ANZ RESEARCH

AUSTRALIAN ECONOMICS AUSTRALIAN ECONOMIC UPDATE

MINING JOBS GROWTH STARTS TO SHOW CRACKS WHILE THE PUBLICSECTOR SHEDS STAFF The ABS yesterday released its quarterly detailed labour force statistics for the three months to August. Key takeaways include: ! aggregate mining employment declined in the three months to August, with apparent weakness in coal mining, after a period of very strong growth (Figures 1 & 2); public sector employment fell sharply in recent months, most notably in NSW and Victoria, reflecting the tightening of state budgets significant job cuts in Queenslands public service are yet to come; construction employment fell sharply over the past year particularly in Victoria, reflecting weak levels of building activity outside of the mining sector; retail trade employment contracted over the year but there are signs of stabilisation, while manufacturing employment has shown surprising resilience, except in Queensland, given the high Australian dollar; and reflecting rising redundancies in parts of the private- and public-sectors, the number of job losers has risen in recent quarters, particularly in Victoria and Queensland; employment is expanding strongly in a range of services industries, particularly professional services, health and education, but contracting in finance and administration support services, likely reflecting cost cutting; agriculture employment declined over the latest three months but grew strongly over the year due to favourable conditions.

14 SEPTEMBER 2012 CONTRIBUTORS

Justin Fabo Senior Economist +61 2 9227 1646 Justin.Fabo@anz.com Craig Michaels Senior Economist +61 3 8655 9406 Craig.michaels@anz.com

! !

The Appendix shows changes in industry-level employment for the major states over the year to August.
FIGURE 1. CHANGE IN EMPLOYMENT BY INDUSTRY, YEAR TO AUGUST 2012
Construction Public Administration and Safety Transport, Postal and Warehousing Retail Trade Administrative and Support Services Financial and Insurance Services Other Services Accommodation and Food Services Arts and Recreation Services Electricity, Gas, Water and Waste Services Rental, Hiring and Real Estate Services Agriculture, Forestry and Fishing Wholesale Trade Manufacturing Information Media and Telecommunications Education and Training Professional, Scientific and Technical Services Health Care and Social Assistance Mining TOTAL

-80

-60

-40

-20

20

40

60

'000 change in employment, year to August 2012

Source: ABS

Australian Economic Update / 14 September 2012 / 2 of 14

FIGURE 2. EMPLOYMENT BY INDUSTRY, AUSTRALIA AUGUST 2012

Employment (sa) 000s Agriculture Mining Manufacturing Utilities Construction Wholesale trade Retail trade Hospitality Transport & postal IT, media & telecomms Finance & insurance Rental & real estate Professional services Administrative services Public admin. Education Health Arts & recreation Other services All Industries 330.0 270.6 962.1 153.9 978.3 421.1 1,211.9 777.5 552.8 239.8 422.7 203.2 915.7 396.1 685.9 888.2 1,365.7 220.3 447.7 11,443.5 % of total 2.9 2.4 8.4 1.3 8.5 3.7 10.6 6.8 4.8 2.1 3.7 1.8 8.0 3.5 6.0 7.8 11.9 1.9 3.9 100.0 Employment q/q change '000 -19.5 -4.6 8.8 -0.5 -13.1 17.1 -0.1 6.6 3.4 7.5 -7.1 -14.9 -14.5 0.1 -18.9 -8.9 8.3 5.4 -2.1 -46.8 % -5.6 -1.7 0.9 -0.3 -1.3 4.2 0.0 0.9 0.6 3.2 -1.6 -6.8 -1.6 0.0 -2.7 -1.0 0.6 2.5 -0.5 -0.4 Employment y/y change '000 11.2 44.6 16.5 7.4 -69.4 14.3 -22.1 -2.4 -30.7 30.5 -10.0 9.3 38.1 -11.2 -48.4 37.7 44.0 7.0 -8.8 57.2 % 3.9 19.8 1.7 5.3 -6.7 3.5 -1.8 -0.2 -5.3 14.9 -2.3 4.8 4.3 -2.7 -6.6 4.4 3.3 3.5 -1.9 0.5 Average annual growth since 2000 % -2.3 10.0 -0.8 5.6 2.8 0.4 1.5 2.0 1.8 0.5 1.8 3.3 3.8 1.9 2.9 2.9 4.1 3.6 0.6 2.1 Aggregate hours worked y/y% -0.6 17.0 0.3 3.6 -4.7 3.6 -2.7 -1.3 -8.6 10.8 -3.6 6.1 1.6 -1.9 -6.6 1.4 1.1 5.4 -4.6 -0.7

