Jobs market: not as slack as you might think

Slacking off?

R. Gittins wrote an enlightening and thought-provoking piece here about the true extent of unemployment in Australia. 

It is well known and all too often pointed out that the headline rate of unemployment understates the reality.

But, as R. Gittins elucidates, lumping together all unemployed and underemployed persons can similarly provide a somewhat misleading picture. 

An important but rarely reported metric, he notes, is underutilisation in volume measures, taking into account how many more hours of work unemployed and underemployed people are looking for. 

I charted the two cited catalogue series below.

These numbers aren't seasonally adjusted so it's generally best to compare like-for-like periods.

What the chart shows is underutilisation falling from 7.9 per cent in May 2015, to 7.7 per cent in May 2016, and then to 7.5 per cent in May 2017. 

Thus, yes, underutilisation is clearly higher than it might be.

But it has also been very steadily falling over the past two years.

In other labour market news, the trend youth unemployment rate has also improved a bit over the last couple of years. 

But here too, there's a way to go before we see single digits again. 

Youth unemployment can be an important bellwether for labour market conditions, as the least experienced staff can be most expendable in a downturn, yet may be hired again as the outlook brightens. 

The next property market to rip...

...will be Geelong.

In early March I wrote a bit about some of the likely drivers here.

You've been...Amazoned

The new black - crashes

Granted, technically it's not Monday morning, yet still it seems as good a time as any for a spot of quarterbacking.

You've already heard of being friendzoned.

Well, now, there's being Amazoned.

Footlocker (NYSE: NL), a company with the well-known wide economic moat of, erm, selling runners and footwear, has been touted in some parts as being an outstanding value play. 

No doubt, there's been an ill-advised fashion trend towards wearing sneakers with suits, and an even less advisable fad for wearing yoga pants on shopping visits. 

But fashion trends will come and go.

Meanwhile, US retail has been coming under serious pressure, so it's got to be considered a risky sector right now. 

In short, it's not a great time to be reporting a material decline in comparable revenues. 

And it's certainly not a great time to report a quarterly that massively misses Street expectations.

EPS for Footlocker was reported at 62 cents per share against a market expectation of 90 cents per share.

Same-store sales, a key market metric in the retail sector, dived by 6 percent.

Comparable sales are also expected to remain well down over the remainder of the year.

The share price was already down by a third in 2017, so arguably the market has long sensed a bad report coming. 

But not this bad.

Perhaps unsurprisingly, another 28 per cent was erased from the market cap during Friday's trade.

Investment, or speculation?

People often say that investing in property is speculation, while buying shares in profitable companies is investing. 

It's a valid argument to a point, and especially where people are betting on short term price movements. 

But is it necessarily true? 

Absent a takeover or merger, companies like this ultimately have a life cycle and seem quite likely to be worth zero one day in the future. 

Working out when that day is and how long the dividend stream runs for...well, to a certain extent that has to be speculation too. 

To be fair, I don't think trainers as a fashion item are going away any time soon, though there will be a lot of competition in the space. 

As for property speculation...to be honest I can't say I've ever stressed too much over the years about owning property on Sydney harbour, especially with 90,000-odd new heads converging on the harbour city each year. 

But you can call it speculation if you want.

In the meantime, it's straight off to the clearance rack for Footlocker!

Weekend reads: must see articles of the week

Summarised for you here at Property Update (or click image below).

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England house prices hit new high

Edging higher

A 30-second look at what's been going down in Britain's housing markets. 

The average UK house price hit a new high of just a tad over £223,000 in June 2017. 

This is £10,000 higher than in June 2016, and £2,000 higher than last month.

England drove the gains, with prices there rising by +5.2 per cent over the year to a record high of £240,000, while prices in Northern Ireland remain more than 40 per cent below their peak. 

London has the most expensive market at an average house price of £482,000, while the industrially challenged North East was the cheapest at an average price of £130,000.

The East of England recorded the fastest annual pace of growth at +7.2 per cent, with London price growth easing back to the pack after a stellar run. 

There have been mixed messages around in the Old Dart for a while now, with the unemployment rate having dived to its lowest level since 1975 but Brexit looming overhead as a potentially disrupting factor. 

Then there are the calls to restrict immigration. 

But for now, mortgage rates remain low, first time buyers are very active, and prices continue to hit new highs. 

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Oh, and have a smashing weekend!

Bonus time

Bonus time

This week's wage price figures showed that including bonuses wages increased by +0.7 per cent in the quarter - the strongest result for the June quarter since 2010 - to be +2.1 per cent higher over the year.

The ABS also released its average weekly earnings figures yesterday, which revealed quite a similar result. 

Over the year May 2017, full-time adult average weekly ordinary time earnings increased by a subdued +1.8 per cent to $1,544.

But the full-time adult average weekly total earnings in May 2017 was $1,608, with a notably stronger rise of +2.1 per cent from the same time last year.

There were as always variations in the underlying figures. 

For example, average earnings for females rose by +2.3 per cent, and for full time females earnings were some +2.6 per cent higher. 

Of course, these numbers are coming from a lower base.

These are average figures, so it's important to note that there are potentially significant differences in the relative number of hours worked, for example.

On the other hand, earnings growth for males has been subdued, with average earnings only up by +1.6 per cent. 

Some males are doing better than others, of course.

For example, the original data shows that full time males in Victoria and the southern states have, on average, seen strong growth in their total earnings over the year to May 2017 - so too, in the ACT - but in Western Australia the equivalent figure fell. 

Queensland bonuses have also pulled back quite sharply since LNG construction dropped off a few years ago.

Total earnings for men have been very high on average in the resources states, reflecting the nature of the work undertaken. 

Indeed, despite the recent malaise, the mining sector still had by a huge margin the highest average weekly earnings of all industries at $2,551. 

Real Estate Talk

Catch me on the Real Estate Talk show (click image to view).

You better, you bet

10 months of gains

A year ago I made the casual observation that the Australian economy had reached an impasse of sorts: either population growth would have to fall, or employment growth would have to rise.

Leading indicators tentatively pointed towards the latter, and in the end, that's what we got.

In fact, over the past ten months employment has torn +277,880 higher to a record high of more than 12.2 million. 

Over the most recent five months the gains have totalled more than +189,000.

You have to go back more than a dozen years to find a hot streak like it. 

Naturally we got all the usually debates about whether the figures were 'right' or not, but drilling the trend line through the figures shows that annual employment growth has accelerated to a reasonably impressive +2.2 per cent, or +259,220. 

Queensland (+27,000) accounted for almost all of the gains in the noisy monthly figures.

Over the past quarter the the +87,500 net increase in employment has largely been centred upon New South Wales (+35,000) and Queensland (+33,600). 

Unemployment rate improving

The trend unemployment rate has steadily improved over 33 months from 6.25 per cent in October 2014 to 5.62 per cent in July 2017. 

The participation rate edged inched up in July, while the trend employment to population ratio is now back up to the strongest level since May 2013. 

So things have evidently been on the mend, though it's a sobering thought that the UK now has an unemployment rate of just 4.4 per cent, the lowest reported reading since 1975. 

At this rate it will be a few years before Australia gets anywhere close to full employment, if international trends are anything to go by.

New South Wales has by far the best trend unemployment rate of the most populous states at 4.8 per cent.

But the surprise package here is Western Australia, where trend full time jobs have been improving for 10 months and the unemployment rate has declined to 5.4 per cent, now materially lower than the national average.

And finally, for the many doubting Thomases, the annual trend in monthly hours worked improved to +2.5 per cent, the best result in 19 months. 

Sound as a pound.