21 August 2024: The Australian economy is at a critical juncture. Two years of RBA interest rate hikes have helped contain price inflation, which is forecast to return to its target range of 2-3% by early 2025. But this has come at a cost to jobs and growth, with the economy stagnating and growing at its slowest rate (outside of the pandemic) since the early 1990s recession.
Releasing the August 2024 edition of the Deloitte Access Economics Employment Forecasts report, Deloitte Access Economics partner and lead author, David Rumbens, said: The view that Australia's economy is stagnating is more evident through GDP, retail spending and business insolvencies data than labour market data, which has remained relatively resilient.
That remains true, though if you look closely enough you can see evidence of a weak economy finally bleeding through to the labour market. The unemployment rate has risen in recent months, nudging up to 4.2% in July 2024.
Employment has still been growing at a healthy rate over 2024. Since the end of 2023, employment growth has averaged 45,400 new workers every month – an excellent achievement. However, detailed labour market data shows that the private sector engine room of the economy has been sitting idle for a while.
According to the ABS Labour Account, employment gains in the year to March 2024 totalled 322,000 people. Of this, 316,000 people came from the non-market sector. As a result, non-market sector employment grew by 7.6% in the year to March 2024, compared to just 0.1% growth from market sector industries. It is clear the resilience of employment growth is being driven by the non-market sector, while private sector hiring is stalling.
Other data also highlights the weakness in at least part of the labour market: job vacancies, job mobility and average hours worked are down, and job security fears are rising.
What's in store for Australia's labour market in 2024-25?
Beyond the labour market there are signs that economic conditions may be about to improve. Tax cuts and cost of living support will allow consumer spending to lift. Meanwhile, Deloitte's CFO Sentiment report is showing an improvement in business confidence.
But the labour market tends to be more of a lagging indicator, trailing broader economic performance by around six months. Rumbens said. That means the labour market may continue to get worse with unemployment rising at the same time economic green shoots are appearing elsewhere.
Overall, we do expect to see weak employment growth through 2024-25 of 1.0% (or 147,400 additional jobs), following 3.1% jobs growth in 2023-24 (423,600 additional jobs). The unemployment rate is expected to rise to 4.5% across 2024-25 (which would mean an additional 101,500 unemployed).
Indeed, we see exactly this position in the responses to Deloitte's CFO survey. While CFO optimism about own business performance has lifted, private sector CFOs are not planning to hire any more people in the next 12 months.
For now, areas of labour market weakness include retail employment, which fell by 0.8% in 2023-24 amid bleak consumer conditions and is expected to fall a further 2.0% in 2024-25. Finance employment is also expected to keep falling in 2024 25 (by a further 3.0%), before returning to a more stable growth path.
Rumbens added: But it's not all dire. We predict health care roles will grow by 3.2% across 2024-25. Elsewhere, construction is forecast to grow by 2.0% as residential construction activity picks up, while technology occupations will grow across a range of sectors.
How does that play out by broad worker classification?
2024-25 looks bleak for white collar employment, with a 0.4% or 23,500 worker decline projected, given weakness in lending and professional services, and as businesses look to kick start activity without increasing headcount. It may be a short, sharp, dip with white collar employment expected to return to growth of 1.6% in 2025-26.
Blue collar employment may benefit short term from a continued focus on construction, with employment growth of 2.0.% or 74,300 workers in 2024-25, before then moderating to 0.4% in 2025-26.
The focus on non-market employment plays well for human services, with employment growth of 1.69% or 96,700 workers expected in 2024-25, tracking steadily to 1.3% growth in 2025-26.
Rumbens said: As employment growth moderates, businesses are also looking to deliver productivity gains, particularly through technology investment and particularly through AI. Tech-led productivity gains are seen as a key element to support the broader economic upswing over the next year.
Employment Forecasts is released quarterly and provides forecasts and commentary for each industry and occupation, plus white collar, blue collar and human services employment. There are three levels of data available: state, city and CBD. Employment Forecasts is particularly useful in the analysis of property market demand.
https://www.deloitte.com/au/en/about/press-room/deloitte-access-economics-employment-forecasts.html
