Australian labour market continues to go backwards as government sits idly by

On Tuesday (October 20, 2020), the ABS released the latest data for – Weekly Payroll Jobs and Wages in Australia, Week ending 3 October 2020 – which gives us the most up-to-date picture of how the labour market is coping with the on-going restrictions. Last week, the ABS released the monthly labour force survey data which covered the period up until September 14. Today’s data gives us an extra two weeks of information to gauge what is happening. It also provides us more accurate estimates of the impact of the harsh Stage 4 restrictions that have been imposed in Victoria to address the Second Wave of the coronavirus. Those restrictions were eased last weekend after the government has brought the outbreak under control. So hopefully, today’s data will signal just about the trough before the slow recovery begins as more activities open up. Overall, payroll employment has fallen by 0.7 points since July 25, 2020, when the lockdowns began in earnest. Unsurprisingly, payroll employment fell in the six-week period ending October 3, 2020 in Victoria by 2.3 points. Employment has also fallen in NSW by 0.7 points over the same period. The Victorian case is about lockdown. NSW is in decline because of failed macroeconomic policy, which goes to the performance of the federal government. The fact that the first recovery period failed to regain the jobs lost was an indicator that the policy intervention was insufficient. The second-wave job losses tell us clearly that more needs to be done by the Federal government. The problem is the federal government is now engaging itself in trivial political point scoring instead of showing economic leadership.

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The long-term unemployed are not an inflation constraint in a recovery

I gave some advice to a politician last week who had read some MMT literature that he said indicated that using the Job Guarantee reduces inflationary pressures in a recovery relative to a situation where a nation had an unemployment buffer stock. I was surprised by the question because the assertions didn’t appear congruent with the facts. It appeared to be rehearsing and endorsing the standard neoliberal supply-side agenda that defined the so-called ‘activation’ approach to unemployment, which militated against job creation programs in favour of training initiatives – the full employability rather than the full employment mindset. The fact is that long-term unemployment always lags behind the overall unemployment movements given it takes time for people to work their way through the duration categories until they get to 52 weeks, after which the national statistician terms a person long-term unemployed. The longer the recession the higher average duration of unemployment becomes and the larger the pool of long-term unemployed as people start to flow into that category. However, the way we think about solutions has been influenced by the myths about the way long-term unemployment behaves, which we summarise as the – ‘irreversibility hypothesis’. This idea has influenced governments to rely on training approaches rather than job creation as solutions to unemployment. And, it has led to the various pernicious unemployment management policies where the victims of the system’s failure to create enough jobs are considered culpable in their own misfortune and shunted through a series of compliance processes in order to receive income support, which do little to get them work.

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The Weekend Quiz – October 17-18, 2020 – 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 – recovery over and more fiscal stimulus is needed

The latest data from the Australian Bureau of Statistics – Labour Force, Australia, October 2020 – released today (October 15, 2020) shows that the recovery has stalled on the back of the Stage 4 restrictions in Victoria as that state dealt with the second virus wave. However, Tasmania and the Northern Territory also experienced employment losses in September 2020 and that is in part due to the locked internal borders that remain throughout Australia. Employment growth declined by 29.5 thousand but the rise in unemployment was only 11.3 thousand because the participation rate fell by 0.1 points. So, hidden unemployment rose (the slack sitting outside the official labour force). If we take a broader view of the labour underutilisation rate, underemployment rose by 0.1 points to 11.3 per cent and combined with the uneployment rate, the broad labour underutilisation rate rose by 0.2 points to 18.3 per cent. If we add in the rise in hidden unemployment then that figure rises to 20.3 per cent. Any government that oversees that sort of disaster has failed in their basic responsibilities to society. It must increase its fiscal stimulus and target it towards large-scale job creation.

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When disaster strikes the poorest nations, the IMF guarantees to make it worse

When a nation or region is experiencing the worst crisis the IMF always comes to the party and makes it worse. The latest evidence from those who study the detail of IMF interventions across the globe have found that the IMF has imposed harsh conditionalities (healthcare spending cuts, cuts to jobless assistance, cuts to public service wages and employment) in 76 out of the 91 loans it has extended to nations in peril as a result of the pandemic. On the other hand, data show that the wealth of billionaires has scaled new heights between April 2020 to July 2020 – a 42.4 per cent increase in their total wealth. If all that doesn’t tell us that the neoliberal system has overextended it indecency and rebellion is required then what else would? The point is that when disaster strikes the poorest nations, the IMF guarantees to make it worse. It should be dissolved immediately through defunding from national states and a new progressive, multilateral institution created that helps people not punishes them.

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Australia – Treasurer’s fiscal statement 2020-21 – abandons nation building

Here is some analysis of Tuesday’s Fiscal Statement from the Australian Treasurer. It was touted as the most important fiscal statement in 100 years (or something like that). What we got was a supply-side statement about markets creating jobs, massive tax cuts for high income earners and virtually nothing for the lowest paid. There was very little about the climate crisis. There was a lot of talk about jobs, jobs, jobs but no direct job creation. And the Government’s own estimates suggest that unemployment will remain at elevated levels through 2023 which means that the scale of the fiscal intervention is grossly inadequate. I see very little good in this fiscal strategy and a lot of bad. There are many commentaries available in the mainstream media which cover specifics and so I am just concentrating on things that I find important.

