Why rising unemployment won’t mean hundreds of thousands of lost jobs
Australians are finding it more difficult to secure work heading into 2025 as the labour market slowly softens in response to high interest rates.
Australian Bureau of Statistics (ABS) data on Thursday showed an estimated 1.1 million people were seeking work and available over the June quarter, up about 22 per cent in annual terms.
It indicates that there’s more surplus labour available across the economy than there was a year ago as the jobs market slows from a position of historic strength and unemployment trends up.
It comes after Reserve Bank forecasts on Tuesday that the jobless rate will rise from 4.1 per cent to 4.5 per cent over the course of 2025 as high interest rates work to slow economic growth.
But that doesn’t mean that hundreds of thousands of Australians are about to lose their jobs.
Slowing in jobs growth
In fact, the RBA is forecasting employment – jobs in the economy – will continue to increase.
RBA governor Michelle Bullock was asked on Tuesday whether there would be widespread job losses over the next year.
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She said Australia is more likely to see a slowing in jobs growth over the next year, rather than a sharp uptick that indicates a recession.
“What we’re actually forecasting is that employment just doesn’t grow as fast as the labour force grows,” Bullock said.
“It’s not that people being tossed out of work like in a recession, which would see a sharp rise in the unemployment rate.
“It’s just that those that are coming into the labour force are finding it more difficult to get jobs, and they’re going on to the unemployment queue rather than into a job.”
Number of applicants increase
The ABS data on Wednesday shows exactly what Bullock was talking about; with more people spending longer looking for work and the number of people that didn’t want paid work plunging.
Growth in the number of job ads across the economy has also been slowing over the past year and the number of applicants for each role has increased as the jobless rate has ticked upward.
University of Melbourne professor and leading jobs market expert Jeff Borland explained that despite the size of the forecast rise in unemployment, it’s expected that there won’t be lots of lost jobs.
“You don’t need a lot of extra people to be thrown out of work for unemployment rate to increase [to 4.5 per cent],” Borland said.
“It could also be that the people who are wanting to join the workforce from out of the labour force just take longer to find work.”
Economist Nicki Hutley agreed that elevated numbers of job losses are unlikely even as unemployment rises.
“There’s jobs growth, but just not as fast as population growth,” Hutley said.
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First-time occurrence
Economist Saul Eslake said the jobs market has actually been quite resilient to rising interest rates, reflecting the RBA’s strategy to tolerate above-target inflation for longer to preserve jobs growth.
“In aggregate there have been no job losses [to date],” Eslake said.
“This could be the first time that a battle against unacceptably high inflation has been won without aggregate job losses.”
Bullock also pointed to resilience in the jobs market this week, saying there are some areas where unemployment is not rising.
“Youth unemployment, for example, has stopped rising,” she said.
“Average hours worked [also] isn’t declining as much as it was.”
No comparison
Eslake explained Australia’s situation contrasts with New Zealand and Canada, which have suffered sharper increases in their jobless rates.
As TND has previously explored, NZ increased rates higher than Australia, which resulted in its inflation rate falling faster.
But there was also a greater economic cost and more job losses.
Hutley said many economists were sceptical that the Reserve Bank could prevent a sharper rise in unemployment, but that current forecast suggests a surprisingly optimistic scenario for jobs.
“It’s an absolute Goldilocks scenario,” Hutley said.
“Its the soft landing everyone wanted.”
