Labour Market

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<p>The rapidly improving labour market is likely to spur confidence and housing affordability, adding upward pressure to already strong house prices, according to Archistar chief economist Dr Andrew Wilson.</p>

<p>His comments come after the Australian Bureau of Statistics unveiled a sharp fall in jobless rates for February, to near-pre-COVID levels.</p>

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<p>“The unemployment rate has fallen sharply over February and is now remarkably within striking distance of pre-COVID shutdown levels, less than a year from the commencement of the pandemic.</p>

<p>“The ABS reports that the national unemployment rate seasonally adjusted fell sharply by 0.5% over February to 5.8% - the lowest rate since the pre-covid result of 5.2% recorded over March 2020.</p>

<p>“The number employed nationally has now almost recovered to pre-covid levels to be now down by just 1800 since March 2020."</p>

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<p>Dr Wilson noted all states reported falls in the jobless rate over February with QLD the best performer falling by 0.8%. NSW and VIC reported the lowest jobless rates at 5.6%.</p>

<p>“Capital city housing markets have recorded strong buyer demand this year so far with prices rising sharply – particularly in Melbourne and Sydney.," he said.</p>

<p>“And concerns over the possible significant negative impact on the economy of the tapering of the Job Keeper allowances at the end of this month will also likely to be to be misplaced – again.”</p>
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The rapidly improving labour market is likely to add upward pressure to already strong house prices, according to Archistar chief economist Dr Andrew Wilson.

jchancellor

Low unemployment to add upward pressure on house prices

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<p><span>GUEST OBSERVER</span></p>
<p><span>Today's Australian jobs numbers surprised a little to the downside, with a drop of -5k jobs in September (market had +10k), while the unemployment rate was steady and in line with expectations at 6.2%.</span></p>
<p><span>The unemployment rate has now been broadly steady between 6.0-6.4% for the past 16 months. The official labour market numbers are broadly in line with other surveys, including job advertisements, vacancies and hiring intentions, which have all shown a gradual improvement in labour demand since their trough in early 2014.</span></p>
<p><span>This gradual improvement is consistent with the RBA's own forecasts. We expect the RBA to be on hold in coming quarters.</span></p>
<p><span>Facts</span></p>
<p><span>Employment fell by -5.1k in September (market and HSBC expected +10k). Over the past six months, employment growth has averaged +15k a month. Annual employment growth was unchanged from August, at 2.0% y-o-y.</span></p>
<p><span>The participation rate fell by 0.1ppt to 64.9%. The recent trough in participation was 64.5% in October 2014.</span></p>
<p><span>The unemployment rate was unchanged at 6.2%, in line with expectations and also exactly where it was one year ago. The unemployment rate has been between 6.0% and 6.4% for the past 16 months, during which time the trend unemployment rate has been steady at 6.1-6.2%.</span></p>
<p><span>Total hours worked lifted by 0.7% in September, with annual growth rising to 2.5% y-o-y. This is the fastest pace of growth since the year to October 2011.</span></p>
<p><span>Implications</span></p>
<p><span>Although the monthly jobs print was weaker than expected (-5k), the unemployment rate is still continuing to track sideways, rather than rise. Looking through the month-to-month volatility, these numbers suggest continuation of the status quo. The labour market has stabilised but there is not quite enough momentum to get the unemployment rate to fall.</span></p>
<p><span>Given recent measurement challenges in the official numbers it is also important to put them in the context of the full range of jobs indicators (see charts below). These measures are showing a broad trend of gradual improvement in labour market conditions.</span></p>
<p><span> Job advertisements rose in September, continuing the upward trend that has been apparent since early 2014. The ABS quarterly job vacancies survey shows a similar trend and continued to rise in Q3. Both of these surveys are showing gradual improvement, although the pace is slower than in previous cycles. </span></p>
<p><span>The consumer sentiment survey has also recently shown a sharp fall in households' expectations of unemployment. This suggests that the labour market is not a key constraint on households' spending decisions. </span></p>
<p><span>From the RBA's perspective, today's numbers are unlikely to be surprising. Along with other indicators, they confirm that the labour market is stabilising, consistent with the RBA's own forecast for a steady unemployment rate in coming quarters. </span></p>
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<p><em><a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">Paul Bloxham</a> is chief economist (Australia and New Zealand) for HSBC. Daniel Smith is e<span style="line-height: 1.3em;">conomist, </span><span style="line-height: 1.3em;">HSBC.</span></em></p>
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Unemployment steady, labour market remains stable: HSBC's Paul Bloxham

