Another day, another indicator suggesting Australian unemployment will keep rising

Groundhog Day/ IMDb
  • Australian job vacancies advertised on the internet fell by a further 1.6% in April.
  • From a year earlier, postings slumped 5.9%, the largest annual decline since December 2013.
  • When job vacancies fall, unemployment tends to rise. Australia’s unemployment rate rose to 5.2% in April, up from 4.9% in April.
  • The RBA needs unemployment to fall further in order to boost wage pressures, economic growth and inflation.
  • That’s not happening at this point, underlining why the RBA says it will consider cutting official interest rates next month.

Australian job vacancies posted on the internet continued to fall in April, a scenario that has typically led to higher unemployment levels in the past.

According to the Australian government’s Internet Vacancy Index (IVI), postings slumped 1.6% to 173,400 in April, continuing to decline from decade highs struck last year.

Online vacancies have now fallen in nine of the past 11 months, including in each of the past four.

From a year earlier, total openings have fallen 5.9%, the steepest decline over a comparative period since December 2013.

As seen in the chart below, there’s a reasonable inverse correlation between the IVI and Australia’s unemployment rate.

Department of Jobs and Small Business

Based on the evidence seen since February, where Australia’s unemployment rate has risen from 4.9% to 5.2%, it looks like this relationship still holds true.

If the overall fall in online postings was enough to make you feel a little glum about the prospects of landing your dream job anytime soon, this statistic is unlikely to improve your mood: vacancies fell across all occupational groups last month, and in every state and territory except for the ACT.

The decline was broad-based last month, in other words.

Here’s a table showing the movement in vacancies by occupational group over the the past month and year.

Department of Jobs and Small Business

And here’s a similar table, only for changes in each state and territory.

Department of Jobs and Small Business

The largest declines by occupation group over the past year were seen in construction, machinery drivers and operators and retail, reflective of the downturn in the housing market and weak spending at the shops.

With the exception of the ACT and Tasmania, some of Australia’s smallest labour markets, online vacancies fell everywhere. In a concerning development for national unemployment, openings declined in Australia’s most populous states, New South Wales, Victoria and Queensland.

The government said advertisements fell in five of Australia’s eight state capitals over the year, led by Darwin, Sydney and Brisbane at 15.3%, 9.2% and 6.0% respectively.

The weakening in the IVI and other leading labour market indicators has certainly caught the attention of policymakers at the Reserve Bank of Australia (RBA).

In a speech earlier this week, RBA governor Philip Lowe noted that “some labour market indicators have softened a little”, coinciding with a weakening in official job market data.

“The unemployment rate ticked up to 5.2% in April, the underemployment rate has also moved a little higher as there are more part-time workers who are seeking additional hours, job advertisements have declined, and hiring intentions have come off their earlier highs,” Lowe said.

In a big hint that the board may be losing confidence that current monetary policy settings will be sufficient to drive unemployment lower, he also acknowledged that “the recent flow of data makes it seem less likely”.

At a time when Australian inflation and economic growth are moving in the opposite direction to what the RBA wants, it’s little wonder that Lowe admitted the central bank “will consider the case for lower interest rates” when it meets on June 4.

Financial markets expect the RBA will do just that, ascribing a 90% probability that Australia’s cash rate will be reduced by 25 basis points to 1.25%.

The IVI is based on a count of online job advertisements newly lodged on Seek, CareerOne and Australian JobSearch during a particular month.

The government says it does not reflect the total number of job openings in Australia as it does not include jobs advertised through other online job boards, employer websites, word of mouth, in newspapers and advertisements in shop windows.

It also does not specify whether vacancies are for full-time, part-time or casual workers.

One criticism of online job ads is that they only capture some job postings, not all. Many analysts, including the RBA, often like to point to the ABS measure of job vacancies as a better guide on the outlook for hiring.

While it sits at record highs both in terms of total vacancies and as a percentage of Australia’s total workforce, nearly 20% of the 245,900 openings in February this year were for “administrative and support services” roles.

However, only around a 3% of Australia’s workforce is employed in this category, meaning many of these jobs are likely to be temporary, and short-term, in nature.

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