While Australia’s official unemployment rate dipped to 4.5% in August, economists are warning the true figure is much higher – and the next few data points may be less forgiving.

The ABS labour force data for August showed a 0.1% fall in the unemployment rate, but at the same time the number of Australians in work dropped to 13,022,600 people from just over 13,168,000.

This discrepancy reflects the way unemployment is measured by the ABS, which counts only people out of work who are actively looking for jobs (measured by the ‘participation rate’) in that headline figure.

Those who have jobs but aren’t getting enough hours to get by aren’t counted, nor are those who have chosen not to look for work until after the lockdowns end.

August saw a contraction in both the number of monthly hours worked (down 66 million hours) and the pool of Australians actively looking for work (the participation rate decreased 0.8% to 65.2%). 

AMP Capital chief economist Dr Shane Oliver estimated that factoring the number of unemployed Australians and those not searching for work back into the figures bring the ‘effective’ unemployment rate up to 6.8%.

As the economy reopens and more Australians start looking for work again, Dr Oliver expects the ABS unemployment rate will climb to reflect the higher rate of participation.

Source: AMP Capital

Even so, consumer confidence is on the rise and businesses appear similarly optimistic about their future prospects than they were last year.

“Consistent with this, job listings and hiring plans are holding up well suggesting that employment may bounce back reasonably quickly once lockdowns end,” Dr Oliver said.

Sources:

• AMP Capital: Market Update 17 September
• Australian Bureau of Statistics: Labour Force, Australia