Last Friday (September 1, 2023), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – August 2023 – which showed payroll employment rising by 187,000 but also that the unemployment rate has now starting rising (up 0.3 points) to 3.8 per cent. Is this the tipping point? I am very uncertain given the surprisingly large burst in participation which accounts almost entirely for the rise in unemployment and the unemployment rate. Most of the other aggregates were relatively stable which is why I am expressing uncertainty in my assessment. However, there is no sign of recession and no sign that the misguided Federal Reserve interest rate rises are causing rises in unemployment. Powell could hardly take credit for the rising participation rate unless he argued that he had created such desperation that people who normally do not work sought work. A stretch!
Yesterday (August 29, 2023), the incoming Reserve Bank of Australia governor was confronted with ‘activists’ as she prepared to present to an audience at the Australian National University in Canberra. They presented her with an application for unemployment benefits and had done her the favour of already filling it in with her name. It was in response to her dreadful speech in June where she said the RBA was intent on pushing the unemployment rate up to 4.5 per cent (from 3.5), which means that around 140,000 workers will be forced out of work. The problem is that even if we believed the logic underpinning such an aspiration, the actual empirical evidence doesn’t support the conclusion. Today August 30, 2023, we received more evidence of that as the Australian Bureau of Statistics (ABS) released the latest – Monthly Consumer Price Index Indicator – for July 2023, which showed a sharp drop in inflation. As well as considering that data, today I reflect on the latest JOLTS data that was released by the US Bureau of Labor Statistics yesterday. The two considerations are complementary and demonstrate that central bankers in Australia and the US have lost the plot. To soothe our souls after all that we remember a great musician who died recently.
It’s been a big data week and after the US inflation data that I analysed on Monday, and the Australian wage data (analysed yesterday), we have the Australian labour force data release by the Australian Bureau of Statistics – Labour Force, Australia – for July 2023 today (August 17, 2023). The July result shows a weakening situation (although the rotation in the sample contributed to this somewhat). Employment fell (particularly full-time) and unemployment rose to 3.7 per cent (up 0.2 points). There are now 10.1 per cent of the available and willing working age population who are being wasted in one way or another – either unemployed or underemployed. That extent of idle labour means Australia is not really close to full employment despite the claims by the mainstream commentators. As I noted yesterday, wages growth is declining and modest. We will see next month whether this weakening is, in fact, a trend consistent with other indicators (retail sales, etc). Given inflation has been in decline since last September and there is no wages pressure, there is no reason for policy settings to be trying to push people into joblessness. That is just an act of bastardry and ideological zealotry.
Last Friday (August 4, 2023), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – July 2023 – indicated a rather ‘steady as she goes’ outcome. A slightly weaker employment outlook compared to the beginning of 2023 but overall a very stable situation. There is no sign of recession and no sign that the misguided Federal Reserve interest rate rises are causing rises in unemployment. More evidence that monetary policy is not an effective tool.
The Australian Bureau of Statistics (ABS) released of the latest labour force data today (June 15, 2023) – Labour Force, Australia – for June 2023. The June result presents a relatively stable picture with moderate employment growth keeping pace with the underlying population growth and the unemployment rate being largely unchanged (a slight drop in rounding). The only negative is that participation fell by 0.1 point but that may just be monthly variance. We should realise though that there are still 9.9 per cent of the available and willing working age population who are being wasted in one way or another – either unemployed or underemployed. That extent of idle labour means Australia is not really close to full employment despite the claims by the mainstream commentators. As I note below, the stability of the unemployment rate at around 3.5 per cent coupled with the rather sharp declines in the inflation rate indicate that the RBA claims that unemployment must rise to bring inflation down is spurious. Their so-called estimate of the NAIRU at 4.5 per cent should mean that inflation is still accelerating given the actual unemployment rate of 3.5 per cent. Exactly the opposite is occurring.
Last Friday (July 7, 2023), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – June 2023 – which revealed that the the US labour market has probably reached a turning point but is certainly not contracting at a rate consistent with an imminent recession. There was a continuing weakening of net employment growth. Further, the weaker conditions are evidenced by the decrease in new job openings and rising underemployment (workers forced into part-time work for economic reasons).
Last Friday (June 2, 2023), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – May 2023 – which revealed that the the US labour market may be at a turning point but is certainly not contracting at a rate consistent with an imminent recession. There was a continuing weakening of net employment growth, even though the payroll and survey data were in conflict. The rate of decline though, is currently consistent with an imminent recession. We will see in the June figures whether the slowdown has become a trend.
Yesterday we had the wages data. Today the Australian Bureau of Statistics (ABS) released of the latest labour force data (May 18, 2023) – Labour Force, Australia – for April 2023. The April result is the second consecutive month that the data is weaker. Employment fell by 4.3 thousand, participation fell by 0.1 point, and unemployment rose by 18.4 thousand even though the fall in the number of workers seeking work took some pressure of the situation. The unemployment rate rose from 3.5 per cent to 3.7 per cent. All the main aggregates are now in retreat – employment falling (also relative to the population), participation falling and unemployment rising. With yesterday’s wage data still revealing only modest wage increases and on-going and substantial real wage cuts, today’s data suggests the deterioration in the economy is underway. The underlying (‘What-if’) unemployment rate is closer to 4.9 per cent, which indicates the labour market still has slack. The broad underutilisation rate rose 0.1 point to 9.9 per cent and that means there are still 1,409.9 thousand Australian workers without work in one way or another (officially unemployed or underemployed).
In my 2015 book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (published May 2015) – I traced in considerable detail the events and views that led to the creation of the Economic and Monetary Union (EMU, aka the Eurozone) once the Treaty of Maastricht was pushed through as the most advanced form of neoliberalism at that time. The difference between the EMU and other nations who have adopted neoliberal policies is that in the former case the ideology is embedded in the treaties, that is, in the constitutional system, which is almost impossible to change in any progressive way. In the latter case, voters can get rid of the ideology by voting the party that propagates it out of office. It is true that in current period, even the parties in the social democratic tradition have become neoliberal and there is little choice. But the EMU is different and has entrenched the most destructive ideology in its legal structures. We are reminded of this recently (April 26, 2023), when the European Commission released its latest missive – Commission proposes new economic governance rules fit for the future. Once operational, the policies advocated in this new governance structure will ensure that Europeans are once again made to endure persistent and elevated levels of unemployment and continued deterioration in the quality and scope of public infrastructure and welfare provision. The collapse of this ideological nightmare cannot come soon enough.
Last Friday (May 5, 2023), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – April 2023 – which revealed continuing employment growth and and modest declines in unemployment. While the US Federal Reserve is deliberately trying to undermine the labour market, even though the inflation rate is falling relatively quickly, the April data suggests that the interest rate increases are not achieving the aim. There is no surprise there. Monetary policy is a relatively ineffective tool to suppress demand. Most of the aggregates are steady and in terms of the pre-pandemic period, March’s net employment change was still relatively strong. Real wages finally showed some improvement in the face of a decelerating inflation rate. Overall, the US labour market is steady and doesn’t appear to be contracting in the face of the Federal Reserve interest rate hikes.