Bulletin

14 October 2011

Jobs by sector and by state

Structural forces at play suggests the risk of longterm unemployment is very high for some!
Total jobs growth has stalled (+41.1k so far this year or
less than 5k per month) but that is not the end of the story. By tapping into a much richer source of information, rather than mine the existing data set, we find that private job creation has been narrowly focused. surprising to find out that retailing jobs have been more resilient there than in Vic or that Vic has added more professional services jobs than NSW.

Non-resources production in WA is struggling with goods

production employment falling 18k this year despite the solid gains in mining.

Job creation has been in mining, utilities, education, health,

business services and public administration. By contrast the rest, which represent a larger 53% share of the workforce, have been shedding workers.

We also find some insights into the weakness in male

employment; there has been significantly more job creation in those sectors that employ a higher proportion of females while jobs losses have been concentrated in those sectors that employ a higher proportion of males.

A structural shift associated with the resources boom, the

high Australian dollar and the loss of the not insignificant credit accelerator, has favoured jobs creation in business and household services while the government has added to the mix. Unlike the resources boom MkI, MkII has done little to lift employment in goods production or distribution.

Such a shift in the composition of employment suggests

many of the newly unemployed may be destined to remain unemployed for a long time. The alternatives, however, may not be much more appealing: a lower skilled, lower paid job or employment on a remote resources project.

When you look at the sector data by state, the variation

within the states is just as great, if not greater, than the variation between the states. You may not be surprised to hear that NSW manufacturing is struggling, but it may be

This also raises the prospect that some households may be

facing a reduction in wage income.

Total employment by state & by sector (% through the year)

Goods Production Sep-10 NSW VIC QLD WA Nat. Sep-11 NSW VIC QLD WA Nat. NSW VIC QLD WA -6.7 -1.2 -0.6 -2.0 -2.4 -4.3 1.1 1.7 0.3 3.9 0.9 -3.1 2.2 0.8 3.1 0.1 -3.9 1.4 2.1 7.1 2.2 1.4 2.9 -0.8 4.1 -0.7 -1.5 1.1 1.3 4.0 4.6 2.1 2.0 5.1 -2.7 -1.2 1.5 7.1 4.4 5.0 12.1 5.7 Goods Distribution Business Services Household Services Government Private Top 5 Private ex top 5 Total

Through the year growth rate %yr 3.0 4.1 -0.1 1.9 2.7 3.9 -0.1 4.5 3.4 2.6 1.4 -2.7 1.9 0.9 -4.5 20.9 13.3 10.5 8.5 6.6 3.9 9.8 -1.5 4.8 1.8 -1.0 5.0 -6.3 3.2 3.6 1.3 3.7 2.9 1.1 1.3 1.0 1.1 1.0 0.1 0.3 0.0 0.1 7.2 6.9 5.6 10.0 6.5 0.3 4.5 5.7 3.9 2.6 -2.3 1.9 3.1 1.3 -1.2 2.3 -0.8 -0.8 0.5 2.4 -1.2 -1.8 -1.7 0.0 2.4 -1.2 -1.8 -1.7 2.7 4.3 2.0 4.1 3.2 1.4 1.4 1.6 1.0 1.2 0.2 0.2 0.3 -0.3 na na na na

Through the year growth rate %yr

Variation to sector national average Sep-11 (%yr)

Variation to state average Sep-11 (%yr) NSW VIC QLD WA -8.1 -2.6 -2.2 -3.0 2.6 -0.5 -4.6 1.2 0.8 5.7 0.6 0.5 2.5 -1.5 3.0 2.5 5.2 2.5 8.2 -2.4 -0.3 -0.1 -0.5 0.2 -1.1 3.1 4.1 3.0 1.1 -2.6 -3.3 -2.7

