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Economics | March 25 2020

Engineering work hits 11-year low

COVID-19 to lift job vacancies for health workers Skilled job vacancies; Engineering construction � Skilled job vacancies: In trend terms, the Internet Vacancy Index fell by just 0.2 per cent (or 250 jo bs

advertised) in February to be down 9.0 per from a y ear ago. Job vacancies for Health Diagnostic and Therapy Professionals, however, rose by 6.2 per cen t or 270 positions from a year ago to 4.600.

� Engineering: Engineering construction work done fel l by 1.5 per cent in real (inflation-adjusted) term s in the December quarter. Work done is down 7.9 per cen t on a year ago. On a rolling annual basis, the val ue of work done fell to an 11-year low of $84.5 billio n.

� The value of engineering work yet to be done eased from $75 billion to $70 billion in the December qua rter. The value of non-resources-related work to be done (excludes pipelines and oil and gas) eased from a record $48 billion to $45 billion in the quarter.

The internet job vacancies data is a leading indicator of the job market and therefore important for consumer-focussed stocks and companies. The data on engineering construction work is important for builders, building material companies, professional services, developers, government businesses and other dependent sectors and industries.

What does it all mean? • It’s a worrying time for Aussies. Job losses are mounting as restrictive coronavirus measures force non-food

retailers - such as jeweller Michael Hill – to shut their doors for an indefinite period with an uncertain future for its 1,600 employees. And today Virgin Australia announced that 80 per cent of its 10,000 workforce would be granted leave of absence after grounding 125 aircraft in response to travel bans.

• While regional recruitment activity was likely impacted by bushfires in both January and February, the immediate concern now turns to rising joblessness associated with virus-related shutdowns enveloping Australia. In response, the Federal government has announced around $84 billion in targeted stimulus measures to support Aussie businesses and keep Aussies in jobs.

• The latest data (to November 2019) shows that around 1.25 million or 9.7 per cent of Aussies are employed in retail trade – our second largest employer. And around 927,000 workers (7.2 per cent of the total jobs) are

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Economic Insights. Engineering construction work do ne hits 11-year low

employed in the accommodation and food services sectors. And looking at leading indicators of jobs growth – job ads and vacancies – retail trade accounts for around 10 per cent of total vacancies, while food and accommodation ads make up around 7 per cent of all jobs advertised. And according to the Department of Employment, there were 4,200 vacancies for hospitality workers in February. It’s now doubtful whether any of these vacancies will exist in March and beyond as hiring ceases.

• But of course, demand for health workers is expected to surge as the COVID-19 pandemic grips the nation. And Coles, Telstra and the Commonwealth Bank have all announced their intention to hire more workers to assist with increased demand for essential services during this difficult time.

• The infrastructure boom has eased. The rolling annual value of engineering work done fell to an 11-year low of $85 billion in 2019. That said, engineering work completed in Tasmania over the past year was a smidgen below record highs. And engineering work yet to be done in NSW and Victoria remains very healthy with $70 billion of work to be completed nationwide.

What do the figures show?

Skilled Job Vacancies - February

• The Department of Employment Internet Vacancy Index fell by 0.2 per cent (or 250 job advertisements) in February. But the index is 9 per cent lower than a year ago, although it is up 4.4 per cent on levels recorded five years ago.

• Occupations: In February 2020 “Job advertisements decreased in six of the eight broad occupational groups and remained steady in one during February 2020. The strongest falls were recorded for Technicians and Trades Workers (down by 0.8 per cent), followed by Labourers (down by 0.7 per cent) and Managers (down by 0.5 per cent).”

• Over the year to February 2020 “Job advertisements decreased in all occupational groups with the strongest falls recorded for Machinery Operators and Drivers (down by 11.8 per cent), Labourers (down by 11.7 per cent) and Clerical and Administrative Workers (down by 11.6 per cent).”

• Detailed occupations: Over the year to February 2020, “Four of the 48 detailed occupational groups recorded an increase in job advertisements. Increases were recorded for Health Diagnostic and Therapy Professionals and Education Professionals (both up by 270 job advertisements), as well as Legal, Social and Welfare Professionals and Hospitality Workers (both up by 70 job advertisements).”

• And “The largest decrease over the year was recorded for General-Inquiry Clerks, Call Centre Workers, and Receptionists (down by 1430 job advertisements), followed by Automotive and Engineering Trades Workers and Corporate Managers (both down by 1090 job advertisements), Numerical Clerks (940) and Business, Finance and Human Resource Professionals (920).”

• States/Territories: Job vacancies decreased in four states and one territory in February: The strongest falls were recorded in Tasmania (down by 0.6 per cent) followed by NSW and Victoria (both down by 0.5 per cent), South Australia (down by 0.3 per cent); and the ACT (down by 0.1 per cent). But vacancies lifted in Northern Territory (up by 0.8 per cent); Queensland (up by 0.4 per cent); and Western Australian vacancies were unchanged.

