(Please note due to issues with the data dashboard we are not able to provide a direct link to the graphs used in this article. However most of these graphs can be accessed through the FWPA data dashboard).
Australia’s unemployment rate was an astounding – given the circumstances – 6.8% in August 2020. But that headline number has very little meaning right now, with under-employment very high at 11.2%, and a simply huge number of people on the cusp of potential unemployment, supported by the JobKeeper program.
We’ll come back to the details, but more on the headline numbers first.
When we combine the unemployment rate (people with no job) and the under-employment rate (people without sufficient work, so that includes those on JobKeeper), we have an 18.0% labour underutilisation rate. That is, close to one-fifth of the nation’s productive workforce is not being used fully. That also means there are 2.428 million people with less work and income than they would like or need.
As we can see in the chart below, the pre-pandemic labour under-utilisation rate was averaging around 14%, or about 520,000 people less than appear to be in that situation right now.
So, no matter what way or when we examine unemployment data, we need to look beyond the headline number to get to a closer version of the truth of the matter. Though it improved in August, we want to see more data before rejoicing, and we definitely want to see the labour underutilisation rate come down.
The decline in the monthly unemployment rate was a sensational 0.7% in August, recording the second-largest fall since data was first assembled. That was huge and unexpected and more than a bit peculiar.
As Greg Jericho wrote in The Guardian:
“In August the Melbourne CBD moved into stage-four lockdown and most economists believed this would surely see unemployment rise. And yet not only did the national unemployment rate fall but the rise in Victoria was small – up to 7.1% from 6.8% in July.”
The seasonal adjustment factor applied to the data is one reason for irregularity, according to Jericho, because seasonal adjustment measures work when conditions are ‘normal’. Right now, the conditions are not normal, not even ‘COVID normal’.
Measurement challenges also exist, especially because the support programs like Jobseeker and Jobkeeper are not being applied equally, so assumptions about who is in, who is out and where in the employment profile they might sit are more prone to error.
Compounding this further, for the really pointy-headed among us, is that August is always good for some and not for others (employees v non-employees). That had a big impact on the August data this year.
In sum, just on its own, the unemployment figure of 6.8% is a bit of a dangerous headline number in which to believe.
Jericho deals with the two-paced employment market (that’s code for Victoria on the one hand and all the other jurisdictions on the other) by showing that for Australia with Victoria included, monthly per capita worked hours averaged 81.0 in August and for Australia without Victoria, something less than 83.0 hours. Both are below the worst point of the 1990’s recession.
There is human tragedy in unemployment, and unless it is addressed, there can be economic disaster also. The long-term costs of under-utilising labour includes lower living standards, slower consumption growth and ultimately, greater public expense, for the simple reason alone that households in work earn and can spend more.
When we think about unemployment, we need to ensure we consider that the largest portion of economic growth is made up by household level consumption.
