Friday, October 14, 2011

About that budget forecast of 500,000 extra jobs. Er...

MEFYO will revise it away

Australia has created so few jobs in the past three months that at the present rate it would take a quarter of a century to reach the 500,000 promised in the budget.

On budget night in May treasurer Wayne Swan promised a half a million new jobs in two years. One quarter of the way in to the first of those financial years the total is 5300.

At that rate Mr Swan or a successor would deliver the promised half million in January 2035, more than two decades late. So sudden has been the collapse in the jobs outlook since the May budget that many of its other forecasts are in doubt, including those for revenue and a return to surplus in 2012-13.

The estimate of 5300 new jobs is generous. Until a jump of 20,400 new jobs in September the total was running backwards. The smoothed trend preferred by the Bureau of Statistics shows just 3200 jobs were created in the first three months of the financial year, a pace that if continued would see the government fall short of its target until 2050.

The figures show the jobs market was crumbling in May as the government released the budget. With most of the financial year already complete the budget predicted jobs growth of 2.75 per cent for the year to June. Jobs grew 2.2 per cent. For the current financial year it predicted 1.75 per cent. So far jobs growth is running at an annualised 0.2 per cent.

Prime Minister Gillard failed to acknowledge the weakness when she announced the result in question time, saying it showed the economy “added over 20,000 new jobs last month, on top of the 750,000 jobs created since this government took office”...

Jobs minister Chris Evans said the 20,400 boost was “double market expectations”. But the Bureau warned against taking the monthly result seriously saying the nature of its survey meant it could only be confident the true result was somewhere between a loss of 34,400 jobs and a gain of 75,200.

The trend measure that it prefered shows next to no jobs growth.

Financial markets surged on the apparent good news believing it made a November rate cut less likely.

The dollar jumped to a a three-week high of 101.89 US cents and futures traders cut the implied probability a rate cut next month from 100 per cent to 74 per cent.

The Reserve Bank’s decision next month will probably have more to do with the inflation figures due in a fortnight than it will with employment figures that remain close to flat.

Westpac economist Justin Smirk charaterised the blip in jobs growth as “statistical noise you would expect in a soft labour market that does not have a strong trend”.

The apparent dip in the unemployment rate from 5.3 to 5.2 per cent is the result of rounding. It remains close to 5.25 per cent.

Weighing heavily on jobs growth is much slower population growth which depresses both the supply of workers and demand for their services. As high as 2 per cent in late 2009, population growth has slipped to 1.4 per cent per year, the lowest rate in half a decade.

Only in Western Australia and Queensland is jobs growth strong. Since the start of the year combined they have put on an extra 25,000 jobs - 80 per cent of the national total. NSW has lost 11,000 jobs; Victoria has gained 15,200.

Published in today's SMH and Age


Barely ticking over

So far this financial year

Work-ready population: up 65,400
Total jobs: up 5,300

Full-time jobs: down 29,000
Part-time jobs: up 34,400

Budget forecast: 500,000 jobs by June 2013
Target date at the present rate: January 2035

Jobs growth June to September, seasonally adjusted, rounded ABS 3101.0


Jobs growth so far this year (trend)

Western Australia +17,500 +1.4%
South Australia +7,600 +0.9%
Victoria +15,200 +0.5%
Queensland +7,500 +0.3
NSW -11,000 -0.3%
Tasmania -1,600 -0.7%

ABS 3101.0


Related Posts

. Employment. What if it hasn't stopped growing?

. Rising unemployment? I Don't believe it - RBA deputy

. Employment growth stops. Pity about the promised 500,000 new jobs


6202.0

16 comments:

Anonymous said...

The last paragraph makes no sense. According to your figures, Victoria created more jobs than one of WA or Queensland (15200 > 25000/2). So Victoria has either the strongest or second strongest jobs growth.

Peter Martin said...

Victoria has a much bigger population.

Anonymous said...

Victoria has only about 20% more population than Queensland. 15200/1.2 is still more than 25000/2, so even assuming per-capita jobs growth (which you neglected to mention) Victoria would still be at least second

Nicholas Gruen said...

Did Swan 'Promise' 500,000 jobs or forecast that job-growth? Promises a morally loaded - forecasts less so.

Peter Martin said...