• Over the year to February 2020, job vacancies decreased in five states and the Northern Territory. Tasmania recorded the strongest decline (down by 15.3 per cent), followed by NSW (down by 14.7 per cent) and Victoria (down by 11.2 per cent); Northern Territory (down by 5.9 per cent); Queensland (down by 3.5 per cent); and South Australia (down by 3.1 per cent). But vacancies lifted in the ACT (up by 5.3 per cent) and Western Australia (up by 2.6 per cent).

• Regions: “Over the year to February 2020, in three month moving average terms, job advertisements increased in 13 of the 37 IVI regions. The strongest increases were recorded in Gippsland, Victoria (up by 14.3 per cent), followed by Yorke Peninsula & Clare Valley, South Australia

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Economic Insights. Engineering construction work do ne hits 11-year low

(up by 12.6 per cent), Port Augusta & Eyre Peninsula, South Australia (up by 11.8 per cent), Wimmera & Western Victoria (up by 8.5 per cent) and South West Western Australia (up by 7.9 per cent).”

• And, “The strongest decreases in job advertisements were recorded in Launceston and Northeast Tasmania (down by 20.3 per cent), followed by Sydney (down by 16.8 per cent), Hobart & Southeast Tasmania (down by 15.7 per cent), Melbourne (down by 11.4 per cent) and NSW North Coast (down by 10.7 per cent).”

• “Canberra & ACT (up by 7.9 per cent) and Perth (up by 6.9 per cent) were the only capital city regions to record an increase in job advertisements over the year to February 2020.”

Engineering construction – December quarter

• Engineering construction work done fell by 1.5 per cent in real (inflation-adjusted) terms in the December quarter. Work done is down 7.9 per cent on a year ago.

• Value of work completed for the public sector rose by 0.5 per cent in the December quarter, but was down by 0.8 per cent from a year ago. Private sector activity fell by 3.0 per cent to be down 13.2 per cent from the year before.

• Work done by the private sector for the private sector rose by 0.9 per cent, but was down by 12.9 per cent from a year ago. Work done by the private sector for the public sector rose by 1.7 per cent, but was down by 6.2 per cent from a year ago.

• Engineering construction work rose in five of the s tates and territories in the December quarter: NSW (up by 0.6 per cent); Victoria (up by 4.3 per cent); Queensland (up by 4.9 per cent); South Australia (up by 2.3 per cent); Western Australia (up by 5.4 per cent); Tasmania (down by 9.6 per cent); Northern Territory (down by 7.0 per cent); ACT (down by 2.8 per cent).

• In the year to December, work done in Tasmania was just below record highs. But work done in Western Australia hit 13½-year lows and the Northern Territory’s engineering work done hit 8-year lows. And total Australian work is at 11-year lows of $84.5 billion.

• Work yet to be done: There was $70.0 billion of engineering work yet to be done as at December 2019. Excluding the resource sector (coal, oil, pipelines etc.) work yet to be done stood at $45 billion in the December quarter, down from a record high $48 billion in the September quarter.

• Of work to be done , a still-healthy $18.2 billion of projects are to be completed in NSW – the most for any state. Victorian work to be done stands at $14.2 billion. And Queensland work to be done is at $10.4 billion over the December quarter.

What is the importance of the economic data? • The Department of Employment releases a monthly Internet Vacancy Index . The index is based on a count of

online job advertisements newly lodged on three main job boards (SEEK, CareerOne and Australian JobSearch) during the month. The index is the only publicly available source of detailed data for online vacancies, including around 350 occupations (at all skill levels), as well as for all states/territories and 37 regions.

• The Bureau of Statistics releases quarterly estimates of engineering construction activity. The estimates include value of engineering construction work done, commenced and yet to be done, classified by state or territory, commodity (roads, bridges, pipelines etc.), sector (public/private) undertaking the work, and sector for whom the work is being done. The data is a comprehensive assessment of the infrastructure pipeline.

What are the implications for interest rates and investors? • There is still a lot of infrastructure work that remains to be

done. The pipeline for public transport and roads remain significant – with blue-ribbon projects such as the Western Sydney Aerotropolis and Brisbane’s Cross River Rail – still being constructed. Of course, bushfire ravaged parts of

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Economic Insights. Engineering construction work do ne hits 11-year low

Australia should see around $2 billion of reconstruction activity. And in response to the drought, it appears that governments are boosting water storage building activity. In fact, the value of planned new water-related infrastructure construction work surged to 2-year highs of around $2.5 billion in the December quarter.

• The social cost of a rising unemployment during an economic downturn is something for all Australians to be concerned about. The unemployment rate fell to 5.1 per cent in February. But announced job losses and the vision of lengthening Centrelink queues serves to highlight that policymakers need to support Aussie workers and small businesses during the escalating virus crisis.

• For example, Newstart needs to be a focus in terms of increased government spending, protecting Australia’s most vulnerable. In the Global Financial Crisis the jobless rate jumped by almost two percentage points from 4 per cent in mid-2008 to 5.9 per cent by mid-2009. And of course the unemployment rate was close to 11 per cent during the last recession in the early 1990s. Let’s hope that we don’t go there again in the coming months.

Ryan Felsman, Senior Economist, CommSec Twitter: @CommSec