How is that stimulus working?

Wayne Swan made this claim just this morning:

WE have an unemployment rate with a “five” in front of it, less than half of what it is in Europe at 12 per cent

That appears to be a fantastic achievement. Yet it ignores a fundamental issue. Last week Judith wrote about the current debt situation.

But in his open letter – “join the thousands of people taking a stand against misinformation” – [The Kouk] does fail to mention one important fact. When the Labor government came to office in 2007, there was no debt at all. Rather, government net debt was minus $45 billion, which was nearly 4 per cent of GDP.

Well, Swan neglects to tell us that the unemployment rate was like when the Labor government came to office in 2007. Those days it had a “four” in front of it.

But again, the Labor government has an excuse – the GFC. As Gillard is wont to tell people, anyone who criticises the government on economic grounds is denying the GFC. Well, yes. Pity the facts don’t support that view. The latest ABS data on unemployment came out today and so I decided to graph the seasonally adjusted unemployment rate since March 1996.

Unemployment - April 2013

So the unemployment rate is nearly back to what it was at the height of the GFC. That must be a bit of a problem. A story about unemployment formed the basis for the stimulus packages at the time. Here is David Gruen explaining:

It is worth providing a brief summary of some of the benefits of avoiding a recession that would not be relevant if a recession was instead simply an equilibrium market outcome.

The first, and most obvious, benefit is that involuntary unemployment is lower than it would otherwise be. Among other things, lower involuntary unemployment implies less long-term unemployment and hence less skill atrophy and less general disaffection with society on the part of the long-term unemployed.

So the logic is to avoid a recession as any cost. Fine, that is one way to look at things. So how does the government explain that the number of unemployed individuals is now higher than it was at the height of the GFC?

Unemployment - April 2013 - 1

Sure the number of individuals in the labour market is bigger now than it was just two or three years ago, but the unemployment rate is nearly at the GFC high.

(HT: Noodle)

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30 Responses to How is that stimulus working?

  1. lem

    Sorry, but ABS figures for unemployment..how to explain Roy Morgan’s figures? And when we combine UNemployment and UNDERemployment and he gets 19.8 percent…know what? I am out in the real world seeing people all day from all works of life, and what matters to them is full employment. Roy Morgan’s figures feel the most real to them.

  2. Jim Rose

    Hours per working age person is a better measure

  3. Craig Mc

    These days, you need to add the number of disability recipients to get the true unemployment numbers.

  4. Louis Hissink

    How’s that Stimulus working? My accountant sent me the following email:

    Also, would you believe a record of your $900 tax bonus from 2009 has just appeared on the ATO website so I have asked them to pay it now. It will be by cheque and they can’t say when it will come.

    I won’t be waiting.

    And as from next Monday, I’m being paid for one day per week work from five days per week; cost cutting. Another recession in the commodities market, another recession.

  5. Louis Hissink

    Oh, the email was two days ago.

  6. Kaboom

    Fuck knows, but I am now on the unemployment scrap-heap once again…..

    Onwards and upwards!

  7. Louis Hissink

    Kaboom, what industry are you in?

  8. OldOzzie

    Anecdotal, but we are seeing 20% surcharge for Sundays in restaurants around our area, and a lot less restaurants open on a Sunday evening (beachside suburb), as well, less shops are opening Saturday Afternoons

  9. lem

    I see many people everyday, and have noticed for some time the gradual increase in people who report being laid off, initially trimming back of public service dud jobs like “project officers” but then nurses and now midwives. What has concerned me most is now I am seeing professionals such as engineers being made redundant from big firms, eg SKM. When engineers are being laid off, the economy is in trouble.

  10. I am the Walrus, koo koo k'choo

    Terribly sorry to hear that, Kaboom and Louis. I sincerely hope things pick up soon in your lines of work. Although I suspect it will get worse, for all if us, before it gets better (sometime around September).

    OldOzzie – a natural consequence of Julia being in the pockets of her union keepers.

    No point trying to find reason in Goose’s words. ‘Against stupidity the gods themselves contend in vain’, etc.

  11. James of the Glens

    So now the unemployment rate is about as high as during the height of the GFC.

    We now have another GFC – the Goose Financial Crisis.

  12. Turtle

    According to a graph Allan Kohler put up, female full time employment has dived. He said ‘…female employment is suffering what amounts to another GFC’. Julia really is doing it for the sisterhood. Rather, she is a sister doing it for herself.

  13. Andrew

    Can someone please put a gag on The Kouk’s mouth. He talks shit 24/7

  14. duncanm

    I linked to this previously in the open thread, but if you look at the historical Roy Morgan numbers, the rate is much higher than the peak of the GFC – the gov’t did some serious fiddling to the official stat. around 2009/10.

    I’m guessing the real ‘official’ stat should be around 8% or more – the Roy Morgan unemployment numbers are higher than they were in 1996.

    I’m currently employment, but our engineering/tech firm just laid off ~30% of the workforce (~100 people).

  15. Andrew

    With your employment graph, it somewhat should be blue right up to Feb 2008 because that is really the actual time that Rudd started Government. I just think that the Howard Government’s record should reflect it’s true reality.

  16. Irving J

    If Swan didn’t tell me better I would have said the stimulus just delayed the inevitable.

