US labour market rebound moderating – policy support is lacking

On August 7, 2020, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – July 2020 – which shows that while employment continued to grow, the rebound has moderated. 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. But 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 – August 8-9, 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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Fundamental lack of leadership vision in Australia’s response to the pandemic

Today, the Prime Minister of Australia indicated that the ‘effective’ unemployment rate in Australia is heading to 13 per cent as a result of the harsh lockdowns that have just begun in Victoria as it reels under a second wave of coronavirus (Source). The effective rate incorporates the official estimate (based on activity tests – search and willingness), the number of workers who have dropped out of the labour force due to a lack of opportunities, and those on wage subsidies who are not working at all. The Stage 4 Melbourne lockdown for the next six weeks will cut GDP by a further 2.5 per cent. While economists fuss about microeconomic losses, the daily output and income losses from the unemployment and underemployment are massive, not to mention the huge personal, family and community losses. A responsible government, which issues its own currency and can procure any productive resources that are idle, would be doing everything it could to ensure these losses do not occur. It is not rocket science. The Federal government could ensure those who are unable to work due to the lockdown maintain their current incomes. The overwhelming impression I am getting as we enter the fourth month of this crisis is that the federal polity in Australia is lost. The scale of the disaster has so confronted the neoliberal DNA of the major parties that they are failing to articulate a coherent and viable short- and medium-term plan to deal with the crisis. The challenge is for the government to abandon its inclination to see a ‘return to surplus’ as a benchmark it aspires to. That mentality is making this disaster a catastrophe. We can do much better.

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Tracing the roots of progressive views on the duty to work – Part 1

This will be a multi-part series and is part of the new book that Thomas Fazi and I are finalising. The series could have easily been sub-titled: How the middle-class Left abandoned the class fundamentals, became obsessed with individualism, and steadily descended into political obscurity, so much so, that the parties they now dominate, are largely unelectable! Because the discussion largely covers that problem. I have been thinking about why a modern so-called ‘progressive’ position draws a line in the sand about retaining a pernicious unemployment benefits system, which provides below poverty rate payments coupled with a harsh system of work tests, despite there never being enough jobs, and think that a guaranteed employment commitment from government with benefits that allow for a decent life, is somehow offensive. The corollary is that somehow the educated Left think that a duty to contribute to society through work is also offensive and they would rather people who can work be able to have the right to output when they are not prepared to contribute to the production of that output. None of these people would approve of a person walking into their homes and raiding their fridge for food. None would approve of some person taking their expensive racing bike parked outside some cafe while they were inside sipping latte! And yet, they do not seem to seem to appreciate the contradiction, when they also rail against capitalists who access the distribution system without contributing to the generation of output. It is no wonder that the traditional working class find the modern ‘Left manifesto’ repugnant and vote accordingly. This is Part 1 of an extended discussion that is the product of some months of research (work!).

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The Weekend Quiz – August 1-2, 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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Inequality and poverty not just an indigenous problem

On Saturday (July 25, 2020), The Australian published another Op Ed that I wrote in collaboration with Noel Pearson. I understand that many people (mostly abroad) were unable to access the article (as a result of paywall restrictions on certain devices). I am unable to post the final article due to copyright restrictions but I can provide the draft article which was not too different from the final version. It also seems that the faux-progressives have somehow decided that our partnership (Noel and I) symbolises how Modern Monetary Theory (MMT) and the Job Guarantee is actually some sort of far right plot to rid the world of welfare support for the disadvantaged and enslave them in onerous Gulag work camps. It is quite amusing really but worrying at the same time. Our partnership is confusing people who cannot cope with nuance and complexity. The so-called Left have characterised Noel as being somehow on the Right, which leads them to conclude that I am selling out on my progressive credentials by working with him. Conversely, the Right, who think Noel is one of them, are accusing him of being used by a Communist (me). Hilarious. If only they knew!

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RBA governor denying history and evidence to make political points

Today, the Australian Treasurer is out in force telling us that the fiscal situation is dire and that they have to start making cutbacks. Meanwhile in the real world, the unemployment rate continues to rise, businesses continue to fail, and the lowest paid workers, are being forced to continue working in dangerous health situations because they cannot ‘afford’ to stay at home like the better paid workers and protect their health. Its doesn’t bear scrutiny. My research centre released an updated report this week that also bears on the situation. The current fiscal stimulus is probably, at least $A100 billion short of where it should be, yet the government is announcing cuts. It will not turn out well. Meanwhile, across town, the Reserve Bank governor has been trying to deny the RBA has the currency capacity to allow the Treasury to keep spending without issuing debt. Already, the Labor party are making political points out of the rising public debt, which just makes them unelectable really, rather than savvy. The RBA governor’s intervention also just proved he is prepared to deny history and evidence to make political points, which had the other consequence of demonstrating how lacking in ‘independence’ the central bank is from the political process. And so it goes on.

