Recession pain hits jobs first, long before official GDP figures confirm it
Economists argue unemployment is a better early warning of recession than the official two-quarter GDP contraction measure.
When a recession hits, it is felt first in the jobs market, not in economic growth figures. The early 1990s downturn taught this lesson: unemployment soared to more than 11 per cent but economists insisted no recession existed because GDP had not yet contracted for two consecutive quarters.
By the time the official figures caught up, damage was done. For a decade afterward, workers who left school or university struggled to find jobs.
Reserve Bank governor Michele Bullock recently conceded a recession is possible if inflation spirals out of control. Right now, unemployment sits at just 4.6 per cent, up from 3.5 per cent during the pandemic but still historically low.
The RBA believes the jobless rate can rise without mass lay-offs, but history suggests otherwise. When money is tight and consumer spending falls, companies cut staff fast.
- over 11 per cent
- Early 1990s peak unemployment
- 4.6 per cent
- Current unemployment
- 3.5 per cent
- Unemployment during pandemic
- Michele Bullock
- RBA governor
Why it mattersIf unemployment starts rising noticeably, it signals real economic pain is coming, even if GDP figures seem stable.
AustraliaAustralians watching their job security should track unemployment data closely as a more honest signal of where the economy is heading than official growth statistics.
✓ Claims checked against the source. checked 2 h ago
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