Australia’s labour market and employment outlook June 2019 ... · ©The Australian Industry Group...

©The Australian Industry Group

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Australia’s labour market and employment outlook

June 2019

Julie TothChief EconomistAustralian Industry Group


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Headline growth: real output growth (GDP) decelerated in 2018-19. 1.8% p.a. Q1 2019. Even slower than post-GFC trend (average = 2.7%)

Australian real GDP, % change per quarter and per year, 1980 to 2019

Source: ABS National Accounts


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Composition of growth in 2019: best industry output growth in mining, health and public admin. (i.e. government). Biggest: mining & finance

Australian industries, real value-added output, $bn and % growth p.a., Q1 2019



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Positive growth drivers: population growth = 1.6% (+400k) p.a. since 2008. Due to higher net migration (long-term arrivals less departures)

Australian population growth, to Q4 2018

Source: ABS Estimated Resident Population


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Positive growth drivers: lower AUD since 2017 supporting export volumes and earnings in all categories, plus import replacements

Nominal export earnings per month, by major category, to March 2019

Source: ABS International Trade

Nominal exports, imports and trade balance per month, to March 2019


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Positive growth drivers: government infrastructure projects are supporting construction activity. Other investment cycles look weaker


Total investment expenditure, public and private sectors, to Q1 2019


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Employment trends in 2019


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Employment structure in 2019: mix of permanent employees (63%), casual employees (20%), self-employed (11%) and employers (6%)

Employment status, Feb 2019

Sources: ABS Labour force Australia.


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Employment structure in 2019: health & welfare is single largest employing industry, 1.6mn and 13% of all workers

Employment by industry, May 2014 and May 2019

Sources: ABS Labour force Australia, Quarterly detail, May 2019.


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Employment structure in 2019: health & education workers are mainly female. Construction, mining, industrial workers are mainly male.

Employment by industry, % female, May 2019

Sources: ABS Labour force Australia, Quarterly detail, May 2019.

Employment by industry, % part-time, May 2019


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Employment structure in 2019: part-time work rates have stabilised, at 31.5% of the workforce. 46% of female workers, 19% of male workers.

Part-time (<35 hours p.w.) work rates, to May 2019



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Employment structure in 2019: majority of part-time workers do so by choice, due to study, lifestyle preferences or family care commitments.

Reasons for working part-time, 2001-2015 (share of part-time employed people)

Sources: HILDA cited in RBA Bulletin, Sep 2017.


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Jobs growth: monthly jobs growth recently peaked in Q3 2018. Slower jobs growth in 2019 so far, and more of the growth is part-time

Labour force, employment and unemployment rate to May 2019



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Jobs growth: public admin, professions, healthcare & selected services. Shrinkage in manufacturing, construction, IT, real estate services.

Employment growth by industry, year to May 2019

Sources: ABS Labour Force Australia, detailed quarterly.


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Jobs growth: strongest in NSW and Vic (& lower unemployment rates). Weaker jobs growth & higher unemployment rates elsewhere

Sources: ABS Labour Force Australia, May 2019.

May 2019 Employment growth

Part time workers

Unemploy-ment

Under-employment

Under-utilisation

Partici-pation

Trend'000 m/m

'000 y/y % p.a. % rate % rate % rate % rate %

NSW 15.9 142.3 3.6 30.9 4.4 7.7 12.1 65.7

VIC 8.3 127.7 3.9 32.2 4.7 8.7 13.4 66.2

Qld 6.2 46.4 1.9 31.1 6.0 9.1 15.1 65.7

SA 2.3 14.3 1.7 35.3 5.8 8.6 14.4 63.3

WA 2.8 8.5 0.6 31.2 6.2 8.6 14.8 68.0

Tas 0.2 -2.3 -0.9 38.8 6.6 10.6 17.2 60.4

NT -0.1 -9.2 -6.6 22.0 4.5 6.2 10.7 71.4

ACT 0.6 0.7 0.3 27.0 3.9 5.9 9.8 69.7

Aus 28.4 332.9 2.7 31.6 5.1 8.5 13.6 65.9


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Jobs growth: number of casual and self-employed workers up in 2019, but they are at or below long-run average as a share of the workforce.

Casual workers, to May 2019


Self-employed workers, to May 2019


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Labour supply, unemployment andunderemployment


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Labour force participation is at a record high, due to rising participation by women & older workers. Male participation stabilised for now


Labour force participation rates to May 2019


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Jobs growth is slower in 2019 but labour force growth is strong, due to relatively high population growth and record high participation rate


Unemployment, underemployment and underutilisation rates to May 2019


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Labour force expansion means spare capacity is rising again: upticks in both unemployment and underemployment rates as of May 2019


Unemployment, underemployment and underutilisation rates to May 2019


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Unemployment: 700,000 people are seeking work nationally in 2019, but 30% of unemployed people are seeking part-time work only

Unemployed and seeking part-time work, to May 2019

Sources: ABS Labour Force Australia, May 2019.


