Labour market efficiency – it’s improved since COVID-19
COVID-19 caused major disruption to the labour market but changes in the relationship between job vacancies and unemployment (the Beveridge curve) since 2021 suggest that the labour market has become more efficient.
Overview
An efficient labour market is important for an economy to function well. The ability for job seekers to find work relatively quickly and easily is important for their financial and personal wellbeing. Likewise, the ability for organisations to find the right staff quickly is important for their ability to invest in, sustain and grow their business. An efficient labour market is also likely to be more dynamic, with people moving to roles where they are the most productive and being compensated for this increased productivity.
Measuring the efficiency of the labour market can be difficult. In this Insight, I explore one way to examine the efficiency of the Australian labour market using the relationship between job vacancies and unemployment, known as the Beveridge curve. Changes in this relationship over time can tell us about how the efficiency of the labour market has changed.
Over recent years, changes in the relationship suggest that COVID-19 and the related policy responses saw large swings in the efficiency of the labour market. Many people left jobs, or the labour market completely, and then had to find new jobs, while some of the typical pathways that employers use to increase their workforce were not available which contributed to a sharp decrease in the efficiency of the labour market. However, the subsequent tight labour market saw sharp movements in the labour market and an increase in efficiency.
Currently the Beveridge curve suggests the labour market is more efficient than it has been on average over the past 35 years, although efficiency has declined slightly over the last year. This is in stark contrast to the early to mid 1990s, following “the recession we had to have”, when the labour market was at its least efficient.
There are several possible reasons for the labour market being more efficient now, these include:
an increase in the search effort of job seekers – potentially in response to cost-of-living pressures.
an increase in the intensity with which hirers recruit – more detail on this here.
a decline in the degree of mismatch between the skills of potential workers and the demand for those skills within the economy – there is currently less structural change in the economy, compared to the decline in car manufacturing in the early 1990s for example.
an improvement in the technology bringing job seekers and hirers together – like an increase in the use of online job marketplaces and better use of technology behind those marketplaces.
The remainder of the insight explores job vacancies and unemployment in Australia, the relationship between them and how it has changed over time in more detail. It also touches on long-term unemployment and its relationship with labour market efficiency over time.
Read the full insight here.
About Blair Chapman, PhD
Dr Blair Chapman is SEEK’s Senior Economist. Blair undertakes economic analysis and forecasting of the Australian and New Zealand economies and labour markets. He leverages SEEK’s data to develop unique insights about the economies SEEK operates in.
Blair’s economic analysis and forecasting skills have been honed across both private and public organisations including ANZ, Deloitte Access Economics, the Reserve Bank of Australia (RBA) and the
Australian Bureau of Statistics (ABS). While at the RBA, he was their representative on the ABS’s Labour Statistics Advisory Group for several years.
Blair holds a PhD in Economics from Johns Hopkins University where his studies concentrated on macroeconomics and labour. He completed his undergraduate studies at Monash University, where he majored in Economics, Econometrics and Accounting.