So the employment figures for July have been published by the ABS today. The seasonally adjusted unemployment rate is 5.7 per cent and the participation rate is 65.1 per cent. By historical standards the 65.1 per cent figure is pretty good, but it is down from 65.3 per cent the previous month.
Is this good or bad for the government? Well that is how the (print) media have largely covered the issue today.
It isn’t at all good for those people who have lost their jobs, or are looking for jobs, or have dropped out entirely of the job market. How unemployment figures impact on the spin we hear from politicians is a secondary concern to the human cost of unemployment.
Rather than focus on a single month we should look at the trends. So I grabbed some data from the ABS and graphed the unemployment rate, the participation rate and the employment to population rate since 1996 to the present (my data are seasonally adjusted from table 2).
The unemployment rate is the blue line in per cent (read off the right-hand axis). Over the Howard era unemployment trended down before increasing massively during the GFC. Now we can quibble about the stimulus spending; did it or did it not ‘save’ Australia from recession? While politically important, that is something of a side-show. What is interesting now is that unemployment has increased since 2011. That cannot be blamed on the GFC.
What else is happening? The red line is the participation rate in per cent (read off the left-hand axis). There are three things that have happened since 1996. Up to 2004, the participation rate was fairly level and then increased, it leveled out again in 2008. Again we can quibble about whether that was due to IR policy, or the mining boom, or whatever. Either way the sustained increase in the participation rate is a success. A ‘good thing’. Small month to month variations in the participation rate should not detract from an overall positive development in the labour market.
But there are clouds on the horizon. Look at the green line - the employment to population rate in per cent (again read off the left-hand axis). This figure generally increases until early 2008, falls during the GFC, then recovers but is now declining again. That is potentially worrying.
There are all sorts of things going on there - people who can’t work, people who don’t want to work, people retiring; the ageing population is going to substantially impact that figure in future.
On current trends unemployment is going to rise. Quibbling over the monthly data fills columns, and air-time, but doesn’t go the heart of the issue. What do politicians imagine they can do about the long term prognosis for employment and can they tell a coherent story to that effect?