Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Tuesday, 19 January 2016

Palmersaurus Wrecks (237 jobs go extinct)

Endangered species?

I spent a most pleasant week up in Coolum last year. Although I generally don't recommend investing in property in regional areas or coastal resorts, I do very much like to visit for holiday breaks.

Alas Clive Palmer's Coolum Resort was closed for a multi-million dollar refurbishment, so I didn't get to see the world-famous Palmersaurus in the end (the dinosaur park and its associated star attraction, I mean, not the other larger-than life character...).

I don't watch an awful lot of television these days (cricket aside, of course), but do occasionally get caught off guard and thus assaulted by financial media reporting, particularly when visiting the gym as I did this afternoon.

In any case, it has been nigh on impossible to escape the news barrage over the past 48 hours as it has been blazoned that Palmer's Nickel & Cobalt refinery operation at Yabulu has gone into voluntary administration, resulting in 237 workers losing their jobs.

This in another potential adverse shock to to the Townsville region, which has already been struggling for 4 years, has declining employment and a high rate of unemployment.

The press will doubtless be all over the story, especially given that the company had reportedly previously made donations to Palmer's own political party (PUP), and there's little need for further comment on that matter here.


One point that it worth noting here, however, is the massively high media profile that is afforded to job losses in the mining and manufacturing sectors. 

Don't get me wrong, I'm certainly not downplaying the significance of the commodity price crunch and its detrimental impact on national income.

And the mining downturn with its associated job losses have been nothing short of a catastrophe for some resources regions, as well as for property investors who were ill-advisedly counselled to buy in such extreme high-risk locations.

But for investors in particular, it is important to keep some level of perspective at the macro level.

If there is one thing we should have learned since 2008, it is that in the internet age some quarters will always be ready and willing to continue promoting doomsday scenarios long after it becomes evident that markets have moved into (or even well beyond) their recovery stage. 

In fact, there will be always be apparently good reasons not to invest, something which has never changed through the cycles. There will always be noise, so you'll need to learn to block it out in order to find opportunities.

Jobs: a few points worth considering...

A few sundry points, then, on the labour market.

The manufacturing sector in Australia remains in a long and punishing structural decline, with total employment shrinking from around 1.1 million to 848,000 over the past three decades. 

Yes, the lower dollar will be of assistance to the surviving manufacturing businesses, but most of the jobs that have been lost are not coming back.

On the plus side the structural decline in manufacturing employment has been entirely swamped by employment gains across the considerably larger services sector.

Granted, there are blurred lines surrounding the growth of the so-termed "gig economy", in contract positions, and in part time work.

This is another structural shift which will continue for the foreseeable future, which has a few interesting implications for future trends in wages, inflation, and monetary policy, to be discussed in more detail in another blog post.

Another point worthy of note is that as the mining construction boom and employment falls away, just how small mining employment actually is as a share of the national labour force.

Interestingly mining employment actually increased a little in the November quarter, with total mining employment of 226,400 still tracking at around triple the levels seen at the turn of the century.

Over the past year mining employment has shrunk by around 5,200 heads, and manufacturing continues to wipe out.

But there has been hugely strong growth in employment in sectors such as health care & social assistance (+151,300), professional & scientific services (+69,800), retail trade (+45,100), finance & insurance (+41,000), education & training (+34,900), accommodation & food (+10,000), and certain others. 

Notably, where I am located in Brisbane at least, the 237 jobs to be cut at Palmer Nickel & Cobalt have naturally been afforded way more airtime than the 130,000 or so jobs reportedly created in September and October

Of course, these are volatile numbers indeed and monthly data should not be taken too literally, yet the smoother trend data shows total employment having increased by more than 312,000 persons in 2015, the best result in years. 

Or if seasonal adjustments are not your thing, the raw original data showed total employment up by nearly 304,000 in 2015 to move beyond 12 million for the first time on record. 

As for the unemployment rate, results were here unexpectedly good in 2015. With employment growing at about double the pace of population growth the seasonally adjusted unemployment rate declined from a spike to 6.36 per cent in January, to 5.76 per cent in December.

At the state level, unemployment rates are trending down nicely in New South Wales, Victoria, and Queensland, while South Australia may finally now be tentatively turning a corner.

At the capital city level Brisbane saw its unemployment rate fall from 6 per cent to 5.4 per cent over the year to November, while in Greater Sydney the rate fell from 5 per cent to 4.4 per cent over the same time frame (I'll analyse the latest figures to December here on Thursday).

To repeat, don't get me wrong, I'm not saying the domestic economy is in amazing shape. It isn't. But away from the resources regions and certain manufacturing locations, the labour market is in surprisingly robust shape.

Anyway, gotta go since the morning news is on, and the lead story is...oh for...