The Australian labour market continued its bull run with the seasonally adjusted unemployment rate, released last Thursday, dropping from 3.7% in April to 3.6% in May even though the participation rate reached a record high of 66.9%.
Total employment rose 75,900 to exceed 14 million workers for the first time and the total number of unemployed declined by 16,500. Just over three-quarters of the new jobs were full-time roles.
The Australian economy added 465,500 jobs over the past twelve months. By comparison, the 12 months to May 2022 saw 386,100 (2.9%) new jobs added.
In the year to May 2022, Australia has recorded 3.4 per cent total employment growth, outstripping the US’s 2.7 per cent growth and Canada’s 1.8 per cent total employment growth. By way of recent comparison, the average annual Australian population growth over the three pre-COVID decades is 1.4%.
In the same twelve-month period 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.
Job advertisements as recorded by the Internet Vacancy Index, decreased by 2.9% month-on-month in seasonally adjusted terms in May 2023 to stand at 282,300. This follows an increase of 3.1% in April 2023 and according to the SEEK Employment Report applications per job ad rose 4.8% between April and May and are now only 1% lower than May 2019.
Both of these data appoints suggest that the height of the worker availability crisis has passed although it’s still very much a crisis when viewed through the recent history of the Australian labour market.
The labour force participation rate of migrants is typically around 70% meaning approximately 280,000 additional workers arrived this financial year with a further 220,000 workers expected next year. Half a million new migrant workers in just two years is unprecedented in this country and I remain unconvinced we have the necessary housing infrastructure to cope.
I advisedly use the words ‘forecasting’, ‘estimated’, and ‘expected’ when it comes to migrants as the housing availability crisis is a long way from being solved with current rates of construction insufficient to meet the housing needs of the current population let alone the substantially larger population that’s on our doorstep.
My eldest son is exhibit 1 for the reality of the current rental crisis – he and his four mates were given their notice by their current landlord and nearly two months later, after every Saturday being given over to attending open homes and submitting many applications, they haven’t been offered a single property to lease. It’s been incredibly disheartening for them.
At least they each have the option of returning to their respective parents’ home as a last resort – many migrants have no such option – they will have to pay for a hotel, hostel, or similar expensive short-term stop-gap measure.
As I asked in a blog in October last year Will overseas workers live in tents? (because there’s no housing for them).
Is there relief in sight?
Deloitte Access Economics seems to think so.
In the latest edition of Employment Forecasts, they are forecasting a significant decline in the rate of employment growth
Forecast employment growth of 0.9% in 2023-24 and 1.1% in 2024-25 are significant comedowns from the estimated 3.6% employment growth in 2022-23 and 3.3% in 2021-22.
In raw numbers, average employment gains of 135,900 per annum are forecast over the next two years, compared with average gains of 452,900 per annum over the last two years.
If these forecasts prove to be accurate it will mean a return to something akin to pre-COVID labour market conditions with the unemployment rate likely to be a percentage point or so higher than the current level of 3.6%.
The only thing we can sure of, regardless of the many forecasts, is that recruiting and retaining workers will continue to be a differentiating business competency and those whose fail to improve quickly enough in this area will be out of business before they know what their problem really is.