Workers in the hospitality and arts sectors may soon be out of a job, with employers in these sectors looking to cut staff as costs mount, if not close all together.
The latest Business Conditions survey from the NSW Business Chamber paints a bleak picture and businesses in the Illawarra are more downbeat than the statewide average.
Illawarra businesses returned a business confidence index score of -58.8, below the statewide figure of -53.8 per cent. A score of 0 indicates respondents are neutral about the next three months.
With the deteriorating outlook, 37.8 per cent of businesses across the Illawarra, Southern Highlands, Shoalhaven and Capital regions were looking to cut staff.
The businesses most likely to shed workers were in the highly casualised accommodation and food services, arts and recreation services and retail sectors, highlighting the impact of consumers cutting back on discretionary spending such as going out, travel and shopping.
Over a quarter of businesses in the region said if current conditions continue they were likely to close, with retail the predominant sector.
Business Illawarra executive director Adam Zarth said a positive outlook after COVID has turned into a negative take on the next 12 months.
"Local businesses were looking forward to expanding post-lockdown but what we are seeing is business owners going into survival mode in the next year," he said.
Following the Reserve Bank lifting interest rates for a tenth consecutive month and energy prices expected to continue to climb, businesses and consumers were looking at ways to cut costs.
"Many business owners have been absorbing price increases into their profits, but this can't go on forever," Mr Zarth said.
"It's worrying to see staff cuts emerge as a response to the cost increases."
For workers, this means more are out of a job, and the Illawarra, which last year was leading the state in employment, has now dropped below the statewide average.
The Illawarra unemployment rate increased from 2.8 per cent in December to 4.1 per cent in January, as total employment fell from 165,300 to 161,700.
While the January figures are the most seasonal, with the Illawarra's rate above the statewide and national average, the figures demonstrate that the local economy is starting to contract.
Other factors driving the cut back in hours were high asking wages and the affordability of housing.
"Now we are seeing the result of softening demand and an increase in unemployment across the region," Mr Zarth said.
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