Jobs outlook improves amid rising unemployment

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ScreenHunter_10 Mar. 29 12.46

By Leith van Onselen

Westpac has released its latest jobs index, which points to an improving labour market, although unemployment is still expected to increase to 6.5% as employment growth fails to match population growth:

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 Mar Jobs Index. The Index fell to 48.6 in Mar from 48.8 in Feb and 49.0 in Jan. The index is based so the long run average equals 50. Note the index is calculated so its long-run average is equal to 50. The most recent low was a 44.6 print in Apr 2013.

Westpac’s Jobs Index correctly indicated that the pace of total employment growth would slow less than 1%yr in the second half of 2013. The ABS reported total employment growth of just 0.5%yr in the year Dec falling to 0.4%yr by Jan 2014.

The index suggests we have passed the low point in the labour market and is pointing to an improvement through the first quarter of 2014. But at sub 50, it is still suggesting that the labour market will underperform population growth. Hence it is still consistent with a rising rate of unemployment (Westpac forecast peak 6½%).

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About the author
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.