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Why Queensland’s rising unemployment numbers are actually a good sign

Queensland’s higher than average unemployment was a sign of the state’s success in dealing with the pandemic, according to Conus Consultancy economist Pete Faulkner.

 

Nov 23, 2020, updated Nov 23, 2020
CentreLink queues may shrink further if employers embrace diversity in their recruitment plans. (File image).

CentreLink queues may shrink further if employers embrace diversity in their recruitment plans. (File image).

Faulkner said the unemployment rate in Queensland was at its current high level not because of a particularly weak labour market, but rather because the better health outcomes have resulted in a strong participation. That means more people were looking for work than would be the case if there was significant community transmission of the virus.

Australia’s unemployment rate in October stood at 7 per cent while Queensland’s was at 7.7 per cent which has led to criticism of the state’s handling of the economy.

Faulkner said there were some distorting effects in the jobs data from JobKeeper and JobSeeker payments which had created an official unemployment rate and an “effective unemployment rate’’. The distortion meant that there were people not counted as unemployed and receiving JobKeeper but had not worked.

“When we consider the Queensland data we see that the March unemployment rate of 5.6 per cent (which would have been 6.1 per cent if we had included zero-hour workers) with a participation rate of 65.5,” Faulkner said.

“Since then the effective rate peaked at 16.7 per cent in May, but has now sharply declined as the participation rate moves above where it sat in March (and the labour force adjustment therefore subtracts people from the count of those unemployed).

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“Based on an estimate of 19,900 zero-hours workers in October, we see that Queensland’s effective unemployment rate is only 6.8 per cent; well below the national effective rate, only 1.2 percentage points above its level in March and 0.9 percentage points below the state’s official rate.

“What this suggests is that the official unemployment rate in Queensland is as high as it is not because of a particularly weak labour market, but rather because the better health outcomes have resulted in a strong participation response.

He said if the same calculation was used in the other states the NSW effective rate in October was 6.5-7 per cent (up 1.6-2.1 ppts from March and Victoria would still be around 12 per cent (up about 6.8 ppts from March and still about 4.5 ppts above the official rate of 7.4%).

“We can also see that, with the current exception of Victoria, the distorting effects of the JobKeeper payments has been largely unwound with the actual and ‘effective’ unemployment rates converging.’’

 

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