This is an important follow up to the recently published post on the Australian labour market as at Sept 2015. This post builds on that data by taking a deeper dive into the distribution of the current labour market performance across the states. The nature of this analysis tends to highlight changes in trend much earlier than annual growth figures.
The performance by state, especially more recently, I think, paints a slightly worse picture of the labour market because it highlights how reliant the slowing aggregate figures are on just several states. The states where employment is continuing to grow are NSW, QLD and TAS. Even then, there are caveats attached to NSW and QLD.
Overall, the slow-down in employment growth is most evident across every state except Tasmania. In fact, in states such as VIC, SA, WA, NT and ACT, employment growth has slowed throughout 2015 and has started declining. The labour market performance in Victoria throughout 2015 is most concerning, given its size and importance to the National picture. It’s surprising that this development hasn’t been getting more airtime.
There are a few bright spots throughout the data where, for example, where FT employment is at least growing faster that PT in markets such as WA and Tasmania.
Importantly, the state employment data is consistent with the growth trends in hours worked by state presented in the previous post.
Employment growth in the latest quarter driven primarily by NSW
On an annual basis, the distribution of employment growth across the states looks good, with employment growing across most states except SA. But even on an annual basis, 50% of the National +232k person annual growth in employment is attributed to one state – NSW.
Employment growth in the latest quarter shows quite a deterioration in this situation (red bars in the chart above).
In the latest quarter, employment declined in Vic, SA and ACT and barely grew in WA & NT. This is consistent with the hours worked data in the previous post.
The trend of this growth over the last 12 months is concerning.
I apologise for this next messy chart – just bear with me. It measures the trend in the monthly change in employed persons by each state. If you add up each of the monthly changes for each state over the last 12 months, you’ll get the National annual employment growth figure of +232k persons. This is one way of looking at the underlying distribution of the annual growth figures.
This chart yields several important insights, the most obvious that employment growth is slowing in most states, notably in the bigger states of NSW and VIC.
New South Wales
Despite having the highest annual growth in employment of any state over the last 2 years, employment growth in NSW has halved since May ’15. At least most of the employment growth is still driven by full-time (FT) employed persons. Unfortunately the growth of FT employed persons in NSW has also more than halved since May 2015. Growth in part-time (PT) employment has fallen to low levels, averaging <1k growth/month. Growth in the NSW labour force has been faster than that of employment over the last 4 months, so the total number of unemployed persons has started to grow again. Despite looking strong at a discrete point in time, the labour market in NSW seems to have lost some momentum over the last 6 months.
Vic has gone from reasonably strong monthly employment growth peaking in Dec 14, to declining employment levels over the last 4 months. If there is any consolation it’s that this decline has not accelerated to the downside –the decline has remained small thanks to slightly higher growth in PT employed persons.
The alarm bells should be ringing regarding the labour market in VIC. Full-time employment has been declining for 6 months and PT employment growth has been <1k persons a month for the last 4 months.
Unemployment has started growing, but that growth remains low likely due to the significantly lower growth in the labour force at the same time. As a result, the unemployment rate has only been ticking up ever so slightly. The slow-down in labour force growth is partly due to the fall in the VIC participation rate from 65% in Feb to 64.5% in Sept 2015. These data points may have important implications for Victoria – especially the housing market, where Melbourne is the second fastest growing real estate market in Australia.
This is the only other state showing any significant level of employment growth (in terms of actual number of persons). The trend in employment growth has been positive for most of 2015 and growth has remained consistent at just below 5k persons/month. Whilst this looks positive in the aggregate, most of this growth has been driven by PT employment growth. Growth in FT employment has been slowing since Feb 2015 and started declining from June 2015. Employment growth has shifted from FT to PT employment and whilst this is not ideal, it’s better than no employment growth. Employment growth has remained higher than growth in the labour force for most of 2015, so unemployment has been falling. In the latest month of Sept 2015, employment growth was only slightly lower than growth in the labour force.
At the start of 2015, there were some promising trends in SA employment growth, with total employed persons growing from Jan to May 2015. Unfortunately, employment has now begun to decline again over the last 4 months and has been accelerating to the downside. Driving this trend is a decline in both FT and PT employed persons. Whilst both are declining, the decline in FT employed persons is at least slowing:-
Unemployment growth has started to slow at the same time – which is likely the result of the labour force declining slightly faster than employment growth in recent months. The unemployment rate in SA is the highest of all states and is now at 8%. There needs to be a fairly significant increase in employment growth in excess of the labour force growth in order to reduce this level of unemployment. It’s no coincidence that we are now talking about the production of submarines and the processing of nuclear fuel rods in SA.
This is an important state in terms of tracking the impact of developments in the mining industry. Employment growth in WA just turned negative in the latest month Sept 2015. The trend of employment growth looks quite concerning (growth has been slowing each month since July 2014 and is now negative) and this fits with the negative outlook for WA. The monthly change in employment over the last five years shows just how much employment growth has slowed in WA:-
At least more recently, the underlying FT/PT employment growth has shifted to become more positive. Full time employment has started to grow from July 2015, while at the same time PT employment has been declining, which is dragging down the total level of employment growth in WA. Unemployment has been growing, but at a slowing pace – thanks to slowing labour force growth. The annual growth in unemployed persons is tracking well above historical averages.
This state continues to confound. Employment growth in TAS is now the third highest (in terms of actual number of persons, no less!) in Australia in Sept and for the quarter ending Sept 2015. The trend shows that most of this growth is being driven by FT employment growth, while PT employment growth is slightly negative. There is some indication that this trend may be starting to reverse, but it’s too early to tell. Employment continues to grow faster than the labour force in TAS, even while participation continues to increase, resulting in the ongoing decline in total unemployed persons. It’s the only state in Australia at the moment where the labour market looks strong.
This is another bellwether state for the mining industry. Employment growth has started to decline only in the latest month, driven by declining PT employed persons. The total number of FT employed persons continues to grow, but that growth has slowed throughout 2015. Employment growth overall has been lagging behind labour force growth and as a result, unemployed persons has been growing since Dec 2014.
Australian Capital Territory
Despite a promising start to 2015, total employed persons in the ACT has begun to decline in each of the last 3 months. This decline in employed persons is being driven by declining FT employment, which has been accelerating lower since June 2015. At the same time, PT employed persons has been growing but not fast enough to counter the decline in FT employed persons. As a result, total unemployed persons has been growing again over the last six months.
Employment growth by state is consistent with the growth in hours worked
This overview of employment growth by state is very much in line with the hours worked trends outlined in the previous labour market post. The only markets where hours worked have grown in the latest quarter are NSW, QLD and TAS. This represents a negative shift from the annual data where hours worked only declined in two states – SA and ACT.
To recap the shifting trends in hours worked data by state:–
- NSW still strong, but rate of growth is slowing
- TAS still strong
- QLD starting to improve in the last two months
- On the fence – NT hours stalling, slightly declining
- Worst performers where hours have declined – SA, ACT and WA
- Hours worked have declined in VIC, but it looks more like a ‘high plateau’ rather than a serious decline at this stage
The short term employment indicators are pointing to a deterioration in performance across most states. These trends are just starting to emerge and, if they continue, could have important implications, especially in states such as VIC. It will be important to keep this state by state view in mind when looking at further developments in areas such as housing credit and house prices. For the moment, I’ll continue to keep track of these trends, as changes in employment levels are an important indicator underpinning consumption and output growth in the economy.