Economic Snapshot
2 mins read

Labour Force Update – August 2022

Chief Economist

Today’s labour force data continued to underline just how tight the Australian labour force is. At 3.4 per cent, seasonally adjusted unemployment rate is at the lowest it has been since 1974. There are now fewer unemployed people than there are jobs available in Australia.

However, looking beyond the raw unemployment rate, we may be seeing early signs that some heat is coming out of the labour market, as the total number of people employed dropped for the first time since October 2021. The reason the unemployment rate also dropped, was that the participation rate (the proportion of Australians currently in the job market) also declined. Participation has been at record high levels, so some levelling off is not surprising. Still a drop in employment could mean that businesses are starting to prepare their workforce make up in anticipation for leaner times ahead.

CreditorWatch BRI data for June 2022 forecasts that the small business default rate is due to climb to around 5.8 per cent. That is about 1 percentage point higher than where it sits today. Ironically, a tight labour market is driving up the cost of employing people, and this is feeding into the distress of some businesses, particularly in the food and beverage sector.

This is typically a labour-intensive market, and any movement in labour costs has an outsized impact. This is one of the reasons that this sector has the highest probability of default of all industries. At 7.1 per cent, this rates well above the average of all sectors, which is 4.8 per cent

Anneke Thompson
Chief Economist, CreditorWatch
Anneke joined CreditorWatch as Chief Economist in April 2022. She is a specialist researcher and commentator on issues impacting the credit industry, SMEs and the broader economy, conducting regular presentations to corporate groups. She is also a media spokesperson for CreditorWatch, regularly appearing on national television and in syndicated media. Anneke is also the Managing Director of Clio Research and formerly the National Director and National Head of Research at Colliers International Australia. She has also worked at NAB and Jones Lang LaSalle.
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