Home prices have been falling in Sydney and Melbourne for over a year, raising concern about the outlook for household spending, residential construction and employment growth.
While the jury is still out as to just how big an impact the housing downturn may have on the broader economy in the future, right now there’s little evidence that it’s impacting labour market conditions in these locations.
Not only does unemployment in New South Wales and Victoria now sit at decade-lows, as seen in the chart below from Macquarie Bank, there’s also little evidence of a slowdown in employment growth this year.
Indeed, trend employment growth has actually increased in Victoria, and only moderated very slightly in New South Wales, with the broader national slowdown in hiring being driven by the other states and territories.
While this suggests the housing downturn hasn’t had an impact on labour market conditions, it must be remembered that employment is a lagging economic indicator, reflecting prior economic conditions.
And while home prices have been falling for quite some time, the declines have been relatively modest so far.
Whether the broader economy, and hence the labour market, can continue to show resilience given widespread expectations for further price declines remains the great unanswered question.