There are many business surveys out there and most have questions, in some shape or form, that are applicable to the labour market. To generate the broadest and deepest labour market indicator possible, Westpac compiles all the relevant indictors from these surveys into the proprietary Westpac Jobs Index.
The Index firmed a touch to 49.2 in Dec from 48.5 in Nov holding below the long run average (50). The index was 49.4 in Oct and 50.8 in Sep. The Index had been on a general firming trend since the low of 45.1 in Apr 2013 till it peaked at 50.8 in Sep.
The Index correctly highlighted some upside momentum in the labour market through the through 2014, up to around a 2%yr pace by end 2014 or early 2015 but this would be the peak and the pace would ease as we move into 2015.
As such, the recent bump up in annual growth in total employment in the Dec Labour Force Survey to 1.9%yr is consistent with the Jobs Index. We would expect that the pace of employment growth is set to moderate through the first quarter of 2015.
There are two key points in this month’s update.
1.The AIGoup PCI Construction Index has been a significant source of volatility in the over index of late. It helped to boost the index from Mar to Sep then softening of the index in the last few months of 2014. Westpac’s seasonally adjusted AiGoup composite jobs index peaking went from 46.2 in Mar to a Sep peak of 57.2 before falling back to 45.9 by Nov. There was a small recovery to 48.3 in Dec. Remember with all the various Jobs Indexes we compose 50 equals the long run average of the index.
2.The NAB employment index declined even further in Dec, to –1.2 from 0.3 in Nov and 2.4 in Oct. This has taken our NAB composite jobs index from 51.3 in Oct to 50.3 in Dec.
This correction in the index, should it continue, would normally be pointing to a deterioration in the unemployment expectations index. But it is important to note that currently, unemployment expectations are more negative on the labour market than other indicators are including the Jobs Index.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
