In recent years, the Australian economy has experienced the pandemic and large-scale interest rate hikes, and real sales in the retail sector have declined, but the labor market has remained strong. This makes one wonder: what is the secret of Australia's job market? Will the economic outlook collapse?
Recently, as mortgage rates in Australia have risen, the economic outlook for the Lucky Country has begun to dim. But there is still a light for the Australian workforce.
Prior to the pandemic's arrival in Australia in February 2020, 11.0% of businesses surveyed by the Australian Bureau of Statistics reported job vacancies. From then until November, the percentage of companies actively looking for employees doubled to 27.7%. The same is true of job vacancies overall, with the total number of positions increasing by 110.3% from February 2020 to May 2022.
Historically, significant increases in unemployment have typically preceded a decline in the number of job openings. In the current economic cycle, we have not seen a similar rapid deterioration of job vacancies, on the contrary, the number has been slowly declining since its peak in May last year.
The overall job vacancies in Australia are now 89.3% higher than in the last pre-pandemic survey. While the slow decline in job openings is worrying, their current decline is so slow that it will not return to pre-pandemic levels until the second half of 2030.
Despite consumer confidence falling to recessionary levels, the fastest interest rate hike in Australian history and inflation-adjusted retail sales falling, businesses are generally reluctant to lay off workers at this time. In fact, more employers reported job openings than before international borders reopened in February last year.
At the time, 23.5 per cent of employers reported job openings to the Australian Bureau of Statistics, while according to the latest data, this figure has reached 24.7 per cent. This may be because businesses have struggled to meet demand for years, so they want to retain employees.
In addition, there is another factor that may come into play. Over the past 30 years, Australia has not experienced what could be called a normal recession, in which overall economic output contracted significantly and unemployment rose substantially, at least outside of the pandemic.
Instead, every threat to economic growth before Covid-19 was helped by stimulus measures from the government or the Reserve Bank of Australia, or lady luck. This has created a high level of confidence for many businesses that the Australian economy can cope with any difficulties in a relatively short period of time.
However, the magnitude of interest rate increases and falling inflation over the past 18 months has been far from normal. While current job advertisements and job vacancy indices seem to point to a resilient labor market in the short term, confidence in the economy's response to the storm could be severely tested in the long term. At the same time, as Australia's domestic economy slows and the possibility of recession looms in some of the world's largest economies, the resilience of the Australian labour market will be severely tested.