Record job vacanciesLongest services expansion in a decadeJob vacancies; Building approvals; Services sector
Job vacancies: Job vacancies rose by 1.3 per cent to a record 241,600 in the three months to November. Vacancies are up by 13.9 per cent on a year ago.
Building approvals: Council approvals to build new homes fell by 9.1 per cent in November to be down by 32.8 per cent over the year – the biggest annual decline in 9½ years. Rolling annual dwelling approvals in the ACT and Greater Hobart are at record highs.
Services sector: The Australian Industry Group (AiG) Performance of Services Index (PSI) eased by 3.0 points to 52.1 points in December. The PSI has expanded for 22 consecutive months – the longest expansion since March 2008. PSI results above 50 points indicate expansion.
World Bank economic outlook: The World Bank projects global growth of 2.9 per cent in 2019, down from 3.0 per cent in 2018 and 3.1 per cent in 2017. Growth of 2.8 per cent is forecast in 2020 and 2021.
What does it all mean?
The Aussie job market is in rude health. Measures of unemployment are at the lowest in around six years. There is still some spare capacity in the labour market, but further job gains are expected with leading indicators such as job vacancies at record highs.
Public sector employment growth is particularly healthy, given elevated government spending on health (the National Disability Insurance Scheme) and infrastructure. Victoria and Queensland have been the primary beneficiaries of public sector jobs growth over the six months to November. And over the year, job vacancies rose the most in Administrative & Support Services (up 7,300) and Health Care & Social Assistance (up 5,600).
Australia’s services sector has expanded for 22 consecutive months – the longest period of uninterrupted growth in over a decade. But confidence and activity have eased, dented by US-China trade tensions, concerns about slowing global growth, domestic political uncertainty, tighter credit conditions and rising input costs.
Retailers continue to discount prices, pressuring margins, but they reported positive conditions in the all-important Christmas trading period.
While labour hiring conditions have moderated, AiGroup reports that “average wages continued to rise [in December] and at a faster pace than the previous month, returning to levels of growth last seen in in the middle of the year. On average, 2018 has seen higher wage growth than the long-term average of this index.”
Home building activity is slowing across the country, moving to more sustainable levels – just like home prices in Sydney and Melbourne. However, home building in Hobart is going gangbusters, reflecting nation-leading home prices, solid economic growth, positive net migration and better affordability than the mainland. And annual dwelling approvals in Canberra are at record highs due to stronger population growth and low unemployment, driven by the public service.
What do the figures show?Job vacancies:
Job vacancies rose by 1.3 per cent to a record 241,600 in the three months to November. Vacancies are up by 13.9 per cent on a year ago.
In original terms, quarterly changes in vacancies across states and territories were: NSW (up 4.8 per cent); Victoria (down 7.2 per cent); Queensland (up 8.3 per cent); South Australia (down 8.6 per cent); Western Australia (up 3.4 per cent); Tasmania (up 17.9 per cent); Northern Territory (up 8.0 per cent) and ACT (up 3.1 per cent).
In original terms, annual changes in vacancies across states and territories were: NSW (up 5.9 per cent); Victoria (up 16.1 per cent); Queensland (up 8.8 per cent); South Australia (up 19.1 per cent); Western Australia (up 44.1 per cent); Tasmania (up 40.0 per cent); Northern Territory (up 20.0 per cent); and ACT (up 6.0 per cent).
Vacancies rose by 2,700 or 1.1 per cent in original terms over the three months to November. In terms of industries, 9 of the 18 industries had increased vacancies. Vacancies rose the most in Retail Trade (up 3,000), Health Care & Social Assistance (up 1,900) and Public Administration & Safety (up 1,800). But vacancies fell themost in Professional, Scientific & Technical Services (down 4,100), Accommodation & Food Services (down 2,000) and Administrative & Support Services (down 1,200).
Vacancies rose by 29,700 or 13.8 per cent in original terms over the year to November. In terms of industries, 14 out of 18 industries reported more vacancies. Vacancies rose the most in Administrative & Support Services (up 7,300), Health Care & Social Assistance (up 5,600) and “Other” Services (up 3,900). But vacancies fell the most for Accommodation and Food Services (down 3,500), Retail Trade (down 1,400) and Manufacturing (down 1,300).
By sector, private sector job vacancies rose by 1.1 per cent over the three months to November and by 13.5 over the year to 220,000. Vacancies in the public sector rose by 4.0 per cent in the three months to November and by 17.6 per cent from a year ago.
Council approvals to build new homes fell by 9.1 per cent in November to be down by 32.8 per cent over the year – the biggest annual decline in 9½ years.
House approvals fell by 2.3 per cent and apartment approvals fell by 18.4 per cent in November.
In trend terms, overall approvals fell by 2.3 per cent. House approvals fell by 0.2 per cent and apartment approvals were down by 5.2 per cent.
Over the past year 215,761 new homes were approved – a 3½ year low – down from the record high of 242,779 in the year to August 2016.
