The latest EL Consult Demand Index, reveals that despite coming off a low base, the IT sector demand for executives in February rose by 34% over January, to maintain its position as the best performing sector. This follows the 1% increase in January against the general trend that month, and when the result was underpinned by positive results in the ACT, Victoria and Queensland.
The February result means the IT sector remains well above its recent lows and in the middle of its recent trading range – unlike all of the other sectors.
The performance of the IT sector last month is also better than for the same period in 2014, when demand for IT executives was at 136 points on the Index compared to 155 points for February this year.
But that’s not the case for most other industry sectors, with demand for executives still lagging demand during the same period last year.
The fact is that executive demand in nearly all sectors last month – with the exception of IT – is down when compared to demand in February 2014 - the national index for February this year stands at 252 compared to 278 in February last year.
Even EL Consult managing director, Grant Montgomery, is cautious about executive demand going forward this year.
“While the numbers of new executive jobs this month are astounding we do not believe that next month will mirror this result,” Montgomery cautions.
“February figures are traditionally affected by a seasonal pickup after a quiet January and it would be misleading to say that this month is the start of a trend but there is no question that this and the general unemployment figures are a move in the right direction.”
Montgomery does say, however, that the “strong” rise of 24% in the index for February does give an indication that the Australian economy “may not be as sluggish” as currently thought.
According to Montgomery, the February result shows that international employers are reacting to cheaper Australian wage costs in US dollar terms, and the Australian dollar adjustment is starting to assist in the internationally competitive industries like tourism biotech and financial services.
And, he says the strong showing of the index gives some context as to why the Reserve Bank failed to follow up its recent 0.25% point cut in interest rates with another 0.25% point cut as expected.
“The RBA has a wide source of data and probably saw that lowering rates two months in a row might do more to excite real estate values than to stimulate the overall economy.
“I still expect interest rates have further to fall but a softly, softly approach makes a lot of sense particularly since a lot of heavy lifting in lowering the Australian dollar is being done by the Federal Reserve as it continues to create a perception that it will raise US rates in the coming months.
“On an international comparison the Australian economy is very sluggish and needs help but purely lowering interest rate can have the wrong effect. The real focus should be on the exchange rate.
“The E.L Index’s substantial performance this month is a key indicator that lower exchange rates have a powerful effect. As a lead indicator it is also showing that general unemployment will improve over the coming 3-6 months as our wage costs become more competitive. Slower wage rises and a 30% drop in the US/AUD exchange rate is having the effect on employment that is expected.
“The recent ABS result on general unemployment backs this up.”
Montgomery says that the markets are stabilising, and the Australian dollar has found a new, lower, range, “at least for the moment”.
And, Montgomery says tourism is just one of many industries along with education, business services and research that immediately benefit from better exchange rates.
“All service sectors have something to gain and eventually, though it’s still a long way off yet, some higher skilled manufacturing business could find themselves competitive.
“We have a reputation of high standards and our regulations and institutions give us some tremendous advantages that we need to we can leverage.”
Montgomery concludes that while executive employment improvements for February were across the board in every State and sector, NSW engineering was the star performer “no doubt buoyed by the major investment being made there in infrastructure improvement”.