Slowing job market projected to hit young workers the hardest

Australia’s job market has proved surprisingly resilient to interest rates moving higher, though chinks in the armour are starting to show.

A slowing pace of annual growth in payroll jobs, which tracks the number of employees on employer payrolls, points to a slowdown in labour market growth.

The Australian Bureau of Statistics data, which is not seasonally adjusted, showed payroll jobs lifting 2.4% in the 12 months to mid-September, down from 2.7% through to mid-August.

Thursday’s payroll dataset follows another incremental decline in job ads as measured by employment marketplace Seek earlier in the week.

Another gauge, the Employment Hero small and medium-sized business index, recorded a softening across hours worked and employment growth metrics in retail, hospitality and tourism businesses.

Chief executive officer at the human resources software firm, Ben Thompson, said the index signalled a level of austerity among consumers.

“The jump in the cost of living means everyday workers and families spend less, hitting our younger workforce the hardest,” Thompson said.

The index revealed a drop in median hours for younger workers, with under-18s experiencing a 5.1% decline.

“As we enter the Christmas and holiday season, it will be telling to see if there is an uptick in seasonality hiring or if the current declines continue through this period as businesses seek to recoup losses,” Thompson said.

The strength of the labour market has been eyed warily by the Reserve Bank of Australia as it lifts interest rates to cool too-high inflation.

The RBA is banking on the jobs market loosening a little to bring inflation back to its two-to-three percent target but tolerating a slower path down than many of its peers to preserve as many of the employment gains as possible.

Commonwealth Bank economist Gareth Aird said it was surprising the jobless rate has not moved higher given the weaker consumer spending, especially when accounting for inflation and population growth.

The bureau’s official unemployment rate has been edging higher but remains extremely low, holding at 3.7% in July and August.

“But other indicators of the labour market have softened more in line with our expectations,” Aird said.

He said the under-utilisation rate was an important metric to watch in the September labour force report, due next week, as it had a stronger correlation with wage movements.

AMP economist Diana Mousina said leading indicators for the jobs market were pointing to a weaker trend, but not a collapse.

“The unemployment rate will rise over 2024,” she said. “This should keep a lid on wages growth.”

Yet she said a spike in wage growth in newly lodged enterprise bargaining agreements would sit alongside other risks that threatened to nudge inflation higher and complicate the RBA’s task.

Other risks to the inflation outlook included the El Niño weather pattern, which could keep food prices high, as well as petrol pain, which could intensify further if the situation in the Middle East leads to the involvement of oil-producing nations.

This article was first published by AAP.