Come good news this morning for the labour market with the early signs of stabilisation I’ve noted in the ANZ job ad series blossoming into a 3% gain for February:
- Job advertisements rose 3.0% m/m in February to the highest level since October 2012, suggesting tentative signs of a stabilisation in hiring. This is still well below the levels of a year ago and 22% below the most recent peak in April 2011.
- In February, job advertising on the internet rose 3.3% m/m, while newspaper job ads fell 2.9% m/m. In trend terms, the number of job ads continued to decline in February (-0.5% m/m) but at a slower rate than in the second half of 2012.
- Newspaper job advertising remains relatively subdued across the country but rates of decline for the most part have been moderating in recent months. Advertisements fell sharply in Victoria (which remains very weak), the NT (after recent strength) and WA, but rose in NSW and Queensland (the latter after recent weakness). Newspaper advertising remains strongest in the Northern Territory and appears to be stabilising in Tasmania. Newspaper advertising now represents less than 4% of total job advertising.
- The recent rise in job advertising over January and February suggests tentative signs of a stabilisation in hiring intentions. However, there were also tentative signs of a recovery in early 2012 that did not last, with labour demand deteriorating over the remainder of the year.
- The brief improvement in job advertising we saw in early 2012 came after a period of financial instability surrounding renewed European government debt concerns. We suspect this brief improvement represented some delayed labour demand from the weak Q4 2011. The negative underlying trend became more apparent in the following months.
- In early 2013, there are again early signs of some stabilisation in hiring intentions which come as concerns about the global backdrop, including the US ‘fiscal cliff’, have moderated. The extent to which the increase in job advertising in January and February represents a similar temporary or sustained pick-up is unclear at this stage. Nevertheless, we forecast an improvement in the European and Chinese economies and remain confident that the US recovery will continue despite a large fiscal drag. Further, rising Australian house prices, equity markets, consumer confidence and to a lesser extent business confidence in recent months are important signs that accommodative monetary policy should support stronger domestic economic activity.
- Despite tentative signs that labour demand might be stabilising, we expect a continued gradual rise in the unemployment rate to around 5¾% by mid year. Anecdotal evidence suggests that Australian firms are generally keeping a close eye on their bottom line, including labour costs. In addition, firms are already reporting that the degree of spare capacity in Australia’s labour market is greater than implied by the current 5.4% unemployment rate.
- We expect the RBA to leave interest rates unchanged at its March Board meeting, while it assesses incoming data to see if and when further adjustment is required. By around mid year, our view is that there will be clearer signs that the domestic economy will remain a little more sluggish than the RBA would like, signalled by a continued moderate rise in the unemployment rate.
That is sound analysis except for the European and Chinese economies which will respectively remain weak and weaken in the second half. My concern is another commodity shock just as unemployment eases up toward 6%.
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For now, though, good news.
