Saturday, August 25

Unemployment payments growing

Payments for the unemployed are growing. Yesterday DEEWR released its payments data for July 2012. From June to July 2012, the number of Newstart recipients rose from 580,807 to 586,745 claimants. An increase of almost 6000 claimants or one per cent. The growth in New South Wales, Victoria, Western Australia and Tasmania was at two per cent or higher.

The positive growth in the number of newstart claimants at this time of the year is seasonally unusual. For example, in the next chart compare the period April to July in 2011 with the same period in 2012.

Not surprisingly, if we apply a seasonal decomposition to the DEEWR data, this growth is showing up as growth in the seasonally adjusted series.

If we add together the Youth Allowance Other and New Start Total payments - we have a rough proxy for the number of people who are unemployed. In raw terms, there is some divergence between the trajectory of this rough proxy and the official ABS count in recent months.

Even comparing the ABS seasonally adjusted series and our seasonally adjusted series for DEEWR we can see some divergence in recent months.

I suspect this divergence deserves a "glass half full" explanation. The ABS seasonally adjusted unemployment count jumped up a bit in July and August 2011. The DEEWR payments data is a typically slower to move than the ABS data. It is only now moving back to its long-term average of some 30,000 claimants above the ABS unemployment series.

To put it bluntly, I am not convinced that this recent increase in unemployment payment claimants presages an increase in the official unemployment rate. The official count of unemployment persons may go up in the future, but the latest DEEWR data is not the smoking gun. The DEEWR data is a lag indicator, not a lead indicator.

For completeness, comparing the official ABS trend with the trend of this rough proxy gives us the following. The lag nature of the DEEWR data is clearly evident around the GFC between 2008 and 2010.

The usual caveats apply: The DEEWR payments data is not consistent over time. From time to time the government changes the eligibility requirements for payments. This means the series suffers from numerous subtle (and occasionally not so subtle) series breaks. At the most extreme, it is possible that conclusions drawn from this data series are spurious.

1 comment:

  1. I wonder if it's possible to establish the contribution of the relaxation in the so-called YA(other) income test from 1 July to this? I imagine it's minor so far, but will presumably have a growing influence.

    There's also going to be a bump up starting in January when the change to parenting payment takes effect (whether the currently in debate version, or the lesser one that's already passed).