The labour market isn’t as zingy as the stats make out. And a lot of jobs growth is actually coming from the government. That’s a worry.
Where will the jobs of tomorrow come from?
Actually, forget that. Where are the jobs of yesterday?!?
I’ve checked the pants I was wearing and looked behind the couch. Can’t find them anywhere.
Maybe things aren’t as rosy as we’re being told?
On the face of it, the Australian economy is going great guns. Growth is modest, but in line with long run averages. Inflation is contained, the budget deficit (at least for the moment) is pretty small, and the unemployment rate might be drifting slowly higher, but is still about half the rate you’d normally expect in a recession.
Sure things could always be better, but there’s nothing in the headline data that’s ringing any alarm bells. And those headline numbers would be like some sort of wet dream to old-world European politicians.
On the face of it, the Australian economic miracle rolls on. 22 years without recession. Aussie, Aussie, Aussie. Everyday I paint an Australian flag on my little lamington belly and run around the block.
But maybe we’re missing something. Businesses aren’t investing like they should, and consumers are tighter than we’d usually expect at this stage of the cycle.
And the vibe on the street is hardly jubilant.
And if you scratch beneath the surface, there’s more than a few things that make you stop and wonder.
Like this chart here. This is the Australian employment to working age population ratio. Most employment data only considers you part of the workforce if you’re working, or actively looking for work.
That means a lot of people can get missed out. If you give up looking for work and take up study, you’re out. If you give up looking for work, and decide to be a stay-at-home dad, you’re out. Sometimes these things are lifestyle choices. Sometimes they’re partly driven by disappointment in the job market.
And so if you look at how many of our 15-64 years actually have jobs (and are making an economically quantifiable contribution to the economy), the ratio is still falling.
The GFC marked a turning point. There was some recovery around 2010, but since then, the trend decline has reasserted itself. That’s a picture of an economy that’s struggling for form since the GFC.
The fact is that the proportion of us with jobs has been falling for over 5 years.
Why is that?
The other thing to consider is that not all jobs are created equal. If you work for 4 hours a week, the ABS reckons you’re employed.
Good luck with supporting a family on 4 hours a week (unless you’re Tim Ferriss.)
There is a stat that tries to get round this. It’s called the under-utilisation rate. It takes the unemployment rate and adds in people who like to work more if they could. That’s in this chart here:
You can see there’s quite a gap between the unemployment rate and the under-utilisation rate. And Since 2012, under-ute’s been on a strong march upwards.
The other side of this coin is the split between full-time and part-time work. Check out this chart:
Part time working has been growing around trend since the end of the GFC – and this is where the bulk of employment growth has come from in recent years. But full-time work has barely done anything.
There’s only around 5% more full-time jobs than there were at the end of 2008. Given how strong the population’s been growing, that’s a pretty ordinary result.
And one more for you. Let’s look at where the jobs have come from… and where they’ve gone. This chart looks at the number of jobs created and lost in different industries:
Healthcare is the clear winner. Manufacturing a clear loser.
But what else do you notice about this. The thing that sticks out at me is that 4 of the top 5 are government-related: healthcare, science, education and the public service. But the three big losers are classic private-enterprise industries, manufacturing, wholesale trade and agriculture.
This troubles me. Basically it’s saying that the government is behind jobs growth at the moment. Private industry is in trouble.
Why is this a problem? Well, government’s don’t tend to be that good at, well, anything. Generally, I think healthy economies, tend to shift the balance of economic activity away from the public sector.
It also leaves us vulnerable. Imagine we actually did have some kind of budget emergency. Imagine we had to bail out the banks like Ireland did. If government budgets were under the pump, and they stopped hiring – or worse, started laying off more and more staff – where would jobs growth come from then?
We’ve put all our eggs in one basket case.
So this is what’s going on. A smaller percentage of us have jobs. Those that do have jobs, many are working part time, and many would like to be working more. And a large share of people who have found work in the past 6 years have found it in industries related to government.
This is not the picture of a dynamic and robust economy. This is not an economic miracle.
And this is probably why most people feel like they’re living in a recession, even if no one’s talking about it.
And so what happens from here?
Well, we need to give things a kick along. We need to somehow get private business inspired and motivated.
We could do this by supporting innovation, and creating supportive cultures around business, particularly small and medium businesses.
But this is hard.
The more likely outcome is that the government will just ask the RBA to throw more money at the problem. Let interest rates fall below 1%.