Source: ABS

LOWER COMMODITY PRICES SEEING CRACKS APPEAR IN MINING EMPLOYMENT Mining employment grew by a staggering 20% over the year to August but is estimated to have declined in the most recent three months. This decline was reasonably broadly based across states, but largely concentrated in coal mining (Figures 3 & 4). While these data can be volatile, recent anecdotal evidence suggests that mining companies are cutting costs where they can, including labour, to offset some of the adverse revenue effects from lower commodity prices and the persistently high Australian dollar. A decline in the number of job ads in the major resources states this year, in line with weaker bulk commodity prices, had foreshadowed a pullback in the rapid growth in mining employment (Figure 5). While mining only accounts for 2% of total employment, it has generated 20% of net employment growth over the past 4 years. Further, the relatively high wages in the mining sector has meant that it has accounted for an even higher share of total wages growth over this period.
FIGURE 3. MINING EMPLOYMENT BY STATE
120

100 Employed persons ('000, sa)

80

60

40

20

0 98 99 NSW 00 01 02 03 04 05 06 SA 07 08 WA 09 10 NT 11 12 Victoria Queensland Tasmania

Source: ABS

Australian Economic Update / 14 September 2012 / 3 of 14

FIGURE 4. COAL AND METAL ORE MINING EMPLOYMENT

70 Coal mining employment Metal ore mining employment 105

Number of employed, seasonally adjusted

60 Total 50 Total 40

90
No. of employed, seasonally adjusted

75

60

30 Queensland Western Australia 10 NSW 0 00 01 03 04 06 07 09 10 12 00 02 03 05 06 08 09 11 12

45

20

30

15

Source: ABS FIGURE 5. SEEK JOB ADS IN MINING STATES VS COMMODITY PRICES
260 240 220 January 2006 = 100 200 180 160 140 120 100 80 06 07 08 09 10 11 12
SEEK job ads - WA, QLD & NT (weighted by labour force shares) RBA non-rural commodity price index (US$) Chinese steel rebar spot price (US$)

Source: SEEK

A clear beneficiary of the mining investment boom in terms of jobs growth in recent years has been the professional, scientific and technical services industry (Figure 6). Jobs growth in the architectural & engineering services subsector has been very strong and this trend continued in WA in recent months (Figure 7). However, demand for architects and engineers appears to have tempered in the populous states of NSW and Victoria, which is where head offices of large engineering firms tend to be located. Employment growth has also remained robust in a number of other services sectors, particularly health but also education. Health services employment has been growing at around double the national average rate over the past decade and now accounts for nearly 12% of total employment (Figure 8). ! Health has accounted for one-fifth of aggregate employment growth over the past decade, with education accounting for a further one in eleven net new jobs created over this period.

Australian Economic Update / 14 September 2012 / 4 of 14

FIGURE 6. PROFESSIONAL SERVICES EMPLOYMENT BREAKDOWN, AUSTRALIA

300

250 000s, seasonally adjusted

200

150

100

50

0 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Architectural, Engineering and Technical Services Management and Related Consulting Services Other Legal and Accounting Services Computer System Design and Related Services

Sources: ABS, ANZ FIGURE 7. ARCHITECTURAL & ENGINEERING SERVICES EMPLOYMENT, BY STATE
80 70 60 50 40 30 20 10 0 95 96 NSW 97 98 99 00 01 02 03 04 05 06 07 08 WA 09 10 11 12 Victoria Queensland Other