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14 October 2011
Jobs growth has stalled this year So far this year the Australian economy has created just 41.1k jobs, an average of just under 5k per month: a very lacklustre result. By comparison, even with the recent slowdown in population growth, the Australian economy still added 81k new potential workers to the labour force (an average of around 9k per month) resulting in a kick up in the unemployment rate from 4.9% to 5.2%. In our review of the August and September Labour Force releases we highlighted that, in our view, the jobs market had turned as the benefits of the mining boom are not spreading as far and wide as many had expected or hoped. To add some more colour to our analysis of the jobs market rather than narrow our focus by mining the monthly Labour Force data, we broadened our scope by incorporating the richer quarterly Labour Force data. What we found is that this year private job creation has been narrowly focused in five key sectors (mining, utilities, education, health and business services which combined account for 47% of total employment). To the September quarter these sectors have added 93k new workers while the rest of the economy has shed 91k (the numbers won't reconcile exactly with the monthly labour force data as the sector data is only available quarterly and is seasonally adjusted separately). More disturbing is the observation that since 2008 the top sectors account for all jobs growth while the rest have tracked broadly sideways. To us, this suggests that we are observing something more structural, rather than just your more normal short-run cyclical weakness in particular industries, unfolding in the labour market. Industry data suggests structural and cyclical factors This is all a little more startling when you break the sectors down a little further. Goods production has lost close to 90k employees this year as the lift in mining jobs (+25k) was not enough to offset the losses in manufacturing (52k) and construction (3.8k). So far the expected boost to domestic production, and other trickle down effects, from the resources boom have not been enough to offset cyclical and structural jobs losses in goods production. Even goods
6.0

Australian jobs reveal sectoral divergence

mn
Top sectors* (lhs) Rest (rhs)
4.81mn

mn
5.39m

7.5

5.0

* Mining, utilities, education, health, public, & business services. Weight, approx. 45% of total

6.5

4.0

6.02mn 5.99mn

5.5

3.0
Sources: ABS, Westpac Economics

4.5

2.0 Mar-86

3.5 Mar-91 Mar-96 Mar-01 Mar-06 Mar-11

Structural shift favours services

180 160 140 120 100
Sources: ABS, Westpac Economics

1990=100
goods production 24% goods distribution 20% services household 32% business 18% government 6%

1990=100

180 160 140 120 100 80

80 Dec-89

Dec-97

Dec-05 Dec-89

Dec-97

Dec-05

Total employment by state & by sector (% through the year)

Agric. Sep-10 NSW VIC QLD WA Nat. Sep-101 NSW VIC QLD WA Nat. NSW VIC QLD WA -22.2 -22.3 -12.9 -16.2 -16.6 -5.5 -5.7 3.7 0.4 9.9 10.3 29.6 5.3 14.0 -4.2 -3.7 15.5 -8.7 -6.9 -3.0 -6.3 -9.8 -5.4 -1.5 2.3 -1.0 -4.4 -36.3 22.4 11.5 -13.0 -5.0 -31.3 27.4 16.5 -8.0 3.0 4.6 0.7 4.3 3.1 -0.2 1.5 -2.4 1.1 -6.6 -7.7 -3.6 11.1 -2.8 -3.8 -4.9 -0.7 13.9 8.4 -0.2 -3.3 1.5 1.4 7.0 -1.6 -4.6 0.2 12.4 -3.2 4.5 3.4 6.0 6.3 -9.2 -1.5 -2.7 19.3 -7.8 7.3 -9.7 3.1 10.6 -16.5 8.4 47.0 20.0 -4.5 -2.4 3.8 -11.5 -2.8 31.8 7.3 21.2 34.2 18.2 -3.8 10.3 0.0 -0.6 1.8 4.7 2.9 -5.5 -6.8 1.2 -2.5 11.2 0.8 2.9 3.0 -10.0 2.3 -0.6 -1.8 -1.6 Mining Man. Utilities Construct. Wholesale. Retail Accom. & Inf. & Financial Trans. Food Telecom. Services Rental & Real Estate Prof. Admin. Public Admin. Educ. Health Nation/ Care State

