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Unemployment rate tops 10%

There’s a saying which is often attributed to author Mark Twain: “There are three kinds of lies: lies, damned lies and statistics.”

The latest release from the Australian Bureau of Statistics (ABS) that the unemployment rate remained steady in the month of July at 5.7%, arguably gives only a glimpse into the real state of the Australian jobs market and could falls within Mark Twain’s definition of a statistic.

While it’s never going to be easy to create and measure an economic variable such as unemployment which everyone agrees on, the ABS definition which doesn’t consider the non-participation rate and only requires one hour of paid work to meet the definition of employed certainly has its limitations.

Roy Morgan Research also produces a monthly estimate of unemployment. Roy Morgan’s definition is broader than the ABS’s and on its numbers the unemployment rate in Australia rose from 9.7% to 10.1% in July.

No matter which definition you use, the lacklustre state of unemployment is bad news for job seekers, many companies and the economy alike.

Two industries which are directly affected by unemployment include recruiting and retailing. Recruiters including Skilled Group (ASX: SKE) and Chandler Macleod (ASX: CMG) are likely to see lower demand for their services, while retailers like Myer (ASX: MYR) who is already enduring lacklustre sales growth will likely see that continue.

There are a few firms which have the potential to benefit however. One retailer which might benefit is The Reject Shop (ASX: TRS) as consumers trade down to a lower price point. Cash Converters (ASX: CCV) also bridges the gap by offering a lower price point to retail customers and also offers personal loan services. While Navitas (ASX: NVT) an education provider that offers bridging courses for pathways to Universities could also benefit from increased demand by job seekers to re-skill and up-skill.

Foolish takeaway

Adding to the data which suggests the jobs outlook is looking bleak is Seek  (ASX: SEK) the online employment advertiser who compiles the monthly SEEK Employment Index. The latest reading from the Index –which measures labour market supply against labour market demand – fell by 4.2% in July across Australia while new job listing fell by 1.3 with the resource exposed state of Western Australia particularly hard hit.

As is always the case in investing – the future is never certain. While macroeconomic indicators aren’t particularly positive, investors who take an ‘all-weather’ approach to constructing their portfolio by purchasing high quality, dividend paying businesses should have little trouble sleeping soundly.

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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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