The employment reports for the US show a chronically dismal state of affairs for US workers and those currently unemployed. And this despite a recent upturn in job creation and a near 2 percentage point fall in the unemployment rate in the last couple of years.
In the latest data released Friday, the US labour force was 154.707 million people and of those, were 8.2% or 12.673 million people were unemployed. The workforce participation rate was 63.8%.
Australia has a labour force of 12.076 million people, the unemployment rate is 5.2% or 632,000 people and the workforce participation rate is 65.2%.
Let slice and dice these numbers to show some what I think are staggering contrasts between the economies and labour markets of the US and Australia.
If the US had Australia’s participation and unemployment rates; there would be an extra 3.47 million people in the labour force: the number of people unemployed would be 4.45 million people lower and the level of employment would be around 7.9 million people higher.
If we apply the US labour force participation and unemployment rates to Australia, the level of employment in Australia would be a staggering 611,000 lower, the number of people unemployed would be 990,000 or some 358,000 more than currently registered.
And don’t forget there has been a quite substantial improvement in the US labour market in the last 2 years or so with employment growing at a reasonable pace and the unemployment rate falling from a peak rate of 10%.
There are many issues that fall out from this contrast. Here are a few.
Most importantly is the importance of economic growth. Keep growing the economy and employment will remain resilient. The stimulus during the GFC in Australia worked a treat, it kept the economy growing and supported employment.
Also important is a smashing of the notion of the benefits of US style labour market flexibility. To be sure, the US labour market has more flexibility than in Australia, much more, but look at the cost. Flexibility to sack people and cut wages delivers flexibility to default on mortgages, to stop spending and to undermine productivity. There is also a paper in the offing for those wanting to look at the “dreadfully inefficient, high cost” German workforce and compare it with the US at the moment.
It all goes to show that Australia continues to be a shining light in the global economy, despite the recent bout of RBA induced growth under-performance.