Pete Wargent blogspot

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

'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, a 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 Australia's finest young commentators' - Michael Yardney, Amazon #1 bestseller.

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

'Superlative work' - Grant Williams, founder RealVision.

Friday, 14 August 2015

Slower population growth helps regional unemployment

Broken record...

I've doubtless sounded like a broken record at times over the last couple of years as regional Australia has failed to add new jobs on a net basis thus resulting in rising unemployment.

However, with the national population growth rate having slowed to +1.4 per cent but employment growth firing along at a rollicking +2.1 per cent pace - the economy adding an impressive +241,000 jobs in just one year - this seems to have helped turn things around to some extent.

It's still early days, of course, but yesterday the Australian Bureau of Statistics (ABS) released its Detailed Labour Force figures for the month of July 2015 which revealed some interesting trends.

Let's take a quick look in 4 short parts.

Part 1 - Capital city unemployment

The strongest economy remains that of Greater Sydney where the unemployment rate is tracking at around 5.2 per cent, while Melbourne's unemployment rate is now trending gradually down after something of a run-up since 2011.

The positive impact of slower population growth has been felt in Greater Brisbane too, where the rolling 12 monthly unemployment rate has trended down steadily from 6.3 per cent to 6.0 per cent.

Labour markets in all three of the most populous cities have to some extent benefited from rising levels of apartment construction.

On the other hand the unemployment rate is trending up sharply in Adelaide, and also the resources capitals of Perth and (maybe) Darwin.

Hobart wins the "most improved economy" award with the unemployment rate seemingly in freefall since some very elevated readings in the early part of 2014.

Darwin is a funny old place, and certainly an unusual labour market which is not directly comparable with those of the larger capital cities. 

The latest unemployment figures suggested an unemployment rate of just 3.2 per cent for Darwin, but it wouldn't be a surprise to see that figure running higher as resources employment is scaled back.

Finally thanks for your kind ongoing messages about Canberra - however, please direct further enquiries to the ABS...I can't chart data that doesn't exist!

Part 2 - NSW regional unemployment improves

A few positive vibes may at last also be spreading beyond the largest capital cities.

The regional unemployment rate in New South Wales had previously been threatening to explode alarmingly, for example, but perhaps now things do seem to have turned a corner.

The drivers have included some early signs of jobs growth in regions such as the the mid-north coast, Richmond-Tweed, Newcastle & Lake Macquarie, the Hunter Valley, the southern highlands and Shoalhaven, and the Illawarra, as well as elsewhere. 

The unemployment rate is still elevated at double digit levels in the Hunter, but the data does seem to imply that perhaps the worst of the fallout from coal mining jobs losses could well now be in the rear view mirror. 

There could be some smoke bombs in the post, of course - such as a potential closure announcement at Port Kembla - but generally there have been considerably better figures for regional New South Wales. 

Perhaps cost-conscious employers and employees are finally beginning to look beyond the expensive city limits of sunny Sydney? Maybe.

Part 3 - Jobs growth

Over the past half decade employment growth in Greater Sydney and Greater Melbourne has been tracking at a remarkable 3-4 times the pace of that of the respective state regional locations.

However, as touched upon above and as denoted by the red line below, regional New South Wales has at last added an august +63,000 jobs over the past year, although regional Victoria is still lagging somewhat.

The employment outlook around the traps remains somewhat mixed.

Brisbane's labour market has been fairly soft over the past year, while the Greater Adelaide economy shed nearly -5,700 jobs in July.

Of course, month to month figures needn't mean too much, but over the past four years since July 2011 the Adelaide economy has lost nearly -8,500 jobs.

This is truly a shocking result for a capital city economy and something needs to be done given that the closure of the car manufacturing industry also lies ahead.

This week's bad news for South Australia - and it does seem to be bad news by the week at the moment - included 380 jobs to be cut by BHP Billiton from the Olympic Dam project and speculation that Arrium is about to deliver yet more bad news for Whyalla in the form of job cuts. 

I discussed the dismal outlook for the "Iron Triangle" in a little more detail here.

Part 4 - Regional unemployed numbers improve

The number of reported regional unemployed seems to have improved significantly in New South Wales over the past six months, although this trend has yet to flow through in full to my rolling annual data charted below.

Victoria's regional unemployment has been trending down for a while, while regional Queensland too has recorded a series of more promising results since February. 

It's hard to pick out any one driver for this.

Most of the new jobs have been reported as being in the services sector, and much of the new employment may not be in the higher paying roles. 

From a macreconomic perspective it may simply be that the slowing rate of population growth has allowed easy monetary policy to push the rate of employment growth forward more quickly than the headcount.

And, if so, long may that dynamic continue.