- The NAB says up to 150,000 residential construction workers may lose their jobs as a result of the housing downturn.
- Such a decline would completely reverse growth in total construction employment in Australia over the past five years.
- The bank expects some workers to be absorbed by the non-residential construction sector.
- Most leading labour market indicators point to a broader slowdown in hiring ahead, increasing the risk of a reversal in Australia’s unemployment rate.
The unwind in Australia’s residential construction boom could lead to an equally large unwind in employment across the sector, says the National Australia Bank (NAB).
It expects dwelling investment will fall by 18% over the next two years, larger than the 10% drop forecast by the RBA, meaning up to 150,000 jobs could be lost in just the residential sector alone.
“This looming forecast decline in dwelling investment would of itself likely lead directly to a decline in employment of anywhere between 50,000 to 150,000, depending on how protracted the decline becomes,” says David de Garis, Economist at the NAB.
“There would likely also be fallout in industries supplying the residential construction sector from importers, manufacturers and hardware-supplying retailers and wholesalers, as well as in some related services such as developers, the real estate industry, legal, accounting, finance, and plant hire.
“Such a prospective decline emanating just from the building construction industry could amount over time to a 1% hit to aggregate employment.”
De Garis says there’s already evidence that demand for construction workers is starting to weaken, noting expectations for employment at construction forms in the latest NAB quarterly business survey fell quite sharply, mirroring similar trends in job ads placed on Seek.
While he expects some workers may find jobs in non-residential construction, de Garis says that will only “fill at least some of that gap”.
“Engineering activity and employment levels are set to rise in the period ahead on the back of higher levels of infrastructure employment,” he says.
“There has also been a modest upward trend in non-residential building approvals in recent years, though that trend has slowed over the past year.”
A decline of 150,000 jobs would completely unwind the boom in total construction jobs seen over the past five years, and could potentially begin to place upward pressure on unemployment given the potential implications for broader economic growth.
In December, Australian unemployment fell to 5%, leaving it at the lowest level since June 2011.
However, despite employment continuing to grow at a decent clip, the pace of hiring has slowed recently compared to what was seen in 2017.
Most leading labour market indicators, outside of job vacancies and the NAB’s monthly business survey, also point to a further loss of momentum in hiring in the months ahead, even before the expected decline in residential sector employment really begins.
The RBA expects Australian unemployment will gradually drift down to 4.75% in the coming years, helped in part by an expectation that the economy will grow at an above-trend pace of 3% this year.
Not everyone believes the economy will perform this well, even with the RBA’s lowered expectations, meaning jobs losses from the construction sector may not be easily replaced in other industries.