The right way to think about Job Vacancies

My read of recent RBA communication, particularly RBA Ellis’s speech on the household sector earlier this week, is that the Bank is worried about a consumption slowdown that bleeds into the rest of the economy.

It is therefore through that lens that today’s ABS job vacancies report should be viewed. For while aggregate job vacancy growth has been decent, the split between the consumption sectors (retail, wholesale, accommodation and food services & rental / real estate) and the non-consumption sectors shows the problem.

Job vacancies in the consumption sector are down ~5% yoy, with the down-trend pretty clearly in place. To my eye this matches the housing slowdown pretty well (though the RBA has been resisting that commonsense conclusion).

Job vacancies in the rest of the sectors are growing very strongly (+14%y/y).

The RBA’s worry is that consumption slows and that slower consumption causes the unemployment rate to rise, and further weighs on the inflation outlook. The vacancy data suggests that worry is well founded.

Here’s Ellis from Tuesday’s speech:

“Household consumption spending is a large part of economic activity. A significant retrenchment there would lower growth and feed back into a weaker labour market, as well as into decisions to purchase housing.”