Economy struggling to generate enough work

There are few clearer signs of Australia's patchy economy than the labour market.
By · 20 Nov 2013
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20 Nov 2013
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There are few clearer signs of Australia's patchy economy than the labour market.

On the surface, things could certainly be a lot worse. With unemployment at 5.7 per cent, conditions here are in another league from Europe, where the jobless rate is a sky-high 12 per cent, and the United States, where it's more than 7 per cent.

However, look a bit closer and a soft underbelly appears. This is reflected in the lack of new "breadwinner" jobs - full-time positions of at least 35 hours a week - being created at the moment.

Many people prefer to work part time, of course. But recently, the economy has not been creating enough full-time work to keep up with growth in the population, and this is leading to underemployment. As this week's graph shows, there were far more full-time than part-time jobs created in the past two years. During 2013, the numbers are even more stark. Indeed, the number of full-time jobs has shrunk since the beginning of this year.

Why are there so few new full-time positions appearing? The experts say it's a classic sign of a weak economy, because it suggests employers lack the confidence to hire people in permanent roles.

And in another sign of caution, employers are also increasing the overall number of hours being worked by their existing staff, rather than bring new people on.

In the past year, total hours worked were up 1.6 per cent, compared with 0.8 per cent in the number of jobs, the Reserve Bank noted this month. This was consistent with reports that some businesses were trying to contain costs by having their existing staff work more hours, it said. So instead of hiring new full-time workers, employers are preferring to take on part-timers, or they are increasing the hours of their existing staff.

It's not all bad news, however, because there are good reasons to think that a growing share of the labour force will work in part-time jobs as the population ages.

After all, the mental and financial benefits of remaining in the workforce, even on a part-time basis, can be extensive. A rule of thumb is that for every year you spend in the workforce after 55, you extend your retirement capital by three years.

But at the moment, the spate of part-time work looks more like a sign of economic weakness. Indeed, the share of part-time workers who could like to have more hours is more than 10 per cent - its highest level in about a decade.

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