Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

'Huge fan of your work. Very impressive!' - Scott Pape, The Barefoot Investor, Australia's #1 bestseller.

'Must-read, must-follow, one of the finest analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for accurate & in-depth analysis' - David Scutt, Business Insider.

'I've been investing 40 years yet still learn new concepts from Pete; one of the finest young commentators' - Michael Yardney, Amazon #1 bestseller.

'The most knowledgeable person on Aussie real estate - loads of good data & charts...most comprehensive analyst I follow in Oz' - Jonathan Tepper, Variant Perception, 2 x NYT bestseller.

Saturday, 25 April 2015

Employment trends

Capital cities driving employment

A worthy inspection of the Detailed Labour Force figures for March 2015 shows that Australia's four largest capital cities have overwhelmingly driven employment growth over the past two years.

The month-to-month figures in this series are not seasonally adjusted; they are also unpredictable and volatile.

By way of an example, having added a seemingly thunderous +34,000 jobs in February, Greater Brisbane promptly gave 22,000 of them back again in March.

Over a more reliable two year time frame, job gains have been driven by Greater Sydney (+69,000), Greater Melbourne (+69,800), Greater Perth (+33,300) and Greater Brisbane (+23,800).

On the other hand, jobs growth has been negative in Greater Adelaide (-8,300) reflective of damaging trends in the manufacturing sector, with further job cuts for struggling Elizabeth announced in April.

Regional employment growth has also been generally weak, reflecting the shedding of nearly 50,000 resources positions over the past year.

Perhaps surprisingly the most significant contributor to regional employment growth was "rest of state" Western Australia (+28,600), where jobs have been steadily and consistently created.


A number of clear trends are beginning to emerge in Australia's employment markets.

Firstly, services employment has gradually picked up predominantly in the largest capital cities, but the manufacturing sector is hurting and aggregate mining employment is falling into disarray.

As shown in my chart packs previously, total resources capital investment in Australia is still being propped up by enormous and unprecedented spend in the Northern Territory related to the $34 billion Ichthys project, but as the construction phase winds up the capex decline is all set to gather a head of steam.

This will ultimately represent adverse news for Darwin, which has long played host to a curiously artificial labour market with resources, tourism, military and the public sector accounting for the bulk of employment.

The likely outcome nationally is that we will see low interest rates for a prolonged period of time - starting with an imminent cut to the cash rate to just 2 per cent - as the mining investment decline continues to act as a drag on growth.

Regional unemployment trends

The month-to-month capital city and regional unemployment rate figures by state and territory are wildly erratic, though I have charted them below for completeness.

As I considered here during the week, the smoothed data shows that regional unemployment is demonstrably rising in Australia.

The most notable divergence between city and regional unemployment is increasingly to be found in New South Wales.

The reported unemployment rate in thriving Greater Sydney has declined to just 5.1 per cent, while regional unemployment in the state is rising materially, now hitting 8.3 per cent, similarly echoing adverse shifts in mining employment.

Here is the smoothed rolling 12 monthly data for New South Wales, with the latest figures suggesting that the divergence will continue.

G'day Hobart!

Population growth and employment growth has been so underwhelming in Tasmania across an often dismal decade for the state that the figures have been excluded from the above charts since they would barely register a blip.

However, regular readers will recall that the economic data for Tassie has sporadically been throwing out mildly promising readings, with state final demand ticking along in moderately positive territory, and some occasionally decent retail figures to boot.

While the absolute numbers may be immaterial from a national perspective, Greater Hobart has seen its total employment increase steadily by more than +4,000 over the past two years to 105,500 (a modest improvement, but one which night be meaningful in the context of a labour force of fewer than 115,000).

Greater Hobart's unemployment rate has lately been consistently hitting with a much-improved "6 handle" after briefly dallying with the "ugly 8s" in early part of 2014.

Lower dollar helping the Apple Isle

Just as parts of the Tasmanian economy were punished by the persistent strength of the Australian currency through the latter stages of the mining investment boom, Hobart now appears to be benefiting from the ongoing weakening of the Aussie dollar.

It is true that some of Tasmania's industries may never recover from the fallout to their previous eminence.

The decline of the grand old forestry company Gunns Limited falling into voluntary liquidation in 2012 represented a sad decline for one of Australia's oldest companies, founded in 1875.

My chart packs of the latest and always fascinating international trade data implied that the resurgence of Tasmania is likely to piggy-back on a strong rebound of the tourism sector, particularly from record numbers (and record spend) of Chinese visitors.

Unemployment convergence

When smoothed on a rolling 12 monthly basis Australia's capital city employment rates appear to be converging.

The respective unemployment rates of Darwin and Perth remain relatively low at the present time, but realistically both are set to trend upwards as the mining investment boom withers.

Sydney's economy is benefitting from a construction and infrastructure boom, and looks to be the best placed of the capital cities. 

A prime beneficiary of low interest rates to date has been the services sector in the four largest capital cities, as well as strong growth in residential construction employment.

The links inserted to this post provide further detail.