New Conus Trend Regional Industry Jobs series

The ABS present quarterly data for industry employment at a regional level. However, the data they supply is only available on an unadjusted 4-quarters average basis for the SA4 regions. This means that the data as presented paints a very delayed picture of the actual employment reality within the regions. For some time we have been working on creating a more timely, and relevant indicator of regional industry employment data. Today we launch the result of that work; the Conus Trend Regional Industry Jobs series.

To create something that is more timely than the original ABS average we first had to dis-aggregate the 4 quarter average data to derive actual quarterly numbers. Those derived quarterly numbers were then adjusted and trended using an X-12-ARIMA model and further adjusted for consistency with the overall Queensland Trend industry data for the quarter (which we created using the original quarterly ABS original data at a state level). What we’ve ended up with is something that, we believe, a far more relevant and timely indicator of industry based employment levels than has previously been available at the regional level.

It should be noted that the Conus Trend Industry Jobs series for the regions will not be directly comparable with the Conus Trend Jobs data since it is based on quarterly (not monthly) data.

The graphs below give us an idea of in which industries jobs have been created (and lost) over the past 12 months in Cairns and Townsville.

As we can see Public Administration jobs have been a significant growth sector in both regions. They have both also seen good growth in the “tourism” sector of Accommodation & Food, while Cairns has also witnessed healthy growth in the Manufacturing sector. Unlike the state as a whole, Retail Trade has been positive in both regions (particularly in Cairns).

When we consider Greater Brisbane with the Rest of Queensland there are dramatic differences.

Again, growth in Public Admin jobs has been significant, but in Greater Brisbane this growth has been exceptional. Without the Public Admin jobs growth Greater Brisbane would have seen a decline in total employment. Construction and Accommodation & Food have also been strong performers in the Rest of Queensland. Note the declines in Retail Trade in both Greater Brisbane and Rest of Queensland in contrast to Cairns.

 

Regional jobs data shows Rest of Queensland improving better than Greater Brisbane

The ABS regional jobs data for May was released this morning and we have completed our Conus Trend analysis. What it shows is the regions doing far better than Greater Brisbane on almost all measures.

Over the year to May Trend jobs were up 31,000 in QLD, but 23,400 of these were added in the Rest of Queensland with just 7,600 in Greater Brisbane. Even more impressively the Rest of Queensland saw full-time jobs up 11,400 while they fell 10,500 in Greater Brisbane. The result is that the Trend unemployment rate in Greater Brisbane is now at 6.4% while in the Rest of Queensland it is 6.0% (its 6.3% in the state as a whole).

In our own region we also saw good numbers. Cairns Trend employment was up 400 for the month (with 1,100 new full-time positions) and up 9,800 fore the year (5,900 of which are full-time increases). With the Participation Rate increasing slightly (after revisions) to 62.0 the Trend unemployment rate has actually nudged slightly higher in May to 5.8% (after April was revised down to 5.7%). As the labour market in Cairns improves and we see participation increasing it is to be expected that the unemployment rate is unlikely to fall further, particularly given it now sits well below the state average.

In Townsville the recovery continues to gather momentum. Trend employment was up 1,200 in May (full-time accounted for 700 of those) and up 11,800 for the year (8,900 full-time increases). Trend participation here was revised lower last month so ,despite a small tick higher in May (to 60.6), the solid jobs growth sees the Trend unemployment rate fall sharply lower to 6.3% (from a downwardly revised 7.3% last month). Townsville no longer figures in the bottom portion of regional areas in terms of Trend unemployment; the initiatives, announcements and improvements in confidence we have been talking about for some time have clearly had a dramatically positive impact.

Despite all this positive news, the graph below makes it clear that, once we allow for the declines in participation, there is still plenty of scope for improvements in labour conditions in both regions.

The full data-set of Conus Trend Regional Jobs is available for download below. Please feel free to use this (for non-commercial purposes) but we would appreciate you acknowledging Conus when you do so.

