Friday, September 09, 2011

Employment growth stops. Pity about the promised 500,000 new jobs

It may be a sampling error. If not...

Turning down

So far this financial year

Work-ready population: up 26,500
Total jobs: down 13,800

Jobs for men: down 15,500
Jobs for women: up 1700

Full-time jobs: down 39,000
Part-time jobs: up 25,100

ABS 6202.0 June - August, seasonally adjusted

Employment has stopped growing, rendering improbable the budget forecast of 500,000 new jobs and pushing up the unemployment rate as the number of work-ready Australians grows.

Since the start of the financial year the number of Australians with jobs has shrunk 13,800. Around 10,000 jobs were lost in August. By contrast the budget forecasts had employment growing by around 20,000 per month, swelling to 500,000 new jobs after two years.

The budget had the unemployment rate falling from 5 per cent in June to 4.75 per cent by June 2012. Instead in the first two months of the financial year the rate has climbed to 5.3 per cent.

Westpac is now forecasting an unemployment rate of 5.75 per cent by mid next year - a completely percentage point higher than the May budget forecast.

The Bureau of Statistics figures show in the past six months employment growth has limped along at an annualised pace of less than half a per cent, well below the rate of population growth. The budget had forecast 1.7 per cent per year for two years.

Without jobs growth at the rate forecast the budget’s revenue forecast and projected return to surplus are in doubt.

Men have borne the brunt of the downturn, losing 15,500 jobs in two months in which female employment held firm, climbing 1700...

The female result would have been bouyed by the creation of 30,000 temporary jobs in July and August to work on the census. Although many were taken by people who already had would, previous ABS estimates suggest about 5000 would have gone to people out of work. Those jobs will vanish in September.

Around 39,000 full-time jobs disappeared in July and August, replaced by 25,100 part-time jobs.

Employment minister Chris Evans described the downturn as “a slight weakening.” Separately indigenous employment minister Mark Arbib reaffirmed the Treasury forecast of 500,000 new jobs over two years.

Basking in the good but dated economic growth figures for the three months to June released Wednesday Treasurer Wayne Swan attacked the media and the opposition for focusing on negatives, saying “the glass is more than half full, it is not half empty”.

Queensland and NSW continue to have the worst unemployment rates in Australia of 6.2 and 5.4 per cent. Victoria and South Australia enjoy rates of 5.1 per cent and Western Australia 4.4 per cent.
Credit Suisse consultant Sean Keane said 2011 was shaping up to be the worst year for jobs growth since 1992. “We have created just 23,000 new jobs this year,” he wrote to clients. “That trend will leave the labour market with its worst annual result in 20 years.

“It’s a reality check for those people who thought the growth figures meant the economy was shooting the light out,” said CommSec economist Savanth Sebastian. “Businesses are cautious and more circumspect about future hiring.”

HSBC economist Paul Bloxham said firms may have been “overzealous” in taking on workers late last year.

“After the chronic labour shortages just prior to the financial crisis many firms were probably overly keen to hire workers when they saw the next investment boom coming and so we had labour hoarding. This seems to be being unwound.”

A reanalysis of the raw employment survey data by RBS Australia economist Kieran Davies suggests the downturn may not be as severe as the published figures indicate.

He said examining changes in the status only of people already in the monthly survey, employment seemed to have advanced 29,000.

Published in today's SMH and Age


Related Posts

. July jobs growth, the damage

. Where 'da new jobs? Hint. Mining is down the list:

. Try living on NewStart. It's getting harder.

6202.0

6 comments:

The Lorax said...

Is Bloxham your favourite now?

Frankly, I think he pulled that "overzealous" hiring idea out of his arse. We have manufacturing, tourism and (bricks & mortar) retailing, all struggling, all big employers, and Bloxham concludes its a winding back of overzealous hiring because businesses were getting too excited about the boom?!

These businesses were hanging onto employees for as long as they possibly could late last year. It was April -- when the dollar went ballistic -- that people finally started throwing in the towel. The "market volatility" of August only accelerated the process.

Time to stop quoting Bloxham and Carr on every economic data point. Give Gerard Minack a call next month for some balance.

The Lorax said...

Dodgy number. I knew it!

A reanalysis of the raw employment survey data by RBS Australia economist Kieran Davies suggests the downturn may not be as severe as the published figures indicate.

No such "reanalysis" of the GDP numbers was required or reported, even though inventories contributed most of the growth, and the data contradicted just about everything we've heard about a weak domestic economy and cautious consumer for the past 6 months. Oh no, that was accepted at face value.

Just how friggin' long does this flat employment growth trend have to run before its not dodgy? A year? Two years?

Its been stuck around 11,430,000 for 10 months now (revisions after the ->)

Aug 2011: 11 432.6 -> ???
Jul 2011: 11 450.5 -> 11 442.3
Jun 2011: 11,455.2 -> 11 450.6
May 2011: 11,440.5 -> 11,431.7
Apr 2011: 11,436.5 –> 11,432.8
Mar 2011: 11,457.1 –> 11,458.6
Feb 2011: 11,412.9 –> 11,419.3
Jan 2011: 11,441.5 –> 11,423.0
Dec 2010: 11,417.4 –> 11,417.5
Nov 2010: 11,416.9 –> 11,415.1
Oct 2010: 11,355.9 –> 11,362.3
Sep 2010: 11,326.2 –> 11 324.9
Aug 2010: 11,272.0 –> 11,275.4

Expectations were for 11,460,500 and we got 11,432,600. 28,000 short.

If you add the Census effect (5,000-6,000 according to the banks) this is getting close to a statistically significant drop in employment.

Anonymous said...

It means Martin Parkinson was correct about the budget being restrictive enough.

We would be moving into a recession now if the critics had their way

Anonymous said...

Peter,

You've seen the investment data for the mining sector - do you believe we'll have 5.75% unemployment? Seems far too high to me. I would be expecting it to start slowly trending down from here.

Kymbos

The Lorax said...

Kymbos, the mining sector is a small employer and always will be. This is offset by three large employers -- manufacturing, tourism and retail -- laying off staff.

The mining investment boom flowing through to other sectors has been an article of faith for most policymakers and economists for many months now, but its just not happening.

I expect unemployment to be above 6% by mid next year, or by Christmas if Europe implodes.

The Lorax said...

Bill Evans spells it out for you Kymbos...

The mining boom is not adding the jobs that are needed to replace those which are going to be lost as a result of the structural change associated with the high Australian dollar or the cyclical changes resulting from tight monetary policy and the intention of government, households and firms to lower debt.

Those folks who point to the mining boom generating wage pressures, as strong demand for labour impacts a tight labour market, must be reassessing. Recall that the Reserve Bank has forecast that the unemployment rate will be lower in 2012 than the 4.9 per cent which it registered at its last forecasting round. Stresses in the retail (15 per cent of employment); manufacturing (10 per cent); finance (7 per cent); leisure (7 per cent) and construction (9 per cent) sectors are unlikely to be absorbed by the mining sector (2 per cent). A recent RBA report calculated that the construction activities in the mining sector over the last year boosted employment by only 0.25 per cent. Measures of the indirect effect of mining demand on business services; finance; and manufacturing are not available, but it appears that this effect has been over-stated by the interest rate hawks.

Furthermore, the income effect which was so important in the previous mining boom has not been apparent in this cycle as government, households and firms have been saving any income boost. That income boost is likely to come to an end later this year and in 2012 as commodity prices fall.


WEEKEND ECONOMIST: No time to waste

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