Pete Wargent blogspot

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

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Friday, 19 June 2015

Regional Australia is not creating jobs

Regional employment floundering

The ABS released its Detailed Labour Force figures for the month of May 2015.

As expected, the release confirmed that the between capital city and regional employment growth has widened to become a gaping gulf.

Let's take a snapshot a few bits and pieces from my chart packs in three short parts...

Part 1 - Capital cities driving the job gains

Over the past year Sydney has added 77,200 jobs and Melbourne has added 73,000. 

The larger capital cities are thriving, partly fuelled by a boom in residential construction, and in Sydney's case, non-residential construction.

If only the same could be said of the regional centres in those states where employment growth is flat-lining. 


In fact, since Q1 2007, Sydney has added a sprightly 350,000 jobs.

Melbourne has added an even more impressive 361,000 positions on a net basis, albeit many of them of the part time variety, which quite incredibly is 7.3 times as many as the rest of Victoria over the same time horizon.


In terms of the other capital cities, over the past two years Brisbane has added 55,900 positions and Perth 45,700, although the outlook is more than a little mixed.

You could just about throw a wet blanket around the rest, with Adelaide having actually shed 11,900 positions over that time.

In fact, until this month Adelaide had not added any jobs for around four years. Zip. Nada. Zilch.

Pulling all together into the one "holy chart" shows how focused employment growth has become on just a few hubs in the past couple of years...

Part 2 - Capital city unemployment 

Recent Housing Finance and Lending Finance data have suggested that dwelling prices in Adelaide may be set for a modest upturn.

A few words of warning, though...words that I have repeated here on numerous occasions.

In an economy with a growing population but zero employment growth, only one outcome can reasonably occur over time, which is higher levels of unemployment.

High unemployment is bad, bad, bad for property markets, and a number of Adelaide's cheaper outer suburbs are suffering this dynamic right now.

According to the latest ABS data Adelaide has by a huge margin the highest unemployment rate in the country at 7.6 per cent, with only Hobart at 6.2 per cent getting even remotely close. 

Now granted, I don't rate the accuracy of the monthly figures too highly, but below I have charted the capital city unemployment rates smoothed on a rolling annual basis.

Sydney is comfortably the best placed economy having recorded successive readings of just 4.9 per cent.

Adelaide now has the highest level of capital city unemployment, and it is trending up.

Perth's unemployment rates are also clearly trending up from a much lower base as mining investment wanes.

Brisbane recorded an unemployment rate reading of just 5.3 per cent in May, which sounds suspiciously low to me, but the rolling annual trend is now improving after a couple of monthly spikes.

Generally capital city labour markets ex-Adelaide appear to be in decent nick, although of course Perth and Darwin in particular face resources-related headwinds.

Part 3 - Regional unemployment

The real point of concern for mine is the near total lack of jobs growth in regional Australia, which can only result in higher unemployment over time.

Indeed, this has already been happening over the eight years or so since the financial crisis first rolled into town.

The trend in regional unemployment in Queensland since 2007 is nothing short of alarming, the dis-spiriting result of a mining capex cliff fused with coal mining employment hitting the wall.

It's something I warned of here last year, and the Reserve Bank even ran a special piece on the thermal coal markets malaise in its enlightening Bulletin yesterday.

To take my "home" state as an example, have a look at the divergence in unemployment rate trends between Sydney and the "rest of state".

New South Wales has thermal coal markets of its own, of course.

The unemployment rate prints in Newcastle and Lake Macquarie have eased a little in recent months which is heartening to see, although they do remain at somewhat elevated levels.

Unemployment rates have also declined to some extent since February in the Hunter, although they do remain in double-digit territory.