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Employment Relations, Results Statistics

Labour productivity at a standstill in March quarter

Productivity Commission 3 mins read
Quarterly productivity bulletin - June 2024

The Productivity Commission’s latest productivity bulletin shows labour productivity stagnated in the March quarter, with a 0.1% increase in output matched by a similar increase in hours worked.

This figure means that there was no labour productivity growth over the 12 months to March 2024 with the level remaining just above the 2015–2019 average.

“With the end of the COVID-19 productivity bubble, labour productivity seems to have reverted to the stagnation we’ve seen for most of the past decade,” said Deputy Chair Dr Alex Robson.

The non-market sector continued to fare significantly worse than the market sector for productivity in the March quarter. While labour productivity actually grew by 0.5% in the market sector, this was offset by a 1.3% decline in the smaller non-market sector.

Over the past year, the large increase in employment in the non-market sector (comprised of education and training, health care and social assistance, and public administration and safety) has been a drag on overall productivity.

“We have seen a major increase in employment in the non-market sector since March last year, but it has not been matched by an equivalent increase in output,” said Dr Robson.

Over the 12 months to March 2024, productivity fell by 2.2% in the non-market sector, but increased in the market sector (0.8%). This coincided with strong growth in hours worked (5.5%) in the non-market sector compared to the market sector (0.5%).

Over the same period, more than half of the increase in filled jobs across the whole economy was in the health care and social assistance industry, which includes childcare, disability and aged care services.

“Many of these jobs likely went to people who are new to these industries who need time to learn and upskill – putting temporary downward pressure on productivity,” said Dr Robson.

Despite strong employment growth in the non-market sector, hours worked across the whole economy rose by only 0.1% in the March quarter. This suggests labour demand is slowing from its historical heights of June 2023. The easing of labour demand has occurred through a softening of hours worked rather than a fall in total employment. Since June 2023, hours per worker have decreased by 2.7% (or 51 minutes less per week) – alongside growing part-time employment.

However, job vacancies are 60% above pre-COVID-19 levels, suggesting the labour market remains relatively tight.

The latest Quarterly productivity bulletin is available from: www.pc.gov.au/productivity-insights.


Key Facts:

 

Labour productivity did not change for the whole economy in the March 2024 quarter.

     An equal increase in hours worked (0.1%) and output (0.1%) meant that labour productivity growth was 0%.

The market sector outpaced the non-market sector.

     Labour productivity growth in the market sector (0.5%), which accounts for about 80% of output, was offset by a large decline in the smaller non‑market sector (-1.3%) in the March 2024 quarter.

     The same pattern was evident over the 12 months to March 2024, with productivity increasing in the market sector (0.8%) but decreasing in the non-market sector (-2.2%).

     This divergence coincided with falling hours worked in the market sector (-0.5%), but strong growth in hours worked in the non-market sector (5.5%).

     The health care and social assistance industry has been a major contributor to recent employment growth for the whole economy. Employment growth within this industry was driven by child care and other social assistance services in 2022-23, and has since been driven by large increases across all sub-industries.

Weak growth in hours worked (0.1%) and falling job vacancies are signs of slowing labour demand.

     Since historical highs in June 2023, total hours worked has fallen by 1%. The number of people employed increased by 1.7%, but workers now work 51 minutes (2.7%) less per week on average.


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