Richard Farmer has made a couple of strange comments in Crikey about the latest jobs numbers.
Yesterday, Farmer wrote:
More evidence from the Australian Bureau of Statistics this morning that economic growth is less than the Treasury and Reserve Bank experts had expected. Unemployment in June remained at 4.9%.
I do not know how Farmer reached this conclusion.
Treasury forecast in the Budget that unemployment would be 5 per cent in June 2011. It was actually 4.9 per cent. How is this evidence that growth has been weaker than expected? [fn1] The RBA doesn’t publish a regular forecast for unemployment , but it does anticipate that the rate will reach 4.25% by the end of 2013. That’s entirely consistent with a 4.9% rate in mid-2011.
His second comment came in Friday’s Crikey, in response to the Prime Minister’s statement that the growth in full time jobs in June was “fantastic”.
Farmer said the PM’s claim:
…was really something of an exagerration [sic]. These monthly employment figures are really quite volatile and quite capable of making the use of extravagant language a problem further down the track. The truth is that employment is barely increasing fast enough to cope with the growth in working age population.
It’s true that the monthly figures can be a bit volatile, but the increase in full time jobs isn’t a one month aberration. Over the past year, 222 000 net new jobs have been added to the Australian labour force, and 202 100 of them are full time. Over 90% of the net new jobs have been full time; full time jobs grew by 2.6% over the year. These are strong numbers.
His claim that “employment is barely increasing fast enough to cope with the growth in working age population” also doesn’t sit well with me. 62.4% of the working age population is currently employed, not far off the all-time record of 63%, reached before the GFC.
Since the labour market recovery began in mid-2009, employment has grown by 4.8% while the working age civilian population has grown by 3.3%.
In recent months, employment growth has flattened out a bit, but that’s what you’d expect as the employment-to-population ratio approaches its previous peak!
The labour market is clearly not perfect; underutilisation is much lower than at most times in the past 30 years, but it’s still too high. Still, I think the Prime Minister is right to describe the full-time jobs growth as “fantastic”, particularly in a year in which Australia and two of its major trading partners (New Zealand and Japan) have been hit with natural disasters.
[fn1] Note that I’m not disputing the fact that growth may have been weaker than expected in the past quarter, I’m just challenging the idea that a lower than expected unemployment rate is evidence of the weakness.