Structural shift towards capital city employment accelerates

One of the best pieces of advice I've received as a property investor is to "follow the jobs growth".

Australia is in the midst of a significant structural shift towards knowledge and services based industries and the data shows that increasingly jobs growth, population growth and economic output is flowing to the centre of our major capitals.

With just over 60% of Australia's population located in the five largest capital cities it might seem reasonable to expect that around 60% of jobs created would be in those five largest capital cities too.

However, this is nowhere near being the case as this week's Detailed Labour Force data from the Australian Bureau of Statistics confirmed.

Over the years our analysis shows that jobs growth has been much stronger in the five largest capital cities at well over 70% of the total for their respective states.

And over the past five years, of the jobs growth in New South Wales, Victoria, Queensland, Western Australia and South Australia, some 77.4% of the jobs added have been in the capital cities, with only regional Queensland contributing significantly.

Not only is there a structural shift afoot in favour of capital cities and centralisation, our analysis of the data below shows that the trend is actually now accelerating.

Full-time employment growth

Looking at full-time jobs growth over the long-term we can see that while regional New South Wales has added jobs until relatively recently, the overwhelming majority of employment growth has been in the capital cities:

In the other states we expect to see something similar playing out, with one exception: Queensland.

Queensland is home to some large and growing conurbations outside Brisbane including Gold Coast/Tweed Heads, Sunshine Coast, Cairns, Toowoomba and Townsville, for example, and as such the rest of state figures for Queensland have tracked relatively strongly. Not so elsewhere...

Total employment growth 

In recent times many jobs added are not of the full-time variety and therefore we have run the same charts for total employment growth over the long run. Note that regional Victoria has added more part-time jobs, but still it is the capital cities which overwhelmingly lead the way.

And it's a similar story in the other states. 

These figures are sometimes easier to interpret in a column chart, and here the evidence in favour of Australia's increasing dependence upon its capital cities for total employment growth and prosperity is compelling (click chart):

We note that jobs growth in regional Australia has stalled, and with the mining construction boom transitioning into the production phase, this trend is likely to become worse rather than better.

Unemployment

Finally, we note that employment growth is not yet occurring fast enough in this cycle to offset population growth in the capital cities and thus the trend in unemployment is up.

Our analysis of population growth in the 'rest of state' regional areas over recent years has shown the growth in regional population to be comparatively weak, and therefore unemployment should not be rising. However, regional jobs growth in Australia has almost totally stalled and the the recent unemployment trend is therefore still up in most cases. 

In short, the capital cities are increasingly becoming the job and population growth magnets, and as the data continues to show, this is becoming more and more so the case as the years progress.