6150.0.55.003 - Labour Account Australia, Quarterly Experimental Estimates, March 2019 Quality Declaration 
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Proportion of vacant jobs - A new labour market measure


The development of the Australian Labour Account has made it possible to produce an important new labour market measure – the ‘Proportion of Vacant Jobs’ (PVJ).

This new measure brings together two separate indicators, the number of job vacancies and the total number of jobs in the economy, to provide insight into met and unmet demand from an industry perspective. This article explores the potential interpretation and uses of the new PVJ series, and the insights that it can provide into industries in Australia.

Traditionally the Beveridge Curve has been widely used by economists to depict the relationship between the job vacancies rate and the unemployment rate, providing insights into spare capacity in the labour market. While the Beveridge Curve can be constructed at the total economy level, it cannot be plotted for individual industries, given industries do not have an unemployment rate (without assuming that all unemployed people will work in their previous industry, and making assumptions around where people who have never worked will go on to work).

The PVJ provides a useful labour demand-side view of relative labour demand, at the industry level, presenting the relationship between unmet demand (job vacancies) and met demand (filled jobs) within the Australian Labour Account.

The PVJ is calculated as the number of vacant jobs as a proportion of total jobs. This derived measure is a function of filled jobs and job vacancies.

Proportion of Vacant Jobs Equation 1: Proportion of vacant jobs calcuation

By bringing together met demand and unmet demand, the PVJ provides new insights into changes in the labour market. The following table shows how PVJ can be decomposed to better understand the underlying factors contributing to changes in the labour market (in a similar way to how the unemployment rate, on the supply side, can be decomposed into underlying changes in employment and unemployment).

Table 1: Direction of Proportion of Vacant Jobs and Underlying Drivers
Table 1: Direction of proportion of vacant jobs and underlying drivers

An increasing PVJ over time may be the result of a decrease in filled jobs and an increase in job vacancies; or the decrease in filled jobs is at a greater magnitude than the decrease in job vacancies; or an increase in filled jobs and an increase in job vacancies at a greater magnitude. A decreasing PVJ over time may be the result of an increase in filled jobs and a decrease in job vacancies; or a decrease in filled jobs and a decrease in job vacancies at a greater magnitude; or an increase in filled jobs of greater magnitude than the increase in job vacancies.

The PVJ therefore provides people monitoring and analysing the labour market with another important headline indicator, to then focus their attention on the underlying changes.

In addition to providing insights into cyclical labour demand and employment, changes in the PVJ over time can also highlight that some of the following may be occurring:
  • Changing employment capacity – there may be indications that the industry is nearing its full employment potential or, conversely, that there is the possibility of future employment growth;
  • Job churn – the industry may not be maintaining long term employment, resulting in a high number of job vacancies without long term growth in employment;
  • Skill mismatch – current availability of skills may not be able to satisfy employer requirements, resulting in an extended search for appropriately skilled staff; and/or
  • Changing employment conditions or arrangements - the industry may be transitioning from full-time to part-time roles, or a greater use of contractors or use of labour hire firms.

Understanding changes in the PVJ (and analysing the underlying factors contributing to these changes) will enable Australia to better understand its labour market.

Analysts can examine the PVJ from a time series perspective, looking for changing employment capacity or turning points in the economy. Some analysts consider job vacancies to be the most important leading indicator of potential employment growth; however, this relationship differs across the industries. Some industries have a longer employment engagement period than others, and some industries have a greater degree of underlying churn that drives changes in their vacancies. The analysis of PVJ in a time series allows for two moving parts to be examined in conjunction. Analysts can look for unusual movements that are not visible through the Beverage Curve analysis or job vacancies analysis alone.

Graph 1: Proportion of Vacant Jobs, by Industry, March Qtr 2019 (Seasonally Adjusted)
Graph 1: Proportion of vacant jobs, by industry, March quarter 2019 (seasonally adjusted)
Source: Labour Account, Australia (cat: 6150.0.55.003)


In addition, the PVJ measure can be used in conjunction with other major labour market indicators such as the unemployment rate and employment data to support a better understanding of changes in the labour market.

Australian economy analysis of proportion of vacant jobs

For the period between 2010 and 2013, the fall in the PVJ was accompanied by a rise in the unemployment rate. Since 2014, the PVJ has been increasing while the unemployment rate has generally been declining.

Graph 2: Proportion of Vacant Jobs and Unemployment rate (Seasonally Adjusted)
Graph 2: Proportion of vacant jobs and unemployment rate (seasonally adjusted)
Source: Labour Account, Australia (cat: 6150.0.55.003); Unemployment rate from Labour Force, Australia (cat: 6202.0)


Analysing the PVJ along with the number of employed persons can also provide useful macro-economic insights into the labour market. Between 2010 and 2013, a decrease in the PVJ coincided with slower employment growth. Since 2014, employment growth has accelerated, alongside an increasing PVJ.

