That release this week April’s unemployment numbers strengthen how fast the economy has slowed, and also that even though these numbers are terrible, many things still have a way to go before we reach the bottom.
This month, although it received a great deal of attention because it rose from 5.2% to 6.2% in April (a record one-month increase), the unemployment rate was largely meaningless.
This is not because of the clever unemployment rate, or because of difficulties with Centrelink (you don’t need to use unemployment benefits to be classified as unemployed).
No, that’s largely meaningless because the rate involves a number of moving parts which all ensure it will be smaller than the “real” number.
For starters, the unemployment rate is a measure of unemployment divided by the number of people in the workforce. In April 594,000 lost their jobs, but unemployment only increased by 104,000.
The rest have just left the workforce – ie they are not working or unemployed because they are not actively looking for work.
The reasons vary, but in large part because it is relaxed from some shared obligations, time and school requirements.
People who accept job seekers may not really be looking for work – that is, they are unemployed but not technically unemployed, and many stop working but don’t look for work because they are at home caring for children who usually are at school.
The recent reason seems to be mainly among women – only 8% of 325,000 women who lose their jobs add to the unemployment rate. The rest leave labor.
This is why the participation rate (the percentage of adults in the workforce) has fallen from 66% to 63.5%.
If the participation rate remains the same – that is, all those who leave the workforce are only counted as unemployed – there will be around 1.3 million unemployed rather than 823,000, and the unemployment rate will be 9.7% – the highest for 26 years rather than the highest for five years.
The unemployment rate for women will be 10.8%, not 5.8%.
But even these horror numbers are hiding something: those in the job guard.
The government has been wise enough to try to keep as many people as possible attached to their work. These people actually do not work, but they are employed so once again they are not counted as unemployed.
However, they will be classified as underemployed because they work less than they want.
That is why the number of unemployed rose “only” 15%, but the number of unemployed rose 50%.
When we combine the 12.7% underemployment rate with 9.7% unemployment that means 22% of the workforce in April was underutilized – well above the previous record of 18.2% set during the 1990s recession.
But everything becomes very dramatic when we look at work hours.
Long hours of work cut everything – no matter whether you are in a job guard or in the workforce or not, it only counts the actual hours worked.
And while total employment fell by 4.6%, the number of hours worked doubled: 9.2%.
So large was the fall in working hours that in April there was less work done per head of population than had been recorded.
In March, an average of 86 hours worked by all people over 15; in April it dropped to 78 hours – lower than even during the recession of the 1980s and 90s when fewer women were employed and a smaller percentage of the population was above retirement age.
This is an amazing fall.
What took 30 months in the 1990 recession took a month now.
This is not something that can be played quickly. The RBA estimates that even if things go according to expectations, in two years the unemployment rate will still be 6.5%.
That is not a sign of the need to worry about debt or deficit or stimulus return. That is the opposite.
And until the actual hours of working back to where it was before shutdown, no one should think about saving.
• Greg Jericho writes about economics for the Australian Guardian
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