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, 16 December 2016

Is Sydney heading towards 'full employment'?

Jobs rebound

One of the things that can be associated with a property market super-boom is 'full employment'.

It might seem rather strange to be even discussing such a topic when there is so much underemployment around, yet the Reserve Bank of Australia Governor recently hinted that he sees unemployment of around 5 per cent to be a key level. 

GDP growth in Sydney has been tracking at around 4.5 per cent with rising house prices, dwelling construction, and the associated multiplier effects fuelling a surge in the harbour city's economy.

As such, the unemployment rate in the state has declined to only 4.9 per cent.

In November, the ABS reported a seasonally adjusted jump of +39,100 jobs in November, all of which were full time.

A great monthly result, perhaps, but it essentially only reverses weak results in preceding months, and the ABS makes it abundantly clear in its media release that it prefers to use the trend data here.

Looking at the volatility in the seasonally adjusted figures you can see why.

Despite the better result in November, looking at the annual pace of employment growth, it's clear that 2016 has been a considerably slower affair, with the rate of growth sliding to +0.7 per cent. 

Annual employment growth of just +84,900 is on another planet from the epic +333,600 we saw this time last year (and tragically low compared to population growth figures of +338,000!), but if there's one thing we ought to remember about employment numbers, it's that they are volatile. 

Perhaps the reality lies somewhere between the two extremes, but there's no shying away from the fact that full time jobs growth has been weak this year. 

QLD rebound

The monthly rebound was driven by a huge increase of +38,600 in Queensland, which was also a reversal of some unusually soft looking numbers previously.

At the state level it's wise to accept that from month to month there will be significant variations. 

For example, in NSW annual employment growth is now stone dead flat, yet over the last two years the state has added +177,600 jobs on a net basis. 

Unemployed hovers around 3-year lows

The participation rate nibbled higher from 64.4 per cent to 64.6 per cent in November, and the seasonally adjusted unemployment rate was reported as 5.7 per cent, with the trend hovering at around its lowest level in three years. 

At the state level, the unemployment rate in New South Wales has trended all the way down from 6.11 per cent at the beginning of 2015 to just 4.86 per cent.

It's clear that recent months have suggested a slower pace of hiring, but record high job vacancies figures for the state suggest to me that this is a blip and Sydney employment growth will reported again in due course. 

In Queensland the unemployment rate trended down to 5.9 per cent, which was a nice result to see!

Western Australia is heading the other way, up to 6.7 per cent, while Tasmania (6.5 per cent) and South Australia (6.7 per cent) are also in a similarly papery boat.

South Australia's seasonally adjusted unemployment rate in November was actually 7 per cent, but the trend still optimistically sits lower. 

The wrap

Overall, while this was obviously a much better result for the month, the trend over the year suggests that the labour market has still been softer this year, with weak full time jobs growth and only a very moderate +0.3 per cent increase in the total number of hours worked.

It's not that hard to see why when you look around the traps. Sydney and Melbourne have had booming economies, but elsewhere conditions range from soft to very soft, to recessionary.

The detailed labour force will in due course provide more detail on the split between Sydney and regional New South Wales, and as such should help to provide the answer the question posed in the blog title.