US labour market – weaker but employment growth remains positive

Last Friday (October 7, 2022), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – September 2022 – which reported a total payroll employment rise of only 263,000 jobs (further slowdown) and a drop (0.2 points) in the official unemployment rate to 3.5 per cent. Total labour force survey employment rose by just 204 thousand net (0.13 per cent), while the labour force declined by 57 thousand net (0.03 per cent) as a result of the decline in the participation rate of 0.1 points to 62.3 per cent. 4. As a result (in accounting terms), total measured unemployment fell by 261 thousand to 5,753 thousand which is why the unemployment rate fell by 0.2 points. However, while the unemployment rate fell, the combination of weakening employment growth and falling participation is a sign of a faltering labour market. There are also no fundamental wage pressures emerging at present to drive any further inflation spikes. Wages growth appears to be reactive to inflation rather than propelling it. The claim that wage pressures are now pushing inflation is untenable given the data.

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The Weekend Quiz – October 8-9, 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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Degrowth, Deep adaptation and MMT – Part 3

This is the third part in a on-going series that I am writing about Deep Adaptation, Degrowth and related concepts, all of which are designed to provide some sort of pathway beyond the current mess that the world is in with respect to climate, inequality, poverty, excessive consumption, and excessive population growth. Today, I consider how Modern Monetary Theory (MMT) fits into the transition agenda and discuss the labour market dislocation that will accompany the transition to degrowth.

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The Weekend Quiz – October 1-2, 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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Musicians should be paid at least a socially inclusive minimum living wage

It’s Wednesday and I am now ensconced in Kyoto, Japan for the months ahead. I will report on various aspects of that experience as time passes. Today, I reflect on a debate that is going on in Australia about the situation facing live musicians. Should promoters be able to employ them for poverty wages including ‘nothing’ while still profiting or should they be forced to pay the musicians a living wage. You can guess where I sit in the debate.

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The Weekend Quiz – September 24-25, 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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Central banks can operate with negative equity forever

The global press is full of stories lately about how central banks are taking big losses and risking solvency and then analysing the dire consequences of government bailouts of the said banks. All preposterous nonsense of course. It would be like daily news stories about the threat of ships falling off the edge of the earth. But then we know better than that. But in the economic commentariat there are plenty of flat earthers for sure. Some day, humanity (if it survives) will look back on this period and wonder how their predecessors could have been so ignorant of basic logic and facts. What a stupid bunch those 2022 humans really were.

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Central bank priorities are not the priorities of working people

I remember a conversation I had when I was picked up hitch hiking to Melbourne from where I was living down the coast. It was during the 1970s inflationary period, which had morphed into stagflation as a result of deliberate government policy to create unemployment and discipline the wage-price spiral. The driver was a manual worker and during a conversation about the state of the economy (I was studying economics at the time) he said “the government should care about employment because at least then everyone has a job even if prices are rising”. That conversation stuck with me because it summed up what research shows in more sophisticated ways – the costs of inflation are minimal when compared to the devastating costs of unemployment. At present, our policy makers are unwilling to recognise that reality because it is not them that bear the costs.

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Australian labour market – slight improvement in the situation despite rise in unemployment

The Australian Bureau of Statistics (ABS) released of the latest labour force data today (August 18, 2022) – Labour Force, Australia – for August 2022. WThe labour market improved slightly in August 2022 with employment and participation both increasing, but this was just reversing the joint decreases in July. The rise in the official unemployment rate from 3.4 to 3.5 per cent was due to the rise in the participation rate, which meant the modest employment growth could not absorb all the new entrants to the labour force. The underlying (‘What-if’) unemployment rate is closer to 6 per cent rather than the official rate of 3.5 per cent. There are still 1,320.4 thousand Australian workers without work in one way or another (officially unemployed or underemployed). The only reason the unemployment rate is so low is because the underlying population growth remains low after the border closures over the last two years. But that is changing as immigration increases. Overall, the situation improved a bit over August.

