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.

Saturday, 24 December 2016

Australia added +102,000 manufacturing jobs this year (& nobody even noticed)

Manufacturing rebounds

Everyone knows that manufacturing is doomed in Australia.

And everybody is certain that the Holden and Ford closure signal the end of the road for manufacturing employment too. 

Australia doesn't make stuff, it only sells iron ore to China.

We all are sure of it, because we've read it on doom and gloom blog sites the interweb!

But wait there just a moment...

Recall that on 1 April I noted that AIG's Performance of Manufacturing Index (PMI) gauge had soared to 58.1, the highest reading in twelve years.

A figure of above 50 denotes expansion, so 58.1 really is quite a huge reading. 

Believe it or not, this was not an April Fool's joke! 

Still even today the gauge is comfortably in expansion territory at 54.2.

What gives?

The reason for these contradictory messages is that while manufacturing has obviously been in a long, sweeping, structural decline over the last three decades, the lower dollar has finally encouraged a rebound since the last quarter of 2015.

In fact, manufacturing was by far and way and the biggest contributor to employment growth in the year to November, adding way more jobs than the remainder of the economy combined at +102,000.

Better still, more than three quarters of these were full time positions at +78,000.

The odd thing is that, as far as I can tell, nobody even noticed, because by the time the figures were reported most people were well esconced in Ryan's Bar (or their home city's equivalent) celebrating the silly season.

Where were these manufacturing jobs? 

Mainly in Greater Melbourne and Greater Sydney, as most new jobs seem to be these days.

Education and training was another winner this year, adding +50,000 jobs. 

Even the mining sector was resurrected somewhat by the commodity price rebound in 2016, posting an additional +12,000 persons employed over the year to November.

Work to be done

As you can see in the chart above, retail trade struggled badly in 2016, reversing most of the good work done in 2015. 

And indeed, it was a poor year for several of the other services industries include finance and insurance, and professional, scientific and technical services, resulting in much slower headline employment growth over the year. 

Clearly there is much more work to be done in 2017 if the national unemployment rate is going to get down to anywhere near 5 per cent, a level that Sydney achieved some time ago already.