For a country undergoing one of the largest economic transitions in its history, Australia’s labour market is not performing anywhere nearly as bad as what some of the doomsayers would have you believe.
Unemployment is still uncomfortably high at 6.2%, but there’s more to the data than that one single figure.
Take employment growth, for instance. Despite an economy that has been growing below trend for much of the past three years, employment growth in the year to July stood at an impressive 234,974 according to the ABS figures. That equates to an average monthly increase of nearly 20,000 each and every month. Not since April 2011 has the economy generated so many jobs over a 12-month period.
Looking at that figure from another perspective, employment grew by 2.04% over the past year, even with downward revisions to past data due on the back of working age population estimates being lowered by the ABS yesterday. Not since May 2011 has Australian employment growth been this quick.
Not only that, but the trend right now in both numeric and percentage terms is moving higher, as this chart shows.
This is something to be celebrated, particularly with all the negativity Australia’s economy has been lumped with for the best past of the year.
For all the talk of a looming recession, housing bubbles and the threat of the slowdown in China, not only is employment growth humming along at a reasonable clip but, for the moment, it is accelerating.
While there are obvious concerns that could reverse this trend – business spending will remain weak for at least the next two years, housing construction is nearing (or has) its peak while concerns about China are likely to persist until there’s a clear stabilisation in verifiable economic data – there are reasons to be positive about the outlook for Australia’s economy, particularly the non-mining sectors.
The Australian dollar is falling, not only against its US counterpart but a basket of major currency pairs, helping to improve Australia’s international competitiveness.
One look at recent international visitor arrivals numbers – both for leisure and education purposes – gives an initial indication that Australia is becoming a more competitive and desirable destination for those offshore. The improvement in the tourism and education sectors are likely to only be the start.
It’s not only tourism arrivals that are pointing to an improvement across Australia’s non-mining sectors. In August the Ai Group services PMI gauge – a survey on conditions across Australia’s massive services sector – expanded at the fastest pace seen since March 2008.
Larger expenditure decisions require far more evaluation, analysis and time than deciding to take a short-stay holiday Down Under. The economic transition is taking place, but will take time. In the interim, while overall economic growth remains sluggish, the activity in the sectors that matter most to the majority of Australians are starting to accelerate.
Employment remains firm, unemployment appears to be nearing its peak and there’s already evidence that Australia’s all-important services sector is improving. The wildcard remains the global economy, something Australia can’t control given its small relative size.
However, given the circumstances, it appears we’re doing all right.
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