No wages breakout in sight in US labour market

The latest news from the US, other than the regular counts of the number of times the President has lied on any particular day, is that there is a wages breakout looming. Yes, you read that correctly. The CNN report (February 2, 2018) – America gets a raise: Wage growth fastest since 2009 – was representative of the media responses to the latest data from the US Bureau of Labor Statistics on the same day. We read that “Economists say its time to take note of how strong , or ‘tight’ the U.S. job market is”. One bank economist quoted claimed that “It’s too early to call this a trend but the breakout [in wage growth] is very welcome news”. Is that fake news? I am an economists and I don’t see any wages breakout or anything remotely like it. On February 2, 2018, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – January 2018 – which showed that total non-farm employment from the payroll survey rose by 200,000 in January. The Labour Force Survey data also showed a relatively strong net employment gain (409 thousand (net) jobs were created) in January 2018. The labour force was estimated to have risen by 518 thousand with participation constant. The BLS thus estimated that unemployment rose by 108 thousand and the official unemployment rate rose slightly from 4.09 to 4.15 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. But as I show below there is no wages breakout going on despite claims to the contrary.

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Social democratic politicians continue to walk the plank – into oblivion

It is Wednesday, so only a snippet of a blog about a few things that caught my interest recently. Words have meaning and concepts have meaning. That is, until you are a social democratic politician in Europe. Then meaning goes out the window as does mission – unless the mission is power at all costs. Social democratic values and views do not resemble neoliberal economic or right-wing social agendas at all. Yet in the hurly burly of European and British politics that is what has been happening. Across three nations (Sweden, Germany and Britain) we have seen this trend in the last few days. The claim is that it is clever politics to shift into the ‘centre’ and take back voters from the conservatives. The problem is that the centre moved significantly to the right over this neoliberal era. Now we have so-called progressive politicians who three decades ago would have looked like conservative right-wingers. It is not clever politics at all. They just lock themselves into positions that make it very hard to pursue true progressive policies. Meanwhile, the people they claim to care about are forced to endure damaging economic policies. Stupid all round.

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The blight of the visitor economy

One of the large funded projects that I have been involved in over the last few years concerns regional equity (in part). Our planning involves the completion of a new book (to be published sometime 2019) on the way in which regional development has become biased to the economic settlement (where jobs are created) at the expense of the social settlement (where people live). This might sound reasonable until you realise that it is another aspect of the way in which governments have abandoned their remit to ensure general prosperity, and have, instead, ‘allowed the market to work’ – which is neoliberal code for tilting the playing field in favour of corporations and global capital. One of the more recent neoliberal ruses in this context, that undermine the lived experience of local residents and boost the profits of large corporations is the concept of the ‘visitor economy’, which is the new buzzword for Tourist-led growth. Governments who claim they have run out of money are quick to hand out massive subsidies to large-scale events to promote the ‘visitor economy’. The same governments also subvert their own planning rules, encourage multi-national corporations to exploit loopholes in labour laws to cut wages and conditions, and privatise valuable public assets to ensure corporations can extract as much profit from activities as possible. Local residents’ rights are trampled in this process as corporations turn their suburbs into ‘global playgrounds’ while pocketing massive public subsidies into the bargain.

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The IMF and the Germans wreaking havoc in Northern Africa

Some years ago, I started collecting information about the so-called Maghreb countries, which typically refers to the region spanned by Algeria, Morocco, and Tunisia, although sometimes Libya and Mauritania are also included in the aggregation. You will find it referred to as the Barbary Coast in English literature. I was interested (as a long-term project when I get old :-)) to write a book about how nations broke away from the yoke of colonialism only to fall into the hands of the IMF and the World Bank, which over time were becoming the leading attack dogs for the neoliberal domination of governments. That book is coming in the future. But I have also been interested in the way the Eurozone Member States have moved into Northern Africa to extract as much surplus as they can from exploiting the resources these African nations have. You know a nation is in trouble when there are nightly riots which were motivated by economic desperation and a pernicious new (so-called) Finance Law, which became law on January 1, 2018. I am, of course, talking about Tunisia. With high levels of unemployment and underemployment and a lack of job opportunities particularly severe in the interior regions, the IMF decided, in its infinite neoliberal stupidity, to force the Tunisian government to impose a harsh austerity program including pushing up value added taxes which have had the effect of driving up medicine, food and energy prices and impacting on those most affected by the lack of jobs. Smart thinking! The riots have now followed.

