Job Growth: Australia vs. the U.S.

I wish I had been at the press conference for President George W. Bush and Australia’s Prime Minister John Howard at the White House last week. I would have liked to pose this question: “Prime Minister. Why is your country producing new jobs so much faster than the U.S. is producing them?

The prime minister might have found the question awkward. On one hand he ought to be pleased to have a chance to brag a little about how his economic policies have brought remarkable prosperity to his country. At the same time, it might have been embarrassing to the man standing beside him.

The economies of Australia and the U.S are remarkably similar. The unemployment rate at 5% is identical. Both economics are growing at a comparably respectable clip. Conservative politicians dedicated to free-market principles are in power in both places. The only difference is that the U.S. population of 295 million is about 15 times larger than Australia’s 20 million.

In June the Australian economy created 41,700 new jobs. Taking into account population differences, this is roughly equivalent to the U.S. economy creating 625,000 jobs. The actual figure was 146,000. In other words, Australia created four times as many new jobs on a per capita basis.

This was not a one-month anomaly. In the past ten months Australia gained 362,000 new jobs, or the equivalent, when population disparity is taken into account, of 5,400,000 jobs. In the same period the U.S. created about 2 million jobs. Thus Australia job growth is at least double that of the U.S.

Here are some figures to chew on. The first column is new job creation in the U.S., month by month. The second is new jobs in Australia, month by month, weighted by population differences (multiplying by 15) with the absolute figures in parentheses.

Job growth in the U.S.

Jun 146,000
May 104,000
Apr 292,000
Mar 122,000
Feb 300,000
Jan 411,000
Dec 155,000
Nov 132,000
Oct 282,000
Sep 130,000
Aug 188,000
Jul 83,000

Source: Bureau of Labor Statistics


Job Growth in Australia

Jun 625,000 (41,700)
May 210,000 (14,000)
Apr 103,500 ( 6,900)
Mar 867,000 (57,800)
Feb 300,000 (20,000)
Jan 667,500 (44,500)
Dec 435,000 (29,000)
Nov 367,000 (24,500)
Oct 655,500 (43,700)
Sep 952,000 (63,500)
Aug 99,000 ( 6,600)
Jul 324,000 (21,600)

Sources: Asia Cable; Australian Bureau of Statistics


Not even the Australians seem to understand why their economy is performing so well. “Unbelievable,” said Tom Kenny, a senior economist with Nomura Research Institute, as quoted by CNN about the June figures. One has to assume that that Australia is benefitting from China’s voracious appetite for resources.

Australia has recently ratified multi-billion dollar gas and coal deals with China and is currently negotiating a free-trade agreement. Indeed, Canberra’s burgeoning trade relationship with Beijing is a matter of concern in Washington, since it brings up the question of how reliable it would be should a confrontation over Taiwan should occur.

Australia’s Foreign Minister Graham Downey recently said words that cast doubt on whether the ANZUS pact would apply to Taiwan. I would imagine that this subject occupied more of the discussion between Howard and Bush behind closed doors than they let on during a press conference dominated by questions about Iraq.

The relatively weak pace of employment growth in the U.S. has been subject of some concern to those who pay close attention to the economy. For a while it became an issue in last year’s presidential campaign, but it never seemed to gain much traction, perhaps because the numbers have little meaning for most people by themselves. That’s why Australia adds a useful perspective.

But job growth has fallen out of the American discourse of late. From time to time, Paul Krugman gives the subject some thought, as he did in his recent New York Times column earlier, entitled “The Job Market’s Puzzle.” He seemed to be arguing that unemployment is worse than the official figures would suggest.

Berkeley professor J. Bradford DeLong writes on his website: “As I often say, the pattern of long-term unemployment, labor payroll employment numbers and the behavior of weekly hours all suggest a weak labor market with considerable slack and unused labor resources. Only the unemployment rate [5%] tells a different story. Why the unemployment rate tells a different story remains a great mystery.”

Again, one clue to the mystery might be found in Australia. In June the Australian work forced topped 10 million for the first time. Since the country’s population is 20.2 million, this means that 49.5% of the population is employed.

Applying that same percentage to the U.S. population of 295 million would produce a work force of 146 million, yet the actual size closer to 133 million. That leaves about 12 million people seemingly unaccounted for. Are they the ones who constitute the “slack?”

Of course, there may be many reasons why the Australian economy is performing better in this field, from demographics to structural reasons. I am not a skilled economist and wade into the field of statistics with some trepidation. Still they must be doing something right.

AUSTRALIA SUPPORTS UNSC EXPANSION

It has been reported that Australia will vote to support Japan’s proposal to expand the U.N. Security Council from 15 to 25 members, adding six permanent members that include Japan, Germany, India and Brazil. Thus, Canberra breaks with Washington, which opposes the proposal, while, of course, earning points with Tokyo and New Delhi. The vote probably will be held before the end of July.