Employment growth slows as talent shortage bite

While job postings remain elevated, employment gains are becoming increasingly difficult. Australia’s unemployment rate is now so low that further improvement will prove challenging. By Callam Pickering, Senior Economist, Indeed.

Key Points

Australian job postings remain elevated but have fallen slightly in each of the past three months.

Major labour market metrics – such as employment growth and the unemployment rate –have been unchanged in recent months.

The disconnect between slow employment growth and near-record job vacancies points towards increased difficulty filling these roles.

This month’s labour market update focuses on the ongoing strength in Australian job postings and the recent slowdown in employment growth as labour market conditions tighten.

Australian job postings no longer rising

While concerns around high inflation and rising interest rates continue to build, the demand for workers remained elevated throughout September. Australian employers are clearly still optimistic about economic conditions and outlook for their respective businesses. By the end of September, job postings on Indeed were tracking 123% ahead of their level on February 1, 2020, our pre-pandemic baseline, after adjusting for seasonal trends.

Postings have fallen in each of the past three months – down 0.4% (July), 0.3% (August) and now 1.0% (September) – but only to a small degree.

Australian postings remain high by international standards, with growth well above the US, UK and Canada. While recruitment has been strong in each of these countries, Australia has consistently outperformed with our recovery beginning earlier and remaining stronger despite repeated COVID-19 lockdowns.

Postings in New South Wales fell 1.9% in September –contributing the most to the national decline – while they were down 3.1% in Western Australia and 2.4% in South Australia. In fact, postings fell in each of the five mainland states, with only Tasmania and the Northern Territory bucking the national trend.

Nevertheless, there remains a lot of jobs available across the country, with postings in all but two regions – South Australia and the ACT – more than double pre-pandemic levels.

Job creation continues to strengthen in some occupations

Over the past three months, job postings have grown strongly in occupations such as agriculture & forestry (+31.5%), construction (+17.3%), medical information (+17.1%), architecture (+15.8%) and education (+15.6%). By comparison, there are a number of occupations where demand for workers has recently eased. There are 21.7% fewer jobs in veterinary medicine than there were three months ago. Postings for medical technicians are down roughly 20%, while jobs in mathematics (-17.2%), logistic support (-17.0%) and food preparation (-15.9%) also fell considerably.

It is, however, important to remember that while postings have fallen in some occupations, they have typically done so from a very high level. For example, postings for medical technicians might have fallen 20% over the past three months but there are still almost twice as many postings as there were before the pandemic began. Or cleaning & sanitation postings, which have fallen recently but are still fourtimes higher than they were on February 1, 2020.

Table (above) titled “Change in Australian job postings” . Indeed compared the percent change in AU job postings between June 30, 2022, and September 30, 2022 across various occupational categories. Agriculture & forestry and construction have experienced the strongest growth over the past three months.

Job vacancies are high but employment isn’t growing

Australian employment growth has slowed considerably in recent months, despite a near-record number of job vacancies, highlighting how challenging filling these roles have become as labour market conditions tighten. Australian employment is unchanged over the past three months, with a variety of labour market metrics, such as the unemployment rate and participation rate, also unchanged over that period. It’s in stark contrast to the rapid employment growth observed throughout the first half of the year.

By comparison, there are 471,000 job vacancies across Australia –more than twice as many as before the pandemic. Employers clearly want more staff but employment isn’t rising. This speaks to the growing skill and talent shortages across the country and the possible mismatch between the new jobs being created and the skills and experience of those not currently employed.

Many occupations have significant barriers to employment, whether that be formal qualifications or even experience thresholds.

That’s certainly true in industries such as healthcare & social assistance and professional services, which have the highest and fourth highest number of job vacancies. Other industries, such as accommodation & food services and retail trade, have few barriers to employment but tend to favour workers under the age of 35. If the Australian labour market tightens further in the near-term, it may require employers to lower expectations around qualifications or experience for some roles.

Broadening the candidate pool could potentially help bring more people into the labour force and help deal with the apparent mismatch between what employers want and what those without a job can provide.

Right now though, it certainly feels as though Australia has reached full employment and the contrast between employment growth and job vacancies certainly indicates that any further tightening of the labour market will be difficult to achieve.

Line graph titled “Australian employment growth, 3-month percentage change, seasonally adjusted” . With a vertical axis ranging from 4 to -4 and a horizontal axis from Jan-21 to Oct-22, the graph shows minimal change in Australia’s numbers over the past three months, and a slight decrease from the Jan-21 numbers.

Bar graph titled “Australian job vacancies, Share of total job vacancies (%), August 2022” . With a horizontal axis ranging from 0 to 20, this graph shows the job vacancies for various industries, with Health care & social assistance with the highest number of vacancies, and the lowest number of vacancies in the Elecricity, gas, water & waste sectors.

Methodology

All posting figures in this article are derived from seasonally adjusted job postings.

We seasonally adjust each series based on historical patterns in 2017, 2018 and 2019.

Each series, including the national trend, occupational sectors and sub-national geographics is seasonally adjusted separately. We adopted this methodology in January 2021. The national and regional analysis is based on the percentage change in job postings on Indeed’s Australia site since February 1, 2020, our pre-pandemic baseline.

The number of job postings on Indeed.com, whether related to paid or unpaid job solicitations, is not indicative of potential revenue or earnings of Indeed, which comprises a significant percentage of the HR Technology segment of its parent company, Recruit Holdings Co., Ltd. Job posting numbers are provided for information purposes only and should not be viewed as an indicator of performance of Indeed or Recruit.

Please refer to the Recruit Holdings investor relations website and regulatory filings in Japan for more detailed information on revenue generation by Recruit’s HR Technology segment.

The data from the Australian Bureau of Statistics comes from the Labour Force Survey and the Job Vacancies report.