Australian labour force data – some respite

After several months of very poor labour market news, today’s release by the Australian Bureau of Statistics (ABS) of the Labour Force data for February 2013 provides some respite. In fact, all the main indicators moved in a virtuous direction, which is a welcome outcome. Caution is required in interpreting monthly data movements as the standard errors are larger than most would imagine. But there was a sharp rise in total employment reported by the ABS, the participation rate rose and monthly hours of work improved. Most of the rise in employment was in part-time jobs. This is the first month in several that employment growth has outstripped the underlying population growth rate. The unemployment rate remained unchanged at 5.4 per cent but would have been 0.3 points lower had the participation rate not risen. So unemployment rose a little and hidden unemployment fell more. However, the continuing negative feature that should warrant immediate policy concern is the appalling state of the youth labour market. The 15-19 year old segment of the labour market continued to deteriorate even though part-time job opportunities surged. That is a deeply disturbing sign. Overall there are still at least 12.5 per cent of the willing work force without work (either unemployed or underemployed). So there is still a massive job shortage and today’s data shows that in February only a tiny fraction of that shortage was reduced. We will also await revisions!

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Australian labour underutilisation rate is at least 13.4 per cent

The Australian Bureau of Statistics released their latest – Persons Not in the Labour Force, Australia – release for September 2012 last week (March 7, 2013). This is an annual publication and provides a detailed breakdown of the demographics of those not in the labour force and the reasons for that status. In particular interest to me is the information the data provides on discouraged and marginal workers. The data allows us to reconstruct the labour force data, under certain assumptions, to generate a very broad indicator of labour underutilisation in Australia, which includes official unemployment, underemployment, and hidden unemployment. What this indicator reveals is that Australia is enduring massive wastage of labour and statements by the Federal Treasurer and other Ministers that we are close to full employment should be treated with the contempt they deserve. That is the subject of this blog.

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Saturday Quiz – March 9, 2013 – 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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The denial of gravity

I was talking about economics at lunch-time today (as you do) and my company was irate about a TV interview that aired last night on the national public broadcaster (the ABC). The source of the angst was the increasing tendency of interviews on the ABC (and other media outlets) to express ill-informed opinions that serve to bias the interview and reinforce the dominant neo-liberal ideology. Such behaviour conditions the public to accept highly contestable propositions as fact, constructions of which, then defines the “solutions” and leave off the discussion table alternative scenarios and propositions that, in fact, represent the responsible policy options given the circumstances. This bias is part of a more general syndrome that defines the neo-liberal era, which is the equivalent of denying gravity. We are now fed a string of statements that parade as authoritative commentary or evidence that are, in fact, total fabrications and deny basis relationships that are at the heart of our monetary systems. This denial of “gravity” has become an art form and is used to bully us into accepting outcomes that advance the interests of the elites and undermine broader social welfare. It is a most extraordinary conflation of values and lies.

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Saturday Quiz – March 2, 2013 – 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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Learning standards in economics – Part 3

This is Part 3 (and the final part) of my mini-series of blogs – “Learning Standards in Economics”. In this blog I consider the way in which learning standards have evolved in the United Kingdom. I propose that they privilege the curriculum development in favour of a monistic approach – which biases programs to advance the competiive, neo-classical model as the way the real world operates. These standards deter universities from offering pluralistic approaches to economics that promote its broad social science qualities. The narrow monist approach, of-course, serves to reinforce the neo-liberal dominance in economic policy making. Such an approach has been one of the principle reasons the world is mired in financial and economic crisis and doesn’t appear to be able to find a way out. The policy framework being imposed by governments is closing the door to growth and increasing unemployment and poverty rates. It is based on the mainstream textbook models that dominate economics education. I hope the Australian exercise in developing so-called “learning standards in economics” will reject the neo-classical textbook monistic approach and come out in favour of a radical rethink of the way economics is taught in Australian universities. However, given the real politic that surrounds these exercises and the bodies that are key players in the development of the standards I won’t be holding my breath on that one.

