Why booming jobs growth isn't leading to lower unemployment in Australia, in one chart

A lot of jobs were created in Australia in the past 12 months.

Some 332,100, in fact.

However, despite the hiring spree, unemployment is still elevated at 5.6%.

Indeed, when measured by actual people, total unemployment has actually risen over the past 12 months, increasing by 9,700.

So what gives? Isn’t booming employment growth supposed to lead to lower unemployment?

Usually, but not on this occasion.

As seen in the chart below, the size of Australia’s labour force has also surged over the past year, jumping by 341,900. That’s faster than the increase in employment.

Strong population growth and an abundance of jobs has seen Australians flock to or remain longer in the labour market, seeing labour force participation — measuring those either already employed or who are actively looking for work — rise to 65.6%, just shy of the highest level on record.

In blunt terms, supply of labour — available workers — has exceeded demand over the past year, seeing unemployment rise to a 13-month high of 741,000.

In order for unemployment to fall, and for wage growth to eventually pick up, employment will need to outstrip growth in the size of Australian labour market for a considerable period.

That isn’t happening at present, creating a scenario where many employers have plenty of available workers to chose from, and where they don’t need to offer bigger pay increases to attract or retain staff.

NOW READ: Why it could be years until Australian workers enjoy a decent pay rise, in one chart

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