Why Macao’s Unemployment Rate Should Stay on Investors’ Radars
The unemployment rate indicates the percentage of the labor force that is currently unemployed but is actively seeking employment. Macao’s unemployment rate was as high as 7% in 2000. Growth in the tourism and gaming industry helped curb the high rates, but the unemployment rate averaged about 3.9% for Macao from 1996 to May 2016.
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For the May 2016–July 2016 period, the unemployment rate stood at 1.9%. The unemployment rate has remained constant at 1.9% for all of 2016. During the same period, the underemployment rate stood at 0.5%, while labor force participation rates stood at 72.5%. Labor force participation in Macao has been declining since 2014.
The underemployment rate includes workers that are currently working part-time and would prefer working full time, as well as those workers who are working in low-paying jobs despite being highly skilled. The labor force participation rate is the percentage of the population aged 15 and over that is economically active.
The tourism industry, which made up of recreational, cultural, gaming, and related services, accounted for about 24.5% of total employment in Macao. Hotels and restaurants accounted for another 14.1%, and construction accounted for 12.1%.
Lower unemployment rates will likely drive demand for leisure activities, and higher wages will likely drive the disposable incomes of local consumers. This could be a positive signal for companies operating hotels and casinos like Las Vegas Sands (LVS), MGM Resorts (MGM), Wynn Resorts (WYNN), Galaxy Entertainment, and Melco Crown Entertainment (MPEL). However, since most of these companies are developing new properties in the Cotai strip in Macao, increased demand could signal higher bargaining power for casino employees, thus increasing the casinos’ labor costs.
Investors seeking diversified exposure to casino companies may be interested in ETFs that invest in casino stocks, like the VanEck Vectors Gaming ETF (BJK). Investors can also invest in the WisdomTree Dividend ex-Financials Fund (DTN), which holds 2% in LVS.