Australia has created 308,000 jobs over the past year, seeing the number of employed workers increase by an impressive 2.5%.
However, if the chart below is anything to go by, the hiring spree over the past year may soon come to an end.
From UBS, it shows the annual change in Australia’s medium home price, advanced by six months, overlaid with employment growth on a three-month annualised basis.
More often than not movements in home prices tends to lead employment growth, an understandable outcome given construction employs around 1.2 million Australians. The family home is also the largest asset held by a vast majority of Australia households, meaning changes in its value can influence confidence levels and spending patterns, hence the broader Australian economy.
The housing downturn is already starting to impact building approvals and employment in the construction sector, although it’s still unclear whether it is leading to a slowdown in household spending.
Some indicators say it is, while others suggest spending is holding up OK, helped by continued strength in hiring.
Given the relationship between home prices and employment in the past, it suggests the risks to employment and spending in the months ahead may be to the downside.
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