Welcome to Employment 101

Andrew Pegler – 13 November 09

With the release of October’s unemployment rate expect a deluge of jargon that’ll leave you scratching your head. Well stop scratching and join me in Employment 101.

As you probably know by now the jobless rate has just increased slightly to a “seasonally adjusted” 5.8%. What is seasonally adjusted? Ever noticed there’s less building in winter, more retail jobs over Christmas and no work for professional services in January? These are seasonal factors and the ABS takes them into account when working out the unemployment rate.

You may also read the participation rate remained steady at 65.2%. This refers to the number of people who want to work, are working, or are actively looking for work. It excludes those with no interest in working, which sounds like me most Monday mornings.

The next question is why is unemployment rising when the economy is improving? Well employment is a “lagging indicator” i.e. it lags behind other indicators as a recession lifts. In fact it’s often the last thing to recover as businesses usually don’t hire until they’re sure the economy is back on track.

Some other terms to look out for include:

The “hidden unemployed” and the “underemployed”

The ABS defines someone as unemployed if they are over 15 and not working but are looking for work. So if you have given up looking, are between jobs or not working as many hours as you wanted then you’re not counted. You are the “hidden unemployed” and the “underemployed”. With this in mind many economists claim the “real” jobless rate can be twice the official figure. In the US for example the official rate is around 10% but if you include the hidden and the underemployed some estimate that it’s closer to 17.5%.

Cyclical unemployment

This refers to unemployment that goes up during bad times and down during good times. In other words it varies with the cycle of economic growth followed by recession followed by growth followed by recession etc.

Full employment

This is when everyone who wants to work is. Surprisingly it doesn’t mean everyone is employed as there are always some people who don’t want to work or are between jobs. Any good government is always aiming for full employment and we came pretty close just before the GFC.

Class dismissed. Run along now.

In other news… well actually in the same news but in more detail – a surprise gain of 24,000 jobs has added to the likelihood of a December rate rise. However, these jobs did not cover the new entrants to the work force so that’s why the rate went up. Underemployment is up across most age groups, with hours worked falling slightly. Oh and the news is good for the yoof because teen unemployment fell 0.8 to 15.5%.