Highlights include:

• Gains & losses: The 39,500 job gain in Wholesale trade was the biggest quarterly rise for the sector in 20 years of records. The drop in manufacturing jobs was the biggest in almost three years.
• Reasons for being unemployed: Over the past year 22.7 per cent of unemployed people say they left their last jobs voluntarily – the lowest proportion in three years.
• Bank funding costs: The Reserve Bank says that funding costs and interest rates have fallen over the past year. And while spreads between lending rates and the cash rate have risen, this reflects strong competition for deposits.
• “Flash” manufacturing gauge in China: The HSBC flash manufacturing purchasing managers index rose from 50.4 to 51.7 in March, above forecasts set near 50.8.

What does it all mean?

• Last week we learned that employment surged in February. And today we learn where the jobs were created – or more precisely, how many jobs were created in the past quarter.
• The good news is that solid job growth has continued – more than 100,000 people found jobs over the past three months, the biggest quarterly rise in five years. And it was Wholesale Trade leading the way, accounting for almost 40 per cent of jobs created. This growth is likely to be part of the online spending boom. In the previous quarter it was Transport, Postal & Warehousing that lead the way in job creation, including courier drivers and warehouse facilities. This quarter it was Wholesale trade – a key sector in the chain linking producers or importers of goods with the end consumers.
• But the shift of spending to the online space may be causing jobs to shift from traditional retailers to wholesalers and importers. In the past quarter Retail trade jobs fell by 4,200 and there have been no net jobs created in the sector over the past two years. By comparison Wholesale trade was the biggest job creator over the past year, adding more than 65,000 jobs.
• The Education sector was second strongest in job creation over the quarter and has consistently created jobs over the past 18 months. More young people have been opting to stay in schools, colleges and universities rather than taking their chances in the job market.
• The Reserve Bank has published its latest report on bank funding costs and margins. And while the good news is that funding costs have fallen, the strong competition for deposits has prevented banks from passing through lower costs to borrowers. Depositors have been key winners in the shake-up caused by the global financial crisis and European debt crisis.
• There are various reasons why people become unemployed. Some lose their jobs; others leave their jobs voluntarily without another job to go to. And still others are former workers coming back into the workforce or are people looking for their first job.
• If you are confident about job prospects you may leave your job of your own accord. However it should be no surprise that just under 23 per cent of those who are unemployed left their last jobs voluntarily over the past year – the smallest proportion in three years and below the decade average. Clearly job confidence levels have eased markedly in recent years with the troubles in the US and Europe.
• The latest economic news from China continues to encourage and that is good news for the Australian resources sector.

What do the figures show?
Industry employment:

• Economy-wide employment rose by 102,400 in the three months to February – the biggest quarterly rise in five years. Almost 40 per cent of the jobs were created in one sector – Wholesale trade (up 39,500).
• The Bureau of Statistics says “units are classified to the Wholesale Trade Division in the first instance if they buy finished goods and then onsell them (including on a commission basis) to businesses.”
• Further: “Wholesalers’ premises are usually a warehouse or office with little or no display of goods large storage facilities and are not generally located or designed to attract a high proportion of walk-in customers. Wholesaling is often characterised by high value and/or bulk volume transactions, and customers are generally reached through trade-specific contacts.”
• Employment rose in 11 of the 19 industry sectors. Employment fell most in Manufacturing (down 30,800) followed by Arts and Recreation Services (down 10,200) and Electricity, Gas, Water and Waste Services (down 8,500).
• Healthcare remains the biggest employer with 1.39 million employees (12 per cent of the total) followed by Retail Trade (10.5 per cent) and Construction (8.8 per cent).

Analysis of Bank funding costs:
The Reserve Bank has issued its latest assessment of bank funding costs: “Developments in Banks’ Funding Costs and Lending Rates.”

• The Bank states: “The main findings are that the absolute levels of funding costs and lending rates have fallen over the past year, while spreads between these rates and the cash rate have widened. This latter development primarily reflects a continuation of strong competition for deposits.”
• The RBA says that lending rates have fallen in line with bank funding costs over the past year. While net interest margins shouldn’t have fallen, the RBA note that margins eased over 2012 due to a range of factors such as changes in the composition of bank assets.
• The RBA notes that spreads of funding costs and variable rate housing loans to the cash rate have moved similarly since June 2007.
• The RBA says that since June 2011 “increases in the cost of deposit funding and the level of compensation demanded by investors to hold bank debt, particularly in the first half of 2012, has seen estimated funding costs rise by a further 40–50 basis points relative to the cash rate.”

What are the implications for interest rates and investors?

• It is good news day. Data has confirmed that employment has continued to expand with job gains spread across a raft of sectors. Further, financial markets have absorbed the shock of the Cypriot parliament rejecting bail-out conditions. And there was also good news out of China with figures showing that the manufacturing sector continued to expand in the latest month.
• Latest figures confirm that jobs continue to be created across Australia. While there are structural pressures causing job losses in sectors like manufacturing and traditional retailing, other domestic-focused areas like wholesale trade, education, health and the public service continue to create positions.
• The latest Reserve Bank assessment of bank funding costs concludes that funding costs have been tracking in line with interest rates. Pressures still remain on margins and profitability in the banking sector due to community reluctance to take on new debt and the strong competition for domestic deposits.
• As Reserve Bank Deputy Governor Philip Lowe said on Tuesday, Australia is going through structural change, but the economy continues to perform well. Jobs are being created in some areas while being lost in others. But overall jobs continue to be created. Australia is positively responding to global challenges, the high Aussie dollar and information revolution.

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