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Australian 2012 Unemployment Data

A Second Look (Seasonally Adjusted)

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Riots in Canberra, Jan 26, 2012

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Table of Contents
No. 1. 2. 3. 4. 5. 6. Topic Abstract Introduction to the Analysis Discussion of 2012 Unemployment data Empirical evidence for the work function in the Australian economy Summary and Conclusions Appendix I: Extending Einsteins work function beyond physics Page No. 3 4 7 15 18 20

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1. Abstract
The most recent Australian monthly unemployment data, from January 2012 to June 2012, is reviewed here critically. It is shown that, in spite of the apparently chaotic month-to-month variations in the labor force x and the number of unemployed y, the universal law y = hx + c = h(x x0) still applies. Ignoring chronological order, the number of unemployed y can be shown to increase as the labor force increases x, if we consider only the Jan 2012 to June 2012 data. Furthermore, the highest slope h 0.27 established early in 2010 is also the slope h now observed in 2012. A high value for the slope h implies a high rate of increase of the unemployed with increasing labor force, a situation that cannot be sustained. The unemployment levels thus drop and the economy essentially exhibits what may be called a sideways movement (on the x-y unemployment diagram), with the unemployment levels growing at a much lower rate with increasing labor force, until its starts increasing again, on a new parallel to the original line (with a lower work function c and a higher cut-off labor force x0), as it is in recent months in 2012. Although the values of h and c can be deduced from the limited amount of data here, these do not represent the true values of the constants h and c. This should be fixed only after reviewing all of the historical unemployment data (as was done for the US economy) to see how unemployment levels varied at critical times, such periods of very high (or very low) unemployment.

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2. Introduction to the Analysis


A new methodology for analyzing unemployment statistics has been described in three recent companion articles see links given below. 1. http://www.scribd.com/doc/99647215/The-US-Unemployment-Rate-Whathappened-in-the-Obama-years Published July 10, 2012. Obama years. 2. http://www.scribd.com/doc/99857981/The-Highest-US-UnemploymentRates-Obama-years-compared-with-historic-highs-in-Unemployment-levels Published July 12, 2012. All US historical data (1941-2012) 3. http://www.scribd.com/doc/100500017/A-First-Look-at-AustralianUnemployment-Statistics-A-New-Methodology-for-AnalyzingUnemployment-Data, Published July 19, 2012. Recent Australian data (Jan 2011-June 2012). The main purpose here is to discuss the significance of this new methodology, much more critically, by taking a second look at the most recent Australian unemployment data, which has already been discussed in Ref. [3]. The familiar unemployment rate is the ratio y/x where the numerator y is the number of unemployed persons and the denominator x is the labor force, which is the sum of the employed and the unemployed. The focus in all unemployment studies has generally been on the ratio y/x and how it varies with time. In other words, the chronological ordering of the (x, y) pairs is of great significance. However, as discussed in the articles just cited, a careful study shows that a simple linear law, y = hx + c, relates the labor force x and the number of unemployed y. The numerical values of the constants h and c can be readily deduced from the empirical (x, y) observations on the economy. The fundamental significance of this universal law is most eloquently revealed if we consider all of the available historical (annual) unemployment data for the US (1941-2012). There were three periods when the unemployment levels were the highest for that era, in 1941, in 1982 and 1983, and in the most recent period 2009-2011. The data is summarized in Table 1 below for convenience.
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Table 1: The highest US unemployment levels on record


Year Labor force, x Unemployed, y (millions) (millions) 55.91 5.56 1941 110.204 10.678 1982 153.889 14.825 2010 Data Source: http://www.bls.gov/cps/cpsa2011.pdf

