I’m trying to recreate as many of The Atlantic’s 44 most important charts of 2013 as I can using Australian data. This is part 3 of my series – part 1 is here and part 2 is here.

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US chart:

Australian chart:

11 unemp by duration

 

Source: ABS 6291.0.55.003.

Note: As per the US chart, the percentage change is calculated as the difference between the average of the final 3 months of 2013 and all 12 months of 2007. I seasonally adjusted the ABS data using X12-ARIMA.

 

Like the US, we have about the same number of people who have been unemployed for a short time as we had in 2007. Long-term unemployment rose sharply during the financial crisis, but this wasn’t nearly as severe as in the US. Over the past year (and particularly the last 6 months) we’ve seen long-term unemployment rise again, with a looser labour market driven by tight fiscal policy and a too-high exchange rate.

Gerard Henderson would probably look at this chart and conclude that it bolsters his argument about the job-destroying properties of the Fair Work Act, but remember: the jump in long-term unemployment in the wake of the GFC happened before the Act came into effect, while the slow and steady improvement between mid-2009 and 2012 happened while the Act was in effect.

US chart:

Australian chart:

12 unemp and LFPR

 

Source: ABS 6202, trend.

 

If people are giving up looking for work, the unemployment rate can give a deceptively rosy picture of the state of the labour market. That’s because you’re only counted as unemployed for the purposes of this rate if you’re actively looking for work. In the US there has been a slow, steady fall in their participation rate, which calls into question how much faith you should put in their unemployment rate – if unemployment has only fallen because people are giving up, that’s not much of an economic recovery.

Here, the story has been a bit different. The participation rate reached an all-time peak in late 2010, well after the financial crisis, when unemployment was falling towards 5%. Since then participation has fallen and unemployment has risen. On the face of it, you might think that this suggests the labour market is weaker than the unemployment rate indicates. But you have to remember that much of the fall in participation here has been due to the effect of the ageing population, most notably the rapidly rising share of the adult population that is aged 65+.

When I calculate the participation rate holding the demographic shape of the population constant since late 2010, I find that all of the fall in participation up to mid-2013 was due to ageing, not due to a fall in participation within individual age groups. Over the past six months or so, the story has changed – most of the recent fall in participation has not been driven by ageing. The labour market has clearly hit a patch of cyclical weakness. I think this was largely caused (as I suggested earlier) by tight fiscal policy (at all levels of government) and an overvalued Aussie dollar.

US chart:

Australian chart:

Source: MYEFO 2013-14.

Justin Wolfers points to the stable outlook for net debt in the US and says that “over the next decade, the non-partisan Congressional Budget Office is effectively saying, “she’ll be right, mate.” The projections in the Budget update issued a few weeks ago by Joe Hockey are more or less saying the same thing. If current policy stays intact, net debt is set to rise a couple of percentage points of GDP, before slowly falling back again over the rest of the decade. This is not what a budget emergency looks like.

I think I will leave it there for now. I have posted 12 Australian versions of the US charts in the Atlantic’s list of 44. Many of the others can’t be replicated with current Australian data. Some could be constructed using financial markets data to which I don’t have access. Others could probably be pieced together if I was willing to put in more time than seems reasonable of my summer holiday to reconstructing charts.

Sometime in the coming days I’ll post what I think are the most important Australian charts of 2013, as opposed to the Australian versions of the most important US charts.

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