Updating the impact of ageing labour force on US participation rates

Yesterday, I discussed the latest US labour market data, including the 0.4 percentage point drop in the participation rate, which is a large decline for a month. Whether that is subject to revision or not remains to be seen. The monthly data fluctuates quite a bit due to sampling errors and uncertainties regarding population benchmarks. It is clear that during the recession, many workers opted to stop searching for work because there was a dearth of jobs available. As a result, national statistics offices considered these workers to have stopped ‘participating’ and classified them as being ‘not in the labour force’, which had had the effect of attenuating the official estimates of unemployment and unemployment rates. These discouraged workers are considered to be in hidden unemployment. But the participation rates are also influenced by compositional shifts (changing shares) of the different demographic age groups in the working age population. In most nations, the population is shifting towards older workers who have lower participation rates. Thus some of the decline in the total participation rate could simply be an averaging issue. This blog updates my previous estimates for the US. The aggregate participation rate has been in decline since the beginning of this century and the compositional shifts account for around 73 per cent of the decline over that time.

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US labour market – uncertainty remains paramount with data volatility

On November 3, 2017, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – October 2017 – which showed that total non-farm employment from the payroll survey rose by 261,000 in October, which the BLS said “mostly offset … a decline in
September that largely reflected the impact of Hurricanes Irma and Harvey”. For more on that issue see my analysis from last month – US labour market – hit by two hurricanes but improvement suggested. While the payroll data showed a strong rebound in employment, the Labour Force Survey data estimated a sharp drop in employment (484 thousand) in October while the labour force was also estimated to have contracted sharply by 765 thousand. The latter was due to a rather implausible decline in the participation rate (0.4 points), which will probably be revised next month. But, taking the data on face value, the BLS estimated that unemployment fell by 281 thousand and the official unemployment rate fell by 0.2 points to 4.1 per cent. There is still a large jobs deficit remaining and other indicators suggest the labour market is still below where it was prior to the crisis. What was striking about the October data though was the dramatic fall in the labour force participation rate – by 0.4 percentage points allied with the decline in the Employment-Population ratio (0.2 points). I analyse those movements in this month’s focus section of this blog. On the face of the aggregate data, the US labour market is getting back to its pre-GFC position but there is evidence that the quality of work has declined and negative cyclical effects remain in the system.

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The Weekend Quiz – November 4-5, 2017 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Q&A from British Labour Party Annual Conference Event, September 2017

This blog is short and only serves to provide a link to the video of the Q&A that followed my presentation at the British Labour Party Annual Conference Fringe Event on September 25, 2017. The presentation introduced the Reclaiming the State Project – and discusses my new book (with Thomas Fazi) – Reclaiming the State A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto, September 2017).

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IMF policies undermine the health of mothers and children in the poorest nations

In our new book Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, 2017) – Thomas Fazi and I argue that a new progressive agenda would see the abolition of the IMF and the World Bank and the creation of a new multilateral institution that is entrusted with ensuring poor nations can access necessary funds to prevent their societies collapsing. This organisation would not be a bulwark for inflicting neoliberal policies on the poorer nations, but rather, a body that assisted nations in developing first-class health, education and environmental care capacities and infrastructure in a fully employed environment. It would help insulate such nations from the vicissitudes of global finance by supporting capital controls and other anti-speculative policy tools. The current multilateral framework dominated by the likes of the IMF and the World Bank have failed categorically in this regard. Recent research, which, in part consolidates a rich body of research going back to 1987, has found that the so-called ‘structural adjustment policies’ that accompany assistance from these organisations have materially damaged child and maternal health in the nations where these conditionality programs have been imposed. The IMF likes to talk about intergenerational fairness, especially in relation to the alleged burdens that fiscal deficits leave for future generations, but then they support and implement policies that unambiguously damage the health and well-being of children in poorer nations, while allowing real resources to be sucked out of those nations to the benefit of the global rich. A criminal enterprise.

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Australian inflation outlook benign – room for fiscal stimulus

Central banks around the world have been demonstrating how weak monetary policy is in trying to stimulate demand. They have been building up their balance sheets (massively) by creating reserves in return for government and corporate paper in an attempt to push their inflation rates up. But the data suggests their efforts are in vain. Which should inform all those who think that if the government stopped issuing debt to match their deficits there would be horrible inflation to think again. Progressives should be calling for their governments to abandon the gold standard practice of issuing debt, which would change the political dialogue considerably. Australia is also struggling to push it inflation rate into the so-called policy range of 2 to 3 per cent. Last week’s Australian Bureau of Statistics inflation data release – Consumer Price Index, Australia – data for the September-quarter 2017 showed that the September-quarter inflation rate was 0.6 per cent with an annual inflation rate of 1.8 per cent (down from 1.9 per cent last quarter). The headline inflation rate has been below the Reserve Bank of Australia’s lower target bound of 2 per cent for nearly two years now. Clearly, within their own logic where an inflation rate within the 2 to 3 per cent band reflects successful monetary policy, the RBA is failing. The RBA’s preferred core inflation measures – the Weighted Median and Trimmed Mean – are also now below the lower target bound and are not showing signs of moving up. The most reliable measure of inflationary expectations has also fallen quite sharply. With the labour market data demonstrating weakness and the economy stuck in this low inflation malaise, it is clearly time for a change in policy direction.

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