Bad news for job seekers – the number of job advertisements fell for the sixth straight month, dropping by 2.8 per cent in September to stand 10.8 per cent lower for the year.
What does it all mean?
Simply, businesses currently aren’t in the mood to take on more staff. Clearly the jitters about the European debt crisis have taken their toll together with uninformed media stories about the presumed end of the mining boom. In this sort of environment many businesses have chosen to work on getting as much as they can out of existing staff, rather than take on new workers.
Clearly, much can change in a short space of time. The US economy is on the improve; the European debt crisis has settled (at least for now); and both home and share prices have been rising. Further, the Reserve Bank injected fresh stimulus into the economy at the start of the month, cutting the cash rate target by another quarter of a per cent.
If the more settled conditions last, then businesses will again be in the mood to hire. But the flat job market is by no means all bad news. Productivity has lifted, enabling the economy to grow at a faster rate without generating inflationary pressures.
All things being equal, the drop in job ads suggests that the Reserve Bank is more likely to cut rates again in November. But all things aren’t equal. Home prices are rising, up 3 per cent since May. And the US economy continues to brighten. Clearly a lot more water needs to flow under the bridge before the next Reserve Bank Board meeting.
What do the figures show?
The combined number of internet and newspaper job advertisements, as tracked by ANZ, fell for the sixth straight month, dropping by 2.8 per cent in September after a 2.4 per cent fall in August and 0.9 per cent decline in July. Job ads are down 10.8 per cent on a year ago and at the lowest level since January 2010.
Newspaper job ads fell by 3.6 per cent in September while the far larger component of internet job ads fell by 2.7 per cent. ANZ provides data on newspaper job ads by state but given their minor importance in relation to internet ads and poor record in tracking total advertisements, the data is not useful for analytical purposes.
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?
Financial markets and economists alike anticipate another rate cut in November. And today’s data is supportive of that view. Currently financial markets believe there is an 81 per cent chance of a quarter per cent rate cut in November.
The job market certainly isn’t in bad shape. Unemployment remains just over 5 per cent and we expect that to still be the case after data is released on Thursday. But rather than falling, the jobless rate looks likely to remain stable or perhaps drift a little higher over the next few months.
Job ads are a forward indicator of the job market. But arguably home prices are a leading indicator of consumer spending and borrowing. While the balance of factors favours a rate cut, concern about a new housing boom being created may act to stay the Reserve Bank Governor’s hands.
