May 15, 2020

ABS April Unemployment estimate doesn’t reflect reality. ABS claims 594,000 lose their jobs but only 104,000 become unemployed (?!?)

Topic: Press Release, Unemployment
Finding No: 8411
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 – by Gary Morgan, Michele Levine and Julian McCrann

Yesterday the ABS released its April employment estimates. The ABS estimate 12,419,000 Australians were employed in April, down 594,000 on March. There were sharp falls for both full-time and part-time employed.

The ABS estimate Australian unemployment increased by only 104,000 to 823,000 in April (6.2% of the workforce, up 1%).

Australians will be asking, how can the ABS say 594,000 Australians have lost their jobs in April but only 104,000 become unemployed? This is because the ABS claim 490,000 people left the workforce in April. i.e. the ABS claims these people lost their jobs and were not then looking for work and available to start work during the reference week. These workers are unemployed – NOT out of the workforce.

So the workforce size in April should match the March estimate of 66%. The real ABS unemployment estimate for April is closer to 1.35 million (9.8%) – an increase of 4.6% points on March.

Combined with the estimated ABS under-employment of 1.82 million (13.7%) this leads to a combined unemployment and under-employment of 3.16 million (23.5%).

This is much closer to the latest Roy Morgan April employment estimates which showed 2.16 million Australians (15.3%) were unemployed and a total of 3.48 million (24.7%) were either unemployed or under-employed.

It is also important to understand that the Federal Government estimate around 6 million Australians are on JobKeeper and the ABS considers these Australians to be employed – whether they are currently working or not - so it is not JobKeeper which has caused this very low estimate of unemployment.

The workers who are now on JobKeeper but are working for reduced hours are significantly boosting the level of under-employment in the Australian economy. The ABS has captured this with their under-employment estimate increasing by 608,000 to 1.82 million. The first JobKeeper payments made by the ATO were distributed only recently, in the first week of May.

What really happened to unemployment in April?

On May 1, 2020 Roy Morgan released accurate real employment and unemployment estimates for the whole of April. Roy Morgan’s unemployment estimate showed a massive 2.16 million Australians were unemployed (15.3% of the workforce) and this was in fact down from late March – when unemployment peaked at 2.4 million (16.8%).

These April unemployment estimates captured the impact of the introduction of JobKeeper on March 30 which kept many Australians attached to their employer rather than become unemployed.

In April there were a total of 3.48 million Australians (24.7%) either unemployed or under-employed, and this was down from the high of 3.92 million (27.4%) in late March.

Why does it Matter?

If we believe the ABS April unemployment release (does anyone?) and don’t read the fine print, when Australia went into lock-down many Australians did not become unemployed – they simply decided to leave the workforce.

If we believe Roy Morgan many Australians lost their jobs and/or had hours reduced. The Roy Morgan estimates show that the drastic Government action that was taken in late March/early April did prevent Australia from plunging into a deep 'depression' as bad as or worse than 90 years ago.

If you’re going by the numbers make sure they’re the right numbers!

(Following is link to full details on Roy Morgan's April employment and under-employment estimates:

Critically, the ABS should make clear when publishing their April unemployment estimates that their results were based on interviews conducted April 12-25 using the 'employment reference period' of April 5-18.

For the record, the ABS unemployment estimates are always lower than those of Roy Morgan because ABS employs a more ‘restrictive’ definition of ‘unemployment’.

Margin of Error

The margin of error to be allowed for in any estimate depends mainly on the number of interviews on which it is based. Margin of error gives indications of the likely range within which estimates would be 95% likely to fall, expressed as the number of percentage points above or below the actual estimate. Allowance for design effects (such as stratification and weighting) should be made as appropriate.

Sample Size Percentage Estimate
40% – 60% 25% or 75% 10% or 90% 5% or 95%
1,000 ±3.0 ±2.7 ±1.9 ±1.3
5,000 ±1.4 ±1.2 ±0.8 ±0.6
7,500 ±1.1 ±1.0 ±0.7 ±0.5
10,000 ±1.0 ±0.9 ±0.6 ±0.4
20,000 ±0.7 ±0.6 ±0.4 ±0.3
50,000 ±0.4 ±0.4 ±0.3 ±0.2

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