Thursday, March 8, 2012

Jobs riddle hints at weakening economy

Australia's jobs market is still flat. Jobs are growing strongly in Western Australia, but collapsing in Victoria. That's the real message coming out of the labour force figures released by the Bureau of Statistics today.

On the seasonally adjusted measures that people are used to focusing on, job numbers zagged after last month's zig.

In the past few months, job numbers rose in November, fell in December, rose in January, and now fell in February: down by 15,000, to end up back where they started.

The headline unemployment rate climbed back to 5.2 per cent.

This shows the naivety of comments last month by Treasurer Wayne Swan and the Reserve Bank seeing the January figures as a sign of improvement, rather than the statistical static you get when you try to use figures for the wrong purpose.

The Bureau keeps warning us that its monthly job movement figures are too imprecise to rely on, and urges us to use its smoothed trend data instead.

Pity the Treasurer and the Reserve don't listen.

And the trend figures this month tell us pretty much what they told us last month: there's virtually no job growth going on out there.

Every month, the potential labour force of people aged 15 and over grows by 18,500, but on average, only 1000 new jobs are created.

Soft spots

That fits with what the Bureau told us yesterday: economic growth has gone soft, above all in the south-eastern states with no coal, iron ore or new natural gas fields.

The economy's output grew at an annual rate of just 2.5 per cent in the second half of 2011, with the great bulk of that going into developing new mines in WA and Queensland.

They don't employ that many people, since much of the equipment is imported, and mining is a capital-intensive industry that employs just 2 per cent of the workforce.

By contrast, the jobs are going from labour-intensive sectors such as manufacturing, retailing, finance and government, which are mostly in the south-east.

That's why Victoria has lost 30,000 jobs since last April, while WA has added 30,000. NSW, South Australia and Tasmania are also losing jobs on balance, but at a slower rate.

In the past couple of months, even Queensland has gone backwards.

Jobs riddle

But if job growth has virtually stopped, and the potential labour force is growing by more than 200,000 a year, why is the unemployment rate stuck at 5.2 per cent instead of rising into the 6s?

Because more than 100,000 people who would normally be in the workforce have stopped looking for jobs, and hence don't count in the figures.

Why? That's the real riddle in these figures, and no one can fully explain it. Most of the people dropping out live in NSW or Victoria.

About a third of them seem to be teenage students deciding not to look for a part-time job. Some of it reflects the ageing of the population, although that is offset by the rapid rise in the proportion of older people staying at work.

But it wasn't happening a year ago. It's another sign of a weakening economy.