Many of Australia's largest sectors are shedding staff right now

Frazer Harrison/Getty Images
  • Australian employment growth has slowed sharply this year.
  • The healthcare, retail, education and construction sectors — among the largest employers in Australia — all shed staff over the past three months, according to data from the ABS.
  • Analysis from Morgan Stanley suggests that while jobs growth has slowed, the quality of those created has improved.

The healthcare, retail, education and construction sectors are among the largest employers in Australia, accounting for over 40% of the total workforce.

In the three months to May, they also shed a lot of jobs, according to detailed labour force data released by the ABS this week.

Over 100,000 jobs were lost across these sectors since the end of February, largely offset by a 90,000 increase in public administration and safety workers over the same period.

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It’s little wonder why employment growth is slowing based on those figures.

Recent weakness in job vacancy data suggests employment growth could get even slower in the second half of the year, particularly as it’s been a reliable lead indicator on hiring levels in the past.

However, it’s not all bad news, according to Morgan Stanley.

According to its Australian Equity Strategy team, while the pace of employment growth has slowed this year, the quality of the jobs created has improved.

“Despite the quantity of jobs slowing significantly over 2018, it does look like the quality has improved somewhat, with most of the growth over the year centred in the top quartile of jobs by wage,” it says, pointing to the chart below.

Morgan Stanley

“This should help improve unadjusted wage measures, and could support national income growth, but at a household level it is unlikely to alleviate the crunch being faced by consumers with tightening credit, falling house prices and rising essentials costs.”

The RBA and Australian Treasury expect solid GDP and employment growth over the next couple of years to help achieve their economic and fiscal objectives.

While a greater proportion of employment growth in higher-paying sectors is welcome, that has been largely offset by a slower pace of hiring in recent months.

And, as the chart clearly communicates, changes in employment by wage bracket are also notoriously volatile. That alone suggests that not too much should be read into the latest spike in higher-paying roles.

In order to boost broader wage pressures, what Australia really needs to do is greatly reduce the amount of underutilised workers in the workforce, either those who are unemployed or underemployed.

That hasn’t happened in recent years, even with record employment growth in 2017.

Undertutilisation remains elevated, meaning there’s still an abundance of workers for many sectors to choose from.

To reduce underutilisation it will require a number of factors to fall into place, including strong, above-trend economic growth over the next couple of years.

The RBA expects that but many forecasters don’t, especially at a time when household incomes are growing slowly and property prices in some major cities are falling.

Household savings levels are also low.

Given that backdrop, it will be a challenge for households to boost their spending levels, even with upcoming income tax relief.

Accounting for around 60% of the Australian economy, whether the Australian economy can grow at more than 3% this year and next will largely be determined household consumption.

And the key for that will be trends in the labour market, both in terms of the number and composition of jobs created.

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