Unemployment is on the rise - welcome to the new normal
Last month – yes it is February already! – the mainstream media ran headlines proclaiming that no jobs were created across Australia during 2011 and the result was the worst in 20 years. No arguments there. Our unemployment rate remains at 5.2%, but the participation rate fell as job seekers have given up the search for positions.
In addition, after holding staff levels steady for about 12 months or so, businesses are starting to lay people off. So, too, is the public service. But the real reason for the lack of job growth here has little to do with Europe or the global economy, and much to do with current government policies.
The modern award system under the Fair Work Act isn’t working. In Queensland, regulation of retail trading hours is costing about 10,000 new jobs. God knows what negative impact the carbon tax will have on job creation.
In addition, politics, rather than economics (yes, the more sceptical will say “what’s new?”), is motivating the federal government to get its budget back to surplus in time for the next election, which, in concert with softer tax revenues, requires public sector staff cutbacks. There are way too many public servants for mine and I usually love a good PSC (public sector cull), but right now it is just adding to our woes.
And of course, there is the elephant in the room – a lack of leadership. All parties are a joke. There isn’t a statesperson amongst our current political set, Campbell Newman being the only exception. Yes, I am biased, but really where is our Howard, Costello, Hawke or Keating? It is too much to ask for another Menzies or Kennett? I have a T-shirt with Howard’s face on it; underneath it says, “Missing me yet?” Well maybe not exactly, but we definitely miss Howard’s budget surplus.
I remain hopeful that the world sorts out its mess and that we won’t enter a recession. Investment in mining and energy projects is likely to keep our growth rate in the black. But unemployment is likely to rise during 2012. How far is uncertain, but as high a 6% isn’t out of the question.
We could improve our employment situation enormously and create many more jobs if we were to tackle our declining productivity, cut futile and costly regulations, abolish inefficient state taxes and embrace a much smaller government.
Official interest rates will now drop, and several times during 2012, but these might not work as well as they have done in the past. Firstly, confidence is shot. We need elections (and someone to believe in and vote for). Secondly, the banks will dribble out only part of the cash rate cuts – they cannot afford to pass on all of the cuts. Thirdly, we are saving more, due to economic uncertainty and our ageing demographic, so a drop in the savings bank rate is an income cut for many. And finally, mortgage holders will use any cut in interest rates to help pay off their debt faster, so they will leave their repayments as they are.
Whilst we bemoan our flat job market, we can thank our lucky stars we don’t live in Europe, where unemployment is approaching 10% in many countries and is at 15% in places like Ireland.
The official labour force statistics make an interesting read. Well, maybe that is taking it too far. There are lots of anomalies and it pays to know what you are really looking at. For example, Queensland’s unemployment rate, as at December last year, was 5.1%, which is down on the 2011 annual average of 5.5%, yet 1,300 jobs were lost during the year.
More enticing (yes, I am now pushing your interest to the limit) are the figures for the Gold Coast. Unemployment across all of 2011 averaged 6.6% across the Goldie but was 4.6% by year’s end. There were 7,100 jobs created across the entire Gold Coast last year, with 9,000 being created in the city’s southern flank and 1,900 lost across the northern suburbs.
Like all statistics, country, state or even regional averages don’t apply to every area. Some places are always doing better than others. It also pays to know that the ABS employment figures are based on place of residence and not place of remuneration. The jobs “created” on the southern Gold Coast weren’t necessarily there. More residents living there had jobs by year’s end. Many actually work far away from the Gold Coast and commute. Many now fly in/fly out of Coolangatta airport and work the mines.
Welcome to another new norm.
Michael Matusik is the director of independent property advisory Matusik Property Insights. Matusik has helped over 500 new residential developments come to fruition and writes the weekly Matusik's Missive.