Data Wrap - unemployment steady at end of 2019, but employment falls

numbers

In the first Data Wrap of 2020, we review today’s labour force figures, and briefly recap other key statistical releases from recent weeks which provide insight into various aspects of South Australia’s recent economic performance.

Unemployment rate stabilises, but employment continues to fall
Unemployment in South Australia appeared to stabilise toward the end of last year after rising steadily through the first nine months of the year, data released by the ABS today shows.

The state’s trend unemployment rate remained unchanged at 6.4 per cent in December 2019, while the total number of unemployed was steady at approximately 57,900 persons.

But digging deeper into the data reveals a darker picture. Total employment in South Australia, measured in trend terms, contracted by 0.2 per cent in December, which represents the sixth consecutive monthly fall in employment.

Moreover, the unemployment rate has only recently stabilised in response to people leaving the labour market. The state’s participation rate slid through the second half of 2019, from 63.3 per cent in June to 62.7 per cent in December. Hence, it appears that recent falls in employment have discouraged people from looking for work.

Looking at the performance of the South Australian labour market last calendar year, total employment rose by just 0.2 per cent through the twelve months to December 2019. This pace of employment formation was insufficient to keep up with growth in the civilian population, which the ABS estimates to be 0.9 per cent. As a consequence, unemployment rose noticeably over the past year, from 5.9 per cent to 6.4 per cent.

The rise in unemployment has been accompanied by a rise in underemployment, which refers to those people who want to work more hours than they currently have. The State’s trend underemployment rate rose by 0.3 percentage points through the year to December 2019. The current underemployment rate of 9.4 per cent is relatively high by historical standards although it is still comfortably below the previous peak of 10.5 per cent reached in mid-2016.

South Australia’s trend unemployment rate of 6.4 per cent has settled well above the national rate of 5.1 per cent and is currently the highest of all states and territories. Only Queensland (6.0 per cent) has a comparable unemployment rate compared to South Australia, while unemployment remains relatively high in Tasmania (5.8 per cent), Western Australia (5.6 per cent), and the Northern Territory (5.6 per cent). Unemployment remains relatively low in New South Wales (4.6 per cent) and Victoria (4.8 per cent).

Building approvals have been growing strongly
According to data released by the ABS in early January, building approvals in South Australia showed a strong upward trend in November 2019, continuing the recovery that emerged in early 2019, following a sharp downturn in the second half of 2018.

The total number of dwelling units approved in November 2019, measured in trend terms, was up 27 per cent compared to a year earlier. In comparison, the total number of dwelling units approved at the national level fell by 12 per cent over this period.

While the total number of dwellings approved in South Australia in November remained short of previous peak levels, they were still at an above-average level by the standard of the past decade.

The total value of building approved in South Australia also rose quite strongly through the year to November 2019 (by 48 per cent). This rise was led by a surge in non-residential building approvals (up 78 per cent), while the value of residential building approved also rose strongly (up 29 per cent).

Lending data paint a mixed picture for new and existing home purchases
ABS data on home lending activity by owner-occupiers paints a similar but less bullish picture compared to the building approvals data in respect of the short term outlook for residential building activity.

The total number of loans for the construction of dwellings in the three months to November 2019 was up 7.1 per cent compared to the corresponding period of 2018. In value terms, loan commitments for the construction of dwellings rose by 13 per cent between these periods.

In contrast, lending activity in respect of established homes has eased. The total number of loans made to owner-occupiers in South Australia for the purchase of existing dwellings in the three months to November 2019 was down 7.5 per cent compared to the corresponding period a year earlier. These results are consistent with house price data which shows that established house prices in Adelaide started to fall through the middle of 2019.

Retail sales continue to grow weakly
The value of South Australian retails sales rose by 0.2 per cent in November 2019 to be up 2.1 per cent compared to a year earlier. These results were weaker compared to national trends; Australian retail sales rose by 0.3 per cent in November and were up 2.9 per cent through the year.

Taking into account general price inflation, the latest retail sales figures for South Australia suggest that retail spending was barely growing in real terms through 2019, and falling on a real per capita basis.

As we noted in our December 2019 Economic Briefing Report, household spending has been a major area of weakness for the Australian economy recently, with spending growing at its slowest pace since the global financial crisis. High household debt levels, slow house price growth and heightened uncertainty regarding the broader economic outlook have all undermined household spending.  

 

Tagged in Data Wrap