Longer term outlook for employment moves negative
Business sits on its hands amid domestic and international uncertainties Western Australia best performing larger state
The demand for Australian executives was stagnant in August as business worries about all the uncertainties of a plethora of both domestic and international factors, according to the E.L. Executive Demand Index.
The zero result follows on from positive returns in the prior months and further reinforces predictions that executive employment has now reached a high point.
Mr Grant Montgomery, Managing Director of E.L Consult, a leading executive search firm that researches and publishes the E.L. Executive Demand Index, said: “The long-term trend for executive employment has now turned negative.
“As highlighted in previous reports rising interest rates, high inflation here and internationally and wars and threats of war are all taking their toll on business confidence.
“Executive employment is a costly exercise for companies, and they are obviously not confident enough in the future to rush into that kind of investment with so many risks
“Fortunately, as executives are employed on perceptions of future growth, and therefore a lead indictor, it is not likely that general employment will fall for few months yet.
“In the over 20 years that the E.L Index has been produced it has been observed there is a strong correlation between the level of executive employment and that of general employment but an average of a three-month delay between changes in executive and general employment
Mr Montgomery said, “Currently inflation is coinciding with wages growth in some of the world, most notably the US, but if this does not continue there is the possibility of stagflation, (high inflation, rising unemployment and low growth) for the first time since the 1970s.
“In Australia, annual CPI inflation increased to 6.1 per cent in the June quarter, due to higher dwelling construction costs and petrol prices.
“That is a 21-year high and is likely to surge even further as food and energy costs explode, stoking speculation interest rates will need to more than double to bring the outbreak under control.
“Annual ‘trimmed mean’ inflation, which excludes large price rises and falls, increased to 4.9 per cent, the highest since the ABS first published the series in 2003.
“According to the Federal Treasurer, Australia’s inflation will peak at an annual rate of 7.75% by the December quarter of 2022 and fall gradually.
“The Treasurer believes this fall will allow wage growth to begin providing workers with real salary increases by the 2023-24 fiscal year. However, if inflation does not fall, and there is no productivity growth my the higher paid workers then stagflation could be the unwanted outcome.
“It is difficult to say if we are on the start of a slippery slope to a recession, but a lot will depend on the US economy that is technically at least, at that point now.
“In its June 2022 global economic forecast, the World Bank warned that the risk of stagflation has risen due to a “sharp slowdown” in global economic growth coinciding with a “steep” rise in the rate of inflation to multi-decade highs.
“The International Monetary Fund now expects global inflation to reach 8.3% by the end of this year, driven by higher food and energy prices, and strained supply chains.”
Nationally, the August E.L Index, Marketing was the strongest sector, followed, surprisingly, by the Engineering sector. This could be due to some heavy supply chain investment, and a small but detectable revival of local manufacturing as arguments of supply chain security become a bigger national issue than simply cheaper manufacturing costs.
South Australia had the biggest Engineering rise at 58 per cent but Victoria put in 15 per cent, probably as a result of some new infrastructure projects becoming shovel ready.
Western Australia performed the best of the bigger states with an 8 per cent rise, driven primarily by an improvement in its Information Technology and Communications hiring.
Call Grant Montgomery on +612 9221 6688 or 0414926688 for further details
Click here to download the full E.L Index report