25 June 2012

Economy still going strong, despite what the media tell you

You might be wondering how the economy can be in such good shape, despite all the media stories to the contrary. And the economy certainly is in good shape.

The latest ABS figures indicate that in the first five months of 2012 the Australian labour market added a total of 116,000 new jobs. Unemployment went up slightly, to 5.1% mainly due to the participation rate increasing by 0.3%.

Real gross domestic product grew by 1.3 per cent in the March quarter and by 4.3 per cent over the year to March. As Treasurer, Wayne Swan, couldn't help himself saying, Australia was 'an island of growth in the middle of global uncertainty'.

I cannot resist rolling out, yet again, my favourite economist, and namesake, Ross Gittins, to explain the reality of economic reporting in Australia to you in his Fairfax Media article of Monday 11 June 2012 Why we can't read the economy without help:
 
'... all the bad news from America and, particularly, Europe we're hearing from the media night after night can't help infecting our views about our economy. We're getting more economic news from China these days but we hear about the threats rather than the opportunities.

The familiar refrain about the alleged two-speed economy is tailor-made for the media but, as last week's figures make clear, an exaggeration of the truth. Consumer spending is reasonably strong in the non-mining states, as is employment growth this year.

The media's highlighting of announced job lay-offs is a classic example of the way their inevitably selective reporting of job movements leaves the public, business people and maybe even economists with a falsely negative impression of the state of the labour market.

A recent list of 25 lay-off announcements showed total job losses of 17,000. When people wonder how the bureau's employment figures could be right when we know so many jobs are being lost, they're showing their ignorance of how selective media reporting is and how big the labour market is.

In a workforce of 11.5 million people, job losses of 17,000 are peanuts (though not, of course, to the individuals involved). Far more than 17,000 workers leave their jobs every month and far more take up jobs every month. The media tell us about just some of the job losses and about virtually none of the job gains.'

 
Highlighting his point about negative impressions last month, Fairfax Media's Australian Financial Review had a story headed Rio gets cracking to add 6,000 recruits and it appeared on ... wait for it ... page 15! Can you imagine the opposite story (Rio axing 6000 workers) would be relegated to page 15? I don't think so.

Balanced media coverage and in-depth analysis of the actual state of the national economy is, sadly, the exception not the rule in the Australian media these days.

2 comments:

  1. Hi Ross,

    You make great points. Unfortunately bad news sells more papers than good news, so our media and politicians (especially those in Opposition) tend to focus on the negative.

    Given that economies grow or contract based on the confidence (or otherwise) of their populations I consider this baseless and ongoing negativity to be nothing short of irresponsible.

    I wrote about the phenomenon myself almost a year ago (see link) and nothing seems to have changed!

    http://www.changingmindset.com.au/2011/08/08/australias-recession-obsession/

    Cheers

    Aaron

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  2. Thanks Ross, this puts the recent axing of jobs at Toyota, Ford and the big banks into perspective. Perhaps clients / companies should be made more aware so that they don't stop hiring - which perpetuates the entire downward spiral. Is it the recruiter's job to educate clients?

    Jeremy

    Twitter - @recruitsmarter

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