The labor force x, which simply is the total number of people in the population who are employed or actively seeking employment (if unemployed), Countries with very low usually increases as a function of time, especially birth rates (e.g. some over a long period, such as the 70+ years being European nations) and considered above. This is a natural law (see box) those with aging populations (Japan), or although we do see the labor force decreasing (with countries with large time) under extraordinary circumstances when the influx of guest workers economy is facing a severe crisis and the long term (in Middle East) need unemployed, or discouraged workers, essentially more careful study and stop looking for work and so are no longer in the might provide some labor force. This was observed in 2009 during the interesting exceptions to first year of the Obama Presidency, see Ref.[1], in this natural law. the aftermath of the financial meltdown witnessed just before the US Presidential election in November 2008. Barring such extraordinary circumstances, and if we consider the longer terms effects, the labor force usually increases with time because of the natural increase in the population. What is truly amazing is the PERFECTLY linear relation between x and y that is observed if we consider the three unique (x, y) pairs above for the US economy. On a x-y diagram, all three points above, lets call them A, B, and C, can be shown to lie on a PERFECT straight line, see Figure 4 in Ref.[2]. This is readily seen by determining the slopes h = y/x between A and B, B and C, and A and C. All three slopes can be shown to be virtually identical differing only in the fourth decimal and are h = 0.0943, 0.0949, 0.0946. Thus, it appears that we have discovered a universal constant h, akin to other universal constants of nature
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observed in the sciences such as physics or chemistry. This is a fundamental property of the US economy. When the US unemployment level reached its then record value of 5.56 million in 1941 (the US Bureau of Labor Statistics does not provide data for earlier years, see link given above) and started decreasing and then increasing again reaching the next highest level in 1982 and 1983, unbeknownst to us, it returned to a new high which was related to the 1941 level by a simple linear law. (The data for the highest unemployed years can be shown to separate itself clearly on the x-y unemployment diagrams provided in Ref. [2].) The existence of such a simple linear law was, however, never suspected, nor could it have been confirmed or speculated about, without the most recent observation for 2010, following the severe jobs crisis now being felt in the USA. It is the appearance of the third point C, the (x, y) pair for 2010, exactly on the extension of the line joining the first two points A and B, that lends credence and fundamental significance to the postulate that we may be witnessing, in the workings of the US economy, something like a universal constant of nature, something that we expect to find only in the hard sciences such as physics and chemistry, not in economics, which has often been dubbed as the dismal science. The slope h = 0.0946 for the line joining the 1941 and 2010 data can be taken to be a universal constant and all of the unemployment data can thus be explained by simply envisioning a series of parallels, with the general equation y = hx + c, with h = 0.0946 and various values of the intercept c sweeping through the data. Indeed, the various x-y diagrams provided in Ref. [2] confirm this line of reasoning - see, for example Figure 7 in Ref. [2]. The universal law y = hx + c = h(x x0), deduced from such specialized empirical observations also implies the existence of a cut-off labor force, x0 = - c/h, below which the number of unemployed will go to zero. The law can therefore be compared to Einsteins photoelectric law, K = E W = hf W = h(f f0). This is a striking and compelling analogy. Einstein proposed this remarkably simple law in 1905 to explain certain puzzling aspects of the phenomenon called the photoelectric effect which engaged the attention of physicists of the late 19th century and early 20th century. A brief
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discussion of this point may be found in Appendix I and in the two additional articles cited at the end of Appendix 1 where we consider the application of a similar simple linear law y= hx + c to describe the profits and revenues relation for a company. Now x is revenues and y is profits. Again, there is a cut-off revenue below which no profits are produced by a company. Returning now to the discussion of the Australian economy, the universal law y = hx + c, as just noted implies that the unemployment level y increases as the labor force x increases. This is what we observed with the US economy, under the most extraordinary conditions, during three unique periods in its history between 1941 and 1982 and 2010. When the labor force was low, unemployment levels were lower, although they were the highest for those periods. How does this law manifest itself under other circumstances, such as with the Australian economy in 2012 and 2011? Dire warnings of an increase in the Australian unemployment levels to 6% have already been sounded by some economists. This was discussed in Ref.[3]. The Australian unemployment levels today are less than the historical maximum levels reported (10.9% in December 1992). They are also higher than the record lows (4% in February 2008) that were observed. Thus, let us take a more careful look at the most recent trends in the unemployment data for 2012. As we will see shortly, this reveals an interesting pattern with unemployment levels going both up and down with the month-to-month increases and decreases in the labor as reported by the ABS (Australian Bureau of Statistics). Both positive and negative values of the slope h have been observed for local periods with both increasing and decreasing labor force levels.

3. The 2012 Unemployment Data


The key figures for each month include two sets of values for the employed and the unemployed. The first is called trend and the second is called the seasonally adjusted value. In the first look article, only the trend values were used for
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the labor force x and the unemployed y. The following information copied and pasted from the ABS website is an example.
JUNE KEY FIGURES
May 2012 Trend Employed persons ('000) Unemployed persons ('000) Unemployment rate (%) Participation rate (%) Seasonally Adjusted Employed persons ('000) Unemployed persons ('000) Unemployment rate (%) Participation rate (%) 11 507.0 621.7 5.1 65.3 11 527.5 624.2 5.1 65.4 Jun 2012 11 517.6 622.8 5.1 65.3 11 500.5 631.3 5.2 65.2 May 12 to Jun 12 10.6 1.1 0.0pts 0.0pts -27.0 7.2 0.1pts -0.2pts Jun 11 to Jun 12 0.7% 2.4% 0.1pts -0.3pts 0.4% 5.9% 0.3pts -0.3pts

http://www.abs.gov.au/AUSSTATS/abs@.nsf/allprimarymainfeatures/F756C48F25016833CA25 753E00135FD9?opendocument

