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Australia’s Unemployment Rate Nears Three-Year Low

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Australia’s official unemployment rate has fallen to 5.6 per cent, despite the Bureau of Statistics estimating the loss of 3,900 jobs last month.

The headline jobless rate is now at its lowest level since the Coalition formed government under Tony Abbott’s leadership in September 2013.

The seemingly contradictory result stems from a steep fall in the proportion of the adult population in work or looking for it – the participation rate – from 64.9 to 64.7 per cent in August.

The decline in the number of people working also saw a fall in monthly hours worked, which eased by 3.9 million to 1,656 million hours.

That is despite the Bureau of Statistics saying that the census data collection would have added to hours worked last month.

“Of the majority of the persons who were employed for the census, most already had another job, but worked more hours during the month,” explained the program manager of the ABS Labour and Income Branch, Jacqui Jones.

Capital Economics has estimated that the census may still have boosted the employment numbers by around 10,000, meaning the fall in jobs was quite a bit bigger than it looked.

There was some good news in the seasonally adjusted data’s detail, however, with an estimated 11,500 full-time positions added, while it was 15,400 part-time jobs that were lost.

Although, Capital Economics said that figure is also likely to have been skewed by the 49,000 people temporarily employed to work on the census in August.

Because many of those people had existing part-time jobs, the extra census work would have pushed some into the category of being employed full-time.

ABS says trend of part-time jobs, underemployment continues

However, the less volatile trend figures, which are preferred by the ABS and most economists, show that the shift towards part-time employment is continuing.

“The latest labour force release shows continued strength in part-time employment growth, with the majority coming from increasing male part-time employment,” Ms Jones said.

Since December 2015, there are now around 105,300 more persons working part-time, compared with a 21,500 decrease in those working full-time.”
This rise in part-time work is also showing through in the underemployment rate, with a 0.3-percentage-point rise to 8.7 per cent of the workforce who would like more hours of work than they are currently performing.

That has put the quarterly labour force underutilisation rate – which combines those unemployed with those who are not getting as much work as they want – at 14.3 per cent, up 0.1 of a percentage point.

Commonwealth Bank economist Gareth Aird said the underemployment rate is now at a record high, which explains a few underperforming aspects of Australia’s economy.

“This indicates that there is plenty of spare capacity in the labour market,” he observed.

“It underpins both incredibly weak wages growth and below target inflation.”

The trend unemployment figure showed a steady labour market, with the jobless rate stuck at 5.7 per cent.

Economists surveyed by Bloomberg were typically expecting unemployment to remain steady at 5.7 per cent, with around 15,000 jobs added.

The Australian dollar dropped around 0.2 of a cent to 74.6 US cents shortly after the 11:30am (AEST) data release, with the disappointing detail outweighing the headline drop in the unemployment rate.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Forex

Nigeria’s Diaspora Remittances Decline by 28 Percent to $16.8 Billion in 2020

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US dollar - Investors King

Nigeria’s diaspora remittances declined by 27.7 percent or $4.65 billion from $21.45 billion in 2019 to $16.8 billion in 2020, according to the World Bank Migration and Development report.

A critical look into the report shows remittances to sub-Saharan Africa declined by 12.5 percent in 2020 to $42 billion. This was largely due to the 27.7 percent recorded by Africa’s largest economy, Nigeria, which accounted for over 40 percent of the total remittance inflows into the region.

The report noted that once Nigeria’s remittance inflows into the region are excluded, remittances grew by 2.3 percent in 2020 with Zambia recording 37 per cent.

Followed by 16 percent from Mozambique, 9 percent from Kenya and 5 percent from Ghana.

The decline was a result of the global lockdown that dragged on the livelihood of most diaspora and unclear economic policies.

In an effort to change the tide, the Central Bank of Nigeria (CBN) introduced a Naira 4 Dollar Scheme to reverse the downward trend and boost diaspora inflows into the economy.

However, the reports revealed that other external factors like insecurities, global slow down, weak macroeconomic fundamentals, etc continue to discourage capital inflows.

On Tuesday, the CBN, in a new directive, announced it has halved dollar cash deposit from $10,000 to $5000 per month.

The move is geared towards discouraging overreliance on the United States Dollar and encourage local patronage and production.

Mr. Guy Czartoryski, Head of Research at Coronation Asset Management, had said in the report, “We looked at the top 10 banks and the breakdown of their deposits showed that 40 per cent of their deposits are in dollars and it is quite astonishing.”

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Deposit Money Banks Reduce Dollar-Cash Deposits by 50 Percent to $5000/Month

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Nigeria’s Deposit Money Banks (DMBs) have reduced the amount of United States Dollars that customers can deposit into their domiciliary accounts by 50 percent from $10,000 to $5,000 per month.

A bank official who preferred not to be mentioned confirmed the new policy to Investors King.

He, however, stated that the new policy does not apply to customers making electronic transfers as well as oil and gas companies and dollar payments into government accounts.

Checks revealed that the Central Bank of Nigeria (CBN) introduced the new policy to discourage the strong appetite for the United States Dollar, which has continued to rise.

A recent report has shown that despite persistent dollar scarcity, around 40 percent of bank deposits in the nation’s top ten banks were in dollars.

Mr. Guy Czartoryski, Head of Research at Coronation Asset Management, had said in the report, “We looked at the top 10 banks and the breakdown of their deposits showed that 40 per cent of their deposits are in dollars and it is quite astonishing.”

According to an analyst at ARM Securities Limited, Mr. Olamofe Olayemi, “this has to do with how much confidence the people have in the naira. Over time, we have seen significant depreciation in the naira.

“If you look at what happened in 2020, no one expected that the naira would be devalued twice in that year and even the outlook, this year is suggesting further depreciation in the naira.

“So, it makes sense to a lot of people to store their money in dollars. But, from the CBN standpoint, you agree with me that there is dollar scarcity.”

He, therefore, argued that the new policy might discourage financial inclusion and encourage cash outside the banking system.

Again, it is important for the flow of money to be captured in the system,” he said.

The CBN had extended its Naira 4 Dollar Scheme last week to further encourage dollar inflow into the Nigerian economy.

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Naira Closed at N411.25 to US Dollar at NAFEX Window

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Naira Dollar Exchange Rate - Investors King

The Nigerian Naira declined further against the U.S Dollar on Tuesday ahead of the Ramadan holiday to trade at N411.25 to a single U.S Dollar at the Nigerian Autonomous Foreign Exchange (NAFEX) window.

The local currency plunged as low as N420.23 per dollar during the trading hours of Tuesday despite opening the day at N410.33/US$ before settling at N411.25 to a US dollar.

Investors on the window exchanged $98.33 million on Tuesday.

At the parallel section of the foreign exchange, Naira traded at N483 to a United States Dollar; N673 to a British Pound and N580 to a Euro.

Foreign exchange rates remained largely unchanged at the bureau de change section, with the Naira trading at N482 to a U.S Dollar; N674 to a British Pound and N584 to a Euro.

Several factors continue to weigh on the Nigerian Naira, especially with the foreign reserves hovering around record low and crude oil output not at an optimal level.

Other factors like rising inflation rate and drop in economic activity due to COVID-19 effect on the economy and lack of enough fiscal buffer to cushion the economy.

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