Unemployment remains low despite labour market slowdown

Unemployment remains stubbornly low amid a gradual cooling in the jobs market, but the resilience of the Australian economy is being tested by a global slowdown.

Job vacancies dropped 0.7% to 389,000 in the three months to November 2023, according to data released by the Australian Bureau of Statistics (ABS) on Wednesday.

But the figure still remained 71% higher than in February 2020 — the last month before COVID-19 disruptions sent the labour market into freefall.

ABS head of labour statistics David Taylor said it was the sixth straight quarterly drop in job vacancies, which have now fallen by around 18% from the peak in May 2022.

“However, this quarter saw a relatively small decline, compared with the 8% fall in August,” he said.

The biggest drops were in real estate and education, while the only two industries where job vacancies rose were mining and public administration and safety.

The number of unemployed people to job vacancies rose to 1.5% in November, still well below the pre-COVID figure of 3.1%.

This suggests the labour market remains relatively tight, Taylor said.

Given recent trends in job advertising, NAB head of market economics Tapas Strickland had been expecting a more substantial decline in job vacancies.

“Importantly, there is nothing in today’s data to suggest the unemployment rate will rise dramatically in the near term,” he said in a note.

The latest labour market figures coincided with the release of monthly inflation data for November, which showed a larger than expected cooling in consumer prices.

The continued decline in job vacancies will add to the narrative that the Reserve Bank’s 13 successive interest rate hikes have had their intended effect, with AMP chief economist Shane Oliver predicting the RBA to begin cutting the cash rate in June.

“With job vacancies, job ads, and the ratio of job vacancies to unemployment ratio now all deteriorating, the jobs market is clearly cooling which will take pressure off wages growth, which in turn will add to the fall in inflation,” Oliver said.

The labour market’s ongoing resilience comes as the World Bank warned that high energy prices, and conflict in Ukraine and the Middle East would cause the global economy to experience its slowest growth in 30 years for the first half of the 2020s.

Treasurer Jim Chalmers said the international monetary body’s dire forecast was a stark reminder that Australia could not afford to be complacent about the conditions confronting its economy.

“Our job in Australia is to make this not a lost decade but a defining decade to modernise our economy and maximise our advantages,” he told ABC Radio on Wednesday.

But the government’s plans to supercharge the renewable minerals sector were dealt a blow on Tuesday when US alumina giant Alcoa announced it will shut the ageing Kwinana refinery in Perth.

About 1000 jobs are likely to be slashed as a result of the closure.