Job advertisements have fallen again, improving the chance of a rate cut. Job advertisements fell by 2.1 per cent in September – the fifth decline in six months.
What does it all mean?
- The odds of a rate cut in November continue to improve following another fall in job advertisements. Job ads fell by 2.1 per cent in September – the fifth decline in six months. Job ads are a forward-looking indicator of the broader job market. So in simple terms if fewer employers are seeking staff, employment is likely to remain flat in coming months.
- The worst case scenario is that employers are not hiring and at the same time they are trimming staff. As a result employment numbers will ease in coming months with unemployment drifting higher.
However one key thing to watch is hours worked. It could be that cautious employers are not looking to add staff at present, preferring instead to get their people to work longer hours. If hours worked and employment fall in unison in coming months then the Reserve Bank probably wouldn’t stop with just one rate cut.
What do the figures show?
Job advertisements:
- The combined number of internet and newspaper job advertisements, as tracked by ANZ, fell by 2.1 per cent in September after declines of 0.7 per cent in both July and August. Job ads have fallen five times in the past six months and are up just 3.1 per cent on a year ago. In trend terms job ads have fallen for six straight months.
- Newspaper job ads were flat in September after falling for the six previous months. Internet job ads fell by 2.2 per cent in September – the third straight decline.
What is the importance of the economic data?
The monthly Job Advertisements release is a leading employment indicator. Employers only seek additional staff if business activity is strong, and more importantly, if they expect that conditions will remain favourable in coming months. It takes around 5-6 months for the new staff to be added to the payrolls. But a fall in job advertisements would have a more immediate impact on monthly employment estimates.
What are the implications for interest rates and investors?
The fifth fall in job ads in six months confirms that the job market has hit the wall and that rate cuts are on the table. The troubling aspect for the Reserve Bank is how quickly economic momentum has been lost. Up to March the economy appeared to be chugging along. But since April, business and consumer confidence has fallen sharply, affecting spending and hiring decisions.
While a cut in interest rates would be celebrated by consumer-dependent businesses, the positive sentiment will be deflated in part by weaker labour market conditions. The Reserve Bank may cut rates, but if people aren’t confident about their jobs, then they may choose to pay off home loans at a faster rate or keep money in the bank rather than saving it.