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<p><span>GUEST OBSERVER</span></p>
<p><span>Labour market statistics are among the most valuable pieces of data we analyse to gauge the health and strength of an economy. </span></p>
<p><span>Trends in the labour market influence virtually every part of an economy. And they have a major impact on monetary and fiscal policy decisions as well as the functioning of society more generally. </span></p>
<p><span>The latest ABS employment report allows us to draw a line under the sand on how the Australian labour market performed over 2016. It also provides a good stepping off point for thinking about how conditions in the labour market will evolve over 2017. </span></p>
<p><span>In this note we take a frank look at how the Australia labour market performed over the past twelve months. We analyse key metrics like employment, unemployment, participation and hours worked. And we take a brief look at outcomes by state. We conclude by presenting our views on what we think is in store for the labour market over 2017 and what it means for policy. </span></p>
<p><span>1. Employment </span></p>
<p><span>We kick off with employment growth because job creation goes hand in hand with output growth (chart 1). Throughout 2016 average monthly employment growth was significantly lower than in was in 2015. The average monthly gain was 7.1k which is a third less than it was in 2015 (chart 2). As a result, annual employment growth in the year to December 2016 slowed to 0.9 percent compared with 2.5percent the previous year. And unsurprisingly, output growth eased over 2016. The latest national accounts put annual GDP growth at a below trend 1.8 percent in QIII 2016.</span></p>
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<p>In addition to soft employment growth, the composition of jobs growth has been suboptimal. Part-time employment was the sole driver of jobs growth over 2016 (chart 3). The ABS estimates that part-time employment lifted by 126k over 2016 while full-time jobs fell by 34k. To be fair, there was a pickup in full-time jobs over the December quarter which provides a glimmer of hope that things may be improving. But over the calendar year as a whole, the news was ordinary for those seeking full-time work.</p>
<p>To recap, a worker is deemed to be employed full-time if they are working more than 35 hours a week. Working between 1 and 35 hours a week means a worker is considered part-time. So a part-time worker could be working a significant number of hours or hardly working at all.</p>
<p>The latest figures show that a part-time employee works on average 17.0 hours a week. A full-time worker on average clocks up 39.2 hours. Having this data enables us to calculate full-time equivalent (FTE) employment growth and the news here is particularly sobering (chart 4). On our calculations, FTE employment growth was flat in the year to December 2016. In other words, the Australian economy created no FTE jobs over 2016. This should concern policymakers because growth in FTE jobs should be a lot higher (1 percent or above) to take into account new entrants into the labour market. It’s therefore no surprise that Australia has near record higher underemployment (see section 3). </p>
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<p>2. Unemployment</p>
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<p><span>It’s fair to say that from where we were 18 months ago, </span><span>the decline in the unemployment rate has bettered RBA and market consensus forecasts which previously had it stuck above 6 percent over 2016 and 2017. But before we get carried away, the unemployment rate moved a little lower over the year purely because of a fall in participation (see section 4). </span></p>
<p><span>Australia has a strong population growth rate and generally needs to generate at least 15k a jobs a month to stop the unemployment rate rising. But over 2016 the economy was generating half as many jobs a month and yet the unemployment rate moved marginally lower. This is reconciled by a fall in participation. On our calculations, the unemployment rate would have risen to around 6.2 percent if the participation rate has remained constant. </span></p>
<p><span>The slight downward trend in the unemployment rate has had a positive impact on job security concerns (chart 6). The WBC MI monthly gauge on unemployment rate expectations moved down a little over 2016 (a decrease indicates that respondents are less pessimistic about the labour market). This helps to loosen the consumer purse strings and since the spending of one person is the income of another, we also welcome the fall in job security fears. </span></p>
<p><span>There is more work to be done, however, because the unemployment rate is still above the level we associate with full employment (around 5 percent) and job security fears are still quite elevated even though they have been receding. Further, the unemployment rate in Australia is higher than the equivalent rate in the US, Japan and the UK </span><span>– </span><span>three economies that Australia is generally assumed to be doing better against (chart 7). </span></p>
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<p><span>3. Underemployment and underutilisation </span></p>
<p><span>In the past the unemployment rate was deemed sufficient to measure labour market slack and therefore very little air time was given to the underemployment rate. But over the p</span><span>ast two years it’s become increasingly fashionable to talk </span><span>about the underemployment </span><span>rate because it’s been rising while the </span><span>unemployment rate has been falling. Underemployment provides a gauge of the proportion of people who are employed but whose labour is not fully utilised. That is, they have a job but </span><span>want to work more and can’t find the work. </span></p>
<p><span>The </span><span>underemployment rate largely tracked sideways at around 8.4% over 2016 which is near its record high. This is undesirable and means spare capacity in the labour market is a lot higher than the unemployment rate implies. </span></p>
<p><span>The sum of the unemployment rate and the underemployment rate produces the underutilisation rate which is the broadest measure of spare capacity in the labour market </span><span>– </span><span>it has been stuck above 14 percent for the past 18 months (chart 8).</span></p>
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<p>The number of additional hours of work wanted by underemployed workers has been stable at around two days (or a little under 15hrs) per week since the mid- 2000s. This compares with unemployed people who are on average looking for an additional 33 hours per week1. To put it in layman’s terms, at the end of 2016,  </p>
<p>8 1⁄2 percent of the Australian workforce wanted to work two more days per week than hey are currently working and 5 3⁄4 percent of the workforce were out of a job and wanted one. These numbers are too high and should concern policymakers.</p>
<p>There is a large pool of the workforce who either need work or want more work. </p>
<p>Having the information on hours of additional work sought enables us to construct an adjusted underutilisation rate. To do this we weight the underemployment rate to take account of the average underemployed person seeking 15hrs a week work compared with 33hrs for an unemployed person. This measure provides the purist measure of spare capacity in the labour market. It moved a touch lower over 2016 from 9.7 percent to 9.5 percent but it is very high by our historic standards and presently sits above the level hit during the GFC. In fact, you have to go back to the late 1990s for the last time the adjusted underutilisation rate was so high.</p>
<p>The data shows that the economy is operating well below its capacity and there is an output gap. As we have covered previously, this has dragged down the pace of wages growth and inflation.</p>
<p>4. Employment to population and participation</p>
<p>The share of the Australian workforce in a job trended down over 2016. The employment to population ratio ended the year 0.4ppts lower at 60.9 percent (chart 9). This shift downwards basically reflects employment growth running below population growth. Normally that would be associated with the unemployment rate drifting higher, but a decline in the participation rate has allowed the unemployment rate to grind lower. A declining participation rate and flat employment to population ratio means that the downward trend in the unemployment rate is overstating the relative strength of labour demand.</p>
<p>The participation rate fell over 2016 for cyclical and structural reasons .</p>
<p>The cyclical force dragging the participation rate lower over the year largely reflects the discouraged job seeker syndrome. The participation rate fell sharply over 2016 in the mining states of WA and QLD (chart 10). And more so for men than women. The big downturn in mining-related investment has greatly reduced job prospects for workers in these states. Some workers appear to have given up looking for employment and have left the workforce. As a result, the participation rate has fallen. </p>
<p>Structurally, the ‘grey army’ – those aged 65 and over – have continued to grow as a share of Australia’s population. This story will continue to play out over a long period of time and it will drag the participation rate down. Basically, the ageing of the population has increased the dependency ratio (the age-to-population ratio of those typically not in the labour force). This underpins the need for fiscal reform.</p>
<p>There is a misconception that Australia’s immigration policy will help to offset the impacts of the growth in the dependency ratio. It works in the short term, but it’s not a long term solution. As the Productivity Commission argued in April 2016, “the continuation of an immigration system oriented towards younger working- age people can boost the proportion of the population in the workforce and, thereby, provide a ‘demographic dividend’ to the Australian economy. However, this demographic dividend comes with a larger population and over time permanent immigrants will themselves age and add to the proportion of the population aged over 65 years.” In other words, it’s a policy more akin to kicking the can down the road. </p>
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<p>5. Hours worked</p>
<p>Hours worked, as you would expect, is strongly correlated with output, consumption and employment growth. It is also a key input into examining productivity growth because we can measure output per hour (or unit of labour).</p>
<p>Monthly aggregate hours worked is quiet volatile so we look to the annual change in trend terms to best gauge what’s been happening in that space (chart 11). The </p>
<p>news is not good. But it’s not surprising given what the other indicators of the labour market aforementioned are suggesting.</p>
<p>The data indicates that total hours worked was just 0.4 percent higher in the year to December 2016. This is weak given population growth is running at 1.4%. As such, hours worked per capita fell over 2016 to a multi-decade low (chart 12). In fact, you have to go back as far as the recession of the early 1990s for when per capita hours worked was as low as it is now. This trend is concerning because it means that unless there is a big lift in productivity, output per worker will be weak along with per capita income. It’s no wonder that there has been no meaningful improvement in Australia’s fiscal position given per capita hours worked has been falling. As we covered back in October, the performance of the Australian economy looks far from spectacular on a per capita basis.</p>
<p>Labour market by state</p>
<p>Back in November we flagged that Australia has a new “two-speed” economy that comprises: (i) NSW and Victoria (driven largely by Sydney and Melbourne); and (ii) the rest of Australia (see here). The evidence is in, among other things, the labour market.</p>
<p>There has been little in the way of jobs growth outside of NSW and Victoria (charts 13 and 14). Employment growth in the Garden State has powered along, driven in part by particularly strong population growth. Jobs growth has slowed in NSW, but Australia’s Premier State put on a lot of jobs in late 2015/early 2016 and the unemployment rate is close to the level we would associate with full employment.</p>
<p>On the other hand, the impact of the downturn in mining investment is particularly evident in the labour markets of Australia’s two resource-rich states. Employment growth in QLD is down a sizeable 1.4% through the year to December 2016 while it’s down by a similar amount in WA. Things have picked up in SA and employment growth is running at a respectable pace. Jobs growth in Tasmanian remains soft but things improved a little in the second half of 2016.</p>
<p>The unemployment rates across the states vary just like the employment data (chart 15). The unemployment rate has trended lower in NSW and sits at a healthy 5.0%. In Victoria, despite solid jobs growth, the unemployment rate ended 2016 unchanged on a year earlier at 5.9% because of a rise in participation. For the rest of the country, the unemployment rate sits at or above 6.0%. The trend is WA is particularly concerning given the unemployment rate has been moving north. It ended the year 0.6ppts higher at 6.7%. </p>
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<p>What can we expect in 2017?</p>
<p>Our frank assessment is that the labour market was soft over 2016. But there are tentative signs that things may be a little better in 2017, at least in the near term. More specifically, jobs vacancies and business surveys are pointing to a lift in employment growth.</p>
<p>The latest NAB Business Survey (January) showed a material jump in the employment conditions indicator (chart 16). This index has historically had a high correlation with the ABS labour force data. It currently sits at its highest level since 2011 which points to a near term lift in employment growth. The rise in the employment index is consistent with a lift in capacity utilisation which provides a source of optimism for business investment - an essential ingredient to long-run job creation. The ANZ jobs vacancies series also posted a solid rise in January (4.0%) and annual growth accelerated to its strongest pace since August 2016.</p>
<p>In addition to the business surveys, the lift in commodity prices over the latter part of 2016 is flowing through to export receipts which filters through to domestic  income. Higher income growth supports consumption which ultimately underpins the demand for labour. So there are some causes for optimism.</p>
<p>But equally, there are plenty of risks. The rate cut chamber only has a few bullets left and even then, the ability of monetary policy to stimulate genuine economic activity from here is questionable. Consumer confidence is still fragile and the geopolitical backdrop suggests that the global economic outlook contains more uncertainties than usual. So while the business surveys suggest that near term employment growth should improve, that picture can change quite quickly, particularly given that the improvement in business confidence and increase in capacity utilisation has yet to translate into actual investment.</p>
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<p><span>What does it mean for monetary policy </span></p>
<p><span>In our view, trends in the labour market are the one to watch in 2017 for clues on the next move in rates. Market participants became fixated on the inflation data throughout 2016 because the RBA eased twice, in May and August, when core CPI came in below target. But since Governor Lowe has been in the top job, inflation has continued to print below target and yet rates have remained unchanged. Concerns around the further build-up of household debt and strong dwelling price growth mean that it would take a slowdown in employment growth (or lift in the unemployment rate) for Lowe to entertain the idea of taking the policy rate lower. </span></p>
<p><span>We think that jobs growth will be sufficient to keep the unemployment rate crabbing sideways which should fend off calls for rate cuts. The risk, however, sits with easing over the next six months while ever inflation is below target. Labour market slack needs to be gobbled up before we start to see wages </span><span>growth lift. And in our view, that’s some </span><span>way off. As such, talk of rate rises is premature and we cannot see the case for the policy rate rising over the next year. </span></p>
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<p class="p1"><span class="s1"><em>Gareth Aird is economist at Commonwealth Bank and can be contacted </em><a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/gareth-aird/14/790/905"><span class="s2"><em>here</em></span></a><em>.</em></span></p>
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Labour market trends the clue to future rate cuts: Gareth Aird

