As a resume writer and employment expert, I’ve been banging on about the inadequacies of the ABS unemployment methodology for seven years. This article gives an excellent overview of some of the issues.
Australia’s official unemployment rate has been so corrupted in recent months it’s obscuring more about the labour market than it’s revealing. According to the Bureau of Statistics, the official unemployment rate jumped from 6.4 per cent to 7.1 per cent last month.
The data show 227,700 jobs were lost in May, following 607,400 job losses in April, bringing the total number of job losses since March to 835,100. But the number of unemployed people has only increased by 211,000 since March — the remainder of the 835,100 having dropped out of the labour force altogether.
Why would over 600,000 people drop out of the labour force in the last two months?
Because they may have become too discouraged to look for work, or they’ve been unable to work because they’ve been forced into an unpaid caring role at home.
Due to temporary COVID-19 rule changes, unemployed people also no longer need to be looking for work to claim JobSeeker — for the first time in many years you can be classified as out of the labour force but still receive unemployment benefits. But since all these people have stopped actively looking for work, they’re no longer counted as officially unemployed — they’ve disappeared from the official figures.
That explains why the participation rate fell to 62.9 per cent last month — to the lowest level in nearly 20 years. And when the participation rate shrinks, relative to the number of people who are employed, the official unemployment rate is kept artificially low.
It’s why the ABS estimated there were 927,600 unemployed Australians in May, when the Government said earlier this month that there were more than 1.6 million people receiving JobSeeker.
Economists say the official unemployment rate would be around 11.3 per cent, if everyone who lost their job in the last two months was still part of the labour force.
Economists say another factor obscuring the true unemployment rate is the JobKeeper program. The Government’s JobKeeper payments have been keeping hundreds of thousands of employees attached to their workplaces through the COVID-19 lockdown, but it means those people are still considered “employed” even if they haven’t been working any hours.
The official unemployment rate of 7.1 per cent is also obscuring the reality of life for younger Australians.
Youth unemployment (15-24 years old) officially hit 16.1 per cent last month — the highest level since mid-1997.
But if every young Australian who had lost their job since March was counted as officially unemployed (rather than being forgotten when they drop out of the workforce), the youth unemployment rate would be 26.5 per cent. More than 290,000 people aged between 15 and 24 have dropped out of the labour force since March.
The rate of youth “underutilisation” (which accounts for the number of unemployed and underemployed) is now over 37 per cent, but that number would be 48 per cent if everyone who’d lost their job was considered “unemployed”.
If the economy did not see a recovery “fairly soon” the risk of permanent damage to the labour market will rise.At this stage, Prime Minister Scott Morrison is still planning to end JobKeeper in September, with plans to “transition” workers from the JobKeeper program to (possibly increased) JobSeeker from that point, which will see the official unemployment rate rise.