  17. Samuel J

    Gruen is talking s***. Avoiding a recession at any cost is clearly foolish in the extreme. For example, let’s say that the country (ceteris paribas) was going to have a recession of two quarters of negative growth of 0.1% each quarter. The government spends 400% of GDP to “stimulate” the economy to 0.1% growth in each of those two quarters. Result: hardly any difference in economic growth or unemployment but a large future burden of debt which would put upward pressure on unemployment, reduce the resilience of the economy and reduce economic growth. Like anything, avoiding a recession is a matter of costs and benefits.

  18. C.L.

    Wayne Swan:

    “But it’s you in a sunshine bubble…”

    Mu-um, Sinclair doesn’t like my painting.”

  19. Aliice

    I now work at three different places and a 4th self employed business just to get decent money coming in from earnings. So much casual and so easy to cost cut isnt it.
    Louis – hang in there. My hubby is ticked off because business is slow and landlord will not take any hair cut along with him – he is even talking about telling the landlady “stuff you” when lease is up and that he will pay half the rent on month to month. There are commercial sites around here been sitting vacant for two years plus.
    Some of them still want the same rent and its just not going to happen.

    Id like to say to LL and her lawyers who gouge to set the lease up – welcome to no income as well.
    He has been in the same premises for 17 years and the cow doesnt even know business is slow because she hasnt even tasted it yet, and her lawyers are even more delusionist. He is thinking seriously of looking elsewhere now for cheaper premises. That is a hassle. Me I just keep working where I can – all over town.

  20. Jannie

    The ABS definition of unemployment has always been a bit silly, if you only work one hour a week that stil counts as unemployed I think. Still if it provides a consistent measure over time its useful for analysis.

    But a more meaningful count would be the number of people collecting unemployment – Newstart or whatever its called. Add to that some caibrated portion of those on Disability Benefit, for surely a large proportion are disguised unemployed, or discouraged anyway many can actually work. Then maybe add in other types of welfare discouraged – a proportion of single mothers. The number of people who could work and have simply given up because of the siren song of easy welfare adds up to a lot of wasted productive potential, not to mention the drain on public money.

  21. Gavin R Putland

    Irving J wrote:

    If Swan didn’t tell me better I would have said the stimulus just delayed the inevitable.

    I said it anyway.

    Yes, the Roy Morgan figures are more realistic, and they show that unemployment is patently worse than in 2009.

  22. Rohan

    When engineers are being laid off, the economy is in trouble

    lem, same thing happened early to mid nineties. I came out of uni with my engineering degree and straight into unemployment. Everyone was firing engineers under the guise of economic rationalism.

    Despite my quite reasonable work history whilst at uni I became long term unemployed and sent out over 300 professional applications. I also applied for work in factories and eventually landed a job packing confectionary for less than $10 per hour.

    It’s funny, but my vocational prospects improved when Howard came to power, but not before. If I were to look at changing jobs, it would be after September this year when sanity is restored in Canberra..

  23. Robbo

    No one should ever use the words “Gillard”, “Swan” and “truth” in the same sentence.

  24. sabrina

    Ex-Ford boss predicts end of Australian car industry

    What do the Economist guys think of his comment that we are not patriotic in that we are not buying home-made Ford cars?

  25. Louis Hissink

    Aliice,

    I don’t expect things to improve for quite while – I just heard Woodside has given up on its Gas Hub thing near Broome?

    Incidentally that cheque the ATO is sending me was the 2009 stimulus cheque!

  26. OldOzzie

    sabrina,

    If Holden and Ford had stuck diesel motors in their cars years ago, they might have had vehicles more relevant for Australians to purchase

  27. Imgol

    I’m an engineer in the resources industry and we are feeling it. My company has people on reduced hours or is sending us to overseas offices for a period. There is no work and we don’t have the choice of walking into a job at a competitor down the street.

    Every company I have friends and contacts in is laying people off and has been for the past 6 months or more, and this is happening Australia wide.

    Reduced Capital Spending by the big miners (think Woodside’s Browse Project) will see those in construction following engineering very shortly.

  28. Rabz

    Yes, the Roy Morgan figures are more realistic, and they show that unemployment is patently worse than in 2009.

    I’d be quite shocked* if there was anyone stupid enough to attempt to deny this.

    Craig Mc and Jannie, there has been an increase of over 100,000 DSP recipients since the advent of the squandermonkeys in 2007.

    If you add in 80,000 of those people (which I don’t think is an unreasonable assumption) to the labour force, the rate jumps to 6.16%.

    Add in say, 250,000 of the 820,000 DSP recipients and the rate becomes 7.33%.

    As usual, these corrupt, criminally incompetent morons are lying through their teeth.

    *Shocked, I tells ya!

  29. Woolfe

    Imgol/Louis,
    Construction is already stuffed. Not many civil jobs around I will be looking for work on July, only cab available is Roy Hill, but this cab is still in the rank.

    We are laying off site admin staff, safety and engineers, some are being offered work in Perth office with no salary uplift (30-40%)to support project.

    Next will not be paying for fifo to east coast. Not needed now as plenty looking for work.

    Batten down the hatches!

  30. Leigh Lowe

    WE have an unemployment rate with a “five” in front of it ………

    And Tony has a Two Party Preferred with two “fives” in front of it.
    What’s your point Woyne?

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