It should also be noted that the figures for each month are usually revised in the following month. Hence we can obtain two sets of values for May 2012 (from the June and the May key figures) and so on, for each month. A second set of values for June 2012 will become available when the July key figures are released (not available as of this writing on July 21, 2012). The seasonally adjusted data is summarized in Table 2. We will overlook the numbers reported under trend.

Table 2: Seasonally Adjusted data for Australian economy in 2012


Month Jun-12 May-12 May-12 Apr-12 Apr-12 Mar-12 Mar-12 Feb-12 Feb-12 Jan-12 Jan-12 Labor force, x 12.1318 12.1517 12.1607 12.0995 12.0992 12.1125 12.1203 12.0796 12.0762 12.0753 12.0781 Unemployed, y 0.6313 0.6242 0.6228 0.6004 0.5982 0.627 0.6291 0.6323 0.6322 0.6158 0.6142 Source of data June figs. June figs. May figs. May figs. April figs. April figs. Mar figs. Mar figs. Feb figs. Feb figs. Jan figs.

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0.635 0.630 0.625 0.620 0.615 0.610 0.605 0.600 0.595 12.04

Unemployed y, [millions]

12.06

12.08

12.10

12.12

12.14

12.16

12.18

Labor force x, [millions]


Figure 1: The x-y unemployment diagram for Australia (Jan 2012-June 2012), using seasonally adjusted values obtained from the monthly figures. As we see from the graphical representation of the data in Figure 1, the true nature of the linear law y = hx + c is not immediately obvious. Is the slope h positive or negative? A case can be made for both positive and negative slopes although the observations on the US economy, which reveal the universal value of h = 0.0946, suggest that unemployment levels increase (naturally) due to the increase in the labor force x (due to the natural growth in the population). If we ignore chronological ordering (hence no time labels are attached to the data here), an upward trend, with a positive slope, is indeed obvious. Perhaps, the data falls on a series of parallels. One member of such a family parallels might be the best-fit line passing through the four data points that seem to fall approximately on a straight line. To proceed further, we will make an important decision now. Let us ignore the first of the figures reported and only take the second revised figure for each month, see
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Table 3. The x-y diagram in Figure 2, with time labels attached, shows a chaotic path between January 2012 and June 2012. Table 3: Numerical values of the slope h from month-to-month variations Month Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Labor Unemployed, force, x y 12.0753 0.6158 12.0796 0.6323 12.1125 0.627 12.0995 0.6004 12.1517 0.6242 12.1318 0.6313 Change x 0.0043 0.0329 -0.013 0.0522 -0.0199 Change y 0.0165 -0.0053 -0.0266 0.0238 0.0071 Slope h Comments xy xy x y xy x y

3.837 -0.161 2.046 0.456 -0.357

0.635

Feb 2012

June 2012

Unemployed y, [millions]

0.630

Mar 2012
0.625 0.620 0.615

May 2012

Jan 2012
0.610 0.605 0.600

Apr 2012
0.595 12.06 12.08 12.10 12.12 12.14 12.16

Labor force x, [millions]


Figure 2: Seeming chaotic path taken by the Australian economy in 2012. As we see here, there are two periods where the labor force actually decreased (March to April and again May to June) defying the natural law of increasing labor force with the passage of time. This shrinking of the labor force is
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indicative of stressful conditions within the economy where some discouraged workers may have just chosen to leave the labor force. A prolonged shrinking of the labor force was observed in the US economy in 2009 with a concomitant increase in the unemployment levels, see Ref. [1]. Now we witness a similar situation with the Australian economy. The short term shrinking is an indication of less than desirable conditions in the economy since it defies the natural order. The natural order is, however, obvious if we look at the start and end points. The labor force has increased between Jan 2012 and June 2012 and the unemployed has also increased. The Mar 2012 data falls in between. The overall increase in labor force x = 0.0565 and the increase in unemployed y = 0.0155 yielding a positive slope h = y/x = 0.274. The equation of the straight line joining these two points is y = 0.274x 2.697 = 0.274 (x 9.831).
0.65

Unemployed y, [millions]