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Learning standards in economics – Part 2

Today is Part 2 of my little mini-series on “Learning standards in economics”. It might appear to be a break in continuity from yesterday’s blog but when I get around to Part 3, I think you will see the way in which today’s discussion fits well. Last month (January 24, 2013), the Peter Peterson Foundation – which is just a propaganda front for people with too much money and influence designed to advance spurious ideas about the economy – released a statement – College Students Launch Campaigns Across the Country to Activate a New Generation on the Nation’s Fiscal Challenges. When I delved into what it was about the story became very mirky indeed. Teams of students are being assembled under the banner of what we might call the “we are self-important and want to show it” banner and being coaxed into action The essential part of education – the search for knowledge – is the missing part. The myth that the US government is going broke is the starting point not the enquiry.

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Saturday Quiz – February 23, 2013 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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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One Ferrari does not a recovery make

I thought that blog title today was appropriate given that Aristotle was Greek. Today I explore motor vehicle registrations – well to be exact, a single registration. That is a backdrop to a brief discussion about the OECD’s latest publication – Going for Growth 2013 Report – which takes the ludicrous to a new level. These organisations need to be closed and the cash that governments pump into them to provide very amenable – some would say, over the top – working conditions (high pay, no tax obligations, well supported travel, first class facilities etc) could be diverted into something more useful. Like provide some low-paid workers with jobs. Lets assume one OECD manager earns the same wage as about 20 low-paid workers per week. The trade-off 1 job lost for 20 gained sounds a good bet to me. Anyway, amidst all the talk about structural agendas and reform zeal there is an ugly truth. There has to an easing of the macroeconomic constraint that is preventing economies from generating enough jobs. Firms need to see spending before they will increase production. Making life harder for workers through cuts to wages, conditions of work, pensions and the like will not create a single job. I lie – at least one job. Some OECD official will get assigned the job of evaluating their work and then a renewed bout of lies will emerge clothed in techno-speak. I just know that one Ferrari does not a recovery make. It tells me that the world is turning for the worse.

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Progressive narrative should be human focused and uncompromising

I was reading an interesting article at the weekend (February 17, 2012) in The UK Independent – The Left should learn about plain speaking from George Galloway – which was about language and the way ideology is communicated. The use of nomenclature and communication methods is clearly central to the way a paradigm establishes itself and maintains its popularity even when its legitimacy in theoretical and empirical terms evaporates. The article points to the failure of the “left” to construct an alternative narrative that relates directly to the human experience. It demonstrates that the “right” can lie but relate those lies at a human level to gain traction. They appeal to our intuition which as I noted in this blog – When common sense fails – is bound to lead us astray. There was an excellent example of this in two articles recently. The left has become so paralysed by its embrace of management-consultant styled, neo-liberal techno-speak that it can no longer speak to us at the human level. With millions of people unemployed it should be a political no-brainer to address the concerns of that cohort to garner political support. Instead, so-called progressive governments and parties in advanced nations fall foul of the neo-liberal dialogue about “scroungers” and “dole-bludgers” and demonstrate their resolve by invoking harsh welfare-to-work policies. Nothing progressive will ever come from that surrender to neo-liberalism. That is what this blog is about today.

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Spain is not an example of reform success

There was an article in the Financial Times last week (February 12, 2013) – Europe’s labour market reforms take shape – that claimed that Spain was on the path to glory by hacking into rights of its workforce (that is, the 75 odd percent that still have jobs). It followed another Financial Times article (February 11, 2013) – Productivity is Europe’s ultimate problem – written by the deputy managing director of the IMF and redolent of the ideology that organisation spins as facts. Both articles are part of a phalanx in the conservative press that prefer to lie rather than relate to the facts. Apparently we have a new poster child – Ireland was the first one (now forgotten as it wallows in the malaise of fiscal austerity). Now, Spain is the go – a model for savage labour market reform and export led growth. Well it is a model – for how to ensure the unemployment rate and poverty rates continue to rise and you produce an economy that stops employing its 15-24 year olds. Some poster child! Spain is not an example of reform success. Rather, it demonstrates how misguided the policy debate has become and how a policy devastation is now being seen as good. Truly bizarre.

