November job ads signals “sharp rebound imminent”

Summary:  Job ads up 7.4% in November; 52.5% higher than same month in 2020; “sharp rebound” in employment “imminent”; 44.2% above pre-pandemic reading; ads-to-workforce ratio slightly higher at 1.6%.

From mid-2017 onwards, year-on-year growth rates in the total number of Australian job advertisements consistently exceeded 10%. That was until mid-2018 when the annual growth rate fell back markedly. 2019 was notable for its reduced employment advertising and this trend continued into the first quarter of 2020. Advertising plunged in April and May of 2020 as pandemic restrictions took effect but then recovered quite quickly.

According to the latest ANZ figures, total advertisements increased by 7.4% in November on a seasonally-adjusted basis. The rise followed a near-identical gain of 7.5% in October and a 2.8% decline in September after revisions. On a 12-month basis, total job advertisements were 52.5% higher than in November 2020, slightly lower than October’s revised figure of 55.9%.

“While employment fell 46,000 in October against market expectations of a 50,000 rise, the latest ANZ Job Ads data signal a sharp rebound is imminent,” said ANZ senior economist Catherine Birch.

The reading was released on the same day as the Melbourne Institute’s November Inflation Gauge reading and Commonwealth Government bond yields fell modestly on the day, despite large falls overnight of their US counterparts. By the close of business, 3-year and 10-year ACGB yields had each shed 3bps to 1.05% and 1.59% respectively while the 20-year yield finished 2bps lower at 2.11%.

Birch noted November’s advertisements were 44.2% above the pre-pandemic reading from January 2020, reflecting “the robust recovery in New South Wales, Victoria and the Australian Capital Territory as restrictions eased…” She expects Australia’s jobless rate to fall below 5% “in the near term” and “to around 4% by the end of 2022.”

The inverse relationship between job advertisements and the unemployment rate has been quite strong (see below chart), although ANZ themselves called the relationship between the two series into question in early 2019.  A rising number of job advertisements as a proportion of the labour force is suggestive of lower unemployment rates in the near-future while a falling ratio suggests higher unemployment rates will follow.

In 2008/2009, advertisements plummeted and Australia’s unemployment rate jumped from 4% to nearly 6% over a period of 15 months. When a more dramatic fall in advertisements took place in April 2020, the unemployment rate responded much more quickly.

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