The Australian Bureau of Statistics (ABS) released its monthly employment statistics today.
According to the data produced by the ABS the unemployment rate has risen by 0.1% to 5.2% since its last monthly update, continuing the streak of unemployment increasing in recent months.
Full-time jobs decreased by 6,300 and part-time employment rose by 34,700, but unemployment also increased by 21,200.
Although the unemployment rate did increase, so did the number of people employed. Around 28,400 jobs were created which was above economists projections of 15,000 new jobs.
The number of people looking for a job has increased with the participation rate sitting at 65.8%, compared to last month’s 65.7%.
Underemployment and underutilisation increased by 0.3% and 0.4% respectively. Underemployment is now 8.5% and underutilisation sits at 13.7%. This reflects the number of people who are not employed to their full capacity.
What Effects Will This Have?
The employment rate has a ripple effect into many areas of the economy. Most notably there has been a lot of focus on the RBA recently, with speculation and commentary that it may be likely to cut interest rates if unemployment rises.
One of the flow on effects of an expected interest rate cut is that the Australian Dollar continues to fall against the US Dollar. This makes importing goods more expensive and any money Australian banks have borrowed in US Dollars from overseas more expensive, with these costs potentially passed onto customers.
Employment is important for people to continue paying and taking out loans with banks such as Commonwealth Bank of Australia (ASX: CBA) and Australia and New Zealand Banking Group (ASX: ANZ).
In their recent financial releases both Commonwealth Bank and ANZ have reported that mortgage repayments are falling behind, with loans in arrears by more than 90 days increasing for all the major banks.
Unemployment and struggling household finances can also affect businesses that rely on discretionary spending such as Harvey Norman Holdings Limited (ASX: HVN) and Nick Scali Limited (ASX:NCK).
Travel and leisure businesses may also feel the pressure if discretionary spending is limited, Sydney Airport Holdings Pty Ltd (ASX: SYD) may continue to find domestic passengers decrease.
If the RBA does decide to decrease interest rates as a result of increasing unemployment, it may have an effect on the share market, as historically people move their money out of the banks the lower the cash rate is and into higher yielding options.
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