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<p>GUEST OBSERVER</p>
<p>In the second half of 2016 employment growth significantly overshot our preferred leading indicators.</p>
<p>So we were not surprised, in fact we had been expecting such a shift, that in the first three months of 2016 (slide 5), the ABS reported total employment rising an average of just 5.6k per month taking the annual pace down to around 2 percent yr from the Nov 2015 peak of 3.0 percent yr.</p>
<p>From a significant outperformance compared in our preferred near-term employment indicator, the Westpac Jobs Index (slide 6), employment growth quickly fell to be more in line with it.</p>
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<p>The June Labour Force Survey continued this softer 'trend' with a 7.9k rise in total employment. Westpac was forecasting +10k while the market was expecting +12k. Total employment has lifted 225.0k in the year (or 1.9%yr) and while full-time employment bounced back in the month (+38.4k) and part-time fell 30.6k, annual growth in part-time employment continues to outpace full-time employment (134.4k/3.7 percent yr vs. 90.6k/1.1 percent yr).</p>
<p>We believe that the shift to part-time employment is likely to be more about the sectors are expanding and contracting rather than any significant change to employment arrangements. It is a similar situation for employment by gender with female employment rising 136.2k in the year (2.5 percent yr) compared to the 88.8k (1.4 percentyr) rise in male employment.</p>
<p>It is possible that uncertainty around the Federal election may have held back the employment gains in July.</p>
<p>In addition, the ABS notes that the July outgoing rotational group for the sample has a higher than average attachment to the labour force. If the in group rolling is more average, this could lead to a softer employment print but not necessarily a higher unemployment rate.</p>
<p>So it may be tempting to forecast a soft employment gain, our Jobs Index continues to strengthen suggesting we are in store for a pick-up in employment. Westpac’s July forecast for +25k total employment has the annual rate easing back a touch to 1.8%yr. However, this is more about base effect than the start of a meaningfully softer trend. The participation rate rose 0.1ppt in May to 64.9. Westpac is forecasting the participation to be flat in June (slide 7). </p>
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<p>Participation did rise through 2015, due in a large part, to rising participation in NSW and, in particular, by females. We have seen a very modest moderation so far in 2016 and the big question for 2016 is can NSW hold this overall higher rate of participation as males participation in that state continues to trend lower? (slide 8).</p>
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<p>Our July forecast for flat participation combined with a solid employment number should be enough to hold the unemployment rate at 5.8%. (slide 9)</p>
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<p><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%208.37.55%20AM.png" alt=""></p>
<p>The March and April Labour Force Surveys revealed a cautionary sign in a sudden decline in hours worked but so far, this has not turned into similar downturn in employment (slide 10).</p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%208.39.01%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%208.39.01%20AM.png" alt=""></p>
<p>While hours worked per person, particularly for full-time employees, has weakened in the last year it does appear that the worst as the slide in hours worked has not led a correction in employment. (slide 11).</p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%208.39.52%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%208.39.52%20AM.png" alt=""></p>
<p>The ABS publishes their own measure of unemployment expectations and this lifted through Q1 which was a worry as this can point to a possible rise in unemployment (slide 12).</p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%208.41.01%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%208.41.01%20AM.png" alt=""></p>
<p>However, the Q2 update reveals this as a temporary blip just as the Westpac–Melbourne Institute Unemployment Expectations Index suggested it would be (slide 13). </p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%208.41.56%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%208.41.56%20AM.png" alt=""></p>
<p>The Westpac–MI Index is pointing to the labour market improving in the near term at least in regards to the unemployment rate (slide 14).</p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%208.42.44%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%208.42.44%20AM.png" alt=""></p>
<p>The Westpac–MI is also useful for gauging how much hours worked may be over/under shooting relative to expectations and thus point to turning points in hours worked momentum. (slide 15) (slide 16).</p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%208.43.45%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%208.43.45%20AM.png" alt=""></p>
<p><a href="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%208.44.37%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/08/16/Screen%20Shot%202016-08-16%20at%208.44.37%20AM.png" alt=""></p>
<p>Outside of NSW it seems we have passed an inflection point for growth in hours worked. </p>
<p><em>Justin Smirk is ‎senior economist, Westpac Group and can be contacted <a href="https://www.westpac.com.au/about-westpac/westpac-group/" target="_blank">here</a><a href="https://wibiq.westpac.com.au/wibiqauthoring/_uploads/file/Australia/2016/August/er20160517JulyPreview.pdf">.</a></em></p>
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Labour market improving in the near term: Justin Smirk