Dwelling approvals across states/territories in November: NSW (down 9.3 per cent); Victoria (down 14.6 per cent); Queensland (down 4.3 per cent); South Australia (down 4.6 per cent); Western Australia (down 7.3 per cent); Tasmania (up 30.6 per cent). Trend terms: Northern Territory (flat); ACT (down 9.5 per cent).
The value of all commercial and residential building approvals rose by 1.5 per cent in November, but were still down 23.3 per cent on the year. Residential approvals fell by 3.9 per cent; new building fell by 4.4 per cent; alterations & additions rose by 0.4 per cent. Commercial building rose by 11.1 per cent in November.
Services Purchasing managers’ indexes
The Australian Industry Group (AiG) Performance of Services Index (PSI) eased by 3.0 points to 52.1 points in December. The PSI has expanded for 22 consecutive months – the longest expansion since March 2008. PSI results above 50 points indicate expansion.
AiGroup notes: “The Australian PSI® has been broadly stable or expanding for twenty-seven months. It has indicated positive conditions (results above 50 points) for the past twenty-two months, however in the second half of the year growth has trended down. Activity remains divergent across the sub-sectors as business-oriented respondents face tighter conditions than consumer-facing businesses. Capacity utilisation in the Australian PSI® fell by 0.7 percentage points to 77.3 per cent of available capacity in December. Across 2018 it has averaged 79.7 per cent and while it has slipped down in the latter part of the year, it remains slightly above its long-run average of 76.0 per cent.”
By activity: Four of five of the activity indexes were positive and indicated growth in December. New orders lifted (+1.2 points to 58.0 points), but sales (-1.4 points to 53.1 points), supplier deliveries (-5.9 points to 51.9 points) and finished stocks (-2.7 points to 51.4 points) all eased. Employment fell 7.4 points to 45.5 points – the first contraction since September 2016.
By industry: Five of the nine sub-sectors expanded in the month: Business & property (-1.3 points to 49.8 points); Finance & insurance (+0.4 points to 50.8 points); Wholesale trade (-2.1 points to 44.3 points); Transport & storage (+2.5 points to 47.9 points); Retail trade (-1.6 points to 51.8 points); Hospitality (+0.1 points to 59.6 points); Health & education (-0.9 points to 55.8 points); Recreation & other services (+2.1 points to 52.9 points); Communications (N/A).
Prices and wages: Measures of prices and wages lifted in December: Selling prices (+3.1 points to 50.9 points); Input prices (+7.4 points to 66.8 points); and Average wages (+2.3 points to 62.6 points).
The World Bank’s Global Economic Prospects update as at January 2019 has forecast the following economic growth for 2019 (previous forecast June 2018):
• Global growth down by 0.1 percentage points to 2.9 per cent;
• Advanced economies unchanged at 2.0 per cent;
• United States unchanged at 2.5 per cent;
• Euro Area down by 0.1 percentage points to 1.6 per cent;
• Japan up by 0.1 percentage points at 0.9 per cent;
• Emerging market and developing economies down by 0.5 percentage points at 4.2 per cent;
• China down by 0.1 percentage points at 6.2 per cent;
• India unchanged at 7.5 per cent;
• Russia down by 0.3 percentage points at 1.5 per cent;
• Brazil down by 0.3 percentage points to 2.2 per cent.
What is the importance of the economic data?
The Australian Bureau of Statistics releases Job Vacancies data each quarter. The data is useful in gauging the strength of the job market.
The Bureau of Statistics’ monthly Building Approvals release contains figures on local council approvals to build residential structures such as homes and units as well as commercial premises such as offices and shops. Approval is one of the first stages of the construction ‘pipeline’ and is thus a key leading indicator of future activity. An increase in approvals would point to stronger future activity for construction-related companies.
The Australian Industry Group (AiG) release surveys on the services sector each month. The Australian surveys are the local equivalents of similar surveys released for othercountries. The services sector surveys are useful not just in showing how the sector is performing but in providing some sense about where it is headed. The key ‘forward looking’ components are orders and employment.
What are the implications for interest rates and investors?
Leading indicators of jobs growth have eased, but point to a continued gradual fall in the unemployment rate as the labour market continues to tighten. The lift in the AiGroup’s average wages index for the services sector implies steady wage gains for workers across industries with solid jobs growth.
Job vacancies are at record highs according to the Bureau of Statistics, backed up by recent robust readings from the NAB business survey and SEEK. Of course, jobs advertised on social media platforms, such as LinkedIn and Facebook, need to be factored in too. However, the AiGroup’s employment sub-indices point to a potential moderation in hiring intentions, particularly in manufacturing amid trade and political uncertainty.
Housing markets vary across the nation. New home approvals have fallen to the lowest level in over five years. Home building remains weak in the Top End. Building activity in Sydney and Melbourne is easing from record highs in response to more ‘normal’ demand, falling home prices and reduced credit availability. However, building is soaring in Hobart and at record highs in the ACT.
CommSec expects official interest rates to remain stable for the foreseeable future.
Published by Ryan Felsman, Senior Economist, CommSec
Record job vacanciesLongest services expansion in a decadeJob vacancies; Building approvals; Services sector