Unemployment figures do not lie but certainly confuse

Unemployment figures do not lie but certainly confuse
Kieran Madden

Auckland, August 14, 2020

“Lies, damn lies, and statistics,” so the saying goes.

Statistics New Zealand’s release of this June’s unemployment figures was not a lie, but it certainly was confusing.

Amidst the job-destroying pandemic, somehow, unemployment had dropped from last quarter’s 4.2% to 4%. The government has been taking the credit, but the reality is more complex. With an election on the horizon and jobs always a key battleground, it’s important we get this straight.

Finance Minister Grant Robertson and Employment Minister Willie Jackson were enthusiastically patting themselves and their government on the back, comparing last week’s figures to Treasury’s budget-time forecast of 8.3%.

Prime Minister Jacinda Ardern was getting in on it too “Our low unemployment rate shows that the wage subsidy scheme has worked to stop a spike in unemployment. And now we have a laser-like focus on jobs and business support to support growth.”

Lower than predictions

Now, a part of the story is the wage subsidies, but they are not the whole story, and spinning it that way is misleading at best. Let us put the laser-like focus onto the unemployment figures. Economists were predicting around the 5% to 6% mark, so why the drop?

There are several criteria that people need to meet to show up in the unemployment stats.

Firstly, and most obviously, they need to be out of a job.

This is where the wage subsidies came in, saving viable jobs and propping up non-viable ones.  Many on subsidies were not working but still counted as employed too.

Secondly, to be considered unemployed, they must be “actively seeking work” during the past four weeks. This criteria is extremely difficult to fulfil during lockdown, and it skewed the figures considerably.

Right response

The wage subsidy did help; they were the right response at the right time. 11,000 people still lost their jobs, however, and the underutilisation rate, broadly those who want to work more, jumped higher than ever before.

The (eight-week extended) subsidy will also end in September.

Statistics New Zealand has since released a “Covid-19 extended unemployment rate” of 4.6%. Jobs figures will get worse over the next quarter, some predicting close to double-figures, but the election will be all over by then.

Disaster for National

Commentator Michael Hooten reckons this is a disaster for National, who were relying on the economy to be a shambles to promise the alternative blue brand of economic management.

Only the last part of their slogan of “Strong Team, More Jobs, Better Economy” remains relevant, he says. The Labour Party is indeed sitting pretty heading into the election, but it should not rely on over-egging stories to stay there.

They did the right things, but claimed more than their fair share of the spoils. 

Whatever happens, we as voters must scrutinise the stories our politicians tell us heading into this election. This example highlights the importance of not talking headline figures at face value.

It is up to us to stay vigilant spend that little extra effort on fact-checking to make sure we have our story straight going into the ballot box.

Kieran Madden is Research Manager at Maxim Institute based in Auckland.

 

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