Australian employment surged by 403,100 last year, the fastest growth over a calendar year on record.
Quite the statistic, but it’s unlikely to last.
To Damien Boey, Research Analyst at Credit Suisse, the momentum in the labour market slowed a little in the December quarter, including in December itself.
“[It was a] mixed-to-slightly disappointing December labour market report,” he says.
“Headline employment came in above expectations, rising by 34,700, but aggregate hours worked fell by 0.2% over the month, taking year-ended growth lower to 3.2% from 4%.
“Also, the unemployment rate rose to 5.5% from 5.4% on the back of an increase in labour force participation.”
While the figures are hardly horrific, Boey says the loss of momentum seen late last year may be a sign of things to come in 2018.
“The labour market performed exceptionally well for the better part of 2017, and arguably was due for a ‘breather’,” he says.
“Our concern is that with retail in the doldrums, housing threatening to weaken further, and the impulse from infrastructure spending fading, that there is very little labour demand left to pick up the slack.”
Boey points the chart below to show what may happen next.
It overlays annual changes in total hours worked against Credit Suisse’s proprietary employment leading indicator, a model that uses retail spending, business confidence and the depth of the infrastructure spending pipeline to estimate the outlook got labour demand.
“[It] points to a very sharp slowdown in labour demand over the coming quarters,” Boey says.
“As such, we can see the December breather in the labour market turning into a more prolonged slowdown.”