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<p><span>GUEST OBSERVER</span></p>
<p><span>From the outset it should be stated that the labour market is in pretty good shape. </span></p>
<p><span>The unemployment rate remains at a 2½-year low and jobs are still being created. However it is pretty clear that there is a slowdown in hiring taking place. And the consolidation in employment is consistent with the softer conditions across the economy over the past couple of months.</span></p>
<p><span>Not only is has there been a fall in full time jobs over the past two months, but weakness in </span><span>hours</span><span>worked</span><span> is more telling. </span><span>Hours</span><span>worked</span><span> has fallen for the past three months and in annual terms is now down 0.5 per cent on a year ago. Now that may not sound like much but it is the first annual fall in </span><span>hours</span><span>worked</span><span> in almost three years. Interestingly in trend terms (a more smooth measure), employment may have risen for 29 consecutive months but the jobs growth of just 4,100 in April was the weakest in 19 months.</span></p>
<p><a href="/images/2016/05/18/Screen%20Shot%202016-05-19%20at%203.47.50%20PM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2016/05/18/Screen%20Shot%202016-05-19%20at%203.47.50%20PM.png" alt=""></span></p>
<p><span>After racking up almost 300,000 new jobs in 2015, there was likely to be inevitable period of consolidation. And the volatility in financial markets in the early part of 2016 was unlikely to see businesses commit to significant hiring. The fact that we are still adding jobs is a positive and while we expect employment to strengthen over 2016, it is likely that employers will be more circumspect in hiring given the upcoming Federal Election.</span></p>
<p><span>The Reserve Bank discussed the more mixed labour market signals at their last Board meeting ahead of cutting interest rates. Given the softer set of economic data no doubt policymakers will place more emphasis on labour market data in coming months.</span></p>
<p><span>The Reserve Bank will be hoping for a lift in activity levels particularly once the election gets out of the way. The key will be the inflation data, due on July 27. A super low inflation result would allow the Reserve Bank to contemplate another rate cut – in effect asking the question whether the economy could run at a faster pace without creating asset bubbles. We expect rates to be cut once again in August.</span></p>
<p><span><strong>What do the figures show?</strong></span></p>
<p><span><strong>Labour force:</strong></span></p>
<p>Employment rose by 10,800 in April after rising by 25,700 in March (previously reported as a rise in jobs of 26,100). Full-time jobs fell by 9,300 while part-time jobs rose by 20,200. Economists had tipped a 20,000 increase in jobs.</p>
<p>Hours worked fell by 1.1 per cent in April. Hoursworked are down by 0.5 per cent over the year – marking the first annual decline in hoursworked in almost 3 years.</p>
<p><span>The unemployment rate held steady at a 2½-year low of 5.7 per cent in April (lowest since September 2013). The trend unemployment rate fell from 5.8 per cent to 5.7 per cent – a 31-month low.</span></p>
<p>The participation rate eased from 64.9 per cent to 64.8 per cent.</p>
<p>A total of 244,700 jobs were added over the year to April. The annual growth rate rose from 2.0 per cent to 2.1 per cent. In trend terms, employment has risen for 29 consecutive months although the jobs growth of 4,100 in April was the weakest in 19 months.</p>
<p><span>The working age population rose by 21,700 in April. The working age population rose by 288,900 over the past year. The working age population is up 1.5 per cent over the past year.</span></p>
<p><span>Unemployment across states in April: NSW 5.3 per cent (March 5.3 per cent); Victoria 5.6 per cent (5.7 per cent); Queensland 6.5 per cent (6.2 per cent); South Australia 6.8 per cent (7.1 per cent); Western Australia 5.6 per cent (5.5 per cent); Tasmania 6.3 per cent (6.8 per cent). In trend terms unemployment in the Northern Territory rose from 4.4 per cent to 4.5 per cent; ACT unemployment fell from 4.2 per cent to 4.1 per cent.</span></p>
<p><span>Jobs across states and territories in April: NSW +8,400; Victoria +100; Queensland -5,600; South Australia +5,400; Western Australia +700; Tasmania unchanged. Trend terms: Northern Territory -100; ACT unchanged.</span></p>
<p>Why is the data important?</p>
<p><span>The Labour Force estimates are derived from a monthly survey conducted by the Bureau of Statistics. The population survey is based on a multi-stage area sample of private dwellings (currently about 22,800 houses, flats, etc.) and a sample of non-private dwellings (hotels, motels, etc.). The survey covers about 0.24 per cent of the population of Australia and includes all people over 15 years of age, except defence personnel.</span></p>
<p><span>If more people are employed, then there is greater spending power in the economy. But at the same time companies may adjust the work </span><span>hours</span><span> of employees. If employees work less </span><span>hours</span><span>, and therefore get paid less, then spending power in the economy is reduced.</span></p>
<p><span><strong>What are the implications?</strong></span></p>
<p><span>Labour market conditions have certainly improved over the past 18 months; business conditions are healthier; profitability has improved; and more importantly the housing sector is providing significant support to an array of industries. However the upcoming election has resulted in a more cautious tone across the economy.</span></p>
<p><span>The fact that the national unemployment rate is holding at 5.7 per cent – the lowest levels in 2½ years – will provide a big boost to confidence amongst Aussie consumers. And as we saw over the latter part of 2015, job security plays a big part in household consumption. However with a lack of wage growth, household real incomes could face pressure over the medium term and that is likely to be another reason why we expect that the Reserve Bank will contemplate another rate cut in August.</span></p>
<p><span><em>Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a></em></span></p>
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First annual decline in hours worked in 3 years: CommSec's Savanth sebastian

