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Message from the CEO: 18 March 2016

March 21, 2016

Much has been made of the Australian Bureau of Statistics’ figures showing the nation’s unemployment rate fell from 6 to 5.8 per cent in February (released Thursday), but the unemployment rate doesn’t specifically tend to affect retailers, the number of job vacancies is far more significant, because labour demand has a profound effect on cash registers.


While we economists love to quantify, well, everything we possibly can, there is a strong tenet of good old human psychology behind how labour demand influences consumer confidence – a fairly vibe-like, feelings-based concept in itself – but one that is so powerful, it underpins the entire retail sector.

Often referred to as consumer sentiment, its name alone should be enough to give everyone an idea of how difficult it is to quantify, but regardless, this ‘feeling’ is driven almost entirely by numbers and statistics (economists rejoice).

When labour demand is strong (i.e. when the number of jobs being advertised is high), people tend to feel secure in their jobs – confident that they can easily move around the labour market and find new work if they need. They feel comfortable and stable, and as a result, are far more willing to spend money in the retail sector.

This is also driven by other factors such as increasing house prices. As consumers’ property values rise, a ‘wealth effect’ tends to follow. Because when asset values go up, so too does a consumer’s general sense of personal financial security – and confidence, which in turn boosts the retail sector to grow and prosper. With one in 10 workers employed in the sector, retail contributes significantly to the strength of the Australian economy, the revenues collected by governments, and the creation of further jobs.

At the moment, the biggest challenge to retailers is that while plenty of jobs are being created (300,000 in 2015 – the largest amount since 2006), it is being outpaced by the number of people wanting to have a job, along with other issues surrounding labour force underutilisation (with plenty of workers in part-time or casual roles who want or need full-time work).

In trend terms, our modelling suggests that 11,000 jobs were created last month, but the number of unemployed job seekers only dropped by around 700 people, so the labour market is a little soft at present.

However, unemployment is being kept steady and is undoubtedly trending in the right direction.

We believe that retail businesses could accelerate this labour demand considerably, if properly supported through areas such as: a more flexible workplace relations regime, aligning penalty rates on Saturdays, Sundays and public holidays; a tangible reduction in red tape, including abolishing a number of unnecessary packaging and signage requirements; simpler trading hours rules; and a harmonisation of the laws relating to shop leasing arrangements.

For more information on unemployment rates and how this can affect your business, contact National Retail Association on 1800 738 245.

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