Last week, I argued that Australia’s official unemployment rate of 3.6% makes no sense, even though the official underemployment rate has been trending higher:
This is because virtually ever other indicator on the Australian labour market shows that Australia is not producing nearly enough jobs to keep pace with the record growth in the working-aged population:
Roy Morgan’s alternative unemployment survey has registered a 1.5% lift in unemployment over the past year.
The 50,000 jobs created have not kept pace with the estimated 412,000 increase in Australia’s labour force, according to Roy Morgan:
Roy Morgan’s unemployment measure generally correlates strongly with the ABS’ official measure, and the current divergence is highly unusual:
Source: Justin Fabo (Macquarie Group)
The same goes for SEEK’s measure showing the ratio of job applications per job ad. This measure has increased well above pre-pandemic levels – reflecting lower job demand and rapid supply growth – and historically is a strong leading indicator for the ABS unemployment rate:
Source: Justin Fabo (Macquarie Group)
Now AMP chief economist, Shane Oliver, has updated his jobs leading indicator. This shows that “super strong population growth Australia needs about 35,000 new jobs a month to stop unemployment rising. But our Jobs Leading Indicator points to jobs growth slowing to around 12,000 a month”:
Source: Shane Oliver (AMP)
According to analysis by independent economist Tarric Brooker, if Australia’s labour supply continued to grow at around its current pace, but jobs growth slowed merely to its pre-pandemic trend, then Australia’s official unemployment rate would rise to around 5.2% by late 2024:
Source: Tarric Brooker
The bottom line is that Australia is adding so many people through immigration that we just don’t have the jobs to soak up all of these people, which means the unemployment rate will inevitably rise.
It’s just not yet being reflected in the official figures. But it’s only a matter of time.
