- Australia's unemployment rate stayed at 4.2% in August 2024, but the underemployment rate rose to 6.5% due to part-time job growth.
- Employment growth, especially in healthcare and social assistance, outpaced GDP growth, with over 200,000 new public sector jobs added since May 2022.
- The rise in publicly-funded roles, including through NDIS spending, has contributed to weak productivity growth which has in-part prolonged the per-capita recession.
- Despite rising hours worked, low productivity and public job creation are key barriers to RBA rate cuts, which economists predict will not happen until 2025.
The ABS revealed the unemployment rate in August 2024 remained steady at 4.2%. Yawn, next.
There's not much to see there, but the devil is in the detail; the number of unemployed people fell by around 10,000, while the number of employed people grew by around 47,000.
The participation rate remained at its record high of 67.1%. Good news right? Well, maybe not so much.
CBA economist Belinda Allen said pretty much all of the employment growth was in part time work, which led to the underemployment rate tracking upwards to 6.5%.
More evocative August jobs figures will be released next week - for now let's look at the detailed quarterly labour force figures, current to May.
Nearly 2.3 million are employed in the healthcare and social assistance sector, which is one of the fastest growing; jobs growth in that one sector is about level with the entire market sector.
More than 200,000 jobs have been added to that sector since the May 2022 quarter, and ostensibly most are publicly-funded roles linked to the NDIS.
Just over 200,000 market-based jobs have been added since June 2022, while nearly 600,000 have been public service roles. This includes public admin, education and training, and healthcare and social assistance.
Few can argue against more teachers, fireys, ambos, and even police on the ground, even if they are hard to quantify in pure dollars-and-sense terms.
However, the biggest per-capita growth factor has come in the 'care economy', even despite the record levels of immigration and population growth.
"Employment growth (2.7% in the year to August) continues to outpace GDP growth. We suspect this difference is due to gains in employment in the non‑market sector with strong gains in healthcare, education and public admin," CBA's Allen said.
It seems governments across Australia can create jobs out of thin air, causing an inflationary effect, faster than the RBA can react.
Correlating with this boom in publicly-funded or publicly-linked roles has been flailing productivity growth, as seen in the latest GDP figures.
This has been one of governor Michele Bullock's bugbears in her first year at the RBA helm.
Productivity, measured as GDP growth per hour worked, was up just 0.5% through the last financial year, and actually down 0.8% when comparing the June quarter to the March quarter.
When compared to net migration levels of nearly 510,000 in the 12 months to March 2024, this is abysmal, and is why we are in the most prolonged per-capita recession on record, with GDP growth per capita posting its sixth consecutive quarterly loss, down 1.5% over the financial year.
This is against a backdrop of 1% annual GDP growth, which was stronger than the 0.9% the RBA had forecast.
Public demand, i.e. government spending, could be leading this charge, outpacing GDP growth.
Government expenditure rose 1.4% over the June quarter alone, largely from increased spending in social benefits programs for health services... a.k.a. the NDIS.
So while monthly hours worked is up 1.7% over the past 12 months to August, we have little to show for it.
The last quiver in the bow is that the US Federal Reserve cut its cash rate by 50 basis points overnight (Australian time); there is little chance of the RBA doing so any time soon when these figures are taken into account.
"The RBA’s assessment that the labour market is still a little tighter than is consistent with full employment and cooling only gradually remains very much intact," NAB senior markets economist Tapas Strickland said.
"NAB continues to expect the conditions for a cut will not be in place this year. We expect the first cut in May, though note the risk skews earlier in 2025."
ANZ economists agree.
The next one to watch will be the monthly inflation indicator due next Wednesday.
The circumstances facing the Albanese govt are quite ironic.
— Tarric Brooker aka Avid Commentator 🇦🇺 (@AvidCommentator) September 19, 2024
They need rate cuts to improve their chances at the ballot box, but the publicly funded job creation they are driving along with the states is the largest road block to those rate cuts.
Image from Anthony Albanese on X
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