Conus Trend Regional Jobs QLD – May 2017

Today all saw the release of the quarterly industry employment data from the ABS. We shall be updating our new Conus Trend Industry Jobs data-set shortly and posting here once we have results.

Significant revisions muddy the data but Domestic Tourism numbers not looking good for TNQ

As we have been expecting for some time, today saw the release of some major revisions to domestic tourism numbers for TNQ. Tourism Research Australia have released the National Visitor Survey report for the March 2017 quarter (available here) along with revisions to data going back to the 2014 year (see here for details). The main point of the revisions is a roughly 15% decline in the original estimate of overnight trips to TNQ in 2015. While details of the revisions are sketchy at this stage (TRA are only providing data for year end, and March 2016, rather than individual quarters) it is clear that they remove much of the increases previously reported for TNQ which many (ourselves included) had queried at the time.

Despite a degree of uncertainty about the revisions this new data clearly confirms the ongoing slide in domestic tourism to the Far North.

Australia saw an increase of overnight trips of 3.1% for the year to March 2017; Queensland was up 4.3%. In TNQ however we saw a 6.9% decline in visits and a 8.4% reduction in expenditure over the year.

Even with international tourism expenditure having increased over the year, the drop in domestic expenditure sees the total for the region fall 4.9% since March 2016.

Given the support that the tourism recovery has given to the TNQ economy it will be worrying many to see this degree of a slow-down seemingly now confirmed. There had been hope within the tourism sector that the long-awaited revisions from TRA would confirm that growth remained in place (albeit at a slower pace than originally estimated); that hope appears now to have been misplaced.

Strong jobs numbers but full-time in QLD are at a standstill

The ABS has shocked the markets with some very strong jobs numbers for May. The headline (seasonally adjusted) unemployment rate has fallen to 5.5% (its lowest level since Feb 2013) on the addition of a thumping 42,000 new jobs. The markets had been expecting the unemployment rate to stay at 5.7% and about 10,000 jobs to be added. All of those 42,000 new positions came in the full-time sector which was up 52,100. Participation also rose slightly curtailing an even sharper decline in the unemployment rate.

However, before we all start getting too excited we should take a moment to look at the Trend series (what the ABS recommends should always be done anyway). Here we see 25,200 new jobs added (and March revised slightly higher too) and an unemployment rate at 5.7%. Trend jobs growth over the past 12 months is averaging 16,200 per month, so the current pace of growth is certainly better than that. It’s worth noting that the Trend unemployment rate has been stuck between 5.7% and 5.8% since December 2015 so it would certainly suggest that the kind of move seen in the seasonally adjusted numbers may be somewhat over stated.

Queensland too saw better numbers although here things are decidedly more muted. Seasonally adjusted jobs were up 5,500 although full-time positions fell by 11,200. The unemployment rate fell to 6.1% (from 6.3% in March) with Participation stable. Again the Trend series paints a more reliable picture; jobs rose by 5,900 (after March was revised slightly stronger) and have been growing at an average pace of 2,600 per month over the past 12 months. Trend full time positions, however, are almost static having risen just 1,800 over the whole 12 month period. The Trend unemployment rate sits at 6.3% (unchanged in 5 months). As the chart below makes clear, although jobs are growing (and the pace has picked up over the past few months) the rate of growth is only just sufficient to keep up with population growth. The Queensland government will certainly be hoping that their “jobs Budget” earlier this week can have the impact on jobs creation it promises.

Regional jobs data for May will be released next Thursday. At this time we will be updating the Conus Trend Regional Jobs data sets as well as releasing our new Conus Industry Trend Regional data based on the quarterly ABS industry employment data for the May quarter.

QLD Budget downgrades growth forecasts. Is Debbie to blame?

