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Underemployment rises alongside job growth in Australia

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In April, the Australian Bureau of Statistics (ABS) released data indicating a slight uptick in the seasonally adjusted unemployment rate, which rose by 0.2 percentage points to 4.1 per cent, compared to a revised 3.9 per cent in March.

Bjorn Jarvis, ABS head of labour statistics, noted that despite an increase of approximately 38,000 individuals in employment, the number of unemployed also grew by 30,000, leading to the rise in the unemployment rate to 4.1 per cent, alongside a boost in the participation rate to 66.7 per cent.

Jarvis further explained that the surge in unemployment reflected both an increase in individuals actively seeking employment opportunities and a rise in those awaiting the commencement of previously secured positions.

Additionally, April saw a marginal increase in both employment and unemployment, contributing to a 0.1 percentage point rise in the participation rate to 66.7 per cent, a level sustained since March 2023.

While the employment-to-population ratio remained steady at 64.0 per cent in April, indicating a balance between employment growth and population expansion, Jarvis suggested that the labor market remained relatively tight, albeit less so compared to late 2022 and early 2023.

Regarding underemployment and underutilization, April witnessed a 0.2 percentage point rise in the seasonally adjusted underemployment rate to 6.6 per cent, while the underutilization rate, which amalgamates unemployment and underemployment rates, increased by 0.3 percentage points to 10.7 per cent.

In terms of underlying trend data, April saw a stable trend unemployment rate at 4.0 per cent, with employment witnessing a 0.2 per cent increase, equivalent to around 31,000 people, aligning closely with pre-pandemic trends.

While hours worked experienced a 0.4 per cent rise between March and April, in trend terms, recent data indicated a convergence with employment growth since December 2023, standing 0.7 per cent above the previous peak in the trend series in June 2023.

The employment-to-population ratio and participation rate, remaining at 64.0 per cent and 66.7 per cent respectively in April, maintained historically high levels observed throughout 2023.

Jarvis emphasized that the latest trend data continued to reflect a relatively tight labor market, consistent with other indicators such as Single Touch Payroll data and job vacancies.

Further insights, including regional labor market data, will be available in the upcoming April 2024 issue of Labour Force, Australia, Detailed, on Thursday, May 23, 2024.

The ABS extended gratitude to Australians for their ongoing support in participating in surveys.

Anneke Thompson, CreditorWatch Chief Economist said: “Conditions in the labour market showed further signs of weakening in April, with seasonally adjusted unemployment rising from 3.9 per cent to 4.1 per cent. Trend unemployment remained at 4.0 per cent, with the steadiness in the trend unemployment rate indicating that job creation is broadly just keeping pace with population growth.

“The latest unemployment rate forecasts included in the Budget papers indicate an unemployment rate of 4.5 per cent by June 2025, which is broadly in line with RBA forecasts. NAB’s latest Monthly Business Survey (April 2024) also revealed an expectation in the business community that labour market conditions are softening.

“CreditorWatch’s latest Business Risk Index data reveals an increase in the number of B2B trade payment defaults, and in fact these have sat at record levels for three months now. While not directly reflective of employment, it is likely that businesses that are unable to pay their bills on time will be decreasing their employment levels.

“However, this trend isn’t being felt uniformly across the market, with industries such as healthcare and education still recording very low levels of trade payment defaults. This is where labour is still in highest demand, and where worker shortages are still being felt by employers. At the other end of the scale, we expect that employment in the food and beverage and retail trade areas will continue to soften, as trading conditions are very difficult in the current interest rate environment.”

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