Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision - where world class experts share their thoughts on economics & finance - & author of Things That Make You Go of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, MacroBusiness.

Friday, 16 January 2015

Bang-Bang Finish to 2014 Jobs Growth (...but r u a Belieber?)

2014 ends on a high note for jobs

ANZ Bank revised its interest rate forecasts yesterday morning announcing that it expects to see two rapid-fire interest rate cuts to an official cash rate of just 2 percent in H1 2015.

No sooner had they done so than the ABS immediately released a tidy and almost unambiguously good Labour Force result for the month of December 2014 with the unemployment rate scotching expectations of a rise to 6.3 percent by declining to a seasonally adjusted 6.1 percent.

The economy added 37,600 employed in December - a growth in full-time employment of 41,600 being offset by part-time employment decreasing by 4,100.

Remember that this comes off the back of a stroing report for November too, where net employment growth totalled 44,900.

This seems to be wonderful news then? In short, yes it is! If, that is, you are a believer in the integrity of the seasonal adjustments. Let's take a look in three short parts.

Part 1 - Employment growth (I believe...)

Total employment increased by 37,400 to a new survey high of 11,679,400.

The participation rate ticked up from 64.7 percent to 64.8 percent but in truth this uptick arose from a miniscule increase in the percentage and was largely a function of rounding - just another one of those quirks of reporting.

Despite the strong headline results purported in recent months, the aggregate growth in the number of hours worked has been pretty anaemic over the past year at only +0.34 percent.

Zooming in the chart below to a 5 year time horizon shows the comaparative strength of the seasonally adjusted data over the past two months, but also shows that the trend data remains some way softer.

After a few apparent wobbles along the way Australia economy romped home in the final straight to add a solid 214,000 jobs in 2014, the strongest annual aggregate result since 2010 (see below chart).

Importantly some 150,000 of those positions were of the full time variety to 64,000 part time additional employed, which tends to be indicative of a more robust labour market as the below chart shows (note, for example, the decline in full time roles in 2008/9).

Part 2 - State employment growth

Over the last quarter of 2014 at the state level Victoria (+43k), New South Wales (+28k) and Queensland (+15k), Western Australia (+12k) and Tasmania (+4k) all added significantly to their respective workforce.

However, South Australia shed roles (-5k) over the past three months of the year, and there are also specific risks and concerns related tot the impact of the shuttering of the automobile manufacturing industry upon that state.

Since January 2010, while the more populous states have added hundreds of thousands of jobs in aggregate, total employment in South Australia has tumbled by -10,700.

Looking at a chart of cumulative jobs growth over the last four years underscores South Australia's woes with a net decline in employment, despite a moderately increasing population. 

Indeed over the past four years close to 100 percent of employment growth on a net basis has taken place in only the largest four states.

Part 3 - Unemployment rates (not a Belieber)

The seasonally adjusted unemployment rate ticked down to 6.1 percent, although you may of course prefer to believe in the trend data which remained steady at a 6.2 percent unemployment rate.

Survey credibility goes MIA

If there is one part of the survey which suffers from a shronic credibility defcit it is the state level unemployment rates which continue to bounce around like limp puppets on a very shoddily-controlled string.

But hey, it was an absolutely ripper month for Queensland where the seasonally adjusted unemployment rate dived from 6.8 percent to only 6.1 percent - an enormous decline in only 31 days!

As we will cover in more detail later in the month in the detailed Labour Force figures. the unemployment rates being seen in many inner Brisbane locations are tracking at relatively low levels and certainly well beneath the national averages.

However, the sunshine state averages unemployment rates are being dragged higher by wretched unemployment data in other regions such as Wide Bay, Logan-Beaudesert and Townsville, among others.

Indeed this is a story being repeated across several states, with regional unemployment rates frequently higher than those being seen in the capital cities (although not Elizabeth in Adelaide which now has comfortably the highest capital city unemployment rate in the entire country).

At the other end of the scale the unemployment rate in Western Australia leapt in an equally incredible manner from the lowest in the nation at only 5.3 percent to 6.0 percent seasonally just one month. 

These wildly gyrating monthly results are costing the survey dearly in terms of its credibility and should be removed with immediate effect or printed only quarterly until such time as the figures can be made more robust...or 'beliebable'.

The 4 month moving average unemployment rate data by state which I've charted below may present a slightly more usueful - or at least followable - trend through smoothing the impact of monthly volatility.

The strongest economy continues to be that of New South Wales, where in particular the unemployment rate in Greater Sydney has seemingly already peaked, now tracking at only 5 percent and much lower than regional centres such as the Hunter Valley, Newcastle & Lake Macquarie or Shoalhaven, by way of a few examples.

The Wrap

As ever there were some dubious aspects to the release, but total employment growth of 214,000 over the past year including 150,000 full time positions ended the year as a solid result thanks to the strong seasonally adjusted November and December prints.

Let's hope that 2015 continues in the same vein and we see continued strong employment growth the unemployment rate declining below 6 percent.

I'll provide much more detailed analysis at the regional level when those figures are released later in the month.


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