Prepare for the dwelling construction jobs bust

The ABS yesterday released dwelling construction data for the June quarter, which recorded a dead cat bounce in both commencements and completions.

According to the ABS, the number of dwelling commencements rebounded by a seasonally-adjusted 1.1% over the June quarter, but crashed by 20.3% over the year. While detached house commencements fell by 10.6% over the quarter and by 16.4% over the year, this was offset by unit commencements, which rose by 21.0% over the quarter but were down by 25.2% over the year:

As shown above, annual house commencements ran moderately above the long-term average in the June quarter, whereas apartment commencements continue to run strong despite crashing over the past year.

At the state level, the commencements have fallen heavily across all mainland jurisdictions, but rebounded in NSW in Q2:

Actual dwelling completions (which lag commencements) rose 1.6% over the June quarter but were down 2.9% over the year. Detached house completions fell by 6.1% over the quarter and 3.4% over the year, but this was more than offset by the 11.8% rise in apartment completions over the quarter, although they were down 2.3% over the year:

Again, annual house completions are running moderately above their long-run average, whereas apartment completions are running way above average.

At the state level, the overall quarterly rise in completions was driven overwhelming by NSW (+18.5%):

The dead cat bounce in dwelling construction helps explain why the number of construction jobs rose in the August quarter to a near record high 1.2 million (9.1% of total Australian jobs):

However, the outlook is dire given the massive 33% decline in dwelling approvals from the March 2015 peak:

As shown by UBS, construction job ads have declined by around 30% – commensurate with the decline in dwelling approvals – resulting in a “material drop in construction employment ahead”:

Tomorrow, I will update the charts plotting dwelling construction against population growth.

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Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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