Australia | Aug 03 2009
By Chris Shaw
Semants of the Australian economy have been showing strength in recent weeks, but the employment side of the equation continues to lag given ANZ Job Ads for July recorded another fall of 1.7% for the month, taking the annual decline to 51.9%.
Internet job ads were the weaker measure, falling by 1.8% to an average of 117,046 per week, which now puts them 52.1% lower than for the same time last year. In trend terms, the outcome was similar with a monthly decline of 3.6% leaving ads down 52.7% from a year ago.
Newspaper ads in major metropolitan papers also fell but by a more modest 0.4% to an average of 8,162 per week, reversing a 0.9% increase recorded in June. When compared to July last year, newspaper ads are now down 48.4%, while in trend terms a 1.2% decline in the month leaves the measure 51.4% lower than this time last year.
ANZ Banking Group head of Australian economics Warren Hogan notes the July results mean a 15th consecutive month of falls, which in his view shows demand for labour remains at recessionary levels. The difference compared to previous recessions is while labour demand is very weak, it has not translated into widespread job losses as it is working hours rather than staff levels that are being scaled back.
This has not prevented Australia’s unemployment rate from moving higher, but as Hogan notes the increase is more the result of rapid growth in the labour force given strong population growth and high levels of participation in the labour market.
The brighter news, according to Hogan, is the pace of the decline in job ads has eased in recent months, which offers an early but weak sign of a stabilising in the level of job ads and implies businesses may soon stop cutting back on their hiring intentions.
The change is unlikely to come fast enough to stop further job losses in the near-term, Hogan forecasting employment will fall by 18,000 for July. He expects an unemployment rate of 6.1% will be confirmed when the Labour Force report is released by the Australian Bureau of Statistics on Thursday.
Going forward the pace of decline in employment is unlikely to be as severe as was expected at the start of the year, in Hogan’s view, as the Australian economy has proven to be resilient, especially in the retail sector. This is significant as this sector is the largest employer in Australia.
As well Hogan points to the recent improvements in business confidence and conditions as indicative of employers not being as pressed to cut back on labour in the months ahead, so he now expects Australian unemployment will peak at 7.5% around the middle of 2010.
Until this occurs he expects the economic recovery will remain fragile at best, but despite this Hogan notes comments by Reserve Bank of Australia (RBA) governor Glenn Stevens that interest rate increases prior to unemployment peaking could not be ruled out. Given such an environment, Hogan expects the RBA will keep rates on hold when it meets tomorrow, but he anticipates the current easing bias will be either softened or removed.