Is the unemployment rate really 6.4%?

I’m about to do an interview on the Labour Force and unemployment. I guess with everyone away on holidays, it’s time for a few of us old stagers to be called upon to inform everyone about what’s going on while they’re at the beach.

So I’ve downloaded the Labour Force data which I almost never do any more and what a surprising set of data. Most interesting to me was that the participation rate has fallen from 65.8% as it was in November 2010 to 65.1% in November this year. This comes to a loss of 131,000 persons from the working world. Since these people have disappeared into the not-included-in-the-labour-force category, which usually means they have become discouraged workers, if we add them back in, the total number of unemployed is actually around 780,000. Much different again from the 650,000 officially recorded.

Had the participation rate stayed constant, the unemployment rate would now be something like 6.4%, very different from the published 5.3%. Feels more accurate as well, since that is why the RBA is bringing interest rates down. They know just as every business survey has been showing. The economy is into a downwards turn. 2013 will be a year of surprises, I feel, and after the Americans go over their fiscal cliff who knows what the New Year may bring.

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