Employment intentions hold

More businesses plan to hire staff in next three months 

1 April 2014

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The number of businesses indicating they will hire staff in the months ahead has increased for a third consecutive quarter, supporting a view that underlying economic conditions are stable and that confidence is sound in spite of recent high-profile company and industry announcements on job cuts.

According to Dun & Bradstreet's latest Business Expectations Survey, 22 per cent of businesses plan to employ new staff during Q2 2014, compared to 12 per cent which expect to reduce numbers. The response from businesses has lifted the employment expectations index to 9.2 points, up from 0.1 points a year earlier and to its highest level since the first quarter of 2011.

The encouraging employment outlook follows estimations by the Bureau of Statistics that the economy added 47,300 jobs in February, and its upward revision of January employment numbers from the loss of 3,700 jobs lost, to a gain of 18,000.

Additionally, D&B's actual employment index, as reported by businesses for the last quarter of 2013, has continued to lift out of the negative territory it occupied across the majority of the past 24 months.

BEX Q2 final - chart 1

The view on hiring plans suggests that businesses are preparing for increased activity in the year ahead. According to D&B's analysis of trade expectations, 46 per cent of businesses anticipate increased sales during Q2 2014. This strong sentiment has lifted the sales index to 33.6 points; up from 13.5 points a year earlier and to its highest reading for 10 years.

Confidence levels also remain steady, with D&B finding that 66 per cent of businesses expect stronger growth during the year compared to 2013, while the capital investment index has strengthened for a second consecutive quarter to 10.0 points, up from 5.0 points a year ago.

Additionally, eighteen per cent of businesses have indicated they will seek new finance or credit to grow their operations in the quarter ahead.

"After seeing a steady pick-up in the outlook for sales, selling prices and profits from late last year, we're now seeing employment intentions improve," said Gareth Jones, CEO of Dun & Bradstreet Australia and New Zealand.

"While the official rate sits at six per cent, and we've seen negative headline news on jobs, the outlook from businesses reveals a resilient optimism.

"Last year's soft conditions forced businesses to manage their costs closely and become more efficient in their operations. With confidence returning, interest rates remaining low and global conditions recovering, businesses now appear ready to focus on growth," Mr Jones added.

Following a difficult previous year, the manufacturing industry has recorded a strong increase in its business outlook. Fifty-two per cent of manufacturers anticipate increased sales in the next quarter, and 40 per cent expect higher profits. The sector has also seen its employment index lift for a second consecutive quarter, after 16 per cent reported an intention to hire new staff in the months ahead.

The outlook from the finance, insurance and real estate sector has also improved strongly, with 50 per cent of respondents anticipating greater sales activity, 38 per cent expecting higher profits, and 27 per cent forecasting new jobs.

BEX Q2 final - chart 2

Following solid December quarter trade, the general outlook from retailers has declined. The sector's sales, employment, profit and investment indices have all fallen from the previous quarter, although still remain higher than the same time last year.

BEX Q2 final - chart 3

At 60 per cent, retailers' optimism about the year's trade is six per cent lower than the national average. A slow growth in demand for products (28 per cent) and online selling by competitors (14 per cent) have been flagged as barriers to growth during the year.

"The clear lift in economic activity continues to unfold," said Stephen Koukoulas, Economic Advisor to Dun & Bradstreet.

"Expected sales have risen strongly since the middle of 2013 and are almost three times the 10-year average, suggesting that economic growth is poised to rise to an above trend pace when the official data for the first half of 2014 is released," he said.

"Encouragingly, the recent gains in expected employment have consolidated at a more favourable level, and the capital investment outlook has maintained its improvement.

"The only slightly disappointing note is a marginal pull-back in expected profits, but it should be noted this tick lower is from a high base," Mr Koukoulas noted.

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