Today’s QLD Budget 2017-18 has downgraded growth forecasts across the forward years and is, to an extent and quite openly, laying the blame at the feet of TC Debbie for the slowdown. The Budget papers say “Queensland growth forecasts for 2016-17 and 2017-18 would have been higher, but for the impact of Severe Tropical Cyclone (STC) Debbie, which is estimated to have detracted around $2 billion or ¾ percentage point from economic growth across these years.” Certainly Debbie will have had impacts on coal, sugar and tourism exports across both 2016-17 and 2017-18 (TC Debbie struck the Whitsundays at the end of March and had severe flood impacts for days afterwards). But how much would this impact have been, and can it really account for the sharp reduction in growth forecasts for 2016-17 and 2017-18?

  • At the end of 2014-15 QLD’s Gross State Product stood at about $309bn
  • The 2016-17 MYFER forecasts growth for the 2015-16 year to come in at 3.2%
  • In reality the result was just 2.4%, which saw GSP at $316.3 bn by June 2016
  • MYFER had forecasts for 2016-17 of +4.0% and for 2017-18 of +3.5%
  • These would have taken GSP to $341.3 bn by June 2018
  • Today’s Budget has revised down growth forecasts to +2.75% in both 2016-17 and 2017-18
  • This growth, if it were attained, would see GSP at $333.9 bn by June 2018; a shortfall of $7.4 bn over the 2 years from the MYFER forecast

If we assumed that the $2 bn negative impact of TC Debbie were spread evenly across the 2 years (i.e. $1 bn in 2016-17 and $1 bn in 2017-18) then we could have expected to see forecasts for 2016-17 fall to +3.7% (down from 4%) and +3.2% (down from +3.5%) in 2017-18; significantly less than the actual reductions contained in this Budget.

So if it isn’t the impact of Debbie that’s seen growth forecasts cut back so far, what is it?

Comparing the projected growth rates of the various components of GSP from the Budget in 2016-17 to today’s we can see the answer lies not just in exports (Debbie impact).

  • Household Consumption (the largest single component) sees forecast growth scaled back in 2017-18 by 0.5%
  • Private sector Investment is now expected to contract by 1.75% in 2017-18 when last year’s Budget had penciled in a 3.5% increase
  • There is a reduction in Net Export growth forecasts in 2016-17 (down to +0.75% from +2%) but the forecast for 2017-18 remains the same at +0.75%, despite the supposed impact of Debbie in this financial year

The reduction in the forecast for Private Investment in 2017-18 would account for a bigger reduction in GSP than TC Debbie; some $3.3 bn. The decline in Household Consumption forecast would account for another $1bn in 2017-18 GSP.

Add these two elements to the $2 bn “Debbie effect” and we have most of the $7.4 bn shortfall between the MYFER and Budget 2017-18 forecasts.

This year sees a bigger than anticipated surplus for the Government ($2.8 bn rather than $2 bn) on the back of higher resources royalties. Unfortunately the slower than expected growth projections will see surpluses now forecast much smaller in the forward years. Previously forecast cumulative surpluses to 2019-20 of $4.6 bn have now been scaled back to just $3.8 bn despite the overshoot in 2016-17.

Pete talking TNQ tourism numbers on ABC Far North & 4CA

Kier Shorey at ABC Far North, and John MacKenzie from 4CA, both spoke to Pete this morning about yesterday’s International Visitor Survey and what it held for TNQ. You can listen below, and read yesterday’s analysis on the IVS here.

Yesterday also saw the GDP release and, as usual, this coincided with the release of our quarterly regional economic roundup in The CONUS Quarterly. You can download your own copy of that full report here….CONUS Quarterly June 2017

ABC Far North

4CA

International tourism grows but QLD and TNQ are both falling behind

Today’s release by TRA of the International Visitor Survey for March 2017 (available here) shows international visitors up by 9.2% y/y with expenditure up 8.1%.

Numbers to Queensland were also up strongly (+6.8%), although expenditure rose just 2.6% y/y. However, as a result the Sunshine State’s share of the international visitor market has fallen to an all-time low of just 33.4%.

In Tropical North Queensland things were somewhat better with visitors up 7.2%, although expenditure managed to drop by 0.8% on the back of significantly lower average regional expenditure per visit (down from $1,310 a year ago to just $1,212 now). TNQ also saw its share of the international market drop top 11.5%. Growth in key areas such as China and the US have slowed while Japan and the UK remained static.

