Pete Wargent blogspot

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

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Friday, 24 February 2017

Perth unemployment rate above 7pc

Perth labour market deteriorates

Over December and January Greater Perth joined Greater Adelaide in the unenviable position of having  an unemployment rate which has breached 7 per cent. 

Smoothing the unemployment rate figures as an annual average shows that of the main capital cities only Perth is in an unemployment rate uptrend as the heady days of the resources boom recede.

Nationally annual employment growth has picked up a little over the past three months, albeit not by very much, with a shade over +90,000 positions added on a net basis for employment growth of +0.8 per cent. 

Having been on a storming run in 2015, annual employment growth has slowed right up in Greater Sydney to +21,000, with only Greater Melbourne adding any meaningful figure to its workforce at +85,000. 

In aggregate, in fact, the rest of Australia has added no net new employment at all over the year to January 2017, which is a rather underwhelming statistic to say the least!

Regions struggling

CoreLogic released some telling research today which showed that while capital city land values have continued to rise, regional land values in Australia are falling, down by some -8.5 per cent in 2016, noting that:

"Capital city dwelling values are rising while many regional areas are experiencing value falls."

According to CoreLogic the capital cities seeing the greatest increase in land values over the year were Sydney (+20.5 per cent), Hobart (+13.1 per cent), and Melbourne (+9.5 per cent). 

On the other hand land price falls were notched in regional New South Wales (-2.4 per cent), regional Queensland (-11.5 per cent), regional South Australia (-5 per cent), regional Western Australia (-2.3 per cent), and regional Tasmania (-3.0 per cent).

With lot sizes having decreased, on a rate per square metre basis some massive regional falls have been recorded in 2016, including -24.9 per cent in regional New South Wales, -34.8 per cent in regional Queensland, -13.2 per cent in regional South Australia, -12.5 per cent in regional Western Australia, and -17.9 per cent in regional Tasmania.

The gap between capital city and regional prices has thus continued to widen to reach its greatest ever gulf. 

You can read CoreLogic's findings in much more detail here

While it's important not to generalise too much, it is the case that many regions of Australia saw employment bolstered through the resources construction boom up until 2011-12, a trend which then retraced after the commodity price cycle peaked. 

To look at Townsville as one example of a region which saw employment trends follow this pattern, total employment picked up strongly and peaked at 125,500 in 2011, subsequently declining by more than 25 per cent before stabilising. 

While the picture seem to have improved of late, with an unemployment rate of 12 per cent across the region to date there remains too much slack in the labour market to force wage increases. 

Recent research by SQM Research showed that the rebound in commodity prices may have helped mining town property markets through their nadir after a diabolical run. 

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