Release of the latest unemployment rate and increases in interest rates may prompt businesses to act to upgrade equipment and vehicles with commercial loans.
Australians have been swamped with the stats, data and rates over the past month or so. While inflation rates and interest rates will be of greatest interest to individuals, the employment situation can be of critical importance to many business operators.
The conditions in the labour market have been a key impact on the ability for many businesses to operate to full capacity. Affecting output, productivity, profitability, supply and potentially pricing. The labour market has been tight for quite some time, so any signs of an easing may be good news for many and reason to get moving with plans that have been on hold.
The Australian Bureau of Statistics (ABS) released the unemployment rate data on February 16th
and it showed an increase. The Reserve Bank of Australia (RBA)
had included a rise in unemployment in its outlook and according to reports the Treasury Department had also expected the rise.
So what does this rise mean, especially in relation to businesses considering taking on finance to upgrade assets such as equipment, plant, machinery and vehicles? We cover off on the ABS report and on what the RBA Governor, Dr Philip Lowe said about unemployment in a recent committee hearing.
Unemployment Rate Rises for January
The ABS reported that unemployment increased to 3.7% in January
. The figures show a fall in employed people of 11,000 approximately and an increase in unemployed people of 22,000. When reviewing the ABS comments, note the differentiation between the references to ‘employment’ and ‘unemployment’. There is a tendency to refer to ‘employment’ which may create some confusion.
Mr Jarvis, the head of the Labour Stats at the ABS, remarked that the January monthly figures were the second time consecutively that employment had fallen, that is unemployment has increased. But he notes that while the rate of employment fell in December 2022 and January 2023, the figure was still higher than for January of 2022 and much higher than March of 2020 – prior to the pandemic.
The timing of the statistics is also noted as January or start of the year, is popular with many people for changing jobs. The leave one position late in the year with another position to take up already confirmed in the new year. Enjoying a break in between. This was observed in the current figures. The number of people who listed as unemployed actually did have jobs to go to in the time ahead.
This could be of significance for businesses competing with others in their sector for limited labour numbers. It could reflect the competitive nature of current conditions as workers are drawn to more attractive wages and conditions.
January did see a drop on the number of people off work with illness – taking sick leave. After years of dealing with COVID waves and having workers on sick leave, this may be a positive sign.
The participation rate fell to 66.5% while the underemployment rate is still 6.1%. Full-time employment fell while part-time employment rose, now accounting for 30.2% of the total figure.
Commentary on Unemployment Rate
The RBA has mentioned both inflation and unemployment in its statements on rate decisions recently. So clearly, the unemployment rate has some bearing on interest rates and other economic factors. The commentary around the latest increase has been mixed with some analysts presenting a positive perspective and others a less than rosy picture of what it may indicate from a business angle.
With Governor Lowe appearing before Members of Federal Parliament in the same week as the rate was released, it was not surprising that an MP posed the question to him around the effect on jobs and more broadly the economy, if high inflation remained.
Dr Lowe responded by saying that the historical evidence shows in conditions where high inflation remains, increases in unemployment tend to occur with loss of jobs and real growth in wages is slowed for several years. If inflation was not controlled, he said that the outcome would be even higher interest rates and further increases in the unemployment rate.
Dr Lowe said that a higher rate of unemployment was the ‘very costly’ price paid for getting the rate of inflation down. But he also noted that the current unemployment rate is at a level near the lows of 50 years ago.
Relevance for Commercial Loans
The relevance and importance of labour market statistics to individual operations will clearly differ. On the positive side, some will see the increase in the numbers of unemployed as potential for filling their vacant jobs. Filling labour requirements and being able to finally operate at full capacity.
But from Dr Lowe’s comments, it does appear that the prospect of more interest rate rises is imminent. Businesses looking to save on interest payable on commercial loans are strongly urged to move on acquiring their necessary assets with finance
The RBA Board is set to meet again on 7th
March and that could mean a further rate rise. Getting approved for finance at our current rates
could be significant over the full term of the finance.
For cheaper interest rates on commercial loans, contact Business Finance Australia on 1300 000 033
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