Through the year growth rate %yr 8.9 -5.9 -7.4 -5.7 -1.4 3.6 11.3 -2.4 -1.9 2.2 1.4 9.1 -4.6 -4.1 -8.4 -2.3 23.3 -30.9 0.3 11.3 -11.7 -5.2 19.6 -3.1 14.4 -8.6 -2.1 22.7 -3.1 7.4 0.1 -2.2 0.4 9.8 14.2 9.5 -22.0 8.3 1.5 5.8 1.2 -30.3 5.2 3.2 11.8 13.3 6.9 -11.3 8.6 -6.7 -13.4 -5.3 -5.9 14.0 -1.4 -8.1 12.8 7.0 -0.4 36.0 8.4 -1.5 8.3 7.2 2.1 2.6 -4.1 5.7 4.7 -0.4 21.2 0.5 8.3 -0.7 8.2 3.4 8.2 -2.9 23.7 6.0 -2.6 2.2 -8.9 17.6 -4.5 20.9 13.3 10.5 8.5 6.6 3.9 9.8 -1.5 4.8 1.8 -1.0 5.0 -6.3 10.3 8.9 7.4 0.9 6.9 -5.2 -5.9 2.7 -1.4 -2.5 -2.7 -3.4 5.2 1.1 8.7 5.7 -0.6 -6.6 3.6 1.3 6.0 4.8 17.4 3.5 -2.2 2.6 1.3 13.9 2.7 4.3 2.0 4.1 3.2 1.4 1.4 1.6 1.0 1.2 0.2 0.2 0.3 -0.3 na na na na

Through the year growth rate %yr

Variation to sector national average Sep-11 (%yr)

Variation to state average Sep-11 (%yr) NSW VIC QLD WA -23.6 -23.7 -14.4 -17.2 8.5 9.0 28.0 4.3 -8.3 -4.4 -7.9 -10.7 -37.7 21.0 9.9 -13.9 1.6 3.2 -0.8 3.3 -8.0 -9.1 -5.1 10.1 7.0 -1.6 -4.8 0.6 11.0 -4.6 3.0 2.4 2.3 9.9 -4.0 -2.9 9.9 -13.1 -6.7 18.6 8.4 12.8 8.0 -23.0 -12.7 7.2 -8.3 -14.4 -2.9 6.9 5.7 1.1 2.0 6.8 -4.5 22.7 5.2 2.5 8.2 -2.4 -6.6 -7.3 1.2 -2.3 -0.1 4.7 3.3 16.4

Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts.

14 October 2011
distribution jobs (retail, wholesale & transport) have only just been holding ground shedding 2k employees this year. Business services added 40k jobs; household services added 14k while government (representing around 6% of the workforce) grew by 36k. The ongoing structural shift that has been unfolding in Australia since the start of the resources boom, has been favouring business services and, to a lesser extent, household services at the expense of goods production (ex mining). And unlike Boom MkI, MkII has done little to lift goods production or goods distribution employment. And more critically given the current tightening in fiscal policy, at both the state and federal level, the boost from government jobs is unlikely to be repeated on such a scale. Construction experienced a modest correction in activity from late 2009 into early 2010. The recovery in 2010H2 drove a modest lift in jobs growth which may have supported manufacturing sectors that supply construction inputs (this part of manufacturing has added 6k jobs this year). This segment of manufacturing, which includes steel fabrication, has been in a trend decline since 2000. However non-construction related manufacturers, which employ 75% of manufacturing workers, have been shedding workers at a rapid pace since the start of 2008, retrenching a further 58k this year. The manufacturing sector faces significant structural forces in the form of structually higher Australia dollar and, we suspect, minings ongoing demand for skilled labour which is sucking resources out of manufacturing. These are meaningful headwinds and manufacturing jobs are contracting outright this time, rather than just the normal erosion of the sector's share of total employment. Variation just as great within the states as between them It is interesting to have a look at the two states at either end of the resources spectrum, NSW and the resources powerhouse WA. So far this year, goods producers have shed 82k workers in NSW (-25k from manufacturing, -18k in utilities, -17k in construction and, quite surprisingly given the ending of the drought, 26k lost from agriculture) which was not offset by the gains in goods distribution (+7k), business services (+18k), household services and government (+11k). More critically, the private sector in NSW has shed 37k workers as the economy adjusted to the ending of the fiscal stimulus while its goods production sector is getting little benefit from Boom MkII. During Boom MkI this sector added around 95k jobs. Contrast this with Mining Boom MkII where government has been the main source of jobs growth in NSW but even then, NSW government jobs have grown at a slower pace than they have nationally. Even mining, while still exhibiting a healthy jobs growth pace of 9.9%yr, is underperforming the national average (20%yr). And we can't ignore the finance sector, which added 16k jobs in the first half of 2011. The sector shed 3k jobs in NSW in Q3 and with the major banks now focusing on efficiency gains and cost control, we expect that this sector will remain a drag on NSW jobs growth for the next quarter or two. Non-mining sectors face significant constraints in WA In contrast to the run up to 2008, when the resources boom supported wider jobs growth, so far this year WA is also exhibiting signs of structural constraints on employment. Employment in goods production has fallen 18k as losses in manufacturing (6k), utilities (1k), construction (3k) and agriculture (13k) outweigh the modest 4k jobs added by mining. Good distribution in WA has been supported by retail (see below) where employment has grown faster than the state average and national average for that sector. However, business services in WA shed 9k workers this year which is consistent with the observation that wage inflation in that sector is less than the national average (business services have added 40k workers nationally). Outside of mining, the source of the new

