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State of the Australian Labour Market - August 2017

2017 has soo far been a mixed year for the Australian economy, with our record-breaking run of 26 years of continuous economic growth continuing apace

2017 has soo far been a mixed year for the Australian economy, with our record-breaking run of 26 years of continuous economic growth continuing apace.

Nonetheless, our world beating performance in terms of GDP growth has come at a time of stagnant wage growth (which is currently the lowest on record), sharp increases in the cost of living and a resulting slowdown in discretionary consumer spending.

Despite these paradoxical trends, the Australian labour market remains in pretty good health, certainly compared to many other developed world peers, with our official unemployment rate falling to 5.6% this month, down from 5.7% in June.

This still equates to 733,659 individuals of working age (15-65 years old) without work. With many commentators questioning the veracity of the formula used to calculate the jobless rate, ApplyDirect have given a brief overview of key trends affecting Australians and their workplaces in August 2017:

 

The Current State of Play

 

August 2017

Unemployment Rate

5.6%

Unemployed Persons (15-65)

730,600

Inflation Rate

1.90% (July 2017)

Wages Growth

1.90% (July 2017)

 

Stubborn Underemployment:

Despite a relatively low unemployment rate, underemployment remains a stubborn problem for the Australian labour market and currently stands at 8.8% - one of the highest rates this century.

Just to give a quick recap, underemployment refers to Australians in the workforce who already have a job but would like to work more hours, yet are unable to find those additional hours of work. Reasons given for our high underemployment rate range from spare capacity in the economy (I.e. low productivity) to a shift in job growth from full-time towards part-time and casual positions.

 

Low Inflation & Slow Wages Growth:

Closely related to Australia's stubborn underemployment rate is our record low wages growth which is currently running at 1.9% - the same rate as inflation.

In other words, the pay of workers in Australia is stagnant – neither going up or down compared to the official measures of cost of living, although to many Aussies it feels like the cost of living is rising much faster than their pay!

Reasons for this frustrating situation include the increasing casualisation of the workforce, the lower bargaining power of workers (driven in part by declining union membership) and mediocre productivity growth. 

 

Increasing Hours Worked:

Interestingly, at the same time wages growth has stagnated and the underemployment rate has remained stuck at around 8.8% of the workforce, growth in hours worked by Australians has risen 2.3% in the year to June 2017.

This is a good sign however, with increasing hours worked pointing towards a slowly tightening labour market - a prerequisite for an even lower unemployment rate and higher wages growth sometime in the near future we would hope.

Increased hours worked also reflects the emergence of a 'gig' economy – with workers taking on additional hours of paid work outside their primary occupation.

 

The State of the States:

As usual, unemployment rates vary from state to state across the country, although this degree of divergence has narrowed in recent years.

Currently, Northern Territory has Australia's lowest unemployment rate of 3.2% (considered to be 'full employment'), whilst traditional economic laggard Tasmania has the highest at 6.3%.

Most importantly, unemployment rates have been coming down across the states in recent times, although youth unemployment rates remain much higher than the general jobless rate.

 

Unemployment By State

STATE/TERRITORY

RATE – JULY 2017

POPULATION – JULY 2017

Northern Territory

3.2%

245,700

Australian Capital Territory

4.8%

403,500

New South Wales

5.0%

7,739,300

Western Australia

5.4%

2,559,000

Victoria

6.1%

6,179,200

Queensland

6.2%

4,848,900

South Australia

6.2%

1,713,100

Tasmania

6.3%

517,600

AUSTRALIA

5.7%

24,210,800

 

 

The Rise of the 'Gig Economy':

The final trend covered in this State of the Australian Labour Market overview is the emergence of the so-called 'gig' economy driven by the likes of start-ups such as Uber, Freelancer and Deliveroo amongst other well-known names.

With full-time work increasingly difficult to find for younger Australians and wage growth growing at a snail's pace, many Aussies are turning to these popular apps as a way to earn additional income or for some, to earn an income in the first place.

However, these types of employment arrangements do come at a cost to society, with employees generally not entitled to the traditional conditions workers have enjoyed for decades.

This, alongside slow wages growth will no doubt be key issues policy-makers will have to grapple with in years to come.

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