Employment growth in Australia has remained resilient despite the significant slowing in GDP growth.
There are several possible explanations for this. First, GDP growth may have been understated. Secondly, the composition of output growth may be skewed towards more labour intensive parts of the economy. Third, firms may still be hoarding labour post-pandemic and/or rebuilding workforces in some industries. Finally, Australia has a real productivity problem.
The composition of growth appears to be playing a role. In particular, strong government spending - including on health and education - is supporting robust growth in employment and hours worked in related industries.
In contrast, employment growth in ‘market’ industries has been more muted, and hours worked has barely increased for more than 18 months.
