Wespac job index points to better Q1

Fresh from Westpac:

There are many business surveys out there and most have questions, in some shape or form, that are applicable to the labour market. To broaden the depth and width of these surveys, Westpac compiles all the relevant indictors we can find into the proprietary Westpac Jobs Index.

• With the release of the NAB monthly survey we can complete our Feb Jobs Index. The Index fell to 49.5 in Feb from 49.6 in Jan. The recent peak in the index was 49.8 in Nov 2013. Note the index is calculated so its long-run average is equal to 50. The most recent low was a 44.8 print in Apr 2013.
• Westpac’s Jobs Index correctly indicated that the pace of total employment growth would slow to around 1%yr, or less, in the second half of 2013. The ABS reported total employment growth of just 0.5%yr in the year Dec falling to flat in the year to Jan 2014.
• The index is suggesting that we have passed the low point in the labour market and we should see an improvement through the first quarter of 2014. But at sub 50 it still point to a labour market underperforming population growth. Hence it is still consistent with a rising rate of unemployment (Westpac forecast peak 6½%).

A word of warning about this index, or rather it’s progenitor indexes. All of the business surveys have insufficient weightings for mining. Given the recent boom is focused around a hand-full of large firms, the distortion is probably even bigger. As the capex cliff slides away in a very narrow but hugely expensive vertical it is possible that all of the business surveys will fail to track the real fallout.

That could help explain the recent divergence between better labour force signals and worse outcomes. Full report.