Australia’s Employment Figure Isn’t as Great as You Think

Last week we had a family member staying at the hospital.

Not to fret, he is ok.

Yet there was something we heard from the nurses and hospital staff often: ‘There will be someone else in here with you tomorrow…I’m a casual.

It´s not the first time we see this.

Casuals are a common occurrence in the health sector, but also in education and hospitality.

In the chart below, published by the Reserve Bank of Australia, you can see that the sector that has seen the largest employment growth by far has been household services, followed by construction.

Employment growth by industry

Source: RBA

[Click to open in a new window]

Household services include tourism-based businesses — such as accommodation and food services — social assistance, recreation, home services — like cleaners and gardeners — education and health services. As in doctors, nurses…but also less traditional professions such as Pilates instructors, masseuses, etc.

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Australians aren’t making a ‘living’

The Australian economy is moving away from mining and manufacturing and shifting towards service industries. Service jobs are usually lower paid, and underemployment is common as there is more casual work.

According to the Australian Bureau of Statistics, one in four Australian employees are now casual, which means that they do not receive benefits or entitlements in exchange for a higher hourly rate of pay.

They are classified as ‘employed’, but that doesn´t mean they are making a living.

In Australia the unemployment rate has dropped to 5%, yet salaries aren’t rising.

That´s why, while unemployment in Australia is now hitting record lows, we don’t believe that this figure shows the whole picture.

You see, when unemployment decreases, companies struggle to find workers as there is a smaller pool of employees to choose from. So they increase salaries to attract more people into the workforce.

And an explanation to why wages aren’t rising could be growing underemployment. That is, part time workers who want to work more hours. Underemployment is currently at 8.3%.

But, we aren´t the only ones thinking employment figures aren´t telling the whole picture.

The latest data from Roy Morgan Research estimates that unemployment is higher than 5%. In fact, they think it is at 9.4%, with almost 2.4 million Australians — about 17.8% — either unemployed or under-employed.

As they noted:

The Australian economy has grown strongly over the last year with nearly 200,000 jobs created at a rate of just over 15,000 new jobs per month. However there were almost as many part-time jobs (+95,000) as full-time jobs (+97,000) created. As a consequence part-time employment in Australia has hit a new record high of nearly 4.5 million in September[…]

‘As we’ve noted previously the persistent high level of unemployment and under-employment in Australia isn’t because jobs aren’t being created, it’s because the workforce continues to grow at a faster rate than the growth in employment. Not only is the expanding Australian workforce not providing enough jobs to reduce unemployment but the long-term trend of an increasing casualisation of the Australian workforce is continuing.

But, part timers wanting more work is only part of the picture.

Aussies are taking on ‘survival’ jobs

People may also be taking on ‘survival’ jobs.

What I mean by survival jobs is higher skilled workers taking on lower skilled jobs on a temporary basis to pay the bills and cover costs of living until they find something in their field.

A survival job can bring you money while you look for more permanent employment. And employment statistics don´t usually pick up them up, as they are classified as ‘employed’.

Engineers working as gardeners, baristas with PhDs, marketers working in construction…you name it. I have seen this very often in Spain. People settling for jobs for which they are overqualified because they cannot find a job in their own field.

High underemployment and low salary growth are the reasons why we are seeing people cutting down costs.

This from the Australian Financial Review:

Retail spending rose just 0.2 per cent on a seasonally-adjusted basis in September, failing to lift to the 0.3 per cent level expected by economists and that retail sales had reached a month ago.

‘Consumers reeled in spending on clothes, shoes and accessories during September while continuing to spend at supermarkets, according to the Australian Bureau of Statistics data out at the end of the week…

‘Stronger wage growth is an offset to higher prices of food and petrol but it remains elusive. The year-on-year growth in the wage price index for the June quarter came in at 2.1 per cent, seasonally adjusted, with underlying consumer price inflation now running at just under 2 per cent.

Officially employment may be looking good.

Yet statistics are focusing on the quantity of employment and not the quality of the jobs created.


Selva Freigedo,
Editor, Markets & Money

PS: Revealed: Harry Dent’s warning to Australians. Download the free report now. Are You Prepared for an Aussie Housing Collapse? Find Out Before It’s too Late.

Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the ravaging effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.

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