Jobs and Housing Scenario: Any Bright Spots?

Summary

• ABS’ payroll data reflects slight progress in May, but market still appears to be gloomy.
• Total payroll jobs increased by 1% in May, but the number is 7.5% below the week ending 14 March.
• Residential property prices rose 1.6% in March quarter propelled by both Sydney and Melbourne gains, witnessing an increase of 1.9% and 2.1%, respectively.
• The central bank, RBA asserted on maintaining an accommodative approach as long as needed by the nation’s economy.

Weekly payroll data released by the Australian Bureau of Statistics (ABS) on 16 June showed that there is some optimism in jobs market as weekly payroll jobs increased 1% in May. However, the payroll data indicated the market has a long road to recovery.

ABS data reflects that payroll job losses were highest at 8.9% since mid of March reflected during the week closed 18 April. Nonetheless, the figure rebounded to 7.5% by May end.

Source: ABS

Between the week ending 14 March, when Australia recorded its 100th coronavirus case, and lockdown was not imposed, till week ending 30 May, total payroll jobs have fallen by 7.5% while total wages paid decreased by 8.3%.

Bjorn Jarvis, Head of Labour statistics at ABS stated that no change in the number of payroll jobs was recorded in the week ending 23 May, but there was a 0.4% rise in the following week ending 30 May.

The assessment revealed that jobs done by multiple jobholders were significantly over-represented in job losses. People earlier worked about 29% of the job losses as a secondary job since mid-March. ABS stated that the JobKeeper assistance could only be requested for only 1 job for every eligible employee. The number of payroll jobs is not the same as the number of employed people in Labour Force statistics for several reasons, and one of them is multiple job holding.

Jobs and wages by sex and industry

The payroll jobs worked by females fell by 8%, and those worked by males decreased by 6.3% since the week ending 14 March. Total wages paid to males decreased by 9.8% and payments to females fell by 5.9% in the same period.

Source: ABS

Payroll jobs in Accommodation and food services fell by 29.1% while Arts and recreation services dropped 26.3% since mid-March.

However, during the last week of May, i.e. between the week ending 23 May and 30 May, payroll jobs:

• Worked by males and females both rose by 0.4%
• Payments to males rose by 0.9% and to females increased by 0.3%.
• Within Accommodation and food services grew by 2.1% while electricity, gas, waste and water services increased by 1.4%, Retail trade rose by 3.6%
• Within Northern Territory fell by 0.8% and New South Wales rose by 0.7%

Justin Smirk, Westpac’s Senior Economist, stated that the data reflects the country has passed the low point for employment. However, he cautioned that the data is new and could be volatile due to being tracked on a weekly basis but improvement in the last 4 weeks is promising.

Housing prices moderated in the March quarter

As per ABS figures, residential property prices increased by 1.6% in the March quarter of 2020, following an increase of 3.9% in the December quarter. Sydney and Melbourne continued to lead witnessing a rise of 1.9% and 2.1% in residential prices during the quarter.

• Residential property prices increased 7.4% with a rise in all capital cities except Perth and Darwin through the year to March quarter 2020
• Number of residential dwellings rose by 43,700 to 10,845,700
• The total value of residential dwellings increased from $141.6 billion to $7,237.1 billion
• Housing and dwelling prices in Sydney rose 2.6% and 0.8% while in Melbourne, increased by 2.3% and 1.5% respectively.

Source: ABS

ABS Chief Economist, Bruce Hockman stated that estimates are as per expectations. Since the coronavirus induced restrictions were applied in late March, they did not have any significant impact on property prices in the March quarter of 2020.

RBA to continue accommodative approach

RBA released its minutes of a monetary policy meeting dated 2 June in which the bank kept its cash rate at 0.25%, and the target for 3-year yields at 0.25%. RBA continued to maintain an optimistic outlook compared to its counterparts as Governor Philip Lowe stated that there is a possibility of Australia to witness a shallower downturn than what was expected earlier, even though the country is facing worst economic contraction since the 1930s.

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The Board of RBA also agreed that the policy package of the bank has helped in supporting the economy by lowering funding costs, and stabilisation of financial conditions. The policy package had also added in enhancing the operations of government bond markets and keeping 3-year government bond yields at the target of ~25 bps.

The Board asserted on upholding an accommodative approach. RBA recognised that significant, synchronised, and unmatched easing of fiscal and monetary policy in Australia were substantial factors in supporting the economy amid these challenging times. It was also expected that fiscal and monetary assistance would be needed for some time. The Board stayed faithful to aid incomes, jobs, and businesses to ensure that Australia is well-positioned for economic recovery.