New Conus Industry Trend data shows the problems Townsville faces

Each quarter the ABS produce data showing the levels of employment in each industry for the various labour force regions. Unfortunately this data is only provided on an unadjusted, 4-quarters average basis and as a result is a very lagged indicator. So, in the same way that we have been doing for some time with the monthly ABS regional labour force data, we wanted to produce a series, utilising this raw ABS data, that would give clients and policy-makers a more timely and responsive data-set when considering industry employment in the regions.

We still have some work to do before we’re ready to launch the full data-set for all the QLD SA4 regions (we anticipate a full launch in time for the next quarterly release of ABS data in June) but at this stage wanted to share with readers some initial findings with regard to Townsville.

To construct this data-set we have had to dis-aggregate the 4-quarters average data from the ABS. We’ve then adjusted and trended that dis-aggregated data to create the Conus Industry Trend for regional employment.

Looking across the 19 ANZSIC industry categories in Townsville, and comparing to the data from a decade earlier highlights the breadth of the slow-down seen.

We can see that only 6 of the 19 industry sectors have seen any increase in employment numbers (this during a period in which the population of Townsville increased by at least 37,000). Of those 6 industries only 3 have seen growth of 2,000 or more (Public Admin, Health Care and Transport). Major declines have been seen in Construction (down almost 6,000), Manufacturing and Retail Trade (both down almost 2,000) and falls of about 1,000 in many other sectors. The downturn in the Townsville economy has clearly been broad-based and impacted a large majority of industry sectors with a total loss of almost 6,000 jobs over the decade.

The full Conus Industry Trend series for all QLD SA4 regions is anticipated to be available after the release of the ABS Quarterly Labour Force data in June.

Note: The ABS Regional Jobs data will be released this Thursday (25th) at which time we will be updating our monthly Conus Trend Regional QLD Labour Force series.

QLD unemployment rate stays static, but this is a strong report for the State

Today saw the release of the ABS Labour Force data for April and it came in well above market expectations. Total employment (seasonally adjusted) rose 37,400 (expected +4-5,000) with the headline unemployment rate falling to 5.7% (from 5.9%). Unlike March, when the gains all came in the full-time sector, April saw full-time jobs drop 11,600. Nevertheless, full-time positions are up over 100,000 in the past 6 months. On the less volatile (and preferred) Trend measure we saw 19,900 new jobs with March data revised stronger. In the past 6 months the Trend series shows 120,000 new positions.

In Queensland the headline, seasonally adjusted, unemployment rate remained stuck at 6.3% (and the Trend at 6.4%) despite some good jobs growth; the reason being a Participation Rate that moved to its highest level in a year. Seasonally adjusted jobs were up 14,500 (with March revised up to +32,600 from +28,800) although, like at the national level, full-time positions dipped by 800. The Trend series shows an increase in employment of 6,600 after March was revised up to +6,800 (from +4,400). In the past 6 months Trend jobs are up by 31,100; which is the strongest period of jobs growth in Queensland since Dec 2015 (see second chart below).

Regional Building Approvals improve slightly in the North

Today saw the release of the March regional building approvals data from the ABS at both SA4 and LGA level. Following the (very) modest improvement in the Trend data at a state level last week (see here for details) we have seen a similar story emerge in the Far North.

Starting with the SA4 level data we see the Cairns Conus Trend improve to 77, after Feb was revised up from 71 to 75. Townsville fell very slightly to 70, but only after Feb was revised up from 67 to 71.

At the Local Government level we also see improvements. Cairns Regional Council (incl Douglas Shire) improved to 49 (Feb revised to 47 from 40). Tablelands Regional Council (incl Mareeba Shire) dipped to 18 (Feb revised up from 18 to 19). The Cassowary Coast Regional Council was unchanged at 6 while Townsville City Council was also unchanged at 67 (although Feb was revised up to 67 from 62).

Looking at the split across the State we see that this generally positive move in the North has occurred in the face of a somewhat weaker picture across the Rest of Queensland.

The full SA4 data set for the Conus Trend series for Queensland is available for download below. Please feel free to use this data (for non-commercial uses) but we would appreciate you acknowledging Conus when you do so.

Conus Trend Regional Building Approvals QLD – March 2017

Short-term arrivals top 8.4 million for 12 months to March

Seasonally adjusted short-term arrivals have broken through the 8.4 million mark for the previous 12 months for the first time. Annual growth has exceeded 10% for each of the past 9 months, with it sitting at 10.3% in March. China remains a major growth factor with arrivals up 12.9% annually; although this is the slowest pace of growth for the sector since Sept 2014. Annual arrivals from China are edging closer to 1.25 million for the 12 months to March (1.24 million).

