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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The Weekend Quiz – February 5-6, 2022 – 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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Some thoughts on a five-year development plan for Timor-Leste

Some years ago, I did some work for the Asian Development Bank on Pakistan and Central Asia. It was a really interesting experience because it taught me a lot about the challenges facing poorer regions who have dependencies on imported energy and food and limited export opportunities. Since then I have been studying a number of countries and am convinced that development strategies have to fundamentally change if the poorer nations are to achieve any hope of sustainable development. At present, I am working on the development of such a framework, which will incorporate the best-practices proposed by scholars who similarly reject the traditional IMF/World Bank development model. Specifically, I am focusing on Timor-Leste, which is about to stage a presidential election (March 19, 2022). Xanana Gusmão’s party – National Congress for Timorese Reconstruction (CNRT) – has backed former president Jose Ramos-Horta against the incumbent Fretilin President, Francisco Guterres and the third candidate Martinho Gusmão (United Party for Development and Democracy – PUDD). It appears that if Jose Ramos-Horta is elected, there will be a dissolution of parliament and early elections will be held after a period of political turbulence following the 2017 election. Early indications are that Ramos-Horta is well placed after the conduct of Guterres in recent years. The new government must consider a new development strategy and so I am working to provide some structure to that goal from a Modern Monetary Theory (MMT) perspective.

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RBA rejects theory that interest rate rises cure Covid and make trucks go faster

It’s Wednesday and a ‘blog lite’ day but there was an important speech delivered by the Governor of Australia’s central bank today that reveals the reasons that the RBA is once again refusing to be bullied into increasing interest rates rises by the ‘markets’. It is almost comical to observe the ludicrous self-importance that the ‘markets’ are exhibiting at the moment. Every day there is a new article or segment on the finance reports about how the ‘markets’ are going to win the battle against the RBA, who will buckle soon on interest rates. Well, yesterday the RBA didn’t buckle and they made fools of the ‘markets’. Remember the ‘markets’ is just a collection of economists who work for financial institutions that make more profits when interest rates are higher. It is no wonder they are always demanding higher rates. That is what vested interests are about. And for the media to just continually give them a platform, especially the national broadcaster, is a disgrace. Anyway, the ‘markets’ lost out yesterday and the RBA clearly doesn’t think that interest rate rises cure Covid and make trucks go faster.

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New UK cost of living dataset improves on standard CPI release – somewhat

The UK Office of National Statistics released a new dataset last week (January 28, 2022) – CPI-consistent inflation rate estimates for UK household groups (plutocratic weighting) – which resumes its analysis of the differential impacts of price rises on different cohorts in the population. Other national statistical agencies have also been doing for some years now. For example, the Australian Bureau of Statistics regularly publishes its – Selected Living Cost Indexes, Australia (last edition September-quarter 2021, published November 3, 2021). This type of data fills the breach left by the standard CPI releases

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Income support for children improves brain development

When I first came up with the idea of a buffer stock employment approach to maintain full employment and discipline the inflationary process (back in 1978), the literature on guaranteed incomes was still in its infancy. The idea of a basic income guarantee was still mostly constructed within the framework Milton Friedman had laid out in his negative income tax approach, which I first came across when reading his 1962 book Capitalism and Freedom, while I was an undergraduate. I wasn’t taken with the idea and the preferred an approach to income security that not only integrated job security but also had a built-in inflation anchor. When I developed that idea, inflation was still conceived of the main problem and governments were fast abandoning full employment commitments because mainstream economists told them TINA. I thought otherwise. However, as I developed the buffer stock approach further in the 1990s as part of the first work that we now call Modern Monetary Theory (MMT), nuances about additional cash transfers became part of our approach. I refined those ideas in work I did developing a minimum wage framework for the South African government in 2008. I was reminded of all this when I read a report in New Scientist last week (January 24, 2022) – Giving low-income US families $4000 a year boosts child brain activity. Some might think this justifies the BIG approach, whereas it strengthens the case for a multi-dimensional – Job Guarantee.

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The Weekend Quiz – January 29-30, 2022 – 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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Natural climate solutions – code for financialisation of nature and profits for capital

I re-read a consulting report from May 2021 – Nature and Net Zero – which was commissioned by the World Economic Forum and prepared by a management consulting company. One of those consulting companies that exemplifies the neoliberal era where everything and anything is classified in terms of its financial value or corporate value and the company’s grand visions for nations amount to little more than transferring massive amounts of public money into their coffers for blueprints about privatising public wealth and skating over local citizens’ rights in their haste to financialise the world. The report is no different really and represents everything that is wrong with the way the elites in the world are taking over the ‘green transition’ agenda and reconfiguring it to suit their own ends – profits and control.

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