access Economics’ latest edition of Employment Forecasts expects employment growth of 0.9% in 2023-24 and 1.1% in 2024-25 (compared with an estimated 3.6% in 2022-23 and 3.3% in 2021-22). In raw numbers, average employment gains of 135,900 per annum are expected over the next two years, compared with average gains of 452,900 per annum over the last two years. Employment Forecasts allocates workers into three classifications:

1.    White collar: Workers in occupations typically attached to an office environment

2.    Blue collar: Workers in occupations who typically engage in manual work such as those in industrial settings

3.    Human services: Workers in occupations typically associated as service workers who may not be attached to an office environment.

Chart 1: Australian employment by worker classification

Source: Deloitte Access Economics Employment Forecasts

Human services workers bore the brunt of the COVID pandemic as lockdowns dampened demand for service-based industries such as tourism and retail. White collar workers, on the other hand, didn’t see the same reduction in demand and were able to transition to a work from home environment which helped to mitigate employment declines.

Looking forward, the labour market slowdown will likely be more pronounced for blue collar workers as industries such as construction and manufacturing are expected to be harder hit from deteriorating economic activity.

Deloitte Access Economics expects human services workers to fare the best in the two years ahead, supported by underlying demand for more ’necessary’ services-based occupations. Average expected employment gains of 135,900 per annum over the next two years are comprised of 55,500 white collar job gains, 12,300 blue collar job losses and 92,600 human services job gains per annum.

This blog was co-authored by Hamish Burrell, Senior Economist at Deloitte Access Economics.