Sources: ABS, ANZ FIGURE 8. HEALTH EMPLOYMENT SHARE OF TOTAL EMPLOYMENT

12.5 12.0 11.5 11.0 10.5 10.0 9.5 9.0 8.5 8.0 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Health employment - % of total employment

Sources: ABS, ANZ

Share of total employment

000s, seasonally adjusted

Australian Economic Update / 14 September 2012 / 5 of 14

PUBLIC-SECTOR JOB CUTS STARTING TO BITE The tightening in government spending, including job cuts, appears to have started to impact on public sector employment levels. Public administration employment in NSW has fallen sharply over the past six months. It also looks to have fallen in Victoria but this might just be data volatility (Figure 9). Until August, public sector employment in Queensland continued to expand, but headcount reductions have already begun in that state amid fiscal consolidation. Interestingly, relative to total employment in each state Queenslands public service is considerably larger than those in NSW or Victoria, but on par with those in South Australia and Tasmania (Figure 10). Public administration employment in the ACT has increased significantly over the past decade, with its share rising by nearly 10ppts to 32% of total employment in that territory. The Federal Governments efficiency dividend is likely to see this share stabilise or decline.
FIGURE 9. PUBLIC ADMINISTRATION EMPLOYMENT BY STATE
250

200 Employed persons ('000, sa)

150

100

50

0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 NSW Victoria Queensland SA WA Tasmania

Sources: ABS, ANZ FIGURE 10. PUBLIC ADMINISTRATION EMPLOYMENT BY STATE SHARE OF TOTAL
10 35

Share of state employment, trned

30

Share of state employment, trend

25

20

15

10

4 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 NSW Victoria Queensland SA WA Tasmania

5 ACT (RHS)

Sources: ABS, ANZ

Australian Economic Update / 14 September 2012 / 6 of 14

CONSTRUCTION EMPLOYMENT IS VERY WEAK Employment in the construction industry fell by nearly 7%, or 70,000 jobs, over the year to August. While weak across all states, a substantial share of the weakness in construction employment has been in Victoria, where building activity is weakening sharply after ramping up in the residential sector particularly in 2009-10 (Figure 11). ! Our view is that further relative weakness in construction employment can be expected. Even with the recent falls in construction employment, this sector has accounted for 13% of net aggregate jobs growth over the past decade, well above its long-run 8% share of the level of employment (Figure 12).

As highlighted three months ago, the weakness in construction employment has contributed significantly to particularly weak employment outcomes for the self-employed and employers (Figure 13).
FIGURE 11. CONSTRUCTION EMPLOYMENT BY STATE
350

300 Employed persons ('000, sa)

250

200

150

100

50

0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 NSW Victoria Queensland SA WA Tasmania

Sources: ABS, ANZ FIGURE 12. CONSTRUCTIONS SHARE OF TOTAL EMPLOYMENT

12 Construction's share of total employment

11

10

5 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Australia WA Queensland Victoria NSW

Sources: ABS, ANZ

Australian Economic Update / 14 September 2012 / 7 of 14

FIGURE 13. GROWTH IN EMPLOYMENT BY STATUS

12 12

4 y/y % change

4
y/y % change

-4

-4

-8

-8

-12

-12

-16 03 04 05 06 07 08 09 10 Employees 11 12 Employers (trend) Self-employed (trend)

-16 Total employment

Sources: ABS, ANZ

MANUFACTURING EMPLOYMENT IN LONG-RUN TREND DECLINE BUT SUPRISINGLY RESILIENT TO HIGHER AUSTRALIAN DOLLAR Manufacturing employment actually increased over the year to August, with strength in Western Australia and more recently in NSW (although the latter increase looks somewhat suspicious) (Figure 14). This comes despite significant weakness in Queensland, which the ABS suggests has been in food manufacturing employment. Moreover, despite significant headwinds facing the manufacturing industry, most notably the high Australian dollar which has reduced export competitiveness, its share of aggregate employment has been broadly steady over the past year or so (Figure 15). Nevertheless, we expect manufacturings share of employment and the economy to continue shrinking over time, mainly due to ongoing competition from lower-cost overseas manufacturers.
FIGURE 14. MANUFACTURING EMPLOYMENT BY STATE
400 350 Employed persons ('000, sa) 300 250 200 150 100 50 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 NSW Victoria Queensland SA WA Tasmania

