In the first half of 2023, the labor market initially remained tight, although various indicators indicated it was not as constrained as in late 2022.
The unemployment rate remained close to a historic low of 3½ percent since mid-2022, with most states reporting rates below 4 percent. Cyclical unemployment, a measure closely linked to wage growth, had a slight uptick recently but still remained low. Long-term unemployment reached its lowest level in decades, with many long-term unemployed individuals finding jobs; however, there was a recent rise in the proportion of long-term unemployed people leaving the labor force.
While there was a slight increase in broader measures of labor underutilization in recent months, they remained at multi-decade lows. This was primarily driven by a rise in underemployment (people working fewer hours than desired), which also stayed near historic lows. The tight labor market was also reflected in reduced job mobility, which returned to levels observed before the COVID-19 pandemic. Employment growth stayed strong in the June quarter, keeping pace with the growth in the working-age population, leading to a record high employment-to-population ratio. The workforce participation rate remained near its peak, driven by women and young people entering the labor force. Population growth and people taking on additional jobs further supplemented labor supply.
The Australian economy experienced a significant growth slowdown from mid-2022, with GDP growth in the March quarter falling below pre-pandemic averages due to factors such as higher living costs, increased interest rates, and earlier declines in wealth. While consumption and housing investment slowed, business investment remained robust, and the rebound in international students and tourists boosted net exports. However, the bounce-back in imports as supply chain issues eased offset some of these gains. The economy grew nominally due to higher domestic prices and improved terms of trade, even though GDP per capita decreased as population growth outpaced output growth. Timely indicators suggested continued subdued domestic activity through mid-2023.
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