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Unemployment is Still Too High

Unemployment is rising again. It never got below 5.6 percent under this Government despite strong economic growth rates. Just as in the 1990s, it seems that around 6 percent unemployment is the best we can expect from National even though we can do a lot better.

Paradoxically, at least until the September quarter, employment had been growing strongly and participation rates (the proportion of the working age population either in jobs or actively looking for work) have touched record levels. What’s going on?

There many factors at work. The population is growing rapidly because of record net inward migration – over 62,000 in the year to October. That pushes up the participation rate without reducing unemployment if job opportunities for locals don’t increase fast enough. The government is putting high pressure on beneficiaries to find work, despite the state of the job market, which also raises unemployment.

The fastest rise in participation rates is among the older population who increasingly are working past “retirement”. The unemployment rate among young people, where unemployment is most concentrated, is still higher than before the Global Financial Crisis, but the proportion of them not in employment, education or training (‘NEET’) is largely back to pre-crisis levels. For most other age groups, unemployment rates are still too high.

Employment rates – the proportion of the working age population actually in work –are arguably more meaningful than participation rates, and they don’t look so good. But given the variety in hours people work per week, these rates based on head-counts miss important trends. An Hours-Worked Employment Rate is lower than in the 2000s and 1980s suggesting work is being spread around more people rather than that more use is being made of the available labour hours.

Finally, perhaps the much-hyped technological revolution really has hit us, pushing up productivity and destroying jobs? But productivity increases have been slower than pre-Crisis. Other factors such as the high dollar, brakes on government employment, high net immigration, punitive welfare policies and the lack of effective industry policies explain more.

Download the full bulletin: CTU Economic Bulletin 174 November 2015