0.64

0.63

0.62

0.61

0.60

0.59 11.50

11.60

11.70

11.80

11.90

12.00

12.10

Labor force x, [millions]


Figure 3: Monthly data (seasonally adjusted) for all of 2010 along with the data for Dec 2009 (updated value in Jan 2010 key figures) and Jan 2011 (initial value in Jan 2011 key figures). Considering the Jan 2010 and Apr 2010 data (in the low labor force portion of the graph which also yields the steepest slope), we can
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deduce values of h = 0.2625 and h = 0.295 which agree with the value of h = 0.274 deduced for Jan 2012 and June 2012, see Figure 4. Compare also the monthly data for 2012 (through June) with the monthly data for the full year 2010, see Figure 3. Both the initially reported and revised values for each month are included along with the Dec 2009 and Jan 2011 data points (obtained by default when the 2010 data is compiled). The labor force was less than 12 million for most of 2010 and had just crossed the 12 million mark in Oct 2010 but is now was well above the 12 million mark in 2012. The number of unemployed had fallen below 0.600 million (600 thousand) in 2010 but never fell below this level in 2012.

0.635

Unemployed y, [millions]

0.630 0.625 0.620 0.615 0.610 0.605 0.600 0.595 12.06

y = hx + c = h(x x0) = 0.274x 2.697 = 0.274 (x -9.831)

12.08

12.10

12.12

12.14

12.16

Labor force x, [millions]


Figure 4: The apparently chaotic path in Figure 2 is replaced here by the simpler view of the overall change between Jan 2012 to June 2012 which reveals the linear law y = hx + c with unemployed y increasing as the labor force x increases. The April and May 2012 data do not fall on this line but also reveal a positive slope.
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The Jan 2012 data now seems to stand alone. The unemployment levels are higher or lower than revealed by the equation. Indeed, this seems to imply that there is a change in the work function, as reflected by the changes in the value of c, yielding either a higher or lower level of unemployment compared to a general trend line consistent with the law of increasing unemployed with increasing labor force. Another important aspect of this natural order of things is also revealed by the linear equation deduced for 2012, see Figure 4. The negative intercept c means a positive value for the cut-off labor force level x0 = -c/h = 9.831. If the labor force falls below this value (9.831 million) there will be no unemployeds. Everyone would have a job because the economy would experience a severe shortage of labor! This is the unique property of the each economy, and varies as a function of time. The term work function, borrowed from Einsteins photoelectric law (see Appendix 1) appears to be an appropriate description for the nonzero intercept c in the universal law y = hx + c. The cut-off labor force is just like the cut-off frequency in Einsteins law below which no electrons are produced when light shines on the surface of a metal. Likewise, if the labor force is less than the critical value of x0, which is directly proportional to the economic work function, no unemployeds will appear. Everyone will be fully absorbed in the labor force, just as all of the energy E of the photon striking the metal is absorbed when E < W, or equivalently, when f < f0. An electron with the maximum kinetic energy K is only observed if f > f0. Likewise, unemployeds will only be observed in any economy if the labor force x > x0. The analogy with Einsteins photoelectric and the generalization of the concept of energy being implicitly made here is thus very appealing. A similar argument can be made about production of profits by a company. A minimum revenue level must be exceeded before profits will appear. Energy in physics is just like money in economics, or vice versa. Likewise, the labor force represents a certain energy present in the economic system. It is this human energy that is being harnessed (along with the employment of available natural resources, capital, i.e., money held by the investors, or the rich, and technological skills) to build a thriving economy. I do not know the term used by Einstein in the original German paper for the term W in K = E W. He appears to have used the term potential, also indicated by
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the symbol P used for this quantity, see references cited at the end of this article. Nonetheless, it is usually translated as the work function in English. This is, perhaps, the most profound, yet so simple, an idea that was put forward to explain one of the most puzzling aspects of photoelectricity. The work function explains the existence of the cut-off frequency. Likewise, the existence of an economic work function explains the existence of unemployed workers. To borrow from Einstein, in the analogous problem here, we are dealing with the human potential instead of an electric potential (which stops the electron flow completely, thus permitting the determination of the maximum K for the electron, see references cited at the end of Appendix I). Hence, it is important to remember (as also discussed in Ref. [3]) that the unemployment rate cannot JUST go up from 5.1% to 6%. Employeds just do not magically turn into unemployed to increase the unemployment rate. The economy is NOT in the business of turning employeds into unemployed (or firing people, as famously reported during this US Presidential campaign). That is NOT the way the economic system seems to work. The law, as revealed eloquently by the historical highest levels of unemployment ever seen in the USA, is very clear. The labor force grows as a function of time. This is a natural law. If the labor force is less than a critical value, there will be no unemployeds. When the labor force grows, the large majority will be employed but some will not be employed. This is the natural order of things. A jump in unemployment level from 5.1% to 6%, in a short period of time, is unnatural and will require extraordinarily stressful situations, such as an economic or financial crisis, as was witnessed recently in the USA between 2008 and 2010 (and still continuing to a large extent). In the natural order of things, an increase in unemployment rate to 6% will mean that the economy must also demonstrate the ability to produce additional jobs that are required by the natural increase in the labor force that must accompany the increased unemployment level. Anything short of this is unnatural, and this is what I meant by simply too horrendous to imagine in Ref. [3] to conclude the discussion of the implications of the projected increase in unemployment rates to 6%.

