Friday, November 09, 2012

Why the unemployment rate rose

John Key is very surprised that the unemployment rate jumped to 7.3 percent yesterday because he says other economic indicators are looking more positive.

Here's a possible explanation but I don't have time right now to thoroughly test it.

Well-publicised welfare reforms cause what I call an anticipatory effect. Many current beneficiaries know that they are going to be work-tested in the near future eg people on the DPB had their requirements tightened in October when those with a youngest child aged 5 were brought into the equation. Many know that next year they will be moved onto the new Jobseeker benefit.

People aren't helpless. They think about what having to take any job offered by WINZ might mean and they start looking for themselves. Hence, if they're part of the HLFS survey - the source for the official unemployment rate - they begin to describe themselves differently.

Two groups who have experienced significant increases are Maori and single parents, both disproportionately beneficiaries, so that supports my theory.

There were only 8,000 fewer jobs between the June and September quarters.

So the higher rate is not so much about people losing jobs but more about people becoming available for and seeking work.


S. Beast said...

You're forgetting the manufacturing crisis that continues unabated. It seems every week we are getting news of hundreds of redundancies in manufacturing.

Are DPB/sickness counted as unemployed in the stats? Or just when certain criteria are met (eg Doctors cert says SBene can work over 20 hours a week, or on DPB but youngest child now 14).

Lindsay Mitchell said...
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Lindsay Mitchell said...

S Beast, The unemployment rate is derived from a survey of households.
Whether or not someone on a benefit is counted as unemployed relies on how they describe their circumstances eg are they available for and seeking work.

If you look at the tables attached to the latest HLFS, manufacturing numbers dropped from 175,900 to 174,400 between the Sept 2010 and 2012 quarters. Not that significant.

thor42 said...

"They think about what having to take any job offered by WINZ might mean...."
You mean to say that they don't have to take any job offered by WINZ *now*?
If that's the case then WINZ needs to **harden up** in a big way.