Weekend reads - must see articles of the week

Weekend reads

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Rise and shine with the 5am club

Getting ahead

The virtues of an early start.

Female earnings playing catch-up

Female earnings up

Justin Smirk of Westpac recently furnished us with a great deep-dive podcast into employment trends in the excellent Business Insider Devils & Details podcast. 

Justin went into some depth to explain the recent shifts in the labour force by gender, with the economy failing to create great outcomes for many male employees, for a range of reasons. 

AWOTE growth for males improved just a little bit to +2.4 per cent over the year to May 2018, which was the best result in 3½ years, the ABS reported yesterday. 

The result for total earnings growth for full time male was a little better too, at +2.6 per cent.

But still this was nowhere near as good a result as AWOTE growth for females, which picked up further to +3.4 per cent, which was the best result in two years. 

While females are still earning less than males on average, the ratio of earnings has closed fairly significantly in recent years from about 81½ per cent to 85½ per cent.

That's the tightest gap over the history of the available statistics since 1994, so some progress has been made here.  

Industries where wages picked up over the year included manufacturing, arts and recreational services, and administrative & support roles, but healthcare and social assistance earnings were soft (probably due to composition change).

Working class man

The ACT continued to have the highest level of ordinary time earnings (OTE) for full time employees at $1,810 per week.

And with the unemployment rate in Sydney declining towards just 4 per cent, unsurprisingly New South Wales recorded strong growth in full time OTE, at +3.9 per cent following a lean couple of years. 

For total full time male earnings the resources jurisdictions remained top of the tree, despite the slowdown in recent years. 

Mining was also the highest paid sector, with average OTE for full time employees of $2,592 per week. 

Earnings growth has been pretty slow in South Australia and Queensland too since the peak of the resources construction boom, although Queensland was one of the best performers over the year to May 2018 at +3.4 per cent (following a dip since 2014).

New South Wales also scored well for total FT male earnings at +3.3 per cent.

The wrap

The general view is that earnings are growing slowly in Australia. 

On average, this is true, but some industries and locations are faring better than others - especially for women.

And for those living in Sydney, wages growth looks to be picking up. 

Victoria drives unemployment rate to the lowest since 2012

Unemployment rate at 5½ year lows

As expected there was a bit of payback on total employment in July after an epic boost in June (and as the sample was rotated this month, with Westpac once again nailing their call...those guys are on fire at the moment). 

The composition was solid enough, though, with full time employment up by +19,300 in July, seasonally adjusted. 

The unemployment rate tumbled again - now down to 5.32 per cent - to sit at the lowest level in the 5½ years since 2012. 

It'll be interesting to see how long they can keep pushing the 'record' mortgage stress storyline if this trend persists. 

The trend number of unemployed persons has been declining steadily since 2014 (note that the resident population of Australia has grown much larger over that time, too). 

Over the past year it's all been about Victoria, with the state making significant inroads into its unemployment challenges on the back of an enormous construction boom. 

The cusp of full employment beckons for Melbourne, helped along by demand from strong population growth, which is good to see. 

In July, Victoria's unemployment rate dropped to the lowest level since 2011 following on from a tremendous leap in job vacancies. 

And youth unemployment is trending down nicely too to the lowest level in about 6 years, leading the 'hip' Treasurer Morrison to Tweet a Taylor Swift song about something or other being shaken off. 

'Cue the beat!'.

Pretty good numbers, overall, with the unemployment rate printing at the lowest level in 68 months.

Wages growth up at a glacial pace

Wages growth a bit better

Wage prices increased by 0.6 per cent in the June quarter.

That was the best quarter since all the way back in March 2014, remarkably.

It was enough to pull annual wages growth reluctantly up to 2.1 per cent. 

Around the traps the best performers were Victoria and Tasmania at 2½ per cent. 

And the worst performers were Western Australia and the Northern Territory at 1½ per cent, reflective of the resources cycle.

