The Australian labour market has continued to be very tight in the second quarter, with the most recent labour data showing strong employment growth through May while the unemployment rate has remained at historic lows at 3.6%, NAB has reported.
In NAB’s latest publication, it noted a 0.3% rise in the number of jobs in mid-June, suggesting a slower pace of employment growth over the month. More significantly, job vacancies fell to just 2% to 432,000, leaving the number of vacancies down 10% from their mid-2022 peak, but still nearly double their pre-COVID level, with the number of vacancies per unemployed at around 0.8.
“Looking ahead, NAB expects the labour market to weaken with the rate of employment growth to slow (and vacancies to fall) over the second half of the year and through 2024 as the economy weakens enough to see the unemployment rate rise to around 5% by end-2024 (from the near 50-year low 3.6%),” said Dean Pearson, NAB’s head of behavioural and industry economics and Robert De Iure, associate director economics.
But while the NAB economists said that would be a considerable rise, importantly that would still leave unemployment around its pre-COVID level.
Labour shortages eased in some industries, thanks to the opening of international borders, increased skilled migrant quotas, and improved skilled migration program processes. It would take time though before the changes would have a material impact to other industries, with many firms continuing to experience severe recruitment difficulties.
“Labour shortages were a little more problematic for Australian SMEs during Q2,” Pearson and de Iure said. “When asked to rate the extent it was an issue for their business, on average they scored 4.9 pts (4.8 pts in Q1 but down from 5.1 pts in Q2’22). SMEs also scored a higher 5 pts when asked about the impact labour shortages may have on their business in the next 12 months (4.7 pts in Q1 but down slightly from 5.1 pts in Q2’22). Average scores suggest the impact of labour shortages is still quite ‘moderate.’
“That said, many SMEs indicated they struggled much more. In Q2, an unchanged one in three of all SMEs said labour shortages were a “very significant” issue for their business (scored 8+ pts) in the last 3 months – though this fell from 35% at the same time last year.”
By state, most SMEs in TAS (43%) and QLD (40%) found labour shortages to be a very significant issue in the past three months. By industry, they were a very significant issue for 42% in the transport and storage sector in Q2, down from 52% in Q1. In the construction and health sectors, labour shortages were a very significant issue for 40% and 39% of SMEs, respectively. The figure was less than half in the wholesale trade (21%), accommodation and hospitality (21%), and personal services (22%) sectors.
SMEs have become a bit more pessimistic about the future, with 31% now expecting labour shortages to have a very significant impact on their business in the next 12 months, a slight uptick from 30% in Q1.
Labour shortages would likely have a very significant impact in the next 12 months for most SMEs in TAS (46%) and QLD (37%), and the lowest in NSW (29%), VIC and WA (30%).
By industry, fewer firms in the transport and storage sector now believed shortages will be a significant issue in the next 12 months, at 39% vs. 52% in the previous quarter. More firms in the business services sector, however, were expecting labour shortages to have a very significant impact, at 34%, up from 23% in Q1.
Some 41% of SMEs in the health sector were now expecting to be significantly impacted by labour shortages, far more than any other industry in the next 12 months, with the lowest number being accommodation and hospitality and wholesale trade, at 20%, NAB reported.
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