- Australian job ads fell for a fourth consecutive month in February.
- At 4.3%, the annual percentage decline is now the steepest since early 2014.
- ANZ Bank says the result points to a “more challenging” period for employment growth in the year ahead.
- An increasing number of leading labour market indicators suggest employment growth will continue to slow in the months ahead, potentially risking an increase in Australia’s unemployment rate.
- The RBA has nominated a sustained increase in unemployment as one trigger that could see it cut official interest rates again.
Australian jobs ads fell for a fourth consecutive month in February, something ANZ Bank says points to a “more challenging” period for employment growth in the year ahead.
The bank’s Job Ads Index slipped by a further 0.9% to 169,568 last month in seasonally adjusted terms, leaving the series down 4.3% over the past year.
The annual decline was the largest in percentage terms since February 2014.
“The labour market has been a key source of strength for the Australian economy over the past year, with the strong gain in jobs and declining unemployment rate providing a material offset to the impact of lower house prices,” said David Plank, Head of Australian Economics at ANZ.
“The year ahead looks to be more challenging on the employment front.”
As seen in the next chart from ANZ, the recent decline in advertisements — in stark contrast to much of last year when they only fell on three occasions in any given month — points to the likelihood that Australia’s unemployment rate may also begin to creep higher in the not too distant future, driven by the possibility that employment growth may slow further.
“Even with this decline, the level of ANZ Job Ads is still consistent with ongoing employment growth,” Plank said.
Combined with other leading labour market indicators such as the ABS job vacancies series, which the ANZ series has recently disconnected from, Plank says it “points to a stable rather than rising unemployment rate even in the face of weaker employment growth”.
“This provides some comfort for the outlook, though we are conscious that the downside risks are rising.”
As for what measure is the most accurate in determining what lies ahead for employment growth, the Reserve Bank of Australia (RBA) is putting a lot of faith in a record number of job vacancies helping to keep gradual downward pressure on Australia’s unemployment rate which currently sits at the lowest level since the middle of 2011.
Other labour market indicators such as skilled job vacancies have also started to lift after weakening throughout most of last year.
In public remarks the RBA made last year, it suggested the recent disconnect between vacancies and job ads data may reflect that employers and employees are now connecting in different forums such as LinkedIn and company jobs portholes, rather than traditional jobs websites.
While recent employment growth has been firm, fitting with the signals in the vacancy data, the pace of Australian employment growth has slowed noticeably over the past year and a bit, falling from in 3.5% in late 2017 to 2.2% in January this year.
Other indicators such as annual home price movements, along with employment readings in PMI reports released by the Australian Industry Group have also point to the likelihood of a further slowdown in employment growth ahead.
If that does eventuate, unemployment levels could start to lift if participation rates in Australia’s labour market hold at current levels.
Last month, the RBA nominated a “sustained increase” in Australia’s unemployment rate as one trigger that could see it cut Australia’s cash rate once again.
“With monetary policy already providing considerable support to the Australian economy, it is appropriate to maintain the current policy setting while we assess developments,” said RBA Governor Philip Lowe in March.
“Much will depend on what happens in our labour market.”
Given the signals from the ANZ Job Ads series, it helps explain why financial markets, and an increasing number of economists, believe the RBA will be forced to cut interest rates again, and sooner than many currently expect.