Job hopes lift on 2014 outlook

Employment index reaches 18-month high

Twice as many businesses intend to hire staff in the New Year compared to the final months of 2013, reversing 18 months of weak expectations on employment and signalling that confidence in the economy is building.

Despite the International Monetary Fund forecasting that Australia's unemployment rate will rise from its current official level of 5.7 per cent, to over six per cent in 2014, the most recent Business Expectations Survey from Dun & Bradstreet suggests that companies are more optimistic.

Ten per cent of businesses surveyed by D&B intend to take on new staff in the first quarter of 2014, while five per cent plan to reduce their employment activity. In the previous quarter, just four per cent of businesses indicated they would lift employment, and a year earlier the response was seven per cent.

The more positive outlook has taken D&B's employment index to 5.1 points, its highest level since the June quarter 2012 and above zero for the first time in six months. Meanwhile, actual employment reported by businesses for the September quarter of this year improved sharply from -8 points to -0.8 points.

BEX chart 1 - Q1 2014 interim
 

Supporting their capacity to employ more staff, D&B's survey has found that 25 per cent of businesses expect stronger sales in the first three months of next year; a lift from 15 per cent in the previous quarter. Additionally, 33 per cent anticipate higher profits; an increase from 28 per cent.

In more general positive findings, D&B's survey also reveals that 70 per cent of respondents are more optimistic about growth in the New Year compared to 2013.

"These findings on employment intentions are a particular bright note among generally improving business sentiment," said Danielle Woods, Director of Corporate Affairs at Dun & Bradstreet.

"While other business projections have been strengthening across the past couple of quarters, the employment expectations index had been continuing a steady downward trend," Ms Woods said.

"This turnaround, especially given the recent lift in the official jobless rate, provides hope that forecasts for unemployment beyond the six per cent mark may be over-estimations, and that Australian businesses are in reasonable shape.

"Given employment activity is essential to consumer spending and an indicator that the corporate sector is healthy and willing to invest, then a sustained pick-up in this index across the coming months would be significant for the economy," she added.

In further signs of confidence in future business conditions, capital investment expectations have lifted out of negative territory, with the D&B index rising from -0.4 points for Q4 2013 to 4.8 points; just below the survey's 10-year average of five points. Additionally, 16 per cent of the businesses surveyed in November intend to access new credit or finance to grow their operations in Q1 2014; the highest response recorded this year.

BEX chart 2 - Q1 2014 interim

"The hint of optimism about the business climate that was evident around the September quarter 2013 is developing into a broadly based upswing," said Stephen Koukoulas, Economic Adviser to Dun & Bradstreet.

"Not only are firms optimistic about expected sales, profits and selling prices, but there is a clear uptrend now evident in expected capital expenditure and employment.

"The current dynamics in the Business Expectations Survey suggests GDP growth will exceed 3 per cent in 2014," he added.

"There is little prospect for further interest rate cuts with expected selling prices on the rise. Indeed, if the upward momentum in business conditions continues with similar momentum in the months ahead, the market will be correct to price in interest rate increases during 2014.

"This is a good news story, with the business sector increasingly positive about the economic outlook."

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