There is a good economic story emanating from the last couple of weeks with a lot of the things economists like to look at appearing rosy.
Companies are investing more than they have for five years and 240,000 Australians got a job last financial year. Treasurer Scott Morrison said “business conditions have risen to their highest level in almost a decade”.
On Monday, ANZ released its job ads data which showed a sixth month of continual growth and job ad numbers 13.3 per cent higher than in August 2016.
The jobs picture looks brighter than at any time since the global financial crisis and things have picked up since the slump in 2014 that followed the funk at the end of the resources boom. Of course we’re still well behind the pre-GFC situation but things are moving in the right direction, some say.
That’s a reasonable argument but it can’t be taken at face value. There are lots of other figures you need to take into account before you crack the champagne bottle. Here are just some of them.
The figures on the hours we are working compared to our aspirations are quite stark.
“The unemployment rate is 5.6 per cent but if you factor in underemployment it is more like 14.5 per cent,” said Alex Joiner, chief economist with IFM Investors.
“The average person seeking more hours wants 13-14 hours more a week so that’s quite a significant dampener on spending.
“In Australia there is an unusually significant trend to underemployment that is higher than in comparable countries.”
In the US, for example, the Department of Labor estimates that underemployment, the sum of those out of work and those wanting more, is 8.4 per cent, well below Dr Joiner’s estimate here.
And the trend to underemployment has taken off markedly in recent years.
The grey area on the above chart measures underemployment and shows that it has gone from around 27 per cent in 2000 to about 31 per cent now. The red and green lines are showing full- and part-time employment respectively.
They demonstrate that part-time job growth (green) has dramatically outstripped the full-time experience since the GFC.
For much of the workforce, wages growth is flat or even negative. Official figures show it up 1.9 per cent last financial year and figures which leave out paid outliers show the average worker it’s just 1.6 per cent.
Professor Phil Lewis, a labour market expert at Canberra University, said a significant driver here is not low union membership per se but deregulation of the market.
“Only 22 per cent of workers are on awards leaving them to negotiate enterprise agreements,” he said.
“If you don’t have much bargaining power you don’t get a pay rise.”
The trend of low wage growth is more pronounced in Australia, partly because the country dodged the GFC bullet and didn’t have high unemployment experienced elsewhere.
“The Reserve Bank has said things will return to normal. But it’s hard to tell; we’ll have to wait and see,” Professor Lewis said.