Labour market challenges and the property market

Photo Source: bittenbythetravelbug.com

It’s no secret that Australia’s labour markets are facing challenges right now as we transition away from the mining construction boom, with the seasonally adjusted headline rate of unemployment brushing against 14 year highs in recent months.

Many of the job losses in recent times have been experienced at the regional level, and particularly over the past 12 months in the mining and manufacturing sectors.

From a property buyer’s perspective it is always important to do your research in this regard.

There is less than no point in asking vested interests in local markets – unemployment could rise to 15 per cent and it would doubtless still be a “great time to buy”, a “storm in a teacup”, a “counter-cyclical opportunity”, or merely a passing phase.

It’s worth noting that some regional markets typically experience unemployment seasonally. Other markets can function reasonably well with persistently high rates of unemployment.

The dynamic to be wary of, however, is a region with an elevated rate of unemployment which is deteriorating.

Let’s take a look through a select few of Australia’s regions, starting with…

New South Wales

Many regional New South Wales property markets have had a decent enough run over the past five years, partly off the back of a booming Sydney economy.

The Albury-Wodonga economy has been notably strong, although there have been a few under-employment concerns of late. 

The most pressing challenges in New South Wales presently relate to coal mining job losses which are showing up in the unemployment rates in regions such as Cessnock, Maitland and the Hunter Valley.

This is likely to be a transient issue, and these are well-located markets which I expect to bounce back reasonably strongly in time.

Photo Source: petewargent.blogspot.com.au

The unemployment rate in Cowra is tracking at double digit levels – although it is not rising – but the property market has been a dud over the last five years when compared to the state capital.

The major challenge for towns such as Cowra is rather an ongoing stagnation. The latest ABS data showed that the population of the town was larger in 2004 than it was in 2014.

It is a challenge which faces many regional locations outside Queensland.

Victoria

It has not been a happy year for the coal mining town Morwell with high youth unemployment and job cuts being followed by a deeply unpleasant mine fire.

Youth unemployment has also been a pressing issue in Shepparton, while Bendigo is also showing up in the unemployment data.

Photo Source: petewargent.blogspot.com.au

Geelong’s unemployment rate has risen with car manufacturing plants to close representing challenges ahead, although being located less than 50 miles from the state capital, the longer term outlook is likely healthy enough.

Queensland

Logan has flashed up as an “unemployment hotspot” in Queensland, but the area’s convenient location will also probably see it bounce back over the longer term. 

As I looked this week here, Mackay is one of several Central Queensland conurbations which are set to face severe headwinds from the commodities crash.

There are plenty more such towns and regions dotted around regional Queensland.

Photo Source: petewargent.blogspot.com.au

On the other hand, tourism regions such as Cairns, the Sunshine Coast and the Gold Coast seem to be seeing their respective labour markets improving as the dollar declines.

South Australia

The highest capital city unemployment rates in Australia by a significant margin are to be found in Adelaide, which is also partly a function of the demise of the car manufacturing industry.

Photo Source: petewargent.blogspot.com.au

The wrap

The latest Detailed Labour Force data has suggested a gradual rebalancing of employment to the capital cities.

However, with nearly 50,000 mining jobs lost in only 12 months and some 23,500 manufacturing positions too, there are plenty of regions which are expected to face a very challenging period ahead.

Consequently it is not surprising to note that capital city population growth is now surging way ahead of regional population growth as the mining investment boom falls away.