Construction jobs following modest cycle

20 15 10 5 0 -5 -10 -15 Mar-86
Sources: ABS, Westpac Economics

% ann
jobs (lhs) output, adv 1 qtr (rhs)

% ann
Smoothed, 2qtr avg

25 20 15 10 5 0 -5 -10

Constructions share 8.3% of output, 9.1% of jobs

-15 -20

Mar-91

Mar-96

Mar-01

Mar-06

Mar-11

& is a constraint on manufacturing jobs.

0.41 0.39 0.37 0.35 0.33 0.31 0.29 0.27
* Wood products, non-metallic minerals, metal products and furniture: approx. 25% of manufacturing.
Sources: ABS, Westpac Economics

mn
construction related manufacturing* (lhs) rest of manufacturing (rhs)

mn

0.78 0.76 0.74 0.72 0.70 0.68 0.66 0.64 0.62

0.25 Mar-86

Mar-91

Mar-96

Mar-01

Mar-06

Mar-11

NSW: manufacturing has been shedding jobs

180 160 140 120 100 80 Dec-89
Sources: ABS, Westpac Economics

1990=100
goods production 21% goods distribution 20% services household 32% business 21% government 6%

1990=100

180 160 140 120 100 80

Dec-97

Dec-05 Dec-89

Dec-97

Dec-05

WA: mining solid but govt. outpaces services

220 200 180 160 140 120 100 80 Dec-89
Sources: ABS, Westpac Economics

1990=100
goods production 21% goods distribution 20% services household 30% business 16% government 6%

1990=100

220 200 180 160 140 120 100 80

Dec-97

Dec-05 Dec-89

Dec-97

Dec-05

Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts.