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Tracing the roots of progressive views on the duty to work – Part 7

This is Part 7 of my on-going examination of the concept of ‘duty to work’ and how it was associated with the related idea of a ‘right to work’. Today, I go back in history (again) to discuss a literature that influenced the evolution of my own early advocacy of a Job Guarantee. We see how I considered developments in the early C19th which established very clearly the responsibility of the government to act as an ’employer of last resort’ could be integrated with the buffer stock literature (which analysed the use of commodity buffer systems) in C20th to provide a coherent buffer stock full employment capacity in our modern economies. In Part, this establishes where the Job Guarantee idea, that is now central to Modern Monetary Theory (MMT) came from – at least, in terms of my early contribution to that body of work.

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US labour market – floundering now despite modest gains

On October 2, 2020, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – September 2020 – which shows that while employment continued to grow, the rebound has moderated significantly. Further, the unemployment rate fell by 0.5 points to 7.9 per cent but only because the participation rate fell by 0.3 points, which saw less workers in the labour force. If the participation rate had not fallen, then there would have been only a marginal improvement in the unemployment situation. The sources of that participation decline are not disclosed. The problem facing the US is that the lack of economic support from the Federal government means that the huge pool of unemployment will take years to reduce and the damage will accumulate. How far the recovery can go depends on two factors, both of which are biased negatively: (a) How many firms have gone broke in the lockdown? (b) Whether the US states will have to reverse their lockdown easing in the face of a rapid escalation of the virus in some of the more populace states. I do not see appropriate policy responses in place at present. From abroad, it looks like the US government is stepping back when it should be engaging in supporting all incomes and introducing large-scale job creation programs.

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The Weekend Quiz – October 3-4, 2020 – answers and discussion

Here are the answers with discussion for yesterday’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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Podcast – Unemployment, Surpluses and Investment

Its Wednesday so a shorter blog post today with an interview I recently did with financial market educational professionals, the i3 (Investment Innovation Institute) where I cover a range of topics of current interest from an Modern Monetary Theory (MMT) perspective. Then we get down with some very cool music. And that is it. And I turned off the debate today in the US after 5 or so minutes and wondered what the hell that nation has become. None of the contenders is electable would be my conclusion.

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Tracing the roots of progressive views on the duty to work – Part 6

This is Part 6 of my on-going examination of the concept of ‘duty to work’ and how it was associated with the related idea of a ‘right to work’. Neoliberalism has broken the nexus between the ‘right to work’ responsibilities that the state assumed in the social democratic period and the ‘duty to work’ responsibilities that are imposed on workers in return for income support. That break abandons the binding reciprocity that enriched our societies and has spawned a solid argument for a basic income. But the solution to the problem is to reinstate the link between opportunity to work and the societal benefits of work, especially as it enhances the material well-being of the least advantaged. In this part, I explore that theme.

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The inner Groupthink camp is breaking up – paradigm shift continues

Last week, there were some rather significant shifts in the public discourse surrounding macroeconomic policy and challenges made to the orthodox economics taboos that have been used to prevent governments from acting in the best interest of the citizens. First, the Australian treasurer broke away from the government’s previous obsession with fiscal surplus pursuit to announce that for the foreseeable future it was only going to concentrate on jobs and growth. In his statement, he basically refuted all the mainstream macroeconomic claims about fiscal deficits – higher interest rates, lower private investment, lower growth, lower private sector confidence etc. There is really nothing left of the mainstream position now and any politician or economist that tries to resurrect the ‘debt and deficit’ narratives of the past will find it hard gaining the same politician traction that they were able to garner some years ago at the height of the neoliberal period. And, if that was not enough, a former Federal treasurer attacked the ‘high priests’ of the central bank, demanding they buy up government bonds and help the government run “Mountainous” deficits to achieve full employment. The flood gates opened just a bit more after those interventions along the way to jettisoning all the mainstream nonsense that should have been abandoned decades ago.

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The Weekend Quiz – September 26-27, 2020 – 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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Latest employment data in Australia continues sorry tale and what I would do about it

On Tuesday (September 22, 2020), the ABS released the latest data for – Weekly Payroll Jobs and Wages in Australia, Week ending 5 September 2020 – which gives us the most up-to-date picture of how the labour market is coping with the on-going restrictions. This data provides more accurate estimates of the impact of the harsh Stage 4 restrictions that have been imposed in Victoria to address the Second Wave of the coronavirus. Overall, payroll employment has fallen by 0.9 points since July 25, 2020, when the lockdowns began in earnest. Unsurprisingly, payroll employment fell in the six-week period ending September 5, 2020 in Victoria by 2.8 points. Employment has also fallen in NSW by 0.5 points in the last 6 weeks. The Victorian case is about lockdown. NSW is in decline because of failed macroeconomic policy, which goes to the performance of the federal government. The fact that the first recovery period failed to regain the jobs lost was an indicator that the policy intervention was insufficient. The second-wave job losses tell us clearly that more needs to be done by the Federal government. I provide some clues as to where an extra $100 billion might be spent below.

