NSW job vacancies plunge in Delta outbreak

Skilled job vacancies; Economic forecasts; Reserve Bank official speech

• What happened? Skilled job vacancies fell by 5.6 per cent (or 12,828 jobs ads) in August to stand at 216,031 available positions. It was the biggest monthly fall in job ads in 16 months and the third successive decline after available positions hit 12½-year highs of 240,349 ads in May. Recruitment activity is still up 28.4 per cent (or around 47,800 ads) when compared to pre-Covid-19 levels.

• Lockdown impact on job ads: Over the two months to August 2021, NSW recruitment activity is down by 19.1 per cent (or 14,843 job advertisements). During Victoria’s ‘second wave’ of the Covid-19 virus, recruitment activity fell by 14.5 per cent (or 4,417 job ads) over the two months to August 2020.

• Global growth forecasts: The OECD expects the global economy, as measured by GDP, to expand by 5.7 per cent in 2021 and 4.5 per cent in 2022. The Australian economy is tipped to expand by 4 per cent in 2021 and 3.3 per cent in 2022.

• Speech from Reserve Bank official: Michele Bullock, Reserve Bank Assistant Governor (Financial System) delivered an online speech at Bloomberg Inside Track today, entitled “The Housing Market and Financial Stability.”

• Implications: Reserve Bank Assistant Governor (Financial System) Michele Bullock said that if macro-prudential policy tools are to be deployed to counter growing financial stability risks from soaring home prices, “they should be targeted at the risks arising from highly indebted borrowers.”

Job vacancies are a key gauge of future employment. Global economic forecasts are useful for exporters and companies that trade across a range of countries.

What does it mean?

• The extended lockdown in NSW is having a massive impact on the labour market. The Bureau of Statistics (ABS) reported last week that 210,000 jobs in NSW had been lost in July and August, with hours worked plunging 6.5 per cent in August alone due to government Covid-19 ‘stay-at-home’ orders.

• Today, the National Skills Commission’s job vacancy report was issued for August. The leading indicator of labour demand showed the extent of the damage to the NSW job market from the current Delta virus outbreak. In fact, over the two months to August 2021, NSW recruitment activity is down by 19.1 per cent (or 14,843 job advertisements). By comparison, during Victoria’s ‘second wave’ of the Covid-19 virus, recruitment activity fell by 14.5 per cent (or 4,417 job ads) over the two months to August 2020.

• Of course, the latest lockdowns are also impacting the ACT and Victorian labour markets. In the ACT, job vacancies dropped by 9 per cent (or 614 job ads) in August. Job ads are now down 11.8 per cent (or 837 job ads) over the two-month period to August. And in Victoria available positions fell by 5.6 per cent (or 3,669 job ads) in August to be down 3.3 per cent or 2,010 jobs ads during the two-month period (ads lifted in July). But the hit to Victorian job ads will likely be much more severe in September.

• In three-month moving average terms, Sydney job advertisements fell by 5.7 per cent (or by 3,022 job ads) in August. But there were even bigger falls in job vacancies in Gosford and the Central Coast, NSW (down 7.5 per cent or 115 ads) and Newcastle and the Hunter, NSW (down 6.4 per cent or 341 positions). That said, other regions of NSW are outperforming with job ads increasing in both Tamworth and North West NSW (up 1.9 per cent or 20 positions) and Riverina and Murray (up 0.1 per cent or 2 job advertisements) in August.

• The Organisation for Economic Co-operation and Development (OECD) released its latest economic forecasts overnight. OECD economists expect the global economy, as measured by GDP, to expand by 5.7 per cent in 2021 and 4.5 per cent in 2022. The Paris-based organisation reported, “The global economic recovery remains strong, helped by government and central bank support and by progress in vaccination. But although global GDP has now risen above its pre-pandemic level, the recovery remains uneven with countries emerging from the crisis facing different challenge.”

• OECD economists forecast consumer prices in the largest 20 economies globally (G20) to moderate from 4.5 per cent at the end of 2021 to around 3.5 per cent by the end of 2022, remaining above pre-pandemic inflation growth rates. The 38-member organisation warned that “near-term inflation risks are on the upside,” due to supply chain disruptions, surging commodity prices, rising shipping costs and pent-up demand by consumers. While inflation expectations are a “huge source of uncertainty,” the OECD stressed that “accommodative monetary policy should be maintained” with “clear guidance needed about the horizon and extent to which inflation overshooting will be tolerated.”

• The OECD also provided updated forecasts for the Aussie economy with GDP expected to expand by 4 per cent in 2021, a 1.1 percentage point decline from its May forecast due to Delta-induced lockdowns in NSW, Victoria and the ACT. And GDP growth for 2022 is forecast at 3.3 per cent, a downgrade of just 0.1 percentage point from May. Of course, the forecasts are contingent on higher vaccination rates and the re-opening of state and territory economies.

• Commonwealth Bank (CBA) Group economists are tipping global GDP growth of 6.5 per cent in 2021 followed by a 4.4 per cent growth rate in 2022. And Aussie GDP growth of 3 per cent is estimated in 2021, before a strengthening of activity to 4 per cent in 2022.

• The Aussie housing market has strong momentum, despite recent lockdowns, with investor activity starting to pick-up. The lift in investor housing credit and home lending increases the risk that bank regulator APRA deploys macro-prudential policy tools to contain financial stability risks. But Michele Bullock, Reserve Bank Assistant Governor (Financial System) today said, “the concerns this time are not specific types of lending such as investor or interest only lending.” Instead, home lending curbs should be more “targeted” with a focus on “tools that address serviceability of loans and the amount of credit that can be obtained by individual borrowers.”

What do you need to know?

Skilled job vacancies – August

• Skilled job vacancies fell by 5.6 per cent (or 12,828 jobs ads) in August to stand at 216,031 available positions. It was the biggest monthly fall in job ads in 16 months and the third successive decline after available positions hit 12½-year highs of 240,349 ads in May. Recruitment activity is still up 28.4 per cent (or around 47,800 ads) when compared to pre-Covid-19 levels.

• Skilled vacancies fell in five state/territories in August: NSW (-9.2 per cent); Victoria (-5.9 per cent); Queensland (-5.9 per cent); South Australia (+1.1 per cent); Western Australia (+1.0 per cent); Tasmania (-2.2 per cent); Northern Territory (+2.3 per cent); and the ACT (-9 per cent).

• Job advertisements decreased in all eight broad occupational groups in August and in 44 of the 48 detailed occupational groups. General-Inquiry Clerks, Call Centre Workers, and Receptionists recorded the largest fall over the month (down by 1,100 job advertisements or 6.5 per cent), followed by Hospitality Workers (1,100 job advertisements or 19.9 per cent) and Sales Assistants and Salespersons (1,100 job advertisements or 10 per cent).

Speech from Reserve Bank official

• Michele Bullock, Reserve Bank Assistant Governor (Financial System) delivered an online speech at Bloomberg Inside Track today, entitled “The Housing Market and Financial Stability.”

Key quotes:

• On monitoring home lending standards and financial risks: “Unlike in 2014 and 2017, the concerns this time are not specific types of lending such as investor or interest only lending.”

• On macro-prudential policy tools: “So the tools used at that time are not really appropriate at this time.”

• And, “they should be targeted at the risks arising from highly indebted borrowers.”

• Also, “Tools that address serviceability of loans and the amount of credit that can be obtained by individual borrowers are more likely to be relevant.”

Published by Ryan Felsman, Senior Economist, CommSec