Thursday, September 10, 2015

Heads up. Today's unemployment rate could be awful. But it won't be as bad as it seems

Prepare to be shocked. On Thursday the Bureau of Statistics is likely to tell us that the unemployment rate has scaled new heights, climbing from 6.3 per cent to as much as 6.5 per cent.

If it happens, unemployment will have hit a 13-year high. It'll be back to where it was before the first of Australia's two mining booms, and higher than it ever was during the global financial crisis.

But the jump won't all be real. Here's why. Throughout July and August the government has been phasing in new rules for access to the Newstart unemployment benefit. It's becoming harder to get without actually applying for jobs to prove you are looking for work.

In July, with the phase-in not complete, the proportion of Newstart recipients actively looking for work jumped an impressive 9 per cent. An extra 38,000 Newstart recipients phoned or emailed potential employers, but the number of Newstart recipients didn't climb at all, in fact it fell a bit.

The bureau calculates its unemployment figures quite differently from the totals compiled by Newstart. It surveys Australia houses door to door and asks whether occupants have been actively looking for work.

Because many more Newstart recipients have been actively looking for work, rather than merely receiving the benefit and passively being available for work, the unemployment rate published by the bureau climbed from 6.1 to 6.3 per cent in July.

But the bulk of those extra "unemployed" would have been no more out of work than before...

While suddenly fitting the bureau's definition of unemployment, their status as Newstart recipients would have remained unchanged.

It's likely to happen again in the August figures due on Thursday. The unemployment rate could well jump from 6.3 per cent to 6.5 per cent without a single extra person signing up for Newstart.

It'd be wise to cut the government some slack if the unemployment rate is high on Thursday. It'll be its fault, but it'll be because of its success in moving people toward work rather than pushing them out of it.

Also on Thursday new much lower estimates of population growth will cut the bureau's estimate of employment growth. It used to be 335,000 new jobs since the election, 243,590 in the past year. It'll become 295,000 since the election, 212,500 over the past year.

Wise hands pay little attention to either the unemployment rate or to employment growth. They look at the employment-to-population ratio.

After falling since 2013 and 2014, it's been climbing for seven months.



In The Age and Sydney Morning Herald