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Underemployment: 1.1 million are working part-time but want more work hours. Mainly in lower-skill sectors with high part-time rates

Underemployment ratios by industry, May 2019



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Wage trends in 2019


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Real wages growth: weak inflation (1.3% in Q1 2019) means all private sector industries are generating (modest) average real wage rises

Wage Price Index (WPI) annual growth, private sector by industry, and CPI, Q1 2019

Sources: ABS Wage Price Index, Consumer Price Index.


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Average wages : highest in public sector, mining, finance, professions

Sources: ABS Wage Price Index, Consumer Price Index, Average Weekly Earnings.

Wage Price Index (WPI), Q1 2019, % change p.a.

Full time adult average weekly ordinary time earnings (AWOTE), Nov 2018, pre-tax $ per week

Private sector 2.4 1,563.50Public sector 2.4 1,762.10All sectors 2.3 1,605.50Mining 2.3 2,611.70Manufacturing 2.1 1,429.40Utilities 3.1 1,823.30Construction 1.8 1,507.20Wholesale trade 2.3 1,553.80Retail trade 1.9 1,184.90Hospitality 2.2 1,161.00Transport & Warehousing 2.5 1,610.20IT, Media & Telecomms. 1.8 1,978.00Financial & Insurance 2.5 1,940.80Rental & Real Estate 2.1 1,458.20Professional services 2.5 1,880.50Administrative services 2.1 1,491.70Public Administration 2.0 1,686.70Education & Training 2.8 1,741.30Health Care 3.3 1,511.30Arts & Recreation Services 2.7 1,540.30Personal and other services 2.4 1,288.30


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National minimum wage: highest in Luxembourg, France & Australia. Raised by Fair Work Commission by 3%+ in each of the last three years

Minimum wages, US$PPP per hour, to 2017

Sources: OECD, real minimum wages database, OECD productivity compendium .


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Real wages growth: rising despite weak inflation (1.3% in Q1 2019). Persistently low inflation reduces future inflation & wage expectations

Wage measures and CPI, to Q1 2019

Sources: ABS Wage Price Index, Consumer Price Index, FWC.


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Real wages growth: rising despite ongoing slow productivity growth (+0.5% in Q1 2019). Slow productivity slows real income growth for all

Wage price index and real GDP per hour worked, to Q1 2019

Sources: ABS Wage Price Index, National Accounts.


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Real wages growth: dragged lower by persistent underemployment.Underemployment is concentrated in lower-skill lower-wage industries

Wage price index and unemployment, to Q1 2019

Sources: ABS Wage Price Index, Labour force Australia.

Wage price index and underemployment, to Q1 2019


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Real wages growth: dragged lower by weak non-mining income growth Persistently slow non-mining sales holds back company profits, wages

Nominal growth in aggregate company profits, sales and wages, to Q4 2018

Sources: ABS Business Indicators, to Q4 2018.

Nominal $ per quarter Aggregate level Growth to Q4 2018 Share in 2018 Average annual growth

Seasonally adjusted $bn per qtr % q/q % p.a. % of total 10 years 2009-18, % p.a.

Mining (CPI average = 2.4% p.a.)

Company profits (GOP)* 34.5 4.0 26.3 38.4 10.4

Business sales ** 73.5 6.1 22.6 10.2 7.0

Business wages ** 6.1 1.1 7.0 4.4 5.8

Manufacturing

Company profits (GOP)* 7.8 -3.6 -2.9 8.7 0.3

Business sales ** 89.3 -0.2 3.9 12.4 -1.2

Business wages ** 13.3 -0.8 2.9 9.5 0.0

Non-mining industries **

Company profits (GOP)* 55.5 -1.0 2.5 61.6 3.4

Business sales ** 648.2 0.1 3.9 89.8 2.7

Business wages ** 133.5 0.5 3.4 82.7 3.1

All Industries **

Company profits (GOP)* 90.0 0.8 10.5 100 4.5

Business sales ** 721.7 0.7 5.5 100 3.0

Business wages ** 139.6 0.8 4.1 100 3.2


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Employment outlook


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Current job vacancies show strongest growth in demand will be for:* education professionals* health & welfare workers* mining engineers* data analysts & managers* IT managers & IT security

SEEK job vacancies May 2019,

annual growth (% change p.a.)

Sources: SEEK, Employment data report, May 2019..


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Employment outlook: jobs growth over next 4 years expected to be strongest in NSW, Vic and Qld. In the cities and some (not all) regions

Projected employment growth by state and region, five years from 2018 to 2023

Sources: Department of Jobs and Small Business, Employment Outlook to May 2023.


