Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), & CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he's one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written, yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data & charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, author of the New York Times bestsellers 'End Game' & 'Code Red'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision - where world class experts share their thoughts on economics & finance - author of Things That Make You Go Hmmm, one of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, 'MacroBusiness'.

Saturday, 19 December 2015

2015 jobs scorecard: Bursars, nurses & hearses

2015 scorecard

Each quarter the statistics bureau releases its Detailed Labour Force series which sheds light on employment trends by industry, and with the final quarterly now in it is a fine time of year to review the winners, grinners and sinners from 2015.

The established major weaknesses in the labour force are well known.

Over the last three decades manufacturing has endured a protracted, sweeping structural decline that has seen total employment continue to fade from around 1.1 million to now sit below 850,000.

The high dollar sustained through the mining boom has eliminated more marginal businesses from the sector, and although the currency has since depreciated again, many of these jobs are never coming back. This macro trend is one of several reasons I’ve been healthily sceptical about the upbeat predictions for the Adelaide property market over the years, even though housing affordability is demonstrably better than elsewhere.

Meanwhile, total employment the mining sector has shrunk by 17 per cent since the May 2012 peak. It is sometimes highlighted by terse commentators that mining accounts for less than 2 per cent of total employment in the Australian economy, the implication being that the influence of the industry is overstated. 

While the statistic might be technically accurate, when resources-related employment and ancillary industries are included, the total decline in investment and economic activity has been hugely significant.

Happily at least the figures for construction employment suggest that most of those laid off from resources construction projects have to date found gainful employment in the residential construction sector. But with a record high of more than 182,000 of the houses and units approved in the last year being back in the capital cities, demand in mining regions is inevitably crashing back to earth.

In real estate terms, many mining towns had their boom, and now must suffer the bust, with some former 'hotspots' finding that there are few buyers at any price.

That’s the bad news.

The brighter news is that nationally the services sector accounts for a considerably greater share of total employment, and here easier monetary policy is steadily biting, as the chart below selectively shows.

Good health!

I’ve written in at least two of my books that investors should consider the healthcare sector for its long term outperformance potential, but share market returns from the healthcare index have been beating even my own often lofty expectations, especially when benchmarked against the lacklustre performance of the wider market.

Although as I charted here Australia’s long term population pyramid is not projected to be as “top heavy” as those in some other developed countries over the decades ahead, largely thanks to our immigration policy, with life expectancies continuing to rise it is inevitable that the post-retirement age headcount will swell.

Healthcare and social assistance employment has exploded over the past year increasing by +142,700, with the sector now accounting for 12.7 per cent of the workforce, which may go some of the way to explaining the recent record gains in female employment.

Finance and insurance employment also jumped by +29,000 over the quarter to be +41,000 higher over the year, although being someone who moves in finance professional circles anecdotally bulk of hiring may have been administrative rather than executive in nature, so wages gains may be muted.

Manufacturing employment has been flogged again, nosediving by -53,900 over the year.

Yet strong gains in aggregate across retail and other services sectors kept quarterly employment positive the tune of a very strong +98,900.

Highest net gains in a decade

As with most years since the financial crisis, there has been plenty of banter about a recession this year, to be brought about by the ongoing falls in the terms of trade.

In truth given the volatility in the quarterly net exports figures a “technical recession” could happen just about any time. But the employment data over the past year has been a long way removed from the trends seen during Australia’s last recession, through which several hundred thousand jobs were being spat out of the economy.

In fact quite the opposite dynamic has existed through 2015 with a massive increase in total employment of +342,600, which is the highest annual result since more than a decade ago in the quarter ended August 2005.

Yes, I know, the numbers must be wrong. The numbers are always wrong! But job vacancy surveys have been almost uniformly positive, so over the near term at least employment growth should continue, particularly in the largest capital cities.

Sydney leads jobs growth

Over the past 12 months Greater Sydney employment growth (+106,900) has been enormous, and Greater Melbourne has followed hard upon (+70,000).  

I’ve spent the last four years lamenting the total dearth of employment gains in regional New South Wales and Victoria. While hopefully this won’t jinx it, over the last three months regional NSW is seemingly creating jobs again, although regional Victoria has remained where it has been for the past half-decade, which is to say, the doldrums.  

The below “holy chart” of employment shows that Greater Brisbane is also shaping up relatively nicely, having added +42,700 jobs over the year. Paradoxically, for the inner Brisbane property market the city’s building boom offers some of its biggest opportunities (employment growth, multiplier) and its biggest threats (apartment oversupply, vacancy rates).

The employment figures for Greater Adelaide have looked tentatively a bit more positive over the past two months, although automotive industry closures still loom as a likely headwind.

The monthly unemployment rate figures at the capital city level are somewhat volatile, but Sydney’s reading of just 4.4 per cent in November is a reminder of the strength of the economy in the harbour city, while Greater Brisbane also recorded an unemployment rate of just 5.4 per cent.

Smoothing the unemployment rate data on a rolling 12 monthly basis shows that Sydney, Melbourne and Brisbane are in a confirmed downtrend, but unemployment rates have been rising in Perth and Adelaide.

The wrap

Overall, 2015 was a big year for headline jobs gains, but all indications are that plenty of slack remains in the labour market, and wages growth has remained soft, suggesting under-employment. Let’s hope for more jobs growth and declining unemployment in 2016.