The national unemployment rate is one of the most closely scrutinised statistics, and it for a good reason; it’s a brilliant indicator as to how dynamic the market is, and how well it is able to manage itself in harsh conditions.
So what is an unemployment rate? Simply, it accounts for the percentage of people who are unemployed, though able and willing to work. Well, these are the parameters that the Australian Bureau of Statistics (ABS) has set for someone to be classified as unemployed.
Last month, Australia’s unemployment rate grabbed attention by dropping significantly to 5.7%. This, however, was in spite of the Australian economy shedding 3,900 jobs, instead of gaining roughly 25,300 as estimated by analysts.
With Australia’s unemployment rate holding steady, despite the consistent exogenous shocks occurring across the world in 2016, it would seem that the economy is quite resilient and is able to deal with multitudinous slowdowns and general economic woes (e.g. China’s ‘Black Monday’). Yet, there is much uncertainty in the air as to how the unemployment rate will look in the next couple of month. The economic market has been plunged into the dark because of events like Brexit, and the ambiguity surrounding the upcoming United States Presidential Election, the latter of which could potentially spell economic doom for the rest of the world – which includes Australia.
Let’s take a closer look. The Northern Territory and the ACT have a particularly low unemployment rates – 3.5% and 3.6% respectively – while NSW and Victoria maintain unemployment rates of between 5% and 6%. The states, however, that are truly worrisome, are Tasmania, South Australia and Western Australia. Tasmania takes the trophy for the highest unemployment rate, with a vexatious 7.2%, while South Australia has 6.8% and Western Australia follows closely behind with 6.2%. Interestingly, Western Australia is actually facing a drain in the labour force, as people are migrating to states like NSW to seek employment. South Australia, on the other hand, is facing terrifying employment challenges, specifically in regards to steelmaking and car manufacturing, as Holden will be axing jobs with some of their shutdowns later this year. All in all, these states have their work cut out for them, yet their respective governments seem eerily optimistic about bringing down their unemployment rates. Whether this is possible is yet to be seen.
So what does the future look like? Will Malcolm Turnbull’s ‘ideas boom’ plan work in time? At this moment it seems as if the effects of his plan will not be immediate enough to be helpful to those who are seeking jobs. After the mining boom, analysts in various firms are concerned about whether the economy would be able to weather a possible slump, and hence, cause fear such an event would cause unemployment rates to rise. Given the data of last month, it would seem that either the economy is still managing, or the consequences have been delayed through stimulus plans. Perhaps it explains the rise of underemployment rates: those who wish to work more hours, yet are in jobs that require them to work lesser hours. While Turnbull’s plan is long-term, and an ‘ideas boom’ can last forever compared to a ‘mining boom’, it would seem that the World economy simply does not wish to cooperate.
Australia’s economy is highly dependent on China’s, so given a slight slowdown on their part, the Australian economy has expectantly suffered. To make matters worse, China’s exports are declining more than expected following the Brexit vote, and this raises concerns for the Australian economy. Demand in the United States for exports has fallen as well, and this in turn also adversely affects the Chinese economy. Unless China recovers from their problematic streak of economic mishaps, Australia could land in some trouble. I have quoted Brexit a few times here as well, as it will definitely unfavourably distress the trade accounts of Australia, while a Trump Presidency, along with protectionist policies, could also wreak havoc on the global economy.
We are facing a presidential election, a possible triggering of Article 50, uncertain stock markets and an underperforming Chinese economy filled with bad debt. Thus, when you combine this with lingering fears that the Australian economy will collapse following the mining boom, the future seems dark and full of terrors. The Australian government must navigate these waters scrupulously.
Photo credit: SBS