Westpac has today released its consumer unemployment expectations report for June, which registered a 1.1% fall – the third consecutive monthly decline. However, despite the improving trend, Westpac maintains its view that jobs growth will be insufficient to soak-up the rising population, suggesting the nation’s unemployment rate will continue to rise, albeit more slowly than expected.
The unemployment expectations index fell 1.1% in Jun, the third consecutive fall (–0.5% in May & –3.2% in Apr). From Nov last year, we had seen a new rising trend in unemployment expectations but this is now broken.
The index has fallen 4.8% in the last three months and is down 1.2% in the year to Jun. It was up 17.7%yr in Mar. In trend terms, the index fell 0.4% in Jun following on from a 1.6% fall in May. We now have passed the near term peak and while the outlook does not suggest that the labour market is set to strengthen significantly, it does appear we have passed the worst and household are less anxious about the jobs outlook.
Nevertheless, the trend is still 22% higher that its 10 year average, consistent with the observation that employment growth continues to underperform relative to population growth. That is, the labour market is still not robust enough to absorb all the new workers.
Two of the five states recorded falls in their unemployment expectations in Jun. The index fell around 3½% in Vic and SA. By contrast, NSW (+1.4%), Qld (+0.2%) and WA (+0.2%) all recorded increases in their expectations.
Employment growth had a brief flurry in the first half of 2014 that expectations did not respond to in a meaningful way. The continued subdued expectations suggest this flurry is not expected to continue and should moderate over the next few months.
In addition, expectations are pointing to a soft patch in hours worked. In particular, expectations suggest hours worked can continue to weaken in WA and Qld while they are set to remain weak in Vic. NSW appears to be on the cusp of a recovery in hours worked while the decline in SA is set to deepen.
Those who are working are more worried about jobs than those who are not (normally they are very similar). Sales/clerical have the highest unemployment expectations but the rest are not too far behind while women are slightly more worried than men. Interestingly, those buying their home now have higher unemployment expectations than those renting or that have already paid off their mortgage.
While the index is still pointing to a higher unemployment, the rate of change in unemployment expectations has eased back meaningfully which has eased the pressure on the RBA for any rate cuts.
Westpac’s job index, a composite of the various business surveys, continues suggest the labour market will remain sound and that unemployment expectations can ease further.
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.
