AUSTRALIAN MARKETS WEEKLY

Transcription

1 25 September 2017 AUSTRALIAN MARKETS WEEKLY Jobs boom seeing some emerging rises in advertised salaries In this issue Employment growth strong 2 Wages are starting to lift in industries that are tighter 2 Our models also suggests wages growth should rising 3 Conclusions 4 Week Ahead 4 Calendar of economic releases 5 Forecasts 6 To contact NAB s market experts, please click on one of the following links: Ask the Economists Ask the FX Strategists Ask the Interest Rate Strategists The unemployment/wages nexus is very uncertain at the moment with wages growth not lifting around the world despite tightening labour markets. For now central banks are still holding the faith on traditional linkages between unemployment and wages. Are they wrong? NAB research suggests not with wage indicators starting to turn higher, albeit slowly. In this Weekly we delve into the industries driving Australia s recent jobs boom and find wages indicators (advertised salaries) are starting to lift. Growth in advertised salaries is strongest in the industries with strong job creation. Over the past 12 months, Australia has created 324.8k jobs in trend terms. Just four industries have driven 91% of the job creation in the past year: Healthcare & social assistance (+117.0k); Construction (+83.3k); Education & training (+49.1k); and Accommodation & food services (+46.5k). A traditional read on the jobs/wages nexus would prompt one to think wages should be lifting in these sectors. Are they? Using average advertised salaries on SEEK.com.au what we consider to be a measure of wages pressure we find advertised salaries are starting to lift slowly for Construction (particularly sub-sectors of design & architecture, real estate & property, and trades & services), Education & Training, and Hospitality. Average advertised salaries are yet to lift significantly for Healthcare related sectors, perhaps indicative of still ongoing spare capacity (underemployment) and the sector drawing in more job seekers from outside of the labour force/industry. Supporting a slightly more positive wages outlook, our earlier modelling of wages suggests a tentative turnaround is near. That modelling found underemployment and lower inflation expectations can almost fully account for subdued nominal wages growth to date. The model now points to a modest uplift in wages growth due to lower labour market slack from the slight decline in underemployment (now 8.6% from 8.9% in February), and higher inflation expectations. For the week ahead, the only local data of market interest is Friday s RBA Credit report for August. There are two RBA speeches, though these may come and go without too much market fanfare. RBA Assistant Governor (Financial Stability) Michelle Bullock is on a panel while RBA Deputy Governor Guy Debelle is speaking at a Bank of England conference. Offshore, it s quiet for major data, Japanese and US inflation and China s PMIs (at the end of the week) the highlights. There s a deluge of speeches though, including Yellen, Draghi, Carney, Lagarde, Poloz, and more. Key markets over the past week Chart of the week: New salaries lifting gradually Last % chg week Last bp / % chg week AUD RBA cash AUD/CNY y swap AUD/JPY ASX 200 5, AUD/EUR Iron ore AUD/NZD WTI oil Source: Bloomberg Tapas Strickland, Economist, Markets National Australia Bank Limited ABN AFSL and Australian Credit Licence

2 In this Weekly we delve into the industries driving Australia s recent jobs boom and find evidence that wage indicators are starting to lift slowly. The key inference is that the traditional relationship between unemployment and wages growth is still alive, a pointer that the RBA will hold its faith that a gradual tightening in the labour market will lead to higher wages growth in time. Employment growth strong Australia s recent strength in employment growth is being driven by just four industries: Construction; Healthcare & Social Assistance; Education & Training; and Accommodation & Food services. Over the past year, these industries combined have been responsible for 91% of Australia s employment growth despite only comprising 38% of total employment in the economy (Table 1). These sectors, along with Professional Scientific & Technical Services have also driven employment growth since 2009 (Chart 1 and Chart 2). At the same time there continues to be job losses in Mining (-5.4k) and Manufacturing (-11.2k) over the year, while job shedding has started to emerge in Public Administration & Safety (-24.2k) and in Administration & Support Services (-38k). Table 1: Four sectors drive 91% of employment growth Employment by Industry - Aug 2017 Employment Level (trend) Employment (trend) y/y '000 % of total '000 % Goods production Mining Manufacturing Construction Utilities Goods distribution Retail trade Wholesale trade Transport, postal & warehousing Business services Professional services Finance & insurance Information media & telco Rental, hiring & real estate services Admin & support services Houseold services Accomodaton & food services Education & training Healthcare & social assistance Arts & recreation services Other services Agriculture Public admin & safety Total Source: National Australia Bank; ABS Chart 1: Employment in construction growing strongly Chart 2: Health, Education & Accomodation also strong Wages are starting to lift in industries that are tighter The key question for markets is, will strong jobs growth in these four industries lead to any lift in wages growth? And if so, does this give us hope that aggregate wages growth will lift as the labour market tightens? We use average advertised salaries from SEEK to look into this issue. SEEK data is available monthly and well ahead of official ABS statistics. While the data is not comparable to ABS wages, it does give some indication of emerging wages pressures or lack thereof; advertised salaries are likely to lift where there is strong employment demand relative to applicant numbers. Chart 3: Advertised salaries by industry SEEK - Average Advertised Salaries 3m/3m* Mining, Resources & Energy Transport & Logistics Government & Defence Healthcare & Medical Advertising, Arts & Media Human Resources & Recruitment Accounting Marketing & Communications Call Centre & Customer Service Information & Communication Consulting & Strategy Science & Technology Construction Trades & Services Sales Community Services & Development Engineering Farming, Animals & Conservation Education & Training Hospitality & Tourism Retail & Consumer Products Legal Sports & Recreation Administration & Office Support Design & Architecture Banking & Financial Services Real Estate & Property Insurance & Superannuation Per cent * Red denotes sectors where employment growth has been strongest Source: SEEK, National Australia Bank NAB Markets Research 2

