Australia’s unemployment rate was 6.9% in September, up 0.1% on the prior month, but lower than the pandemic peak of just 7.5% in July. This is a weird result, masking an under-story that is likely to ripple through the Australian economy for many years to come. Most of the job recovery was part time work, and many of the currently employed are receiving JobKeeper support that ends in March 2021
One year ago, the unemployment rate was 5.2%. In normal times, a 1.7% lift in the unemployment rate, and a recession, would have the nation in anger. They are Government changing numbers and situations for example.
But, in the peculiar world of the pandemic, the data below – showing 973,400 Australians did not have a job in September – is actually good news.
Commentary suggesting this unemployment result means the economy has ‘snapped back’ are inaccurate by any measure, but especially because the real employment story probably won’t play out until early 2021, when the stimulus and employment support programs begin to be wound back. If they are that is. There are few economists and business leaders supporting a hard stop to JobKeeper in March.
Jobkeeper has done a fabulous job of keeping people connected to their business and job, and off the unemployment queue, but as John Kehoe observed in the Australian Financial Review, the effective unemployment rate (if we take JobKeeper away) is closer to 9.5%, really underscoring the challenge faced in recovering from the recession – we will need lots of jobs!
In this recession – which despite a lot of over-reach from commentators is by no means over as Greg Jericho pointed out in The Guardian – the biggest issue is jobs and employment. If we were not in the midst of a health crisis, it is more or less all we would discuss.
It could be that technically the September quarter GDP maybe positive, but so what when ALL of the growth comes from resource export price growth and the massive lift in Government spending? Remove one of those two factors and growth remains negative. Remove the Government support and the economy remains in a deep ditch.
So, Jericho focusses on a jobs measure of a recession – its more real as an indicator than the complex math that makes up economic growth projections, that is certain.
Rather than focus on unemployment, he drills into under-utilisation, where the unemployed are matched with the under-employed (those without sufficient work) to define a recession. We will leave the argument alone, but below, we can plainly see that under-utilisation of labour remained at a massive 18.3% in September, way up from a pre-pandemic 13.5%. And that is before we take a large number of people off Job Keeper and add them to the unemployment data. On any objective basis, Australia remains in a jobs recession.
With labour underutilisation tracking very high, we need to examine the situation or the under-employed, who number about
In the chart above, we can see just how bad the situation has become. More than 1.536 million people had insufficient work in September, in addition to those unemployed. The underemployed are down since they peaked in April at 1.820 million people when the nation was in hard lockdown.
So, what does underemployment look like right now?
The best clue comes from monthly hours worked on a per capita basis in the Australian economy. The long term average hours worked per month has been 85.7, so when that ticked lower in late 2019, there was already concern about a softening economy. But in April, the crash to 77.3 hours meant that on average, every Australian was working 8.4 hours less than the average each month. We can see this in the chart below.
Beaause average hours worked includes people working a full week, as well as those working a few hours, the impact on those who need the hours most has been most severe. At 80.9 hours worked per person in September, there has been a mild recovery, but the nation is using its working labour somewhere between 8-10% less than it was previously. That is a big drag on the economy and on families, not to mention those without a job at all.
Little wonder the calls for 2021 to see huge stimulus and income support are continuing.
