Leading Indicator of Employment latest release

Monthly Leading Indicator of Employment – March 2023

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The Monthly Leading Indicator of Employment (the Indicator) fell for the twelfth consecutive month in March 2023. This month’s fall is due to falls in three of the five Indicator components, especially the NAB Forward Orders Index and the US 10-year 3-month yield difference, offset partially by the rise in China’s Purchasing Managers Index for Manufacturing Output.

The Indicator has a track record of predicting turning points in cyclical employment, with an average lag of between 12-18 months. On this occasion, however, the Indicator’s confirmed peak in March 2022 was followed nine months later with the peak in cyclical employment in December 2022. While employment (in trend terms) is still rising (3.1 per cent over the year to February 2023) it is expected to slow down, to below its long-term trend rate of 2.0 per cent per annum.

Levels of the Leading Indicator of Employment & Cyclical Employment

March 2023 Leading Indicator

Monthly Changes in Value of Leading Indicator*

  Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23
Change in Leading Indicator -0.339 -0.324 -0.266 -0.180 -0.102 -0.050

*monthly changes in standard deviations from the cyclical trend.

Components of the Leading Indicator**

Series Contribution to Change in Leading Indicator
Contribution to Change in Leading Indicator
Contribution to Change in Leading Indicator
China’s Purchasing Managers Index for Manufacturing Output (March 2023 release)  0.054  0.108  0.129
US Yield Difference
(10-year vs. 3-month interest rates, March 2023 release)
-0.085 -0.074 -0.065
NAB Forward Orders Index
(February 2023 release)
-0.112 -0.098 -0.082
Westpac-Melbourne Institute Leading Index of Economic Activity
(February 2023 release)
-0.037 -0.037 -0.034
Westpac-Melbourne Institute Consumer Sentiment Index
(February 2023 release)
 0.000  0.000  0.002
Change in Leading Indicator: -0.180 -0.102 -0.050

**Note: The cyclical components of each series contribute to the monthly movements in the Indicator. Each series in the Indicator has the same weight of 20 per cent. The units of measurement for the contributions to change in the Indicator are monthly changes in the standard deviation from the long-term trend. NBSC stands for the National Bureau of Statistics of China.

Technical Notes

The Indicator is designed to give advance warning of turning points in ‘cyclical employment’ (i.e. the deviation of the centred one-year trend in employment from the centred six-year trend). The average lead time of the Indicator over the series (i.e. the time between a peak or trough in the Indicator and the corresponding peak or trough in cyclical employment) is over a year. A ‘turning point’ in the Indicator is said to be confirmed when there are six consecutive monthly movements in the same direction after the turning point. A fall (or rise) in the Indicator does not necessarily mean that the level of employment will immediately fall (or rise). Rather, it implies that after a lag, the growth rate of employment may fall below (or rise above) its centred six-year trend rate.

The Indicator is the average of the normalised and standardised cyclical elements of the five series in the table above, which have been shown to lead cyclical employment consistently over a long period. The cyclical components and the composite Indicator for previous months are subject to revision when new statistics are incorporated.

The date of the issue of the Indicator, and the labels for the x-axis of the chart, relate to the month the Indicator is released. The data used to derive the cyclical employment, however, are two months behind the release month for the Indicator. The data for the NBSC Purchasing Managers’ Index and US Yield Difference are one month behind their release dates, while data for the other three component series are two months behind their release dates.

Release Details

The Indicator is available on the Department of Employment and Workplace Relations website at approximately 2 pm AEDT on the day of its release. The next issue is scheduled for release on Wednesday 12 April 2023.

Contact Officer

Mr Dominic McNally/Mr Kerry Guan/Ms Kehan Zhao
Economic Analysis Section, Department of Employment and Workplace Relations
Email: leading.indicator@dewr.gov.au