The good employment news of 2017 looks set to continue into the new year. The Australian Bureau of Statistics revealed on Wednesday that job vacancies in the November quarter last year grew by 4.1%, marking more than four years of consecutive growth and meaning it is easier now on average for the unemployed to get a job than it has been for six years. The question now is whether this good news will also lead to better wages growth.
Job vacancies are one of the key forward-looking employment indicators – so called because while they do not measure actual employment they are a strong indicator of employment growth to come.
In the three months to November last year, there was a record 192,000 private sector job vacancies, 4.6% above that of the August quarter and 17.7% above the number recorded a year earlier.
That is some seriously strong growth – the best since we came out of the GFC. It means that private sector vacancies have been rising for 17 consecutive quarters – more than four years.
The public sector however saw a decline in vacancies in November, the first such decline since November 2013. But as the public sector accounts for only around 10% of all job vacancies, it meant the overall number of vacancies still grew in November by 4.1% and by 16.8% annually:
And while job vacancies by themselves are a handy indicator, economists like to compare them with the overall size of the labour force to get a better indicator of how things are going.
The job vacancy rate measures the number of vacancies as a percentage of the labour force (which includes those working and unemployed). An increasing vacancy rate is better as it indicates the number of vacancies are growing by more than is the labour force. And here as well the news is very good.
The vacancy rate in November was above 1.6% for the first time since February 2011, and is just below the record rate of 1.65% that occurred at the end of the mining boom in 2008:
The vacancy rate is also linked with the unemployment rate in a relationship shown by what is called “the Beveridge curve”. Essentially as the vacancy rate rises, the unemployment rate should fall. The current vacancy rate of 1.6% should normally be associated with lower unemployment, but one of the problems of shifting from a mining boom to a period where the job growth is more spread across the nation and in different industries is that it can be more difficult to fill jobs than in the recent past:
But even still, this does suggest that the unemployment rate should be more likely to fall than rise if the job vacancy rate stays where it is.
And one reason the unemployment rate should fall is that at the moment it is on average easier to get a job than it has been for six years.
In November there were 3.4 unemployed for every job vacancy – which makes it 12 consecutive quarters were the fight to get a job has gotten easier.
Of course underemployment has been a major issue over the past few years, but even here things look to be improving. While not every underemployed worker is looking for another job (most would just like to get more hours in their current job), if we do include the underemployed among those fighting for one of those vacancies, there are 8.6 underutilised workers (ie underemployed and unemployed) for every vacancy.
While that does sound high, it is the lowest it has been since August 2012:
The other good thing about this is that fewer people fighting for each job vacancies means the job market is actually becoming quite tight. When the number of unemployed per vacancy falls, it also means employers have a tougher job finding someone to fill a position. This should lead to higher wages as employers look to pay more in order to encourage workers not to leave.
But as ever the difficulty or ease of finding a job depends on where you live and what type of work you do.
Currently New South Wales is the easiest state to get work – just 2.2 unemployed on average per vacancy, the lowest on record. Victoria is a bit more difficult with 3.1 unemployed per vacancy and Queensland just a touch harder at 3.9.
While South Australia and Tasmania are the toughest states to get a job – 5.8 and 5.9 unemployed per vacancy – both are better now than they have been for most of the past four years.
Western Australia is perhaps the only concern. While the current 4.3 unemployed per vacancy is well down on the number that were after each job in early 2016, there has been a slight rise in the unemployment fight over the past nine months:
We’re not able to calculate the number of unemployed per vacancy by industry (because while you may be looking for work in the mining industry for example, it doesn’t mean you won’t also look for a job in construction), but we can get a proxy vacancy rate by looking at the number of vacancies as a percentage of those employed in that industry.
As ever the highest total number of vacancies are in the more transitory/casual industries of retail trade and administration and support, but almost all industries have seen an improvement in the vacancy rate over the past two years.
Even the mining industry has seen an increase in the number of vacancies per employed. There has also been strong gains in the education, healthcare, and public administration industries:
Fighting for a job is of course rarely as easy as these figures suggest. When you go for a position, you will be more likely to be competing with more than one other person – even if you live in New South Wales. But what these figures do show is that the fight to get work has improved across all states and virtually all industries.
But as we know what has not improved is the pay of that work. Over the past few years economists have surmised that workers have been worried more about their hours than their wage – but with a near record low numbers of unemployed available for vacancies, that means workers are becoming more valuable to employers as they are harder to replace.
If these conditions don’t lead to improved wages growth then it will be clear that the old rules have broken down – much as has the link between unemployment and wages growth.
These very good job vacancy figures highlight more than ever that 2018 should be the year of better wages growth, and if it isn’t, workers – and voters – will be very much entitled to complain.