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Saturday Quiz – February 16, 2013 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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 government – failing in its most basic responsibility

The Australian government is demonstrating to all of us that they are mishandling fiscal policy. The background is simple. Australia saw its growth vanish and unemployment start rising in December 2008 as the financial crisis spread into the real economy. The government responded, mostly correctly, and introduced a swift and significant fiscal stimulus. The economy resumed growth, the rise in unemployment was pegged (although there wasn’t enough done to generate sufficient jobs growth), and the budget deficit rose. Before the private sector had demonstrated it could take up the spending slack and support the growth process, the Federal government became obsessed with “returning the budget to surplus”, erroneously thinking that this would separate them, politically, from the Opposition. They were wrong. The imposition of fiscal austerity has caused economic growth to slow and tax revenue growth to fall well below projections (declining world commodity prices have also not helped). First, the government abandoned their surplus promise realising that the revenue side was not going to improve sufficiently. Now, they are implying they need to hike income taxes to cover the “revenue shortfall”. If they ever had any credibility as responsible fiscal managers then it is safe to conclude they have none now. Their continued claims about maintaining a “strict fiscal policy” (read: procyclical fiscal stance) are not only moronic but they are also leading to policies which are killing growth and employment.

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I wonder what the hell I have been writing all these years

I have spent almost the entire time I have been in academic life – from the time I was a fourth-year student, onto Masters, then PhD and subsequently as an teaching and research academic – studying, writing, publishing, and teaching about the Phillips curve and the link between labour markets and inflation. I have published many articles on how full employment was abandoned and how it can be restored taking care to consider how an economy that approaches high pressure might cope with the increasing nominal demands on real output. I have advanced various policy options to resolve the problem of incompatible nominal demands on such output and provided the pro and con of each. I have published some very detailed papers on those questions and my recent book – Full Employment abandoned – went into all the tedious detail of how inflation occurs and what can be done about it. But, apparently, Modern Monetary Theory (MMT) ignores “the dilemmas posed by Phillips curve analysis” as one of its many alleged sins. I wonder what the hell I have been writing all these years

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Saturday Quiz – February 9, 2013 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. 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 – still slipping backwards

Today’s release by the Australian Bureau of Statistics (ABS) of the Labour Force data for January 2013 reveals that the Australian labour market continues to slide. While total employment rose modestly (very), full-time employment fell for the third consecutive month and working hours also fell. The small rise in unemployment would have been much worse had not the participation rate fell again. The unemployment rate remained unchanged at 5.4 per cent but would have been at least 0.1 per cent higher had the participation rate not fallen. So both unemployment and hidden unemployment rose. The rate of employment growth is not sufficient to even keep pace with the underlying population growth. The data is not consistent with any notions that the Australian labour market is booming or close to full employment. The most continuing feature that should warrant immediate policy concern is the appalling state of the youth labour market. My assessment of today’s results – a failing economy with further weakness to come. The Government realised late in 2012 that its obsessive pursuit of a budget surplus was going to fail. It should now go one step further towards becoming economically responsible and reverse the direction of fiscal policy by introducing some significant direct job creation. The budget deficit is too low in Australia by perhaps 2-3 per cent of GDP.

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Saturday Quiz – February 2, 2013 – 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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Keynes and the Classics Part 9

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text during 2013 (to be ready in draft form for second semester teaching). Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

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Keynes and the Classics Part 8

While I usually use Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray, today I am departing from that practice (deadlines looming) and devoting the next two days to textbook writing. We expect to complete the text during 2013 (to be ready in draft form for second semester teaching). Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog approach.

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Exploring directions in fiscal policy

This blog extends the discussion in yesterday’s blog – Exploring pro-cyclical budget positions – which is why I am running them on consecutive days. Not that I think any of my readers (Austrian schoolers and other conservatives aside) have memory issues! The discussion that follows focuses on ways in which we can interpret the fiscal stance of a government and hopefully clears up some of the confusion that I read in E-mails I receive from readers. I say that not to put anyone down but rather to recognise that the decompositions of budget outcomes and analysing the direction of fiscal policy on a period-to-period basis is not something that the financial press usually focuses on. In avoid detailed analysis, the press leaves lots of misperceptions unchallenged and often the wrong conclusions are drawn. I am not talking about policy preferences here. Just coming to terms with the facts is sometimes difficult for many commentators to achieve. But, of-course, the “facts” are also sometimes difficult to discover given that the methods used to produce them are often ideologically biased (I am talking here about the decomposition of the actual deficit into structural and cyclical components requires a full employment benchmark, which is where the fun starts.

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