Summary: Job ads up 0.1% in May; 6.1% lower than May 2022; signals strong demand for workers; ACGB yields up significantly; rate-cut expectations deferred until second half of 2024; ad index-to-workforce ratio steady at 1.01.
From mid-2017 onwards, year-on-year growth rates in the total number of Australian job advertisements consistently exceeded 10%. That was until mid-2018 when the annual growth rate fell back markedly. 2019 was notable for its reduced employment advertising and this trend continued into the first quarter of 2020. Advertising plunged in April and May of 2020 as pandemic restrictions took effect but then recovered quite quickly to historically-high levels.
According to the latest ANZ-Indeed figures, total advertisements inched up by 0.1% in May on a seasonally adjusted basis. The result followed losses of 0.7% and 2.7% in April and March respectively. On a 12-month basis, total job advertisements were 6.1% lower than in May 2022, unchanged from April’s revised figure.
“While Job Ads are 8.0% lower than the September peak, the level remains very high, signalling strong demand for workers,” said ANZ economist Madeline Dunk.
The figures came out on the same day as the Melbourne Institute’s latest reading of its Inflation Gauge and Commonwealth Government bond yields increased significantly on the day, generally outpacing upward movements of US Treasury yields on Friday night. By the close of business, 3-year, 10-year and 20-year ACGB yield had all increased by 14bps to 3.57%, 3.79% and 4.18% respectively.
In the cash futures market, expectations regarding rate cuts in 2024 have been deferred until the second half of the year. At the end of the day, contracts implied the cash rate would rise from the current rate of 3.82% to average 3.915% in June and then to 4.025% in July. February 2024 contracts implied a 4.115% average cash rate while May 2024 contracts implied 3.975%, 16bps more than the current rate.
The inverse relationship between job advertisements and the unemployment rate has been quite strong (see below chart), although ANZ themselves called the relationship between the two series into question in early 2019. A lower job advertisement index as a proportion of the labour force is suggestive of higher unemployment rates in the near future while a rising ratio suggests lower unemployment rates will follow. May’s ad index-to-workforce ratio remained unchanged at 1.01 after revisions.
In 2008/2009, advertisements plummeted and Australia’s unemployment rate jumped from 4% to nearly 6% over a period of 15 months. When a more dramatic fall in advertisements took place in April 2020, the unemployment rate responded much more quickly.