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Unemployment figures will be bad. Here’s why the reality is worse

The long queues outside Centrelink offices were a stark early sign of how many people had lost work during this pandemic.

Across suburban Australia, thousands of people lined footpaths as they waited for financial assistance in late March and early April. Prime Minister Scott Morrison described the images as heartbreaking.

Now the real story of unemployment is about to be made public. The numbers won’t look good – but the reality is far worse.

Centrelink queues in March and April will be reflected in the latest unemployment figures.

Centrelink queues in March and April will be reflected in the latest unemployment figures. Credit:Justin McManus; digital treatment Michael Howard

The Australian Bureau of Statistics on May 14 will release its April employment report with all expectations it will show the largest increase in the number of people out of work on record. The jobless rate is likely to soar through 7 per cent or higher.

Analysts are tipping anywhere between 400,000 and 650,000 people to have become unemployed in a single month. The previous monthly record, of 65,400 jobs lost in October 1982 during that year’s deep recession, will be dwarfed by the April result.

But it will only give a small insight into what’s actually playing out across the nation’s workplaces as a series of factors – from government policies to definitions of employment – will cloud a still terrible number.

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Why is it so hard to get a clear picture of unemployment? What does government policy have to do with it? And is a different measure, such as the number of hours we work, a better indicator of the strength of the jobs market?

What does timing have to do with it?

In March, the ABS reported a 0.1 percentage point increase in the unemployment rate to 5.2 per cent. It was met with disbelief by many who had either been in those Centrelink queues or had friends who had lost their jobs.

The result was largely driven by when the bureau collates its monthly report. It is based on a survey of about 26,000 households taken in the first two weeks of March.

At that point, restaurants and cafes were still operating as normal. Only the travel industry, via the ban on citizens from China and a handful of other countries, was directly feeling the impact of the measures aimed at preventing the spread of the coronavirus.

It was in the second half of March that much of the economy was shuttered.

The April jobs report, based on a survey carried out through the first fortnight of the month, will pick up the impact of those closures and social distancing restrictions.

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Payroll data recently collated by the ABS suggests more than 900,000 people lost their job in six painful weeks.

How does government policy affect the number?

But this is where government policies aimed at protecting workers through the pandemic will affect the job figures.

The ABS will define people paid through the JobKeeper scheme as employed, even if they have been stood down.

There are about 5 million Australians being supported by JobKeeper, with many of those not working at all.

When JobKeeper was announced, economists scaled back their estimates of peak unemployment. Westpac’s chief economist Bill Evans noted it was a “game-changer” of a policy as he cut his forecast for peak unemployment to 10 per cent from 15 per cent.

The bureau also defines someone as employed if they are on any kind of paid leave (even if workers are being forced to take that leave) or someone who may have been stood down without pay but believes they still have a job.

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This “attachment” to a job only last four weeks. If someone hasn’t been paid in a month then the ABS will move them into the ranks of the unemployed.

How do you work out who is really unemployed?

Another wrinkle to the job figures will be the participation rate, which measures the number of Australians with a job or in search of one.

If people simply give up looking for work, that reduces the actual number of officially unemployed Australians.

Analysts and the Treasury believe a drop in the participation rate will keep a lid on the total unemployment rate.

Federal government figures suggest about 1 million people are now getting supporting through JobSeeker (the old Newstart or dole payment).

But just getting JobSeeker doesn’t necessarily mean you’ll meet the official definition of unemployed.

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People can get JobSeeker and still be employed part time if they meet a low-income test.

To be unemployed for the ABS, a person has to be actively looking for full- or part-time work over the past month and be available to take on that job.

What else may be a better indicator?

The true nature of the jobs market is likely to be revealed in the measure of how many hours worked by Australians through April.

Unlike the unemployment rate, hours worked will take into account the hundreds of thousands of people who have been stood down or forced on to paid leave plus many who are working from home.

In March, Australians collectively worked 1785 million hours. The Reserve Bank is bracing for a 20 per cent reduction which would take us back to the number of hours worked in 2005.

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NAB economists, who are tipping a 650,000 lift in the number of unemployed through April, this week said the fall in hours worked would capture the true nature of the jobs market.

“The drop in hours worked is a substantial hit to household income, even with the dramatic increase in government assistance, and will limit the bounce-back in spending as restrictions are eased,” they warned.

The gap between unemployment and employment can be changed just by a definition.

A survey released this week by the ABS showed a three percentage point drop in the number of Australians holding a job between the start of March and the start of April. That’s a fall of about 400,000.

But there was an 8 percentage point drop over the same period in the number of Australians working paid hours. That’s a fall of more than one million.

They were similar questions but delivered vastly different answers. The April jobs report will be just one insight into how the coronavirus pandemic is changing the nation’s workplaces.

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