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<p>GUEST OBSERVER</p>
<p>Population growth is bouncing of the slowest annual pace in almost 10 years.</p>
<p>If population is growing near 1.3 percent, we will need productivity growth near 1.7 percent to maintain the “speed limit” of the economy at 3 per cent. As the Reserve Bank has intimated, the speed limit of the economy has probably come down to a rate closer to 2.75 per cent.</p>
<p>Victoria is still the population leader. You have to go back to 1888 to find a time when Victoria held the position of the state with the fastest population growth. In fact population in Victoria is growing at the fastest pace in six years. In comparison Western Australia and South Australia have the weakest annual population growth rates in 12 and 11 years respectively. A result that resonates with the slowdown and weakness in the driven mining states. Only NSW and Victoria now have an annual population growth rate above long-term averages – important in absorbing the record amount of homes being built.</p>
<p><a href="/images/2016/06/24/Screen%20Shot%202016-06-24%20at%2010.14.31%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/06/24/Screen%20Shot%202016-06-24%20at%2010.14.31%20AM.png" alt=""></p>
<p>It is clear the labour market was the stellar performer over 2015. But there have been a number of signs that employment growth is now in the midst of a consolidation. Job advertisements have shown signs of consolidating in the past couple of months while the monthly employment statistics suggest employment growth has softened. Interestingly the data by industry provides a telling breakdown about where the jobs are being created. Over the three months to May employment grew by almost 47,000. Overall 10 of the 19 industry sectors recorded job gains in the past three months, with the hiring dominated by Healthcare &amp; social assistance, Wholesale trade and Accommodation &amp; food services.</p>
<p><a href="/images/2016/06/24/Screen%20Shot%202016-06-24%20at%2010.16.03%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/06/24/Screen%20Shot%202016-06-24%20at%2010.16.03%20AM.png" alt=""></p>
<p>Overall the labour market remains relatively upbeat. The lift in consumer confidence and business conditions should boost spending, investment and employment once the election is out of the way – a result that should see the jobless rate trend lower to 5.5 per cent by the end of this year.</p>
<p>  Healthcare remains the biggest employer and was also the biggest job creator over the past year. Interestingly Finance &amp; insurance, Construction and Retail were amongst the major employers over the past year – a result that resonates with the lift in activity across the economy.</p>
<p>What does the data show?</p>
<p>Industry employment:</p>
<p>Employment rose by 46,700 over the three months to May after a gain of 4,000 in the previous three months.</p>
<p>Over the past year employment lifted by 224,000 well above the decade average of 190,600.</p>
<p>Employment rose in 10 of the 19 industry sectors. Employment rose most in Health Care and Social Assistance (up 40,700), followed by Accommodation and Food Services (up 20,100) and Wholesale trade (up 17,500).</p>
<p>In the quarter, the number of jobs fell the most in Professional, Scientific and Technical Services (down 34,800), followed by Retail Trade (down 21,900), and Administrative and Support Services (down 18,800).</p>
<p>Healthcare remains the biggest employer with 1.6 million employees (13 per cent of the total) followed by Retail Trade (1.3 million jobs or 10.5 per cent) and Construction (1.08 million or 9.1 per cent).</p>
<p>Population Statistics: </p>
<p>Australia’s population expanded by 326,100 people over the year to December 2015 to 23,940,300 people.</p>
<p>Overall, Australia’s population growth rate rose from a 10-year low of 1.36 per cent to 1.38 per cent.</p>
<p>Australia’s population grew by just 71,300 people over the December quarter – the weakest quarterly result in 41⁄2-years.</p>
<p>A total of 177,000 people migrated to Australia over year to December, well down on the 315,700 peak migrants in the year to December 2008.</p>
<p>There were 305,300 babies born in the past year, just shy of the record 312,200 births in the year to December 2012.</p>
<p>Over the past year population growth was the strongest in Victoria (1.87 per cent – the fastest growth in 6 years), followed by NSW (1.40 per cent), the ACT (1.36 per cent), Queensland (1.26 per cent), Western Australia (1.20 per cent – weakest in almost 13 years), South Australia (0.66 per cent –weakest in 11 years), Tasmania (0.41 per cent) and the Northern Territory (0.35 per cent).</p>
<p>Population growth is above decade averages in NSW (7 per cent) and Victoria (5.6 per cent).</p>
<p><a href="/images/2016/06/24/Screen%20Shot%202016-06-24%20at%2010.18.45%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/06/24/Screen%20Shot%202016-06-24%20at%2010.18.45%20AM.png" alt=""></p>
<p>What is the importance of the report?</p>
<p>Demographic Statistics are issued by the Bureau of Statistics each quarter. The figures include estimates of births, deaths, in-bound and out-bound migration movements and estimates of population change by State.</p>
<p>The Australian Bureau of Statistics (ABS) provides detailed labour market figures one week after releasing ‘top level’ statistics of employment &amp; unemployment levels across states and territories. The detailed data is useful in identifying broader underlying trends and instructive about the health of the economy. </p>
<p>What are the implications for interest rates and investors?</p>
<p>The latest data has few implications for interest rate settings. But if population growth remains soft, the Reserve Bank may need to make further adjustments to economic growth assumptions.</p>
<p>CommSec expects the Reserve Bank to cut interest rates again in August. </p>
<p><em>Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a>.</em></p>
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Baby boom; Healthcare leads hiring: CommSec's Savanth Sebastian

