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Aust labour market outshines US but maybe not for long

By Garry Shilson-Josling, AAP Economist
12 Jan 2009 5:49 PM

SYDNEY, Jan 12 AAP - If Australians want to gloat over how much healthier their labour market is compared with that of the US, they should get their gloating in before it's too late.

The contrast between the labour markets of the US and Australia is stark but may become less so in coming months.

The news on Friday from the US Bureau of Labor Statistics was bad.

Non-farm payrolls, the measure of employment favoured by economists, fell by over half a million in December for the second month in a row.

The annual fall in number of jobs was 2.6 million, the biggest fall in percentage terms since 1982, and the biggest fall in absolute terms since war production wound down in 1945.

Until the final few months of the year employment was falling less steeply than in previous episodes of weakness like the recessions of the early 1980s and 1990s and the pseudo-recession of 2001.

Of the major industrial sectors, construction had accounted for the most of the job losses.

The renewed outbreak of financial market anxiety around September, centred on the failure of US investment bank Lehman Brothers, put paid to that.

Since then the downturn has become more broad-based and the total has fallen more rapidly.

After a year of contraction, the 1.9 per cent fall in payroll numbers has outpaced the first year of decline after peaks in June 1990 and February 2001.

It has been eclipsed by the 2.3 per cent fall in payroll numbers after the peak in July 1981, but the current rate of decline is faster than it was back then.

The way things are going, this could easily turn out to be the worst labour market slump since 1975 or even earlier.

The picture in Australia is much brighter, at least so far.

Rather than falling two per cent, employment rose by that margin in 2008, according to the household labour force survey by the Australian Bureau of Statistics (ABS).

As a result the unemployment rate of 4.4 per cent in November was the same as a year earlier.

In the US, the December figures showed unemployment at 7.2 per cent, from 4.9 per cent a year before, a 3.6 million increase in the number of jobless to 11.1 million, the highest since June 1983.

But this divergence between Australia and the US seems unlikely to continue for much longer.

Already, the ABS figures - to be updated with December data on Thursday - show a sharply slower trend rate of growth, just 1.0 per cent on an annualised basis in November versus 3.4 per cent a year earlier.

Pointers to the outlook for the local jobs market are uniformly alarming.

The latest is the ANZ's survey of job ads.

Ads in newspapers in December were down by 52 per cent from a year before, while ads on the internet were 28 per cent lower over the year.

In both cases it was the biggest annual fall ever recorded in the life of the survey - 33 years for newspapers ads and 11 years for the internet.

The former mining boom state of Western Australia posted the biggest annual fall, so the biggest plus is now the biggest minus.

The ANZ's head of Australian economics, Warren Hogan, said the figures showed demand for new labour was "now at recession levels".

Quick interest rate cuts by the Reserve Bank of Australia last year and the federal government's fiscal easing will give the economy a shot in the arm.

And the job ads figures do not show how much labour-shedding is going on - just demand for new labour.

So there are grounds for expecting a better outcome than the US is currently enduring.

Even so, no-one can be certain.

To be on the safe side, intending gloaters should get cracking.