Job vacancies falling
Job vacancies have fallen but by historical standards the jobs gap remains relatively tight.
Job vacancies data released by the ABS today demonstrates further easing of labour market conditions. The latest data represents the 9th consecutive quarter that national job vacancies have fallen, meaning that vacancies are 31% lower than the May 2022 peak. This equates to 143,000 fewer jobs being advertised.
However, while the number of job vacancies has fallen significantly, they remain 45% higher than the pre-pandemic average.
This data follows another month of strong employment data for August, where employment grew by 47,500 while the unemployment rate remained unchanged at 4.2%. So far it seems that firms are responding to increasingly difficult economic conditions by reducing hiring and existing employee hours, rather than by significantly down-sizing their workforce.
On an industry basis, the relative strength of the public sector seen in recent labour market and National Accounts data is clearly evident in job vacancies data. Both the private and public sector are experiencing weaker labour demand compared to the mid-2022 peak, but demand remains elevated in the public sector. The ABS Labour Account found that the non-market sector accounted for 83% of all employment gains in the year to June 2024, and the National Accounts print identified strong public demand as a key factor keeping economy growth in positive territory.
Falling job vacancies are widening the Australian jobs gap. Broadly speaking, the jobs gap represents the difference between demand for labour (job vacancies and employment) and the size of the labour force. This measure can be used to assess the level of ‘tightness’, or spare capacity, in the labour market.
Chart 1: The Australian jobs gap
Source: ABS Labour Force Survey, ABS Job Vacancies, Deloitte Access Economics
Note: The Australian jobs gap is calculated as the sum of labour demand (job vacancies and employment) from which labour supply (labour force) is subtracted. It is then presented as the share the labour force.
The gap approached zero towards the end of 2022 – when the competition for talent was at its peak - and has since fallen alongside the decline in job vacancies. However, with the gap currently less than half of its pre-pandemic size, it remains tight by historical standards.
The jobs gap has remained small due to strong employment growth, which has been supported by strong population growth. The point being that while falling job vacancies shows signs of weakness, there are counter-balancing forces that continue to keep labour market conditions tight by historical standards.
What might this mean for interest rates? Alongside job vacancies data; the ABS monthly CPI indicator was released yesterday. The result (headline inflation growth is at 2.7%, down from 3.5%) is the first inflation measure within the RBA's target band since August 2021. While that's good news, it’s artificial - primarily demonstrating the impact of the Federal budget's cost of living relief, rather than an easing of cost drivers.
The Reserve Bank has demonstrated this week that it’s not following the lead of the US Fed to cut rates. Primarily, an elevated rate of underlying inflation is on the mind of the RBA, but it is also waiting to see some further loosening of the labour market in Australia. With the jobs gap still relatively tight, expect the RBA to hold its ground for a little while yet.
This newsletter was distributed on 26th September 2024. For any questions/comments on this week's newsletter, please contact our authors:
This blog was co-authored by Tom Harding, Manager at Deloitte Access Economics
Click on the links below to read our previous Weekly Economic Briefings: