How achievable is the LNP 4% unemployment target?

Before the previous state election the LNP’s Economic Blueprint for Queensland committed the new state government to achieving an unemployment rate of 4% in six years (not in this first term, as some seem to be be assuming). With unemployment currently running at 6.7%, and trending higher, what are the chances that this remains anything like an achievable target?

Firstly we need to get an idea of how many jobs would actually be required to get to a 4% unemployment rate. If we assume that the state population continues to grow at the average rate it has done since the LNP came to government in March 2012, then by March 2018 our working age population will be about 4,073,180. If we assume that the Participation Rate remains at its average since March 2012 (66.3) then we would have a Labour Force in Mar 2018 of 2,700,520. {In fact this assumption about the PR rate is probably wildly inaccurate…see below} Therefore a 4% unemployment rate would mean 108,020 people counted as unemployed, which would leave 2,592,500 as employed.

As at August 2014 there were 2,372,100 people employed in Queensland. Therefore for the LNP to meet their target we need to see an extra 220,400 new jobs in the next 43 months (to Mar 2018); or an average of 5,125 every month.

Since the LNP came to power there have been 81,300 new jobs created in 29 months at a rate of 2,800 pm.

However, as we mentioned above, the assumption that the PR rate would stay at 66.3 while the unemployment rate fell to 4% (below what most would consider to be “full employment”) is certainly inaccurate. As unemployment fell to such low levels we would almost certainly see many people, who previously had removed themselves from the labour force, be encouraged to return; the PR rate would surely rise. The last time Queensland saw an unemployment rate around 4% (back in late 2008) the PR sat at 67.5, and indeed went even higher in following months.

If we use a PR of 67.5 by March 2018 then our labour force would be 2,749,400; unemployment (at 4%) would be 109,980; and employment would therefore be 2,639,420. This would require an increase of 267,320 jobs over the next 43 months at a rate of 6,200 per month.

So is the goal achievable? Of course it is; but if it is to be reached then the rate of job creation will have to more than double between now and March 2018. Is that likely? No; but it’s possible.

The irony here is that whether or not the target is reached will have virtually nothing to do with the LNP state government. As Treasurer Tim Nicholls pointed out in a recent interview on radio (listen here), one of the reasons that job growth in the state has been so weak has been the (entirely predictable) winding down of mining construction jobs. The LNP will have known about that coming weakness when they made this bold commitment; they will have known that there was little or nothing they could do about it; and yet they made the promise anyway.

Job creation in Queensland (or any state) has always been, and will continue to be, driven primarily by macro-economic factors, both national and international, about which the state government (any state government) has no control. When the 4% target is missed (as it almost surely will be) the LNP will, with much justification, claim that influences over which they had no control (think, national GDP slowdown, mining investment wind-back etc.) were the cause. The fact is that if the target is met it will be met due to similar factors well beyond the control of the state government (and yet I’m certain they will take full credit).

Gene Tunny at Queensland Economy Watch (who also features on the radio clip mentioned above) has written on this theme recently. The graph in Gene’s post, or in our own from the other day, shows clearly how exceptional a 4% unemployment rate really is.

I guess the moral of the story, if there is one, is “Don’t make promises about things over which you have almost no control”. More fool the LNP for making the commitment, and more fool anyone who seriously believed that they (or anyone else) could promise such a thing.

2 replies
  1. Gene Tunny
    Gene Tunny says:

    Great analysis, Pete. It’s interesting to think about what will happen to the participation rate, particularly given the ageing of the population is expected to have a downward impact on the rate.

    Reply
    • Pete Faulkner
      Pete Faulkner says:

      Absolutely Gene, plenty that could shift the PR either way. I would probably be prepared to bet that, if the unemployment rate was at 4%, the PR would be higher than it is now (even barring demographic change being a downward pressure)!

      Reply

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