Hanging out each others' washing

As the vast amounts of newspaper ink spilt around the country attests, the primary focus of attention on recent labour market statistics has been on the unemployment rate.

Last week the unemployment rate, as calculated by the Bureau of Statistics, continued upon its typical monthly pogo stick journey by increasing 0.2 percentage points to a seasonally adjusted 5.6 per cent last month.

Naturally two divergent political outtakes have emerged from this result, with the government continuing to draw favourable comparisons between Australia and other Western economies and the opposition warning that the increase is a harbinger for worse to come.

While concerns about the movement in the unemployment rate remains a legitimate concern, given the severe economic and social costs of unemployment faced by the jobless, there is a similarly profound feature of the labour market statistics that are often overlooked in policy discussions.

This concerns trends in the division of employment between the public and private sectors of the economy.

Using industry‑level employment data provided by the ABS, it is possible to demarcate industry employment as being either 'private' or 'public,' on the basis of the extent of government ownership, subsidisation and direct price regulations.

While there is some degree of judgment involved in making these distinctions, aggregate public sector employment can be calculated as including those employed in public administration and safety, education and training, health care and social assistance, arts and recreation, and utilities.

The private sector employment classification includes some key industries in the Australian economy, such as agriculture, mining, manufacturing, construction, retail and major services.

Using the ABS statistical series from 2000, when most of the privatisation efforts of the 1980s and 1990s had been completed, it can be shown that employment in the private sector is considerably greater than in the public sector however the jobs dominance of the private sector has receded.

In February 2000 for every public sector job there were 3.2 private sector jobs, however by February 2013 this has shrunk to 2.5 private sector jobs for each public sector job.

In other words, most of the jobs growth in recent years has been concentrated in industries dominated by public sector financing and output provision.

From February 2000 to February 2013 the overall growth of private sector employment was in the order of 20 per cent, which was exceeded by public sector employment growth of about 60 per cent over the same period.