On Monday, I appeared on the 612 ABC Brisbane Radio Drive program (from 2:09:00) to chat with Kelly Higgins-Devine about how we estimate the unemployment rate, a matter of interest that day obviously due to the Opposition Leader being unable to remember the 4% national unemployment rate. I mentioned the ABS methodology is based on internationally-consistent definitions agreed via a forum organised by the ILO, and that the ABS undertakes a comprehensive survey of around 26k households (see Labour Force Survey methodology).
That said, the ABS may need to undertake a public information campaign to improve public confidence in its labour force data. Based on the questions I received from Kelly on the Drive program, there appears to be a lot of scepticism in the community about the data, largely because, technically, you are counted as employed if you only work an hour per week. But as the ABS has pointed out in a post How many people work one hour a week?: “Only a very small number of people usually work one hour a week – most of whom would not like to work any more hours.” It’s only about 15k people or 0.1% of all employed people in Australia. The vast majority of Australians work more hours than that (e.g. see chart below).
Another point I made was that it’s not as if the ABS is hiding the fact that some people working part-time (i.e. less than 35 hours per week) would like to work more hours. The ABS produces an underemployment rate estimate (see chart below), and an underutilisation rate estimate which is the sum of the unemployment and underemployment rates. The underemployment rate, as reported by the ABS was 6.6% in February. Adding it onto the 4% unemployment rate, we get an underutilisation rate of 10.6%. While the unemployment rate is at a rate last seen before the financial crisis, the underemployment rate, and hence the underutilisation rate, are still significantly higher than they were back then, particularly for Queensland. Possibly the media and commentators pay too much attention to the unemployment rate figure and should discuss underemployment as well. The underemployment data are available, so there’s no reason to think the labour force data are being manipulated or something is being covered up.
Another criticism of the unemployment data I’ve heard relates to the discrepancy between the ABS’s unemployed persons estimate (i.e. 563k people in February) and the number of people on JobSeeker payment (i.e. 868k people in February). The difference between them comes from the fact you can receive JobSeeker but not be currently available to work, so you wouldn’t be classified as unemployed according to the ABS’s definition. For instance, you could be sick or injured and receive JobSeeker, but not be counted as unemployed by the ABS. Is this misleading? I don’t think so, but I would like to have a closer look at the composition of people on JobSeeker to make sure I really understand the source of the discrepancy, and I’ll aim to do that in a future post.
The March labour force figures will be published tomorrow (Thursday 14 April) and we’ll see whether the unemployment rate will fall below 4% and end up at a rate not seen since the early seventies. Certainly there is extraordinary momentum in the economy and along with super-high commodity prices, that will have a big positive impact on upcoming state budgets, as I’ve attempted to estimate in a recent report:
Nearly $30 Billion of Potential Upside for State Budgets in 2021-22 and 2022-23
Highly relevant to Queensland’s state budget, coal prices have been going crazy and the market is expecting them to remain high for the next year or so, based on futures pricing (see chart below). That represents a big injection of money for Queensland Treasury. Sure, the state government faces an expensive clean up bill for the floods, but the federal government will cover the bulk of the cost, and the economy is performing better than expected, which will boost payroll tax revenue. Consider that Queensland’s unemployment rate was 4.3% in February, while the mid-year budget update forecast an average rate of 5.25% in 2021-22 and 5% in 2022-23. In Queensland and the rest of Australia, state budgets are looking stronger.
N.B. 1st position refers to one-month ahead futures prices and 12th position refers to 12-months ahead prices (i.e. currently for March 2023 delivery).
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Hi Gene, Thanks for this analysis, very informative. The graph of hours worked in exceptionally good as well. It certainly shows the difference in males and female work pattern. I can glean from this that many more females “want” to work part time so that they can be more available for parenting. To me that says that, ignoring job types, the gender pay gap is somewhat about choice not misogyny. Maybe another post to see if that is correct?
Also, the price of coal is based on geopolitical events both in Europe and trade issues with China. Russia invaded Ukraine expecting the Europe would appease Putin because they were being wedged on critical energy supply. We are now in a period of energy wars in part brought about by poor timing of the West’s exiting fossil fuel production, too early in the transition and under appreciation of the worlds current needs. Also, the dumb move by Germany to exit nuclear. Merkel has been shown to be an unwitting pawn of Putin’s plan to rebuild the Russian empire.
Good for Australia as long as we can control the timing of our coal and LNG exit and not let The Greens do that at an accelerated pace.
Thanks Russell. Yes, the gender pay gap is partly about choice, but there does remain a small gap after accounting for observable variables which are partly a matter of choice, a gap which is only a fraction of the reported pay gap I should note. Discrimination possibly plays some role still, but it’s impact appears small – a few percent at most and definitely not the reported 14% gender pay gap statistic based on average weekly earnings and not accounting for industry or occupation mix differences. At least that’s my reading of the empirical evidence. I’ve covered this on my podcast in the past (e.g. https://queenslandeconomywatch.com/2020/06/18/gender-pay-gap-recap-latest-podcast-episode/) but it’s definitely worth another post on it.
Re. the exit from coal and LNG, neither major party wants an accelerated exit, so as long as there’s not some crazy election result, we should be ok. Possibly Labor will need to make some concessions if they need Greens’ support, but I doubt that would include the moratorium on coal that the Greens want.