Last week the most recent measurement of the unemployment rate was released by the ABS and it was announced that unemployment has fallen to 5.8%. This is the lowest unemployment has been since the lockdowns caused by the pandemic started in March of 2020 (where UE was 5.2%). The media and government have made sure to celebrate these numbers and cite that Australia has almost returned to normal post pandemic. But should these numbers be celebrated?
At first I was highly sceptical of these numbers as I was expecting that full time employment had fallen significantly and part time employment would be on the rise (as someone only needs to work for one hour per week to be considered employed). However, when I checked the most recent statistics (tradingeconomics.com should be your best friend this year) it turned out that full time employment has been rising and part time employment had not really changed. The labour force participation rate has also remained stable over the past few months. So as far as direct statistics are concerned, this 5.8% unemployment rate really is a great indication that labour market conditions have been improving over the past few months.
So why do I still think you should be sceptical of these numbers?
The government's JobKeeper wage subsidy is set to end on March 28th (conveniently shortly after the statistics were released... convenient right?) . This wage subsidy has been paying up to $1,500 per employee for businesses originally and more recently a reduced rate for a significant period of time. This has prevented businesses from laying off workers despite their business being negatively impacted by the pandemic. Once these subsidies end, many businesses are going to have increased costs of production and are likely to lay off workers as a result. Therefore it is fairly likely that in the next recorded measurement, the unemployment rate could significantly rise.