City and State:


Economic Analysis


            Unemployment is a macroeconomic occurrence that influences the lives of people all over the world. Every country in the world has a portion of its citizen that remains unemployed even when the economy improves. This is especially the case for countries in the third world where unemployment rates are as high as forty percent in some states. This high unemployment has many negative effects on a country, as it renders people unable to sustain themselves and their families and forces them to depend on government welfare. The economic crisis of the late 2000s affected the developed world and damaged their economies significantly. One of the effects of the crisis was widespread unemployment that even affected people with high academic qualifications and years of experience. Australia was of the countries affected by the economic downturn. After the economic crisis struck in the late 2000s, the government and private sector struggled to create enough jobs for the labor force in the country. As the workforce grew in size, opportunities continued to decrease and analysts claim that this trend is continuing in 2014. This condition makes Australia’s future look bleak. However, a holistic approach in the analysis of Australia’s unemployment rate reveals that the future may not be as bleak as it appears to be.

Unemployment in Australia

            In February 2014, the government of Australia announced that Australia had an unemployment rate of six percent (Jericho, 2014). A comparison of this unemployment rate with other countries and economic groups implies that Australia is doing well. The six percent unemployment rate was lower than the average for OECD (Organization for Economic Cooperation and Development), G7 and EU (European Union) states. It was also more than a point lower than the rates found in the UK and the US (Short-Term Labour Market Statistics: Harmonised Unemployment Rates 2014). However, analysts were quick to point out that there was still a cause for concern despite the low unemployment rate in the state. Greg Jericho (2014) points out that six percent was Australia’s unemployment rate in 2003, ten years ago. The difference, however, is that the rate was going down in 2003 while the current situation has it going up.

            An analysis of Australia’s unemployment rate over the past five years shows that the situation has been bleak. The rate of unemployment in the country had been in a steady decline until reaching a nadir of four percent in 2008. After the economic crisis struck, the rate started to go up. Apart from a brief respite between 2009 and 2011, the rate of unemployment in Australia has been increasing steadily since mid-2008. The recent announcement by the government is a stark indicator of the condition in the country as it shows that the condition has regressed to a situation that was last seen in 2003 (Jericho, 2014).

            Even more worrying for Australia is the fact that the nation’s labour force is growing much faster than the rate of employment. According to Jericho (2014), the rate of unemployment does not relay the whole image by itself. Accordingly, it is necessary to look at how many jobs the Australian economy is creating each year and compare them to the number of people entering the nation’s labour force every year. Between February 2003 and October 2008, the Australian economy was able to generate enough jobs to satisfy the demands of the growing labour force (Jericho, 2014). This situation reached its peak in March 2007 when employment in Australia was growing by 3.19 percent, while the labour force was growing by a rate of 2.64. This meant that the government was at that time able to create more jobs than the people needed. However, the rate of employment in the country has declined to a low of 0.3, meaning that Australia is struggling to make enough jobs (Jericho, 2014). This implies that the unemployment rate in the country will continue to rise as the entire world recovers from the recent economic crisis.

Macroeconomic Analysis of the Situation

            From a macroeconomic point of view, unemployment is a problem that encompasses various theories and concepts. An analysis of unemployment normally takes into account issues such as the country’s GDP (gross domestic product), labour force and economic growth. While Jericho’s analysis of Australia’s employment considered many of these factors, it failed to account for some concepts that are likely to have changed the figures. These concepts add new dimensions to the analysis of Australia’s unemployment as they consider issues such as cyclical and frictional unemployment.

            One of the reasons why Australia’s unemployment rate may have seemed so high was the transitioning of workers from one job to another. Mankiw (2012, p. 305) acknowledges the fact that workers have their own preferences when it comes to work and that the job opportunities that an economy generates require certain skills and abilities. Additionally, issues such as geography, the flow of information and availability complicate the process of looking for a new job. Because of these factors, workers who are trying to transition from one job or position to another may spend a lot of time trying to find work. The joblessness that results from the prolonged transition period is called frictional unemployment (Mankiw 2012, P. 305). The main idea in the concept of frictional unemployment is that workers take some time trying to find new jobs. This contributes to the national unemployment rate but does not truly reflect their status or the conditions in which they are. For some workers, unemployment may be prolonged as they seek to find jobs that satisfy their demands. Others may remain unemployed because they are unwilling to settle for jobs with certain wages. Whatever the case, frictional unemployment implies that a significant percentage of jobless workers within every labour force, are unemployed due to their own volition. 

            Another issue that Jericho should have considered in his analysis was cyclical unemployment. Miller (2005) refers to cyclical unemployment as a situation that sees people rendered jobless because of the fluctuations in the economy. As a nation’s economy goes through various highs and lows, people will become unemployed. This kind of unemployment is usually beyond the worker’s control and normally goes away with time (Miller 2005, p. 181). During the economic lows, many people have trouble finding meaningful work, a situation that is reversed when the economy rises again. Edge (n.d.) explains that Australia has become susceptible to cyclical unemployment in the past two decades. The nation experienced mining booms between 2001 and 2007. These booms are likely to have resulted in many employment opportunities for workers and are most likely the reason behind the nation’s steady decline in unemployment during the first decade of the 21st century. The late 2000s economic crisis then followed the mining booms and reversed some of the gains that the economy had made. During the period, aggregate demand in the country fell to a low point and was paralleled by a decline in the demand for labour (Edge n.d.). Accordingly, the cyclical unemployment increased. The fact that the nation is still recovering from the crisis means that the cyclical unemployment may not have completely passed. It is possible that the increasing unemployment in Australia will pass as the nation pulls itself out of the economic rut it was in.


            Unemployment is one of the key issues that economists look at when analyzing the economic situation in a country. Unemployment rates normally serve as good indicators of the direction in which an economy is heading and the way that it is benefiting the residents of a country. For Australia, unemployment has been on the rise since 2008 and the rate of six percent that the prime minister announced in February was the highest in the nation since 2003. Even though a shallow analysis implies that the nation is doing badly, a consideration of mitigating factors such as cyclical and frictional unemployment shows that the situation may not be as bleak as it seems.


Edge, K n.d., Economic issues in the Australian economy, NSW HSC, viewed 13 May 2014, <>

Jericho, G 2014, Unemployment rate same as 10 years ago, but what lies ahead is a worry, The Guardian, viewed 13 May 2014, <>

Mankiw, NG 2003, Macroeconomics, Worth Publishers, New York.

Mankiw, NG 2012, Principles of macroeconomics, Cengage Learning, Mason.

Miller, RL 2005, Understanding modern economics, Pearson Higher Education, Harlow.

Short-Term Labour Market Statistics: Harmonised Unemployment Rates 2014, OECD StatExtracts, viewed 13 May 2014, <>

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