Data Wrap - Employment remains stalled

In today’s Data Wrap we review the September Labour Force Survey results and consider what the latest data on home loan activity has to say about the direction of the residential building and property markets.  

Employment growth remains stalled
The September 2019 Labour Force Survey results – released by the ABS today – show that total employment levels in South Australia remained virtually unchanged, and suggest that the recent deterioration in the state’s unemployment rate as indicated by seasonally adjusted data has not been as severe as previously reported.  

Trend data indicates that just 400 jobs were created in September 2019, while the number of unemployed rose by 600 people. As a consequence, South Australia’s trend unemployment rate ticked up from 6.4 per cent in August to 6.5 per cent in September. The unemployment rate remains well up from its previous low of 5.6 per cent recorded in August 2018.  

South Australia’s participation rate remained steady at 63.4 per cent in September, while the underemployment rate rose by 0.2 percentage points to 9.5 per cent.

Much attention will focus on the seasonally adjusted results which indicate that South Australia’s unemployment rate fell by 1.0 percentage points to 6.3 per cent in September 2019. However, this fall follows a sharp rise from 5.7 per cent in May 2019 to 7.3 per cent in August 2019, and it is hard to reconcile these large and abrupt movements with actual events on the ground. Indeed, the seasonally adjusted estimates are inherently volatile, and month-to-month movements in these measures should not be interpreted as reflecting movements in actual labour market performance. This month’s data, with the trend and seasonally adjusted estimates telling a similar story, is more likely to be an accurate gauge of the current state of unemployment in South Australia.  

Perhaps the key take-away from recent Labour Force Survey results is that total employment in South Australia has ceased growing over the past five months. A total of 855,000 people were employed in September 2019, which is unchanged from May. This lack of employment growth, combined with an increase in the number of people looking for work, has put upward pressure on the unemployment rate.

South Australia’s 6.5 per cent unemployment rate compares with a national unemployment rate of 5.3 per cent, which is a relatively large differential by historical standards. Unemployment remains quite high in Queensland (6.6 per cent) and Tasmania (6.4 per cent), and at a moderate level in Western Australia (5.7 per cent) and the Northern Territory (5.6 per cent). On the other hand, unemployment remains very low in New South Wales (4.5 per cent), Victoria (4.8 per cent) and the Australian Capital Territory (3.5 per cent).

Lending data points to further easing in residential building activity
Revised estimates of building activity released by the ABS last week confirmed that residential building activity has been easing in South Australia. The value of residential building work done fell by 5.0 per cent in the June quarter 2019 in real seasonally adjusted terms, and was down 14 per cent from their peak level reached in the June quarter 2018.

Looking forward, the latest ABS data on home lending activity suggests that residential building activity will continue to slow in the short term. The total number of loans for the construction or purchase of new homes by owner occupiers in South Australia in the three month to August 2019 was down 3.9 per cent compared to the corresponding period a year earlier. However, home lending activity has held up better compared to national performance, with the number of loans for new home construction or purchase in Australia down 13 per cent over the same period.

The broader housing property market has cooled recently with Adelaide residential property prices falling through the first half of the year. The latest lending data points to ongoing weakness in broader home lending activity in South Australia, with the number of loans for the purchase of established owner occupier dwellings in the 3 months to August down 6.9 per cent year on year.

It appears that the moderation in residential property prices has at least encouraged first home buyers to enter the market in greater numbers. Total loans for new home buyers in the 3 months to August 2019 was up 7.4 per cent compared to the corresponding period a year earlier.