Graph 3: Proportion of Vacant Jobs and Employed Persons (Seasonally Adjusted)
Graph 3: Proportion of vacant jobs and employed persons (seasonally adjusted)


Source: Labour Account, Australia (cat: 6150.0.55.003)


The PVJ measure can provide useful insights into labour demand within industry divisions and subdivisions when presented together with employment measures.

Mining

The PVJ for the mining industry reached its peak during 2011-2012. This was followed by a fall in the measure as the mining industry made the transition to a production phase from an investment phase. Gross fixed capital formation for the mining industry increased during the same period as the PVJ, reaching its highest level in 2012-13 before declining afterwards. Since 2016, the mining industry has experienced an upswing in response to several factors, including increased oil price, higher global demand for coal and increased LNG production.

Graph 4: Proportion of Vacant Jobs and Employment in Mining (Seasonally Adjusted)
Graph 4: Proportion of vacant jobs and employment in Mining (seasonally adjusted)
Source: Labour Account, Australia (cat: 6150.0.55.003)

Over the past five years, the PVJ, when considered alongside the number of employed persons, provides useful insights into the post-boom softening in the mining industry. In comparison to the period of the mining boom period, both the PVJ and employed persons have generally either fallen or remained flat for all subdivisions, and have only begun to increase recently, highlighting increased demand for labour.

Graph 5: Proportion of Vacant Jobs in the Mining Subdivisions
Graph 5: Proportion of vacant jobs in the Mining subdivisions
Source: Labour Account, Australia (cat: 6150.0.55.003)

Graph 6: Employed persons in the Mining Subdivisions
Graph 6: Employed persons in the Mining subdivisions
Source: Labour Account, Australia (cat: 6150.0.55.003)

Construction

Construction was the fourth largest employing industry in Australia in March 2019, with 1.2 million filled jobs. Following the end of the mining boom, the construction industry experienced strong growth, driven by increased demand for residential construction building, growth in house prices and increased expenditure on large scale infrastructure projects.

The PVJ for the construction industry has continued to grow over the recent period, which has generally coincided with increasing employment.

Graph 7: Proportion of Vacant Jobs and Employment in Construction (Seasonally Adjusted)
Graph 7: Proportion of vacant jobs and employment in Construction (seasonally adjusted)
Source: Labour Account, Australia (cat: 6150.0.55.003)

Administrative and Support Services

The PVJ for the administrative and support services industry increased from September 2013, reaching the highest levels in September 2018 and March 2019. This rise was in line with the growth in some of the key related industries (e.g. construction, professional scientific and technical services and mining).

Graph 8: Proportion of Vacant Jobs and Employment in Administrative and Support Services (Seasonally Adjusted)
Graph 8: Proportion of vacant jobs and employment in Administrative and support services (seasonally adjusted)
Source: Labour Account, Australia (cat: 6150.0.55.003)

The sustained PVJ in March quarter 2019 in the administrative and support services industry, which coincided with decreasing employment, may point to increasing churn within the industry.

Graph 9: Proportion of Vacant Jobs and Employment in Professional Scientific and Technical Services (Seasonally Adjusted)
Graph 9: Proportion of vacant jobs in employment in Profressional, scientific and technical services (seasonally adjusted)
Source: Labour Account, Australia (cat: 6150.0.55.003)

Health care and social assistance

The PVJ for the health care and social assistance industry has generally risen over the past 3 years, and remains at a series high. In recent years, the aging Australian population, the roll-out of the National Disability Insurance Scheme, as well as the increased use of childcare services, have contributed to increased labour demand in this industry, with increases in the PVJ seen across three of the four subdivisions.

Graph 10: Proportion of Vacant Jobs and Employment in Health care and social assistance (Seasonally Adjusted)
Graph 10: Proportion of vacant jobs and employment in Health care and social assistance (seasonally adjusted)
Source: Labour Account, Australia (cat: 6150.0.55.003)

Graph 11: Proportion of Vacant Jobs in the Health Care and Social Assistance Subdivisions
Graph 11: Proportion of vacant jobs in the Health car and social assistance subdivisions
Source: Labour Account, Australia (cat: 6150.0.55.003)

Conclusion

This spotlight has shown the value of the PVJ as a key labour market measure, providing new insights into met and unmet demand.

Starting with the March quarter release of the Labour Account, on 11 June 2019, a PVJ measure will be published for all divisions and subdivisions.

The Labour Account is the best source of headline information on employment by industry. It provides an estimate of the number jobs, hours worked and associated labour income. The Labour Account has been specifically designed to produce industry estimates that have been compiled, analysed and confronted to present the most coherent picture of the Australian labour market. Its estimates are complemented by other industry information, from Labour Force Survey statistics (cat. no. 6291.0.55.003) and Jobs in Australia (cat. no. 6160.0), which provide insights into the characteristics and distribution of people and their jobs in the labour market.