Employment Market Trends Q4 2024

As we work our way through the latter end of 2024, unemployment remains at historic lows and the labour market is showing signs of softening.

The unemployment rate ticked up since last quarter (now 4.1% nationally, and 3.9% in NSW), though Australia’s employment-to-population ratio remained stable – suggesting employment growth and population growth matched one another, record immigration levels simply vanishing into vacancies. That said, this isn’t the same all over: population growth in the Northern Beaches outpaced employment growth, pushing the unemployment rate towards pre-COVID levels.

Experts are expecting economic activity to slow down, so this should contribute to a bit of a reprieve for the market and help to ease pressures on those vacancy fill rates.

Market insight:

This quarter saw one of the highest rates of decline for job postings ever reported, down 9.5% nationally (compared to 4.6% last quarter). NSW specifically had the lowest rate of decline among states and territories, at just 3.4%. Most of this loss comes from flexible work opportunities, which shrank 12.7% this past quarter and 31.3% this past year, versus permanent work which shrank 8.7% this quarter and 21.4% in the last year. This is somewhat unexpected and may be a sign of 'de-risking' among employers - choosing the certainty of permanent talent rather than risk flexible talent in a complex market.

Last quarter’s downward trend continued across individual sectors, with the exception of Accommodation & Food, and Financial & Insurance Services. Finance & Insurance was the only sector to expand (up 14.4% YOY), buoyed by a level of demand not seen since 2021.

Projected growth:

It's a cautious economy moving towards 2025, with household consumption not quite recovering as expected, interest rates remaining high, the cash rate staying static, and inflation hovering around 3-4% (the RBA is targeting 2-3% by mid-2025). These combined factors have led to slow GDP growth, and this figure was revised down since last quarter – now standing around 1.8% and not expected to get back to that 2% mark until next year.

As for wages, they seem to have finally hit their peak. National wage growth dropped to 4.1% YOY (0.8% this quarter), down from 4.2% in June last year and possibly signalling the end of the post-COVID wage increases. Predictions are they’ll continue to soften through to 2026. However, annual wage growth for NSW was slightly higher, at 4.2% (0.6% quarterly growth). Looking at sectors, Professional, Scientific & Technical Services contributed the most to national wage growth (0.09%), followed by Education & Training (0.07%) and Construction (0.06%).

Compared to this time last year, enterprise agreements had less influence on overall wage growth than jobs covered by individual arrangements. Enterprise agreements contributed 0.21% to growth, and individual arrangements 0.34%. Though, this is partly because there were fewer new enterprise agreements this quarter.

Sources: ABS Wage Price Index, Australia; KPMG Australia Economic Outlook Q2 2024; RBA, Statement on Monetary Policy – May 2024

Trends:

The coming months may be a ‘best of both worlds’ hiring market (or at least a step in that direction), with both recruiters and candidates getting something they want. Vacancies continued to drop, and the vacancy fill rate was up for the third year in a row (up 4.2% to 64.3%). For candidates, the median job search duration has also stayed relatively low, at 15 weeks.

That said, skills shortages remain a hot issue. The ‘suitability gap’ between qualified candidates, and qualified and suitable, widened in the past 12 months. A widening gap shows us ‘qualified’ does not necessarily mean ‘appropriate’. While this could be a sign that talent is coming to the market without sufficient training, given the cautious attitude among employers we saw earlier, it could also be a marker that (despite shortages) employers are closely scrutinising applicants to better guarantee right-fit hires. Until the economy offers its expected relief, this de-risking trend is likely to hang around.

Small businesses are having the toughest time hiring, with a lower vacancy fill rate than medium or larger enterprises. Applicants just aren’t going for smaller organisations, who are unable to provide equally generous pay and benefits compared to their bigger peers.

Sources: ABS, Skills Shortage Quarterly March 2023 & 2024; KPMG Australian labour market in detail

What Job Seekers are Saying:

Candidates are expressing frustration with the length and opacity of the recruitment process. Excessive time spent on multiple rounds of interviews and assessments has contributed to the growing call for change, plus feelings that companies aren’t being transparent about their processes.

This issue has been exacerbated by high application volumes, ensuring companies struggle to provide the same level of service that candidates could previously expect. Candidates say they feel undervalued and disengaged from the process, leading them to opt out of the application process altogether and choosing companies with a better candidate experience.

In light of this, some things to consider to enhance your employer brand and attract the best talent include:

Streamline the hiring process: Reducing the number of steps and implementing more efficient recruitment processes may help you move through applications more swiftly.

Increase communication: Always provide clear timelines and offer regular updates about a candidate’s status and next steps where possible. These updates can significantly improve the experience, even if the hiring process starts to drag on.

Offer competitive compensation & benefits: A strong compensation package may help you attract the best talent even if the length or depth of your hiring process is slightly unappealing.

Highlight company culture: Showcasing your values, company culture, wellness initiatives, and growth & development opportunities will help candidates assess if your company is a good fit for them before they apply.

Opinion from the Experts:

The employment market in Sydney’s Northern Beaches is currently characterised by a cautious approach from employers. Many businesses are attempting to find employees independently, often without backfilling positions. This strategy is placing additional pressure on existing staff, who must shoulder increased workloads as a result.

That said, many employees are opting to stay put – waiting for the market to shift. We hear almost daily that employees intend only to seek new opportunities when market conditions improve, so we’re anticipating a significant exit wave when that happens.

Additionally, there has been a noticeable uplift in temporary employment as businesses seek flexible staffing solutions to navigate the uncertain market. With senior-level employees finding it increasingly difficult to secure positions and turning to contract work to alleviate pressures at home, forward-thinking businesses have the opportunity to leverage high-level skills that they might not have usually been able to afford.

Suzy Howard

Director & Employment Market Expert

mme Group