GDP slows (as expected) while QLD grinds to a halt

The ABS have released the GDP data for the first quarter of 2017. After a strong Q4 last year (unrevised at +1.1% q/q) Q1 is up just 0.3% q/q, +1.7% y/y and +2.3% annualised. This is result is in line with market expectations, although stronger than some had been expecting; there had been talk of a negative result. The initial result on the forex markets has therefore been to push the A$ somewhat stronger (up about 0.4 of a US cent).

The positive result is down to a strong contribution from Inventories (+0.4 ppts) while private and public investment and net exports all detracted from growth.

The less volatile Trend series shows growth at +0.4% (where it has sat for the past 3 quarters) with annual growth at just +2.2%, the weakest result since Q2 2010.

In Queensland we see State Final Demand unchanged in Q1 for a 1.6% increase over the same period a year ago and up just 1.1% for the year. This is however the first time that we’ve seen two consecutive quarters of positive annual growth in Queensland since Q3 2014. In Trend terms State Final Demand rose 0.4% q/q and as the second chart below shows is being kept positive by the impact of Public sector spending (most notably public CAPEX which is up 2.8% q/q) offsetting the decline in private CAPEX (down 0.9% q/q).

Regional Building Approvals offer no joy to the North

Today sees the release of the April regional Building Approvals data from the ABS. As always we focus on the Conus Trend data series rather than the highly volatile original series as presented by the ABS.

Looking at the SA4 level first, we see Cairns approvals stable at a Trend of 73 after March was revised down from 77. This represents a 35.3% decline from the same time last year. In Townsville the Trend is also stable, at 79, although March was revised up from 70. The year/year change in Townsville now stands at +0.6% after the sharp declines seen last year.

When considering the split between Greater Brisbane and the Rest of Queensland we see Trend approvals in both up to six month highs, although both are still well down from their levels of a year ago ( Rest of Queensland down 10.1% and Greater Brisbane down 27.1%).

When we look at approvals across the Local Government Areas the slightly weaker picture is repeated (not surprisingly!). Cairns Regional Council (incl Douglas Shire) sees Trend approvals at 43, up from 42 in March although this was revised down from 49; this is a 46.7% decline from a year ago.

Townsville City Council Trend approvals are stable at 73 after March was revised up from 67. This represents a 1.1% decline year on year.

The Tablelands Regional Council (incl Mareeba Shire) dips to 17 from an unrevised 18 in March; a 30.4% decline for the year.

The Cassowary Coast Regional Council also dips, to 5 from an unrevised 6 in March for a 35.5% drop on the year.

The complete set of Conus Trend Regional Building Approvals data is available for download below. Please feel free to use this data (for non-commercial purposes) but we would appreciate you acknowledging Conus when you do so.

Conus Trend Regional Building Approvals QLD – Apr 2017

 

 

 

 

The Participation Puzzle; the impact of demographic changes

Many commentators have written about movements in the Participation Rate (PR) and the impact this can have on unemployment rates (one such recent example from Nick Behrens at QEAS). The discussion is certainly a valid one, but in this post we want to try and dig a little deeper into what is actually driving the changes in PR.

Firstly, some definitions. PR is the percentage of the working age population (those 15 years and older) who are in the Labour Force (those either employed or counted as unemployed). Changes in the PR tell us something about the proportion of those able to be in the Labour Force who actually are, but the number itself tells us nothing about why the changes might be occurring. If we wish to understand more fully the structure of the Labour Force we need to look at the two factors at work determining changes in the net PR.

  • Changes caused by shifts in PR within the working population age groups
  • Changes caused by shifts in the demographic make-up of the Labour Force

Fortunately there is a way of splitting these two effects out from the data. The method was described and detailed in 2009 in a paper entitled Decomposing Changes in the Aggregate Labor Force Participation Rate written for the Federal Reserve Bank of Atlanta by Julie L. Hotchkiss.

