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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The Weekend Quiz – November 6-7, 2021 – 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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The pandemic that just keeps giving, and not in a good way!

Today, we have a guest blogger in the guise of Professor Scott Baum from Griffith University who has been one of my regular research colleagues over a long period of time. Today, he has taken a breather from teaching and exam marking to write about the long-run uneven labour market impacts of the COVID-19 pandemic. The COVID-19 pandemic has been the global emergency that just keeps giving. And not in a good way! Daily figures from around the world show that the pandemic’s health impacts continue to be widely felt. So, it’s over to Scott to explain how.

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The Weekend Quiz – October 30-31, 2021 – 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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In the battle between government and the hedge fund gamblers – the government has all the cards

Given my inflation report yesterday, I have shifted my usual Wednesday light blog post day and music feature to today. The economic debate has moved in recent years from ‘when is the government going broke’ to ‘hyperinflation is approaching’. It amazes me how puerile the economic commentary is as journalists and economists seeking headlines trot out headlines about how bad something (insert: insolvency, inflation, whatever is the latest craze) is going to be and what needs to be done about it. Nothing much happens in the real world and they keep their jobs and begin the next mania. Replay. And so it goes. It seems though that within this fictional world, that masquerades as informed economic commentary, subtle changes are underway. Governments worked out that during the GFC, the only weapon they had that would save the system was fiscal policy. They also worked out that large-scale bond buying by their central banks complemented the effective use of fiscal policy and didn’t deliver all the maelstrom that the mainstream New Keynesian textbooks predicted. The pandemic has accentuated that. And now there is this sort of stand-off between the ‘markets’ that were given too much latitude in the pre-GFC period and governments. The market players, who have become accustomed to manipulating government policy to ratify their speculative bets, which delivered massive profits to the hedge funds and the like, are now confronting central banks and treasuries that actually have power and cannot be bullied into delivering such policy ratification. That is progress and interesting to observe.

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When ‘new’ is really old and doesn’t get us very far – latest BIS paper

It takes a while for the mainstream organisations in economics, banking and finance to start to realise that the framework they use cannot explain the actual events in the real world, without serious revision. The problem though, is that the overall framework is flawed and the typical ‘response to anomaly’ approach, which changes a few assumptions to get ‘novel results’ is inadequate because it leaves one blind to all the possible policy solutions. The latest example is the Bank of International Settlements paper – Indebted Demand (released October 19, 2021) – which was written by three economists from Princeton, Harvard and Chicago Booth, respectively. They now recognise that rising inequality and massive household debt is a major problem for economic growth and macroeconomic stability. But, in maintaining ‘conventional’ assumptions about the government sector, they miss the vital linkages in the story, that Modern Monetary Theory (MMT) economists have been providing for the last 25 or so years. Whether these responses to anomaly represent progress or different variations in a flawed ‘chess’ strategy is a matter of opinion. My thought is they are a largely a waste of time, although marginally, they demonstrate that elements of mainstream macro theory that were considered core elements a decade ago are no longer sustainable.

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Marx’s dream does not justify ignoring day-to-day human suffering

One of the recurring criticisms I face when presenting at events comes from those who say they are ‘socialists’ or ‘Marxists’. They accuse me in various ways of being an apologist for capitalism, for offering palliative solutions to workers, which will delay the break down of the system and the revolution to socialism and communism. These critics proudly announce they follow Marx’s solutions and that they reject Modern Monetary Theory (MMT) because it is just a stooge for capitalism. The problem is that Marx had no real vision of how we would transit to Communism. A recent book referred to Marx’s philosophical position on this as a ‘dream’ (more later). And MMT is not specific to any mode of production, by which I mean, who owns the material means of production. It is applicable to any monetary system, and I cannot imagine any modern, technologically-based society functioning outside of that reality – socialist, capitalist or otherwise. But, moreover, the critics seem to be displaying a lack of basic humanity where they exercise reasoning that Noam Chomsky regularly refers to as belonging in a philosophy seminar. Even progressives (and socialists) have to be aware of humanity – as they plot and scheme for the revolution.

