Westpac with the note.
― Australia’s resilient labour market is the main factor preventing a complete capitulation in consumer sentiment to the record lows seen during the early-1990s recession. That said, consumers have continued to lose confidence in the jobs outlook. The Westpac Melbourne
Institute Index of Unemployment Expectations rose a further 10% to 131.2 over the 3mths to July, nudging slightly above the long run avg for the first time since the pandemic (recall that a higher index means more consumers expect unemployment to rise in the year ahead).
― To date the shift is more consistent with flattening labour market conditions rather than a sharp spike in job-loss fears.
― That is consistent with the picture from the latest labour market data. Job gains have continued at a robust pace, averaging above 40k/mth through Q2 with the unemployment rate holding at 3.5% – neither rising nor falling (see here for more). Other measures show job vacancies still at very high levels by historical standards while the number of workers expecting to be retrenched over the next 12mths remains near historic lows.
― The survey detail shows the deterioration in expectations is broad-based but slightly bigger for those employed in the hospitality and transport sectors, suggesting there has been some cooling in some discretionary services spend locally.
This is a very good leading indicator of unemployment and 131 on the index is equivalent to around 5% unemployment within four months.
It may be a little slower this time with job vacancies high but will probably still get there.
