Unemployment rises to 5.4%: Seven insights for property investors and buyers
As the Commonwealth Bank’s chief economist Michael Blythe says, the RBA pays “a lot of attention” to the unemployment data – and so should property investors and buyers.
Most home owners need to have a job in order to secure and pay off their mortgages.
Unemployment rose – as expected – by 0.1 percentage points over November to 5.4%, but there’s more to the monthly labour force data than just the change to the headline unemployment rate.
Here are seven points to ponder from the December figures:
Nationally, employment is trending upwards
On trend measures (rather than using seasonally adjusted figures) employment is trending upwards at a modest pace, with 7,000 jobs added. According to bullish HSBC chief economist Paul Bloxham, the trend data “cuts through the month-to-month noise”. Rising employment could temper the RBA’s eagerness to cut the cash rate. Bloxham is the only bank economist tipping the cash rate to rise to 3.25% this year.
However, a fall in the participation rate is masking higher unemployment rate
The participation rate (those employed or unemployed but looking for a job) was flat in December but is trending down. Westpac points out that if the participation rate were holding closer to its average since March 2008, then the unemployment rate would now be around 6% rather than 5.4%.
Employment is growing in some non-mining sectors
Looking at December quarter data (October, November and December combined), Bloxham points out that employment is rising in some of the “exchange rate sensitive industries” including manufacturing, as the “effect of the high Australian dollar starts to wear off”. Again this suggests the economy may be starting to rebalance away from mining, suggesting a wider economic recovery.
But unemployment is rising in Queensland and is at 6.2%
Those hopeful of a recovery in house prices in south-east Queensland should keep in mind that the state still has the highest unemployment rate on the mainland, well above the national average, and that it rose by 0.1 percentage points to 6.2% while the national unemployment rate fell. Westpac labelled the Queensland December unemployment result as “very poor”. The state’s unemployment rate has been above 6% since August last year – a drop in this rate could bode well for a pick-up in demand for housing, but should it continue to remain elevated a recovery could be further off.
Unemployment rate lowest in WA, but higher than six months ago
The biggest beneficiary of the mining boom, Western Australia, has the lowest unemployment rate of any state or territory at 4.3% – well below the national average. Six months ago, though, WA had an unemployment rate of 3.5%. ANZ notes that employment growth in Western Australia was strong over 2012 but “moderated towards the end of the year as the iron ore price fell sharply and the global outlook became more uncertain. Strong population growth has meant that the unemployment rate has increased a little in WA as a rising share of jobseekers has not found work”.
NSW employment trending upwards
NSW employment growth is up a solid 1.6% year-on-year, with ANZ noting that this was accompanied by a “broadly unchanged jobless rate over the year”. This bodes well for expectations of moderate recovery in house prices in Sydney and other parts of the state in 2013.
Unemployment rate among youngest-seeking work at 14.1%
Loans to first-home buyers fell from 18.7% to 15.8% over November according to ABS housing figures. December unemployment figures show that those aged between 16 and 24 seeking full-time work, the unemployment rate stands at 14%, up from 13.5% in November. A year ago the unemployment rate for this category of prospective workers was 13.3% and it was less than 10% before the GFC – many of these people seeking work are potential first-home buyers.