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There is no inevitable trade-off between saving the lives of the aged and economic prosperity

Many issues that become ‘hot topics’ in public debates are really non-questions despite the heat they raise. All sorts of experts advance views, television current affairs programs trawl over them with various of these experts making careers for themselves, politicians take up hours of their time and our time discussing them, yet, when you really break the issue down – there is nothing much to see. The seemingly very erudite debates, discussions, opinions are all based on false starting premises, which are assumed and rarely discussed. This sort of charade is all the legacy of living in the fictional world created by my profession, which has distorted public discourse so badly that we now have people saying old people should be allowed to die terrible deaths from COVID so the young people can have jobs. These are old people who worked all their lives to help build our nations, who fought in World Wars to defend our freedom from daunting enemies, old people who cared for us personally, and old people who mostly, probably, have the joy of life before them each day they open their eyes, just like any of us. The problem is that the whole construction is based on a false premise: being that there has to be widespread economic damage if we choose to protect the health of our peoples. That premise is based on the failure to understand that the currency-issuing government can attenuate any economic losses if it chooses to adopt appropriate economic policy interventions. The fact that real GDP and employment has fallen significantly this year is testament to a failure to use fiscal capacity. We should be better informed before we get into elaborate but flawed debates that essentially come down to turning one population cohort against another.

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Australian labour market – improving modestly but much more fiscal stimulus is required

The latest data from the Australian Bureau of Statistics – Labour Force, Australia, August 2020 – released today (September 17, 2020) shows that employment rose by 0.9 per cent as the economy struggled to shift back into growth mode. In part, the moderate result was due to the impact of the Stage 4 restrictions in Victoria as that state dealt with the second virus wave. Victoria was the only state or territory to endure negative employment growth in August. As the virus situation is coming under control and the lockdowns are easing, Victoria will rebound fairly quickly – how far depends on the damage done during the closures. The lack of external migration is also seeing the labour force growth moderate significantly, which allowed unemployment to decline by 86.5 thousand on the back of the modest employment boost. Participation also rose. The reality is that if we take a broader view of the labour underutilisation rate (adding in the hidden unemployment who have left the labour force since March) to the official unemployed and underemployed, we find around 19.5 per cent of the available labour supply is not working in one way or another. Any government that oversees that sort of disaster has failed in their basic responsibilities to society. It must increase its fiscal stimulus and target it towards large-scale job creation. My overall assessment is: (a) The current situation can best still be described as near catastrophic; (b) The Australian labour market needs massive fiscal policy intervention targetted at direct job creation; (c) The pre-pandemic need for a fiscal stimulus of around 2 per cent has changed to a fiscal stimulus requirement of several times that; (d) The Federal government’s attempts to date have been seriously under-whelming and we will soon see the results of their withdrawal of the unemployment benefit supplement (a ridiculous decision); and (e) Any government that oversees that sort of disaster has failed in their basic responsibilities to society.

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There is no limit to government debt issuance – if you have your own currency

Japan has a new leader of the ruling Liberal Democratic Party, who, given the majority of the LDP in the Diet will become prime minister in the coming days. He was interviewed over the weekend about the current crisis and the role that the Japanese government can play to attenuate the costs. He stated clearly that there was no limit to government debt issuance. The meaning of this statement is clear. The Japanese government should ignore claims that its public debt ratio is too high or is facing impending insolvency or bond-market revolts or any of the other manic predictions that economists who do not know better keep making. Instead, as Yoshihide Suga noted, the challenge is jobs and incomes. The only limits are real resource constraints and when there is a pandemic and rising unemployment, those constraints ease and the fiscal space for more net spending increases. At least one world leader understands that.

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British legislation must be able to override EU law – that is what independence means

Piety has no bounds it seems. The Sunday Times ran an Op Ed at the weekend (September 12, 2020) – John Major and Tony Blair: Johnson must drop shameful no-deal Brexit bill or be forced to by MPs (paywall) – which told us how angry former British Prime Ministers Tony Blair and John Major are with Boris Johnson about the Government’s intention to introduce the Internal Market Bill to ensure the so-called Withdrawal Agreement is compatible with national law. They started by appealing to the international treaty status of the Withdrawal Agreement, which outlined Britain’s terms of exit from the EU. The Op Ed called the decision by government as “shocking”. The Remainers are jumping on the ‘breach of international law’ bandwagon like there is no tomorrow. Of course, they never highlight the fact that they want to be part of an arrangement, which is created by international law and which regularly violates that law to serve its own political and elite interests. And those breaches, which include gross human rights abuses and deliberately undermining the prosperity of its own citizens through mass unemployment and more, have had severe consequences for humanity. The fact that the British government is now declaring national law will no longer be subjugated and subservient to international agreements is not in the same ball park of international violations.

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The Weekend Quiz – September 12-13, 2020 – 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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