Monthly Media Brief

Employment | The Economy | Contract Workforce

A CXC Global Knowledge Initiative

February 2017

THE ECONOMYThe following summary of media coverage relating to the economic outlook for Australia, covers the period: Dec 2016-Feb 2017 Dated: 17 February, 2017

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Australia’s Economic Outlook

But in terms of the past 2 weeks, there’s been an overall upswing in business & consumer sentiment. Business survey out this week (Access Economics), shows a more positive outlook.

Retail sales continued to slow in November, while the labor market showed signs of moderation, with the unemployment rate ticking up a couple of notches to close out the year. This had a knock-on effect on consumer sentiment, which ended 2016 on a low note and remained broadly stable at the start of the year.

The Australian economy posted its worst performance since the global financial crisis in the September quarter 2016. While economists expect the economy to avoid two consecutive quarters of negative growth and a technical recession, it is a threat hanging over the nation until the next set of national accounts figures in early March. At an annual rate of 1.8% it is running well below a long-run average of just under three per cent, which will keep pressure on the jobless rate. The government does not expect a three per cent growth rate until the start of 2018.

The RBA has been reluctant to trim cash rate again, after cutting to a record low of 1.5% in August 2016.

However, growth figures were weaker than the RBA had been expecting, causing some economists to believe a cut will be on the cards after the Feb meeting last week - this didn’t end up happening.

Economic Outlook

Australia’s AAA credit rating survived the pre-Xmas and Mid Year Economic Fiscal Outlook (MYEFO).

It’s not expected to survive the May Budget. Many analysts believe S&P will strip Australia of its rating - some speculating that it’s a matter of ‘when’ not ‘if’. But this is up for debate.

If this does happen, it could be an indication of the Fed Govt’s limited capacity to respond to economic challenges, amidst increased spending. And it has the real potential to undermine Australia’s position as a sound economic market, which will result in foreign investment dollars pouring out of our country. A tough position for the many businesses, that rely on foreign investment.

This will also see an increase in the cost of offshore funding for Australian banks, because of downgraded credit ratings.

Economic Outlook

CHINA SLOWDOWN: The biggest threat for Australia currently, is the economic health of our biggest trading partner. China’s private debt is up there as one of the highest in the world (along with Australia’s).

Beyond a full-scale financial meltdown, there are indications China will shift its economic focus, away from heavy industry & construction to services.

Last year, China boosted commodity prices by increasing infrastructure spending, relaxing restrictions on real estate investment, and cutting coal production. Even moderate moves to limit growth in these sectors will see a backflip in the commodity price gains, and with it, any potential boost to Australia’s national income.

HOUSING AFFORDABILITY: Houses in Sydney & Melbourne have never been less affordable, relative to most measures, but in particular relative to incomes & rents. Having said that, there isn’t a housing shortage, in fact with the proliferation of construction in Australia, we’re likely to very soon, be seeing a glut (especially of apartments).

Economic Outlook

The expectation is that there will be a drop in investor demand: banks are under pressure to uphold lending standards; global interest rates are on the rise; there’s new taxes on foreign buyers; and a crackdown on money leaving China - all of which points to a drop in investor demand.

Hence, declining demand, increasing supply, an already expensive product all point to a likely price drop in property by the end of 2017 - an expectation of many analysts.

Economic Outlook

REMEMBER: Over the past few years, Australia has embarked on the most epic apartment construction boom in our history. With this likely softening (thanks to the glut), and knowing the construction industry accounts for almost 10% of employment, this poses another economic risk for Australia this year.

Morgan Stanley predicts up to 200,000 jobs could go, as a result of the construction downturn over the next year. This could lead to an unemployment rate of 6.5%.

Economic Outlook

THE TRUMP FACTOR: Despite the positive sharemarket response to Trump’s surprise win in November, there’s real concern about ongoing positive impact, given his policy platform.

If he fails to deliver on his stimulus promises, the US sharemarket will suffer, with inevitable global fallout. Having said that, if Trump delivers on his promise to boost infrastructure spending, the stimulus to the US economy could see the Federal Reserve increase interest rates faster than expected.

This will cause unease in developing markets, as money is redirected back to the US. It will also increase the cost of debt, which is largely dominated by the $US.

Rising $US & interest rates could also undermine the very economic recovery that is prompting them higher.

Keep in mind, there will be significant fallout if Trump delivers on his promises to roll back various free trade agreements and impose new tariffs on many major trading partners.

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Greece

EUROPE: Brexit was the shock of 2016, until Trump took over the Whitehouse. This year, attention in Europe will be on France & Germany who both have elections.