3 The data shows average advertised salaries are rising the most in sub-sectors of Construction (SEEK sub-sectors of Real Estate & Property, Design & Architecture, Engineering and Construction, Education, and Hospitality. These are coloured red in Chart 3, while other increases are also mostly skewed towards industries with higher job ads growth. and inflation expectations in wage developments. (Please if you would like a copy of that research). The model is now pointing to a lift in wages growth with less of a drag coming from underemployment and from inflation expectations. Chart 6: Wages model up on lower underemployment Chart 4 shows that as the number of job ads have risen in design & architecture, so have average advertised salaries. This is also emerging in tourism and real estate and property. Reassuringly, this suggests the traditional link between employment/unemployment and wages growth is still alive. Chart 4: Rise in job ads consistent with higher salaries Underemployment has now fallen for two consecutive quarters and is now at 8.6%, down from the peak of 8.9% in February. Industry details suggest the decline in underemployment has been mostly broad-based with notable declines in Construction, Manufacturing and Education. Chart 7: Underemployment edging down The one exception is Healthcare & Medical, where despite strong job growth to date, advertised salaries are declining slightly. This may indicate ongoing spare capacity in the industry (through underemployment around one in ten workers) or is drawing in more job seekers from other industries and perhaps also from those outside of the labour force. There is also a state dimensions to the SEEK data with average advertised salaries trending higher in the non-mining states of Vic and NSW, but lower in QLD and WA. Importantly though, QLD and WA have started to turn and should be no longer dragging on aggregate wages growth. Eliminating the drag from QLD and WA could alone see aggregate average compensation of employees lift by 0.7% points. Chart 5: Mining/non-mining divide NSW/Vic higher Nevertheless, there still exists considerable underemployment in the Accommodation and Food Services industry (21% of workers or one in five employees) and Retail Trade (16.9%) with no real turnaround in these sectors. It is likely that further Chart 8: Underemployment still high in retail & accom Our models also suggest wages growth should rising Our previous research on modelling wages growth has pointed to the importance of underemployment NAB Markets Research 3

4 inroads into underemployment in these sectors will be needed before we see wages growth accelerate in a significant way. Recent strength in job ads in the Tourism sector suggests there are reasons to be hopeful for Accommodation, though Retail will continue to be challenged by the rise in online sales along with a relatively subdued consumer (see chart 8, previous page). Inflation expectations have also been heading higher, driven by higher electricity prices and a stabilisation in fuel prices. This should in time feed through to wages as labour slack falls. Chart 9: Consumer inflation expectations higher Week Ahead Locally, the only data of market interest is Friday s RBA Credit report for August. There are two RBA speeches, though these may come and go without too much market fanfare. RBA Assistant Governor (Financial Stability) Michelle Bullock is on a panel while RBA Deputy Governor Guy Debelle is speaking at a Bank of England 20 years on independence from Government conference on Thursday evening AEDT, speaking on Central Bank Independence In Retrospect, also possibly of less immediate market sensitivity. Offshore, it s quiet for major data, Japanese and US inflation on Friday and China s PMIs (on Friday and Saturday) the highlights. There s a deluge of speeches though, including Yellen, Draghi, Carney, Lagarde, Poloz, and much more. The RBNZ has its rate announcement on Thursday and is odds on to leave rates on hold. Conclusions The unemployment/wages nexus is very uncertain at the moment with wages growth not lifting around the world despite tightening labour markets. For Australia at least, early evidence suggests that the low point in wages growth is passing. Strong employment growth in some industries is now translating through to higher average advertised salaries, suggesting the traditional relationship between unemployment and wages growth still exists. A more theoretical model of wages growth is also pointing to a lift. Overall that suggests the RBA is likely to continue to hold its faith that a gradual tightening in the labour market will lead to higher wages growth in time. Tapas.Strickland@nab.com.au NAB Markets Research 4