The paper specifies the aggregate PR to be the population weighted average of the PR for different age groups. The difference in PR between different time periods (t and t-1) is therefore;

Where LFPR is the Labour Force PR; i are the age groups and p is the percentage of working age population.

The formula tells us that changes in PR between periods can be deconstructed into the change caused by shifts in PR within age groups (let us call this the “Propensity effect“) and change caused by shifts in the demographic make-up (which we shall call the “Demographic effect“).

The Propensity effect can be caused by a range of issues. The most often cited is the impact that a weak labour market will have in discouraging people from entering the labour force; the reverse is true when a strong labour market encourages people to return. However, this is not the only thing causing the Propensity effect. More young people opting to go into tertiary education, or staying longer in secondary education, would also shift the PR within their age group. Likewise more older workers opting for early retirement, or being forced to delay retirement, would impact on PR in that age demographic.

The Demographic effect is a result of shifts in the age make-up of the population. An aging population, as we are currently witnessing across much of the developed world, will shift aggregate PR as a higher proportion of the population moves into the older age groups where PR (naturally) is lower than in middle-age.

In order to deconstruct changes in PR we need to have data for PRs and population proportions for the various age groups considered. While the ABS provides us with aggregate Trend PR levels at a National and State level we have had to construct our own Conus Trend PRs for the chosen age cohorts^ (youth, 15-24 years; middle 25-44 years; older 45+ years) and utilise the Conus Trend Regional Jobs database to make comparisons at a regional level.

^ ABS Trend PR for the 15-24 age group is available at National level and used here.

The Results

We have opted to consider the period of a decade from April 2007 – April 2017. We need to look at relatively long periods of time if we are to see meaningful changes caused by demographic shifts.

In Australia over that decade Trend PR fell from 65.0% to 64.8%. The table below details the elements of interest within the relevant age groups.

PR p
Apr-07 Apr-17 Apr-07 Apr-17
Young 70.6 66.8 17.2 16.1
Middle 82.6 83.9 35.4 34.5
Older 65.0 50.9 47.3 49.3

Applying the formula above to this data we see that the Propensity effect actually increased aggregate PR by 0.3 ppts while the Demographic effect subtracted 0.5 ppts; the decline in PR between April ’07 and April ’17 was caused exclusively by demographic shifts.

We carried out the same process looking at Queensland and the results were quite different. Over the decade Trend PR in QLD fell from 67.4% to 64.6%. The Demographic effect accounted for just 0.7 ppts (or 26% of the total) of that decline while the Propensity effect subtracted the remaining 2.0 ppts. In Queensland it would appear that a weak labour force (perhaps with other factors at play…see above) has been the main driver to lower PR.

We also consider the Cairns region and found that Trend PR had fallen over the decade by 5.9% to just 61.6%. In Cairns the Demographic effect caused 1.7 ppts (29% of the total) of the fall while the Propensity effect caused the bulk (4.3 ppts) of that decline. Although the nominal impacts to PR are greater in Cairns it is worth noting that, as a proportion, the two effects had similar impacts at both State and regional levels.

When looking at Townsville, where the labour market has been particularly weak in recent times, we see Trend PR fell from 70.3% to 61.6% over the decade. However, here we see the Propensity effect having caused 6.9 ppts of the fall while the Demographic effect is responsible for just 1.8 ppts (20% of the total) decline. It would appear that the relative impact of the Propensity effect (perhaps caused by a weak labour market discouraging workers) in Townsville has been greater than at a State level.

Conclusion

We see that at a National level declines in Trend PR over the past decade have been caused exclusively by changes in the demographic make-up of the working population with PR shifts within age groups actually increasing PR. However, in Queensland it has been the Propensity effect that has been the major driver of lower aggregate PR levels. These shifts vary across regions but in the North we see a similar pattern at play, although on a greater nominal scale (perhaps not surprising given the tendency for regional data to be more volatile that aggregate State data).