Macau Employment, GDP Dip, But Casino Operators Show Resiliency
Posted on: May 30, 2022, 05:30h.
Last updated on: May 30, 2022, 10:57h.
Macau and its casinos continue to look for ways to free itself from the grasp of COVID-19. It’s not easy, and a drop in both employment and GDP from February to April are indicators of the struggle.
The total employment for Macau during the period was 370,400, Macau Daily Times reports. Of that figure, 278,800 were residents of the SAR. The overall total is 800 less, and there were 100 fewer residents employed than in the previous period.
The number of underemployed people jumped by 1,000 in the period to 11,600. Most are part of gambling and junket activities, as well as the construction industry. In addition, there were 13,300 individuals unemployed, the same as the number in the previous period.
More Drops Coming
The number of unemployed workers could rise soon. The media outlet emphasized reports that the Million Dragon Hotel has allegedly begun to fire employees because of “unforeseeable business prospects.” Employees received a letter stating that June 26 will be their last day of work.
The proportion of people who are attempting to enter the labor market for their first job has increased by 0.3 percentage points to 6.2%. Compared to the February-April period of last year, the unemployment rate rose by 0.5%. However, the underemployment rate fell by 1.8 percentage points and the labor force participation rate dipped by 0.5 percentage points.
Macau’s labor force was 383,700 during the period, and its participation rate was 69.1%. Preliminary estimates from movement records show that approximately 87,800 Macau residents and nonresident workers lived outside Macau during the period.
The Macau Statistics and Census Service (DSEC, for its Portuguese acronym) reported that the city’s gross domestic product (GDP) fell by 8.9% in real terms during the first quarter of the year. The category “Exports of Gaming Services” saw a bigger decline, dropping 25.1%.
This is the second consecutive quarter with negative GDP growth. It also fell 4.4% in the fourth quarter of last year.
Visitors arrived in this quarter rose by 8% year on year. However, exports of other tourist services only saw an uptick of 1.9% due to a decline in overnight stays. Overall exports of services fell 4.7%.
DSEC stated that the economic downturn was due to a weakening in overall demand. The average household consumption expenditure lost 2.2% in the period, compared to the first quarter of last year.
Employment Ops Remain Unclear
Despite assurances by the government and concessionaires, concerns remain about the future of satellite casinos and the employees who work there. Macau Legislative Assemblywoman Ella Lei Cheng I has asked the government to make sure employees still have jobs during the transition to new legislation.
New Macau gambling legislation, which is still undergoing changes, will allow satellite casinos to operate in Macau even if they do not own the property. Concerns that satellite casino owners might withdraw from the market led to the change.
This could lead to job losses. However, Lei warned that, despite all reassurances, no one will know what the impact is until after the SAR introduces its new gambling laws.
SJM Holdings Executive Director Angela Leong On Kei stated that the casino operator would provide support for employees affected by the closing of satellite casinos. In addition, the company established Macau-led protocols to prepare for a change in employment structures.
Macau Casino Operators Resilient
Concessionaires in Macau are in a good spot to weather liquidity concerns related to COVID-19 and border restrictions. A note from brokerage Bernstein on Friday, in which analysts Vitaly Umansky and Louis Li assess the individual liquidity position of each concessionaire, reflects a positive outlook.
Operators have been able to have covenants waived into 2023 (and 2024 for MGM China) and there are no near-term debt maturities that raise concerns. If covenant waivers need to be extended, we expect banks to give such waivers. The ability to reduce cash expenses from current levels is limited, although operators could potentially cut further back on (CapEx) and some other minor costs,” said Bernstein analysts.
There was one exception. The analysts note that SJM Holdings has yet to confirm its long-awaited bank refinancing. However, it may only have enough cash to stay afloat for three months if it doesn’t bring in new revenue.
This could essentially mean the closure of Macau’s casinos and borders. However, more realistic scenarios show a brighter picture.
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