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We will conclude this discussion now by summarizing the numerical values of h and c observed during these short periods (extending over just one month, or a few months). As we see from the calculations included earlier in Table 3, both positive and negative values of the slope h can be computed from the month-to-month variations. A positive slope is observed with both x and y are positive and also when both x and y are negative. Likewise, a negative slope h is also observed with negative x or a negative y. The numerical values of h > 1 are also noteworthy and are NOT indicative of healthy conditions. Given sufficient time, however, the natural order is restored and the economy is shown to reveal a much smaller positive value of h < 1 and a negative intercept c, as seen in Figure 4, between January 2012 and June 2012. Some calculations presented in Table 4. The March 2012 data, as noted earlier, falls in between. Table 4: Numerical values of the slope h from month-to-month variations Month Jan-12 Mar-12 Jun-12 Jan-Jun Labor Unemployed, force, x y 12.0753 0.6158 12.1125 0.627 12.1318 0.6313 Change x 0.0372 0.0193 0.0565 Change y 0.0112 0.0043 0.0155 Slope h Comments xy xy xy

0.301 0.223 0.274

4. Empirical Evidence for the Economic Work Function in the Australian Economy
The following calculations, alluded to earlier and presented clearly in Figure 5, provide further empirical evidence (over and above what has been demonstrated in Refs.[1,2] for the US economy) for what has been called the economic work function (or Einsteins German term the Potential) in the Australian economy. A straight line with the slope h = 0.2625, which is approximately equal to the slope h = 0.274 deduced for the most recent months (Jan 2012 to June 2012), joins the data for Jan 2010 and April 2010. This is very close to the steepest slope observed
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for the year 2010 (highest increase in the number of unemployed) with all the other data points falling below this line (or on other straight lines with a lower slope), as seen in Figure 3. Now, let us the monthly data for the three key months in 2012 on to this graph, see the red squares in Figure 5. It is now clear that the data for 2010 and the data for 2012 follow roughly parallel lines.

0.85

Unemployed y, [millions]

0.80 0.75 0.70 0.65 0.60 0.55 0.50 11.40

Jan 2010 to Apr 2010 y = 0.2625x 2.433 = 0.2625 (x 9.27)

Jan 2012 to Jun 2012 y = 0.2625x 2.433 = 0.2625 (x 9.27)


11.60 11.80 12.00 12.20 12.40

Labor force x, [millions]


Figure 5: Empirical evidence for the economic work function in the Australian economy. After establishing the high slope early in 2010, the economy moves sideways with an increase in the labor force and a more gentle increase in the unemployment levels, until the same slope is re-established again in 2012.

Also, the Dec 2010 and Jan 2011 data are now seen to lie on the extension of the line joining the most recent data, at a lower labor force. (The slope h = 0.2705 for the line joining Dec 2010 to Jan 2011 and the intercept c = - 2.652, nearly same as for Jan 2012 to June 2012 line.) Thus, after establishing the high growth rate for
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the unemployment levels, early in 2010, the Australian economy seems to be moving sideways with an increase in the labor force and a more gentle increase in the unemployment levels. It then re-establishes the higher slope late in 2010 and early in 2011 which has continued in the most recent months of 2012. Stock market analysts often refer to this type of a sideways movement. The market can either go up or down but neither the up nor the down trend can be sustained for very long. The market then relaxes from its bullish or bearish posture and moves sideways. This is essentially what is going on here. The economy cannot sustain the high rate at which unemployeds are increasing because economic activity cannot be sustained without an increase in labor force. The adjustment mechanism may be first to lay off workers and then, perhaps, negotiate wage reductions (or part time employment, thus creating underemployment, rather than unemployment). This is revealed here by the sideways movement between the two parallels with different values of the work function c, or the cut-off labor force x0 = - c/h. The task remaining now is determine if there is a universal value of the slope h for the Australian economy, as for the US economy (for which h = 0.0946), and also determine the numerical value of this universal slope h. And, with all due apologies for the committing the sin of repetition, this will require a study of ALL of the available unemployment data using x-y unemployment diagrams. Why is this important? The cut-off labor force x0 = -c/h, is directly proportional to the intercept c but inversely proportional to the slope h of the straight line in our linear law. The high slopes established in 2010 and 2012 may therefore be misleading indicators of the cut-off labor force. The higher the cut-off labor force, the lower will be the unemployment levels in any economy. The search for the correct value of the slope h is thus similar to the efforts made by Millikan to accurately determine the slope h of the K-f graph in Einsteins photoelectric law. The universal constant called the Planck constant could thus be determined from direct empirical observations. The same considerations apply now for the economy, specifically the Australian economy.

