For the first time in almost 50 years, Australia’s unemployment rate drops to 3.4% putting immense pressure on businesses to recruit new employees as they scramble to meet supply demands.

A quick summary:

• Unemployment rate is currently 3.4% – down from 4.9% last year in June 2021
• 58% of employers were recruiting in October 2022 – up 10% from previous year
• Recruitment difficulty is 70% – up from 52% in June 2021
• Employment increased by 445,100 people over the last year
• 31% of employers were expecting to increase number of employees – up from 20% in June 2021
• Inflation is expected to peak at 7¾ per cent over this year

Competition for candidates has been a looming plight for employers for quite some time. Since mid-pandemic, employee demands and attitudes shifted with the ‘new normal’ ways of working and changes in the economy. Inconclusive reports of the great resignation in Australia began to saturate the media and then businesses began to feel the stress of hiring in a candidate short market.

Favourable conditions for job seekers

These conditions are great for candidates as they’re spoilt for choice of new vacancies with high salaries offered by businesses competing for the same talent.

According to the latest ABS Job Mobility report, 9.5 per cent of people changed jobs in the year leading up to February 2022. This is a 2 per cent increase from 7.5 per cent from the previous year. Meanwhile, unemployment continued to decrease, suggesting that more employers are approaching the passive candidate market to fill their roles.

Evidently, in 2021, 32 per cent of employers relied on word of mouth to promote their vacancies. This was a 2 per cent increase from the previous year.

While it’s been debated whether the great resignation occurred in Australia or not, the primary reasons that drove the great resignation in other countries, such as the US and the UK, were still evident in Australia. The RBA found the main reason people left for a new role in the year leading up to February 2022 was because they wanted a better job or wanted a change. This was an increase of more than 11 percentage points from 21.7 per cent to 33 per cent.

Poor work arrangements, pay or hours was the second most common reason people left for a new role at 12.5 per cent – a 2 per cent increase from the previous year. Last month, SEEK announced that the top keyword search on their platform was “work from home”, beating out role title and location searches.

The same conditions, however, are proving difficult for employers, and the RBA predicts at least another two years of the tight labour market before it begins to wane.

Inflation and the tight labour market

Inflation will continue to rise over the following months and has generally had a contrary correlation with unemployment. The RBA predicts inflation to peak at 7¾ per cent over 2022 and is expected to be high at 4 per cent over 2023 and 3 per cent over 2024. As a result, unemployment is expected to rise only to 4% by the end of 2024. Until then, businesses will continue to face tight labour market conditions.

Despite the challenges high inflation may bring about for small and medium businesses, surveys conducted by the RBA indicate that businesses will continue to raise wages in hopes of winning talent in the candidate short market. In addition to raising wages, the National Skills Commission has seen an uptake of online recruitment methods in the market as part of employers’ strategies for attracting talent.

A shift in recruitment methods

It is concerning to see that less candidates are applying to jobs on job boards while businesses have increased their reliance on such methods. Both SEEK and Indeed had reported an increase in job ad postings, with SEEK also reporting a decline in candidate applications.

Other online recruitment methods that Australian businesses increasingly adopted over 2021 were social media, recruitment job boards and websites, and company-owned websites.

The National Skills Commission stated in their latest Recruitment Insights Report that no decline was evident in other traditional recruitment methods.

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