ANZ job ads for December are out and it another bad month, down 3.8% from November for the tenth straight loss. Indeed the series is looking decidedly ill:
Job advertising continued to weaken at the end of 2012. The number of job advertisements in December was 20% below the most recent peak in February 2012 and has fallen to almost half the level reached before the global financial crisis.
Job advertising is a key barometer of economic activity and business confidence. Its ongoing weakness suggests that conditions for a large share of Australian businesses remain challenging and the outlook uncertain. In addition, job advertising trends in the resources states of Western Australia and Queensland deteriorated significantly over 2012 as commodity prices fell sharply. ANZ’s view is that the recent sharp rise in iron ore prices will not see a commensurate rebound in job advertising in Western Australia as mining firms are expected to maintain a keen focus on cost reduction.
Without a solid pick-up in the non-mining sectors as the contribution to overall growth from mining investment shrinks through 2013, ANZ’s view is that Australia’s unemployment rate is set to drift higher to around 5¾% from 5.2% currently by mid to late this year. The degree of spare capacity in the labour market, however, is already greater than the current jobless rate suggests, with labour force participation among some key working age groups falling noticeably over the past couple of years. In part, this has been because rising job losses have seen a higher share of jobseekers give up looking for work.
The ABS releases December labour force data this Thursday, 17 January. Trends in job advertising point to a rise in the unemployment rate in the month after it declined surprisingly in November. ANZ expects the unemployment rate to have risen to 5.4% in December and for employment to have risen only modestly. Labour market conditions are expected to remain relatively soft in at least the near term, with falling job advertising consistent with employment growth not keeping up with growth in the working age
population.
We expect growth in the Australian economy to be noticeably below trend this year as the economy transitions towards a lower dependence on mining investment growth. The Australian dollar is expected to remain elevated and not provide support to the economy while government finances will continue to be a drag on growth. Further monetary easing is therefore necessary to generate sufficient expansion in interest-rate sensitive sectors to support overall growth and limit the rise in the unemployment rate. ANZ expects the RBA to lower the cash rate by a further 25bps in coming months and for modest growth to necessitate further policy easing over the remainder of this year.
I agree with all of that except the rate cut call. Iron ore will have to come back to below $130 or cuts are off. There was one small silver lining in the release. Job ads in the most heavily affected mining states improved slightly. But these were outweighed by weakness in SA, NT and the ACT.
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.
