ABS 6202.0 - Labour Force, Australia, August 2013: Jobless rate rises to four-year-high of 5.8%; Unemployment rate climbs to post-global financial crisis high of 5.8%, in line with forecasts
Of course the primary driver between economic (and business) growth is expansion of the consumer base (population growth), but to say we should pursue population growth because otherwise equity market returns will be lower is ridiculous.
It’s like observing that Ponzi schemes will continue to work so long as there is a sustained influx of new investors.
As for the risk that returns from companies and property will be lower, that’s completely irrelevant without considering other factors (such as inflation).
Also his comment about falling fertility — I’d suggest he should have said falling birth rate (arguably fertility is higher than in the past thanks to technology, though men & women breeding later has had an impact). If we had a static population and resources, services and production were built around the current need it could be argued that a lower participation rate (due to people living longer) could be sustained without any increase in the hours worked by the active workforce.
Finally, to suggest we should be worried that some countries have a sub-replacement birth rate completely disregards migration, or the picture more globally. Birth rate in countries such as India are a major issue given their vast population.
IT IS harder for the unemployed to get a job now than at any time since the 2000 slowdown, and the deteriorating labour market is set to dominate economic policy for both the Reserve Bank and the new government for many months to come.
The cyclical softening in the economy as the resources investment boom comes to an end is compounded by the ageing of the population, which now has baby-boomers retiring in large numbers.
For a long time, the monthly labour force reports have been surprising for their resilience in the face of dismal business surveys showing companies cutting back their hiring and falling numbers of job advertisements.
The outgoing Labor government was still able to go to the election claiming there was "almost full employment". Treasury analysis has shown that when unemployment drops below 5 per cent, labour shortages start pushing wage costs and inflation higher.
However, the labour market has been slowly weakening since April last year. Until about February this year, the jobless rate was creeping higher by about 0.1 percentage points every three months. Since then, the pace has picked up to 0.1 percentage points every two months.
Hiring has stopped, at least in net terms. There has been no increase in the total number of people with jobs since February.
The ABS survey tracks a portion of its sample every month to gauge mobility in the labour force.
UBS interest rate strategist Matthew Johnson has analysed the trends. They show that almost 4 per cent of workers are now leaving their job every month, either to join the unemployment queue or quitting the labour force altogether. That is the highest level since 2001 and compares with a low point of just under 3.3 per cent a month two years ago.
The big growth has been in people leaving the workforce altogether. Many have been made redundant and are taking time out before returning to the search for employment. There has been only a modest increase in the numbers losing their jobs directly to unemployment.
There is also a demographic element to this. Part of the growth in people leaving the workforce is the result of baby-boomers taking their retirement. The numbers joining the workplace to replace them are falling as a result of young people remaining in education longer.
ANU demographer Peter McDonald estimates that the labour force could be expected to fall by 140,000 a year for demographic reasons, with elevated levels of immigration required to keep the labour force steady.
The effect of rising retirement rates is partly offset by the fact that the current generation is more likely to remain in the workforce longer than the previous generation.
So, the participation rate of people aged 65 and over has risen from 10 per cent to 16 per cent over the past decade.
However, Treasury estimates that unless there is a further rise in participation rates of older workers, the ageing of the population can be expected to reduce the overall portion of the population in the labour force by about 0.25 percentage points a year. Although that doesn't sound very much, it translates to a reduction in the labour force of about 60,000 a year. Labour force participation peaked at just under 66 per cent in November 2010 and has fallen a full percentage point since then. That is equivalent to 190,000 people leaving the workforce. Participation is now at the lowest level since January 2007.
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