Jobs surprise but QLD bucks the positive trend

The Labour Market data for March released by the ABS this morning showed an unexpectedly strong employment number with a total of 26,100 extra new jobs (although all of them, and more, were part-time with full-time jobs actually declining 8,800). With the Participation Rate stable (64.9) the only cloud on the horizon was the decline in hours worked (reflecting the shift to part-time positions) and the fact that the Feb numbers were revised downwards (employment revised down by 1,000 and full-time revised down by 2,000). Against expectations of a possible tick up in the seasonally adjusted unemployment rate we actually saw a drop to a two-and-a-half year low of 5.7%. The more stable Trend series remained at 5.8% (where it has sat for the past three months).

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Earlier this week we got an Australian Chartbook from our friend, and respected UK market economist, Graham Turner at GFC Economics in London. It’s interesting to see what an external perspective makes of the Aussie economy, particularly from someone so well thought of amongst UK investors. Among the points Graham makes was “..Australia is transitioning quickly from mining: non-manufacturing employment surged 355.5k in 2015, the biggest y/y increase on record. This offset a 59.7k drop in manufacturing & mining. The latest job vacancies data point to a further decline in the jobless rate.” (this commentary was written earlier this week before today’s release). He also notes “The dynamic labour market reduces the need for more RBA stimulus. Of course, the recent rebound in the Australian Dollar could unnerve RBA board members, particularly as the trade deficit hit a new high in the year to February. However, it should be stressed that the real trade balance has improved sharply: the deterioration in the trade deficit reflects falling prices.

For some years Graham and his team have focused heavily on the impact of “productive investment” in new technologies and the impact that this will have (and is having) on economic growth. He comments that in Australia our transitioning from the manufacturing & mining to non-manufacturing sector “reflects stronger ‘productive’ investment: real spending on research & development and software (combined) hit a record 1.85% of GDP in Q4 2015. Australia is investing in fintech, renewables, and software.

Below are a couple of the charts from the GFC Chartbook (reproduced with GFC’s permission) which highlight the points Graham is making.

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Unfortunately the picture is not so rosy in QLD. Although to be fair this is largely due to the overly positive results from Feb (see here) rather than any disaster in the Sunshine State. Seasonally adjusted employment fell by 15,500 (and Feb’s decline was also revised weaker) with a total of 27,700 full-time positions lost (after the strong Feb increase was revised down slightly). Despite a decline in the Participation Rate, the headline unemployment rate lifted to 6.1% from the surprisingly low 5.6% of Feb. Considering these rather wild swings we should perhaps focus our attention on the Trend series and here we see employment fell by 500 in March; the first decline in Trend employment for 16 months. The Trend unemployment rate lifted to 6.0%, where, after revisions, it has stood for 4 months.

As the chart below makes clear we are seeing employment growth in QLD struggling once again to keep up with increases in the size of the working population. Barring declines in the Participation Rate, that makes further declines in the unemployment rate difficult to see.

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