The recent Labour force release from the Australian Bureau Statistics reported that the unemployment rate decreased from 5.0% to 4.9%. What does this mean for house price inflation?
Chart.1 Unemployment in 2011
Chart.1 shows the recent employment rate at the beginning of the year to current. Most notable is the marked improvement in the unemployment rate in mineral rich West Australia and Victoria. Surprisingly, the unemployment rate in service dominated New South Wales rose by 0.5%.Unemployment for Australia as a whole was down 0.1%
Chart.2 Employment Growth and House Price
In the latest cycle, the momentum in house price growth has slowed. The slowdown in house price growth began prior to the slowdown in employment growth. This could be due to the interest rise resulting in a lack of affordability.
Chart.3 shows the employment levels (seasonally adj.) for the different states re-based to June 1991, the bottom of the last major recession.
Australian Employment Growth since June 1991
Queensland (up 78%) and West Australia (up 69%) employment growth has outpaced the rest of the nation since the bottom of the June 1991 recession. Tasmania (up 23%) and South Australia (up 27%) have been the laggards. Employment for the entire country rose by 39%. A prior blog post reviews the house price performance of eight main cities in Australia.
Despite low levels of unemployment, house price growth has begun to moderate due to affordability issues. It will be interesting to see if the next report, due on May 12, provides further evidence of a continued slow down on house price inflation. In the future I shall look at activity in the rental market.