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<p>GUEST OBSERVER</p>
<p>The labour market has comprehensively strengthened over the past four months.</p>
<p>Trends in employment (including the composition of jobs growth), the unemployment rate, participation and hours worked suggest that output growth will accelerate over H2 2017.</p>
<p>Sustained strength in the labour market is a necessary condition for wage inflation to lift. </p>
<p>Overview</p>
<p>After a soft 2016 the Australian labour market is on an encouraging trend. The latest ABS employment report was the fourth robust set of monthly jobs numbers in a row. The improvement is evident in a range of labour market indicators. And it suggests that GDP growth will lift over H2 2017. As a result, market pricing for another rate cut has faded to zero and a 65% chance of a hike within the next twelve months is now priced.</p>
<p>In this note we analyse the latest trends in the key metrics that relate to the labour market. We also take a brief look at outcomes by state. We conclude by presenting our views on what we think is in store for the labour market over the second half of 2017 and what it means for policy. </p>
<p>Employment</p>
<p>We kick off with employment growth because job creation goes hand in hand with output growth (chart 1).</p>
<p>Click to enlarge</p>
<p><img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.48.21%20AM.png" alt=""></p>
<p>Over the past four months there’s been a marked improvement in jobs growth. The ABS reports that employment has lifted by 154k over the four months to June and the average monthly gain has been 38.5k (chart 2). These results are strong. As a result, annual employment growth in the year to June 2017 accelerated to 2.0% - quite a bit higher than population growth (1.5%pa).</p>
<p>As we flagged a few weeks ago, Australia’s population growth has boosted headline growth rates and masked some per capita weakness in the economy. But if employment growth can continue to outpace population growth some of the per capita metrics related to the labour market and output will improve. From GDP perspective, the recent trend in jobs growth means we should see a lift in growth over H2 2017 after a soft 2016/17. </p>
<p><a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.49.33%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.49.33%20AM.png" alt=""></p>
<p>In addition to strong employment growth, the composition of jobs growth has been impressive. Taken at face value, full-time jobs have lifted by 179k over the past four months while part-time employment has fallen by 25k. As a result, the annual growth rates have converged (chart 3).</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.50.22%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.50.22%20AM.png" alt=""></p>
<p>There can be a fair bit of noise in the PT/FT split each month. But looking at the trend series indicates there has 4.0 recently been a solid lift in full-time jobs growth.</p>
<p>This is a welcome development and is reflective of some genuine strength in job creation. In addition, the pace of full-time job losses from the fall in mining-related employment has eased which means that the headwind on net full-time jobs growth has lessened. </p>
<p>2. Unemployment  </p>
<p>There has been a modest improvement in the unemployment rate in recent month which reflects the combination of solid jobs growth dampened a little by a lift in participation. The trend unemployment rate, our preferred measure of the jobless rate, has come down by 0.2ppts over the past four months to be 5.6% in June (chart 4). The current level of the unemployment rate is not at a historically high </p>
<p>one. But despite the fall it is above the non-accelerating inflation rate of unemployment (NAIRU) which the RBA recently estimated to be 5%. It suggests that there is still a fair way to go to take the economy back to the level we associate with full employment. But it’s moving in the right direction, albeit that it’s a slow grind.</p>
<p>Job security fears have remained stubbornly high despite the recent improvement in the labour market. It looks to us like the latest strength will need to be maintained if job security fears are to lessen. In fact, in may be the case that a lift in wages growth is also required for job security fears to recede. </p>
<p>3. Underemployment and underutilisation </p>
<p>Underemployment remains a problem in Australia. In May, the underemployment rate was 8.8% - just 0.1ppt off its record high (chart 5). To recap, people who are underemployed have a job but want to work more and can’t find the work.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.51.26%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.51.26%20AM.png" alt=""></p>
<p>The number of additional hours of work wanted by underemployed workers has been stable at around two days (or 14hrs) per week since the mid-2000s. This compares with unemployed people who are on average looking for 33 hours of work per week. </p>
<p>On Wednesday, when this note was in train, RBA Governor Philip Lowe gave a speech on The Labour Market and Monetary Policy which covered a lot of the themes here. One chart in the Governor’s speech depicted proportionately the reasons why people work part-time. The data came from the HILDA release and indicated that the bulk of people in part-time work have chosen to be there. Nothing surprising there. Interestingly, however, the proportion of people who are working part-time because they could not find full-time work was put at around 9% which marries up almost perfectly with the underemployment rate.</p>
<p>Data on underemployment is published by the ABS on a quarterly basis so we will need to wait until August for the next update. But the trend lift in full-time employment suggests that it’s more likely than not that the underemployment rate inches a little lower when the new data prints.</p>
<p>The sum of the unemployment rate and the underemployment rate produces the underutilisation rate which is the broadest measure of spare capacity in the labour market – using the latest unemployment and underemployment rates puts it at 14.4% in June. This is quite high and means that the economy is operating below its capacity and there is a negative output gap. We have known this for some time. What we are interested in from here is the direction in the underutilisation rate and there are tentative signs that it’s starting to decline. In our view, it’s going to need to come down materially to generate wages inflation. </p>
<p>4. Employment to population and participation</p>
<p>The share of the Australian workforce in a job has recently lifted. The employment to population ratio has ticked up by 0.46ppts to 61.3% (chart 6). This shift upwards basically reflects employment growth running above population growth. Given the very solid jobs growth over the past few months we would have expected the unemployment rate to fall by more than 0.2ppts. But its decline was capped due to a lift in participation.</p>
<p>Labour force participation has picked since late 2016. There are structural and cyclical forces that drive participation and it looks like some of the cyclical headwinds have receded. At the end of 2016 the part. rates of WA and Qld had fallen quite a bit through the year as the big downturn in mining-related investment reduced job prospects for workers in these states. As a result, some local workers had given up looking for work which reflects the discouraged worker syndrome. But the recent lift in jobs in WA and Qld has been coupled with an increase in participation which suggests a touch more optimism for workers in these states. </p>
<p>5. Hours worked</p>
<p>Hours worked, as you would expect, is strongly correlated with output, consumption and employment growth. It is also a key input into examining productivity growth because we can measure output per hour (or unit of labour).</p>
<p>Monthly aggregate hours worked is quiet volatile so we look to the annual change in trend terms to best gauge what’s been happening in that space (chart 7). The news is pretty decent. The data indicates that growth in total hours worked has accelerated to be 2.3% higher in the year to June 2017. For most of the last five years annual employment growth has been stronger than growth in hours worked because of the strong growth in part-time relative to full-time employment. But the recent strong lift in full-time employment has seen growth in hours worked pick up to be running ahead of employment growth. It’s still early days and we aren’t getting too carried away. But these type of developments are generally commensurate with an authentic lift in the demand for labour.</p>
<p>The increase in aggregate hours worked has been sufficient to see per capita hours worked lift from a multi-decade low (chart 8).</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.52.39%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.52.39%20AM.png" alt=""></p>
<p> </p>
<p>Again, we are coming off a low base and there will need to be a sustained upward trend in per capita hours worked if Australia’s labour market is going to genuinely tighten. </p>
<p>6. Labour market by state</p>
<p>In our view, one of the striking things about the latest jobs growth is that it’s been relatively broad-based (charts 9 and 10). For most of the past few years there has been a “two-speed” economy that comprises i) NSW and Victoria (driven largely by Sydney and Melbourne); and (ii) the rest of Australia. We wrote about this in late 2016.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.53.59%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.53.59%20AM.png" alt=""></p>
<p>But the labour force data suggests that we may be seeing some convergence in outcomes. This is a particularly welcome development.</p>
<p>Jobs growth has been spectacularly strong in Victoria, driven by population growth. But there has also been solid growth in employment over the past few months in Qld, WA and SA, which had previously all looked soft. Employment growth in NSW has slowed, but that’s to be expected given Australia’s biggest state is close to full employment.</p>
<p>There is a little more divergence in terms of trends in the unemployment rate (chart 11). The trend jobless rate in NSW sits at a healthy 4.8%. In Victoria, despite strong employment growth, the unemployment rate has remained stuck above the national rate at around 6.0%. The jobless rate has also trended sideways in Qld while it’s unexpectedly fallen in WA. </p>
<p>What does it mean for policy?</p>
<p>There are two key questions that need to be answered to determine what the recent labour market trends mean for monetary policy: (i) can they be maintained; and (ii) will they generate wages inflation.</p>
<p>On the former, the leading indicators suggests that the pace of job creation will ease from its current red-hot pace. But it should still be sufficient to match and slightly better the monthly increase in labour market supply (charts 12, 13 and 12. 14). The CBA PMIs, along with the NAB Business Survey and the vacancies  data, suggest that employment growth should average around 20k a month in the near term. That would be enough to exert some further mild downward pressure on the unemployment rate.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.54.58%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.54.58%20AM.png" alt=""></p>
<p>There are still plenty of headwinds for the labour market to contend with over 2017. Namely, a gradual decline in dwelling construction, closure of the car industry and the completion of the final big resources projects. But there are also a few tailwinds at work like the continual ramp up in public investment, particularly in NSW, and the improvement in the global economy which is providing a boost to Australia’s tradables sector. </p>
<p>On that basis, the first condition about ongoing labour market improvement is satisfied in our view and that takes another rate cut off the table. The focus therefore shifts to what the improvement in the labour market means for wages growth given a lift will be required to propel core inflation back to target. Here, we think that we are still some way from labour market slack being eroded sufficiently to put genuine upward pressure on wages.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.55.49%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="https://www.urban.com.au/images/2017/08/01/Screen%20Shot%202017-08-01%20at%2010.55.49%20AM.png" alt=""></p>
<p>Our modified Philips curve, which puts underutilisation against wages growth, suggests that we probably need to see underutilisation fall comfortably below 14% for wages growth to lift (chart 15). In our view, that is unlikely to happen until early next year which would all but rule out a rate increase in 2017. In addition, because any improvement in wages growth is coming off a very low rate, we suspect that the RBA will not act to tighten until a solid uptrend is firmly in place. As a result, we don’t see the RBA raising rates until late 2018. </p>
<p><em>Gareth Aird is economist at Commonwealth Bank and can be contacted </em><a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/gareth-aird/14/790/905"><span class="s2"><em>here</em></span></a><em>.</em></p>
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Has the Australian labour market turned a corner? Gareth Aird