In France, the right-wing candidate (a euro sceptic) looks likely to win. In Germany, Angela Merkel is under pressure mainly due to her policies of welcoming Syrian refugees.

Italy will likely go to elections this year instead of 2018, after it lost its Prime Minister in 2016 whose constitutional referendum was rejected.

In summary: if any of these nations pull out of the common currency, there’s great risk the whole Union will collapse. Which will make the Greek debt crisis look minor.

Economic Outlook

Consumer sentiment rose by 0.3% in September compared to August, when it increased 2%. Hence the index was up a healthy 8% on the same quarter, YOY.

Wage growth will remain weak in

2017/2018. Budget deficit will

likely improve. Housing construction

has peaked. Adjustment to the

mining slowdown still happening.

GDP is expected to grow 2.8% this year, rising to 2.9 in 2018. The RBA is expected to lift rates 3 times in 2018.

Economic Outlook

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In summary…

Australia’s shock economic contraction in the September quarter, was likely a one-off - this means we’ll likely surpass the Netherlands in having the world’s longest-run without recession.

Most economists believe Australia has the potential to continue growth throughout 2017. Having said that, there seems to be a deep divide in the expectations of analysts.

If there’s an ongoing slump in business investment, this will be exacerbated by the likely slowdown in housing construction. Couple this with a sluggish consumption growth due to a negligible rise in real wages and a weakening labour market, and we have the grounds for a potentially shaky 2017.

Economic Outlook

JOBS OUTLOOKThe following summary of media coverage relating to the jobs outlook for Australia, covers the period: Dec 2016-Feb 2017 Dated: 17 February, 2017

• Australia’s jobless rate fell in January 2017, after a significant surge in part-time work

• Unemployment rate fell to 5.7% from 5.8%, beating expectations for a steady rate at 5.8%

• Part-time work increased by 58,300 jobs • Decline of 44,800 full-time roles • The number of people working full-time is no higher than it

was August 2015 • Wage growth is low, as people are working fewer hours,

and there’s an excess supply of labour • Full-time job creation in the December quarter was the

strongest in 6 years, so the drop in Jan not surprising • Total employment rose by 13,500 • Steady labour market supports the Reserve Bank’s take

that a gradual improvement in employment will take place in 2017

• There are improvements in forward looking indicators for the jobs market, according to NAB’s latest survey

• Labour force participation rate (measures proportion of working age population either in a job or looking for one), declined slightly in January to 64.6% from 64.7%, helping push the unemployment rate lower

• Under-employment is increasing which is a concern, whereby people aren’t getting the employment hours they want or need

Labour Force Participation Rate

Unemployment Rate 5.7%

Jobs Outlook

With Ford shutting down at the end of 2016, 600 jobs were lost. When Holden & Toyota follow suit, as it expected this year, automotive industry groups estimate up to 40k jobs will be lost: if none of these auto-workers found new jobs, the unemployment rate will rise above 6%, it’s expected.

The risk posed by the auto industry is potentially far-reaching for both unemployment and under-employment: well-paid manufacturing jobs will be likely replaced with lower-paid, part-time & casual service sector jobs.

INDUSTRY SPOTLIGHT AUTOMOTIVE:

Over the past 12 months, employment increased by 163,134, the smallest annual gain recorded since April last year. In percentage terms, employment grew by 1.38% over the past year, also the slowest pace since April 2015

Jobs Outlook

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Part-time employment has grown by 5.4% over the past year, the fastest pace seen since January 2010. On the other hand, full-time employment has fallen by 0.4%, the first decline registered since April 2014. It now sits at the lowest level since February 2013

Unemployment Rate in Australia averaged 6.93% from 1978 until 2016, reaching an all time high of 11.10% in October of 1992 and a record low of 4% in February 2008 (unemployment Rate in Australia as reported by the Australian Bureau of Statistics)

A similar risk to that of the auto industry, faced with a continuing downturn, rising underemployment & unemployment will result. The RBA estimates at least 3/4 of the decline in mining construction has passed. BIS Shrapnel, alternatively, believes Aus is only half way through the resources downturn.

The difference in estimates is worth $10’s of billions & 10’s of thousands of jobs. Mining related construction employs far more during construction, than operation, at an estimated ratio of 10 or 20:1.

INDUSTRY SPOTLIGHT: MINING

CONTINGENT WORKFORCE COVERAGEThe following summary of media coverage relating to Contingent Workforces, covers the period: Dec 2016-Feb 2017 Dated: 17 February, 2017

The exploding number of ‘gig’ or contingent workers, globally, continues to dominate the workforce & HR media news.

This classification of worker is the fastest growing in the US and is expected to continue into the foreseeable future.