Short-term departures actually fell from a year ago (-4.0%), the first dip in almost 2 years, and are up just 3.6% for the 12 months to March.

Data from the Tourism Research Australia International and National Visitor Surveys are due for release in the first and third weeks of June.

Cuts to ABS funding likely to make better regional data a pipe-dream

One of the less publicised elements of the 2017-18 Budget released on Tuesday was the decision to slash funding to the Australian Bureau of Statistics (ABS). Tucked away in Budget Paper 4; Agency Resourcing is a reduction in funding for the agency of some $218m (33.6%) for the next financial year. Further cuts are projected in 2018-19 and 2020-21 to bring expenses down to $375m by 2020-21 from $622m 2016-17.

Where these massive cuts are to be found is left unclear. The Budget papers note that “(a) number of Commonwealth agencies are taking advantage of technology and other innovations to provide more productive and efficient ways of working such as establishing flexible working environments, including converting offices to open plan and activity based working facilities, to enable co-location and improving remote access technology to allow staff to work from anywhere” and that these reforms will save the ABS some $5.5m per annum from 2018-19. However, that would appear to be only a small contribution to the budgeted cuts of more than $220m by that time.

The same Budget paper also notes a reduction in ABS staff by 408 (14%) next year although a note to this table states that ” (t)he projected decrease is due to various reforms within the Department and Machinery of Government changes that moved staff to the Department of Employment and the Department of Finance.” But it provides no further information about the scale of those staff movements or the impact they might have on ABS services.

For some time we have been concerned about the lack of reliable and timely regional data coming from the ABS (and other agencies) and the impact this might be having on decision and policy making. It was for this reason that we developed the Conus Trend Regional Labour Force series. In discussions with senior officials in the ABS it has become clear that they acknowledge the need for better regional data, and are aware of the needs being expressed to them by “clients” for such data. To quote one such senior ABS official when discussing the Conus Trend series, “we continue to be reminded of the interest in small area labour market statistics by our clients, so it is good to hear that someone is trying to fill in some of the gaps.”

Cuts such as those announced this week will do nothing to help the ABS providing much needed regional data in the future. We are therefore committed to continuing to develop and enhance the Conus Trend Regional data-sets and hope to be soon releasing our Conus Trend Industry Employment series for Queensland regions. 

The most recent Conus Trend data-sets for regional labour force and building approvals can be found on our Reports page.

Budget kicks the can of structural repair down the road

Among all the Budget 2017-18 announcements and trumpeted measures (of which Nick Behrens from QEAS provides as good a summary as any here) the most interesting (disappointing?) chart for me comes in Budget Paper 1, Statement 3 regarding the Structural Budget Balance. As the Budget acknowledges; “Restoring the structural integrity of the budget is crucial for achieving surpluses on average over the economic cycle and paying down government debt“.

The Budget papers go on to say…”The structural budget balance estimates seek to remove factors that have a temporary impact on revenues and expenditures, such as fluctuations in commodity prices and the extent to which economic output deviates from its potential level. Considered in conjunction with other measures, estimates of the structural budget balance can provide insight into the sustainability of current fiscal settings. Improvements in the terms of trade since the 2016-17 MYEFO are cyclical. As such, Treasury estimates of the structural budget balance over the forward estimates are largely unchanged since MYEFO.

Essentially what they are saying here is that the resource price led mini-windfall that the Government is enjoying now (and which has added some $5bn to revenues over the forecasts to 2020-21) is unlikely to last. Additionally, none of it is being used to improve the long-term structural position. In the years to 2020-21 total revenues are forecast to be some $11.4bn above those forecast in the 2016-17 MYEFO ($6.4bn of that due to increased taxation of various types announced in this Budget) and yet, as the Treasury admits, “estimates of the structural budget balance over the forward estimates are largely unchanged since MYEFO.”

If we want to address the structural deficit that we face then we need to be bold enough to take opportunities to improve it when they present themselves. This Budget has used such an opportunity to increase spending instead.

Building Approvals disappoint, but the Trend turns positive

Today’s building approvals data for March have come in well below market expectations, although the Trends at both state and national level were positive for the month; the first time they’ve both been positive since early 2016..

March’s approvals across the nation fell by 13.4% for the month (expected down 3.9%) after an 8.9% pickup in Feb. This takes the seasonally adjusted yearly figure to a 19.9% decline. The weak numbers are on the back of weak (volatile) units data. When we consider the Trend series (which smooths out much of the volatility caused by the lumpiness of the units data) we see an increase of 0.8% for the month, year on year levels remain down 13.1%.

In Queensland seasonally adjusted approvals fell 21.3% (again on the back of weak units data) for a 37.2% decline over the year. The Trend series, however, was up 0.5% for the month but remains down 31.4% for the year. As the chart below makes clear, the sharp declines seen over recent months look as if they may be reaching a bottom; we might see some improvements in coming months.

