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You’re hired!

Hiring has improved significantly in 2017, particularly for full-time jobs, which will be a welcome relief for the Reserve Bank of Australia.

Another sometimes useful indicator we can look at is the employment to population ratio, which is less volatile that many of other labour force estimates (since estimates of the resident population are also less volatile). measure-success-motivation-goal-tracking-happy-work-job-employment-rate-stat-ruler-math-lady-woman-female

Scanning the trend in the employment to population ratio it initially looked as though the labour market had reached a trough in 2014.

But then there was a setback, which some commentators attribute to then Treasurer Hockey’s ‘austerity’ measures, which attempted to drag the Budget kicking and screaming back into surplus.

Now the trend employment ratio is improving again, up from 60.9 per cent at the beginning of the year to 61.3 per cent in June 2017, with both the male and female cohorts rebounding.

As you can see, nationally the employment ratio tends to be considerably higher these days than it was in the 1980s due to the vastly increased female participation in the workforce.

Employment Population 1

This also has important implications for the housing market, for there are now many more dual income households than there were, increasing household incomes, and in turn borrowing and purchasing power.

Despite the recent improvement the national employment population ratio remains 1.5 per cent lower than in 2008, when the employment to population ratio ran all the way up to 62.8 per cent in a starburst of fiscal stimulus packages.

State versus state

Most states have seen a bit of an improvement in recent months.

Possibly the surprise package here is Western Australia, which has rebounded nicely as jobs growth has picked up.

Employment Population 2

This has partly been driven by resurgent commodity prices, although at least part of the improvement in labour force ratios has been due to negative net interstate migration, with disaffected workers now migrating back to the eastern states.

We’ve seen similar trends in the Northern Territory, where the employment to population ratio ran even higher at above 70 per cent in the early part of 2017, but population growth in the Top End is now threatening to turn negative.

Still, it shows that the medium term prospects in the resources states may yet prove to be better than many imagine.

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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


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