Friday, 8 August 2008

Jobs slump hits NSW

THE tide is turning on Australia's once-strong jobs market, and it's turning in NSW first.

NSW shed 17,600 jobs last month - the worst performance of all the states and territories - while the resource-rich states of Western Australia and Queensland picked up more than 15,000 jobs each.

The Treasurer, Wayne Swan, warned people to brace for a slowdown: "Employment growth is slowing and it's slowing on the back of eight interest rate rises over three years and, of course, the most difficult global economic conditions in 25 years, particularly the oil shock in recent times."

The Reserve Bank governor, Glenn Stevens, said this week that the consecutive rate rises had had a significant impact.

"The evidence is that the tightening in financial conditions, in conjunction with other factors including rising fuel costs and lower asset values, has restrained demand," he said.

Nationwide, jobs growth has slowed from its breakneck pace of last year to add just 10,900 jobs last month - leaving the jobless rate steady at 4.3 per cent.

But as a growing number of companies such as Starbucks and Qantas unveil plans to retrench staff, it appears March was the high point for employment in NSW. Since then, the number of jobs has steadily declined and the jobless rate has gone up half a percentage point to 4.7 per cent - the highest in the country.

An economist at Macquarie Bank, Brian Redican, said NSW was the "canary in the coalmine" and predicted the national jobless rate would rise above 5 per cent next year.

NSW's heavily indebted households had been hardest hit by the rise in mortgage repayments and petrol prices, Mr Redican said. Jobs were particularly at risk in the retail, property and finance sectors.

"I think that the weakness in the housing market in the south-west of Sydney has now encompassed the rest of Sydney, even in the northern and eastern suburbs," he said.

But with oil prices falling and a probable cut to official interest rates next month, it was unlikely the economy was heading for recession: "We don't think the canary's going to snuff it this time, it's just going to have a very bad cough," Mr Redican said.

But further job losses are seen as inevitable.

An economist at the Commonwealth Bank, Michael Workman, said clients in the retail sector were already laying off staff because of the spending slowdown. "Large national companies are saying to us that they've actually started to put some people off, but were reluctant to do it and would prefer to reduce their hours."

Any reduction in hours would not be picked up in the Bureau of Statistics' monthly jobs survey, because it counts people who work one hour a week as employed.

A fall in retail and service-sector positions is a likely cause of the plunge in part-time jobs of 42,800 last month. This was offset by a rise in full-time jobs of 53,700.

But the bureau was forced to slash the sample size of its job survey by a quarter in the month because of budgetary constraints. It has warned of increasing volatility in jobs numbers.

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