Indeed, mining was the worst performing sector at 1.33 per cent, followed by retail at 1.46 per cent. 

The best performing sector was healthcare at 2.74 per cent.

Melbourne is set to be the best performing economy going forward, with construction and job vacancies exploding.

The above figures confirm that low wages growth is not just about immigration - in fact wages growth is higher where the migrants are heading (and vice-versa).

Low wages growth is rather a global phenomenon.

For example, the ONS reported yesterday that the UK unemployment rate fell to the lowest level in my lifetime at 4 per cent, and yet wages growth is only moderate there too. 

Public sector leads

Slightly better then, but private sector wages growth was still very soft at 1.99 per cent (up from 1.78 per cent a year earlier).

That's well behind the public sector, which recorded annual wages growth of 2.41 per cent.

The wrap

It's good that wages growth has picked up steadily as unemployment falls.

But there is a long way to go on this front, and the progress has only been gradual. 

The weakness in the retail sector is palpable, with Amazon Australia now opening its gigantic 43,000 square metre warehouse in Sydney, putting plenty more downward pressure on retail prices. 

No rate hikes in 2018, 2019, 2020(?)...

Yield curve flat

The Reserve Bank now sees headline inflation falling back to 1¾ per cent, as electricity and fuel prices fall.

Kudos to Westpac economics for calling this. 

And the market is finally waking up to this reality.

No rate hikes are priced in, as far as the eye can see...

And a lot can change between now and 2020, of course.

Not least, the Prime Minister and the government!

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If there's one key metric that will be watched keenly in relation to the above it's wages growth.

The June quarter wage price index is due out tomorrow morning, with the market expecting a 0.6 per cent quarterly rise.

The minimum wage increase this time around was some +3.5 per cent - however that won't flow through until 1 July. 

In other words, there may be some downside risk to the forecast. 

Sustained decline in Brisbane rental vacancies

Vacancies decline

Despite the high rates of apartment construction, strong population growth continues to absorb the rental stock.

The total number of rental vacancies in Australia has declined over the past year from 75,733 to 72,748, according to the latest figures from SQM Research.

This represents a decline from in the national vacancy rate from 2.4 per cent to 2.2 per cent - while construction is now set to slow.

SQM reported that Brisbane continues to experience a sustained 2018 decline in vacancy rates from 3.6 per cent in December to 2.9 per cent by July.

And this will likely continue as apartment construction falls away and migration from interstate picks up. 

Perth is also now through the worst with vacancy rates trending down (from 5.2 per cent to 4 per cent over the past year) and the oversupply of rentals easing a bit, after several years of rental price declines.

Meanwhile Adelaide tightened again into just 1.3 per cent - getting pretty tight down there now! - and Canberra...well, Canberra is heading for zero at this rate.

Sydney indigestion

In Sydney number of vacancies was down from 19,572 to 19,114 in the month - a tight rental market would be represented by more like 12,000 vacancies or fewer - but year-on-year the vacancy rate is considerably higher at 2.8 per cent. 

Sydney tends to be a much busier place in summer these days, so this trend will be one to watch with interest.

Employment growth to slow next?

Another perspective on jobs

Is employment growth set to slow in the second half of 2018?

That looks likely, according to Roy Morgan's latest estimates, a view mirrored across business surveys.

Roy Morgan saw employment growth tracking at an estimated +167,000 or +1.4 per cent year-on-year in July, largely driven by part time employment.

The more widely followed ABS figures for June were tracking at a much faster employment growth rate of 2.8 per cent, seasonally adjusted.

The Roy Morgan unemployment rate estimate was also up to 10 per cent, the highest since August 2017.

Downside risk for July

The ABS labour force figures for July are due to be released on Thursday this week, and are coming off the back of a huge result in June whereby seasonally adjusted total employment came in at +50,900 for the month.

With sample rotation potentially impacting the July figures adversely, however, there is a risk that this month's result is negative...or at least much softer.