Australia's retail sector shed nearly 60,000 jobs over the past year

Photo: iStock

Australian employment growth has been a disappointment in recent years, even with a slight pickup in recent months.

According to figures released by the ABS last month, employment grew by 146,000, or 1.22%, in seasonally adjusted terms in the year to March, equating to average employment growth of just 12,167 per month over that period.

It’s a disappointing and somewhat surprising outcome, particularly given many alternate labour market indicators suggest that Australian employment growth should be faster than it currently is.

So why, given other indicators, is employment growth continuing to lag?

Some might point to well-known issues in the ABS’ seasonally adjusted jobs data to explain the difference between the two, pointing out that the official figures likely overstated employment growth by some margin in late 2015 making recent weakness merely a reversal of that trend. But according to economists at the National Australia Bank, another reason to explain why employment growth has been weaker.

Employment in retail, the second-largest employer in Australia behind the healthcare sector, has fallen sharply over the past 12 months.

This chart from the NAB shows just how weak employment conditions have been in the retail sector over the past year.

Source: NAB

In trend terms, retail jobs — currently employing around 1.2 million Australians — have fallen by a whopping 59,300 in trend terms over the past year, helping to drag total employment growth lower as a consequence.

It’s a lot, and to the NAB economists is one factor that might explain why the official statistics have been weaker.

“Excluding the retail sector, employment growth would have averaged around 200,000 – around where the leading indicators have suggested for the past 12 months,” they say.

“Further employment weakness in the retail sector could be likely with SEEK reporting job ads in the retail sector have been trending down since mid-2016, while retailers continue to report difficult business conditions in the NAB survey.”

Given recent recent in weakness in retail sales, coupled with stiff competition leading to margin erosion and lower profitability at some firms, it suggests it’s now having an impact on demand for labour across the sector, and with that, total employment growth across the country.

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