A ‘fake news’ unemployment rate coming your way

Unemployment is much higher than the government would have you believe.

Unemployment is much higher than the government would have you believe. Photo: Getty/TND

Australia’s official unemployment rate this week is likely to come in at about half the latest US count, but the real level of unemployment is likely to be similar.

The US unemployment rate soaring to nearly 15 per cent grabbed plenty of headlines over the weekend, reflecting COVID-19 wiping out some 33 million American jobs.

The Australian Bureau of Statistics on Thursday is tipped to produce an April unemployment rate starting with a 7 or 8, on its way to 9 per cent or so in June. It will fool nobody.

The official count is being kept down primarily through the JobKeeper scheme, along with plenty of assistance from the ABS unemployment definition and workers dropping out of the workforce.

A better guide to the amount of work that has been lost is the Reserve Bank’s estimate that hours worked will be down by 20 per cent.

The discrepancy between work lost and official unemployment goes further than the usual long-running argument between the ABS and the Roy Morgan polling organisation about the best definition of “unemployed”.

Roy Morgan uses a simple survey question: Is the person looking for work?

On that basis, Roy Morgan counted 2.16 million Australians – 15.3 per cent of the workforce – as unemployed last month. 

The ABS uses a much tougher international standard that makes it possible to compare unemployment rates across nations, but understates the genuine level of people without work and wanting it.

A report by the CBA economics team last month spelt out the key elements in the ABS definition that will keep numbers down.

To make the official “unemployed” grade, individuals had to have “actively looked for work” in the survey week, been available to work and had worked for less than one hour in that week.

There are hundreds of thousands of people on JobKeeper who are not working, but aren’t classified by the ABS as being unemployed.

There also are plenty of people on JobSeeker who are not officially “unemployed”.

What we’re also likely to see on Thursday is a sharp fall in the participation rate – the percentage of people who are either working or looking for work.

Many people who lost their jobs won’t have been actively seeking a replacement last month, given few jobs to be had and a couple of million people looking for them.

The CBA is tipping Thursday’s ABS release will claim more than half a million jobs were lost in April, with the participation rate down one full percentage point to 65 per cent, resulting in an unemployment rate of 8 per cent.

It takes time for people to start searching again after such a large-scale employment shock – they need to sense there are jobs to be found.

Hence the participation rate is likely to remain well below its recent peak as long as the economy is weak – and that’s for some years under current government policies, according to the Reserve Bank.

When the Prime Minister Scott Morrison said on Friday that he had “a plan that, according to treasury, can see some 850,000 jobs restored in the months ahead”, those jobs were mostly from the JobKeeper pool – people who officially aren’t unemployed now.

A disingenuous politician could end up claiming unemployment during this recession was kept well below the double-digit levels of the past two recessions in the 1980s and 1990s.

That would be fiddling with statistics.

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