5 CALENDAR OF ECONOMIC RELEASES Country Economic Indicator Period Forecast Consensus Actual Previous GMT AEST Monday, 25 September 2017 NZ Daylight saving started in NZ 24 Sept NZ Fonterra announces Full Year Financial Results JN Nikkei Japan PMI Mfg Sep P JN Leading Index CI Jul F JN BOJ Kuroda make a speech in Osaka EC ECB Vice President Constancio speaks in Frankfurt EC ECB's Mersch Speaks at Lisbon Conference on Risk Management GE IFO Business Climate Sep GE IFO Current Assessment/Expectations Sep 124.7/ / US Fed's Dudley Speaks on Workforce Development US Chicago Fed Nat Activity Index Aug EC ECB President Draghi speaks in Brussels CH Conference Board Leading Economic Index Aug US Dallas Fed Manf. Activity Sep EC ECB's Coeure is chairing a panel is Frankfurt US Fed's Evans Speaks on Economy and Monetary Policy Tuesday, 26 September 2017 AU RBA's Bullock Participates in Panel in Sydney NZ Trade Balance NZD Aug US Fed's Kashkari Speaks at Townhall in Grand Forks, North Dakota AU ANZ Roy Morgan Weekly Consumer Confidence Index Sep JN BOJ Minutes of July Meeting NZ ANZ Activity Outlook/Business Confidence Sep / 38.2/ AU NAB Consumer Spending Q NZ New Residential Lending YoY Aug EC ECB's Praet chairs speech in Frankfurt US S&P CoreLogic CS 20-City MoM SA/YoY Jul 0.2/ / US Fed's Mester Moderates Session NABE US New Home Sales, #/MoM Aug 587.5/ / US Conf. Board Consumer Confidence Sep US Richmond Fed Manufact. Index Sep US Fed's Brainard Speaks on Labor Market Disparities US Fed's Bostic Speaks to the Atlanta Press Club US Fed Chair Janet Yellen Delivers Keynote at NABE Conference US Fed's Bostic Speaks to the Atlanta Press Club Wednesday, 27 September 2017 CH Industrial Profits YoY Aug AU NAB Consumer Anxiety Q JN Small Business Confidence Sep JN Machine Tool Orders YoY Aug F UK CBI Retailing/Total Dist Reported Sales Sep 8/ -10.0/ US Durable Goods Orders/Core Orders Aug P 1/ / US Pending Home Sales MoM/YoY Aug -0.5/ -0.8/ CA BoC Governor Stephen Poloz speaks CA BoC Governor Poloz press conference US Fed's Bullard Speaks on Economy and Monetary Policy US Fed's Brainard Speaks at Minority Banker Forum Thursday, 28 September 2017 NZ RBNZ Official Cash Rate Sep US Fed's Rosengren to Speak to Money Marketeers in New York CH Swift Global Payments CNY Aug AU Job vacancies Aug GE GfK Consumer Confidence Oct EC ECB's Praet speaks in Berlin UK Carney Speaks at BOE Independence Conference, London AU RBA's Debelle Speaks on "Central Bank Independence in Retrospect" at BOE Conference, London EC Business Climate Indicator Sep CH BoP Current Account Balance 2Q F EC ECB's Lautenschlaeger speaks in Vienna GE CPI EU Harmonized MoM/YoY Sep P 0.1/ / US GDP Annualized QoQ 2Q T US Initial Jobless Claims Sep US Advance Goods Trade Balance Aug US Wholesale Inventories MoM Aug P US Fed's Fischer Speaks at BOE Independence Conference, London US Fed's George Speaks on Economy and Monetary Policy US Kansas City Fed Manf. Activity Sep US Fed's Bostic to Speak about Careers in Economics Friday, 29 September 2017 NZ Building Permits MoM Aug UK GfK Consumer Confidence/Lloyds Business Barometer Sep / JN Jobless Rate/Job-to-Applicant Ratio Aug 2.8/ / JN Overall Household Spending YoY Aug JN Natl CPI YoY Aug JN BOJ Summary of Opinions at Sept Meeting JN Retail Sales MoM/YoY Aug -0.7/ / JN Industrial Production MoM/YoY Aug P 1.8/ / AU Private Sector Credit MoM/YoY Aug 0.4/ / / CH Caixin China PMI Mfg Sep NZ Credit Aggregates, Household YoY Aug GE Unemployment Change (000's)/Claims Rate (%) Sep -5/ / UK Current Account Balance 2Q UK Net Lending Sec. on Dwellings/Mortgage Approvals Aug 3.6/67 3.6/ UK GDP QoQ/YoY 2Q F 0.3/ / UK Index of Services MoM/3mYoY Jul 0.1/ / EC CPI Estimate/Core YoY Sep 1.6/ / UK/IMF IMF's Lagarde Speaks at BOE Conference, London UK BOE's Broadbent Speaks at Conference in London US Personal Income/Spending Aug 0.2/ / US PCE Deflator MoM/YoY Aug 0.3/ / US PCE Core MoM/YoY Aug 0.2/ / CA GDP MoM/YoY Jul 0.1/ / CA Industrial Product Price/Raw Materials Price Index MoM Aug -1.5/ US Chicago Purchasing Manager Sep US U. of Mich. Sentiment/5-10y Inflation expectations Sep F 95.3/ 95.3/ EC/UK ECB's Draghi, BOE's Carney in dialog in London US Fed's Harker Speaks at Fintech Event on Consumers and Banking US Baker Hughes U.S. Rig Count/Oil Rig Count Sep 29 / 935.0/ Saturday, 30 September 2017 CH Manufacturing PMI Sep 51.7/ 51.7/ Upcoming Central Bank Interest Rate Announcements New Zealand, RBNZ 28-Sep 1.75% 1.75% 1.75% Australia, RBA 3-Oct 1.50% 1.50% 1.50% Europe ECB 26-Oct -0.4% -0.4% -0.4% Canada, BoC 26-Oct 1.00% Japan, BoJ 31-Oct -0.1% -0.1% -0.1% US Federal Reserve 2-Nov % % % UK BOE 2-Nov 0.25% GMT: Greenwich Mean Time; AEST: Australian Eastern Standard Time NAB Markets Research 5

