Long-term unemployment rates show the jobs picture is not so rosy | Greg Jericho

The new jobs minister should be aware of problems under the surface of the solid-looking employment figures

The new minister for jobs and industrial relations, Kelly O’Dwyer, has on the surface been given an easy job. Employment growth has been strong and unemployment is now lower than it has been since the end of 2012. But while the general employment news appears quite solid, a deeper look reveals the overall picture is somewhat brittle and that along with underemployment and low wages growth, long-term unemployment is an increasing area of concern.

It certainly is the case that unemployment is relatively low. The current trend rate of unemployment of 5.4% is lower than it has been for 61% of this century.

But that figure reveals perhaps more than anything just how poor the unemployment rate has become at measuring the overall state of the labour market.

While the current unemployment rate is looking relatively rosy compared to the recent past, the level of underemployment is higher now than it has been for around 90% of this century:

And wages growth, as we all know, is also lower now than it has been for most of this century – indeed for all bar 8% of it:

But the rise of underemployment and the weak wages growth are not unknown – indeed they have been concentrating the minds of policymakers for some time now.

As I have noted previously, wages growth and underemployment will be a key issue for the government come the next election. If, after a period of very strong employment growth, wages remain stuck around or below the inflation rate, then voters will likely be wondering if that is as good as they can hope to get.

While wages growth and underemployment have received a wealth of coverage, one area which hasn’t but which points to a high degree of brittleness underneath the overall good news of the unemployment rate is that of long-term unemployment.

The latest detailed labour force figures revealed that the current long-term unemployment ratio – which measures the percent of unemployed who have been looking for work for more than a year – is now at its highest rate since October 2000. More than a quarter of those who are unemployed have now been so for more than 52 weeks:

Partly this is due to the fall in unemployment overall and the fact that when employment improves often it is those who have been unemployed for the least amount of time who are most likely to get a job.

But even as a percentage of the entire labour force, the level of long-term unemployment is high compared to that of recent years:

The intriguing thing however has been what has driven this recent increase in long-term unemployment.

Basically you can divide the long-term unemployed into two groups – those who have been looking for work for one to two years, and those who have been searching for more than that time.

And what the data highlights is that over the past 12 months it has been the latter category that has risen while the numbers of one-to-two-year job seekers have generally fallen:

And when we look at the make-up of those who have been unemployed from more than two years, the big growth has come from older workers – especially those aged 55-64. Around half of the increase in these very long-term unemployed has come from that age group, despite them only making up around 20% of the total number of those who have been out of work for more than two years:

The decline in the number of young very long-term unemployed also suggests that the issue is not one that can be solved with the standard “let’s give kids some training and work experience” solution. It points to deeper issues, not just relating to a need for training in new industries for older workers whose place of work might have closed (such as those working in car manufacturing) but also a need to ensure employers do not see such workers as past their use-by-date.

One other measure that suggests things are not as rosy as it all might seem is the unemployment rate of those looking for full-time work.

While the overall unemployment rate has been falling over the past year, the unemployment rate of those looking for full-time work has remained rather steady, and the two measures have drifted apart over the past six months:

As a general rule this is not a good development as periods of economic weakness have been associated with times when the unemployment rate has been much higher than that of the rate of those looking for full-time work.

After a good run, where by August 2017 the two rates were level, the current gap is the biggest it has been since 2014:

And while the current gap is not of the same magnitude that it was during the financial crisis or even the weak economic period of 2013, it does suggests that getting work is much easier at the moment if you are more open to working part-time, and that the spare capacity in the labour force is continuing to grow. This would suggest little likelihood of wages growth being about to improve.

On one level the new jobs minister would be rather relieved, given she has moved on from having oversight of the financial sector and the horror show that has been the royal commission, as well as the problem that the government’s vilification of the industry super sector has come to naught.

But while the employment sector does look quite solid, there remain many problems under the surface, problems that will be a major barrier to the government’s re-election chances should they stay in place.

  • Greg Jericho is a Guardian Australia columnist

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Greg Jericho

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