The headline numbers show the seasonally adjusted unemployment rate lifting from a revised 5.5% in April (revised up from 5.4%) to 5.7% in May. As we mentioned last time, the most important figure to watch was the new trend estimate for April – which came in at a revised 5.6% (with the May trend estimate running at 5.7%). Worth noting as well is that it was an increase in the participation rate which drove most of the increase in the unemployment rate.

So there we are, unemployment in April was around the 5.6% mark and doesn’t seem to have grown much this month – hardly the sky is falling nonsense we’ve been seeing from the sandwich board wearers howling away on the street corners at News Ltd. We’ll get to their latest nonsense in a bit.

The important thing about these figures is the way they’ve been defying expectations – albeit expectations from people that have seemed utterly confused for the last 12 months. While expectations on the unemployment rate was broadly correct, the expectations were also for a fall in employment of around 30,000 rather than the fall of 1700 we witnessed – as a consequence, their forecasts for the participation rate were also out.

Remember that until very recently, most parts of the economy were experiencing extremely tight labour market conditions, where it was difficult to find reliable new workers. That has a profound effect when it comes to the behaviour of firms laying people off work. Firms appear to be going out of their way to use other mechanisms rather than retrenchment to reduce the size of their labour inputs. Rather than sackings, reduced hours and the exchange of full time jobs into part time jobs appear to be playing an extremely large roll in keeping our headline unemployment rate down.

If we go over to the ABS measure of labour underutilisation – there’s a spiffy chart that says it all.


As the economic downturn hit, firms started to use less labour while simultaneously retaining employees rather than simply reducing the overall numbers of their workforces outright. If the broader economy can muddle through over the next 6 months or so without too many more overall job losses, we will be in excellent shape to exploit the next upturn in the economic cycle – simply by way of it being easier, cheaper and more efficient to increase the hours of your existing workforce than it is to actually increase the overall size of your workforce.

The media coverage has been pretty good. The Age and the SMH managed to get their head around the figures properly, even placing them  in their proper context – a mighty fine improvement from last months twaddle.They also rounded up the usual suspects for their 5 second grab – noticeable is the absence of widespread doom and gloom.

News Ltd on the other hand, well – they can’t even read the figures properly:

The official labour force data, released today, showed more than 35,300 jobs were axed in May with the unemployment rate climbing to 5.7 per cent, after it took an unexpected slide in April.

Er, no – the data didn’t show 35,300 jobs being axed at all!

Employment – you know, jobs – actually fell by 1700 rather than the 35,300 quoted.

It’s not exactly rocket science, the ABS release even says clearly “Employment decreased by 1,700 to 10,793,100.”

The irony here is that straight after that bit of News Ltd confusion, the article continues:

CommSec economist Savanth Sebastian said the rise was actually a good sign for the job market, signalling things could be on the way up.

“It was a tremendous result that employment didn’t fall significantly – we’ve got a much more flexible workforce than we did in the 1990 recession,” Mr Sebastian said.

Just quietly, but a tremendous result wouldn’t be employment numbers sinking by 35K.

(UPDATE: seems to have fixed that complete brainfart up)

I’ll update this a little later with some probabilities – but if you want to play yourself, use The Poll Cruncher with samples sizes 41000, and 5.5 and 5.7 as the results for Poll 1 and Poll 2 respectively.


Just a quick bit on the probabilities – while the movement in the unemployment rate from the revised April figure of 5.5% to the May figure of 5.7% isn’t actually a statistically significant movement, there is however an approximate 73% probability that the unemployment rate increased to some level greater than 5.5%.

There is an approximate 46% probability that the unemployment rate is between 5.5% and 5.7%, and of course an approximate 50% probability that it’s greater than 5.7%.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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