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The Weekend Quiz – February 3-4, 2018 – 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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Oh poor Britain – overrun by chlorinated chickens, hapless without the EU

I have been doing some research on Brexit. I vowed to stay clear of the topic because of all the stupidity surrounding it from both sides, but most galling are the Labour Remainers who think the European Union is some sort of nirvana (with a few problems) and is on the road to redemption through some amorphous ‘reform’ process. Pigs might fly! I mentioned the recent publication by Open Britain (January 30, 2018) – Busting the Lexit Myths – in yesterday’s blog. This document seeks to state the case for British Labour’s “Campaign for the Single Market”. The ‘single market’ is held out as some sort of security blanket for all and sundry. Without it, Britain will apparently lapse into a state where the government will be unable to maintain services, where “genetically modified foods, chlorinated chicken, and access to procurement of protected sectors like healthcare” overwhelm the local economy, where environmental and working standards disappear and that hapless island floats off into a shocking dystopia. It is really the stuff of fantasy. But the image it evokes of the confidence in British democratic systems and its own capacity for volition is quite stunning. Without the EU, Britain becomes hapless. You laugh then cry. Pathetic.

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British Labour remainers – the reality seekers bogged down in myth

This is my Wednesday no blog day. I am working on various written pieces today. But I did stray on some anti-Brexit material overnight (thanks to all who sent it through), which shows how far the British Labour Party has to go before they can even pretend to be a progressive voice in politics. They are sounding very much like a European social democrat/socialist party on this issue and we know what happened to that lot across various elections over the last year. I have a few words to say about that in what follows.

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Planning public works – history has a lot to say if we listen properly

A few weeks ago, in my three part series answering questions about Modern Monetary Theory (MMT), I addressed the issue often raised about the fiscal policy emphasis in MMT, that it is difficult to time government spending injections to match the cyclical need. These criticisms go back a long way and were used by the likes of Milton Friedman to build up his case against discretionary fiscal activism in favour of monetary rules. Of course, that was an ideological preference, given the Monetarists wanted ‘small’ government and technocrats implementing economic policy. The basic precepts of Monetarism have not stood the test of time and the GFC and its aftermath have showed, beyond doubt, that monetary policy is an ineffective means of stimulating aggregate spending and that fiscal policy is the best way to counter non-government spending collapses. In those blogs, I outlined several ways in which fiscal policy could overcome ‘timing’ issues and deliver prompt stimulus when needed and be able to contract the stimulus in a timely manner once non-government confidence and spending had recovered. The points I raised are not new and have been discussed and made operational many times in the past. A tweet from my MMT colleague Stephanie Kelton last week reminded us of this again when the US National Resources Planning Board (NPP) was mentioned with a link to the The Internet Archive is a “non-profit library of millions of free books, movies, software, music, websites, and more” and is a fabulous resource for researchers. Reading the Report from the NPP is like music to the ears! History has a lot to say if we listen properly.

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IMF finds the Eurozone has failed at the most elemental level

The IMF put out a new working Paper last week (January 23, 2018)) – Economic Convergence in the Euro Area: Coming Together or Drifting Apart? – which while they don’t admit it demonstrates that the Economic and Monetary Union (EMU) has failed to achieve its most basic aims – economic convergence. The stated aim of European integration has always been to achieve a convergence in the living standards of those within the European Union. That goes back to the 1957 Treaty of Rome, which established the EEC (Common Market). It has been reiterated many times in official documents since. It was a centrepiece of the 1989 Delors Report, which was the final design document for the Treaty of Maastricht and the creation of the EMU. The success or otherwise of the system must therefore be judged in terms of its basic goals and one of them was to create this convergence. The IMF finds that the EMU has, in fact, created increased divergence across a number of indicators – GDP per capita, productivity growth, etc. It also finds that the basic architecture of the EMU, which has allowed nominal convergence to occur has been a destabilising force. It finds that the Stability and Growth Pact criteria has created an environment where fiscal policy has become pro-cyclical, which is the exemplar of irresponsible and damaging policy implementation. Overall, the conclusion has to be drawn that the EMU, at its most elemental level, has failed and defies effective reforms that would make it workable. It should be scrapped or nations should exercise their own volition and exit before it causes them further damage.

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