The unemployment figures released last week saw everyone draw in a sharp breath as the rate hit 6.4% – a level not seen since August 2002. While the seasonally adjusted figure might be best taken with a grain of salt, it has now been 36 months since employment grew faster than the population and a report from Monash University has called for Australia’s immigration intake to be reduced.
The Guardian, by Greg Jericho, 11 August 2014
The unemployment rate has been rather skittish this year. As I noted in March, the ABS has slightly reduced the sample size of people it surveys each month, which increased its margin of error. This month it also announced it had slightly changed the way it defined whether or not a person is unemployed. To be unemployed you need to be actively looking for work. The ABS has now included two new categories that defined what this meant: “had an interview with an employer for work” and “taken steps to purchase or start your own business”.
The first of these meant that more people may have been included as unemployed than in the past because previously, if you had had an interview and were waiting to see if you got the job but hadn’t gone looking for other work while you waited, you were not classed as being in the labour force.
The ABS suggested the impact was not significant, but it’s clear when you look at the participation rate – which measures the percentage of the adult population in the labour force – there has been a fair bit of volatility over the past year:
And this has flowed into the unemployment rate, with the seasonally adjusted rate jumping 0.33 percentage points – the second biggest change in the past five years:
So can we all relax and realise it’s just a statistical blip? Alas, no. While the seasonally adjusted measure is bouncing around, the trend rate of 6.1% has been rising steadily, with little sign of relief.
And just in case you might not trust the data, in last Friday’s Statement of Monetary Policy, the Reserve Bank stated it pretty bleakly: “the unemployment rate is likely to remain elevated for a time and is not expected to decline in a sustained way until 2016.”
So what is going wrong?
Well to state the bleeding obvious, there just aren’t enough jobs.
Despite what Senator Abetz might think, the key for the unemployed to become employed is not through applying for as many jobs as you can, but for there to be more jobs to apply for.
As a general rule, our adult civilian population grows by around 1.6% every year (although it has been slightly higher than that for most of the past eight years). If employment doesn’t grow faster than population, unemployment is likely to rise.
In the past year employment grew by just 1%, and it has now been 36 months since annual employment growth was above 1.6% – the second longest streak ever behind the 40 consecutive months between August 1990 and December 1993.
Clearly the impact of the GFC has been pretty long. Partly this is because the GFC was a massive shock to the economy (one which we Australians, thankfully, largely avoided), but our recovery has been hampered firstly by other nations around the world taking ages to get off the canvas and secondly due to those nations recovering largely on the back of very low interest rates and undervalued currencies – which has overvalued ours.
And as I’ve noted in the past the high Australian dollar has been a massive handbrake on our economy – countering the positive impact of our own low interest rates.
The impact of the GFC can be seen in two ways: full-time jobs and youth unemployment.
During the mining boom period from 2004 to 2008 the growth of full-time and part-time jobs was almost identical:
But when the GFC hit, while part-time job growth continued almost unaffected, full-time job growth went down the toilet. In the past year the growth in full-time work has slightly recovered – it’s now up to 0.7% annual growth. But that rate remains well below what is required to fill the demand for work.
So when you have weak employment growth and a scarce number of jobs on offer, who suffers? Those who are least experienced and least qualified: the youth.
Since the GFC, youth unemployment has been woeful. As Leith van Onselen noted on the macrobusiness blog, non-youth employment growth (for those over 24 years old) has remained positive (if weak) since the GFC. On the other hand, it has now been nearly three years since annual youth employment growth has been positive.
What this has meant is that while the percentage of 25-64 year olds in employment has roughly stayed the same as it was pre the GFC, the percentage of youth employed is around 11% below where it was in August 2008:
And as with everyone else, the youth have been hit by the dearth of full-time work. While there are around 7% more youth employed part-time than there was before the GFC, there is an astonishing 18% fewer full-time youth workers.
Given the inability of employment growth to keep up with population growth, and the flow through hitting the youth hardest, it is not surprising people are looking at our immigration intake.
Monash University’s Centre for Population & Urban Research last week released a paper on this subject, which noted that since January 2011, 708,000 immigrants have arrived, of which 380,000 are employed. When you considered total net employment growth in that time is just 400,000, it suggests many of the new jobs are going to migrants.
While the visa intake is supposed to help fill skills shortages, the report found that the largest occupational intake was for cooks, which have not been on the shortages list since 2010. Similarly, there has been a large influx of accountants – 5,766 accountants given visas under the permanent resident skilled program in 2012-13 – despite the department of employment finding that there is actually an oversupply of accountants within Australia.
The growth has not just come from 457 visa workers (for temporary skilled workers) but also 417 visas (those here for a working holiday). The report found the numbers of 417 visas grew from 185,480 in 2010-11, to 214,644 in 2011-12 to 249,231 in 2012-13.
And while the stereotype is of these workers picking fruit, the report notes that “by far the majority” of 417 visa holders “spend their time in the major cities.” It concluded that: “they, along with students and other temporary visa holders, are proving to be ferocious competitors for the same entry-level jobs that Australian resident youth are seeking”.
Talk of cutting back immigration is always contentious given how quickly it can be criticised as xenophobic as occurred when the Gillard government moved to tighten the rules for 457 visas.
But with the employment situation set to remain weak for at least another 18 months it’s tough to argue that the large numbers of people coming here on working visas are not making an already tough task for young job seekers unfairly tough.