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Latest US quits behaviour signals possible shift in power to workers

The US Bureau of Labor Statistics published the latest JOLTs data last week (October 12, 2021) – Job Openings and Labor Turnover Summary – August 2021 – which has raised a possible shift in bargaining power in the US labour market towards workers. The most obvious sign of that is the rising quit rates, which are most prevalent in the low-wage sectors. While there is still some slack in the US labour market, the evidence suggests that workers are taking advantage of the improved job opportunities to pursue better wages and conditions. We will have to wait and see whether there are any significant wage outcomes arising from this behaviour or whether workers are just jumping from very bad to bad jobs. Time will tell.

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The Weekend Quiz – October 16-17, 2021 – 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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Australian labour market continues to contract

The Australian Bureau of Statistics released the latest labour force data today (October 14, 2021) – Labour Force, Australia – for September 2021. The background is that the entire East Coast is in or has been in lockdown over the last few months and for the two largest labour markets (NSW and Victoria) that lockdown has been very tight. Both states are in the process of easing restrictions as vaccination rates rise. The September 2021 data reveals that the longer NSW lockdown is now impacting heavily on employment growth which is now 4.7 points below the March 2020 level. Similarly, Victoria’s employment level has fallen and is 2.1 points below the pre-pandemic level. Overall for the nation, employment fell for the second consecutive month as did the participation, the latter cushioning the rise in official unemployment. But if we take into account the participation decline, the actual unemployment rate would be 5.7 per cent rather than the official rate of 4.6 per cent. Quite a difference. The turbulence caused by the pandemic has really masked the steady decline before that and my estimates are that the true unemployment rate, taking into account the rise in hidden unemployment since August 2019, is close to 7 per cent. Again, quite a difference. The more stable ratio – the Employment-to-Population ratio plunged again in September – two months of massive declines. Last month, I predicted the situation will would worse in September – and it did. So while the unemployment rate might be relatively low by recent historical standards, the situation is dire. 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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US labour market – recovery in a fairly languid state

Last Friday (October 8, 2021), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – September 2021 – which reported a total payroll employment rise of only 194,000 jobs in August and a 0.4 points decline in the official unemployment rate to 4.8 per cent. The combination of rising employment and falling unemployment might suggest that things are improving. But the reality is that the active labour force shrunk significantly as the participation rate fell by 0.1 points in the face of declining employment opportunities. The results suggest that the labour market recovery has slowed quite significantly from the situation mid-year. The US labour market is still 4,970 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. Further, it is clear that there has been a slight bias towards low pay jobs being added in the recovery at the expense of above-median wage jobs, particularly in the service occupations.

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The Weekend Quiz – October 9-10, 2021 – 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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The Weekend Quiz – October 2-3, 2021 – 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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(Modern) Marx and MMT – Part 2

This is Part 2 of my analysis of the way that fundamental ideas in Modern Monetary Theory (MMT) are totally consistent with a reasonable interpretation of Marx’s work. The motivation to clarify these issues came after I spoke at an event last weekend in the UK and shared a panel with a critic who claimed that Marx’s work established that MMT is wrong to assume that unemployment is a monetary phenomenon (insufficient spending) and that government spending can do anything about it. The claim was based on a view that Marx thought that capitalist firms have some unique logic that if they decide not to produce no amount of sales orders will induce them to expand production even if they have massive excess capacity (‘machines lying idle’) and a huge pool of idle labour to draw upon. No reasonable reading of Marx’s work would lead to that conclusion. In this part, we will consider what Marx thought about crisis and some later developments of his reproduction schemes, which make it clear that effective demand drives capitalist output, which conditions their employment decisions.

