Australia vs US unemployment rates: 5.5% in Australia, 3.9% in the US, but Australia’s situation is better than the US

In March, Australia’s unemployment rate was 5.5%, while the US unemployment rate was 3.9% in April.  It would appear that the US jobs situation is better than Australia’s.  However, this is not the case.

I am using the seasonally adjusted US and Australian data here, rather than trend or original data.  US data is from the Bureau of Labor Statistics, and Australian data from the Australian Bureau of Statistics.

In the US, the participation rate (the proportion of all those eligible for work who are looking for a job or have a job) was just 62.8%.  The Australian participation rate was 65.5%.

The employment population ratio in the US (the proportion of those eligible to work who have a job) was 60.3%.  In Australia, it was 61.9%.

If the US participation rate was the same as Australia’s, the US unemployment rate would by about 7.9%, not 3.9%.

A low participation rate makes the bottom line unemployment rate look better than it otherwise would.

The US Bureau of Labor Statistics carries out an establishment survey and a household survey every month.  The unemployment and participation rates are derived from the household survey, but the media’s reports of changes in employment are from the establishment survey, based on reports of employers.

In April, the establishment survey showed 164,000 jobs were created, but the household survey suggested a net gain of just 3,000 jobs.  The drop in unemployment from 4.1% to 3.9% was entirely based on people leaving the workforce – the participation rate and employment population ratio both dropped 0.1% in April.