This might not work, but hey, it’s easy.
We’ve seen what happens when the rest of the world goes EZ money crazy. Imagine what happens when the money’s coming straight from the RBA.
If you’ve been enjoying a boom in property and asset prices so far, just hold on to you hat.
How does the economy feel to you? Business as usual or hidden recession?
Would most people you know “like to be working more”?
How do we inspire and support business to start hiring again?
couch potato says
If you checked the pants you were wearing,or the brand mark on the new Couch Jon, you may have seen they were both imported from China. Thats probably where the jobs are?
Andrew Vader says
so true CP
Traveller says
The industrial revolution started in the UK in the 18th Century. The 19th Century was the century of Europe. In the 20th Century Europe tore itself apart with two pointless wars and were rescued (and charged for it) by the US so the 20th Century was the century of the US (and latterly Japan). Australia did well in this period as well. The 21st Century now is clearly the century of Asia (especially China and India) so we (Australia) had better find a good niche in the Asian economy – and I don’t mean just digging out the dirt and selling to Asia, or selling it to Asia without digging out the dirt!
Traveller says
At the end I meant “selling the land to Asia without digging out the dirt!”
PaulS says
John, I see the “Change in Jobs Since GFC” a little differently to you. Look at the bottom of the graph, these are all jobs we have lost overseas, our manufacturers can’t compete with cheaper overseas labour markets, our farmers are under pressure from cheap imported food, the same with our wholesalers, and telecommunications is much the same… are there any Telco call centres left in Australia.
Compare that to the top of the graph, it is very hard to import health care (equipment aside, the vast majority of healthcare cost is in infrastructure and labour), accommodation, public service, recreation and the like are much the same. Mining would have been even higher on the list a few years ago during the boom, as this is one industry where we have traditionally been able to compete with overseas competitors, although this has changed in the last few years with the explosion in wages.
In short, I don’t believe these figures are the result of a flat economy with only the government creating jobs, I think they are the result of overseas competition resulting from lower overseas wages causing jobs to be lost in industries where we can now import goods more cheaply, and those we can’t import are the ones with strong jobs growth.
Rudolf Ruyter says
Hi Jon
What a stupid economy we live in……
We are told we need more workers to pay more taxes so the govt. can pay for the future retirees.
So we get more people (migrants, floatees, etc.) to increase our population, to raise more taxes, and put most of them on the services & government payroll (and welfare).
I just do not get the logic of it, it’s a catch 22, again it contributes to eventual economic disaster.
When will we get some intelligent politicians instead of the current idiots we have in all parties.
Australia desperately need wealth building employment, not consumption building employment.
We need an environment for private enterprise to flourish.
Historically, when private enterprise did well (generally small & medium sized businesses), so did everyone else, and so did the country. Australia can not afford to continue its slow slide into a socialistic welfare state, as is currently happening.
When will we learn.
Regards
Rudolf
Gareth says
NeoLiberal Globalist Sellouts, they are the ones to blame for sending our industrial base and jobs overseas. A future of putting hope in restaurants and tourism does not look pretty for our country.
Bazz says
The Lima declaration was responsible for Australia winding down manufacturing. Agreed to by Whitlam & Frazer. Read this document word for word, see the real nature of our esteemed leaders
KatM says
Great analysis Jon! Now you see why the Govt wants to broaden the consumption tax base to include health and education services. Of course they knew there aren’t going to be as many PAYG income taxpayers to rely on into the foreseeable future.
The cost of all imported medical imaging and IT (poison apple) equipment in these institutions is astronomical. Look at the cars surrounding you in the city streets and don’t tell me that Japan and Germany lost the war 70 years ago!
Blame the 2-party rotation with gutless polices for the current situation. Not to worry though, when our political leaders make a sharp left turn they’ll allow euthanasia and legalise drugs to reduce outlays and increase tax revenue. Or we’ll ditch the monarchy and get a dictator like they had in Singapore to kick some butt.
johannes says
Jon, my understanding is that those job growth stats only represents the % growth in the numbers so they don’t actually tell the full story in respect to actual job numbers. I couldn’t imagine that the science based job numbers were huge to start with and with Abbot and Co slashing CSIRO funding that the growth in this sector will continue, which is a major shame.
I don’t necessarily agree with your claim that the majority of the job growth is driven by government expenditure and secondly, growth in science based jobs is an excellent thing as it’s where our future high value industries will initially incubate from..and unfortunately then be taken overseas to be commercialised! Even if this is funded by the Government it’s not a bad thing as it represents a major investment into our future. This is where good Governments should be investing!
