In this edition of Data Wrap, we consider the latest round of ABS employment data releases, before covering the latest developments in engineering construction and property prices.
Job vacancies tick up
Job vacancies data released by the ABS today suggests that vacancies in South Australia rose in the early part of the year. Total job vacancies in February 2018 were 10,400, which compares with estimates of 9,100 vacancies in August and November 2017 respectively. However, as these state level estimates are only produced in original terms they are not directly comparable across different months, and may therefore paint a misleading picture of recent underlying movements.
Looking at longer term trends, job vacancies in South Australia as a proportion of total employment has remained stable for 2 years now.
Unemployment rises in response to higher labour force participation
The latest job vacancies figures follow the release of ABS labour force survey estimates for February last week. These results paint a quite similar story to January: despite solid employment growth, unemployment has ticked up in South Australia in response to a further lift in labour force participation.
South Australia’s trend unemployment rate rose to 6.2 per cent in February, and is now up 0.3 percentage points from its previous low in October 2017. The state’s labour force participation rate – those in work or looking for work as a proportion of the working age civil population – rose by 0.8 percentage points to 62.9 per cent over this period, which is a relatively large rise over such a short timeframe.
To the extent the recent increase in unemployment is due to an increase in participation is a positive development as it suggests people have been encouraged to re-enter the labour market in response to improving labour market conditions. Employment growth over the year to February was quite healthy at 2.3 per cent. However, the relatively large rise in participation in part reflects that there has been significant excess capacity in the South Australian labour market, which has manifest in part through a stronger “discouraged worker” effect.
Such excess labour market capacity has also been felt through relatively higher unemployment and underemployment (i.e. people employed but wanting to work more hours). Unfortunately the latest estimates of underemployment show no improvement over the last 3 months. South Australia’s trend underemployment rate was estimated to be 9.2 per cent in February 2018, unchanged from the previous estimate made in November (with a notable increase in the seasonally adjusted estimate). In comparison, the national underemployment rate was 8.8 per cent in February, a marginal improvement compared to 3 months earlier (down 0.1 percentage points).
South Australia’s unemployment rate also remains relatively high by national standards. The state’s trend unemployment rate of 6.2 per cent in February was well above the national unemployment rate of 5.5 per cent. In fact, it was once again the highest in the nation, just eclipsing Queensland’s unemployment rate of 6.1 per cent.
Engineering construction remains strong
Engineering construction played a significant role in lifting overall activity levels in the South Australian construction sector in 2017, latest ABS estimates confirm. The total volume of engineering construction work done in the December quarter 2017 measured in trend terms was up 23 per cent compared to the year ago quarter. In comparison, national engineering construction work done rose by 8.5 per cent over this period.
A positive sign from the latest data is that private sector activity picked up solidly in the second half of 2017. However, in terms of the short term outlook engineering construction activity will be heavily dependent on public sector projects. The value of engineering work yet to be done for the public sector in the December quarter 2017 was at a frothy level by historical standards, accounting for 72 per cent of total engineering work yet to be done.
Residential property price growth slows
Residential Property Price Indexes published by the ABS show that annual growth in Adelaide residential property prices slowed during the second half of 2017. Adelaide residential property prices rose by 3.6 per cent through the year to the December quarter, which represents an easing from the previous peak rate of annual growth of 5.0 per cent in the June quarter 2017. The slowdown for Adelaide is consistent with national patterns with annual growth for the eight capital cities slowing from 8.3 per cent to 5.0 per cent over this period.
The moderation in price growth is consistent with the introduction of tighter supervisory lending conditions by APRA in March last year. These measures appear to have had a prominent impact in Sydney where property prices have fallen over the last couple quarters.