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Latest Australian payroll data suggests employment damage from shutdown is worse than thought

The evidence that is mounting is allowing researchers to better assess the damage that is emerging from the way in which we are dealing with the coronavirus. One of the important questions that will determine the future trajectory of our economy relates to how many workplaces have disappeared altogether as a result of the businesses disappearing forever as a result of the flow-on impacts of the compulsory lockdown. Last week (July 14, 2020), the Australian Bureau of Statistics released their latest employment data taken from Australian Tax Office data – Weekly Payroll Jobs and Wages in Australia, Week ending 27 June 2020. They have slowed the release cycle on this data (for reasons they have not disclosed), so it is a month since I have analysed it. The latest data covers the period up to June 27, 2020. The monthly labour force data released last Thursday for June 2020, covers a period that ends around June 12, 2020, so the payroll data provides a more recent snapshot of the state of affairs – an extra three weeks. As the enforced restrictions were eased, payroll employment recovered somewhat and by the end of June is now 5.7 per cent below the March 14, 2020 levels. It appears though that, while part-time work has recovered, full-time work continues to decline. Examining the age profiles of the recovery demonstrates that prime age workers have not enjoyed a commensurate recovery. The two observations are linked and are suggestive of the impacts of the initial damage have now permeated the supply chain and employment losses are spreading outside areas initially most impacted by the lockdown. So my prediction in March that many businesses will disappear because the fiscal support by the government was inadequate and poorly targetted in terms of protecting jobs is looking like being validated by subsequent data. But it now seems that the recovery in employment will be protracted given how many jobs have been lost to date and the renewed lockdowns in Victoria. A much larger fiscal intervention is required and it has to be directed at workers rather than firms and support direct job creation.

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The Weekend Quiz – July 18-19, 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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Australia labour market – one step forward up a gigantic mountain

The Australian labour market recovered somewhat as the governments eased the lockdown restrictions in the service sector. The latest data from the Australian Bureau of Statistics – Labour Force, Australia, June 2020 – released today (June 18, 2020) shows that employment rose by 1.7 per cent. However, participation also rose as job opportunities increased, and the labour force change outstripped the employment increase, which meant that unemployment rose by 69,300 thousand. The rise in employment was totally accounted for by part-time jobs growth, which is a worrying sign. The decline in full-time employment signals that some businesses are closing or others are restructuring their workforces towards more precarious work. The official unemployment rate of 7.4 per cent continues to underestimate the actual impact given that the labour force is still 384 thousand lower than it was in March 2020. Adding those ‘hidden unemployed’ workers back to the underutilisation rate suggests that 22 per cent of the available labour supply is not working in one way or another (unemployment, hidden unemployment, and underemployment). 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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MMTed Q&A – Episode 7

Here is Episode 7 in our weekly MMTed Q&A series. This is the third- and final part of my discussion on the Job Guarantee with Dr Pavlina Tcherneva and in this episode we discuss the applicability of Job Guarantee to nations that have both fiscal and external deficits and are exposed to international currency markets. While such a nation faces somewhat different pressures from their external sector, the point remains that if they have their own currency, they can always ensure that all the available productive resources at their disposal can be fully employed. The catch is that that level of activity may not deliver a high standard of material prosperity. We discuss examples such as Indonesia, Pakistan, South Africa and Argentina.

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Governments are now in an ideological bind

Today’s blog post is a draft for another deadline I have this week, this time writing for a European publication on the state of affairs in the Eurozone. I have four major pieces of work to finalise this week so, as in yesterday, I am using this time to progress those goals. For many regular readers it will be nothing new. But, putting the arguments together in this way might just provide some different angles for people who haven’t thought about things in this way before. Regular transmission will resume on Thursday (probably).

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MMTed Q&A – Episode 6

Here is Episode 6 in our weekly MMTed Q&A series. This is the second-part of my discussion on the Job Guarantee with Dr Pavlina Tcherneva and in this episode we discuss the central role that employment buffer stocks play in Modern Monetary Theory (MMT), a point that is often missed by those who think it is just a job creation program and of secondary (and dispensable) importance to the ‘banking’ aspects of MMT. As you will hear (and see), the Job Guarantee is an integral part of MMT and that status is derived from the elemental insights that MMT offers about the way a currency works. If a person thinks the Job Guarantee is an unnecessary add-on to MMT, then they haven’t understood the basics of MMT. It is as simple as that.

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We can have full employment again in a green world

Last Saturday, the Weekend Australian, Rupert Murdoch’s daily national newspaper, had a relative Modern Monetary Theory (MMT) avalanche, with two core MMT-style articles published and two that were supportive rather than hostile. That tells you something about the way the world is shifting. I have received a bit of flack for publishing an Op-Ed piece in that newspaper from those who style themselves as Leftists. It is the same old argument – dealing with the devil. And the same old reply – if you want to influence policy then you have to talk to those who make policy. It is easy plotting revolutions over lunch. There has been a lot of groundwork laid over the last several months to bring people into the conversation. It is quiet stuff. Discreet. And as things unfold I will make some of the developments public. At present, all I can say is that I have a document before the Prime Minister today and there is a lot of behind-the-scenes workshops/briefings going on at state-level. And, while activists spend a lot of time ‘pressuring’ this person and that person on social media, the big shifts that are going on at present, including the publication of Noel Pearson’s piece and my article, are not being helped by aggressive social media confrontations. Sometimes it is better to work in a subtle way and exploit networks where they are available. That is not to say that activism to promote MMT is not appreciated and helpful. But we do need to pick our path. Anyway, a number of people asked me to publish my article here because they cannot get behind The Australian’s paywall. So here is the penultimate version which is a few hundred words longer than the actual article, which I cannot provide due to copyright restrictions. I also cannot provide Noel Pearson’s accompanying and complementary article but it was magnificent.

