Regional unemployment escalating

jobs employment

The ABS released its Detailed Labour Force figures for January yesterday, which rarely receive any coverage at all in the media.

This seems a little unusual given the great hullabaloo after the main data is printed.

I have been warning on this blog since its very inception that many of Australia’s regions have been carried along on a once-off decade long mining construction boom, which simply would not and could not last forever.

It has taken a bit longer than  many of us thought, but we’re now into the capex decline, and we had better look out because it is going to be steep.

Let’s take a look at a few of the more interesting trends in four short parts.

Part 1 – Total employment

employmentThe detailed labour force figures are not seasonally adjusted and therefore we do expect to see dips in the month of January

However, the figures for regional New South Wales look especially weak with total employment declining by 23,000 back to Q3 2007 levels, which is a lot of years for no employment growth, seasonal adjustments or no.

The major driver in the state appears to be coal mining contractor positions being cut.

This is not particularly surprising since much of Australia’s coal production surely cannot be viable at today’s prices, as discussed previously here.

This will be reflected in higher unemployment rates in the Newcastle/Lake Macquarie region and the Hunter Valley.

For different reasons the data for Greater Adelaide also appears particularly weak, with employment declining further to be some 27,000 lower than where it was in Q4 2012.

Total employment in Adelaide is below where it was 65 months ago, with the main drivers possibly including job losses in the Elizabeth region,

Elizabeth now has the highest reported capital city rate of unemployment in Australia (33.3 percent unemployment) with Smithfield-Elizabeth North (24.0 percent) and Davoren Park (20.1 percent) also seeing unemployment rates rise sharply and consistently over the past four quarters.

Christie Downs (20.1 percent) has also suffered from rising unemployment.

The total employment growth chart in a columnar format below underscores the same story.

Part 2 – Unemployment rates

Monthly unemployment figures are volatile, but smoothing them on a rolling annual basis shows that while Greater Sydney and lately Greater Hobart may have experienced generally improving labour markets, Greater Melbourne, Perth, Adelaide and now Darwin appear to have been deteriorating.

The unemployment rate in regional New South Wales has soared to 8.5 percent, the highest level since 2002, indicative of substantial coal mining job losses.

Greater Adelaide recorded an unemployment rate of 7.9 percent, its highest reading in 13 years.

 

[sam id=40 codes=’true’]

A selection of regional unemployment rates smoothed below on a 4mMA basis to reduce the wild volatility shows that coal mining regions are struggling, while Moreton Bay North is also dragging up the Greater Brisbane averages.
The most alarming jump in the month was seen in Logan-Beaudesert – a weakening employment trend recently flagged by Michael Matusik among others – where the unemployment rate recorded for January 2015 soared to 11.9 percent, the highest level it has seen since 2001.

Monthly figures can be volatile, but on a 4mMA basis the unemployment rate in the Logan-Beaudesert region trended up to a concerning 9.3 percent.

The main driver of this trend appears to have been the reported unemployment rate in Logan Central which increased over the past four quarters from 19.6 percent to 21.0 percent.

Part 3 – New South Wales

The divergence between unemployment in Greater Sydney and regional New South Wales is quickly becoming a gulf.

On a rolling annual basis regional New South Wales unemployment rate has crept up to 7.0 percent, but the latest reading of 8.6 percent suggests that it may be heading significantly higher.

The coal mining regions feature heavily in the unemployment statistics at the present time.

Unemployment rates in inner ring Sydney on the other hand remain low.

Property investors may consider the eastern suburbs which have lagged in this cycle and are set to benefit from new light rail infrastructure, but should be wary of the inner west where prices in a number of suburbs are blowing off at an extraordinary pace (and I say this as someone who owns investment properties in Sydney’s inner west).

 

Part 4 – Queensland

Finally a short look at Queensland. While regional Queensland unemployment is heading higher than that of Greater Brisbane the trend does not look as pronounced.

This is partly because regional Queensland has a number of regions where unemployment is relatively low, including some of the largest tourism markets and Toowoomba.

However, every third person you meet in Queensland seems to be someone or know someone who has lost a mining contract position of late, and there is undoubtedly a good deal of  “blood on the streets” in a number of coal mining regions.

As previously noted, Logan-Beaudesert also appears to be struggling, while employment in Moreton Bay North also looks to be somewhat depressed, dragging up the Metropolitan averages.

Unemployment rates remain low in Brisbane East, Brisbane North and in the Brisbane inner city.

The Wrap

Regional unemployment is rising, and in some regions it is rising very sharply.

This trend in mining-influenced regions seems likely to accelerate through 2016 as the capex bust gathers momentum.

Expect to see interest rates dropped to 1.75 percent by Q1 2016, in line with cash rate futures market pricing.



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Pete Wargent

About

Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog


'Regional unemployment escalating' have 4 comments

  1. February 24, 2015 @ 7:29 am [email protected]

    Hi Pete,
    Nice work and not to many suprises. Its make me wonder about the advice from all these self poclaimed professionals. Margaret Lomas has been pushing the Logan Shire and Adelaide (Christies Beach) as a hot spot for some time know but where are
    her so called Growth Drivers. Did she not ask her self her own 20 questions. basically with out Jobs in an area, it all comes to a grinding halt. Makes you question the advice when the so called ” heavy weights” cant even get it close.

    Reply


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