Newman’s jobs pledge – checking the arithmetic

Queensland Opposition Leader Campbell Newman has made a bold jobs pledge today which has drawn strong criticism from Treasurer Andrew Fraser. The Brisbane Times reports:

Queensland’s Liberal National Party is vowing to create 420,000 jobs over the next six years as it seeks to reduce the state’s unemployment rate to 4 per cent after two terms in office.

But Treasurer Andrew Fraser hit back at the election-eve pledge, questioning the modelling behind it and declaring that 420,000 jobs had been created in the past seven years under Labor…

…“Only by making wild presumptions about the labour force participation rate and a collapse in population growth could Mr Newman conclude his 4 per cent target can be delivered with 420 000 jobs.

I think the Treasurer has received some questionable advice on this issue. By my calculations Queensland could achieve 4% unemployment with significantly fewer new jobs than 420,000, so Mr Newman’s jobs pledge actually appears larger than necessary. Let’s step it out:

1. Take the November 2012 employed persons estimate (trend) of 2,351,000 and grow it at the average monthly growth rate over the last 12 months of 0.07% to get to employment of 2,357,900 by March 2012 (i.e. around election time).

2. Now take the current civilian population aged 15+ in Queensland of 3,690,800 and grow it out to March 2018 (i.e. six years after the Newman Government gets in) by the growth rate implied by the official OESR population projections (around 2% per annum or 0.17% per month) to get a civilian population 15+ of 4,193,500 in March 2018.

3. Assume the labour force participation rate (67.6%) remains constant, which implies a labour force of 2,836,600 in March 2018.

4. An unemployment rate of 4% (Mr Newman’s target) would therefore mean there would be 113,500 unemployed persons in March 2018.

5. Subtracting this from the size of the labour force means total employment would have to be 2,723,200 persons.

6. Subtract the March 2012 employed persons estimate of 2,357,900 (see Step 1) from the March 2018 estimate of 2,723,200 persons (see Step 5) to get required employment growth of 365,300 over the period, which is less than Mr Newman’s pledge of 420,000.

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