Young workers miss out in job stakes

From

Latest economic news

  • There were fewer young Australians with jobs at the end of 2010 than a year earlier. Employment for those aged between 15-19 years actually fell by 6,100 in 2010 with the slump concentrated amongst women.
  • The big winners in the job stakes in 2010 were senior Australians. Employment for those aged 65 and above soared by almost 6 per cent, almost five times the pace of Gen Y workers aged from 15-24 years.
  • Inflationary expectations have spiked higher in response to the floods across Australia. In January, the median expectation of survey respondents was for inflation to lift to 4.6 per cent, up from the 2.8 per cent
    median estimate of expected inflation in December.

What do the figures show and what does it all mean?

  • The past year was a good one for job seekers with almost 370,000 new positions created, up 3.3 per cent on a year ago. But not all the gains were shared equally. Generation Y lagged behind in the job stakes while senior Australians were the most successful in securing positions.
  • Overall just over 26,000 positions were created for those between 15-24 years. However in percentage terms the increase was just 1.3 per cent, well behind the 5.9 per cent lift in employment for those aged above 65 years. In fact, employment for those between 15-19 years actually went backwards by 6,100 in 2010.
  • Baby boomers certainly led the way in the job stakes. There are 150,000 more people aged 45 years and above with jobs than a year ago. In contrast the pivotal 25-34 age group saw job numbers rise by just fewer than 140,000 positions.
  • Interestingly senior women have been big winners in the job stakes over 2010 with employment amongst women over 65 soaring by 13 per cent over the year. Perhaps prompted by disappointing sharemarket returns there are more couples above 65 years where both partners are working.
  • Another group to struggle in the job stakes in 2010 was the key Generation X group – those aged 35-44 years. Employment lifted just 53,200 or 2.1 per cent over the year.
  • The 35-44 age group is pivotal in the economy for retail spending and home ownership. The fact that Gen X found it harder to secure jobs over the past year goes a fair way in explaining the conservative behaviour of Australian consumers, especially the reluctance to spend.
  • If more senior Australians are being prompted to work by poor sharemarket returns, then they also would be more inclined to save, rather than spend, adding to the broader trend of consumer conservatism.

  • Yesterday figures showed that consumer sentiment had weakened in response to the widespread floods across the country. Today data shows that consumers also believe that inflation is likely to rise as a result of the flooding, no doubt concentrated in fresh food items like fruit and vegetables.
  • In a survey conducted in December, respondents, on average, expected inflation to be around 2.8 per cent over the coming year. In January the same survey has come up with a expected inflation rate of 4.6 per cent.
  • The proportion of people expecting inflation to be between 2-3 per cent slumped to the lowest levels in 20 months in January. The biggest change in expectations was by those who expected prices to lift by more than 10 per cent – the proportion lifted from 9.9 per cent in December to 17.8 per cent in January.
  • No doubt many Australians have taken on board media reports of likely spikes in fruit and vegetable prices following the flooding in Queensland. However the fact is supplies of most fruit and vegetable, apart from some selected items, are produced in other parts of the country at this time of year. The main growing time in Queensland is autumn and winter. So the anticipated surge in prices may not take place – at least not to the extent suggested in media reports.
  • Still, the spike in inflationary expectations is a concern. If inflationary expectations remain at these higher levels for a number of months they could prove self-fulfilling, resulting in a range of businesses lifting prices by bigger margins than a year ago.
  • In coming months it will be important for industry bodies and governments to regularly provide data and trends on food prices to dispel misperceptions.

What are the implications for interest rates and investors?

  • Investors shouldn’t be content just to focus on top level trends in employment and consumer spending. By drilling down through the figures, investors get valuable insights. Fundamental improvement in retail spending won’t occur until those in their 20s and 30s secure a greater share of jobs and job security improves.
  • The spike in inflation expectations would be viewed with some concern by the Reserve Bank. Still, it may prove a one-off spike, prompted by reporting on the floods. No doubt the test will come as people go about the usual weekly supermarket shopping. If consumers fail to see surges in prices then inflationary expectations will quickly return to normal.
  • In November and December all the focus was on discounting by retailers whereas now the concern is about food prices soaring. Inflationary expectations bounce around, but it is the longer-term trend that’s important.

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