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Inflation falling in the US and expectations are sharply in decline

It’s Wednesday and today we discuss the latest inflationary expectations data from the US, which tells me that my assessment that this episode will be a transitory phenomenon, diametric to the experience of the 1979s, was sound, despite the flack I have received over the last several months. The data is now showing consistent, cross-month declines in expected inflation and the latest CPI shows an easing of the general CPI pressure. AS the supply chains return to something like pre-pandemic capacities, then the easing will continue. It is too early to say that this period of elevated CPI rises is over but it sure looks like it and wages have barely moved. Once we get our heads around that I provide some information about an interesting ‘golf’ experiment and finish with some great keyboard playing.

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Australian national accounts – wage share at record low while corporate profits boom – this is not right!

The Australian Bureau of Statistics released the latest – Australian National Accounts: National Income, Expenditure and Product, June 2022 – today (September 7, 2022), which shows that the Australian economy grew by 0.9 per cent in the June-quarter 2022 and by 3.3 per cent over the 12 months to the end of June 2022. Growth is being driven by a combination of household spending (which has not yet succumbed to the cost of living squeeze exacerbated by the ridiculous interest rate rises) and a booming export sector (on the back of strong terms of trade). The problem is that while the on-going productivity growth has provided scope for non-inflationary real wage rises, real wages are going backwards. The problem is that business are pocketing these productivity gains as profits. The wage share fell further to a record low of 48.5 per cent which is a shocking testimony of the way the wages system is penalising workers. That needs to stop and the government should do something about it.

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US labour market showing further signs of slowdown

Last Friday (September 3, 2022), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – September 2022 – which reported a total payroll employment rise of only 315,000 jobs (a major slowdown) and an official unemployment rate rose 0.2 points to 3.7 per cent. The participation rate also rose (somewhat reversing last month’s decline) and the broad labour underutilisation rate (U6) rose by 0.3 points, largely due to the rise in unemployment. The other interesting aspect of this data is that real wages continued to decline in all industry sectors – they have systematically fallen each month since March 2022. I note some commentators are trying to claim that wage pressures are now pushing inflation. That conclusion is untenable given the data. The US labour market is still producing employment but it is hardly booming. Further, most of the net jobs created since the pandemic have gone to workers in occupatinos that pay above-median earnings.

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The Weekend Quiz – September 3-4, 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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Business investment in retreat for the second successive quarter

The Australian Bureau of Statistics released the latest version of – Private New Capital Expenditure and Expected Expenditure, Australia – today (May 26, 2022), which is part of several releases leading up to the publication of the June-quarter National Accounts next Wednesday. Today’s business investment data shows that private new capital expenditure in Australia fell by 0.3 per cent in the March quarter but was up by 2.2 per cent on the year. This is the second successive quarter in which business investment has fallen and it is likely the September-quarter will also record a contraction, which will all but wipe out the positive annualised result. This is the Australian business community at work – they are enjoying massive cuts to real wages for their workforces, record levels of profits, a rising profit share – and their investment performance is pathetic. There is some tension in the data though – as the expectation series indicates business investment growth over the next 12 months. I think that is overly optimistic given that household expenditure is likely to slow down with the rising interest rates and high energy prices really squeezing low-income families. One of the challenges facing the new Federal government is to somehow convince the business community to change their behaviour in this respect. Good luck with that. The way that the business sector has hijacked the ‘Jobs and Skills Summit’ agenda to turn it into a justification for more skilled migration – which will further dampen wages growth, push up unemployment, and further strain the almost impossible rental and home market – is evident that they are not for changing. And, if the new Treasurer keeps harping on about the $A1 trillion debt and the need to cut the fiscal deficit we will sink into recession.

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The Weekend Quiz – August 27-28, 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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It all adds up to the conclusion that system change is required not progressive tinkering

It’s Wednesday and some short items that caught my interest over the last week. The FAO’s latest – Food Price Index – shows that even though food prices fell 8.6 per cent from June (to August), “the fourth consecutive monthly decline”, they are still massive inflated (13.1 per cent higher than August 2020) and the “world’s top four grain traders” are profiting from record sales in the face of supply disruptions. The World Food Program informs us that 345 million people are enduring ‘acute food insecurity’ which is nearly 3 times the pre-pandemic number. The system is not working and I have some things to say about that below. Further, latest PMI data from Europe shows that price pressures are declining, which brings into question those (with vested interests) calling for even higher interest rates. And then some music.

