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Thursday, 21 September 2017

Bedpans, bitumen, & Bachelor's degrees

Employment boom

Australia has created an extraordinary ~325,000 jobs over the past year, including a boom over the past six months the like of which arguably hasn't been seen in decades. 

The question is how? And where?

Greater Sydney (+83k), Melbourne (+59k), and now Brisbane (+46k) have each seen a drive in employment growth over the past year. 

Greater Sydney now has a monthly unemployment rate of only 4.46 per cent, and the annual average unemployment rate across the harbour city continues to decline, as it has for 3½ years now. 

That's been partly driven by apartment construction and the associated multiplier effect, and a swathe of infrastructure projects. 

Increasingly Hobart is firing up, adding +6k jobs over the year to August 2017, with the median duration of job search continuing to decline. 

Where else?

Gold Coast (+21k) and Sunshine Coast (+12k) have been other contributors to Queensland jobs growth over the past year, presumably driven by tourism, while Toowoomba added a cheeky +5k of new jobs on a net basis. 

Emerging from the resources doldrums, meanwhile, Mackay (+10k) and Townsville (+17k) have clearly turned a corner of sorts lately. 

Construction still raging

Over the past quarter the greatest employment gains were to be found in construction (+64,600), healthcare & social assistance (+48,000), and education & training (+25,700).  

Between them these three industries have created net new employment of +263,000 since August 2016, which really is a huge number. 

Alongside tourism, a boom in international students and education has been a shining light of the economy in recent times - at least in terms of quantity, if not quality.

Offsetting this, some professional services and administrative employment has been scaled back. 

The construction employment surge needs to be viewed in the context of the preceding resources construction boom, which took construction employment to already unprecedented levels. 

And now total construction employment has elevated further - thanks to a combination of residential and infrastructure projects - to 1,168,000. 

The wrap

Sydney's economy is clearly relishing its stamp-duty-funded infrastructure boom.

At the industry level, healthcare & social assistance may well continue its structural uptrend, perhaps eventually accounting for ~15 per cent or more of the entire workforce. 

Construction now directly accounts for ~9.5 per cent of Australian employment. This is much more surprising, and it's never been higher.

This is why, in my opinion, it may pay to be sceptical about all the casual chatter about rate hikes.

Residential jobs account for about three quarters of total construction industry employment.

So once the residential building sector inevitably slows over the next year or two, total employment growth could be winching itself down to earth with a big, clumsy thump.