Unemployment on the rise in Melbourne and Sydney prestige suburbs: Gottliebsen

The eastern suburbs of Sydney and the inner-city areas of Melbourne – both high to middle-income havens – are showing signs of cracking. As we discussed recently, while most of the escalating middle-income unemployment is hidden, some clear surface signs are emerging.

Sydney's eastern suburbs has one of the highest proportion of people employed in the finance and professional services sectors in the country – around 80% of households. Research by Brian Redican and Macquarie Bank shows that in this white-collar middle-class ghetto unemployment is rising rapidly while participation in the labour force has fallen sharply – down from 70.9% two years ago to 67.8%.

In late 2011, unemployment along the lower north shore of Sydney had not recorded the same deterioration as the eastern suburbs. But now it is following the same trend.

Last year, while there was rising unemployment in Sydney's affluent areas, it was not obvious in Melbourne. But in the last six months unemployment in the inner suburbs of Melbourne has risen, although it is still substantially below the level reached in 2009-10.

Other states do not have the same clearly defined demography.

And so those retrenched last year appear to have started to show up in unemployment. The ex-middle income avalanche will follow next year.

Nevertheless, those that have escaped the axe and remain part of middle-income Australia are starting to feel more confident. In addition, very often couples are helped because only one partner has lost their job.

An important part of middle-income Australia is the small business community. Large areas, particularly in manufacturing and construction, are bleeding. Retail is holding up remarkably well.