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5. Summary and Conclusions


1. The most recent unemployment data for the Australian economy, for the six months ending June 2012 is reviewed here critically. Although, the x-y diagram reveals an apparently chaotic pattern, this is shown to be the result of short term fluctuations. Given sufficient time, the unemployment data can be shown to reveal the simple linear law discussed in earlier articles. 2. The number of unemployed y increases with increasing labor force x following the simple linear law y = hx + c = h(x x0) where x0 = - c/h is the cut-off labor force below which the number of unemployed will go to zero. This law is thus similar to Einsteins photoelectric law K = E W = hf W = h(f f0), first proposed in 1905. The intercept c is like the work function W in Einsteins law and cut-off labor force x0 is exactly analogous to the cut-off frequency f0 below which no electrons will appear when light shines on the surface of a metal. 3. The constant h in Einsteins law is one of the fundamental constants of nature and is now called the Planck constant, in honor of Max Planck, who first conceived the idea of an elementary energy quantum E = hf, in December 1900, to explain the radiation spectrum of a heated body. Einstein was extending this idea of an energy quantum of light, in 1905, which he envisioned to be a stream of photons each having the elementary energy quantum hf. The numerical value of the Planck constant can be deduced from the slope of the K-f graph. However, care must be taken to ensure that maximum kinetic energy K of the electron is determined experimentally. Likewise great care must be exercised in fixing the numerical value of h in the unemployment law y = hx + c. 4. It is proposed that, as with the US economy, the correct numerical value of h can only be ascertained by reviewing ALL of the available unemployment data for a country, especially after considering the periods of highest (or lowest) unemployment levels. The validity of the simple linear law can then ascertained and the numerical h determined, as was described in Ref. [2] for the US economy. (I have made attempts to obtain this historical data by contacting the Australian Bureau of Statistics, ABS, since it was not easy to obtain from the website.)
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5. The linear law relating labor force x and the unemployed y also implies that the unemployment rate will follow the hyperbolic law y/x = h + (c/x). Depending on the numerical values of the constants h and c, the graph is either a rising hyperbola or a falling hyperbola. Once the numerical value of h is fixed, by considering special (x, y) pairs for the economy, ALL of the unemployment data can be explained by envisioning a series of parallel lines on the x-y plot, or a series of hyperbolas on the y/x versus x plot. Such plots have been prepared for the US economy and discussed in Ref. [2]. 6. The analysis provided here will be updated after an analysis of ALL of the historical Australian unemployment data.

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6. Appendix I Extending Einsteins work function beyond physics to economics and financial world
All the fifty years of conscious brooding have brought me no closer to answer the question, 'What are light quanta?' Of course today every rascal thinks he knows the answer, but he is deluding himself. Albert Einstein (1951). Quoted in Raymond W. Lam, Seasonal Affective Disorder

and Beyond (), 1. Science quotes on: | Light (93) | Photon (4) | Thought (135)
Near the end of his life, Einstein wrote: All the fifty years of conscious brooding have brought me no closer to the answer to the question: what are light quanta? .. Of course, today every rascal thinks he knows the answer, but he is deluding himself.

