E.L Executive Demand Index reports biggest slump in six months

Demand for Australian executives has slumped, sparking fears for the wider jobs market as the economy teeters on the edge of a recession.

Demand for Australian executives has slumped, sparking fears for the wider jobs market as the economy teeters on the edge of a recession.

The E.L Executive Demand Index, which uses a combination of job market statistics including print and online advertisements to provide a measure of demand for Australian executives, slumped by 11 per cent in June – its largest monthly drop in six months.

Led by the deepest losses in the information technology and marketing sectors, there were also falls across all other industries tracked including finance, engineering and management.

The index is regarded as a lead indicator of the Australian economy and jobs market given managerial recruitment usually precedes the employment of other skilled and unskilled workers, and employment of engineering executives generally comes before major capital investment.

Grant Montgomery, the managing director of executive search firm E.L Consult which produces the E.L index each month, said the Reserve Bank’s rapid fire increase in interest rates over the past year was starting to bite, resulting in a “savage retraction in the jobs of middle Australia”.

“Recently, interest rates hikes have not been affecting the economy as much as one might expect with employment remaining high,” he said.

“Now, it seems that employment, at least for middle Australia, which has the largest and biggest number of home mortgages, might have the added worry of becoming unemployed.

“That coupled with an impending cliff when large numbers of fixed interest rate mortgages turn into flexible rates suggest that homeowners, and Australia, could be in for a rough time.”

The Reserve Bank held fire on interest rates this week despite the most recent ABS figures revealing a surprise fall in the nation’s unemployment rate in May.

The jobless rate fell to 3.6 per cent from 3.7 per cent in April, with close to 76,000 jobs added to the economy, lifting the number of employed people past 14 million for the first time.

Mr Montgomery welcomed the Reserve Bank’s decision to keep rates on hold this week, and called for a “cautious step by step approach”, arguing consumer spending would likely soften as signs of weakness in the employment market emerged.

“Things have, up till now, kept fairly stable with those on fixed rates insulated from the recent RBA rises and spending kept buoyant with high employment levels and people continuing to spend,” he said.

“It is that strong spending, possibly by people using up their savings, that meant business didn’t suffer falling sales and continued to employ more people.

“That period is now coming to an end, and it becomes clear why the RBA decided to keep rates on hold, at least to see how the economy reacts.

“Just how long borrowers can be the fall guys for government spending and international price hikes is yet to be seen.

“From now on using up savings or selling the family home is all that is left – changing jobs for better pay will no longer be an option.”

South Australia and the Northern Territory were the only states or territories where an improvement in executive demand was reported within the E.L Index figures, while Western Australia was the weakest performing state.