More sackcloth and ashes stuff concerning employment data in today’s AFR, including the strident by-line “Swan’s maths are a mess when it comes to our employment data”.
Determined to find a problem with an unemployment rate in the low 5’s, John Black makes much of the fact that if the labour force participation rate hadn’t “…slumped a massive 1.6%…” since December 2010, our unemployment rate would be much worse; 7.2% in fact. This is of course on the assumption that “…there’s an extra 300,000 Australians who have lost the confidence to chase jobs since 2010”.
I’ve got a few issues with this approach, namely:
1. Black uses raw data to calculate the 1.6% fall. The seasonally adjusted numbers only show a 0.7% decline over that period, so are ignored.
2. Not everyone who drops out of the labour market does so because they have “…lost the confidence to chase jobs”. Presumably one or two have dropped out because their mortgage payments are now miles less than what they were, and their families no longer need two incomes to get by.
3. Finally, what was so magic about December 2010 that we have to use the participation rate at that time as some kind of gold standard? If we go further back in time the participation rate was way less than it is now:
Ten years ago the participation rate was barely above 63%. Any guesses what the unemployment rate would be today if we had a 63% participation rate today? A fair bit lower than 5%, and a whole lot lower than 7%.