Westpac Brings Forward Its Forecast For Oz Labour Market Trough

Thompson's indicators include full-time and part-time relativities as well as data on average hours worked and the latest numbers here suggest the labour market is likely to turn out of its current downtrend in the fourth quarter of this year rather than in the first quarter of 2010 as he had previously expected.

Supporting this, Thompson notes de-trended job ads are likely to have troughed in June, which suggests annual jobs growth of minus 1.5% in January of next year. At the same time he points out consumer unemployment expectations peaked in March and this suggests the trough in jobs growth could come as early as October of this year.

To reflect this, Thompson has adjusted his forecast for a low in jobs growth to minus 1.6% in the December quarter against a previously forecast trough of minus 2.1%, while his previous forecast for peak unemployment in late 2010 or early 2011 of almost 9.0% has been revised down to 8.2%.

In terms of quarterly forecasts Thompson has also made revisions and he now expects average unemployment to rise to 5.7% in the June quarter of this year, 6.8% in the September quarter, 7.4% in the December quarter and 7.7% in the first quarter of next year.

In support of his revised outlook, Thompson notes there are increasing signs of significant labour hoarding in the current downturn at a level not seen since the 1982/83 recession. In other words, the trend in total employment growth against full-time employment shows employers have been cutting back on worker's hours rather than releasing them.

Actual numbers support such a view as Thompson notes in the 12 months since the trend unemployment rate troughed at 4.1% in March of last year, total job growth has fallen from almost 3% to slightly negative in annualised terms, while full-time growth has slowed from around 2.5% to minus 2.2%. Over the same period part-time job growth has risen from 4.2% to 5.2% in annualised terms.

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