SMEs in Australia are facing a dual challenge: finding suitable candidates amidst rising unemployment while also navigating a potentially slowing economy.
The Australian Bureau of Statistics (ABS) reported that the seasonally adjusted unemployment rate increased by 0.1 percentage point to 4.2% in July. Kate Lamb, ABS head of labour statistics, noted that while unemployment rose by 24,000 people, employment also grew by 58,000, pushing the participation rate to a historic 67.1%.
“The employment-to-population ratio climbed to 64.3%, indicating that employment is growing faster than the population,” Lamb said. Despite the uptick in unemployment, the overall labour market remains strong, with unemployment still 70,000 below pre-pandemic levels.
Monthly hours worked also saw a 0.4% increase, in line with the rise in employment. The underemployment rate fell to 6.3%, reflecting a slight decrease in people working fewer hours than they would prefer.
The great employment paradox
The trend data shows a modest rise in unemployment but continued growth in employment, suggesting that the labour market remains tight. Detailed regional labour market data will be available in the upcoming ABS Labour Force report on August 22.
While the overall employment rate has increased, the unemployment rate has risen slightly, indicating a tightening labor market. This could pose challenges for SMEs in finding suitable candidates and potentially lead to increased competition for talent.
However, the growing participation rate and increase in monthly hours worked suggest that there is a demand for labor,which could benefit SMEs seeking to expand their workforce. Additionally, the decline in the underemployment rate indicates that more people are finding full-time employment, which could positively impact the labor market for SMEs.
Despite these positive indicators, SMEs are likely to face headwinds due to the decreasing Business Risk Index and falling job ads. These factors suggest that consumer demand may be weakening, leading to reduced business activity and potentially impacting SMEs’ need for labor.
Anneke Thompson, Chief Economist, CreditorWatch: “The labour force continues to be a positive outlier in the Australian economic story, with the July 2024 data revealing growth in employment over the month of 58,200 people. However, at the same time, the growth in unemployed people increased by 23,900, pushing both the trend and seasonally adjusted unemployment rate to 4.2 per cent. The story behind this data is revealing – while there is a record number of people in employment, the labour force itself continues to grow, with more and more people entering the workforce looking for or getting a job. While there are many reasons as to why people who were not in the workforce choose to enter back in, it is highly likely that the high cost of living and high interest rates is resulting in more people needing to find work to cover additional costs.
“We expect that the unemployment rate will continue to rise as we move towards summer, given that job ads are falling, and workflows in the small business sector, in particular, are decreasing. CreditorWatch’s latest Business Risk Index (BRI) data for July 2024 shows that the average value of invoices held by businesses has dropped 51.5 per cent over the year to July 2024, indicating that businesses are ordering significantly less from suppliers as consumer demand falls away.
“This can only result in less employment in the SME sector. NAB’s most recent Business Sentiment survey has also reported continuing falls in capacity utilisation, which is a strong indicator of rising unemployment (given the unemployment rate and capacity utilisation have an inverse relationship).”
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