Is Australia's job growth telling the full story?

Recent reports indicate a significant trend: the public sector is now accounting for a majority of jobs being created in Australia.

This was a hot topic in a recent economic outlook presentation our managing director David Williams-Chen gave to small business owners. Despite the official unemployment rate being a low 4.1%, many entrepreneurs and small business owners in the audience found it irreconcilable with their own experience of soft conditions amongst businesses in the private sector. That set off a discussion of where is all the growth in employment coming from and why isn't that being seen in the private sector?

Analysis shows that a large proportion of new jobs over the last 3-5 years are in government-funded or public sectors, a dynamic that raises important questions about the underlying health of the private sector labour market. While headline employment figures may look strong, this government-funded jobs boom might be concealing weaknesses.

Consider these insights:

• Since 2019, while our country’s population has grown by 8%, hours worked in the market (private) sector of the economy have grown by only 7%, yet the non-market (public) sector has surged by 26% (see below chart).

• The largest growth sectors for jobs since 2019 have predominantly been public sector-aligned. Health Care and Social Assistance alone has expanded by a staggering 43%, adding 818,900 jobs and contributing 39% of all jobs added to the economy since then.

• When combined with Public Administration & Safety and Education & Training, these three mainly public sectors contributed more than half (54%) of all jobs added since 2019 – that's 1.1 million of the 2.1 million new jobs added!