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).

5 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 finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

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"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'.

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"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, MacroBusiness.

Tuesday, 24 March 2015

Mining, manufacturing and motors malaise

Two-speed employment projections 

The latest data from the Department of Employment forecasts jobs gains across construction and a range services based industries.

Over the five years to November 2019 health care and social assistance is projected to make the largest contribution to employment growth (+258,000), followed by education and training (+142,700), construction (+137,900) and professional, scientific and technical services (+136,600). 

Together, these four industries are projected to provide more than half of total employment growth over the five years to November 2019.

Given the evident shift towards dwelling construction (apartments in particular) and services employment, the most recent 5 year regional employment forecasts which suggested that the bulk of jobs gains will be seen in Greater Sydney (+185,300), Melbourne (+150,700), Greater Brisbane (+94,900) and Greater Perth (+104,300) may prove to be fairly close to the mark in aggregate.

Generally the most recent 5 year "rest of state" forecasts for employment growth were relatively soft, although there were a handful of brighter spots including Gold Coast (+32,400), Sunshine Coast (+18,900) and Ipswich (+16,500).

Mining, manufacturing and motors

Unsurprisingly the Department of Employment forecasts a cosmic drop in mining employment over the 5 years to November 2019 of another 40,700 positions or 18 percent of total mining employment, which will undoubtedly see property prices in many mining towns revert earthward very sharply.

Even these employment figures seem mighty upbeat to me.

While it can hardly be said to be a surprise, the fall in the number of employees in the mining sector has been dramatic, tailing all the way from 270,000 to just 220,400 in the past year, with nearly 50,000 positions cut in just 12 months

Fortunately dwelling construction jobs growth back in the four largest capital cities has to date helped to offset this decline in mining employment out in the regions, and total construction employment has actually increased by +45,800 over the past year.

It seems to me that at the current rate of change the Department's forecasts for mining employment could be somewhat buoyant, with both mining and manufacturing employment being thwacked according to the latest ABS data.

Manufacturing malaise

The other industry which is forecast to see continuing and marked declines is that of manufacturing,.

A significant percentage of manufacturing jobs to be cut relate to motor vehicle manufacturing, where almost half of existing jobs are projected to be lost. Noted the Department:

"The long-term decline of employment in Manufacturing is expected to continue, with employment in the industry projected to decline by 26,100 over the five years to November 2019. 

This decline is expected to be primarily driven by a projected fall of 23,800 (or 47.5 percent) in Motor Vehicle and Motor Vehicle Part Manufacturing, following the announced plant closures by Ford, Holden and Toyota." 

Again the 5 year forecasts seem rather sanguine, projecting a further decline in manufacturing employment of 23,800 over 5 years, with the Department citing that the lower Aussie dollar could "offer some support to the rest of the industry over the period ahead".

Given that 25,300 manufacturing positions have already reportedly been lost in only the past 12 months with total manufacturing employment declining from 947,700 to 922,400, there appears to be significant potential downside to these forecasts, though I do acknowledge the inherent volatility in some ABS data series.

There will be consequential headwinds for parts of the Adelaide economy - particularly the northern suburbs - with the latest 5 year regional forecasts suggesting that a material part of the manufacturing labour force will be lost.

Adelaide is said to suffer from a debilitating "brain drain" of its best and brightest. so the hope for Adelaide according to the forecasts appears to be that healthcare and social assistance employment can plug the cap left by the decline of its manufacturing industry.

Adelaide North is one of a number of regions that has been projected by the Department of Employment to lose a significant share of its manufacturing workforce. 

Of course, the relative size of the existing manufacturing industry in each region determines the materiality of the likely impact on the local economy. 

Adelaide's total manufacturing employment is projected to contract to around 50,700 by November 2018 or around 7.6 percent of the "all industries" employment, which is down from 55,300 or 8.8 percent as at November 2013.