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US labour market reverses direction but for how long?

On July 2, 2020, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – June 2020 – which shows that the US labour market response to the relaxation of lockdown controls gained pace in due, although the question that remains is how long can the governors of the states allow the relaxation to continue given the alarming spread of disease. Already, nations such as Spain are returning to lockdown as their hospital systems become overwhelmed by the ‘second wave’ following easing. And US states such as Texas, Arizona and Florida are approaching the time when they will have to return to some form of lockdown given the health crisis that premature easing has created. The problem is that the lack of economic support from the Federal government makes those decisions difficult to take and extremely damaging for the unemployed. It is almost unbelievable that the Republican politicians are endorsing cutting unemployment support. But, in June, as the economy reopened, the payroll numbers improved as you would expect with a 4.8 million increase in jobs net) and the official unemployment rate rate falling to 11.1 per cent. The numbers filing for unemployment insurance are now falling but now top 49.2 million since March 7, 2020. A further 1.4 million filed in the week ending June 27, 2020. 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. But I do not see appropriate policy responses in place. The US government should have guaranteed all incomes and introduced large-scale job creation programs and a Job Guarantee as an on-going safety net.

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The Weekend Quiz – July 4-5, 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 minimum wage case decision – a scandalous indictment of our system

On June 19, 2020, Australia’s wage setting tribunal, the Fair Work Commission handed down its – Decision: Annual wage review – which saw the National Minimum Wage (NMW) rise by just 1.75 per cent per cent from July 1, 2020. However some of the flow-on increases (awards linked to the NMW), which would normally have been adjusted on the same date have been staggered (November 1, 2020 for Group 2 Awards and February 1, 2021 for Group 3 Awards). The new minimum wage will be $753.80 per week or $19.49 per hour (a measly 35 cents per hour extra). In terms of any inflation measure you want to choose, the FWC’s decision represents a real wage cut for the lowest paid workers (Group 1) and even larger cuts for the other Groups as a result of the staggered wage rises. There is certainly no joy for workers when the mindless pursuit of austerity by the federal government slows growth (before the pandemic), which the government’s own wage setting tribunal then uses as a pretext (the slow growth) to cut real wages. Meanwhile the major employer groups argued for zero nominal rise while enjoying growth in profits with rising productivity growth. A scandalous indictment of our system.

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MMTed Q&A – Episode 5

Here is Episode 5 in our weekly MMTed Q&A series. And when you are done with the answers you can Zoom some mates and have a dance party to the music that follows. This week we further reduced the length of the Episode and focused on one big issue with a special guest.

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Apparently the government has no money but then has plenty

Things are obviously getting desperate out there in financial media commentary land. If one could express written text in graphical terms then there are a number of financial journalists out there that look – like a rabbit caught in the headlights – that is in a state “of paralyzing surprise, fear, or bewilderment.” A good example of this increasingly observed syndrome is an article in The Australian newspaper today (June 30, 2020) by Adam Creighton – Never forget that governments have no money – it is always ours (subscription required). This sort of journalism is becoming an almost daily occurrence as it becomes obvious that capitalism is now on state life support systems and the extremities of government intervention are demonstrating very clearly what Modern Monetary Theory (MMT) economists have been saying – and the only ones that have been saying it – for 25 years or so. I often note that Japan has already pushed the fiscal and monetary policy parameters beyond the limits most countries have explored in peacetime and mainstream economists have systematically predicted various scales of disaster and have always been wrong. Now all countries are at extremes and still no fiscal disaster. But the mainstream mouthpieces – these financial journalists who seem to think the stuff they read in first-year text books from mainstream economics programs are in same way the basis for expertise and knowledge – are in advanced states of dissonance. Drivel follows.

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Governments should do everything possible to avoid recessions – yet they don’t

In May 2020, the IMF published a new Working Paper (No 20/73) – Hysteresis and Business Cycles – which provides some insights into what happens during an economic cycle. The IMF are somewhat late to the party as they usually are. We have known about the concept and relevance of hysteresis since the 1980s. In terms of the academic work, I was one of the earliest contributors to the hysteresis literature in the world. I published several articles on the topic in the 1980s that came out of my PhD research as I was searching for solutions to the dominant view in the profession that the Phillips curve constraint prevented full employment from being sustained (the inflation impacts!). The lesson from this literature in part – especially in current times – is that governments should do everything possible to avoid recessions. The hysteresis notion tells us clearly that the future is path dependent. The longer and deeper the recession, the more damaging the consequences and the longer it takes to recover while enduring these elevated levels of misery. Organisations like the IMF have never embraced that sort of reasoning, until now it seems. They certainly didn’t act in this way during the Greek disaster. But, better late than never.

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