Commentary and analysis of labour force data releases.

US labour market – employment and participation up, but still no obvious wage pressures

Last Friday (February 4, 2022), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – January 2022 – which reported a total payroll employment rise of only 467,000 jobs in December and a rise in the participation rate – which often leads to a rise in the unemployment rate as marginal workers outside the labour force sense their opportunities for work are now better. Employment growth accelerated in January 2022 which reverses the recent trend. 0.3 points decline in the official unemployment rate to 3.9 per cent, while participation was unchanged at 61.9 per cent. While the US labour market is still creating work – it is doing so at a declining rate and there are unequal patterns across the industrial sectors. The US labour market is still 2,875 thousand jobs short from where it was at the end of February 2020, which helps to explain why there are no fundamental wage pressures emerging. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data.

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Australian labour market continues to improve but Omicron overshadows all

The Australian Bureau of Statistics released the latest labour force data today (January 20, 2022) – Labour Force, Australia – for December 2021. The situation is this: most states have now abandoned Covid restrictions. The December survey was taken a few weeks after the ‘opening up’ and before Omicron got settled at parties, events, restaurants and wherever else it is lurking. Infections are now very high but the data only captures the opening up effect (with some Omicron impact). Employment growth slowed but was still strong and unemployment and underemployment fell significantly. We are seeing the impact of flat population growth coming up against growing demand for workers and that is the reason the unemployment rate has fallen so quickly. It is good for workers but that won’t last long because the government is already trying to lure foreign workers to fill so-called labour shortages. This will stop the wages growth that would benefit domestic workers from occurring. Overall, this is an improving situation although whether it will last is another question given the rapidly rising infection rate. It is certainly time for the Federal government to take advantage of the strengthening situation in the non-government sector and target some really good job creation initiatives in the regions and demographic cohorts that are still lagging behind.

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US labour market cannot be healthy with rising numbers of sick people

Last Friday (January 7, 2022), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – December 2021 – which reported a total payroll employment rise of only 199,000 jobs in December and a 0.3 points decline in the official unemployment rate to 3.9 per cent, while participation was unchanged at 61.9 per cent. While the US labour market is still creating work – it is doing so at a declining rate and there are unequal patterns across the industrial sectors. The US labour market is still 3,572 thousand jobs short from where it was at the end of February 2020, which helps to explain why there are no fundamental wage pressures emerging. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data. The failure to introduce a renewed fiscal stimulus will definitely leave the economy worse off, especially with the renewed virus onslaught from Omicron.

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Australian labour market rebounds strongly after lockdown ends but still 1.6 million (12.1 per cent) without enough work

The Australian Bureau of Statistics released the latest labour force data today (December 16, 2021) – Labour Force, Australia – for November 2021. With most states now abandoning most Covid restrictions just as the new variant arrives, which evades the vaccine coverage and infection numbers soar to record levels (go figure), the labour market certainly rebounded emphatically. Employment growth was very strong and resulted in sharp falls in unemployment and underemployment. Participation also rose, which prevented the unemployment rate from falling more. Overall, this is an improving situation although whether it will last as infection numbers start to rise rapidly is another question. It is certainly time for the Federal government to take advantage of the strengthening situation in the non-government sector and target some really good job creation initiatives in the regions and demographic cohorts that are still lagging behind.

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The NAIRU should have been buried decades ago

In 1983, I started a PhD at the University of Manchester working within the Phillips curve framework. At the time, all the talk was Monetarist – eschewing the use of fiscal policy to reduce unemployment. Unemployment was high after the OPEC oil shocks and governments were abandoning their responsibilities to reduce it because they had drunk the Monetarist Kool-aide. The Monetarists invented a concept – the Non-Accelerating Inflation Rate of Unemployment (NAIRU) or the ‘natural rate of unemployment’, which became part of the dominant macroeconomic approach and influenced policy makers to pursue microeconomic reform (deregulation, privatisation, outsourcing etc) and obsessing about fiscal surpluses. My work was an attempt to show this shift in thinking – away from a commitment to full employment was based on a lie. The whole NAIRU story was a fraud. I was largely ignored along with other progressive economists who were also producing credible research that refuted the main propositions. Some 40 years later, the ECB has produced a research paper which now supports the position I took back then. Millions of jobless people later!

