In our last newsletter we provided an overview of the recruitment market in 2008 and a copy of the annual salary survey.
At the time of printing the December newsletter the employment data had not been released but as recruiters we were living with the reality of the fallout from the financial crisis and both the business and consumer sentiment that particularly affects the Retail and hospitality sectors.
The data shows that the economy lost 44,000 full-time jobs in December as companies reduced their payroll exposure in anticipation of a tighter economy with less cash available from lenders and all the media speculation about a possible recession.
The unemployment rate rose to 4.5% from 4.4% in November, as the number of home loan applications plunged, construction activity fell and business confidence shriveled.
Full-time employment dropped by 44,000 to 7,640,200 while part-time positions soared 42,800 to 3,102,200, bringing the net loss of jobs to 1200. This has been artificially affected by the huge increase in part time roles filled based on both the seasonal nature of Christmas and holiday trading and employers removing potential exposure by scaling back the scope of roles from full time to part time employment.
Economists had expected 20,000 full time jobs to be shed last month, but the drop in full-time positions of 44,000 last month is the biggest monthly drop since March 2003, and came as a massive surprise.
“The market has changed from a candidate short, job rich market to a job short candidate rich market in every state but Western Australia where the impact and fallout from the financial crisis is lessened by the resources sector, so it will be interesting to see what the availability of funding, the forecast slowing of the Chinese economy and the early indicators of a slowing resources sector has on the WA market,” says Peter Davis, Frontline Recruitment Group.
On a positive note there has been a significant increase in first home owner loan applications in December which will spark the residential building sector and in a recent survey conducted by Grant Thornton's International Business Report. Nearly half of Australia's medium to large private businesses’ are optimistic about 2009 as the fall in the currency and the strong resource sector temper the effects of the financial crisis.
According to the report 46% of Australian private businesses that employ between 20 and 299 people said they were optimistic about the domestic economy.
Of the 250 surveyed businesses, 80% expect their turnover to increase, or remain the same and two thirds think that profitability will be steady, or gain.
Unemployment to rise
The labour force shrank by 1200 positions, seasonally adjusted, after a loss of a revised 16,200 jobs in November.
While total employment numbers rose to 10,749,400, economists took the figures as a precursor of future bad news.
It is believed that unemployment will reach 6% by the end of the year, with a monthly increase of 0.1 to 0.2 percentage points.
Pressure on RBA
The slumping jobs numbers suggest the Reserve Bank's rate cuts of last year, along with the government's $10.4 billion stimulus package still have some way to go before they kick in, providing the boost needed by consumers and business to keep the economy expanding through a period of sluggishness.
A rising unemployment number puts more pressure on the RBA to cut the interest rate again when it next meets in February, after the central bank already lopped off three full percentage points in the last four months of 2008 in an effort to induce growth.
Most economists are expecting a fairly aggressive cut in February.
A Bloomberg survey forecasts a 50 basis point cut in the cash rate in February, which would bring the interest rate to 3.75%.
The market is expecting an even bigger cut of 0.75 percentage point rate cut in February to the cash rate, according to Credit Suisse.
More companies cut staff
This week, Ford Credit Australia said it would cut 160 staff as it exited the retail car finance industry. The losses come after retrenchments announced by GE Money and GMAC Australia, ANZ Bank, Qantas, and GM Holden.
The mining sector, too, critical to Australia's growth, has been cutting back workers in recent months. Since November 1400 people have lost their jobs in mining and mining related jobs in Queensland alone.
Rio Tinto has announced 15,000 job cuts worldwide and has postponed mining projects in NSW costing 346 jobs.
While coal miner Xstrata has chopped about 380 workers from over the past two months.
What’s the fallout?
If you’re an employer this is great news, the market is awash with excellent quality and quantity of candidates, the biggest issue will be sorting the wheat from the chaff and this is where utilising the expertise of a recruitment agency can assist clients with the recruitment process.
For candidates it’s a time of uncertainty, wondering if there current role is secure, dealing with a smaller team as roles are made redundant and the potential increase in their workload. For those considering entering the job market there’s the risk and uncertainty of the roles they are applying for and the fact that the market is so competitive that employers now hold the upper hand and we are seeing salaries being far more negotiable particularly in the finance sector.
Please feel free to contact us at Frontline Hospitality. with any recruitment requirements - we are here to help.