Employment Market Update
August 2010
The National unemployment rate eased to its lowest point in more than a year at 5.1 per cent in June with a participation rate of 65.2 per cent. According to the Australian Bureau of statistics the economy added just over 45,900 jobs for the month. While a great result there are still plenty of challenges and dynamics at play for both job seeker and company.
Trends
The recovery in Australia’s labour market has been remarkable, compared to the experience of other industrial economies. However, there are still mixed messages depending on the data you reference.
Looking at unemployment figures the labour market picture looks good. It is no surprise the mining states lead the way and are starting to show consistent and stronger jobs growth – in June Queensland’s unemployment rate fell from 5.5 to 5.3 per cent with Western Australia now at an amazing 4 per cent (it was at 5% in January).
Australia’s biggest economies NSW and Victoria did not experience the same employment growth for June. However, the NSW unemployment rate fell 0.5 per cent in May to be 5.2 percent, basically the national average. The number of full time jobs has now grown for 6 consecutive months and the unemployment rate has fallen 1.6 percent over the last 12 months. It should be noted that NSW was hit by the GFC harder than any other State.
By comparison unemployment stands at 10 percent in the Euro Zone, 9.5 per cent in the US, 8.1 percent in Canada and 7.8 percent for the UK.
Advertised jobs also support a much improved labour market as they have continued to improve throughout 2010. The total number of ads was 32.2 per cent higher than June 2009 – the fastest annual growth rate since 2007. The total number of ads placed in newspaper and on the internet rose by 2.7 percent in June to an average of nearly 170,000. This follows a 2.7 percent rise in May and the trend throughout 2010. Newspaper ads were 11.8 per cent higher than 12 months ago and internet jobs were 33.6 per cent higher.
However, if you reference average weekly earnings data (ABS) it shows that the labour market is still struggling. Although the data is a bit dated (April 2010), it does support our own experience. A key figure shows that overtime made up just 3.9 per cent of adult full time earnings in the March quarter, up by just 0.1 percentage point from the all time low in the previous 3 months. So we are coming off a recent historical low, and are lower than the 4.1 percent for the same quarter last year. The labour market is still short of full strength with a factor of underutilised pent up labour.
Finally, business confidence continues to fluctuate complicated by the issues surrounding the Federal election. Acording to the latest NAB Business Survey, Business Confidence in June was steady following a decrease of 13 points in May due to concerns over the proposed mining tax, profitability and the uncertain political landscape. We eagerly await the impact of a hung parliament on this key business metrics.
The Market
I noted in our February 2010 update that “we are entering a unique period – the demand for and the pool of talent, are both increasing and are in some sort of equilibrium. It is a characteristic consistent with a job market in an economy that is well on its way to recovery. Historically it is a window of 3 – 6 moths before demand outstrips candidate supply and we return to skill shortages.”
With the power of hindsight this has proven true but not completely true. For junior and middle management position and more technically focused positions this has been very much the case. There has been an increase in demand and candidates are gaining confidence and with more professionals open to exploring potential career moves. However, the demand for senior management roles and commercial support positions has not followed the predicted trend. If anything demand has dropped year on year.
The demand for senior professionals dropped off significantly from April of this year. This has been a stark contrast to last calendar year. While 2009 was a dower year, if there was a shining light, it was the volume of more senior opportunities. While a number of factors contributed, it was primarily driven by business re-engineering and management restructure. Most of this activity, which started in mid 2008, came to an end late last year. With business maintaining a conservative outlook to growth and costs this has impacted the volume of senior and commercial career opportunities.
In the Commercial and Industrial sectors, the pendulum is beginning to swing on the supply of talent for lower middle management positions. The more junior a role, the tighter the supply of appropriate talent is becoming. It is not at a critical stage yet however, it will not take a substantial increase in economic activity for the market to return to the candidate short characteristics that dominated the market of 2005 – 2008.
Much of the recruitment activity in the last financial year was been dominated by the ASX Top 300 listed companies. The demand has generally been across the spectrum of sectors including retail, infrastructure, utility, energy, healthcare and food/beverage. However, we have seen the multinational subsidiaries becoming more active in the last 6 months. While the shackles have been loosened that part of the market won’t gain full momentum until the economies of Parent companies improve.
The picture in Financial Services has also begun to improve. The Financial Services sector has rebounded profitably and beyond most people’s expectations. We believe that the sector bottomed out last year with most job loses realised. The challenge for white collar professionals in Banking & Finance is that their skill set is specialised and not overly transferable to other sectors. Low demand in the financial services employment market has provided some real career challenges. However, we believe the market for these individuals will gradually start to improve in the early part of 2010 and this should flow through at all levels.
Remuneration
Albeit an improving employment market, salary and wages growth has yet to follow the same trend. This will begin to change quickly as the market pendulum swing to labour shortage – and it will. Even now companies as companies determine bonus and incentive payments for last year they are grappling with the dilemma of business performance, key person retention and remuneration, all with an eye to next year.
The Demand Areas
He last 6 months has seen a steady increase in the demand for junior and middle management positions across the Profession, Industry and Banking. The areas of demand in the last 12 months will continue and are; Financial Control; Internal Audit/Risk Management; Treasury; and Management Reporting- more technically orientated. However we are seeing an increase in demand for business and commercial support roles and see this trend really taking hold as business confidence stabilises and growth activity increases.
