We are heading into worrying territory for jobs: Gottliebsen

Fasten your seat belts. Unemployment is set to skyrocket and that will cause the Reserve Bank to slash interest rates, weaken the dwelling market in many areas and change the debate between Julia Gillard and Tony Abbott.

Alan Kohler last month forecast that the official unemployment statistics would show unemployment rising to 6%. At the weekend, Roy Morgan Research reported a big jump in unemployment during January.

Almost certainly that will be reflected in the official figures when they are released later this month. Morgan uses a different method to calculate unemployment to the statisticians and Morgan’s December unemployment was 8.6%, compared with the statisticians’ 5.2%.

But now Morgan estimates that January unemployment has skyrocketed from 8.6 to 10.3% – the highest level since Morgan began calculating unemployment.

There is no doubt there are seasonal issues as those leaving tertiary education try to join the labour force. They are usually not employed until February or later months. A rise of the proportion shown by Morgan reflects much greater forces than seasonal influences and in 2012 it will be much harder for students to gain employment than in 2011.

The Morgan trend will be picked up by the statistician either in January or February. Employers have been hanging onto staff, hoping for a miracle, but they are now shedding staff and many of those who are not are frightened to hire because of the rising dollar and the greater risks in employment created by the industrial relations laws.

Of course, the higher unemployment has not stopped a vigorous push for higher wages in industries where unions either have great power or believe their power can be restored. Accordingly, the unions with bargaining power are focusing on government employment and the mining industry.

The other higher wages push comes from Fair Work Australia, which has not yet understood what is happening in the real world. There is no doubt the higher unemployment trends will cause the Reserve Bank to lower interest rates by half a per cent in the next few moths. They will probably make their first move this week but it is always possible they will wait a month until the official unemployment figures come out.

In theory, higher unemployment should be a disaster for Julia Gillard. But she has had long talks with US President Barack Obama on this matter. Obama is fostering US manufacturing and Julia Gillard is looking at similar strategies in Australia, as we saw with the motor industry. Tony Abbott will be seen to be putting at risk tens of thousands of auto industry jobs.

Our problem in Australia is that in fostering US manufacturing, Obama is dealing with industries that have became very efficient. That is not always the case in Australia. And Julia Gillard will have to cope with the unemployment consequences of the carbon tax.

This article first appeared on Business Spectator.