Random Analytica

Still a Tough Old Road

In my most recent analysis of the mining sector the March data highlighted a return to positive employment sentiment for the first time in nine months backed by a series of increasing commodity price gains across most mineral commodities. Unfortunately for manufacturing the Workforce Planning Scan has shown a steep decline since commodities withdrew from historical highs (around May/June 2012). I’m sure the sector would be happy with a return back to the period when the data was at best flat or when it experienced its last Australian employment increase (up by 5,300 according to the ABS data from November 2011 through to February 2012).

Looking at the positive/negative index for Employment over the past 13-months you can easily identify the flat, almost neutral period prior to End-Of-Financial-Year 2011/2012 and the subsequent decline since July 2012. January 2013 was the worst month on record while February and March saw a small improvement (all tracked via the 3-point polynomial trend-line). It should be noted however that any indicator which records <5 negative readings is in a very poor state.

An almost 5:1 ratio of bad over good news stories saw Employment continue to lead the story count, the seventh consecutive month and counting. Engagement (20%) came in a close second with 11-stories, mainly focussed on what seems to be an annual March-April conference season (something I intend to look at in detail next month). Third was Learning & Development/Research & Development (16.4%) tracking a little bit higher than its 12-month average of 10.2%.

Learning & Development/Research & Development with a sentiment score of +3 was the only positive indicator for manufacturing in March! L&D/R&D generally tracks positively and March saw some good news from ongoing research and an extension of the Apprentice Kick-start Initiative by the federal government with the hope of boosting new entrants into building, construction, and engineering.

As mentioned previously Employment continued to disappoint with a -7 sentiment for March. Migrate/Visa finished the month on -2 after the Prime Minister, Julia Gillard, contentiously raised the issue of 457-visa’s (skilled workforce quota).

It is my view that this indicator would have finished with a greater proportion of stories and a more negative sentiment; however the 21^st March internal Labor spill that didn’t really occur robbed the government of its 457-topic momentum. Remuneration also finished weaker on -2 after reports of weaker wages growth.

Here is a look at the indicator data for March.

No entries for Augmentation and Australian Made in March. The lack of Augmentation stories especially is interesting, given that there is now some consensus that the high Australian dollar is here to stay and productivity via technology is a must-have option.

Another interesting point. So far in 2013 there hasn’t been a single Diversity, Recruit/Retain, Skills Shortage or Work/Life story recorded which reflects the sectors weakened state and its inability to compete for employees due to high cost inputs and global competition.

March was the first month of 2013 when jobs lost did not top the four-figure mark, although the monthly average is still over 1,100.

Given the trend at the moment a loss in the hundreds is much better than in the thousands.

It wasn’t the manufacturing hubs which dominated the story count this month. New South Wales topped the list with 16-stories (10.9%) followed by Victoria and South Australia at 11-stories apiece (7.5%) and the mining states of Queensland and Western Australia with nine each (6.1%).

National stories were aplenty with Australian topics recording 66 (44.9%). Of the final international Workforce Planning stories, four (2.7%) were global, seven were European (4.1% with 3 from that continents manufacturing powerhouse, Germany), four were Asian (3 from China) and New Zealand recorded two.

The story of the month was in relation to the death of a glass worker at Wollongong. This was the third consecutive month with a reported death, two of which were in glass manufacturing and the second in New South Wales this year. It run could have been worse, as a tonne of glass fell on a worker in Queensland in December causing severe injuries and three other Australian workers were killed in separate incidents during October and November.

Manufacturing can be dangerous so be careful out there.

Final thoughts and two indicators to watch…

Outside of some recent talk about increased productivity as business starts to respond to the high Australian dollar and creates efficiencies to counteract global competiveness I can see no reason why anyone would be even remotely optimistic about manufacturing in this country.

Possibly one of the best guides on how poorly the sector is performing was Manufacturing Australia’s own call for cheaper energy via Sue Morphet, effectively a request for industry subsidies. Sue replaced Dick Warburton in March as the Chairman for Manufacturing Australia and did not deny the sectors woes during her 7.30 interview.

Having ‘structurally adjusted’ Pacific Brands as its CEO with the loss of 1,850 Australian manufacturing jobs (to Asia) why would any other CEO credibly listen to her asking them to save Australian positions?

The attacks by the Labor government recently of the 457-program which is a skilled visa entry rather than a more detailed discussion on Enterprise Migration Agreements (effectively a non-skilled program) could make Migrate/Visa an indicator to watch. I hope that I am wrong and sanity returns to that area.

Employment plus the jobs gained and lost is still the only important manufacturing indicators at the moment. One can only hope the numbers going forward will be kinder than the ones we have seen over the past 12-months.

I’m still very bearish about Australian manufacturing and I very much doubt that we have reached the end of the current negative cycle.