Pete Wargent blogspot


'Must-read, must-follow, one of the best 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, Markets & Economics Editor, Business Insider.

'I've been investing 40 years & still learn new concepts from Pete; one of the best commentators...and not just a theorist!' - Michael Yardney, Amazon #1 bestseller.

Friday, 18 September 2015

Mining employment rebounds

Employment by sector

The ABS Detailed Quarterly employment data revealed some interesting trends, a few of which I've highlighted below.

The quarterly data is somewhat subjective and prone to statistical noise, but the long run data reveals a few key points.

Firstly, the manufacturing sector remains in a structural decline. 

The lower Aussie dollar can theoretically support the manufacturing industry to a point - indeed the latest PMI gauge pointed to an expansion of sorts - but the long run trend is clear, and realistically most of these manufacturing jobs are not coming back.

Total manufacturing employment (refer to the dark blue line below) over the full data series since 1984 has declined by more than a fifth from 1.1 million to sit below 870,000. 

The decline has continued apace over the past year with a further -45,500 manufacturing jobs gone.

This obviously does not bode well for local economies that are heavily dependent on manufacturing. 

Secondly, on the other hand, mining employment (refer to the light blue line below) through the commodity price boom rose very strongly, tripling since 2001.

Although it is widely expected that total mining employment will now decline back towards its long run average, there was actually something of a rebound of +19,300 jobs over the past quarter. 

The ABS figures provide little detail, but perhaps LNG projects accounted for some of the rebound.

It is worth noting that despite the commodities boom, mining remains a relatively small employer in the economy, accounting for fewer than a quarter of a million jobs.

Thirdly, note that many of the mining boom related jobs were in fact created in the construction sector (refer to the sharp rise in the maroon line above) as new projects passed feasibility.

Although we might have expected to see this sector now in decline, with so many positions having rotated into the residential construction sector - for the time being at least - total construction employment has actually now increased to a record high of more than 1.05 million.

Generally speaking this is healthy news for capital city economies where residential construction is abundant, but not is not such good news for resources regions where aggregate demand is now declining.

And fourthly, note the relative importance therefore of the services sector to the strength or otherwise of the economic recovery in Australia. 

Healthcare and social assistance employment, for example, has exploded from 540,000 to more than 1.45 million since 1984.

If the Aussie economy is to see growth return to "trend", then it needs its services sector to be firing.

Year-on-year change

With the quarterly data throwing out more nose than a Who concert, a look below instead at the annual change in employment by sector.

As already noted the manufacturing sector has been the hardest hit over the past 12 months (-44,500).

However, services employment has more than picked up the slack over the year to August 2015, most notably in healthcare & social assistance (+87,600), accommodation & food services (+39,000), professional, technical & scientific (+29,100), admin & support (+20,200), arts & recreational (+19,900) and transport and warehousing (+19,200). 

Curiously enough total mining jobs (+11,100) were up for the past year too, but resources is unlikely to be a growth sector for employment going forward.