Jobless? Figure it out, if you can

Date
    August 11, 2012


Ross Gittins
The Sydney Morning Herald's Economics Editor



Most say Australia's unemployment rate of 5.2 per cent is as good as it gets. But there are those who doubt it.



IF YOU want to know what's happening to employment, there's the hard way and the easy way to find out. But, in any case, can you believe the official figures?   

Economists, the markets and the media prefer to do it the hard way, using the ''thrills and spills'' method. The ''seasonally adjusted'' figures we got from the Bureau of Statistics this week showed total employment across Australia rose by 14,000 last month.

But the previous month it fell by 28,000. So, did the economy take off in July, having collapsed in June? Maybe, but employment grew by 28,000 in May, after growth of 13,000 in April. So, is the economy going up and down like a yo-yo?

Maybe. Last month the unemployment rate fell to 5.2 per cent from 5.3 per cent the previous month. But that was up from 5.1 per cent in May, which was itself up from 5 per cent in April. Then again, April was down from 5.2 per cent in March.


Confused? Precisely. The hard way gives you thrills and spills from one month to the next, which makes it hard to work out what's really happening.   

The easy way to do it is to take the bureau's advice and look instead at its ''trend'' figures. These are the seasonally adjusted figures smoothed out to remove statistical ''noise'' - unexplained variability that probably doesn't prove anything.

The trend figures show that, over the first seven months of this year, employment has been growing at an average rate of 10,000 jobs a month.

Is that a lot or a little? Well, it's been sufficient to hold the rate of unemployment virtually unchanged at 5.2 per cent. (Remember, since the labour force keeps growing, we have to create jobs just to hold unemployment steady.)

Is an unemployment rate of 5.2 per cent good or bad? Well, most economists would tell you it's about as good as it gets. They regard the rate of full employment as being about 5 per cent or a little lower.

But here's where the doubts arise. I get more emails from readers querying the reliability of the job figures than any other subject.   

''One can't help gain the impression that the definition of employment is being gradually liberalised for political purposes, i.e. to make the figures look more impressive,'' says one. ''An individual is now assessed as being 'employed' if they work just one hour each week,'' says another.

Many people have a deeply held belief that the way we measure employment and unemployment has been tampered with by governments in recent times.

When unemployment fell to much better levels under the Howard government, this notion used to pop up in the minds of Labor voters. Now Labor is in power it pops up in the minds of Liberal voters.   

I don't know where this notion came from, but it's factually wrong. It didn't happen. No government of any colour has changed the way employment and unemployment are measured in the past 30 years.

The definitions the bureau uses are set by international statistical convention. And the convention hasn't changed significantly in many decades. No one has changed the rules.

The real trouble with the official figures is that the definition of unemployment has always been unrealistically narrow. It's true a person is classed as being employed if they work just one hour each week.

Of course, very few people who do work do so for as little as an hour or three. Nor is it correct to imagine that everyone working part-time would prefer to have a full-time job.

Some would; many - particularly full-time students, the semi-retired and parents looking after young children - wouldn't.

So the real question is: how many part-time workers would prefer to be working more hours than they do? The answer in May was 890,000.

Note, however, that other figures suggest only a bit over half of those people wanted full-time jobs. The rest (roughly 400,000) were people working part-time who just wanted a few more hours a week.

The 890,000 ''underemployed'' workers account for 7.4 per cent of the labour force. Add to them the 625,000 workers officially defined as unemployed (the ones giving an unemployment rate of 5.2 per cent) and you get a ''labour force underutilisation rate'' of 12.6 per cent.

The bureau calculates underemployment every three months. It's readily available.

I think that, whereas the official unemployment figure understates the true size of the problem, the underutilisation figure overstates it (because part-timers who'd like to work a few more hours a week don't have a big problem). That's why my rule of thumb has long been that to get a more realistic idea of the extent of unemployment you should take the official figure and double it.   

But if you're trying to get at the truth (as opposed to trying to prove the political party you hate is doing a terrible job), remember two points.

First, if you double today's unemployment rate you should double all the earlier rates you compare it with.

Second, remember the trajectory of the higher figure should move pretty much in line with that of the lower figure. So if the official unemployment figure is stable, it's reasonable to assume the more realistic figure is, too.

