How is Australia’s unemployment rate measured and why does it matter?

Australia’s unemployment rate is making headlines – and not because it is one of the lowest for a major developed economy in the world.

On the first day of the 2022 federal election campaign, Labor leader Anthony Albanese failed to name the unemployment rate, sparking a thousand think-pieces about why it matters or doesn’t.
It was certainly not good “optics” for a party campaigning on the basis of being a good economic manager.

But what exactly is the unemployment rate, and why is it important?

What is the current unemployment rate?

• The current unemployment rate in Australia is 4.0 percent.
• It is the lowest rate since August of last year.
• An unemployment rate is a single number that indicates the number of Australians who are ready and willing to work but do not have one.

Who is in charge of calculating the unemployment rate? Is it just a game of political chess?

• The Australian Bureau of Statistics calculates the unemployment rate (ABS).
• It is an important – but not perfect – method of measuring one aspect of the country’s economic performance.
• Presumably, the greater the number of people employed, the better a country’s economy performs.
• Politicians have no say in how the rate is calculated or what it is.
• With job-creation policies, a sitting government may be able to reduce the unemployment rate.
• The unemployment rate, as recent headlines have demonstrated, is frequently used in political campaigns to prove or disprove a government’s economic performance.
• The ABS is part of the Australian Government and reports to Parliament and the public, but it operates independently and objectively.

What exactly does the unemployment rate represent?

• Since 1966, the unemployment rate has been calculated in the same way.
• A person must meet three criteria to be classified as “unemployed”:
• During the reference week, they must not work more than one hour.
• They must be actively seeking employment.
• They must be ready to begin work during the reference week.
• Looking at these criteria, it is clear that the unemployment rate does not represent the total number of Australians who are unemployed – but rather only those who are ready and willing to work.

So if I work just one hour a week I’m counted as being employed? That’s not enough to live off!

Correct.

I’ll leave it to the ABS to explain this one.

“Everyone who works for at least one hour during the reference week is counted as employed by the ABS.” While a one-hour cut-off point may be argued to be insufficient to sustain a family or individual financially, the organization says on its website that “there are several reasons for including everyone who works at least one hour per week as employed.”

“From an economic standpoint, any time spent in paid work, no matter how small, contributes to economic production and is thus accounted for in national accounts.”
Statistics on labor force participation are economic indicators that must be consistent with other economic measures.”

The one-hour criterion is consistent with numerous established economies around the globe – it’s not a weird quirk of the Australian system.

Does that mean the unemployment rate is inaccurate in the ‘real world’?

No way, no how.

The unemployment rate measures exactly what it claims to measure – the ABS is extremely open about its methods.

It is critical that we can compare Australia’s economic performance to that of other countries using internationally consistent standards.

However, keeping the one-hour criterion in mind, the ABS also tracks “underemployment.”
Underemployment is defined as working fewer than 35 hours per week but wishing to work more and being willing to work more hours.

The underemployment rate in Australia is 6.6 percent.

How does the ABS find out if people are working or not?

The ABS conducts a monthly survey of approximately 26,000 households in Australia, as well as a variety of hotels, hospitals, boarding schools, colleges, prisons, and indigenous communities.
This includes over 50,000 people, forming a “representative sample” of the country’s population.
Self-guided online questionnaires or trained interviewers are used for the survey.

When is the next release of the unemployment rate, and how frequently does it change?

The data, which is released monthly, determine whether the unemployment rate changes.
The March figures are due in just a few days, on Thursday at 11.30 a.m.