Dear Anonymous, I've put the results up top. Victoria comes in third in terms of percentage growth since the start of the year.

Peter Martin said...

Dear Nick,

It evolved from a forecast into a promise.

Here's Swan's written budget speech:

"Over 300,000 jobs have been created in the past year and the unemployment rate is forecast to fall further, to 4½ per cent by mid 2013, creating another half a million jobs."

Here's him hardening it in the budget lock-up press conference:

"We will see another half a million jobs created over the next couple of years, and we will see unemployment fall to 4½ per cent."

Here's Gillard a few days later turning it into a fact:

"The real impact of this Budget will more jobs – half a million more jobs for Australians. Now, I think Australians understand very, very deeply that if they don’t have the benefits of a job, if they don’t bring home that all-important pay packet, that for them and their families life would take a fairly grim turn. It’s very important for people to have the benefits of work."

A few days further on it became a fact and a promise:

"We presented a Budget which will see half a million jobs created."

By July it had become axiomatic:

"There was a suggestion in those print advertisements that employment was going to somehow slow or go backwards under pricing carbon, simply not true. Employment in this country will go up by 1.6 million jobs by 2020, half a million of those new jobs in the next two years."

..and became ever more so as Gillard sold the carbon tax:

"There’ll be half a million in the next two years. Jobs are going up."

"We’ve got unemployment with a four in front of it, we will create half a million new jobs in the next two years."

"We will generate 1.6 million jobs by 2020, half a million of them in the next two years."

Credit where credit is due, they're quiet about it now.

The Lorax said...

Your best commentary on employment data all year.

I have nothing to add (you'll be pleased to hear). Even your economist quote makes perfect sense.

The Lorax said...

Justin Smirk has also produced this excellent analysis: Jobs by sector and by state

Anonymous said...

Pete I hate to be a stickler for correct definitions but the term jobs growth is sloppy, misleading and just plain wrong when it comes to employment data from the labour force survey. The survey measures employment NOT jobs. The difference being that an individual can have two or more jobs but is only counted once as employed. Please try to stop this sloppy use of jobs when referencing the Labour Force data.

Peter Martin said...

I know that A.

It's a convention. Almost everyone uses it, including our politicians and the author of Swan's budget speech -- as the quotes above indicate.

Here's my opposite number in the Australian today.

Sloppy? Probably. Widely accepted? Absolutely.

Anonymous said...

Just thought I should explain my comment about 'jobs growth' further. You probably already understand this but it isn't reflected in your writing or by others. Refering to the postive changes to employment as creation of jobs is wrong. There are buisness surveys tht measure jobs/positions but the Labour Force Survey measures people. This is a very important distinction as I said before because one person can have more than one job. So based on the data all that can be sais is that there are only an estimated 5300 more people that are employed. A measure that might more accurately reflect people working more i.e. More than one job or more hours is the aggregate monthly hours series. From memory I think it has been increasing (except this month). So tighten your language up!

Anonymous said...

Just because its convention doesn't make it right. Its misleading and sloppy. Your job as a commentator is to accurately report on the data. Using this terminology is not accurate. Just because others use it doesnt make it right. This is just one of the many problems with journalistic commentary on economics in this country...journalists who know better (or should) use sloppy or misleading language that doesnt give an accurate description of the economic climate. Its your job to inform people, I would have thought you would like to do it properly.

Peter Martin said...

Dear A,

Like I said it is a convention.

When swan promised "half a million jobs created over the next couple of years" everyone knew what he meant, including you.

It causes no confusion.

Anonymous said...

So its convention to be wrong. Take some pride in your work and try to change the convention. The problem with accepting this convention is that it is misleading and leads people i.e. The general public, to belive that the measure of employment is some how measuring the number of jobs there are whn its not. The concept is simple Pete so why not explain it properly. Or are you just one of the many of the sheep that make up the ranks of australian economic journalists!

Anonymous said...

Furthermore, the point that I knew what Swan meant is mute. The point is that the employment figures don't measure jobs growth, other surveys do. So either use those surveys when reporting on jobs or explain the employment figures. Simple really! Use the right measure or the right language when commentating.

Nicholas Gruen said...

Thanks Peter,

Fair call.

Sad how they do that.

And there's going to be a surplus in 2012-13!

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