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The Weekend Quiz – September 25-26, 2021 – 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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Zero-hour contracts in the UK are an affront to progress

It’s Wednesday and so not much blog writing today. I have a few writing commitments to finalise in the coming few weeks and I need some time to do that. So today I provide some working notes and analysis of the data on UK Zero-hour contracts after I updated my dataset today. Some advertising of upcoming events follows and then some great guitar playing. A typical Wednesday at my blog it seems.

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Australian labour market in dire straits

At present, the pandemic is causing massive fluctuations in the labour force aggregates to the point that it is very difficult to know more than that things a bad even when conventional indicators would normally be moving in a direction that would lead to the opposite conclusion. Today (September 16, 2021), the Australian Bureau of Statistics put out the latest – Labour Force, Australia – for August 2021. The background is that the entire East Coast is in or has been in lockdown over the last few months and for the two largest labour markets (NSW and Victoria) that lockdown has been very tight. The August 2021 data reveals that the longer NSW lockdown is now impacting heavily on employment growth. Employment, working hours, and participation are now falling sharply and we have the situation where unemployment and the unemployment rate is falling because the labour force is declining faster than employment. Of course that just means that the workers who would normally have been counted as officially unemployed as they lost jobs are now outside the labour force – and we consider them to be hidden unemployed. Their participation decline is because employment opportunities have collapsed. The more stable ratio – the Employment-to-Population ratio fell by 0.8 points in August, which is a massive shift for one month. The situation will get worse in September. So while the unemployment rate might be falling the situation is dire. 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. The lack of support is one reason low-paid workers in high infection rate areas are still mobile – looking for work etc and spreading the virus further.

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Monetary policy is not effective in dealing with a pandemic – it must support active fiscal policy

It’s Wednesday and I have now settled back into my office after being stuck away from home for 9 weeks as a result of border closures between Victoria and NSW. So I am reverting back to the usual Wednesday pattern of limited writing, although today, the topic is worthy of some extended narrative. Before we get to the swamp blues music segment, I am analysing a speech made by the RBA governor yesterday on the role of monetary policy during a pandemic, whether low interest rates are driving house prices too high, and, what should be done about that. The conclusion is that he supports better use of fiscal policy – sustaining supportive fiscal deficits and dealing with the distortions that are contributing to high housing prices, via amendments to taxation (eliminating incentives for high income earners to buy multiple properties) and public infrastructure policies (more social housing).

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Remembering Tuesday, September 11

Last Saturday, September 11, we observed the anniversary of a terrible terrorist act, inflicted on a free people with a democratically-elected government by multinational conspiratorial forces. The terrorist attack happened on a Tuesday. It resulted in the death of thousands of innocent people and the offenders have never been brought to justice. We should etch that day – Tuesday, September 11, 1973 – in our consciences, especially if you are an American, British or Australian citizen, given the culpability of our respective governments in that despicable coup d’etat. Today, a bit of a different blog post as I remember this historical event and the way it undermined progressive thought for years. The type of economic policies introduced by Pinochet on advice from the ‘Chicago Boys’ became the standard approach for even the traditional social democratic parties in the 1980s and beyond. We still haven’t abandoned the macroeconomic ideology that accompanies this approach. And Chile, 1973, was the live laboratory. Yes, the Blairites and the Delors-types and the American Democrats, etc don’t chuck inconvenient people out of planes in the ocean to get rid of them like Pinochet did on a daily basis, but the macroeconomics invoked is not that different.

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NSW fails to control Covid (incompetence) and the labour market contracts sharply across the nation

There were two significant data releases from the Australian Bureau of Statistics this week that provide information about the state of the labour market – both in the short-term and also in terms of longer-term trends. The first release (September 8, 2021) – Labour Account Australia – June 2021 – is a quarterly dataset that allows us to tie together information about employment, persons, hours and payments. The second release today (September 9, 2021) is the – Weekly Payroll Jobs and Wages in Australia – Week ending August 14, 2021 – which is Australian Tax Office data that provides a much more current view of how the labour market is performing. That snapshot is especially valuable given the on-going tight lockdowns in Sydney and Melbourne and the impact they are having on employment and wages.

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