Official unemployment rate hides real market story

18 September 2020
| By Chris Dastoor |
image
image
expand image

The surprise drop in the Australian unemployment rate in August to 6.8% masks a weaker underlying market story, according to BetaShares.

David Bassanese, BetaShares’ chief economist, said, by his estimates, a more accurate measure of the unemployment rate was a marginal drop in August from 9.9% to 9.8%.

“Due to both the JobKeeper program – and potentially because employers hope the decline in activity will be only temporary – a good deal of the decline in labour demand has come from reduced average hours worked, rather than employment per se,” Bassanese said.

“Average hours worked have recovered somewhat in recent months, but still remain below pre-COVID levels.”

Bassanese said many that had lost their jobs were defined as not looking for work or participating in the market and would not count among being unemployed.

“Although the non-participation rate has dropped back in recent months, it remains above pre-COVID levels,” Bassanese said.

“If average hours worked and non-participation had held at pre-COVID levels, my estimates suggest an extra 675,000 Australians would have been officially recorded as unemployed in May (or around two million in total) and the unemployment rate would have peaked that month at 14.7%,” Bassanese said.

However, his estimates also suggested that there had been a stronger decline in effective unemployment than implied by the official statistics. 

“By August, it is estimated the number of effectively unemployed Australians has declined by around 670,000 since March to 1.347 million – and the effective unemployment rate has declined to 9.8%,” Bassanese said.

“That said, my effective unemployment rate in August declined only marginally – as much of the 0.9% gain in employment seems to have come at the expense of a 0.8% decline in average working hours.

“Aggregate hours worked rose only 0.1%! Many non-working Australians (self-employed it seems) appear to have declared themselves as suddenly employed last month, even though they don’t appear to have worked that many extra hours!”

Official unemployment rate versus pre-COVID-19 non-participation rate

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 1 week ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 1 week ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 1 week ago

A Sydney-based financial adviser has been banned from providing financial services in the interest of consumer protection after failing to act on conduct concerns. ...

3 weeks 3 days ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

3 weeks 1 day ago

Having divested its advice business in August, AMP is undergoing restructuring in at least four other departments amid a cost simplification program....

2 weeks 5 days ago