Zero hours and declining participation drive ‘effective unemployment rate’ higher

We have previously discussed the idea of effective unemployment rates which take into account the distorting effects of workers on zero hours and moves in participation rates on headline unemployment rates (see here for one of our earlier explainers). When we crunch today’s labour force numbers for August we see the massive impact that these two distorting factors are having on unemployment rates.

In this analysis we assume PR remained at its level from March 2020; taking a different starting point here will impact results, so our estimates may vary somewhat from others doing similar analysis.

Australia

  • Headline unemployment rate 4.5%
  • Effective unemployment rate 7.3%

NSW

  • Headline unemployment rate 4.9%
  • Effective unemployment rate 12.1%

Victoria

  • Headline unemployment rate 4.1%
  • Effective unemployment rate 5.3%

Queensland

  • Headline unemployment rate 5.3%
  • Effective unemployment rate 6.0%

You can conduct a similar process but, to remove reliance on an assumption about participation, use employment:population ratios rather than unemployment rates. This results in a very similar picture being painted (although inverted).

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