•Unemployment fell to a six year low of 5% in September. If you look at the labour market holistically, the large monthly drop looks like survey volatility rather than a new lower trend (see “Australian Labour Force Survey; a robust update if you look through the volatility”). Nevertheless, it is our view that the labour market is sound and that unemployment has been trending down.
•Westpac forecasts the unemployment rate to hold above 5% to end 2018 before a soft patch in the June quarter 2019 (due to both election uncertainties and correction to the 2017/2018 strong patch) will lift unemployment to 5.3%. Once past the soft patch, steady employment growth will take unemployment back down to 5.0% by end 2019 and 4.8% by end 2020.
•We use business and household surveys to guide our near term employment forecasts while our medium term profile is driven by our fundamental view on household demand, services exports and non-mining investment.
•Our participation forecasts are dynamic responding to changes in employment growth. The forecasts are, however, bound by the assumption that participation will not hit a new record high.
The turning point seems about right though I can’t any reason why it would re-accelerate into 2020. Private capex will sour as housing construction follows prices down. Consumption will follow house prices down as well. The election of Labor will not turn either. Public capex is beginning to flatten out despite more gains ahead in state spending because the NBN rolls off next year. The NDIS roll out is also falling away next year.
What’s going to drive a jobs growth rebound as bed pans, bureaucrats and construction dry up:
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.
