Don’t panic about unemployment just yet – still below long-run average

I’ve noticed the Courier-Mail is reporting the incoming Government has “been handed a massive headache with new figures showing unemployment rising and Queenslanders dropping out of the job market.” However, yesterday’s figures simply confirmed the labour market has been lacklustre for some time. There is no reason yet to suspect it will get much worse. As I’ve commented frequently, it is important not to over-react to month-to-month changes in employment and unemployment data, given the sampling errors involved. Finally, from a historical perspective, unemployment really doesn’t look too awful (see chart below). Hence the Government should proceed cautiously in developing new measures to tackle unemployment as they may not be cost-effective, particularly given the RBA’s monetary policy is imparting a significant stimulus to the national economy.

Unemployment_since_78_latest

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11 Responses to Don’t panic about unemployment just yet – still below long-run average

  1. Jim says:

    Gene

    A comment and a question….

    Comment. You comment that there is no reason to suspect it will get much worse. There is still a fair bit of job shedding to occur in mine construction as more mines move to their operational phase. Hopefully this will be partially offset by a pick up in tourism on the back of a weaker AUD. I suspect we will see thing get a little bit worse before they start to get better.

    A question. Is there a broader employment measure (perhaps that picks up underemployment), and if so, what does the long term trend look like? Just wondering.

  2. Jim says:

    Gene / Pete

    It would be really interesting to see the underutilisation rate over time….

  3. Jim says:

    Pete / Gene

    That is pretty interesting. Thanks for pulling it together Pete.

    Just eyeballing the data, the unemployment and underemployment data for Qld and Australia respectively have tended to move together (roughly at least). But in the past couple of years, there is more of a gap emerging (underutilisation rate is growing faster than the unemployment rate). This is consistent with the trend over the past couple of years of part time employment generation while full time jobs are lost. This might also partly explain why the Commonwealth’s income tax take is tanking.

    To me this indicates that the jobs situation is quite a bit worse than the unemployment rate would suggest. It might not be time to panic yet, but a bit more concern may be in order….

    • Gene Tunny says:

      Yes, you may be right. Thanks for the comment, Jim.

    • I’d certainly agree with that analysis Jim. The divergence in recent years would seem to suggest a weaker jobs market than the headline unemployment number is suggesting. However, we should also be aware that the sharp spike up in the underutilisation rate occurred about the same time as the ABS seasonal adjustment debacle in the labour force data, so there could well be an issue here with the change of survey methodology which is being reflected in more people responding that they would like more hours etc. Just a thought that might be worth bearing in mind.

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