****************************************************************** Ah! We are not talking here about quanta that Einstein says he brooded about for 50 years. We are talking here about the work function W that appears in his explanation of the photoelectric effect. Without W, i.e., if W = 0, the photoelectric observations cannot be explained, quanta or no quanta. The photoelectric effect was actually a curious phenomenon observed by Heinrich Hertz (in whose honor the unit for frequency is now named, such kHz, MHz, and now even GHz) during the course of his famous experiments which showed that electromagnetic waves, predicted by Maxwells theory of electromagnetism, can indeed be produced in the laboratory. (Hertz produced what is called radio waves. As we know, this was the beginning of a huge revolution in communications systems starting with the 20th century radios, telegraphy, TV and now all sorts of mobile devices that we take for granted.) Other experimenters, notably Leanrd (who was an assistant to Hertz) and Hallwachs, followed up on Hertzs observations. Investigations showed that when ultraviolet light shines on the surface of a metal, it ejects electrons. This was the
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source of the curious spark that Hertz had observed in his work with radio waves. Lenard, who investigated this and other phenomena dealing with cathode rays, received the Nobel Prize in 1905, the same year Einstein published his paper on the photoelectric effect, which also fetched the Nobel for Einstein, see http://www.nobelprize.org/nobel_prizes/physics/laureates/1905/lenard-lecture.pdf) However, experimenters also found that there is a cut-off frequency f0 below which no electrons are produced. This could not be explained on the basis of the wave theory of light, the theory that was then widely accepted. Einstein provided what was then actually a revolutionary, but very simple, explanation. He showed (using the property of radiation called entropy) that light might be made up of microscopic particles (now called photons) each having the elementary quantum of energy E = hf (first conceived by Max Planck in December 1900, where h is a universal constant, now called the Planck constant and f is the frequency of the light wave). This was an old idea with a new twist. The particle idea of light had been proposed by Newton in the 17th century. It had also been discredited since experimental observations contradicted the predictions. Newton proposed the idea of light being made up particles that obey his laws of mechanics, each color of light having particles of a fixed momentum. Einstein was reviving this idea by associating a fixed energy E = hf instead of a fixed momentum. When the photon with energy E strikes the surface of a metal, it transfers some of its energy to the electron which is thus ejected from within the metal. Einstein said that the maximum kinetic energy K of the electron must be less than E because some of the energy must be given up to overcome the forces that bind the electron to the metal. This is a difficult calculation (not even attempted by physicists). Einstein decided to call this unknown work simply as W, which is a unique property of a metal. This line of reasoning yields the simple linear law relating K and the frequency f, K = E W = hf - W. The linear K-f law is what revolutionized physics in the early 20th century. The cut-off frequency, which could not be explained using the classical idea of light being a wave (of electromagnetic origin, another idea that originated from Maxwells theory of electromagnetism) now follows. The cut-off frequency f0 = W/h is a property of a metal. The light that strikes the metal must have a frequency
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f > f0 since the energy E must exceed W, the work function, the minimum energy needed to produce the electron. K = E W = hf W = h(f f0) where f0 = W/h. If W is zero there is no cut-off frequency. In other words, the cut-off frequency is a manifestation of the work function W but its absolute magnitude varies inversely as the numerical value of the Planck constant h. The emphasis on the maximum kinetic energy K of the electron is very important. The value of the universal constant h, the Planck constant, can be deduced from the photoelectricity experiments, only if great care is taken to determine the maximum K accurately. This was recognized by Millikan whose experiments with lithium and sodium (with light of various frequencies, 5 with lithium, 6 with sodium) led to the first direct determination of the constant h. Only under these conditions is the true value of the constant h revealed. As Millikan discusses in the introduction to his 1916 experiments, electrons are actually being produced with a range of energies. Some have the maximum kinetic energy K envisioned by Einstein. Millikan notes that the inability of earlier investigators to accurately determine the maximum K is, perhaps, a reason why Einsteins linear law could not be confirmed up to that time. Millikan describes in details how the maximum K is determined in his experiments. (This is still a topic that is considered to be controversial by some critics of Millikan, although the idea of the universal constant h is now firmly entrenched in physics). Likewise, it is only under exceptional circumstances that we will observe the property called h embodied in the universal law y = hx + c which describes unemployment statistics. For the US economy, it appears that this property was revealed after the financial meltdown and the attendant job losses of 2009-2011, a crisis that we are still experiencing with the unemployment levels at a record 12.75 million in June 2012. Some references on the photoelectric effect and evidence for extending the work function beyond physics. http://www.scribd.com/doc/98825141/Google-A-Lovable-One-Trick-PonyAnother-Single-Product-Company-Analyzed-Using-the-New-Methodology Discussion of Profits-Revenues data using the idea of work function which leads to the idea of a Line of Excellence for a company.
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http://www.scribd.com/doc/99333764/Kia-A-Disppearing-Brand Clear evidence for a work function in the profits-revenues data for a company.

