For the past few months I’ve noted that it was likely that we’d see a firming in the labour market in the first of half of 2014 following decent Christmas sales and the bounce in housing construction and before the capex cliff kicks in hard in the second half. That appears to be upon us. From Westpac:
• Job advertisements rose 5.1% in Feb, the strongest monthly rise since the 11.1%mth print in Feb 2010. The robust Feb rise breaks a long down trend with job ads falling in 21 of the 23 months leading up to Feb. Job ads are now down just 4.8%yr (troughed at –18.8%yr in Jun 2013). Ads are, however, still at a very low level at 21% below the Feb 2012 print.
• The turnaround is highlighted in the 3-month change which was 4.4% in Feb, up from –1.6% in Jan and a recent low of –5.6% in Jun 2013. It is the strongest 3- month gain since the 7.5% print in Dec 2010.
• This turnaround in job ads has been highlighted by our model of the 3-month change in employment for some time. However, as you can see in charts 6 & 7 there have been large deviations from the model estimates and actual employment outcomes so we were very cautious of this turnaround. We do now have to admit that it is starting to look a bit more solid.
• Internet job advertisements rose 5.3% in Feb (4.2%yr). Newspaper ads fell 0.5% in Feb but the annual pace of decline continues to improve lifting to –19.4%yr from –22.1%yr in Jan, –27.5%yr in Dec and the May low of –39.6%yr.
• Westpac has noted before the issues with the ANZ jobs ads and how the internet series is composed. We thus use job ads very cautiously as a leading indicator of employment. Nevertheless, the more robust signs of a turnaround in labour demand which is something to watch closely.
• In particular we note the improvement in the annual change in the deviation from trend of newspaper ads (chart 9). This second derivative of newspaper ads abstracts from the trend decline in this series and has been a handy indicator of turning points. Moving above zero has, in the past, been a signal for stronger employment growth 3 to 7 months out. This series printed +3.8 in Feb.
• We will be closely job ads and other labour market indicators such as the business surveys. The business surveys turned more positive about employment near the end of 2013 and jobs ads suggests firms are following through.
• The level of the job ads highlights labour demand remaining well below the highs of 2008; the bounce in Feb takes the overall level of job ads to just 4.7% higher than the post GFC low.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
