I usually try not to get drawn into payroll guesses.
But since I thought we might be due for a catch-up print this month I took a stab at a wildly bullish 37,500 job gains in November…not too shabby just quietly (!) & the best of the “forecasts” (i.e. guesses).
In the event we did indeed see a much better than expected Labour Force release with employment increasing by a seasonally adjusted 42,700 in November against market expectations of only 15,000.
Let’s take a look at today’s release in four short parts…
Part 1 – Total Employment
A good result for the month of November, with seasonally adjusted employment increasing by 42,700 to a new high of 11,637,400.
It’s worth noting that the seasonal adjustments have been decidedly dodgy of late and trend jobs growth was notably weaker at only 7100 for the month to be up by 134,000 over the year.
Zooming in the chart to a 5 year time horizon shows that while the trend in seasonally adjusted employment is up and total employment in Australia is at an all-time high, the rate of employment growth has only increased to +140,000 over the past year, which is some way short of what would be desirable.
So, a better month, but still two more interest rate cuts will be needed in all likelihood.
Part 2 – The Jobs Added
79,000 jobs have been added for males over the past year (now 54.2 percent of the workforce) and 61,000 for females (now 45.8 percent of the workforce).
Notably of the jobs added in this month’s survey some 40,800 of them were part-time positions and fewer than 2000 were full-time roles.
The monthly result was therefore not quite as strong as suggested by the headline result.
Part 3 – State Versus State
Most of the jobs this month were added in New South Wales (+19,600) where the Sydney economy is firing, and Victoria (+10,800).
Over the past year, New South Wales has added a reasonably healthy 53,000 jobs, with Western Australia the surprise package adding a net 51,000 positions. Less inspiring news elsewhere, although Tassie has recorded a long overdue bounce of sorts.
Looking at cumulative employment growth over time in the chart below reveals the variances by state.
Whether or not South Australia is in a technical recession is rather a moot point – the fact is that the local labour market is in a desperately weak condition which will be reflected in slow growth and ultimately declining population growth from an already weak position.
South Australia’s economy has fairly consistently now been chewing up and spitting out jobs for three years consecutively, and this ahead of the terminal decline of the automobile manufacturing sector.
Looking at the total employment growth by state in a columnar format shows a moderate improvement of late in Tasmania, but the southern states lagging badly:
Part 4 – Unemployment Rate – The Canary in the Coalmine?
The headline rate of unemployment was essentially unchanged in the month of November (“rising” from 6.2498 percent to 6.2638 percent) but thanks to rounding this resulted in an increase to 6.3 percent for the headline rate of unemployment.
We have not seen the Australian unemployment rate at the 6.3 percent level in more than a dozen years since September 2002.
At least two more interest rate cuts appear likely to be needed to get the unemployment rate heading back to below 5 percent where it should be, which presents both opportunities and threats to investors depending upon what you are investing in.
Charted below are the movements in unemployment rate by state, which shows elevated rates of unemployment in South Australia, Victoria, Tasmania and Queensland respectively.
However, this state level headline data is merely an indicator.
The real concern is that unemployment rates in parts of regional Australia are high and running higher – in some cases threatening to spiral in an extremely damaging manner – as we will discuss further in the detailed labour force figures later in the month.
Investment should always be about risk management first, particularly leveraged investment.
Property Observer recorded this week that house prices in Emerald in Queensland (one of the expert picks of yesteryear) have declined by 15 percent over the past year as the coal industry inevitably hits the skids, a salient risk highlighted here on numerous occasions previously.
The problem with ‘investing’ in an asset which drops by, say, 20 percent in value, is that prices then need to increase by a significantly greater 25 percent only to get back to a break even point (and closer to 30 percent in order to cover transactional stamp duty and acquisition costs) which could take many, many years…perhaps even a decade or more.
The best way to build wealth is to do so slowly and steadily, and especially to never have a significantly loss-making investment.
That way you’ll be like the 2007 version of the Melbourne Storm – if you never concede a try how can you not win* over the course of the season? An investor who never loses significantly can rarely be beaten over the long term.
*salary cap breaches, notwithstanding.