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http://www.nature.com/nature/journal/v433/n7023/box/nature03280_bx1.html Happy centenary, Photon, Nature January 2005. http://www.physik.uni-augsburg.de/annalen/history/einstein-papers/1905_17_132148.pdf Einsteins paper in original German. http://www.esfm2005.ipn.mx/ESFM_Images/paper1.pdf English translation of the 1905 paper on light quanta, Concerning an heuristic point of view toward the emission and transformation of light. The Photoelectric Effect, in Great Experiments in Physics Firsthand Accounts from Galileo to Einstein, Edited by Morris H. Shamos, pp. 232-237, Dover Publications1959. The English translation of the original paper by Max Planck may also be found here. http://en.wikipedia.org/wiki/Albert_Einstein Wikipedia article on Einstein. http://physics.about.com/od/quantumphysics/a/photoelectric.htm Photoelectric effect by Andrew Zimmerman Jones. http://www.oufusion.org.uk/index.php?option=com_content&view=article&id=2:e instein-millikan-and-the-photoelectric-effect&catid=1:features&Itemid=3 Modern Research by Keesing on photoelectric effect and Millikans experimental observation of the cut-off frequency. http://www.nhn.ou.edu/~johnson/Education/Juniorlab/Photo_Electric/2002-PhotoE-FusionNewsWinter01.pdf Einstein, Millikan, and the Photoelectric Effect http://www.spsnational.org/radiations/2004/elegant_connections_f04.pdf Excellent discussion by Dwight E Neuenschwander about how Einstein deduces the idea of quanta of light from the entropy of radiation, which is discussed at length by
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Einstein in the first part of his 1905 paper (which actually fetched the Nobel for Einstein, not his work on relativity). http://www.kutl.kyushuu.ac.jp/seminar/MicroWorld1_E/Part3_E/P36_E/photo_electron_E.htm http://www.nd.edu/~dhoward1/Klein%20The%20Natural%20Philosopher%20Eins tein%27s%20First%20Paper%20on%20Quanta.pdf Discussion of Einsteins paper by Martin Klein, historian of science. http://www.physics.iitm.ac.in/~labs/amp/EPEE_PCD_SV.pdf Nice review of photoelectric effect http://www.pitt.edu/~jdnorton/papers/Miraculous_Berlin.pdf Discussion of Einsteins 1905 paper by J D Norton.

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About the author V. Laxmanan, Sc. D.


The author obtained his Bachelors degree (B. E.) in Mechanical Engineering from the University of Poona and his Masters degree (M. E.), also in Mechanical Engineering, from the Indian Institute of Science, Bangalore, followed by a Masters (S. M.) and Doctoral (Sc. D.) degrees in Materials Engineering from the Massachusetts Institute of Technology, Cambridge, MA, USA. He then spent his entire professional career at leading US research institutions (MIT, Allied Chemical Corporate R & D, now part of Honeywell, NASA, Case Western Reserve University (CWRU), and General Motors Research and Development Center in Warren, MI). He holds four patents in materials processing, has co-authored two books and published several scientific papers in leading peer-reviewed international journals. His expertise includes developing simple mathematical models to explain the behavior of complex systems. While at NASA and CWRU, he was responsible for developing material processing experiments to be performed aboard the space shuttle and developed a simple mathematical model to explain the growth Christmas-tree, or snowflake, like structures (called dendrites) widely observed in many types of liquid-to-solid phase transformations (e.g., freezing of all commercial metals and alloys, freezing of water, and, yes, production of snowflakes!). This led to a simple model to explain the growth of dendritic structures in both the ground-based experiments and in the space shuttle experiments. More recently, he has been interested in the analysis of the large volumes of data from financial and economic systems and has developed what may be called the Quantum Business Model (QBM). This extends (to financial and economic systems) the mathematical arguments used by Max Planck to develop quantum physics using the analogy Energy = Money, i.e., energy in physics is like money in economics. Einstein applied Plancks ideas to describe the photoelectric effect (by treating light as being composed of particles called photons, each with the fixed quantum of energy conceived by Planck). The mathematical law deduced by
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Planck, referred to here as the generalized power-exponential law, might actually have many applications far beyond blackbody radiation studies where it was first conceived. Einsteins photoelectric law is a simple linear law, as we see here, and was deduced from Plancks non-linear law for describing blackbody radiation. It appears that financial and economic systems can be modeled using a similar approach. Finance, business, economics and management sciences now essentially seem to operate like astronomy and physics before the advent of Kepler and Newton.

Cover page of AirTran 2000 Annual Report

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