Australia | Jul 02 2013
– Australian Jobs continue to fade
– Lower sales higher costs to blame
– Businesses expect weak 2014
– Jobs losses could mean more rate cuts
By Andrew Nelson
When the rest of the world had a GFC, they also had to endure the GFC jobs market and it wasn’t a good one. The US is just starting to recover and the Europeans wish they were. Australia was spared the worst of it through 2008-2013, but those halcyon days of low unemployment may be drawing to a quick close, or so thinks Dun & Bradstreet.
The business information company’s latest Business Expectations Survey shows that Australian businesses simply don’t plan to hire new staff in the months ahead. This indicates to D&B that businesses readily expect the current economic soft patch to carry on into the new financial year.
This marks the sixth straight quarter that hiring expectations have declined, with D&B’s employment index for Q3 2013 dropping to minus 3.3 points, the lowest read in four years.
The hiring softness is seen across most segments of the market as well, although the report shows the worst hit are the construction, manufacturing and retail sectors.
Given actual employment activity over the past 12-months has been tracking along with these negative sentiment reads, the latest data tell D&B that last month’s run of company job cuts and off-shoring announcements probably won’t be the last we’ll hear about. This view is supported by the latest numbers from the ABS, which reported a 7.3% decline in total job vacancies in the three months to May last week.
The report speculates that rising operating costs, weak sales and anaemic cash-flow are limiting the ability to add new staff. Although an uncertain economic outlook and a looming Federal Election are also factors that are currently affecting demand for new hires.
Dun & Bradstreet’s Chief Executive Officer Gareth Jones said that with little spark to be found in the domestic economy, businesses are wary of investing, instead focusing on their core operations and controlling their costs.
“This is a continuation of what businesses have been saying throughout the first half of the year– that they won’t seek new credit to grow their business and that they won’t be increasing employment and other significant forms of business spending,” Jones said.
According to the Business Expectations Survey, 25% of businesses expect to see weak demand for their products. This has been held up as the single largest barrier to growth in the September quarter. The sentiment is also borne out by the survey’s low sales expectations index, which D&B notes has fallen sharply from 13.5 in the previous quarter to 4.9 points on the latest read.
Adding to the difficulties of a weak sales outlook is an increasingly weak profit outlook. D&B reports its own profits index for the next three months has come off to 13.2 points, down from 14.2 in the previous quarter. While lower sales expectations must certainly play a part, the cost of doing business is also rising and taking an increasingly larger bite. The report shows that 42% of executives surveyed blamed operational costs as the main factor limiting future growth.
Stephen Koukoulas, economic advisor to Dun & Bradstreet, said that this steady pullback in employment intentions is pointing to net job losses and almost undoubtedly a rise in the unemployment rate over the next few months. A potential lift in unemployment may provide opportunity for the RBA to cut interest rates some more, especially given the survey also shows weakness in expected sales and profits.
“While there appears to be some pick-up in expected selling prices on the back of the recent fall of the Australian dollar, this increase is from a historically low base. It would be unlikely to deter the central bank from cutting interest rates given the more problematic big-picture view of the economy,” Koukoulas concluded.
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