Insight: Australia April Data May Show Jobless Rate Below 8%

• Published on
• 01 May 2020, 07:28 PM

By Sophia Rodrigues

A recent data showing sharp rise in benefits paid to jobseekers and youth may not be comparable to number of unemployed in the labor force survey, making it less likely the jobless rate would rise as high as 8% in the April data.

The April labor force survey is due for release by the Australian Bureau of Statistics on May 14. The March data showed the number of unemployed at 718,600 and the unemployment rate at 5.2%.

On Thursday, the Parliament was presented with data from the Department of Social Services that showed total number of Jobseeker payments, including Youth Allowance, rising to 1.346 million on April 24 compared with 887,896 on March 20.

The data showed there were around 300,000 claims that were not yet finalized.

To get an estimate of the number of unemployed for April, the data between April 10-17 would be most relevant. Total number of Jobseekers was 1.070 million to 1.199 million during that time.

But not all these people would necessarily be classified as unemployed.

JOBSEEKERS CAN INCLUDE EMPLOYED

The Jobseeker payment includes people who have a job but are still eligible for payment because of low income. Such people would be counted as employed in the labor force data. There could be a substantial number of such people currently.

Additionally, due to relaxed criteria under COVID-19, recipients do not have to meet the usual mutual obligation requirements such as looking for work. So, there may be people who are claiming Jobseeker but are not recognized as unemployed.

On the other hand, there would be some unemployed people who may not be eligible for Jobseeker payments because their remaining household income is too high. Additionally, they might be others that just don't want to apply for them. They could come under the unemployed category or outside the labor force.

Among those claiming Youth Allowance, there might be those who were previously outside the labor force and will continue to be outside but are now claiming the allowance because of relaxed criteria around parental income.

There are thus several reasons why the two data won’t overlap neatly, with ABS’s classification of people during the COVID-19 period making it more difficult to estimate data.

PAST AS GUIDE

The past data on welfare payments could be used a guide for unemployed numbers.

At the end of December 2019, the number of welfare payments was around 800,000 and the number of unemployed in the labor force data was around 700,000.

While welfare payments have risen sharply since then, it is also likely that the difference between unemployed numbers and welfare recipients would widen due to COVD-19 calculations. Assuming the gap would widen, the number of welfare payments of around 1.2 million could translate to about 1.0 million of unemployed or possibly less.

If we assume a drop in labor force participation to around 13.0 million, it would translate to an unemployment rate of 7.7%, or a jobless rate of 7.3% if participation rate is unchanged.

HOURS WORKED IMPORTANT INDICATOR

It is likely that any unemployment rate below 10% would mask the true state of the labor market and hide the fact that the number of job losses have been massive.

The best gauge of labor market for the next few months is therefore is the number of hours worked. It would capture those that are beneficiaries of the Jobkeeper policy and will be classified as employed but only their actual hours worked will be counted. In many cases, it would be zero hours.

It will also capture the ones who received the Jobseeker payment and got counted as employed but worked very few hours. Hours worked will be zero for those who have been stood down and counted as employed because received paid leave. Or those who didn’t work for up to four weeks but believe they still have a job to go do. They would be employed but without working any hours.

--Contact: sophia@centralbankintel.com