Regional approvals will be released by the ABS next Monday at which time we will update our Conus Trend series for the SA4 regions in QLD, as well as those for our regional Local Government Areas.

Treasury data shows QLD economy recovery picking up

The QLD Treasury data for State Accounts for the final quarter of 2016 shows the economy picking up nicely.

Whilst the ABS only produce Gross State Product data on an annual (financial year) basis, the Treasury produce their own quarterly estimates. These show GSP rose by 0.9% q/q after the third quarter numbers were also revised stronger (+0.9% from +0.5% original). This equates to an annual increase of 2.1% (after Q3 was revised up from +1.9% to +2.2%).

Even State Final Demand (which does not include the strong trade sector) showed improvement (+0.4% q/q) with the annual change moving into positive territory (+0.7%) for the first time since Sept 2014. Although we should note that the ABS estimate is just a 0.4% increase (also the first positive plot since Sept 2014).

Household expenditure rose 2.6% annually, although this is the weakest annual increase for this sector since June 2015. More encouragingly Private Business Investment rose 0.5% for the quarter, although a decline in Private Dwellings Investment saw total Private Sector Investment decline by 0.3%. Nevertheless, the annual change in Private Investment (-6.7%) is the best result since Sept 2014.

Media still pushing old news about unemployment in Cairns

A piece in today’s Australian (read it here) perpetuates the old news that youth unemployment in Cairns is running at crisis levels. In this case the article quotes Cairns youth unemployment rate at 27.5%. As regular readers will know, this figure would appear to be the “official” 12 month moving average of the unadjusted original ABS data. The article quotes a Treasury document prepared for the Queensland government “late last year” at which time the 12 month moving average youth unemployment rate was about the quoted 27.5% level.

However, this extremely lagged measure of unemployment can be improved upon by utilising the Conus Trend which, at the end of last year, already had Trend Youth unemployment in Cairns down to 14.0%; and has subsequently fallen further still.

The problem with this focus on the 12 month moving average data can be seen clearly when we consider the most recent (March) data. The “official” 12 month moving average number remains elevated at 21.6% (note this is already a sharp decline from the number quoted in The Australian’s article today) but the Conus Trend sits at just 10.2%. With the “official” data still telling us that youth unemployment remains very high in Cairns, it is worth noting that the ABS original data hasn’t had a rate above 17.5% for 6 months and the most recent reading was just 7.3% (the lowest in almost 5 years). The 12 month moving average is simply not responsive enough to changes in the underlying data to allow for sensible decisions and positions to be taken based upon it.

In the past 6 months the original average level of youth unemployment in Cairns is just 12.4%. If nothing significant happens with regard to youth employment in the next six months then by September the Treasury will be reporting youth unemployment in Cairns at just 12.4% and those who believed the “official” numbers will be scratching their heads wondering what on earth happened since March to bring it down so sharply from 21.6%! In fact nothing will have happened during that period; the improvement had already happened but their data hadn’t picked it up.

I fully accept that our Trend estimates are subject to revision and the scale of the improvement seen over recent months may well be exaggerated, and therefore liable to revision, but the fact remains that to suggest that youth unemployment in Cairns is still at crisis levels is simply misleading. 

The Treasury report from the end of 2016 is quoted as saying that “there has been a relatively slow pick-up in labour-market demand” in Cairns. If we are only considering the lagged Treasury 12 month moving average data that may well be true. But since July last year those with an eye on the Conus Trend employment data for Cairns have been well aware of a significant pick-up in jobs which, even as early as the end of last year, had identified almost 8,000 new jobs over the previous 5 months; with another 1,000 added since.

It’s time that the Treasury and media stopped pushing the old, tired news that Cairns is some kind of employment black-hole when the reality proves different. This kind of negative reporting and thinking not only leads to bad policy making but it also negatively impacts sentiment in the region, an impediment to future improvements.

 

Inflation edges higher…as expected. Tradables inflation at 3 year high.

In line with market expectations, the inflation data released by the ABS today shows CPI back within the RBA’s 2-3% target range.

For the March quarter headline CPI rose by 0.5% for an annual increase of 2.1% (up from 1.5% in the previous quarter). The RBA’s preferred “core” measures of inflation (Trimmed Mean and Weighted Median) were up an average of 1.8% for the year.

Certainly inflationary pressures remain muted and this data will not be forcing the RBA’s hand on rate hikes any time soon. However, it is worth noting that the Tradables inflation measure (basically prices of goods that trade on foreign markets) was up 1.3% which, while still low, is the highest it’s been in 3 years. Non-tradables inflation was at 2.6%.