Saturday, September 14, 2013

Unemployment rates debates

Labour force data was released this week with the national unemployment rate nudging up to 5.8%. There is commentary at Conus Blog and a good chart-laden post with a range of indicators on the most recent numbers at MacroBusiness: Australian unemployment in detail.

In the midst of the election campaign there was a rather misleading report by ABC TV 'The Business' on the ABS stats with the title: “Lies, more lies, propaganda and the unemployment rate.”

This was based on a paper from Andrew Baker at the CIS claiming changes to Newstart classifications had somehow manipulated the ABS unemployment rate for political reasons. The ABC report also gave Roy Morgan another soapbox and selectively quoted certain economists with dubious context.

There was an excellent response on this from ACTU economist Matt Cowgill: Has the unemployment rate been manipulated? This pretty much debunks the claim and I think Cowgill has been all too kind re the credibility, professionalism and motivations of Baker and CIS on this!

Cowgill I think does a good job of explaining the unemployment rate as an imperfect indicator and only part of a range of relevant indicators.
The unemployment rate is inadequate, as is any other alternative measure you’d like to propose. I quite like looking at the employment-to-population ratio – this simple measure tells us what proportion of the population is in work. Ah ha, you might ask, but what if all the newly created jobs are part time? Good point – for that reason I also quite like looking at the number of hours worked per adult in the population. But this isn’t perfect either, as when hours fall it doesn’t tell us whether this pain has been shared broadly across the population, or concentrated in a few unlucky people who’ve gone from full-time work to the dole queues. If you want to get a sense of how the labour market is going, you’d want to look at all of the above measures and more.
I also recently posted a not dissimilar comment from US Nobel laureate and NY Times blogger Paul Krugman on this: There is no "true" unemployment rate. Similar claims of manipulation had coincidentally arisen during the last US Presidential election?

Which brings me back to the most recent numbers this week where the consensus is that a weaker labour market is indicated. A positive noted in the MacroBusiness post has been aggregate hours worked and particularly year-on-year growth in Queensland in recent months. Albeit this growth follows a period of sustained weakness and the aggregate has only recently recovered the levels of early 2012 so there could be some catch-up component.

Meanwhile NAB have released a State Economic Update with lots of nice graphs and a mixed outlook for Queensland including a forecast 7.2% unemployment rate in 2014/15! Queensland Economy Watch is more positive: Qld labour market stable, not worsening.

Update: The very bullish report on Queensland in todays Cairns Post reads more like a PR release than journalism! Oh, hang on? Cairns in front for economic comeback

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