Read more: http://www.theage.com.au/business/jobless-figure-it-out-if-you-can-20120810-23zyg.html#ixzz23BRYHp5S

Change is the only constant in jobs market

Date
    August 11, 2012

Jessica Irvine
Economics Writer for The Sydney Morning Herald.


I've been thinking a lot about jobs lately. Seems to me the changing nature of the Australian workforce has produced two big trends that, combined, are both unsettling in one sense, and exciting in another. The first big trend, for white collar workers in particular, has been the encroachment of our working lives into our private lives. Gone are the 9 to 5 jobs. The advent of smartphones and ''CrackBerries'' means barely an hour goes by when we're not in contact with our employers, colleagues and contacts. I'm fairly certain I spend more time each day talking to colleagues than to my actual family.   

And yet, the more atomised nature of the workforce means we're also more likely than at any other time to change jobs and employers. Generation Ys were never meant to stay in one place for too long. It is estimated Gen Ys will have about 10 career or job changes in their lifetime.

So at the same time we are spending more time with our colleagues, we are also more likely to up and leave them. It can be wrenching.   

But it's not just young people. There is a massive churn that goes on every month in the jobs market that is hidden in the official stats.


The latest official jobs report, released by the Bureau of Statistics on Thursday, conveys an overly simplified view of the real flux and change that goes on in the jobs market.

Or perhaps you didn't hear there was a jobs report out this week. Bad job reports will always get more attention than good reports. And this week's report was a zinger.   

In the face of global storm clouds, the Australian economy remains doggedly resilient. Despite high-profile job losses at Caltex and Darrell Lea, the national jobless rate dropped from 5.3 per cent to 5.2 per cent. In total, 14,000 more people were employed last month than the month before.

But it's more complicated than that.

Keep in mind that saying 14,000 more people were employed is not the same as saying 14,000 jobs were created in the month. The headline jobs figure of 14,000 is a ''net'' figure - the balance of all the jobs created and all the jobs destroyed in the month. In fact, many tens of thousands of jobs were both created and destroyed. But on balance, there were more gains than losses.

For every job lost at Caltex or Darrell Lea, another job was created in health services, mining and other industries, and then some.   

To get a real picture of the constant flux and change always under way in the labour market, it is necessary to delve into the bureau's ''gross flows'' data.

The monthly labour force report is compiled through a survey of a sample of Australians asking them if they were employed or not in the previous week (and yes, it's true that it counts anyone as working one hour or more as employed, in line with international standards). Respondents typically participate in the monthly survey for eight consecutive months before dropping out.

It is possible, then, to track individuals to see, over time, how many who were employed in one month were suddenly not employed the next. Or vice versa, jobless one month, and employed the next.

Economist Bruce Chapman had a look at the monthly gross flows data in a paper last year for The Australia Institute. His findings are astonishing.

On average in every month between 1998 to 2010 about 372,000 people who were jobless in one month were employed the following month.   

Conversely, about 368,000 people who were employed in each month were jobless in the following month.       

Breaking that down from monthly into hourly figures, that means that every working hour of every day, about 1530 Australians lose their jobs. But it's OK. Every working hour of every day, about 1550 Australians get a new job.   

Change is the only constant when it comes to the modern jobs market.

Read more: http://www.theage.com.au/national/change-is-the-only-constant-in-jobs-market-20120810-23zjp.html#ixzz23BcOpDFE

Quote:



They'd freak us out if they released the real figures.

Better to be falsely optimistic and hope that the numbers get back to 5.2% before someone exposes them for their lies.

Youth unemployment is a lot worse

Also they should only count 40 people working one hour a week equivalent to 1 job !!

Bobby. wrote on Aug 11^th, 2012 at 10:53am:


What makes you think that?

They use a sampling technique to calculate the unemployment rate. You don't have to be collecting the dole to be counted as unemployed. If you want to work and can't find work you're unemployed, or perhaps twiddling your thumbs in school.

MOTR wrote on Aug 11^th, 2012 at 11:01am:



That's the first time I've heard that.

All I know is that the statistic is way understated.
I estimate the true unemployment rate at 20%

Bobby. wrote on Aug 11^th, 2012 at 4:40pm:


The way we measure unemployment certainly underestimates the true level of unemployment. However, as Gittins  explains in his article, it has always been underestimated.