14 October 2011
jobs this year has been retail (+11k) which is consistent with robust growth in retail sales in that state and health care (+14k) with the government chipping in a solid contribution (+3k from a sector that employs just 10% of the workforce). WA is in the grip of the greatest resources boom that state has ever experienced but that boom is also generating significant structural forces that may be acting as a brake on jobs growth in the non-resources sectors. Goods production & distribution in decline in Qld. The other states reveal a different but nonetheless complex picture on the jobs market. Queensland goods production employment has been basically flat this year as the jump in mining (+13.8k) and utilities (+7.1k) have been offset by jobs losses in agriculture (3.9k), manufacturing (5.3k) and construction (11.8k). The last is particularly surprising given the recovery that should be underway from the natural disasters early this year and the not insignificant resources and public sector infrastructure programmes that have been announced. The construction sector shed 7k jobs in Q3 but we would expect this sector should be a significant contributor to jobs growth going forward. It has, however, been a dismal year for goods distribution employment in Qld with this sector shedding 28.8k employees and just about all of these were in retail. Business services have been a modest positive (+9.2k) but this has been mostly offset by the 7.2k jobs shed by household services. Now the breakdown of household services provides an insight into the forces pulling the Qld economy in different directions. Employment in accommodation & food services has fallen 11.6k this year (as the tourism industry contracts following a double king hit from a high Australian dollar and the natural disasters earlier this year) with a further 4.7k lost in education and 6.7k reduction in other services employment. Offsetting these losses was a 5.9k gain in health & social care jobs and a 8k lift in arts & recreation employment. Looking ahead for Qld, mining and construction should add to jobs growth. However, manufacturing is likely to continue to be a significant drag while the tourism sector should stabilise by the end of this year, it is also unlikely to expand any time soon. Growth in household services (non-retail), business services and the public sector will be critical for Qld employment growth from here. Vic finding growth in business services Victoria was hit by the double whammy of declining employment in goods production (-16k) and goods distribution (32.7k). While the losses in goods production have been less than what NSW has experienced (smaller losses in Vic manufacturing while utilities and construction were still positive) the wholesale and retail sectors (goods distribution) have shed jobs in a meaningful way (13.8k & 18.9k respectively). This last observation is interesting as so far this year, the jobs market and retail sales have been stronger in Vic than NSW. So you would think that Vic retail employment should at least be on par with NSW. But if you compare the relative level of retail jobs in NSW and Vic you see that NSW jobs peaked back in 2008Q2 and then bottomed in 2010Q3. For most of 2011, NSW retail employment has been around mid 2009 levels. Compare this with Vic retail employment which was on a more solid trend and did not peak until 2011Q1. The recent correction has only taken the level of employment back to 2010Q2. This would suggest that the correction in Vic retail trade employment may only have just started and so it could have further to run to match the correction in NSW.

Vic: growth in services have been key

180 160 140 120 100 80 Dec-89
Sources: ABS, Westpac Economics

1990=100
goods production 24% goods distribution 20% services household 31% business 19% government 5%

1990=100

180 160 140 120 100 80

Dec-97

Dec-05 Dec-89

Dec-97

Dec-05

Retailing & professional services

260 240 220 200 180 160 140 120 100 80 Dec-89
Sources: ABS, Westpac Economics

1990=100
retail trade NSW Vic professional services Vic NSW

1990=100

260 240 220 200 180 160 140 120 100 80

Dec-97

Dec-05 Dec-89

Dec-97

Dec-05

Qld: goods peaked in 08, govt. solid

240 220 200 180 160 140 120 100 80 Dec-89
Sources: ABS, Westpac Economics

1990=100
goods production 25% goods distribution 20% services household 32% business 16% government 6%

1990=100

240 220 200 180 160 140 120 100 80

Dec-97

Dec-05 Dec-89

Dec-97

Dec-05

Goods production
12 9 6 3 0 -3 -6 -9 Mar-86
Sources: ABS, Westpac Economics

% ann

% ann
Agriculture, Mining, Manufacturing, Construction, Utilities

12 9 6 3 0 -3

Jobs

Output, adv 1 qtr

Smoothed, 2qtr avg

-6 -9 Mar-11

Mar-91

Mar-96

Mar-01

Mar-06

Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts.

