Unemployment ‘unlikely’ to go to 6%, say experts

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Unemployment ‘unlikely’ to go to 6%, say experts

Forecasts that unemployment will go to 6% and 300,000 Australians will lose their jobs are mathematically unlikely, according to international employment services company Manpower.

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Forecasts that unemployment will go to 6% and 300,000 Australians will lose their jobs are mathematically unlikely, according to international employment services company Manpower.

Manpower said there is something ‘intrinsically wrong with this “chicken little” theory’.

Analysis

Manpower makes the following analysis of Australia’s unemployment situation:

According to the latest ABS data, there are currently 11,217,000 people in the labour force and this is made up of 10,737,400 people who are employed and 479,607 who are unemployed.

Simple math then tells you that 479,607 as a percentage of the 11,217,000 person labour pool is 4.3%, which is of course the current unemployment rate.

Now, if we assume that population conditions remain at similar growth levels as they have recently and the labour pool remains steady at around 11,217,000, then we can also calculate that an unemployment rate of 6% of that number is 673,020; so, with 479,607 already unemployed, then we are looking at another 193,413 people joining the unemployment numbers.

Long way from the headlines

While it is not good news to see anybody become unemployed for any reason, this is still a long way from the 300,000 grabbing the headlines.

There are only two ways that we can achieve 300,000 new people becoming unemployed, as added to the current 479,607 that would total around 785,000 unemployed.

With the size of the current labour market at 11,217,000 people, then 785,000 unemployed would equate to an unemployment rate of  7%, and we don’t see anybody brave enough - or foolish enough to stand up and make that statement.

The simple fact is that for the mathematical equation to work; that is, for 6% unemployment to equal an additional 300,000 people or a total of 785,000 unemployed, we would have to have a labour force of 13 million people.

Two sides to the equation

Should this turn out to be true according to the 'chicken little' theory, this would also mean that 12,215,000 would be employed as there must be two sides to the equation.

The most probable reality in Manpower’s view is that the unemployment rate will edge up to around 4.8%, which is the upper band of the long-term downward trend, and this suggests another 60,000 people may well lose their jobs in the short term; but, then again, we have a rapidly ageing workforce and some 327,000 people who are intending to retire in the next 12 months, assuming their super has held up.  


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