Friday, April 24, 2009

Could Australia's unemployment rate hit 10 per cent?

It has jumped from 3.9 per cent to 5.7 per cent in just over a year.

But double figures?

The Treasurer thinks it's possible.

Here's what Michelle Gratttan asked him just before he left for a G20 meeting:

Q: Is there a risk that unemployment could hit double digit figures?... There’s no guarantee we won’t get back to those early ’90s levels?

A: There’s no guarantees when you are in the middle of the most savage global recession since the Great Depression.

Here are two reasons why the Treasurer could well expect a double-digit unemployment rate.

1. History suggests that a jump of 5 percentage points is typical in an Australian recession:

2. Bill Mitchell has done the numbers using the IMF's forecasts for Australian GDP which have it shrinking 1.4 per cent this year and inching forward 0.6 per cent next year.

He comes up with an unemployment rate of 10.04 per cent:


I forget what I was using said...

Last few months the trend according to the RBA stats graph have been unemployment rising by 0.3% every month and if that trend continues we will hit about 7% in August, Almost 8% in August and as stated before 7-8% is the average unemployment of the last few Prime Ministers, so that's when we really should start worrying, especially if it doesn't start dropping from around October when in theory this trend should hit 8%

derrida drider said...

Anything's possible, but it would take a really severe recession to get official Australian unemployment above 10% these days. That's for three reasons:

- labour supply growth has fallen since the 1980s and 90s for purely demographic reasons.
- the prevalence of part time work means that some of the rise in unemployment will instead manifest as a rise in underemployment.
- there are an awfully lot more marginally attached people now in work than there were 20 years ago. These people will drop out of the labour force entirely rather than be unemployed (a phenomenon that is really clear in the US figures, BTW).

Anonymous said...

unemployment is unlikely to reach double digits but it's likely that overall underemployment and therefore poverty will increase in Australia. This is evident in the graphs that show an increase of poverty from the 90's

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