Unemployment expectations improve

Fresh from Westpac:

• The unemployment expectations index fell 3.2% in Apr following a 5.5% in rise Mar and a 2.3% gain in Feb. So far this year, the index has lifted 5.1% to be 12.4% higher over the year.
• Despite the Apr fall, the trend is still upward (1.2%mth in Apr) and Apr is the third and highest peak in the current cycle.
• From its Sept 2013 low, the index is up 11.6% taking the annual rate of growth from –8.2% to 12.4% in Apr (vs. 17.7% in Mar).
• This decidedly pessimistic trend, which suggests households are getting increasingly anxious about the jobs outlook, appears to be continuing for now. But as we note later, there are signs this trend may be about to turn.
• Nevertheless, the trend is now 25% higher that its 10 year average, consistent with the observation that employment growth is underperforming relative to population growth.
• In Apr, the largest increase in unemployment expectations were in Vic (+5.2%) and SA (4.7%).
• Overall, expectations are pointing to a soft patch in hours worked (charts 9-15). In particular, the level of expectations suggests a further moderation in hours in NSW & Vic while WA faces the unwinding of the mining boom. Qld hours worked have run ahead of expectations, pointing the risk of to a near term correction.
• Sales/clerical have the highest unemployment expectations but the rest are not too far behind. Those who own their home have higher unemployment expectations than those renting or buying.
• While the index is still pointing to a higher unemployment, the rate of change in unemployment expectations has peaked which has eased the pressure on the RBA for a near term rate cut.
• Westpac job index also points to a turning point in expectations.

Full report here.