A headline jump in unemployment of 6.0 to 6.3 per cent is not what it seems. So how alarmed should we be?

Well for a start, the headline rate released on Thursday by the ABS is the seasonally adjusted figure.

Most economists – by which I mean those trying to figure out what’s actually happening rather than those helping politicians spin their stories – get more excited by ‘trend’ figures.

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Trend figures, in the ABS definition, smooth out annual bumps by using a precise formula known as the ‘Henderson moving average’.

The mathematics of that formula are not important here – suffice to say that when trend data takes a turn, there is a very high likelihood that it’s time to be alarmed or euphoric, as the case may be.

And in the July jobs data, there is no such turn. The trend unemployment rate remained steady – 6.1 per cent in both June and July.

So there’s nothing to worry about in the jobs numbers?

Actually, there is some cause for concern – it’s just not the headline jobless rates that tell the story.

To understand why, we have to go back to first principles. With productivity levels virtually flat in the past few years, the output of the Australian economy is affected not only by how many people are in jobs, but by how many hours work each gets.

That figure is expressed by the ABS as an aggregate – total monthly hours worked.

And what we need that figure to do first and foremost is to keep up with population growth (again, assuming no great leaps forward in productivity of the kind seen in the late 1980s and early 1990s).

That’s not quite happening, but we’re close. The past 12 months produced 1.4 per cent more hours worked in total than the preceding 12-month period.

So how does that compare with population growth? A steady birth rate, longer lifespans, and high net migration, have kept the estimated resident population increasing at 1.6 per cent per year on average in the past five years – roughly 400,000 more Aussies a year. So the hours-worked increase is not quite keeping pace.

The headline unemployment rate disguises that discrepancy. Yet, for a nation accustomed to living the high-life during the mining boom years, that has a material impact – stagnant incomes.

In theory, hours worked could fall behind population growth without impacting living standards, but only if multi-factor productivity (MFP) grew to compensate.

But it’s not growing – while labour productivity has grown fairly steadily since the mid-1990s, multi-factor productivity has been flat for a decade. That, in turn, is reflected in flat wages growth.

There are lots of ways to boost multi-factor productivity, but nearly all of them require large structural reforms to the economy.

We could, for instance, sort out the ridiculous, teetering edifice known as the property market. Businesses, just like households, have to pay for the exorbitantly-priced land they operate on – and yet neither side of politics is doing much to rein in the distorting tax concessions that cause capital to pour into property, rather than more productive businesses.

That means that too much of a business’s fixed costs are land-related, rather than being spend on machinery, vehicles, technology and so on.

Likewise, we could do a lot more to attract, or even retain, innovative businesses – the kind that spend money on R&D to create new intellectual property to use here rather than having to go offshore to grow.

And we could invest more in training and education to develop a more skilled and productive workforce.

Those are some of the reform challenges. But given the political timidity of much policy development in Australia, the only other way to increase the size of the pie is to work longer hours.

And until domestic or international demand picks up in our key industries, the hours are lagging behind population growth. And that means less pie for everyone.

Read more columns by Rob Burgess here