It’s obvious the official unemployment rate figures from the ABS are understating the true unemployment rate due to large numbers of people having left the labour force, evidenced by the collapse in the workforce participation rate. The official estimates for May were 7.9% for Queensland and 7.1% for Australia (see chart above). We know from JobSeeker statistics (i.e. over 1.6 million people having been on the payment) and ABS labour under-utilisation and hours worked estimates that the economic situation is much worse than the unemployment rate estimates suggest. For instance, the Queensland Treasury in its excellent brief on the latest figures noted:
With persons not working but receiving JobKeeper payments from their employers classified as ’employed’ by the ABS, the reduction in hours worked is probably the clearest example of the full impact of COVID-19 social distancing measures on labour market activity.
There were 321.0 million hours worked in Queensland in May 2020, down 0.1% from April and down 7.6% over the year…
Forecasts of a June quarter GDP/GSP contraction of around 8% are looking reasonable. Also, check out the state Treasury’s chart illustrating the big reduction in the workforce participation rate to 62.6%, compared with 65.9% in May 2019. As Adept Economics Director Gene Tunny noted regarding last month’s data (Qld jobless rate at 6.8%, but effectively over 10%), if the participation rate hadn’t collapsed the unemployment rate would be in double digits.
Also, check out Pete Faulkner’s commentary Another big drop in employment and another decline in participation.
Finally, regarding whether the May labour force estimates are at odds with the ABS/ATO payroll data showing a pick up in employment at the end of May (see Gene Tunny’s Wednesday post), note the May ABS Labour Force estimates are based on activity in the “reference week” in early to mid-May. In its Explanatory Notes, the ABS writes:
The interviews are generally conducted during the two weeks beginning on the Sunday between the 5th and 11th of each month. The information obtained relates to the week before the interview (i.e. the reference week).
So it’s very possible that, with some relaxation of restrictions in the second half of May, some jobs came back online. Of course, it’s early days, and the payroll data have issues as Pete Faulkner has commented on (see this tweet from Pete), but we live in hope.