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US labour market – job shortfall continues with government sector undermining job creation

Last Friday (December 3, 2021), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – November 2021 – which reported a total payroll employment rise of only 210,000 jobs in August and a 0.4 points decline in the official unemployment rate to 4.2 per cent, while participation rose by 0.2 points. This is one of those crazy months when the payroll figure suggests a slowing down while the labour force survey paints a fairly rosy outlook with strong jobs growth stimulating rising participation and a declining labour underutilisation rate. We will have to wait until next month to see how it all works out. But the undeniable facts are that the economy is still creating work – in an unequal pattern across the sectors and the government sector is undermining the benefits of that creation. The US labour market is still 3,912 thousand jobs short from where it was at the end of February 2020, which helps to explain why there are no fundamental wage pressures emerging. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data.

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Why flat wages growth in Australia tells us nothing about the impact of migration on the labour market

One of the important concepts one learns in studying the way firms work with respect to pricing and markups is the distinction between quantity and price adjustment over the course of an economic cycle. When economists talk of supply and demand, they usually refer to price adjustment, where prices adjust up or down when there is an imbalance between these aggregates. Orthodox economics presumes that prices adjust, for example, to eliminate an excess supply, which they apply to the labour market and conclude that the cure for mass unemployment is wage cutting. The problem is that in many circumstances, firms use quantity adjustments long before they contemplate price adjustments, because the former involves lower costs. The Australian Broadcasting Commission (ABC) ran a story from its business reporters today (November 16, 2021) – As migration restarts, will it hold down wages for everyone? – which has also become a feature news segment on its television coverage today. The analysis presented is seriously misleading. It not only fails to characterise the problem properly but buys into a highly contentious debate about whether migration has negative impacts on the labour market prospects for local workers. It behoves analysts to actually construct the problem correctly before they start taking sides in this debate. The ABC article fails in that regard which is disappointing. Their failure also reflects the lack of diversity in opinion they seek these days. They chose to simply rehearse the arguments presented by one pro-migration analysis as if it was definitive rather than seek expert opinion from neutral analysis. But it also demonstrates why understanding the difference between quantity and price adjustment is crucial to getting the conclusions right.

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Australian labour market – more than 2 million workers without work – 14.7 per cent

The Australian Bureau of Statistics released the latest labour force data today (November 11, 2021) – Labour Force, Australia – for October 2021. The background is that the entire East Coast has now come out of an extended lockdown over the last few months. The October 2021 data reveals the damage that those lockdowns have caused. But, given that today’s data reflects what was happening about a month ago, it is still too early to say what the speed of recovery will be although more recent payroll data suggests that employment growth is rebounding. But the story of today’s data is that total employment and the unemployment rate are worse than before the pandemic – so the nation has lost ground over the last 20 months. And that is largely because the federal government withdrew its fiscal stimulus too early. The summary results are clear: employment continues to contract, the unemployment and broader underutilisation rates soared. There are nearly 2 million Australian workers without work in one way or another (officially unemployed or underemployed) and several hundred thousand who have left the active labour force due to lack of employment opportunities. Overall, the labour market is in poor shape and the federal government is doing nothing to help. The lack of any significant stimulus from the federal government is telling. There is now definite evidence that further and rather massive fiscal support is required.

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When labour shortages just signal management caprice – case study

I have been researching the so-called labour shortage that business types are talking about relentlessly as part of their on-going strategy to undermine the conditions of work and make more profit. In the course of that enquiry, I came across an interesting juxtaposition between two US companies that illustrate a lot of what we have known about for years but have allowed this relentless, neoliberal, race-to-the-bottom to obscure. Well-paid workers with job security, work better and are happy workers. Companies that pursue the ‘race-to-the-bottom’ strategy and seek to build profits by trashing the conditions they offer workers eventually struggle to prosper because their bad reputation undermines their ability to attract productive workers. In the case we discuss today, the so-called ‘labour shortage’ is really just a signal of management caprice. Rather than being a shortage of workers, there is a shortage of workers who will tolerate the indignity of low wages, onerous conditions and capricious management. It is also a union versus non-union type of discussion where the unionised work places generate high productivity and worker attachment, while the non-unionised workplaces find it hard to attract reliable staff and blame it all on ‘labour shortages’.

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US labour market improves but still a long way to go before full employment is reached

Last Friday (November 5, 2021), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – October 2021 – which reported a total payroll employment rise of only 531,000 jobs in August and a 0.2 points decline in the official unemployment rate to 4.6 per cent. With participation unchanged, this was a stronger result than the previous month and the employment-population ratio rose by 0.1 points. It is still well down on the February 2020 peak though. The US labour market is still 4,204 thousand jobs short from where it was at the end of February 2020, which helps to explain why there are no fundamental wage pressures emerging. An occupational analysis shows that the lower paid occupations have not participated proportionally in the jobs growth and many groups have endured real Median weekly earning cuts over the course of the pandemic. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data.

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