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Australia’s job prospects decline

The Australian Bureau of Statistics (ABS) has released its latest Labour Force data, which shows Australia’s unemployment rate increased 0.2% to 5.7% in June. Labour force participation rose and on a net basis around 10,000 jobs were created, but the increase came from part-time employment with a decrease in the level of full-time roles.

The bad news continued for job seekers, with online job classified firm Seek (ASX: SEK) releasing its SEEK Employment Index,  recording a decrease of 2.4%.The decline in new job ads was most apparent in Queensland and Western Australia, which is not surprising given the decline in the resource sector that both these states are heavy exposed to. Indeed just this week reports have surfaced of major gold miner Newcrest (ASX: NCM) cutting jobs.

Meanwhile across ‘the ditch’ in New Zealand, the employment outlook looks significantly brighter. Website owner Trade Me (ASX: TME) has reported that the NZ employment market is “fizzing again with the number of vacancies advertised in the quarter to June up 11% on a year ago.”

Foolish takeaway

The mounting evidence that Australia’s economy is slowing will undoubtedly put pressure on companies’ earnings. This could well lead to downward revisions in earnings expectations for the current 2014 financial year. The increasing potential for downgrades should make investors wary of paying lofty valuations for companies that could shortly be facing economic headwinds.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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