14 October 2011
So in the end, even with Vic business services adding jobs (+31.8k this year) and only modest jobs losses from household services (2.7k), the Victoria private sector has shed 19.7k jobs due to the large jobs losses in goods production and distribution. With construction and manufacturing likely to struggle this year (a looming oversupply of new dwellings points to a correction in dwelling construction activity), unless there is a strong uptick in business services employmentwhich has been growing faster than the national averagegiven that it is unlikely we will see a surge in public administration jobs we struggle to see were Victoria will find a significant source of employment growth. Industry data explains the weakness in male jobs ... The strongest sectors for jobs growth so far this year, outside of mining and utilities, have been finance, professional services, public admin, health and arts & recreation. These sectors are significant female employers (60% female vs. 61% male in the other sectors) and thus continued growth in these industries would be a significant boost for total female employment. In addition, parttime employment in these sectors has grown at a faster pace than full-time employment (6.2% vs. 2.7%) and so even though part-time employees represent a smaller share of total employment, the number of part-time employees has grown by a similar quantum as that for full-time employees. But that is not the end of the story, as in the top performing sectors male full-time employment has grown almost as strongly as male part-time employment (4.6% vs. 5.9%). In fact, while male employment has grown more strongly than female employment (4.8% vs. 3.0% or 65.2k vs. 60.9k) is very interesting to note that female full-time employment growth has almost stalled (0.8% for 10k) while female part-time employment has surged (6.1% for 50.9k). So this sector has added about the same number of male and female employees but female recruitment has been biased towards part-time while male recruitment has been more balanced. So what is driving such a stark shift in the overall mix of male/ female employment is not so much an acceleration in the growth of female employment (which has grown at a reasonably steady pace for the pace decade) but rather the significant job loss in those sectors that tend to have a higher ratio of male employment (construction and manufacting in particular). And even here, the pace of female job losses (1.6% so far this year) is less than the pace for males (2.6%) as female employment has been supported by steady employment for part-time females (0.4%). Male part-time has fallen in these sectors. So a rising share of female and part-time employment it is not just a story of stronger growth in the sectors with a higher proportion of female and part-time employees, nor is it just that those sectors with a higher proportion of male full-time employees retrenching staff. There is also the growing preference for female part-time employees in those sectors that traditionally did not favour them. Thus the recent strength in part-time and female employment is a reflection of structural factorsthat is a shift in the composition of the Australian economywas well as the normal cyclical factors such as firms adjusting hours worked to meet softer demand conditions. And these structural forces can be a bit like an oil tanker, very slow to start but once they gather momentum, very difficult to then change tack. ... and the strength in female participation ... The observations above also help to explain why the female participation rate has been more resilient (just above 59%) in contrast to male participation rate (which has fallen from around 73% in late 2010 to close to 72%). The demand for labour tends

Goods distribution
10 8 6 4 2 0 -2 -4 -6 Mar-86
Sources: ABS, Westpac Economics

% ann
Wholesale, Retail, Transport

% ann
Smoothed, 2qtr avg

10 8 6 4 2 0 -2

Jobs

Output, adv 3 qtr

-4 -6 Mar-11

Mar-91

Mar-96

Mar-01

Mar-06

Growth in full-time employment stalled...

million
Sources: ABS, Westpac Economics

million 3.3 2.8

8.0

7.0

2.3 1.8 1.3

full time (lhs) part-time (rhs)

6.0

5.0 Sep-81

Sep-87

Sep-93

Sep-99

Sep-05

0.8 Sep-11

...while males have lost jobs this year.

6.3 6.1 5.9 5.7 5.5 5.3 5.1 4.9 4.7 Sep-97 Sep-00
males (lhs) females (rhs)

million
Sources: ABS, Westpac Economics

million 5.2 5.0 4.8 4.6 4.4 4.2 4.0 3.8 3.6 Sep-03 Sep-06 Sep-09

For full-time jobs, females outpacing males

1990=100 320 280 240 200 160 120 80 Dec-89
Sources: ABS, Westpac Economics fastest growing sectors ex mining & utilities

1990=100
the rest with mining & utilities

males ft males pt females ft females pt

320 280 240 200 160 120 80

male pt male ft female ft female pt

Dec-97

Dec-05 Dec-89

Dec-97

Dec-05

Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts.

