Skilled Job Vacancies

• Skilled job vacancies: In trend terms, the Internet Vacancy Index (IVI) fell by 0.7 per cent – the fifth consecutive monthly decline – to 81.1 points in May. The index is 5.7 per cent lower than a year ago – the biggest annual decline since December 2013.
• ‘Winners and losers’: In trend terms, the annual growth rate of skilled internet job vacancies for Education Professionals (up 49.1 per cent), Farmers and Farm Managers (up 26.4 per cent), and Health and Welfare Support Workers (up 26.2 per cent) were strongest in May. But over the year to May, skilled vacancies for Construction Trades Workers (down 21.6 per cent), Construction and Mining Labourers (down 21.1 per cent) and Other Labourers (down 19.7 per cent) were the weakest.

The internet job vacancies data is a leading indicator of the job market and therefore important for consumer-focussed stocks and companies.

What does it all mean?

• Leading indicators of job growth – such as skilled internet job vacancies and job advertisements from the Department of Employment, SEEK and ANZ have all weakened in recent months.
• Of course, prospective employers use other online websites to advertise jobs and source labour, such as LinkedIn, which are not captured in these surveys.
• But the trend unemployment rate has lifted from 8-year lows of 4.9 per cent in February to 5.2 per cent in May. And this has coincided with worker participation reaching historical highs.
• With Reserve Bank policymakers recently adjusting down their estimate of “full employment” to 4.5 per cent, concerns over labour market slack have re-intensified.
• A key measure of spare capacity in the job market, the underemployment rate – those working but wanting additional hours – has lifted back up to 15-month highs of 8.6 per cent in May.
• Last year, Reserve Bank policymakers tied their monetary policy tightening bias to falling unemployment, increasing skills shortages and expectations for an eventual lift in wages growth.
• But this year, attention has turned to cutting interest rates due to slowing job gains and the potential for higher unemployment. And looking at today’s skilled internet job vacancies data, weakness is most pronounced for construction workers with residential home building and dwelling investment softening.
• In the Reserve Bank Board minutes released yesterday, members said, “Given the amount of spare capacity in the labour market and the economy more broadly, members agreed that it was more likely than not that a further easing in monetary policy would be appropriate in the period ahead.” Governor Philip Lowe provides a further update tomorrow.

What do the figures show?

Skilled Vacancies

• The Department of Employment Internet Vacancy Index fell by 0.7 per cent to 81.1 points in May – a 23-month low. It was the fifth successive monthly decline. The index is 5.7 per cent lower than a year ago – the biggest annual decline in 5½ years – although it is still 15.1 per cent above the level recorded in May 2014.
• Decreases in job advertisements were recorded all seven occupational groups in May with the largest falls recorded for Labourers (down by 1.5 per cent) and Managers (down 1.3 per cent). Vacancies remained steady for Community and Personal Service Workers.
• Over the year to May 2019, job advertisements fell in six occupational groups. The strongest falls were recorded for Machinery Operators and Drivers (down 17.0 per cent), Labourers (down 14.7 per cent) and Sales Workers (down 11.9 per cent). But increases were recorded for Community and Personal Service Workers (up 4.7 per cent) and Professionals (up 1.5 per cent).
• Job vacancies decreased in four states and one territory in May: NSW (down 1.2 per cent), Northern Territory (down 1.1 per cent), Victoria (down 0.8 per cent), Queensland (down 0.4 per cent) and Tasmania (down 0.1 per cent). Vacancies were steady in Western Australia. But vacancies lifted in the ACT and South Australia (both up 0.3 per cent).
• Over the year to May, job vacancies rose in two of the states and one territory: Tasmania (up 14.8 per cent), ACT (up 6.3 per cent) and South Australia (up 0.6 per cent). But vacancies fell in NSW (down 9.2 per cent), Northern Territory (down 8.7 per cent), Victoria (down 5.5 per cent), Queensland (down 4.6 per cent) and Western Australia (down 0.9 per cent).

What is the importance of the economic data?

• The Department of Employment releases a monthly Internet Vacancy Index. The index is based on a count of online job advertisements newly lodged on three main job boards (SEEK, CareerOne and Australian JobSearch) during the month. The index is the only publicly available source of detailed data for online vacancies, including around 350 occupations (at all skill levels), as well as for all states/territories and 37 regions.

What are the implications for interest rates and investors?

• With key leading job vacancies indicators softening in New South Wales and Victoria and unemployment rates ‘stuck’ at 6 per cent or above in Tasmania, Queensland and Western Australia, the Reserve Bank appears likely to pull the interest rate lever again in the next month or two.
• Labour market economists at online job search company Indeed have also indicated that labour market ‘mismatches’ – when titles of job seekers’ resumes are compared with job titles posted – are alarmingly high in Australia relative to other countries and “that higher mismatches might be associated with greater job market weakness.”
• CommSec expects at least another rate cut in August.