Goldman: Australia’s real unemployment rate 19%

Australia’s official unemployment rate is forecast to peak at around 10% during the COVID-19 lockdown, according to the Australian Treasury.

However, ANZ economist David Plank says the ‘shadow’ unemployment rate is likely to be much higher, and the number of hours worked will be the best indicator of the virus’s impact on the labour market. Mark Wooden from the University of Melbourne agrees that hours worked is a far better measure of the labour market than the unemployment rate.

From The AFR:

“Hours worked will be the best indicator and you are likely to see a massive drop in full-time jobs and a jump in part-time jobs,” Mr Plank said.

“Calculating the unemployment rate is going to be complicated and it will understate the degree of underused labour”…

University of Melbourne labour economist Mark Wooden said the unemployment rate had never been a great measure of the labour market and “hours worked has always been a better measure”.

“There’s going to be people on JobKeeper working zero hours who are almost unemployed people.”

Both are right. The official unemployment rate will be next to useless given:

  • Those receiving JobKeeper but not working will be counted as employed; and
  • Those that have given up looking for work (but would like a job) won’t be counted as unemployed.

Total hours worked were already falling before the COVID-19 lockdown hit:

Average hours worked had also tanked to the lowest level on record:

Meanwhile, the Reserve Bank of Australia forecasts a “staggering” 20% decline in the number of hours worked over coming months.

Goldman sums it up nicely:

  • real rate of unemployment is likely to hit 19% by the middle of this year;
  • JobKeeper’s working very few hours;
  • others will leave the labour force;
  • significantly undermine the usefulness of standard measures of underemployment and underutilization; and
  • slowing wages growth.

We’ll get our first official indication of the employment impact mid-May when April’s labour force data is released.

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Comments

    • kannigetMEMBER

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  1. It also doesn’t count people like me who are technically employed but are seeing a big reduction in compensation and therefore plan to spend absolutely nothing in the immediate future.

  2. They can lie all they want on unemployment, the banking system will tell the tale. In ANZ’s ASX report today – about 14% of home loan customers have asked for a deferral on their repayments.
    That is a massive level of potentially delinquent home loans and this crisis has only been going for a couple of months.

  3. For sure hours worked is a better measure, but nobody seemed to have a problem before with basing employment status on one or more hours work which was clearly nonsense. What makes anyone think this will make a jot of difference. So with hand on heart, any messaging will be technically correct, but obviously wrong.

    • However stats are contrived in order to make the government look good. Scumo will be crowing about how he kept Australia’s unemployment rate at 10% unlike USA/ Europe. Also to keep the well employed spending. They would fill their nappies and not spend a cent if they knew what was waiting for them with a potential redundancy and a real unemployment rate of 25%

  4. I’m obviously an idiot. Why are we not using our underutilized universities and education establishments to train keen workers for skills of the future.

    Composites, renewable energy, programming, data analytics, high tech manufacturing, agtech etc etc.

    I feel genuinely sorry for people who have either lost their job or have been underemployed for sometime. The analogy, never waste a crisis does come to mind in how we can productively deploy these people to become high earners for the future.

    But then again….real estate should suffice…pfft

    • No it didn’t. It was more than 7,000 a few weeks back- now 5,522. A long way to go before it sees an all time high again.