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The Weekend Quiz – August 20-21, 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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Australian labour market deteriorating as employment and participation contract

The Australian Bureau of Statistics (ABS) released of the latest labour force data today (August 18, 2022) – Labour Force, Australia – for July 2022. With Covid infection rates rising quickly, and already around 780,000 workers working few hours than usual because of sickness, I predicted last month that there would be a deterioration in the labour market in the coming months. That trend emerged in July 2022. The labour market deteriorated in July 2022 with employment and participation both contracting. While the official unemployment rate fell to 3.4 per cent this was all down to the decline in participation. Had the participation rate not declined the unemployment rate would have risen from 3.6 per cent to 3.9 per cent. Further, the underlying (‘What-if’) unemployment rate is closer to 6.1 per cent rather than the official rate of 3.4 per cent. There are still 1313.7 thousand Australian workers without work in one way or another (officially unemployed or underemployed). The only reason the unemployment rate is so low is because the underlying population growth remains low after the border closures over the last two years. Overall, the situation worsened over July.

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Australia – wages growth flat and purchasing power of workers is plummeting to new depths

All eyes have been waiting for today’s release (August 17, 2022) of the – Wage Price Index, Australia – by the Australian Bureau of Statistics for the June-quarter, given that the Reserve Bank of Australia has been claiming wage pressures are becoming threatening and using that as a cover for unnecessarily pushing up interest rates. Prior to pushing up interest rates over the last several months, the RBA had been signalling that they would not move on interest rates until there was a concerted increase in wages growth, which has been at record low levels for some years now. On the back of that information, many new entrants to the housing market ran up massive mortgage debts and now feel dudded by the central bank. Whatever, information on wages the RBA is privy too is not gelling at all with the official data, which continues to show that wages growth remains flat (hasn’t moved in three months) and at record low levels. The is no acceleration. Wages growth is not driving the inflation trajectory. Workers are enduring massive real wage cuts and the RBA has made that worse by pushing up mortgage rates for those exposed. The business sector, as a whole, thinks it is clever to always oppose wages growth and the banks love that because they can foist more debt onto households to maintain their consumption expenditure. But the reality is clear – there can be no sustained recovery for the economy post Covid without significant increases in the current rate of wages growth.

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Germany is in deep trouble and requires a major shift in policy strategy

The latest news I read from Germany was that the Rhine is now so low on water that its importance as a commercial waterway for transporting raw materials and finished products is being significantly compromised. The water level in places is now well below that required for navigation by the barges. It is the second time in the space of a few years that inland shipping in Europe has been thwarted by this sort of problem. The War in Ukraine is also causing bottlenecks in the inland transport routes as grain transports are being diverted as a consequence of the Black Sea blockades. Sure enough there are rail transports still capable of shifting the cargo but this problem is one of many now hitting Germany, which is finding out that its economic growth strategy is deeply flawed. It was only a matter of time before the ‘chickens came home to roost’. It was obvious for years that the Post-unification strategy the German government took as it entered the common currency could not deliver sustainable and stable growth. The reliance on suppressing domestic expenditure and wages growth in order to game its Eurozone partners so they recorded large external deficits in order to buy German exports was problematic given that the German insistence on austerity across the Eurozone resulted in stagnation and weaker export markets. Further, Germany relied heavily on diesel engines to underpin the strength of their dominant motor vehicle industry and not only did they lie about the quality of the products, but they failed to foresee the shifting sentiment away from polluting diesel. And, of course, they relied on imported energy from Russia to feed this industrial strength and supply their consumer markets, which assumed that Russia would remain reliable. At present they are also being impacted by the supply disruptions in China, given they have shifted their external sector towards an increased reliance on China. Some of these problems will ease but the reality is that the German model that they took into the Eurozone is now unsustainable. They must abandon their export led growth obsession, increase their reliance on domestic demand and improve the circumstances for their workers while dealing with the increasingly evident climate emergency.

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