This week’s unemployment figures brought some good news – but that number also disguised a lot of ongoing worries. We should not underestimate just how far we have to go to get back to where we were before the virus.
No one was expecting the unemployment rate to drop from 7.5% to 6.8%. It certainly did not square with what we were seeing in the weekly payroll job numbers.
The Bureau of Statistics noted that this is because almost all of the increase in employment was due to sole traders. And as AMP Capital senior economist Diana Mousina suggested, this was because of the partial re-instatement of “mutual obligation requirements to qualify for unemployment benefits”.
As AMP’s Shane Oliver pointed out, this meant these changes “may have encouraged them to report a return to employment even though they aren’t doing much”.
So it might not actually be a sign that there are more jobs, rather that people are pretending to work so they can access government benefits.
A more rational person might suggest this highlights just how dumb and counterproductive mutual obligation requirements are, but let us leave that arguments for another day.
We also need to realise that these numbers are estimates based on surveys, which is hard enough to do in the best of times. And these are not the best of times – just ask yourself how would you compare this current “season” with any previous and then produce a “seasonally adjusted” measure that makes sense.
That despite its massive lock-down, Victoria’s unemployment rose from 6.8% to just 7.1% – still well below the 7.5% the state recorded in June – suggest the figures may not be totally representative of reality.
But even putting those statistical doubts aside, 18% of Australian workers (some 2.4 million of us) are either unemployed or underemployed, a level equal with the worst period of the 1990s recession – hardly good news.
And importantly, while employment grew 0.9%, hours worked increased by just 0.1%.
This later aspect is why we’re a fair way from cracking open the champagne and declaring mission accomplished.
As I noted back in May, rather than looking at the unemployment rate, we are better off focusing on hours worked per capita.
In March, all Australians on average (which means also counting those not in the labour force) worked 85.6 hours a month. By May that had fallen to 76.5 hours – a drop of 9.1 hours a month.
In August we were back to 80.7 hours worked a month on average – meaning were are now “just” 4.9 hours a month below what we were working in March.
Or to put it another way, we have recovered 4.2 of the 9.1 hours we lost – roughly 46%.
When we look across the states we see clearly that those states that have done better at containing the virus – Tasmania, South Australia and Western Australia – have recovered the most.
The ABS estimates that Tasmanians in August worked more hours on average than they did in March. (Which, to be honest, seems highly unlikely).
Victoria is now just 3% above the bottom reached in April, while New South Wales has recovered nearly two-thirds of its lost hours.
But while it is tempting to think that means we’re almost out of the Covid hole, we need to remember that the depth of that hole is beyond anything experienced since the Great Depression.
Even with the recovery, at its current point, the average hours worked by people in NSW has fallen in the past year by more than it did in one year during the 1990s recession.
And even if we exclude Victoria, the average hours worked in August were lower than any time since 1985 – back when women’s participation was so low, it would be the equivalent of having around 1.5 million fewer women in the labour force.
Moreover, in NSW most of the recovery occurred in June; August saw barely any improvement.
So yes, some good figures, and seemingly most states are more than half way to fully recovered, but there remains a very long way to go – and the recovery is slowing.