Australia’s labour market may not be as healthy as it seems

Employment growth has outstripped economic activity over the past 18 months to an unsustainable extent. Accordingly, the Australian economy has been facing a big question of when the labour market will slacken further, reflective of the substantial and well entrenched slowdown in the real economy.

Access the research report to learn more about the key points outlined below:

• Looking at jobs growth by industries’ sensitivity to the business cycle, a marked hiring slowdown is underway in business-cycle sensitive industries. But ‘non-market’ industries have made an outsized contribution to jobs growth.
• ‘Non-market’ industries (education, health and public service) made up around 4 in 5 new jobs added over the year to Q1. The NDIS expansion has been a key contributor to this runup in hiring. The market sector is lacking a clear engine of growth, and we expect non-market industries will continue to drive gains in employment.
• The concentration of jobs growth in the non-market sector will do little to help Australia’s poor productivity performance. But it may give the RBA pause against further rate hikes; the tightening in policy to date has clearly contributed to a softening in labour demand in interest-rate sensitive industries.