Australia adds an average of 1,149 jobs per day (for the past 4 years)
On 23 November 2023 Deloitte Access Economics’ (DAE) weekly email was devoted to forecasting the labour market in 2024, including the following.
Deloitte Access Economics expects tougher economic conditions to weigh down on firm hiring decisions.
We are forecasting national employment growth of just 0.5% (75,000 workers) in calendar year 2024, before gradually increasing to 1.3% (177,000 workers) in calendar year 2025. We expect this to be accompanied by an increase in the unemployment rate, forecasting an increase to 4.5% by June 2024.
At an industry level, Deloitte Access Economics expects employment growth in manufacturing (4.2% decline, 38,700 workers) and wholesale trade (3.0% decline, 11,200 workers) will be hit hardest by the slowdown in calendar year 2024.
Last week’s November labour market release reported Australia’s unemployment rate fell to 3.9% in November, down from 4.1% in October, seasonally adjusted total jobs jumped to a new record of 14.54 million (see graph, above) and annual employment growth was 2.4% (see table, below).
The month-on-month job growth in November of 35,600 was 28% above the most recent 12 months’ monthly average of 27,900.
DAE was correct in forecasting tougher economic conditions. The most recent national accounts data shows Australia’s GDP growth in the 12 months to September 2024 was a dismal 0.8% and GDP per capita was negative for the seventh consecutive quarter.
DAE got it spectacularly wrong on total employment growth by a factor of three and a half (see table below), although they were dead right about manufacturing jobs (down by 38,100 in seasonally adjusted terms) and almost right about wholesale trade jobs (down by 6,200 in seasonally adjusted terms).
The uncoupling of the previously consistent relationship between GDP growth and employment growth has perplexed economists, as ABC news reported.
CBA economist Gareth Aird commented, that it has become difficult to forecast the unemployment rate now because the usual economic “laws” didn’t seem to be in play.
“Taken at face value the data indicates that the labour market is not loosening despite well below trend GDP growth and forward indicators of labour demand all consistent with a softening labour market,” he said.
“Okun’s law, which is an empirically observed relationship between unemployment and GDP, is not in play at the moment. And most economists are struggling to model and forecast the unemployment rate,” Aird concluded.
Consider the most recent four years of post-COVID lockdown labour market results (2021 – 2024)
| Period | Total job growth (000s) | % annual job growth | end of period unemployment rate | end of period participation rate |
|---|---|---|---|---|
| 12 mths to Nov 2024 | 334 | 2.4% | 3.9% | 67.0% |
| 12 mths to Nov 2023 | 442 | 3.2% | 3.9% | 67.2% |
| 12 mths to Nov 2022 | 554 | 4.2% | 3.5% | 66.8% |
| 12 mths to Nov 2021 | 349 | 2.7% | 4.6% | 66.1% |
Annual average job growth for the past four years has been 420,000. The unemployment rate has been below 4% more often than above, and the participation rate continues steadily climbing.
Total employment growth between November 2020 and November 2014 was 1.678 million (13.04%)
Compare this with the four years pre-COVID lockdowns (2016 – 2019).
| Period | Total job growth (000s) | % annual job growth | end of period unemployment rate | end of period participation rate |
|---|---|---|---|---|
| 12 mths to Nov 2019 | 255 | 2% | 5.2% | 66.0% |
| 12 mths to Nov 2018 | 285 | 2.3% | 5.1% | 65.7% |
| 12 mths to Nov 2017 | 385 | 3.2% | 5.4% | 65.5% |
| 12 mths to Nov 2016 | 74 | 0.7% | 5.7% | 64.6% |
Annual average job growth for these four years was 250,000. The unemployment rate consistently had a 5 in front of it. The participation rate was already on the upward trajectory it maintained post-2020.
Total employment growth between November 2015 and November 2019 was 999,000 (8.86%).
DAE propose ‘labour hoarding’ (ie employers reduce employees’ weekly hours before they reduce headcount) as the reason for the unemployment rate not declining in line with the decline in GDP across 2024.
An analysis of historical data would suggest this is a relatively minor factor, as in November 2019 average monthly hours per job was 137.5 compared to November 2024’s equivalent result of 135.2, a decline of only 1.8%.
If professional economists are so bad at forecasting the labour market I am certainly not going to try.
However when you consider the Australian economy has produced a net gain (i.e. all jobs lost subtracted from all jobs added) of 1,149 jobs every single day of the week for the past 48 months it seems highly likely that trend will continue in 2025.
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