The latest unemployment statistics have been reported and the unemployment rate has fallen to 4.6%! Our goal of full employment is to have the lowest rate of unemployment possible without causing unnecessary inflationary or external pressure where around 4.5% natural unemployment exists.
Well 4.6% is definitely around 4.5%... so is it time to celebrate?
Maybe not quite yet. There is a lot that goes into calculating the rate of unemployment, but it is also not a perfect measurement. There are many flaws or limitations of the way it is calculated that can lead the numbers to be misleading.
So let's take a closer look at the numbers and talk them through.
Firstly, thank you to Economics mastermind Peter Martin (https://twitter.com/1petermartin?s=20) for posting this image on his Twitter as it really simply and effectively highlights why the change to 4.6% is not a cause for celebration.
The simplest place to start is the change in the unemployment rate. 4.9% to 4.6%, a change by 0.3%. That's good. Although the underemployment rate increased from 7.9% to 8.3%. That's bad. So already even though there's 0.3% less people unemployed, 0.4% more people are working less hours than they would prefer (this correlates with the 0.2% fall in hours worked also). Finally, the most important part of this data. The unemployment rate fell yet when you look at the data you will see that although there are 2,200 more people employed, there are 39,900 less unemployed persons. This means that 37,700 people did not get a job and simply stopped looking all together in the survey period. In essence, the unemployment rate fell because people have given up on finding employment and therefore are not even considered part of the labour force.
So remember this in the lead up to your upcoming exam, that a really strong student would be able to discuss some of these points when talking about whether or not full employment has actually been achieved.
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