Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

Thursday, 9 October 2014

There's life, Glenn, but not as we know it...

Employment by state

As ever today's jobs data revealed some interesting variances at the state level and an overall soft picture. 

The monthly figures are proving to be most unreliable, but comparing September's data to where total employment was at back in June (i.e. before the seasonality complications kicked in) shows total employment to be a little lower in South Australia and Tasmania, and quite a lot lower (-19,800) in Queensland.

I read somewhere recently that property investors should buy in Brisbane because "unemployment is falling". I don't know where other people pull their information from, but that's not what the official statistics have shown in recent years. 

That said, as a property market Greater Brisbane does indeed appear to have some of the brightest prospects in the decade ahead in Australian property markets, with Residex forecasting 6%+ capital growth per annum for the next eight years - note that due to the compounding effect that is the equivalent of house prices booming by a massive 59 percent on today's values.

6 percent plus capital growth per annum implies that Brisbane's median prices would double in perhaps only a dozen years according to John Edwards' forecasts. Given that experienced investors always aim to comfortably outperform median capital growth rates, these are huge predictions by Residex.

Trend by state

Given the recent volatility in the labour force data, it's best to try to get a feel for what is happening from a bit more distance. The total employed chart shows that the southern states have demonstrated no jobs growth for years now, while New South Wales in particular has been adding jobs aplenty (click charts to expand).


Over the long haul it is abundantly clear that the four largest states by population today have driven the great bulk of the jobs growth, with the mining boom playing a key role.


The 5 year cumulative increase in total employed figures show why I remain dubious about the strength of the South Australian economy. The economy has not added net employment at all which will show itself in an elevated and rising unemployment rate in the state, and that is never a good sign. 


Unemployment

If there is one set of data which outdoes itself on the volatility stakes it is the unemployment rate by state. The trend clearly remains one of steadily rising unemployment at this juncture, and thus any real or imagined threat of imminent interest rate hikes has surely receded. 


Drilling into the unpredictable 5 year unemployment rate chart below shows that the unemployment rate remains too high for comfort in Tasmania (7.4 percent), Victoria (6.7 percent) and South Australia (6.5 percent) in particular. 

Despite the mining boom having passed its peak, the rate of unemployment remains low (if trending up) in Western Australia at 5.0 percent, while Westpac has called the New South Wales unemployment rate as having peaked at 5.8 percent, which is welcome news for the First State. 


Summary

Overall it's a soft set of numbers, with the southern state economies looking very weak and their respective outlooks rather bleak, particularly for manufacturing. Meanwhile significant challenges will also continue to face those regions with a mining focus. 

As for the monetary policy outlook, with the labour market evidently remaining soft with plenty of slack, interest rates still appear as likely to fall as anything else, as I pondered here only last week.

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