A fall in unemployment in the latest ABS report raises the chances of more interest rates rises and highlights importance of cheaper rates for commercial loans.
The Australian Bureau of Statistics (ABS) published the latest Job Figures last week and in a surprise to many, the unemployment rate in Australia dropped again. This time by 1% to 3.4%.
The fall is being interpreted in some comments as the economy continuing to show strength and with inflation still rising, seen as further backing for another rate rise by the RBA when the Board next meets on 6 December.
There may have been a glimmer of hope that the RBA would ease up on by how much it would increase the cash rate in the coming period. In remarks in an address at a business dinner following the November rate decision, Governor Lowe said that the Board had discussed the effects on households of rising prices and rising rates. There was mention of ‘easing’ the size of the rate rises, but there is already talk of expectations of another 0.25% rise on 6 December. At least that will be the last increase for the year and the last until February 2023 as the RBA does not hold a rate decision Board meeting in January.
But the significance for many businesses of the jobs figures goes beyond the significance for interest rates. With a tight labour market, many are struggling to fill jobs and that is leading to stiff competition, including with wages. The ABS also released the latest wages growth data last week and together with the jobs figures should be of interest to many operators.
Latest Unemployment Data
The Jobs Figures Report
was published online by the Australian Bureau of Statistics (ABS) on November 17 and as mentioned above, shows unemployment has dropped to 3.4% from 3.5%. The rate for underemployment, which is those looking for more hours, was constant for the reporting period at the previous level of 6%.
In a breakdown of the data, Mr Bjorn Jarvis, Head of Labour Statistics at the ABS, notes the a 0.3% drop in unemployment for males. This is the lowest for 48 years - since November of 1974. The unemployment rate for females remained constant.
The data for ‘hours worked’ can be of significant interest to businesses as it has been extremely relevant during the pandemic period with isolation rules etc. For the current reporting period, there were around 1/3rd
less hours worked due to illness, compared with what is normal for the October period. Mr Jarvis noted that this was quite different from much higher levels of hours lost to sickness which were reported earlier in the year. Those were around 2-3 times over normal levels.
The ABS notes that bad weather and flood situations in the reporting period in Tasmania, Victoria and NSW were considered as contributors to reduction in hours worked. The rate for underutilisation was reported at the lowest for over 40 years, going back to March of 1982.
In discussing the trends in the employment figures, Mr Jarvis said the continued growth in employment was seen, but the rate had slowed to below the long term average.
For businesses still trying to fill jobs and enable operation at full capacity, the scenario appears to be one of continuing challenges. With such low levels of unemployment, clearly there are less people looking for and available for work.
Following the Jobs Summit earlier this year multiple initiatives were agreed on and put into action. Business operators will no doubt be waiting impatiently for these to be fully implemented and start showing positive impacts.
Wage Growth Data
Also published last week by the ABS was the Wage Price Index
covering the quarter to the end of September 2022. This index shows the growth in wages. This may be key data for businesses to consider when budgeting ahead for wages. A critical cost component for many operators.
The data shows wages growth of 1% in the quarter which relates to an annual increase of 3.1%. Prices Program Manager at the ABS, Michelle Marquardt said this was the highest quarterly growth in hourly wages since the March quarter of 2012 and highest annual figure since the same quarter in 2013.
The growth in wages for the September quarter was driven primarily by wages in the private sector. Ms Marquardt said the recent decision by the Fair Work Commission awarding an increase to awards, in addition to pressure on the labour market in the private sector contributed to the current increase.
An interpretation or analysis in regard to significance for business, may be that there is strong competition for staff and that is being played out in offering higher wages. This has been noted in the media with several industries offering extremely attractive packages to attract staff.
Significance for Interest Rates and Commercial Loans
As mentioned at the outset, the latest jobs figures do not augur well for those that were hoping the RBA might deliver a Christmas or end of year present with no or a very small rate rise. With such good unemployment figures that can indicate the strength of the economy, the RBA will most likely continue on its pathway to address soaring inflation with another 0.25% cash rate rise.
As lenders respond in differing ways to rate rises and as the business finance and commercial loans market is less regulated than consumer finance, this can provide a very varied rate market. Business owners then face a challenge to cover off on sufficient lenders to find the one that is offering the cheapest rates
at the time the finance is required. A process which is much easier when engaging Business Finance to handle the finance sourcing and negotiating.
The other point of significance is the prospect of further wage growth, an issue which the Albanese Government is pushing hard on. If a higher wages bill is in the forecast for a business, especially at a time when operating with less staff and hence lower capacity, it may present pressures on cash flow.
Pressures which may require a rethink of existing finance arrangements through refinancing or the need to seek support through new lines of credit such as a Business Overdraft
. Speak with one of our consultants about the commercial loan solutions we can offer to support your business in this tight labour market situation.
Contact Business Finance on 1300 000 033 for cheaper interest rate commercial loans
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