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Why Investors Should Watch Macao’s Unemployment Rate

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Unemployment rate

The unemployment rate indicates the percentage of the labor force that is currently unemployed but actively seeking employment. In 2000, the unemployment rate in Macao peaked at 7%. Since then, tremendous growth in the gaming industry has helped reduce employment in Macao. Unemployment averaged 3.8% between 1996 and May 2017.

Between January and May 2017, unemployment in Macao was 2.0%. It stood at 1.9% for 17 consecutive months (August 2015–December 2016) before that, and at 1.8% between May 2015 and July 2015. At the time of the gaming industry crackdown, the unemployment rate in Macao was 1.7%, the lowest since 1996. Between March 2017 and May 2017, the labor force participation rate stood at 71.1%, a decline of 0.9% YoY (year-over-year). Labor force participation has been declining since 2014.

The underemployment rate includes highly skilled workers in low paying jobs and part-time workers who prefer to work full time. The labor force participation rate is the percentage of the economically active population above the age of 15.

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Employment in the gaming industry rose 1.1% from 81,000 to 81,900 people. The wholesale and retail trade industry’s employment was flat at 46,500, and the hotel sector’s employment rose 1.7% to 31,900. The construction industry’s employment fell 4.5% from 36,500 to 34,900, and the restaurant industry’s employment fell 4.3% from 23,600 to 22,600.

Takeaways

Higher unemployment can be negative for casinos such as Galaxy Entertainment, Wynn Resorts (WYNN), MGM Resorts (MGM), Las Vegas Sands (LVS), and Melco Resorts & Entertainment (MLCO). It would translate to lower revenue generated through locals, as disposable income would decline. Investors can gain exposure to casino stock by investing in the iShares US Consumer Services ETF (IYC), which invests 1.6% of its portfolio in casinos.

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