According to the latest EL Consult Executive Demand Index, last month the IT sector remained well above its recent lows and in the middle of its recent trading range – unlike all of the other sectors.
Information Technology was one of only two sectors not to fall in January, with the sector underpinned by positive results in New South Wales, South Australia and Western Australia.
In this latest report, EL says that Demand for Australian executives rose a small 2% in January, and that it is very clear when looking at the where the executive employment demand is going that the Australian economy is weakening.
Montgomery says, however, that growth in China, Australia’s biggest trading partner, is easing and this will have continuing ramifications throughout the economy and show why it is likely that the Reserve Bank will continue on a rate cutting agenda over the next quarter.
Montgomery, says that, as predicted in EL’s December report, the weakness in employment growth across Australia in all industry sectors has led to the Reserve Bank cutting interest rates.
And, while general employment is also weak, Montgomery says that the executive level employment levels are a better indicator of where the overall economy is going by showing where the actual investment is being made.
Montgomery points out that while the small rise of 2% in January might be surprising for the holiday period close analysis shows this was driven almost entirely by activity in marketing and merchandising and is unlikely to effect the Reserve Bank continuing a cut program into this year.
“Three months ago we said the weakness in the employment market was creating the conditions for a cut in interest rates in the year.
“We might have been a couple of months early, but we made this prediction at a time when many economists were still thinking there might be an increase in interest rates.
“And given the only mild recovery in the executive employment market in January, we expect the Reserve Bank to again cut official rates by a further 0.25% to try and stimulate the local economy, and tame the value of the Australian dollar.
“As always there are a lot of factors in the interest rate equation but it is worth noting that even after the recent 0.25 per cent fall Australia’s rates continue to be amongst the highest in the developed world.”
Montgomery says that despite the 2% increase in executive job opportunities in January, the EL Index remains almost 10% below the same time in 2014, and “what is more unusual is that an increase in demand in any sector rarely happens in January which is traditionally holiday and shutdown for many Australian businesses”.
“That there is holiday activity, no matter how small, shows how the profile of the economy and the jobs market is changing. As we move away from manufacturing and more into a service based economy so we changing from the traditional January shutdown to a 24/7 model. A trend that is further driven by increasing internet based service delivery.”