Source: ABS

Australian Economic Update / 14 September 2012 / 8 of 14

FIGURE 15. SHARE OF EMPLOYMENT BY INDUSTRY, AUSTRALIA

20 80

Per cent of total employment

Per cent of total employment

15

75

10

70

65

0 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Agriculture (LHS) Manufacturing (LHS) Construction (LHS) Services (RHS) Mining (LHS)

60

Source: ABS

RETAIL TRADE JOBS SHOWING TENTATIVE SIGNS OF STABILISING Retail trade employment fell by around 20,000 jobs, or 1.8%, over the year to August. Jobs growth in supermarket, department stores, non-store retailing was more than offset by lower employment in specialised food, motor vehicle and electrical goods retailing. The retail sectors share of employment has declined over the past decade, in line with the rise in the household saving ratio, to the lowest in at least 30 years (Figure 16).
FIGURE 16. RETAIL TRADES SHARE OF EMPLOYMENT VS SAVING RATIO
12.0 -5

Per cent of total employment

11.6

Per cent, inverted

11.2

10.8

10

10.4

15

10.0 85 87 89 91 93 95 97 99 01 03 05 07 09 11 Retail trade - share of total employment (LHS)

20 Household saving ratio, inverted (RHS)

Source: ABS

There are tentative signs that the worst conditions for Australias retail sector are behind us. While employment in retail trade fell over the year to August, and might fall a little further in coming months, history suggests that it should at least consolidate given the improvement in retail sales volumes growth (Figure 17). Part of the improvement in conditions in retail will reflect that the Australian dollar has remained around its current level for some time now such that the drag on retail growth is diminishing. Evidence of this effect can be seen in the inverse relationship between retail sales growth and travel imports (i.e. spending by

Australian Economic Update / 14 September 2012 / 9 of 14

Australians travelling overseas): the shift to a higher exchange rate and level of overseas spending by Australians was a significant drag on domestic retail sales growth while this adjustment took place (Figure 18).
FIGURE 17. RETAIL TRADE VS RETAIL SALES VOLUMES
10

y/y % change

-2

-4 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Retail trade employment Real retail sales, 12m forward

Source: ABS FIGURE 18. RETAIL TRADE VS TRAVEL IMPORTS (i.e. OVERSEAS TRAVEL)
30 25 20 15 0 1 2 y/y % change, inverted 3 4 5 5 0 -5 -10 -15 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Travel imports (LHS) Retail sales, inverted (trend, RHS) 6 7 8 9 10

y/y % change

10

Source: ABS

Reflecting weakness in goods sectors of the Australian economy and construction, employment in the transport, postal and warehousing industry declined by 30,000, or 5%, over the year to August, weighed down by a decline in road transport employment (Figure 19).

Australian Economic Update / 14 September 2012 / 10 of 14

FIGURE 19. ROAD TRANSPORT EMPLOYMENT AND OUTPUT GROWTH

15

10

y/y % change

-5

-10

-15 01 02 03 04 05 06 07 08 09 10 11 12 13 Road transport employment Road transport output (forward 5 qtrs, trend)

Source: ABS

REDUNDANCIES ON THE RISE Part of the relative weakness in employment growth over the past 18 months or so in Australia has been due to a pick-up in actual job losses. As a share of persons looking for full-time work, a rising share has been job losers (i.e. workers who involuntarily lose their jobs, such as through retrenchment) (Figure 20). The rise in the number of job losers has been most apparent in Victoria, which is consistent with anecdotal evidence that this state has borne the brunt of redundancies, particularly in industries affected by structural change and deleveraging in the economy (Figure 21). NSW and Queensland have also seen a rising number of job losers, and we expect that public-sector redundancies in the latter state could see a further rise in the number of job losers.
FIGURE 20. REASONS LOOKING FOR FULL-TIME WORK
60

