Wake up!

Let’s not pretend the economy is fine

The January employment figures came out last week. According to the figures, employment grew by approximately 46,000 (seasonally adjusted) over the month, having declined by 36,000 the month before. My goodness employment levels seem to bounce around a lot. Well, of course, they don’t. These figures can be taken with a grain of salt. They are based on sampling of around 30,000 households and suffer from a high probability of sampling error. For example, according to the ABS, the reported employment growth for January is the midpoint of a 95 per cent confidence interval of between minus 8,700 jobs and plus 101,000. 

It is better to look at the ABS’s trend figures which even out monthly movements. These show that employment grew by less than 2000 during the month and show significantly that over the year to January employment grew by only 0.2 per cent. Even using the more volatile monthly figures produced an annual growth of only 0.3 per cent. The trend unemployment rate has edged up only from 5.1 to 5.2 per cent over the year because participation in the labour force has fallen from 65.8 per cent to 65.3 per cent. If participation had not fallen unemployment would now be around 6 per cent.

An amusing, though pathetic, sideshow to the figures was Bill Shorten explaining that Australia had never had so many people employed. He might have said, with a certain smugness; higher than in 1912. And yes, it is true, each year, major recessions/depressions apart; Australia’s employment grows as does its population. In fact, in each of the years John Howard was prime minister, he or Peter Costello could have claimed that employment was higher than it had ever been. I doubt they ever thought of saying anything so patently silly. How can Mr Shorten spout this kind of trivial nonsense without a hint of embarrassment? Practice in the trade union movement perhaps. I don’t know. My assumption has to be that he is without sense or that he assumes we all are.

What do the employment figures show? They show that the labour market is weakening. All of the concentration of the media and, of course, the government was on the (statistical artifice) headline monthly growth of 46,000 jobs. Contrasts were made with the announcements of prospective job lay-offs by ANZ and Qantas and Alcoa as though there was an enormous puzzle to be solved. There isn’t. The prospective job losses tell a consistent story with the lack of employment growth over the past 12 months. Look at the moribund Australian stock market to get a feel for the way the economy is going. And the Reserve Bank is not inclined to reduce interest rates unless an economic slowdown is too obvious to ignore.

Meanwhile Treasury Secretary Martin Parkinson tells the Senate estimates committee that “we have an incredibly bright future ahead of us” and that we are “not Greece”. What is the use of having these economic mandarins? If Chinese and Indian growth remains robust Australia is facing enormous structural adjustment problems because of the effect it has on the value of the dollar. This is the promising scenario. If China and India stall, Australia is in deep trouble. We desperately need a non-politicised Treasury, staffed by real economists, providing wake-up calls not soothing platitudes.

Australia needs maximum labour market flexibility and reduced environmental and red tape regulation to deal with structural adjustments. It does not need a new mining tax wasted on recurring expenditure or, and more particularly and much more critically, the world’s biggest carbon tax to damage our already struggling manufacturing sector. If Treasury mandarins don’t understand that then perhaps they should pursue different occupations. If they do understand and are afraid to say so and embarrass the government then perhaps they should pursue different occupations.