Tag Archives: RBA

Unemployment Forward Estimate

Estimate of Unemployment

Estimate of Unemployment

With the unemployment figures steady for the last three months and the fiscal policy adopted by the Australian government given almost universal plaudit in saving jobs I thought I would try my hand at estimating whether unemployment will rise or fall in the coming months.

I should preface my comments with I have no knowledge in statistics or trend line regression that I attempt in this scenario.  It is all just a best guess I could be using a completely inappropriate process and be totally wrong.

Above we have unemployment statistics as recorded by the RBA to a line graph and a third order polynomial regression trend line attempting to forecast six months into the future.

In the graph above we see the trend line just above 5.8% in September at 5.9% as estimated by a product called Engauge1. It stays stable at that throughout October and November before falling in December back to a trend of 5.8%, 5.7% in January, 5.5% in February and 5.2% in March.

Using this analysis, suggests that Unemployment could begin to fall rapidly as early as December.

UPDATE:

It looks like I am going to have two bites of the cheesecake on this one.  I mistakenly placed 5.8% in the September 2009 unemployment figures when that figure is true only for August 2009 at this stage.  We will find out at 11.30am on the 8th of October whether this figure also holds true for September.  If it does the above estimate analysis should hold true.

However, since I erroneously placed some non-existent data into the original analysis, let us reassess with the correct data.

RuddUnEmploy

Using the same techniques as described above, the trend line sneaks up to 6% in October and stays steady until about February where it begins to fall, first to 5.9% and then to 5.7% in March.

Assuming these estimates are even remotely done correctly, unemployment should begin to fall in either December 2009 or February 2010.

Either way unemployment should be falling by the end of the third quarter in the 2009/2010 financial year.

1 Another product brought to you by the Stubborn Mule.

The Great Recession

On my Essays page I have a link to the then ANZ economist Saul Eslake post called “The Truth about Recessions & Depressions”, it is almost required reading for this post.

The media and the public generally poorly define what is actual meant by a recession.  The popular definition being two quarters of negative growth.  Some call it a technical recession.  This is an inaccurate definition.

Saul Eslake goes on to say:

Defining a recession as any period during which the unemployment rises by more than 1½ percentage points in 12 months accurately identifies all of the designated recessions in the US since 1945, without giving any ‘false signals’.

This rule also accurately delineates the five genuine recessions Australia has had in the last 50 years (in 1961, 1974-75, 1982-83 and 1990-91) without giving any ‘false signals’ – unlike the ‘consecutive quarters of negative GDP growth’ rule of thumb.

The unemployment rate for July 2008 was 4.3% according to statistics found on the Reserve Bank of Australia website.

According to the ABC, the unemployment rate for July this year is listed as 5.8%

Australia has, in fact, been in recession since March using the unemployment figures.

So despite popular reports by the media, the Australian, Bloomberg, BBC, Alan Kohler, and the ABC, AUSTRALIA IS IN A RECESSION!