We’re seeing a lot of coverage on how to manage contingent workers, a sign that their credibility & importance in the business environment is growing.

We’re also seeing significant coverage on the technology side of managing contractors & gig workers.

Overall, the sentiment we’re seeing in the media is largely positive. Mostly, the expectation is that the developments & trends in the contingent workforce market that we saw taking shape in 2016 (increased usage of contractors, technology growth, increased usage of services procurement), will continue in 2017.

Contract Work

Contract Work

There’s a firm belief that the majority of the workforce, cobbling together to do ‘gigs’ is overblown. Not everyone is going to freelance, but technology is certainly gaining exposure, especially in how we interface with and schedule work, including ‘support’ work and highly specialised skills.

Gigwalk is a software platform that’s a good example. It provides mobile tools that help companies manage their own distributed teams, and enable them to seamlessly engage talent pools outside of their business.

Said their CEO, David Hale: “The on-demand model won’t disrupt & replace most companies, but companies will definitely adopt on-demand technology to provide schedule flexibility options for their workforce”.

Performance metrics of gig and contingent workers is becoming increasing important. In particular, costs are monitored more closely, as they are directly tied to operating margins, and time to fill is being noted as a crucial metric. For an organisation that hires thousands of contractors each year, analysis & improvement will have a significant impact on the bottom line.

TECHNOLOGYA broader coverage of the online tools used to manage contingent workers.

Contract Work

CATALANT: Over 30k professionals registered for on-demand work. Companies use Catalant to access professionals on an as-needs basis. “We help companies find exactly what they need, when they need it, whether that expertise is a highly skilled freelancer, a large or small consulting firm, a retiree from your firm, or a skilled expert”. WORK MARKET: Helps procurement professionals drive better adherence to corporate standards and improve their leverage of the supplier ecosystem - using a simple algorithmic cloud-based software. It provides quality supplier hygiene via the powerful software which automates how labour is vetted, provisioned & sourced. This is a progressive procurement technology.

WONOLO: An on-demand staffing network, able to predict whether jobs are going to be filled, whether there will be no-shows, or reliability issues. Fundamentally changing the way companies are finding workers and getting their jobs filled.

BRIGHTFIELD STRAGTEGIES: A natural language processing software of job descriptions for services procurement, to automatically structure & summarise the unstructured text of SOW contracts. Effectively, it reads all the key elements of a contract into a series of fields. Provides rapid visibility to services procurement spending segments, spending behaviours and potential savings.

EY study, released at the end of January 2017, found:

Contract Work

- One in two employers reported increasing their use of gig workers over the last five years

- The number of workers engaged in alternative work arrangements rose by 66% in the 10 years to 2015

- There are several reasons for this rapid increase in the use of contingent workers, not the least of which is the lasting effects of the 2008-9 global recession. This period created a sharp focus on cost control, which ultimately resulted in a contraction of full-time employment

- Behavioural, regulatory and policy shifts, and changes in expectations meant that both workers and organisations adjusted to and embraced the flexibility that contingent work arrangements provided, while technology served to facilitate a more seamless interaction

- If part- time workers are included, a wider definition of contingent work used that captures a range of “alternative work arrangements”, as much as 40% to 50% of the workforce could be in non-permanent employment by 2020

- In the UK, the number of self-employed has touched record highs at 4.8 million, growing 28% over the 10 years to 2016, against only 6% growth in UK employees in the same time period

- There are similar stories of rapid growth in the self- employed workforce in the Netherlands, Belgium, France and Australia. The rise of the gig economy is increasingly a global phenomenon

- There is also a more strategic and change management element to drawing on contingent workers: organisations are using contingent workers to overcome resistance to change within legacy workforces

- When it comes to managing the contingent workforce, many organisations currently suffer from fragmented governance models, and manual systems and processes. In many cases, organisations are using basic tools to measure contingent workforce performance rather than data analytics

- While there are major opportunities to gain efficiencies from the flexibility that embracing the gig economy offers, organisations need to fix the lack of leadership accountability and governance over their contingent workforce

- By working together and collaborating on ways to overcome the potential risks, organisations and giggers alike can ride a rising tide that will lift all boats to economic prosperity and performance

www.bls.net

Contract Work

EY study, released at the end of January 2017, found:

Sources: www.abs.gov.au www.abc.net.au/news http://www.focus-economics.com/countries/australia www.ey.com/gigeconomy http://www.hcamag.com/ http://www.afr.com/news/economy https://www.wonolo.com/ https://www.benzinga.com/ https://spendmatters.com/ https://www.workmarket.com/ http://start.gocatalant.com/ http://brightfieldstrategies.com/ http://www.smh.com.au/ http://cporising.com/