Share of total persons looking for full-time work

50

40

30

20

10

0 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Job loser Job leaver Former worker Never worked

Sources: ABS, ANZ

Australian Economic Update / 14 September 2012 / 11 of 14

FIGURE 21. NUMBER OF JOB LOSERS BY STATE

140

120

000s, seasonally adjusted

100

80

60

40

20

0 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 NSW Vic QLD SA WA Tas

Sources: ABS, ANZ

Australian Economic Update / 14 September 2012 / 12 of 14

APPENDIX CHANGE IN EMPLOYMENT BY STATE, YEAR TO AUGUST 2012 NSW

Public Administration and Safety Other Services Transport, Postal and Warehousing Retail Trade Wholesale Trade Construction Health Care and Social Assistance Rental, Hiring and Real Estate Services Accommodation and Food Services Electricity, Gas, Water and Waste Services Professional, Scientific and Technical Services Education and Training Administrative and Support Services TOTAL Agriculture, Forestry and Fishing Financial and Insurance Services Mining Arts and Recreation Services Information Media and Telecommunications Manufacturing
Construction Public Administration and Safety Administrative and Support Services Financial and Insurance Services Transport, Postal and Warehousing Health Care and Social Assistance Electricity, Gas, Water and Waste Services Rental, Hiring and Real Estate Services TOTAL Mining Arts and Recreation Services Other Services Retail Trade Information Media and Telecommunications Professional, Scientific and Technical Services Accommodation and Food Services Education and Training Manufacturing Agriculture, Forestry and Fishing Wholesale Trade

Victoria

-25

-20

-15

-10

-5 0 5 '000 change

10

15

20

25

-45 -40 -35 -30 -25 -20 -15 -10 -5 0 '000 change

10 15 20 25 30 35

Queensland
Manufacturing Agriculture, Forestry and Fishing Construction Arts and Recreation Services Wholesale Trade Rental, Hiring and Real Estate Services Financial and Insurance Services Electricity, Gas, Water and Waste Services Retail Trade Administrative and Support Services Public Administration and Safety Professional, Scientific and Technical Services TOTAL Information Media and Telecommunications Mining Other Services Transport, Postal and Warehousing Accommodation and Food Services Education and Training Health Care and Social Assistance TOTAL Financial and Insurance Services Wholesale Trade Accommodation and Food Services Retail Trade Manufacturing Construction Administrative and Support Services Transport, Postal and Warehousing Arts and Recreation Services Agriculture, Forestry and Fishing Other Services Electricity, Gas, Water and Waste Services Rental, Hiring and Real Estate Services Public Administration and Safety Information Media and Telecommunications Education and Training Mining Professional, Scientific and Technical Services Health Care and Social Assistance

South Australia

-35 -30 -25 -20 -15 -10 -5 0 '000 change

10

15

20

25

30

-20

-15

-10

-5 0 '000 change

10

15

Western Australia
Accommodation and Food Services Public Administration and Safety Construction Transport, Postal and Warehousing Retail Trade Wholesale Trade Health Care and Social Assistance Other Services Information Media and Telecommunications Arts and Recreation Services Agriculture, Forestry and Fishing Administrative and Support Services Electricity, Gas, Water and Waste Services Professional, Scientific and Technical Services Rental, Hiring and Real Estate Services Education and Training Financial and Insurance Services Manufacturing Mining TOTAL Public Administration and Safety Construction Agriculture, Forestry and Fishing TOTAL Accommodation and Food Services Financial and Insurance Services Administrative and Support Services Manufacturing Electricity, Gas, Water and Waste Services Wholesale Trade Education and Training Retail Trade Rental, Hiring and Real Estate Services Arts and Recreation Services Other Services Information Media and Telecommunications Transport, Postal and Warehousing Mining Professional, Scientific and Technical Services Health Care and Social Assistance

Tasmania

-20

-10

10 20 30 '000 change

40

50

60

-6

-4

-2

0 2 '000 change

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