6 FORECASTS Economic Forecasts Australia Forecasts Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Household Consumption Underlying Business Investment Residential Construction Underlying Public Spending Exports Imports Net Exports (a) Inventories (a) Domestic Demand - qtr% Dom Demand - ann % Real GDP - qtr % Real GDP - ann % CPI headline - qtr % CPI headline - ann % CPI underlying - qtr % CPI underlying - ann % Wages (Pvte WPI - ann %) Unemployment Rate (%) Terms of trade G&S trade balance, $Abn % of GDP Current Account (% GDP) Source: NAB Group Economics; (a) Contributions to GDP growth Exchange Rate Forecasts Global GDP 25-Sep Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Dec year Majors Australia AUD/USD US NZD/USD Eurozone USD/JPY UK EUR/USD Japan GBP/USD China USD/CNY India USD/CAD New Zealand USD/CHF World MTP Top Australian Cross Rates AUD/NZD Commodity prices ($US) AUD/JPY Sep Dec-17 Mar-18 Jun-18 Dec-18 AUD/EUR WTI oil AUD/GBP Gold AUD/CNY Iron ore AUD/CAD Hard coking coal AUD/CHF Thermal coal Copper Interest Rate Forecasts Aust LNG (*) Sep Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 (*) Implied Australian LNG export prices. Australia Rates RBA Cash rate month bill rate Year Swap Rate Year Swap Rate Offshore Policy Rates US Fed funds ECB deposit rate BoE repo rate BoJ excess reserves rate RBNZ OCR China 1yr lending rate China Reserve Ratio year Benchmark Bond Yields Australia United States New Zealand Sources: NAB Global Markets Research; Bloomberg; ABS Annual % change Quarterly % change 20 Yr Avge NAB Markets Research 6

7 CONTACT DETAILS Market Economics Ivan Colhoun Chief Economist, Markets ivan.colhoun@nab.com.au David de Garis Director, Economics david.degaris@nab.com.au Tapas Strickland Economist tapas.strickland@nab.com.au Markets Research Peter Jolly Global Head of Research peter.jolly@nab.com.au Group Economics Alan Oster Chief Economist alan_oster@national.com.au Riki Polygenis Head of Australian Economics riki.polygenis@nab.com.au Important Notice This document has been prepared by National Australia Bank Limited ABN AFSL ("NAB"). Any advice contained in this document has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice in this document, NAB recommends that you consider whether the advice is appropriate for your circumstances. NAB recommends that you obtain and consider the relevant Product Disclosure Statement or other disclosure document, before making any decision about a product including whether to acquire or to continue to hold it. Please click here to view our disclaimer and terms of use. NAB Markets Research 7