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Australias Labour Force in Australia Needs Quick Restart to Avoid Long Term Damage


News Analysis

The Australian Bureau of Statistics (ABS) release of the Labour Force Survey on Thursday broke many records, but only confirmed what many already knew—Australias labour force deteriorated significantly in April as Australians halted normal life to contain the spread of the Chinese Communist Party (CCP) virus, commonly known as the novel coronavirus.

Australias unemployment rate experienced the largest monthly increase in history, rising 1 percentage point to 6.2 per cent. This is the highest unemployment rate since 2014.

But its expected to go higher, with both the Reserve Bank of Australia and Treasury forecasting the unemployment rate to reach 10 per cent before recovering.

The increase was accompanied by the largest decline in employment on record, with employment falling by almost 600,000 people. The next largest decline on record occurred in October 1992, when employment fell by almost 75,000 people.

Headline Numbers Mask Real Pain

Australian Bureau of Statistics
Australian Bureau of Statistics
Australian Bureau of Statistics logo in Canberra, Australia. (Michael Masters/Getty Images)

As the CCP virus and the governments social distancing measures in response to the pandemic saw economies grind to a halt, the consequences for the nations economic statistics have been a headache for statistical agencies and policy makers.

The ABSs definition of an unemployed person, which does not include individuals still employed but now working zero hours because of government mandated shutdowns or those receiving Jobseeker payments while not actively seeking work, means that headline numbers are providing a poor indicator of the health of the labour market.

Though the headline 6.2 percent unemployment rate is not high by historical standards, the number likely understates the real pain being experienced by workers who have been laid off, have had their hours reduced, or been placed on government welfare.

This was reflected in the decline of individuals participating in the labour force—a metric that fell 2.4 percentage points—bringing it down to levels seen in the mid-2000s. The ABS estimates that if these individuals had stayed in the labour force, the unemployment rate would be closer to 9.6 per cent.

A measure that more accurately reflects the seismic disruption to the workforce is hours worked. The ABS survey reported a 9.2 percent monthly decline in hours worked, while the number of employed people only fell by 4.6 per cent in comparison.

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