Politicians will always try to sugarcoat bad news, but it takes some front to do it on the day that a record number of Australians were found to be unemployed and when Australian workers remain in the deepest recession since the Great Depression.
“The Australian economy is fighting back,” Scott Morrison told the media in response to the release of the labour force figures on Thursday, which showed a record 992,300 unemployed Australians and an unemployment rate of 7.4%, the worst since November 1998.
He of course wanted to focus on the increase in jobs. Morrison told Karl Stefanovic on Friday: “We had 210,000 jobs that came back into the economy in June. That’s the biggest increase in jobs we’ve ever seen in a month.”
That is true, but when we dig into those numbers we find not a great deal of fighting back.
While total employment grew, full-time employment actually fell 38,000 – off the back of the two biggest drops in full-time employment ever recorded. All up there are 375,900 fewer people working full-time now than there were in March.
And there are 660,700 fewer people working at all.
But yes, a recovery has to start somewhere.
The problem is the job growth in June was not really a sign of a recovery. The job growth was all part-time and mostly among young casual workers.
Consider that teenagers account for around 5% of the labour force, but made up 27% of the entire increase in jobs in June.
Given nearly two-thirds of their work is in retail and hospitality, it is not surprising that as restrictions eased they were able to pick up some shifts.
The real problem is for prime-aged workers.
Traditionally a prime-aged worker is between 25 and 54 years of age. Those under 25 are still mostly training or learning their trade, those older than 55 are less likely to be seeing the regular increases in responsibility and pay they saw in their 30s and 40s.
It’s never a good time to be out of the workforce, but between 25 and 54 is truly bad, as you also miss out on opportunity to advance – which is less important when you are under 25 (and why the issue of women’s participation before and after childbirth is a crucial issue).
And here things are not good.
The prime-aged unemployment rate in June was 6.3%, the worst since 1998, but if we include those who have given up looking for work since March the effective rate is 7.5% – the worst since 1994 as we came out of the recession.
American economist Claudia Sahm has developed a measure for assessing recessions that involves comparing the three-month average of the unemployment rate with the lowest it has been in the past 12 months. Any time the gap is above 0.5 percentage points, she argues the economy is in a recession.
Right now the gap in Australia is 1.9 percentage points.
For prime-aged workers it is 2 percentage points, and if we use the effective rate is it closer to 3.5 percentage points – worse than it was during the 1990s and 1980s recessions.
But this measure ignores underemployment, which is currently sitting at 10.7% for prime-aged workers. A broader measure of underutilisation takes into account both unemployment and underemployment.
If we instead use “underutilisation” to measure a recession we find just how big a hole we are in – even if we increase the recession indicator to a 1 percentage point gap to take into account that underutilisation is always larger.
During the 1990s recession, the biggest gap between the underutilisation rate for prime-aged workers and its 12 month minimum was 3.9 percentage points.
In June this year it hit 6.9 percentage points.
Or, to put it another way, to be only as bad as the worst point of the 1990s recession we need around a quarter of a million people to either get a job or the hours they seek.
I understand the desire to paint a positive picture, and yes, the prime minister has suggested “we’ve got a long way to go”.
What we need to realise is that way to go is longer than any of us has ever had to experience.
• Greg Jericho writes on economics for Guardian Australia
