Summary: Although Australia's housing market is under severe pressure, the country's central bank expects employment growth and an uptick in consumer spending to mitigate the ill effects. This is why it's a good idea to monitor employment patterns, especially via job advertisments.
The job ads data is compiled by ANZ from the number of jobs advertised in the major daily newspapers and Internet sites covering the capital cities each month.
But, this job ads data is at odds with another labour market leading indicator. ABS job vacancies data which tracks the number of specific job openings in the economy as reported by Australian employers. Job vacancies include both newly created and unoccupied positions (or those that are about to become vacant) where an employer is taking actions to fill these vacant positions.
According to the ABS job vacancies are at record highs, signalling the labour market may remain robust despite advertisements falling. The divergence between the 2 indicators could reflect a change in the way businesses are looking for new employees, with more reliance on LinkedIn or other mediums not included in the ANZ job advertisements survey. If this is the case, this would render the ANZ job advertisements a less useful leading indicator of future labour market vigour.
To date, the labour market so far remains resilient, unemployment is now sitting at an 8-year low of 4.9%, but unemployment is a lagging indicator, so the data only give us a rear-mirror view on the health of the economy. Given that strength in the labour market is crucial in determining the RBA’s next policy move, it is vital to watch these leading indicators for clues on the path for monetary policy.
We don’t necessarily need to see unemployment move up in a big way, given that it has remained the RBA’s pillar of strength in the domestic economy. If this were to crumble, there is probably a relatively low threshold for moving to a cut, given that the option has been opened for a potential downwards move in the cash rate. In our view, the RBA will move to cut the cash rate in the second half of this year, but so long as employment remains at a cycle low, the RBA will not fully capitulate on policy guidance.
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