14 October 2011
to have an effect on the supply of labour, i.e. as the probability of getting work improves this tends to draw in the more of marginally attached participants of the labour force, in particular women who may be returning to work or looking for supplement household income. ... while highligting risks to household incomes. This leads to a third important observation: those who are currently losing their jobs may have incompatible skill and experience sets for the industries where the new jobs are being created. So there is a very real risk that those men being laid off may remain unemployed for a very long time. Their only alternatives may be to accept lower skilled and thus much lower paid work or possibly be "banished" to the mines. We use the word banished not to be derogatory about the work conditions on major resources projects but more in reflection that the resources companies are reporting great difficulty in recruiting skilled labour suggesting that, to many Australians, working on the mines is a purgatory that they would prefer to avoid. And then there is the potential impact of these structural shifts on household incomes. The jobs losses are heavily focused in the male dominated industries and for many households, men remain the primary source of income. And men, on average, are still paid more than women. The concern is that if this trend continues, while many households will not lose all their wage income for many moving they may be facing a reduction in household wage income. Nationwide, retail & finance sectors remain under pressure while transport and professional services offer further gains. Despite significant growth in mining employment, and a possible turnaround in construction later this year, the goods production sector is likely to continue to be a drag on employment as manufacturers squeeze further productivity gains out of the existing workforce. This sector has been retrenching staff since early 2008, even in the recent period of positive output growth through 2010. It will be a significant drag in Vic and NSW in particular but we expect it to have a meaningful impact in Qld as well. For goods distribution we do see some near term upside and suspect this will be further supported by the expansion of the resources sector. But the focus will be in the transport where jobs growth has lagged the recent strength in output, while there is scope for jobs growth in wholesaling and warehousing. But further retrenchments are in store for retailing where nationally jobs have run ahead of output. Despite the recent correction to Vic retail jobs, we suspect the correction has further to run in that state. A further significant headwind for jobs in NSW is the fact that finance & insurance employment has been running well ahead of output and we expect to see a near term correction from the jobs side. While representing only 3% of total employment nationally, this sector employs close to 5% of the NSW workforce with that state holding 42% of all finance jobs. As such a correction in finance sector employment would hit NSW particularly hard. One bright area for NSW, professional services is expected to grow strongly on the back of the resources boom with a further boost from the fact that jobs in this sector have lagged well behind the lift in output. NSW has 35% of the professional jobs representing almost 9% of employment in that state. By comparison, Vic has only 26% of all professional services jobs but it is quickly closing the gap with NSW adding 18k new jobs in this sector so far this year compared with a 3k gain in NSW. Has Victoria started taking professional services jobs away from NSW or is this just a late cycle surge? Only time will tell. Justin Smirk, Senior Economist, ph (612) 8254 9336
Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts.

Manufacturing
12 9 6 3 0 -3 -6 -9 -12 Mar-86
Sources: ABS, Westpac Economics

% ann
Smoothed, 2qtr avg

% ann
Jobs Output

12 9 6 3 0 -3 -6

Manufacturings share 10.0% of output, 8.9% of jobs

-9 -12 Mar-11

Mar-91

Mar-96

Mar-01

Mar-06

Retail trade
10 8 6 4 2 0 -2 -4 -6 Mar-86
Sources: ABS, Westpac Economics

% ann
Jobs Output, adv 2qtrs

% ann
Smoothed, 2qtr avg

10 8 6 4 2 0 -2

Retails share 4.9% of output, 10.8% of jobs

-4 -6 Mar-11

Mar-91

Mar-96

Mar-01

Mar-06

Finance & insurance

20 15 10 5 0 -5 -10 Mar-86
Sources: ABS, Westpac Economics

% ann
Jobs (lhs) Output (rhs)

% ann
Smoothed, 2qtr avg

30 25 20 15 10 5 0 -5 -10 -15

Finances share 12.0% of output, 3.6% of jobs

Mar-91

Mar-96

Mar-01

Mar-06

Mar-11

Accommodation & restaurants

15 12 9 6 3 0 -3 -6
Accommodation & restaurants share 2.3% of output, 6.7% of jobs

% ann
Smoothed, 2qtr avg

% ann
Jobs Output

15 12 9 6 3 0 -3 -6

-9 Mar-86

Sources: ABS, Westpac Economics

-9

Mar-91

Mar-96

Mar-01

Mar-06

Mar-11