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<h3 class="post-title entry-title"><a href="https://petewargent.blogspot.com.au/2016/11/labour-market-weakness-under-hood"></a></h3>
<div id="post-body-5100146898223249015" class="post-body entry-content">Let's begin with the good news, because I'm in a jolly good mood and don't want to spoil it.<br><br>It won't take long anyway, as there isn't really that much good news to report!<br><br><div>The unemployment rate ticked down to 5.35 percent in original terms, the lowest in well over three years.</div>
<div> </div>
<div>In seasonally adjusted terms the unemployment rate of 5.58 percent was the lowest in 42 months, and well below the 6.32 percent seen in January 2015 (click the graphics to expand, as always!).<br><br>
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<div>Drilling the trend line through the figures, the unemployment rate of 5.6 percent looks healthy enough. </div>
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<div>In New South Wales the trend unemployment rate has continued to decline to just 4.89 per cent, the lowest figure in nearly six years, while Victoria and Queensland are also moving in the right direction.<br><br>The trend hasn't caught up but Queensland's seasonally adjusted unemployment rate dropped to 5.8 per cent. Bonzer.</div>
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<div>Tasmania and Western Australia are heading the other way. </div>
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<br><div>Although not charted here due to their respective small sample sizes, the unemployment rates in the Northern Territory (3.5 per cent) and the ACT (3.4 per cent) are low. </div>
<br>OK, that's great. Now brace for the not-so-cheerful news....<br><br><div><strong><span style="text-decoration: underline;">"Jobs and growth?" Maaate...</span></strong></div>
<div> </div>
<div>Hiring is usually strong at this time of year, and total employment increased by about +78,800 over the last two months.</div>
<div> </div>
<div>After accounting for seasonality, however, this month's increase was only +9,800, although that figure did at least include a vast swing back to full-time employment of +41,500. </div>
<div> </div>
<div>This all sounds cool until we revisit what happened last month, which was a big seasonally adjusted drop in employment, while full-time employment is nearly 90,000 lower than at the beginning of the year.</div>
<div> </div>
<div>Looking through the noise, the trend in employment growth now looks poor. </div>
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<div><a href="/images/2016/11/18/B4.jpg" target="_blank">Click to enlarge</a></div>
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<br><div>Another way to look at this is to view the annual trend employment change, which has dropped to +108,100, or an a trend annual increase of only +0.9 percent. </div>
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<br><div>The annual rate of employment growth is at its lowest level in 23 months and is now below the rate of population growth, and categorically 'not good enough'!</div>
<div> </div>
<div>Victoria has now cruised to the top of the employment growth charts, with Victoria (+107,300) and New South Wales (+46,100) accounting for more than all of the net employment growth over the past year.<br><br>Employment in Tasmania dived by -3,400 in October to be -4,300 lower than a year ago. </div>
<div> </div>
<div>Queensland employment fell by -16,900 in the month, and by -46,000 over the year. This month's result was a rogue statistic due to the sample rotation from September, though there's no question that employment in aggregate has weakened in the Sunshine State, led by resources-related job losses in locations such as Townsville. </div>
<div> </div>
<div>I'll look at the Queensland figures by region in more detail next week. </div>
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<br><div>Shadow Treasurer Scott Emerson highlighted that 67,600 jobs had been lost in Queensland since the beginning of the year and that "anyone who sees today's result as good news doesn't understand how tough it is to find a job in Queensland".</div>
<div> </div>
<div>He's right about the second part, but clearly he didn't read the commentary on the incoming sample and cocked up his numbers by calculating them from the end of January rather than the beginning. Maybe that was deliberate. Oh well, at least his job doesn't require strong numeracy skills! </div>
<br><strong><span style="text-decoration: underline;">The wrap</span></strong><br><div> </div>
<div>While the unemployment rate superficially looks positive, the participation rate is well down and now at the lowest level since early 2006. </div>
<div> </div>
<div>Despite a much improved monthly result, total hours worked - as useful an indicator as any when looking at a volatile survey - increased by only +0.9 per cent over the year to October, and less in trend terms. </div>
<div> </div>
<div>And despite the wild swing back to full-time employment this month, it's important to see through the monthly noise and understand that much of the growth in jobs has been part-time in nature over recent times.</div>
<div> </div>
<div>Therefore, we have the weakest nominal wages growth on record, some of the weakest non-tradables inflationary pressures on record, and weak employment growth across recent months. </div>
<div> </div>
<div>Sounds like the easing cycle isn't over to me, but markets remain tentative for now, and job vacancies figures have admittedly been solid enough.<br><br>I will just note that when the labour force report prints solidly most commentary states that it must be somehow wrong, yet when the figures are weaker (as they are now) they are instantly taken at face value!<br><br>Something to bear in mind if the headline figure snaps back up next month...</div>
<div> </div>
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<div class="post-footer"> 
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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pwargent-M4siyDbqQY

