Ten years post-GFC we’re still working. That’s the good news| Greg Jericho

It is now a decade since the US sub-prime mortgage crisis started wreaking havoc on the world’s economy, and in that time our economy has changed greatly. While as many workers in their prime-earning years are now employed as was the case in the middle of 2008, where they are working and who is doing that work is very different.

One of the problems with economics is trying to judge how things are going. The unemployment rate used to be a good measure but one clear sign of how poor it can be occurs when you compare our current unemployment rate of 5.5% with the US’s 4.1%:

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Australia & USA unemployment rates

2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%10.0%200720082009201020112012201320142015201620172018

USA

Australia

USA

Australia

Chart: Greg Jericho Source: ABS, BLS Get the data Created with Datawrapper

It would seem we’re doing much worse, whereas I’d take our economy any day of the week.

The main reason the US’s unemployment rate is better than ours is that they have comparatively fewer people in the workforce now, as a percentage of the overall population, than we do – their participation rate has plummeted, whereas ours is almost as high as it ever has been.

A better way to compare the two economies is to look at the employment rates of those in the “prime working age” of 25-54. That removes those young enough to still be expected to be in education, and those old enough to have their employment affected by changes to their retirement prospects.

At the start of 2008, 80% of prime-aged workers in both the US and Australia were working. Because our economy was hit by the GFC later than the US, the level of prime-aged employment here rose to 80.3% in August 2008 before falling.

But in January this year, we finally returned to that 80.3% level. As many Australians in their prime-earning years are employed now as was the case before the GFC. In the US, however, just 79% of the same age workers are employed. That is equivalent to two and half million fewer Americans not working:

Australia & USA: employment to population ratio – 25-54yo

74.0%75.0%76.0%77.0%78.0%79.0%80.0%81.0%20082009201020112012201320142015201620172018

Aus

USA

Aus

USA

Chart: Greg Jericho Source: ABS, FRED Get the data Created with Datawrapper

It highlights why you want to do everything within your power to avoid a recession – they destroy jobs and livelihoods and take a very long time to recover from.

While Australia’s experience in the GFC was nowhere near that in the US, the time it took for the level of prime-aged employment to return to the pre-downturn levels was as bad as in any recession.

After the 1982-83 recession it took 52 months for the prime-aged employment rate to recover, whereas it has taken 113 months for us to get back to the August 2009 levels – that is almost as long as the impact of the 1990s recession:

Change from pre-recession peak of 25-54yo employment rate

-3.5% pts-3% pts-2.5% pts-2% pts-1.5% pts-1% pts-0.5% pts0% pts05111723293541475359657177838995102110118126Months

1982-83

1990s

GFC

Chart: Greg Jericho Source: ABS 6291.0.55.001, Table 1, derived Get the data Created with Datawrapper

The graph clearly shows that the stimulus package worked – it turned things around – and we looked set for a quick return, but then in mid-2011 things went backwards.

You can write your PhD thesis on why this occurred – our non-mining export industries being hit by the value of our dollar reaching US$1.10, the government attempting to get back to surplus too quickly, the RBA failing to cut interest rates (they only began cutting at the end of 2011), or the global economy struggling to recover.

Whatever the case, it meant another six and half years was required to get us back to pre-GFC levels.

But all is now good? Are we back to where we were when things were booming?

Not by a long shot. Our economy has massively changed since then, and that includes who works and what type of work is done.

Over the past decade, the growth in employment among prime-aged workers has been very much women-based, and very much in part-time work:

Change in employment rates since August 2008

TotalFull-time

Created with Raphaël 2.1.2

1.3% pts

45-54 – women

-4.0

-2.0

2.0% pts

-2.2% pts

25-34 – men

1.3% pts

25-34 – women

-0.9% pts

35-44 – men

2.9% pts

35-44 – women

-2.0% pts

45-54 – men

1.3% pts

45-54 – women

Chart: Greg Jericho Source: ABS 6291.0.55.001, Table 1, derived Get the data Created with Datawrapper

Consider that in August 2008, 88.4% of prime-aged men were employed – now it is just 86.7%; whereas back then 72.4% of women aged 25-54 were working, now it is 74.2%.

In effect, since August 2008 the rate of prime-aged men working has fallen by 1.7% points, while it has risen by the same amount for women:

Change in 25-54yo employment rates relative to Aug 2008

-2.5% pts-2.0% pts-1.5% pts-1.0% pts-0.5% pts0.0% pts0.5% pts1.0% pts1.5% pts2006200820102012201420162018BoomperiodGFCPost-GFC

Men

Women

Men

Women

Chart: Greg Jericho Source: ABS 6291.0.55.001, Table 1, derived Get the data Created with Datawrapper

The reason is because of the changing economy.

Over the past 10 years, five of the eight industries with the biggest employment growth have been in industries such as healthcare, accommodation and food services, and education, which have an above-average level of women employed and a below-average level of full-time employment:

Industry employment growth 2008-2017

Highlighted are those with above avge women employment & below avge full-time employment

Growth 2008-2017Breakdown thenBreakdown nowChange in breakdown

Created with Raphaël 2.1.2

20.0

40.0%

Health Care etc

Arts & rec

Prof, Sci & tech

Education

Accom & food

Mining

Construction

Admin & support

Other Services

Public Admin

Transport etc

Electricity, Gas etc

Real Estate etc

Retail Trade

Finance

Info media & telco

Wholesale Trade

Agriculture

Manufacturing

Chart: Greg Jericho Source: ABS 6291.0.55.003, Table 4 & 6, derived Get the data Created with Datawrapper

But there has also been big differences in age of the workforce.

A good, quick guide for judging how well the economy is doing is looking at the employment rates of younger workers. They are always the first retrenched in slow periods and the last to be re-hired when the going gets good.

Since early 2008, the rates of 15 to 24-year-olds employed has fallen from a high of 65.1% to the current level of 59%:

Employment to population ratio of 15-24 year olds

55.0%56.0%57.0%58.0%59.0%60.0%61.0%62.0%63.0%64.0%65.0%19801985199019952000200520102015

Employment to population ratio

Chart: Greg Jericho Source: ABS 6202.0, Table 13, derived Get the data Created with Datawrapper

By contrast, since the GFC, older workers have been staying in work longer than in the past – both overall and in full-time employment – possibly as a result of concerns about the ability to afford to retire, as well as a long-term trend of older workers remaining in work as the baby boomer generation has neared retirement age.

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Change in employment rates since Aug 2008

15-24; 65+ are trend figures, 55-64 are rolling 12 mth avge of original data

TotalFull-time

Created with Raphaël 2.1.2

4.51% pts

65+ – women

-10

-5

5% pts

-7.14% pts

15-24 – men

-3.58% pts

15-24 – women

4.36% pts

55-64 – men

9.43% pts

55-64 – women

2.87% pts

65+ – men

4.51% pts

65+ – women

Chart: Greg Jericho Source: ABS 6202.0, 6291.0.55.001, derived Get the data Created with Datawrapper

The past 10 years have seen great changes in our economy. While as many people aged 25 to 54 work now as did then, fewer men do, and much fewer men work full-time. The decade has also seen jobs for younger workers disappear and not return, while older workers have stayed in the workforce longer than in the past.

It’s a combination that makes for low wages growth and a lot of spare capacity as workers seek more hours in industries that are historically lower-paid..