Westpac’s unemployment expectations data is out and shows persistent worries over job security:
The unemployment expectations index fell slightly in Jul, (–0.3%) following on from a –1.1% fall in Jun. The fourth consecutive decline the index is now down 5.1% in 4mths. The index is up 2.2%yr, up from –1.2%yr in Jun due to base effects.
The index appears to have peaked and the trend has been falling now for three months. This suggests households believe we are passed the worst for the labour market but at 23% above the long run average, the level of the index is historically very high suggesting the labour market is still a long way from being described as robust.
The level of the index is also consistent with the observation that employment growth continues to underperform relative to population growth. That is, the labour market is still not robust enough to absorb all the new workers which explains the high level of unemployment expectations. It also suggests that hours worked will remain volatile around a soft trend.
The results varied across the states. In particular, Vic recorded the largest fall of 5.2%, followed by a 1.6% in Qld. Contrast this with the 4.8% rise in WA while NSW and SA respectively, recorded increases of 0.7% and 1.9%.
Employment had a brief flurry in the first half of 2014 but expectations did not respond in a meaningful way (charts 8 & 9). This suggests that the flurry was not expected to continue and the recent moderation is likely to continue over the next few months.
In addition, expectations continue to point to a soft trend in hours worked (charts 10-11). In particular, expectations suggest hours worked can continue to weaken in WA and Qld but they are suggesting hours worked should recover in NSW & Vic. In SA, the decline in hours worked loos to be set to deepen.
Those who are working are more worried about jobs than those who are not (normally they are very similar). Driving this declinehas been falling expectation for retirees. Expectations of those
unemployed or not working have not fallen as much.
Sales/clerical and paraprofessionals/trades have the highest unemployment expectations which is interesting when you consider than those with tertiary qualifications are the most worried, those with primary education are the least.
While the level of the index is still pointing to the possibility of higher unemployment, the rate of change in expectations has eased back meaningfully easing the pressure for further rate cuts.
Westpac’s job index, a composite of the various business surveys, continues to suggest that the labour market is sound and thus unemployment expectations can be expected to ease further.
Hmm,that’s does not look like a peak in trend to me. I’d like to see it pull back below the previous low before declaring that. Here is the Westpac jobs index, which has been eroding:
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.