Labour market: weakness under the hood

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<p><span>'Tis an odd thing, by but the </span>Detailed Labour Force<span> figures are so often overlooked or ignored by market commentary, though fortunately not by everybody. Here's ex-Reserve Bank boffin and now ANZ market economist Justin Fabo.</span></p>
<p><a href="/images/2015/10/26/Fabo.jpg" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2015/10/26/Fabo.jpg" alt=""></span></p>
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<div>Indeed so, the employment data has improved significantly for Brisbane over the year to September 2015. Let's take a look at the latest figures in 3 short parts.</div>
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<p><strong><span style="text-decoration: underline;">Part 1 - Large states</span></strong></p>
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<div>Most employment growth over the last 12 months has taken place in Sydney (+68k) and Melbourne (+55k)...but lookee here, because hey presto, regional New South Wales is now creating jobs again (+55k)!<br><br>Regional New South Wales has seen jobs created particularly in Newcastle &amp; Lake Macquarie, the Hunter Valley and the Illawarra. On the other hand regional Victoria has seen total employment decline.</div>
<p><a href="/images/2015/10/26/LF1.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2015/10/26/LF1.jpg" alt=""></p>
<p><span>Looking at employment growth cumulatively in the two most populous states, we can see that the outlook in regional New South Wales has certainly improved, although the most employment is still created in the Greater Metropolitan area. </span></p>
<p><a href="/images/2015/10/26/LF2.jpg" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2015/10/26/LF2.jpg" alt=""></span></p>
<p> </p>
<p><span>Better still, the total figures reported for regional unemployment now seems to be declining again after a worrying surge through 2014.</span><br><br><span>This represents evidence that at least some of the fallout from mining and construction contract layoffs is now in the rear view mirror, at least from an employment perspective. While aggregate demand may still be in declining in some mining regions, many of those contracted for the construction phase of mining projects have now returned to the capital cities. </span></p>
<p><a href="/images/2015/10/26/LF3.jpg" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2015/10/26/LF3.jpg" alt=""></span></p>
<p> </p>
<p><strong><span style="text-decoration: underline;">Part 2 - Brisbane bounce</span></strong><br><br></p>
<div>The other location which created a material number of jobs over the past year was Brisbane (+34k).<br><br>In fairness - while not charted here due to immateriality - Hobart's small labour market has also been picking up very nicely (+3k).<br><br>Not so much doing elsewhere.</div>
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<div><span>Piecing the jobs growth data together, over the past year the growth in employment has been almost entirely accounted for by Greater Sydney (30 per cent), Greater Melbourne (25 per cent), Greater Brisbane (15 per cent), and regional New South Wales (24 per cent).</span></div>
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<div>
<strong><span style="text-decoration: underline;">Part 3 - Unemployment dispersion</span></strong><br><br><div>The dispersion of unemployment rates across Australia continues.</div>
<div> </div>
<div>Amazingly enough Hobart recorded an unemployment rate of just 4.9 per cent in September, a remarkable turnaround as the Aussie dollar has depreciated, evidently boosting the local economy.<br><br>Unemployment has also declined steadily in Greater Brisbane (5.4 per cent) and Melbourne (6.3 per cent).<br><br>Meanwhile in Greater Sydney unemployment remains relatively low (5.3 per cent), though the Sydney result has been skewed higher by rising unemployment rates on the Central Coast, and in Blacktown.</div>
<div> </div>
<div>On the other hand, Perth (6.1 per cent) and Adelaide (7.6 per cent) have unemployment rates that remain in a clear uptrend.<br><br>Smoothing the original data on a rolling annual basis reveals the dispersion more clearly, with Hobart, Brisbane, and Melbourne showing the greatest improvement.</div>
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<div>
<div>I've been concerned about unemployment rates in a number of regional centres of the last year or two, so it has been pleasing to see the reported unemployment rates falling sharply in cities such as Geelong (4.8 per cent), Newcastle (5.1 per cent), the Hunter (7.3 per cent), though unemployment rates remain too high for comfort in a number of Queensland regions.</div>
<br><div>Greater Brisbane's unemployment rate has ticked down to 5.9 per cent on a 12mMA basis after some elevated readings at the beginning of 2015, despite an unemployment rate of above 9 per cent in Logan-Beaudesert.</div>
<p><a href="/images/2015/10/26/LF7.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2015/10/26/LF7.jpg" alt=""></p>
<p> </p>
<p><span>On the other hand Greater Adelaide's unemployment rate is now tracking consistently at around 7.6 per cent or above, and has ticked up to 7.3 per cent on a 12mMA basis. </span></p>
<p><a href="/images/2015/10/26/LF8.jpg" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2015/10/26/LF8.jpg" alt=""></span></p>
<p><span> </span></p>
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
<p><span> </span></p>
</div>
</div>
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