Loosening labour market
On Thursday morning this week, the latest labour force figures are expected to show a modest increase in the unemployment rate from 4 per cent to 4.1 per cent.
That remains a remarkably low rate of unemployment, when you contrast this against the unemployment rate in, say, Canada of 6.4 per cent, for example.
Stunning analysis from economist Harry Ottley at CBA shows that the reason for this has been massive growth in government-aligned or non-market employment.
The recent significantly softening trend in jobs vacancies would normally equate to an unemployment rate having soared to 5 per cent, or perhaps higher.
Yet although the unemployment and underemployment rates have softened, overall things have held up pretty well to date in Australia.
Some firms have opted to reduce hours rather than making layoffs - and more employees are working multiple roles - but the killer chart below also explains a lot, accounting for a +316,000 increase in non-market jobs over the year to March 2024.
As a share of employed persons, non-market employment has jumped to a new high of 30.6 per cent.
That's not an entirely unexpected trend for a Labor government, one might say, but it's quite a dramatic uplift nonetheless.
Huge cost overruns in projects such as the NDIS have drawn criticism for racking up billions of dollars in wasted spending, as well as for keeping the rate of inflation higher than it might otherwise have been.
Indeed, healthcare and social services has been the most prominent sector driving the trend.
Another implication of this is that the market sectors of the economy have been softening quite considerably, including retail trade, wholesale trade, hospitality, and arts and recreation, with monetary policy working to curtail household spending and consumption.
Furthermore, this recent trend must be weighing adversely on Australia's productivity growth.
Overall, government spending as a share of the economy has increased and is budgeted to remain high over the years ahead, which has propped up employment levels in non-market sectors of the economy.
In spite of this, CBA forecasts the unemployment rate to rise to 4½ per cent by the end of 2024.
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