With Queensland’s unemployment rate at 6.7%, compared with 5.8% one year ago, debate has resumed over the Government’s pledge to reduce unemployment to 4% within two terms (see the Courier-Mail’s coverage). I’ve previously commented that, when the promise was made, it was technically achievable, but probably not sustainable for very long (see The 4% unemployment rate target – achievability vs sustainability). Now with the unemployment rate more than one percentage point higher than when the Government took office in March 2012, there are doubts about whether 4% would be achievable by the end of the Government’s next term (assuming it’s re-elected). As you can see from the historical data in the chart below, the unemployment rate can take a long time to fall from a peak.
The unemployment rate can take a long time to fall because there is a hard core of unemployed people who find it hard to get jobs even when conditions are good, and because, as the labour market improves, people marginally attached to the labour force (e.g. some stay-at-home mums) come back in looking for work. Unemployment goes up in an elevator, but comes down on an escalator – as I recall PM John Howard saying in an interview once.
The chart also shows just how far below the historical average of the unemployment rate the 4% target is. Even allowing for economic reforms that have improved the functioning of the labour market – by calculating the average over the last twenty years instead of since 1978 – a 4% unemployment rate looks very difficult to reach and sustain.
Commentary on today’s labour force data by other Queensland bloggers includes: