Australia, You Need More Than A Paddle

A few days ago I wrote Australians, Grab A Paddle!

If home equity continues to fall at current rates and spending dries up at current rates what happens to that 'service' sector where 12% of Australia's employed are in retail, most of which are in businesses with less than 20 employees?

When those 'service' industries and shops start to lose money what happens to employment?

When unemployment climbs what happens to the housing Ponzi scheme?

Roy Morgan Research:  2.21 MILLION AUSTRALIANS UNEMPLOYED OR UNDEREMPLOYED – HIGHEST EVER RECORDED. UNEMPLOYMENT AT 10.3% – A RECORD 1.28 MILLION AUSTRALIANS LOOKING FOR WORK
  

In January unemployment is up 1.7% to 10.3% (1,278,000). The large increase is primarily driven by an increasing number of young people looking for work — youth unemployment (18-24yr olds) has increased to 24%, far higher than the next highest age groups (14-17yr olds: 9.5% and 25-34yr olds: 8.9%). However unemployment has risen across all age groups in January.

Unemployment traditionally rises in January — the Roy Morgan unemployment estimates tables below show unemployment numbers have risen in 9/11 years since the turn of the century. The rise is because young people emerging from school are waiting for University offers — especially second round offers, and other young people are yet to decide whether to continue further University study and seek employment while they consider their options. 

Recent University graduates looking for work are also uncertain about the year ahead as post-graduate job offers are yet to be made and many people who may be offered a job in February are themselves job-hunting in January just in case the post-graduate job offer doesn’t materialise. The Roy Morgan unemployment estimates show that unemployment consistently drops in February (7/11 years) as students receive formal job offers and transition into full-time work.

A further factor in explaining why unemployment this January has increased far more than it did a year ago is the fact that January 2011 was unique. Last year saw continuing Government stimulus (Building the Education Revolution, the Home Insulation Scheme) and also a spate of natural disasters around Australia that created many disaster related jobs. Many young and able-bodied people were employed during January 2011 to help ‘clean-up’ after devastating floods Australia wide, and particularly in Queensland and Victoria. The month of January has passed relatively disaster-free — although there is now severe flooding occurring in Northern NSW and Southern Queensland.

The rise in youth unemployment is occurring alongside the broader trend of rising unemployment — which has now risen in six out of the last eight months from a 2011 low of 818,000 in May 2011 (up 460,000 in eight months) — unemployment has now reached a record high of 1,278,000 (10.3%). This is the highest ever recorded Roy Morgan unemployment estimate in Australia. Additionally, a further 934,000 Australians are employed part-time but looking for more work. Incredibly, this means a record high total of 2,212,000 Australians (17.8% of the workforce) are either unemployed or underemployed. 

Today’s Roy Morgan unemployment estimates strongly support anecdotal evidence of continuing job losses throughout Australia. Just in the past week we have been told that Westpac has announced 550 jobs to go; ANZ is axing 130 jobs; Holden will cut 200 jobs at its Adelaide plant; Toyota will cut 350 jobs in Melbourne; Reckitt Benckiser (maker of Mortein & Dettol) is to retrench 200 jobs at its Sydney operations; defence firm Thales shedding 50 jobs in Bendigo — these are just the most prominent examples of job losses occurring in the Australian economy!

Economists and politicians are wrong to talk about a ‘tight’ labour market in Australia driving wage pressures. Wage demands (inflation) at the moment are being driven by unions — a small minority of the Australian workforce — not by a tight labour market with workers changing jobs to secure better wages and conditions. Today’s Roy Morgan employment estimates show why inflation in Australia is contained, and will remain contained — at its meeting next Tuesday the RBA must drop interest rates by at least 0.5% and probably more.

The most interesting quote:

youth unemployment (18-24yr olds) has increased to 24%, far higher than the next highest age groups (14-17yr olds: 9.5% and 25-34yr olds: 8.9%

Those people are primarily employed in retail and services and the first to be 'let go'.

This Ponzi scheme is unravelling far faster than I expected. And, a Eurobank failure and credit freeze is yet to occur.