If you look at Health Care, I would imagine a fair bit of this would encompass age care which is an industry that’s growing rapidly and which is going to continue growing for a very long time in Australia. This is predominantly owned by Private enterprise or Institutional based organisations such as the Churches. Sure the Hospitals are government owned but i wouldn’t imagine that a major portion of this growth came from new Hospital growth.
In respect to Education, Australia has become a major destination for overseas students and it’s now a major export for Australia. With the low dollar and our favorable destination status Education will continue to boom and the growth will be driven predominantly by private enterprise. Even if a portion of this growth is due to government spending is that a bad thing? Better teachers and education opportunities lead to a smarter country and in turn a greater tax base in the future which is what we require.
This economy is confused and for good reason. We have a Government that got into power on the back of a fear campaign of debt and deficit and then proceeded to break all their promises. People are afraid to spend and are still holding onto their cash as they wait to for a vision and some constructive growth and industry policies. The property market has helped some, but not the majority and hopefully the increase in prices can continue to stimulate construction activity without leading to a major bubble.
Jeff says
Australia….. one happy little Ponzi… Have a good look at the employee profile of manufacturing employees in the most companies- up to 50% are casual. Keep rotating them around on 4-8 hours shifts, 2-3 days a week. Most are multinationals with 200- 300 employees. The rise of the labour hire companies- have a look through the job ads- how many jobs are direct thorugh the HR Department? Very few. Mostly recruitment is done through agencies designed to reduce pay and spread the hours around to give as many people as possible their couple of hours a week. A well known liquor shop reduced the number of full time positions (40 hr per week) and replaced with 5 people doing 8 hrs per week then again with 10 x 4 hour shifts between 10 people. So in effect converted 1 x 40 hr full time job into 10 x 4 hr casual jobs. I am sure industry has gone to bed with government for this win- more competition between worked, keep wage growth low and keep the debt slaves hungry. We are only bringing in more people so we can build dwellings for them. The population is on track for 40 odd million by 2040-2050. I hope this is what we all want. It has been downhill for some years now and will only be downhill from here.
Paul M says
It might help if the government stopped talking down the economy at every available opportunity.
They have continued to try to score goals against Labor in order to keep their most gullible punters voting for them and believing that Labor should never be let near an economy again – but at the expense of the economy. Even Liberal ministers can’t even keep their own stories straight about ‘budget emergencies’ and ‘debt and deficit disasters’! (And we seem to find it remarkably easy to fund wars that need to be shirtfronted whenever we feel like it.)
But the Opposition-like ranting should have stopped 18 months ago, when they got into government. When are these much-vaunted adults actually going to start acting like adults?
And of course, as another correspondent has mentioned here, what are they cutting? Things like the CSIRO and science and innovation funding that has the potential to create the business breakthroughs of the future! And why not sabotage one of the most promising new industries – renewable energy for the benefit of the fossil fuel mates while they’re at it?
Abbott and Costello, sorry Hockey, still haven’t made the transition from Opposition to Government – and they’re dragging us down with them. The decline of the economy is THEIR responsibility – as the party in government – and has been for 18 months!
After the recent passing of Malcolm Fraser, I’m starting to feel nostalgic for a Sir John Kerr again. Personally I’d like to see the two major parties decimated at the next election and a completely new pragmatic party or government model arise made up of normal reasonable people – not career politicians – independents who actually worked for their electorates like Oakeshott, Windsor, Katter and Xenophon. And perhaps intelligent politicians from the dinosaur parties like Turnbull and Plibersek would be welcome. But not Dinosaur Clive!
Simon says
That little fly speck england ruled the whole world, because it invented things, then manufactured them,
sth korea went from a bare rock, with no minerals, and no infrastructure to a world leader by manufacturing things people wanted at an affordable rate,
not by working 25 hours / day without pay, as some people would imagine, manufacturing workers pay matches living costs, modern technology means that workers pay is leveraged, 2 % pf american or australian society produce enough food for all of their societies, most of modern society does the equivalent of producing terracotta warriors rather than producing things people need or want
by contrast, a mature society lets the wealthy make money by restricting resources, like land for instance, property ownership was one of the keys to england’s rise to wealth, but taken too far, property ownership, with the benefits to society and individuals, can be restricted to only the wealthy, there’s no need for the wealthy to invest in a risky manufacturing plant, he has only to squat on living space, and wait, and if more land is released, sit on that as well
Pyramid schemes; imagine an airplane filling with passengers, where the seat you buy is paid for by the people coming after you, but don’t worry, their seat is also paid for by the people coming after them, everything is free and profitable with a little admin,
Like Hongkong, Australia has an acute land shortage,
at the peak of the property boom, melbourne houses were going up by 1800 / week, this is like a free energy machine, shut the factories, and grease the property wheels, a square of dirt is doing more for society than someone rolling out of bed early in the morning, and slaving away in a factory, producing consumer goods that people actually need or want, slowing down the conveyor belt that rolls inferior goods from china to here, and the nations wealth from here to there.
