FactCheck: does Western Australia have the highest unemployment in the country?

AuthorsRebecca Cassells, Principal Research Fellow
Published9 March 2017

Rebecca Cassells, Curtin University

It is true the Liberals and Nationals have … created the highest unemployment in the country in Western Australia, higher than Tasmania, higher than South Australia… – West Australian Labor leader Mark McGowan, interviewed on Radio National, March 6, 2017.

Mark McGowan on RN Breakfast, March 6, 2017. Quote begins at 1:20.
ABC RN Breakfast6.89 MB (download)

In the lead-up to the March 11 state election, Western Australian Labor leader Mark McGowan said the state has the highest unemployment rate in Australia. Is that correct?

Checking the source

When asked for sources to support his statement, a spokeswoman for McGowan said by email:

The first source is the Australian Bureau of Statistics stats for January (most recent) – below is the table on their summary page showing WA as the highest on a seasonally adjusted basis. In addition we had The West [Australian] citing the same stats here.


Let’s take a closer look at what those numbers really mean.

Who is counted in the unemployment rate?

The Australian Bureau of Statistics (ABS) considers a person to be unemployed if they were aged 15 years and over and were not employed during the labour force survey reference week, and:

  • had actively looked for full-time or part-time work at any time in the four weeks up to the end of the reference week and were available for work in the reference week; or
  • were waiting to start a new job within four weeks from the end of the reference week and could have started in the reference week if the job had been available then.

The unemployment rate is the number of unemployed persons expressed as a percentage of the labour force. This is a reasonable indicator of the overall health of the labour market and economy.

The ABS collects labour force statistics on a monthly basis, but adjustments are made to these estimates to take into account seasonality and previous trends.

Is Western Australia’s unemployment rate the highest in the country?

The most recent Australian Bureau of Statistics labour force monthly figures show that, when using the seasonally adjusted metrics, the unemployment rate is the highest for Western Australia at 6.5%. This is closely followed by South Australia at 6.4%. These figures support the claim that unemployment is the highest for Western Australia.

However, when using trend estimates, the unemployment rate is marginally higher in South Australia: 6.7% compared to 6.6%.

Trend figures are typically more reliable than seasonally adjusted figures. And – as with all labour market statistics produced by the ABS – there is a degree of statistical error in such estimates because the figures are based on survey data.

Overall, there’s very little difference between first and second place in the unemployment ranks, with only 0.1 (rounded) of a percentage point difference between the two states using either metric.

The unemployment rate for Western Australia is higher than Tasmania’s unemployment rate, as McGowan said.



The Conversation/ABS – Labour force, January 2017, CC BY-ND

Recent unemployment trends

Unemployment rates typically follow economic cycles. When the economy is doing well, unemployment is low. When the economy is flagging, unemployment will begin to rise.

Unemployment rates and other labour market indicators such as labour force participation and employment rates will also be affected by the population composition of an area and any changes in this composition.

Changes in the unemployment rate across Australia’s states and territories over the last 15-plus years demonstrate that these largely follow the economic cycle (Figure 2).
Over the course of the mining boom, unemployment rates decreased, falling to a low of 2.7% in Western Australia and 4.2% nationally.

In the wake of the global financial crisis, unemployment rates begin to rise again after a short reprieve in 2009 and 2010. Since this point, unemployment rates for all states and territories have been on an upward trajectory.

Comparing 2012 with the most recent figures, the unemployment rate in Western Australia has risen most sharply across all states and territories – from the lowest rate alongside ACT in 2012 to the current highest rate alongside South Australia.

Over the same period, the unemployment rate in NSW has fallen, while in Tasmania and Victoria the rate initially climbed before returning to around the same level.


Figure 2: Unemployment rate, Jan 2000 – Jan 2017, trend estimates.
ABS Labour Force Statistics, Jan 2017, Cat No.6202.0

It is less clear to what degree the state government in Western Australia has helped “create” the current labour market conditions being experienced in that state. (McGowan’s full quote was: “It is true the Liberals and Nationals have wrecked the state’s finances, and have created the highest unemployment in the country in Western Australia, higher than Tasmania, higher than South Australia…”, but checking the claim about the state’s finances is a separate and bigger question beyond the scope of this FactCheck, which has focused only on employment.)

As I explained in this previous FactCheck, a government’s influence over the labour market is constrained by what is happening in the wider global economy. Taking credit for jobs growth, or laying blame when the unemployment rate goes up, is valid only to a certain degree.

Verdict

McGowan’s statement that “the highest unemployment in the country [is] in Western Australia, higher than Tasmania, higher than South Australia” is correct when based on the most recent seasonally adjusted figures from the Australian Bureau of Statistics.

Trend estimates are typically a better data source to use and show that South Australia is marginally higher than Western Australia. However, there is very little difference.

It is less clear to what degree the current state government helped “create” this situation. Western Australia’s unemployment rate has been increasing since the global financial crisis. A similar pattern is seen across most Australian states and territories.

Since 2012, WA’s unemployment rate has risen at a faster pace than other states and territories, from the lowest in 2012 alongside ACT to the highest now alongside South Australia.

Changes in the population composition of the state along with the economic cycle are likely to be driving these trends. – Rebecca Cassells


Review

This is a sound FactCheck. It notes that the Australian Bureau of Statistics provides more than one measure of the unemployment rate. While Western Australia has the highest state unemployment rate in January 2017 on a seasonally adjusted basis, South Australia has a higher trend estimate. It is less clear, however, that the trend estimate is considered more reliable than the seasonally adjusted estimate, particularly for the most recent month of reported figures.

I agree with the caveat that it is less clear that the current state government helped “create” this situation. The potential for state governments to influence the overall state of the economy in the short term is very much constrained.

I would stress even more that the unemployment measures provided each month by the ABS are only estimates, based on surveyed samples of individuals, not the whole population. State unemployment rates in particular are quite volatile month to month, with changes up and down of 0.3-0.4 percentage points quite common. Differences in unemployment rates between states of 0.1 percentage points in any specific month are not particularly informative. – Michael Coelli


Have you ever seen a “fact” worth checking? The Conversation’s FactCheck asks academic experts to test claims and see how true they are. We then ask a second academic to review an anonymous copy of the article. You can request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.

Rebecca Cassells, Associate Professor, Curtin University

This article was originally published on The Conversation. Read the original article.