What is the unemployment rate and how does it impact employers and job seekers?

What is the unemployment rate?

The unemployment rate basically means the percentage of people who are currently without a job but are actively seeking one.

It is a valuable indicator of a nation’s economic stability and the health of the job market, letting us know whether there are enough job opportunities available to absorb most of the people looking for work.

Countries with low unemployment rates are generally seen as having a strong economy. As increased employment often translates to a higher household income, meaning people can provide for their families and will likely have more money to spend. And with more economic activity, businesses grow and more jobs are created. Keeping the cycle going.

Australia’s unemployment rate is sitting at 3.8%, which is a dramatic decrease from January’s 4.1%. While, New Zealand’s unemployment rate is sitting at 4.0%.

What factors influence the unemployment rate?

1. Economic cycles: During economic downturns, such as recessions, the unemployment rate typically rises as businesses reduce hiring or lay off workers to cut costs. Conversely, during periods of economic expansion, job opportunities increase, leading to a decline in the unemployment rate.
2. AI and technological advancements: In our 2023 Salary Guide, we found that although majority of people are excited about the impact AI will have on their role, 31% are concerned. This is because while new technologies create new job opportunities, they may require different skills, leading to temporary unemployment for those lacking in-demand skills.
3. Structural changes: Shifts in industries or demographics can impact the unemployment rate. For example, the decline of manufacturing jobs in favour of service-oriented industries can affect regional unemployment rates.
4. Government policies: Government interventions, such as fiscal stimulus packages or changes in labour laws, can influence the unemployment rate by affecting business confidence, investment decisions, and hiring practices.

How does a low unemployment rate affect job seekers?

• There will be increased job opportunities: In a low unemployment environment, job seekers have a higher likelihood of finding employment as the number of vacancies greatly outweighs the number of people looking for them.
• Candidates will have greater bargaining power: With fewer candidates available, employers can be desperately looking to fill roles so job seekers may have increased bargaining power in negotiating salaries, benefits, and job perks.
• Skill development: As employers will be focusing on retaining their current employees, so they may invest more in training and development programs so they don’t lose them to competitors.

How does a low unemployment rate affect employers:

• There will be talent shortages: With a lot less people applying for jobs, finding the right candidates to fill vacancies will be a lot harder, particularly in industries or regions where specific skills are in high demand. The focus needs to shift to retention efforts, and companies will need to invest in their people.
• There will be increased competition: Employers will need to make their offer stand out amongst the crowd. Qualified talent will have options and will be looking for more than just a bigger salary, so employers will need to think outside the box in their hiring strategies.
• Pressure on profit margins: Rising labour costs associated with recruiting and retaining employees can put pressure on profit margins, especially for small businesses with limited resources.

Want to learn more about your local job market?

In Australia and New Zealand low unemployment means although there are more opportunities for job seekers to find fulfilling work, employers will need to stay competitive and put their best foot forward in order to find the right people.

Reach out to your local Frontliner to learn more about your local job market.