Wednesday, July 15, 2009

Worried about losing your job? Breathe more gently.

The latest NAB business survey shows employers easing off on letting go of workers and more inclined to take workers on. And it accords with what they are also telling the Commonwealth Treasury.

Only 1 in 5 employers felt the need to trim staff in June, down from 1 in every 3 in March.

The proportion expanding their workforce climbed from 8 per cent to 10 per cent.

"Employment is still going backwards, but not at the rate it was," said NAB chief economist Alan Oster. "We are no longer seeing large chunks of labour shedding."

The finding mirrors that of the Treasury's Business Liason Program which found this month that job cuts were becoming "less prevalent" and that some retailers and construction firms were taking more workers on...

Extraordinarily good conditions and forward orders for retailers and motor vehicle traders as well as improved conditions for construction contractors pushed the NAB's business conditions index to its highest point since before the late 2008 financial crisis in June. Business confidence turned positive and climbed to its highest point since December 2007.

"I am surprised by the results, and I am concerned they won't hold," said Mr Oster. But June appears to have been the best retail month on record, right up there with December when the first stimulus cheques arrived. Car sales are probably being boosted by tax breaks in the Budget and the extension of the first home boost is feeding construction."

"But can we be sure the jobs market will continue to improve when when each of those supports is removed later this year? I'm not sure."

Mr Oster is maintaining the NAB's forecast that the unemployment rate will peak at 8 per cent, somewhat below the government's forecast of 8.5 per cent. But emboldened by the survey other forecasters think things now won't get that bad.

"We would only expect 7.5 per cent now, not much higher," said UBS economist George Tharenou. "We are now expecting 6.5 to 7 per cent," said CommSec economist Savanth Sebastian.

Every forecaster expects Australia's unemployment rate to continue to climb beyond its present 5.8 per cent even if the jobs market does turn. Immigration and the annual influx of school leavers means employment needs to grow by about 3 per cent a year in order to stop the rate climbing.

Treasurer Wayne Swan took credit for some of the change in sentiment saying as he moved around the country, businessmen and women have told him "again and again that stimulus means they still have customers coming through their doors, and that means they can hold on to more staff than they otherwise would".

The former boom states of Queensland and Western Australia now have the weakest business conditions according to the NAB survey, with NSW the strongest, and Victoria the middle of the pack.

Mr Swan said the global recession still had "some way to run".

"The terms of trade effect alone is expected to cut about 3 per cent from national income over 2009/10," he told an audience at the Australian National University in Canberra.

"And the effect does not stop there - it cycles into weaker business profits and hence into weaker investment and employment outcomes. It also shows up in weaker government revenue."

"Budget decisions are going to remain difficult for the next few years at least."

Published in today's SMH and Age

Graphic: From here

NAB June 09