We can make a law saying that you can’t build in your back yard, then employ people to make a special case to disregard that law, that raises the value of that land by maybe 70G, for costs of only about 30G, and then we can take that money we manufactured to China, and employ a whole village with it.
I don’t blame people for taking advantage of property laws to increase wealth, but it’s buggaring the countries future, our manufacturers have to pay their workers the increased rents those inflated properties command, and tho we’ve got more to lose than Nauru had when they were the richest country in the world, we’ll end up just as broke on our current trajectory.
—
HonestJohn says
You can do your own analysis on Australian economic indicators at tradingeconomics.com
http://www.tradingeconomics.com/australia/labor-force-participation-rate
Can chart back as far as 2004 and the trend is consistent with a resonably constant level of labor force participation (64-65%) – down 1% or so now, as a result of unemployment drifting up from less than 5% to more than 6%.
John, you should also do some deeper investigation before promoting covered calls strategies. Covered calls are a strategy going back to 1976. You can read some of the history here http://www.forbes.com/sites/baldwin/2012/07/17/covered-calls-what-works-what-doesnt/
If you want to understand why a covered call and a naked put are the same thing with the same risk, you can read Debunkery by Ken Fisher.
It is misleading to tell people they will be earning 2-3% per month. Such monthly returns ends up being around 20%+ per annum. Warren Buffet is considered the greatest investment genius of the modern era and he cannot get those type of annual returns. Does anybody think that if were as easy as spending 30 minutes writing covered calls to make 3% a month the greatest investor of the last 40 years would not be doing it too. Of course not. There are dozens of covered calls ETF’s which are currently underperforming the market as volatility is low (making the the call options cheap while the market is returning double digit growth.).
Finally, that few percent that you make make in month a significant drop which does happen will wipe out an entire year of gains.
You are potentially letting yourself and your clients who trust you down promoting a scheme which proven to be inferior to just buying an index like the ASX 200 or the S&P 500 and holding it long term.
John from Perth says
Some of the posts say that Australia is in a huge Ponzi
scheme where we have committed to spending that we can’t pay for. I think that is exactly right. We are now saddled with borrowings for NDIS,
NBN, PPLS (now a child care scheme), GFC money wasting schemes, and huge social
welfare costs for immigration of social welfare dependants. At the same time the car and submarine industries
have been trashed, expenditure in the wealth creating CSIRO and other R&D has
been cut and free trade policies have worked against our best interests.
Liberals are too gutless to stand up to corrupt unions and to
implement the labour reform to make our economy competitive. This explains why
the government sector has grown at the cost of real wealth creating
industries. Both liberals and Labour are
threatening us with more taxes (higher GST, higher tax on superannuation and
elimination of negative gearing) It is also explains why Australian
productivity/competiveness is dropping and why our kids and a lot of adults can’t
get the work we want and why people are nervous about investing.
None of our political parties have the vision or quality of
leadership we need. Liberals think that being better than the worst government
we ever had (ie Gillard’s) is good enough hence their poorly thought through
attempts to put things right.
Contrast this to England.
They made deliberate decisions to get their manufacturing industries competitive
after they were let to run down before the GFC.
Now England’s car manufacturing industry is competitive and England has
one of the best economies in Europe.
The outlook for Australia is poor. We have political
leadership that is sending out economy into being a socialist basket case.
Ned says
Hi Guys…..I totally agree with all your points but from a self employed persons view I feel the majority of our situation must lie in the hands of the banks as they have played a huge part of stopping the economy from growing……in early 2010 we had exceptional borrowing capacity and have an excellent score card rating but then all of a sudden those of us who are self employed employing people are now seen as huge risks and banks now treat us so disrespectfully, because of this we have now put off all our staff and have gone back to sole operators.