Friday, November 25, 2011

Extraordinary. The boom is spreading job prospects more evenly

Treasury's David Gruen at the forecasting conference yesterday.

The fastest growing sector of the economy is "mining related" - including construction and services provided to the mining industry, but not mining itself:

"To leave the analysis here, however, would be to tell only part of the story. There is a complementary way to look at the economy’s response to these differential growth rates across the mining and non-mining sectors, which is to look at the behaviour of the labour market and, in particular, the distribution of unemployment rates across the country.
Data on unemployment rates are available for about 1,400 statistical local areas (SLAs) which, together, span the whole of Australia. We can therefore examine how the distribution of unemployment across the country has changed over time. Chart 13 shows, for every quarter from Sep 1998 to Jun 2011, two summary measures of this distribution – the average unemployment rate, and its dispersion (the weighted standard deviation across all SLAs).

As the mining boom has progressed, the average unemployment rate has fallen, and its dispersion across the country has also fallen. While it is possible to identify individual parts of the country that have experienced higher unemployment as a consequence of the differential rates of growth of the sectors of the economy (for example, the region around Cairns), the results in Chart 13 imply that these examples are the exception, rather than the rule.

We are seeing a widening gap between the growth rates of the mining (and mining-rated) sectors and the non-farm non-mining sector. But thus far the economy has absorbed this significant structural change with average unemployment remaining quite close to its full-employment rate, and the dispersion of unemployment across the country having declined to well below its level before the boom.

That is a quite impressive achievement.

In a sense this is not surprising. As labour gets more scarce employers have to search for workers everywhere.

But who'd have thought? The mining boom boosting equality.

Macro Economic and Structural Implications of a Once-In-A-Lifetime Boom

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