The labour market isn’t as zingy as the stats make out. And a lot of jobs growth is actually coming from the government. That’s a worry.
Where will the jobs of tomorrow come from?
Actually, forget that. Where are the jobs of yesterday?!?
I’ve checked the pants I was wearing and looked behind the couch. Can’t find them anywhere.
Maybe things aren’t as rosy as we’re being told?
On the face of it, the Australian economy is going great guns. Growth is modest, but in line with long run averages. Inflation is contained, the budget deficit (at least for the moment) is pretty small, and the unemployment rate might be drifting slowly higher, but is still about half the rate you’d normally expect in a recession.
Sure things could always be better, but there’s nothing in the headline data that’s ringing any alarm bells. And those headline numbers would be like some sort of wet dream to old-world European politicians.
On the face of it, the Australian economic miracle rolls on. 22 years without recession. Aussie, Aussie, Aussie. Everyday I paint an Australian flag on my little lamington belly and run around the block.
But maybe we’re missing something. Businesses aren’t investing like they should, and consumers are tighter than we’d usually expect at this stage of the cycle.
And the vibe on the street is hardly jubilant.
And if you scratch beneath the surface, there’s more than a few things that make you stop and wonder.
Like this chart here. This is the Australian employment to working age population ratio. Most employment data only considers you part of the workforce if you’re working, or actively looking for work.
That means a lot of people can get missed out. If you give up looking for work and take up study, you’re out. If you give up looking for work, and decide to be a stay-at-home dad, you’re out. Sometimes these things are lifestyle choices. Sometimes they’re partly driven by disappointment in the job market.
And so if you look at how many of our 15-64 years actually have jobs (and are making an economically quantifiable contribution to the economy), the ratio is still falling.
The GFC marked a turning point. There was some recovery around 2010, but since then, the trend decline has reasserted itself. That’s a picture of an economy that’s struggling for form since the GFC.
The fact is that the proportion of us with jobs has been falling for over 5 years.
Why is that?
The other thing to consider is that not all jobs are created equal. If you work for 4 hours a week, the ABS reckons you’re employed.
Good luck with supporting a family on 4 hours a week (unless you’re Tim Ferriss.)
There is a stat that tries to get round this. It’s called the under-utilisation rate. It takes the unemployment rate and adds in people who like to work more if they could. That’s in this chart here:
You can see there’s quite a gap between the unemployment rate and the under-utilisation rate. And Since 2012, under-ute’s been on a strong march upwards.
The other side of this coin is the split between full-time and part-time work. Check out this chart:
Part time working has been growing around trend since the end of the GFC – and this is where the bulk of employment growth has come from in recent years. But full-time work has barely done anything.
There’s only around 5% more full-time jobs than there were at the end of 2008. Given how strong the population’s been growing, that’s a pretty ordinary result.
And one more for you. Let’s look at where the jobs have come from… and where they’ve gone. This chart looks at the number of jobs created and lost in different industries:
Healthcare is the clear winner. Manufacturing a clear loser.
But what else do you notice about this. The thing that sticks out at me is that 4 of the top 5 are government-related: healthcare, science, education and the public service. But the three big losers are classic private-enterprise industries, manufacturing, wholesale trade and agriculture.
This troubles me. Basically it’s saying that the government is behind jobs growth at the moment. Private industry is in trouble.
Why is this a problem? Well, government’s don’t tend to be that good at, well, anything. Generally, I think healthy economies, tend to shift the balance of economic activity away from the public sector.
It also leaves us vulnerable. Imagine we actually did have some kind of budget emergency. Imagine we had to bail out the banks like Ireland did. If government budgets were under the pump, and they stopped hiring – or worse, started laying off more and more staff – where would jobs growth come from then?
We’ve put all our eggs in one basket case.
So this is what’s going on. A smaller percentage of us have jobs. Those that do have jobs, many are working part time, and many would like to be working more. And a large share of people who have found work in the past 6 years have found it in industries related to government.
This is not the picture of a dynamic and robust economy. This is not an economic miracle.
And this is probably why most people feel like they’re living in a recession, even if no one’s talking about it.
And so what happens from here?
Well, we need to give things a kick along. We need to somehow get private business inspired and motivated.
We could do this by supporting innovation, and creating supportive cultures around business, particularly small and medium businesses.
But this is hard.
The more likely outcome is that the government will just ask the RBA to throw more money at the problem. Let interest rates fall below 1%.
This might not work, but hey, it’s easy.
We’ve seen what happens when the rest of the world goes EZ money crazy. Imagine what happens when the money’s coming straight from the RBA.
If you’ve been enjoying a boom in property and asset prices so far, just hold on to you hat.
How does the economy feel to you? Business as usual or hidden recession?
Would most people you know “like to be working more”?
How do we inspire and support business to start hiring again?