Unemployment remains low but labour market is weakening

Australia's unemployment rate has been remarkably steady – and low – for more than a year, but it might start trending upwards in the coming months.

Unemployment rose from 3.6% in September to 3.7% in October, according to the Australian Bureau of Statistics (ABS). That marked the 16th consecutive month in which it had hovered between 3.5% and 3.7%.

Data from the ABS and Jobs & Skills Australia (JSA) data show there were 547,800 unemployed workers and 261,200 job ads in October – or 2.1 unemployed for every 1 vacancy. That marked a change from the year before, when there were 483,900 unemployed and 287,400 job ads – or 1.7 unemployed for every 1 vacancy.

So there are now more unemployed people chasing fewer vacancies.

Furthermore, Australia’s pool of workers is actually doing less work.

Over the six months to October, the number of people with jobs rose 1.7%. But the total number of hours worked by all those people actually fell, by 2.1%.

That suggests that as the economy has slowed, some employers have responded by putting some staff on reduced hours rather than dismissing them. But if the economy slows further, some of those workers might get retrenched.

Unemployment forecast to reach 4.25%

As it turns out, JSA said its October data showed labour market conditions were weakening across most of the country.

“While online recruitment grew in some regional areas, declines were recorded for all major occupation and skill level groups. October saw the largest single month decrease in job advertisements during 2023 and, at the national level, job advertisements were at their lowest since December 2021,” JSA said.

At the Reserve Bank’s latest monetary policy meeting, board members reached a similar conclusion.

“Members noted that the labour market had been resilient in 2023, though there had been signs of gradual easing in a range of measures,” according to the minutes of the meeting. 

“Employment growth had slowed to around the rate of population growth, such that the employment-to-population ratio had remained around its multi-decade high. Hours worked had been a key margin of adjustment for firms. Average hours worked had declined over preceding months and most of the employment growth during that period had been in part-time work.”

The minutes added: “The unemployment rate was anticipated to stabilise around 4.25% from late 2024, with employment growing but at a more moderate pace.”