We haven’t had a bad year so far in terms of jobs growth. Total jobs are up 110,000 with most of that, 94,000, full-time. That’s not to say that this is strong growth or anything, but it is an above-average clip -- and a good deal better than some of the more alarmist commentary out there would have us believe. Consistent with our above-trend pace of growth I guess. At this rate we’ll be looking at more than 200,000 jobs created for the year.
As positive as that all is, chances are we’re only seeing the tip of the iceberg at this point. I realise this isn’t a common view. The consensus regards the labour market as weak, although this quite clearly isn’t the case using the more respected employment metrics over time. Even some of those who acknowledge recent momentum suggest it can’t last because of this fearful obsession with the ‘end of the mining boom’.
A few things to note there though. Firstly, the mining boom didn’t add very much to jobs growth in the first place. Think about when the investment boom really took off: late 2010 through 2011. Over that time, jobs growth averaged just over 10,000 per month, well below trend; the participation rate dropped 0.4 per cent; and the unemployment rate did nothing. There was no noticeable effect. Why, then, would anyone expect jobs growth to moderate and the unemployment rate to shoot up now?
Not that the mining boom has ended or anything, but you get the point. No one should expect any detrimental impact when it does end, because the fact is, the mining sector isn’t a big employer! Sure, mining employment shot up 40 per cent during the boom -- but the reason that didn’t show up in the broader employment statistics (average monthly growth of only 11,000 though that period) is because the mining sector only accounts for about 1-2 per cent of the labour market.
Now think of what’s happening in the rest of the economy. In particular, think about the impending residential construction boom. The latest national accounts suggest this boom is well under way, with investment surging over 6 per cent in the March quarter. On top of that, dwelling commencements are up over 22 per cent compared to last year and so, notwithstanding recent softness in the building approvals figures, all the indications are that we should see residential construction continue to surge this year. At least 10 per cent and probably more -- and what with the severe shortage of housing stock currently, there is no reason why we shouldn’t see that again next year.
The good news for Australia is that the construction sector is a big employer. Construction directly employees over 1 million people, or near 10 per cent of the labour market. A good chunk of that is involved in residential construction -- more than half probably (although just on the Australian Bureau of Statistics figures it’s hard to get an exact estimate).
A boom in a sector which is one of our largest employers is going to create a lot of jobs. It’s anyone’s guess as to how many, obviously, and I’m sure cone heads throughout the country are madly running their regressions to see what they can come up with. The last major statistical study done by the ABS was about 12 years ago using data from 1996. Obviously that’s a bit dated -- but for interest, they came up with a result showing that for each $1 million spent on construction (a house or whatever else), nine jobs were created directly in the construction industry. Including multipliers (think estate agents, retail, teachers etc) that rose to 37 jobs. With inflation, that’d be lower, obviously -- something more like 20 jobs now. On current commencements and approvals data, that means you could get up to 100,000 jobs created this year -- just from the additional surge in housing construction.
This is all back-of-the-envelope stuff obviously, but you get the point. The end of the mining boom shouldn’t be expected to lead to any noticeable job losses. The upswing in residential construction however, should lead to quite noticeable job gains. It’s probably no coincidence that the construction sector accounts for a full one-third of all jobs created over the last six months, with strong gains also found in the services sectors -- which includes things like real estate, professional and technical services etc. Should business ever get off its backside and start investing, then things could really heat up. Non-mining investment is at recessionary levels. This has to turn at some point, and if that happens alongside the resi-construction boom, then jobs growth could be truly phenomenal.