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Employment outlook: jobs growth over next 4 years expected to be strongest for professionals, healthcare/welfare workers & managers

Projected employment growth by occupation group, five years from 2018 to 2023



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Employment outlook: jobs growth over next 4 years expected to be strongest for professionals, healthcare/welfare workers, managers

Projected employment growth by occupation, five years from 2018 to 2023



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Employment outlook: jobs growth over next 4 years expected to be strongest in healthcare, disability services, education, building services

Projected employment growth by industry, five years from 2018 to 2023



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IMF latest growth forecasts (and revisions), selected economies

e = estimate. f = forecast. Source: IMF, World Economic Outlook, April 2019.

Challenges ahead: global growth slowed to 3.6% in 2018 (from 3.7% in 2017). Outlook for 2019 and 2020 downgraded due to slowing trade

Real GDP, % change p.a. 2018 (e) 2019 (f) 2020 (f)

World output 3.6 3.3 (-0.4) 3.6 (-0.1)

Advanced economies 2.2 1.8 (-0.3) 1.7 (0.0)

US 2.9 2.3 (-0.2) 1.9 (0.1)

Euro area 1.8 1.3 (-0.6) 1.5 (-0.2)

UK 1.4 1.2 (-0.3) 1.4 (-0.1)

Japan 0.8 1.0 (0.1) 0.5 (0.2)

Australia 2.8 2.1 (-0.7) 2.8 (0.1)

Emerging and developing economies 4.5 4.4 (-0.3) 4.8 (-0.1)

China 6.6 6.3 (0.2) 6.1 (-0.1)

ASEAN 5.2 5.1 (-0.1) 5.2 (0.0)

India 7.1 7.3 (-0.1) 7.5 (-0.2)

World trade volumes, % change p.a. 3.8 3.4 (-0.6) 3.9 (-0.2)


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Challenges ahead: RBA downgraded GDP forecasts for 2019 as of May. RBA less optimistic than Treasury in 2020 and 2021 on prices & wages.

e = estimate. f = forecast. p = projection. Sources: ABS; RBA Statement on Monetary Policy(SoMP), latest quarter; Australian Treasury, Federal Budget 2019-20 (April 2019).

RBA, SoMP (May 2019)Dec 18

eJun 19

fJun 20

fJun 21

f

GDP, % change p.a., year end 2.3 1.7 2.7 2.8

Unemployment rate, %, year end 5.0 5.0 5.0 4.8

Inflation (CPI), % change p.a., year end 1.8 1.7 2.0 2.1

Wages (WPI), % change p.a., year end 2.4 2.4 2.5 2.6

Treasury, Federal Budget 2019-20 (Apr 2019)2017-18

e18-19

f19-20

f20-21

f21-22

p22-23

p

GDP, % change p.a., year average 2.8 2.25 2.75 2.75 3.0 3.0

Household consumption, % p.a., year average 2.8 2.25 2.75 3.0 - -

Dwelling investment, % p.a., year average 0.2 0.5 -7.0 -4.0 - -

Business investment, % p.a., year average 6.0 1.0 5.0 4.5 - -

Employment growth, % p.a., year end 2.7 2.0 1.75 1.75 1.5 1.5

Unemployment rate, %, year end 5.4 5.0 5.0 5.0 5.0 5.0

Inflation (CPI), % change p.a., year end 2.1 1.5 2.25 2.5 2.5 2.5

Wages (WPI), % change p.a., year end 2.1 2.5 2.75 3.25 3.5 3.5

Terms of trade, % change p.a., year end 1.9 4.0 -5.25 -4.75 - -


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Challenges ahead: weak inflation and wage expectations have set in. RBA has factored this in, but Treasury still hoping for a lift in 2020-21

Sources: ABS; Macquarie Research; RBA Statement on Monetary Policy, May 2019; Aust. Treasury, Federal Budget 2019-20.

Wage Price Index (WPI), Treasury forecasts and latest RBA forecast


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Challenges ahead: weak productivity growth persists (0.5% in 2017-18).Holding back income growth. Requires investment, innovation & skills

Australian productivity cycle estimates, 1994-95 to 2017-2018, % change p.a.

* Output volumes per hour worked in all market sectors. Sources: ABS Multifactor productivity estimates, OECD productivity compendium, 2019

OECD labour productivity growth

estimates for Australia, 1995 to 2018


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Challenges ahead: Drought and climate outlook. 2019 winter is warmer and drier than average (again) across most of Australia.

BoM seasonal climate outlook for June to August 2019

Rainfall Temperature

Source: Bureau of Meteorology, ENSO Wrap-Up, 16 May 2019.


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Australia’s labour market and employment outlook June 2019 ... · ©The Australian Industry Group...

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