And, right on cue, there it was.
Yesterday, the Australian unemployment rate hit 6% again.
Didn’t we tell you? Of course we did. As day follows night, the inevitability of it was obvious to anyone not blinded by dreaded optimism.
No one takes pleasure in hearing about people losing their jobs. But I have a somewhat offbeat admission to make. When bullish ‘official’ labour market statistics are parroted each and every month, I can’t help but smirk when they’re, well, bad. Does that make me a bad person? Maybe, though I’d like to think not.
I’m no sadist. Just a realist trying to make sense of the senseless. For months, I haven’t been able to wrap my head around the better-than-expected unemployment figures. Every successive month seemed to defy the last. When we read that October and November brought with them 80,000 new jobs, I was incredulous, to say the least. And I wasn’t alone.
Many of us wondered how it was that jobs numbers were showing improvement at a time when everything else seemed to be deteriorating.
Does weaker business spending help the labour market? It shouldn’t, but there it was, doing exactly that. Yes, much was made of the economy’s ‘rebalancing’ act. Mining jobs were going down the drain, but services were doing their bit. That’s all fine; we can’t discount the effect this transition had on job numbers. But I remain somewhat sceptical of it all.
Even so, other economic indicators can’t be chalked off quite so easily. From mounting trade imbalances, to rising household and government debts — there were few bright spots for the economy last year. The reason why markets are in such a tizzy is because they’re a mirror of the global economy.
But our policymakers would have us convinced that economic conditions were improving. Enough to keep people off the unemployment line.
Well, that might be true, at least according to the ABS. Only, you suspect, convincing the public of this involves more than the odd fib on its part.
You could teach a six year old child about basic economic concepts in one afternoon. When there’s less money in your pocket, you can’t buy as much candy. This same principle applies to an economy. Only that, when there’s less money to go around, fewer business can afford to hire workers.
If everyone is tightening their belts, where is the money coming from to create all these jobs? Moreover, can businesses hold onto their existing workforce as earnings plummet? No. They can borrow to spend, but is that always a ‘good’ idea?
Even a child could understand that something wasn’t quite right with the official jobs figures spouted during the second half of last year.
But, in modern day Australia, we have seasoned ‘pros’ masquerading as economists. They sit around telling us things are dandy because, well, the figures never lie!
The sub-6% unemployment dream: at an end?
As it happens, the figures certainly aren’t lying anymore. Or, at the very least, some truth is finally seeping into proceedings.
It’s about time, too. So, how bad was it?
In truth, it wasn’t a disaster. But January saw the unemployment rate edge up 0.2%, to 6%.
According to ABS figures, jobless numbers jumped by 8,000 last month. Keep in mind, these are calculated in seasonally adjusted terms.
Analysts prefer to use ‘trend’ terms to measure unemployment. But if we use the trend, we’d find unemployment actually falling by 4,000. Since we’re in the truth finding business, we’ll choose to ignore that deliberate fabrication. In fact, the trend suggests employment surged by 19,800 between December and January. Good one.
As far as the participation rate goes, that remained unchanged. Participation refers to the number of people actively looking for work. If this measure goes up, the unemployment rate does too. But if participation goes down, it can improve the unemployment rate. It’s as silly as it sounds, but that’s Big Government for you.
Across both trend and seasonally adjusted estimates, participation remained at 65.2%. In other words, the job losses were real people, losing real jobs. And not some wizardry of accounting and number collation.
I bring the participation rate up to illustrate that some of the ‘gains’ over 2015 resulted from this creative accounting.
But, all flippancy aside, there’s one reason why the 8,000 figure wasn’t two, three, or even four times higher. And it has to do with record low wage growth.
I asked earlier how employers might be keeping their staff on board. Well, the answer should be obvious, if it isn’t by now. It’s because employers have stopped giving workers raises. Whatever raises the average employee receives these days is likely to be miserly at best.
Ultimately, if you want to make sense of the jobs figures, think of it like this: unemployment is reverting back to a normal level. It is, as some have described it, the ‘correction we had to have’. That’s probably the way I’d look at it too.
Either way, these very same people remain bullish on the jobs market looking ahead, which is where I tend to disagree. They reckon what we’re seeing isn’t a sign that Aussie employers are getting jittery about economic prospects. I’m not convinced.
In any case, the trend is negative. And, until it changes, it’ll remain that way. That paints a rather different picture of business spending than what we’ve been led to believe. Whether a dip in employment affects the economy too much isn’t the issue, as far as I see it. The bigger problem is what this does to public confidence in the short term. And confidence, more than anything, is the trickiest beast to tame when it comes to the economy.
Admittedly, unemployment at 6% might not do anything. I, for one, hopes it gets more people thinking about where we’re heading.
Contributor, The Daily Reckoning
PS: Australia’s unemployment rate is holding steady, but for how long? Weak growth prospects are forcing businesses to cut back on spending. You can expect this to ramp up in 2016, as weaker economic activity catches up with the labour market.
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