For the first time in more than two years, companies in Australia’s gigantic services sector have shed staff members. And if you think that news doesn’t affect you, think again.
The services sector is the nation’s biggest employer, with around 70 per cent of Aussie workers filling roles within that industry.
In fact, it comprises many industries under the one umbrella — everything from retail and hospitality to teaching, nursing, trades and even health and education.
So when news broke that activity across that sector had slowed in December, experts took notice.
That’s because the Australian Industry Group’s (Ai Group) Performance of Services Index (PSI) — which measures the sector’s performance month on month — showed a three-point drop to 52.1 in December in seasonally adjusted terms.
It’s a slight improvement of October’s figure, which was 51.1 — the worst result in years.
In its latest report released this week, Ai Group Chief Executive Innes Willox said business-orientated areas were the worst hit.
“While still growing, the services sectors slowed at the end of the 2018 as contractions in business-orientated sectors weighed against the more buoyant consumer facing sub sectors,” he said.
But the employment subindex was more worrying, falling to 45.5 — a 7.4 point drop from November, and remaining at the lowest level since September 2016.
According to Business Insider, companies have revealed they have cut staff for the first time in more than two years — and given that the sector is our largest employer, many have taken it as a concerning sign of possible things to come.
However, David Solnet, associate professor of service management at the University of Queensland Business School, said the figures weren’t cause for alarm — yet.
Speaking generally about the services sector and the wider economy, he said overall signs were good and that he didn’t expect the downward trend to continue.
He said while there may be some nerves surrounding the global and local economy, a likely change in government early this year, trade wars, tariffs and international spats, for the most part, it was “highly likely this is not a trend, but a blip”.
Prof Solnet also noted that the broad definition of the “services sector” made it hard to accurately see what was really going on, and that even something as small as disappointing December retail sales or regional factors like floods or fires could skew results.
“A small decrease in sales or revenue could cause disappointment and cause an immediate impact on casual employment … expectations for December can be too high, and the services sector can be seasonal,” Prof Solnet said.
“But I can’t think of any reason for alarm. If January and February show similar downwards trends then somebody does need to investigate that and figure out the underlying causes.”
He said some industries within the services sector — such as tourism — were actually booming.
That’s backed up by brand new figures from the Australian Bureau of Statistics, which revealed job vacancies had soared to an all-time high over September to November 2018.
Overall vacancies rose a seasonally adjusted 1.3 per cent to 245,700 in that three-month period, compared to the previous quarter when they increased 1.1 per cent.
Vacancies in the private sector rose 1.1 per cent to 220,000, while the public sector recorded a vacancies increase of 4 per cent to 21,600.
However, our manufacturing sector shrank for the first time in over two years in December and a similar result is also on the cards for the construction industry, Business Insider reported.
The Ai Group report also showed new orders had risen solidly, meaning there was more reason to believe a slowdown and cuts to staff could just be temporary.
Bridget Loudon, CEO of freelance jobs marketplace and management platform Expert360, said the latest figures were a concern.
“This decrease in jobs is due in part to a softening in demand for full time headcount as economic uncertainty hits global markets,” Ms Loudon said.
“With companies facing increased pressure on the bottom line, laser focus will centre on continued balance sheet prudence.
“The ability to flex workforces accordingly, to suit demand, businesses needs and objectives will likely become a key initiative for executive leaders in 2019.”
Continue the conversation @carey_alexis | firstname.lastname@example.org