If you want to know what's happening to employment, there's the hard way and the easy way to find out. But, in any case, can you believe the official figures?
Economists, the markets and the media prefer to do it the hard way, using the "thrills and spills" method. The "seasonally adjusted" figures we got from the Bureau of Statistics this week showed total employment across Australia rose 14,000 last month.
But the previous month it fell 28,000. So, did the economy take off in July having collapsed in June? Maybe, but employment grew 28,000 in May, following growth of 13,000 in April. So, is the economy going up and down like a yo-yo?
Maybe. Last month the unemployment rate fell to 5.2 per cent from 5.3 per cent the previous month. But that was up from 5.1 per cent in May, which was itself up from 5.0 per cent in April. Then again, April was down from 5.2 per cent in March.
Confused? Precisely. The hard way gives you thrills and spills from one month to the next, which makes it hard to work out what's really happening.
The easy way to do it is to take the bureau's advice and look instead at it its "trend" figures. These are the seasonally adjusted figures smoothed out to remove statistical "noise" - unexplained variability that probably doesn't prove anything.
Guess what? The trend figures make it easy to do what we want to do: identify the trend. Is employment going up, down or sideways?
They show that, over the first seven months of this year, employment has been growing at an average rate of 10,000 jobs a month. Is that a lot or a little? Well, it's been sufficient to hold the rate of unemployment virtually unchanged at 5.2 per cent. (Remember, since the labour force keeps growing, we have to create jobs just to hold unemployment steady.)
Is an unemployment rate of 5.2 per cent good or bad? Well, most economists would tell you it's about as good as it gets. They regard the rate of full employment as being about 5 per cent or a little lower.
But here's where the doubts arise in many people's minds. I get more emails from readers querying the reliability of the job figures than any other subject.
"One can't help gain the impression that the definition of employment is being gradually liberalised for political purposes, i.e. to make the figures look more impressive," says one. "An individual is now assessed as being 'employed' if they work just one hour each week," says another.
Many people have a deeply held belief that the way we measure employment and unemployment has been tampered with by governments in recent times to make things appear better than they are.
When unemployment fell to much better levels under the Howard government, this notion used to pop up in the minds of Labor voters. Now Labor's in power it pops up in the minds of Liberal voters.
I don't know where this notion came from, but it's factually wrong. It didn't happen. No government of any colour has changed the way employment and unemployment are measured in the past 30 years. I wrote this when Howard was in power and I'm writing it again now.
One reason the pollies haven't fiddled the figures is that the Bureau of Statistics, which enjoys a high degree of independence of the elected government, would never let them. Had any pollie ever tried to twist the bureau's arm, you'd remember the monumental row this would have created.
No, the definitions the bureau uses are set by international statistical convention. And the convention hasn't changed significantly in many decades. No one has changed the rules.
So, does that mean we can take the official figures as gospel truth? Sorry, life ain't that simple. There's a saying in Canberra: when you're trying to explain something and you face a choice between a stuff-up and a conspiracy, go for the stuff-up every time.
The trouble with the official figures is not that the definition of unemployment has been changed, but that it's unrealistically narrow and always has been. It's true a person is classed as being employed if they work just one hour each week.
Of course, very few people who do work do so for as little as an hour or three. Nor is it correct to imagine everyone working part-time would prefer to have a full-time job. Some would; many - particularly full-time students, the semi-retired and parents looking after young children - wouldn't.
So the real question is: how many part-time workers would prefer to be working more hours than they do? The answer in May this year was 890,000. Note, however, that other figures suggest only a bit over half of those people wanted full-time jobs. The rest (roughly 400,000) were people working part-time who just wanted a few more hours a week.
The 890,000 "under-employed" workers account for 7.4 per cent of the labour force. Add to them the 625,000 workers officially defined as unemployed (the ones giving an unemployment rate of 5.2 per cent) and you get a "labour force underutilisation rate" of 12.6 per cent.
How do I know that? I read it in the same bureau publication (which you can find on its website) that told me this week the official unemployment rate in July was 5.2 per cent. The bureau calculates underemployment every three months, but publishes the figure each month.
I think that, whereas the official unemployment figure understates the true size of the problem, the underutilisation figure overstates it (because part-timers who'd like to work a few more hours a week don't have a big problem). That's why my rule of thumb has long been that to get a more realistic idea of the extent of unemployment you should take the official figure and double it.
But if you're trying to get at the truth (as opposed to trying to prove the political party you hate is doing a terrible job), remember two points. First, if you double today's unemployment rate you should double all the earlier rates you compare it with.
Second, remember the trajectory of the higher figure should move pretty much in line with that of the lower figure. So if the official unemployment figure is stable, it's reasonable to assume the more realistic figure is too.
