- Australian job vacancies hit the highest level on record in February.
- While total vacancies are still rising, the pace of growth has slowed sharply.
- In the three months to February, vacancies rose in New South Wales, Victoria and Western Australia, masking declines in all other states and territories.
- The largest amount of openings are for administrative and support services. This category includes a large proportion of temporary, low-skill openings, meaning several positions could be filled by just one worker.
- The RBA has put a lot of faith in the job vacancy report to justify its view that unemployment will continue to drift lower. Today’s data is unlikely to alter its view.
Australian job vacancies rose to a record high in the three months to February, pointing to not only firm hiring levels in months ahead but also a slightly reduced chance of a near-term interest rate cut from the Reserve Bank of Australia (RBA).
According to the Australian Bureau of Statistics (ABS), vacancies rose by 1.1% in trend terms to 244,900 over the quarter, leaving total growth in openings over the year at 9.2%.
In seasonally adjusted terms, the quarterly and annual increase was even faster than in trend series lifting by 1.4% and 9.9% respectively. However, given the margin or error in the seasonally adjusted series, most favour the trend measure of vacancy changes.
Vacancies in the private sector — the largest employer in the country — also grew by 1.1% from November to 223,500 in trend terms, leaving the increase on a year earlier also at 9.2%.
Openings in the public sector grew by a slower 0.8% during the quarter to 21,400, although that was still up 9.4% on the levels reported in February last year.
While total openings nationwide continue to lift, the pace of growth is slowing, according to the ABS.
“Growth in the quarterly trend measure of job vacancies eased further”, said Bruce Hockman, Chief Economist at the ABS, noting quarterly growth during the same period a year ago stood at 5.2%.
“This was consistent with the recent slowing in other economic indicators.”
That deceleration was also reflected in vacancy growth over the year which slowed to less than half the 20.4% pace seen in the 12 months to February last year.
By state and territory, the ABS said that vacancies in New South Wales, Victoria and Western Australia all increased during the quarter, lifting by 1.7%, 2.3% and 2.4% respectively in original terms, masking declines in all other locations.
While the moderation in vacancy growth points to slower hiring in the months ahead, that’s unlikely to be enough to shake confidence at the RBA that unemployment — already sitting at 4.9% — will continue to shift lower in the period ahead, something it expects will help to support economic growth and gradually lift inflation back to towards its 2-3% target.
Earlier this month, the RBA highlighted the vacancy report to justify this view.
“Leading indicators of conditions in the labour market, such as vacancies and hiring intentions, pointed to further tightening in the labour market in the near term,” the RBA said in the minutes of its March monetary policy meeting.
“This further reduction in spare capacity underpinned the forecast of a gradual pick-up in wage pressures and inflation.
“Given this, members agreed that developments in the labour market were particularly important.”
With vacancies still increasing, even with the pronounced slowdown in the Australian economy in the second half of last year, today’s report is unlikely to alter the RBA’s view.
The ABS measure of vacancies is based on a survey of approximately 5,400 employers, selected from the ABS Business Register. This differs it from other measures such as job ads and skilled vacancies that use changes in advertisements placed online.
Put simply, it aims to track total vacancies at Australian businesses, rather than just those that have been advertised. Recently, measures of job advertisements have started to fall, pointing to the likelihood of a slowdown in hiring ahead and a potential increase in unemployment in the latter parts of the year.
Other leading indicators for employment growth, such as capacity utilisation at Australian businesses and home prices, also suggest that hiring is likely to slow in the months ahead.
However, the RBA is clearly putting more faith in the ABS measure of vacancies, rather than those alternate reports, based on recent public comments.
The RBA has previously stated that the divergence between job ads series and the ABS vacancy report may be due candidates and employers now connecting in other forums rather than traditional jobs sites, such as LinkedIn and candidate databases within some organisations.
“Today’s data support the RBA’s view that the labour market will continue to improve, and provide an offset to the drag from reduced housing activity,” said Kaixin Owyong, Economist at the National Australia Bank, in a note released following the vacancy report.
However, despite the signals being provided by today’s data, Owyong, as opposed to the RBA, is putting more faith in alternate leading labour market indicators.
“We still believe the RBA is too optimistic on the economic outlook given the slowdown in growth and we expect the Bank to enact two 25 basis point cuts to the cash rate, in July and November,” he said.
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