The latest data from the Australian Bureau of Statistics – Labour Force, Australia, February 2021 – released today (March 18, 2021), shows that the labour market has accelerated its pace of recovery from the pandemic recession. Employment increased by 0.7 per cent (88,700) in the month and unemployment fell by 69.900 to 805.2 thousand persons. As a result the unemployment rate fell by 0.5 points to 5.8 per cent, which with participation stable, is a good outcome. The main uncertainty now is that the recovery is still dependent on government fiscal support, which is due at the end of this month (March 2021). Given the labour market is still quite a margin from where it was in March 2020, the idea that the government would withdraw its fiscal support is not a compelling option. Overall, the recovery is still too slow and more government support by way of large-scale job creation is needed.
It is Wednesday and I am travelling most of the day. We are now entering Week 3 of the edX MOOC and I outline what students can expect this week. And some ideas about why it is wrong to think mainstream economists have got it wrong. Plus a reflection on one of Australia’s great musicians who died this week.
One of the problems of neoliberalism is that it is anti-people. This makes it hard for governments to actually impose austerity and so they work out ways to lessen the visibility of their pernicious policy choices, except if you are in Greece that is. The ways they deflect the political fall out are many and include use the depoliticisation strategy – like appealing to TINA demands from external bodies such as the IMF (circa British Labour Party 1976), claiming central banks are independent, and hacking into expenditure items that delay recognition in the public eye that damage is being done. This blog post focuses on the latter. I have been studying the shifts in government spending in the European Union since the GFC and it is apparent that final consumption expenditure and outlays on social benefits have not been the focus of the austerity to the same extent as government spending on capital formation (public infrastructure). It is much harder politically for governments to cut recurrent spending because it usually impacts on people straight away. Cut a pension and the hurt is visible. Cut lots of pensions and there is a political problem. But cutting back on public infrastructure is less visible and the damage takes time to manifest as the depreciation process sets in, maintenance delayed and additional new capacity is lagging. But make no mistake – cutting capital spending undermines the future productivity of the nation and paves the way for a diminished future for our grandkids, the very ones, mainstream economists claim they are protecting by advocating austerity.
It is clear that the Reserve Bank of Australia (RBA) management is at odds with the elected Federal Government over the current state of the economy and what needs to be done to get through the COVID-19 pandemic. The Federal government is about to significantly wind back its fiscal stimulus, which although was insufficient at the outset, did help reduce the damage that the health responses to the pandemic caused (lockdowns, etc). The Government has the view that the private sector will now rebound quickly especially as the vaccination process has begun. The RBA though is clearly not convinced and its senior officials are wont to point out (regularly) that growth will struggle for years unless the stimulus is maintained and the government promotes an environment where wages can grow more quickly. The RBA clearly blames the Government for the record low growth in wages given the penchant of the latter to impose wage freezes and wage caps on public sector workers, which spill over into poor private sector outcomes. And that is quite apart from the damage that Government industrial relations legislation has done to the capacity of unions to gain wages growth for workers. The chances that we will break out of this malaise are close to zero. The Government is anti-union and anti-wages growth. It thinks that suppressing wages growth to historically record lows and further attacking the unions, will drive the wage share down even further (as the profit share rises). And, of course, the funding of the conservative political forces largely comes from the beneficiaries of these trends. For the vast majority of Australians the situation gets worse. Our real incomes stagnate and to maintain consumption levels we have to borrow more, even though household debt is at record levels in relation to disposable income. It is not a sustainable future but the damage will get worse until there is a pushback from the population. And one of the things holding that back is the deplorable state of the Australian Labor Party in electoral terms. We can generalise all this to most nations. The neoliberal score card: Biggest F you can find.
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.
Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
The capacity of prominent people in economics to attempt to airbrush history and forget what they said and did in the past continues to amaze me. It always has. The problem for them though is that there is a public record. Yet, the mainstream media seems to ignore that public record as they give these characters continued coverage without noting the contradictions and about turns that have been going on. The issue is the past keeps catching up with these characters but they just maintain their authority in the public debate as they freely morph between contradictory and inconsistent positions, without ever having to provide any sort of accounting for those shifts. It would clearly help if the media held these people to account because then the public would realise that some of the things that they had said in the past, which led, because they had positions of power, to devastating policy impacts on workers and their families, were false all along and should never re-enter the policy debate.
Its Wednesday and only a short blog post day – well a collection of items I accumulate during the week. Week 2 of our MOOC – Modern Monetary Theory: Economics for the 21st Century – begins today and you can find enrolment details below. We also have some culture today – a beautiful poem which inspires optimism and some music that inspires past memories.
My MOOC is in full-swing (over 3000 participants) and I am quite busy getting Week 2 up and running and then Weeks 3 and 4. So, today, we have our regular guest blogger, Professor Scott Baum from Griffith University who has been one of my regular research colleagues over a long period of time. Today he is examining the creeping tendency in the political debate and media to start to focus on questions like when will the debt be paid back. Journalists have been asking me to estimate the quarter when Australia can return to fiscal surplus, as if that is a target to aspire to. Anyway, over to Scott …
Last Friday (February 5, 2021), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – February 2021 – which is consistent with a view that the US labour market recovery is stop-start at present and not reducing the jobs lost since March 2020 at any reasonable rate. prediction. Payroll employment growth was stronger in February. The labour force survey data showed consistent employment growth but not strong enough to really do anything about unemployment and the broader labour wastage captured by the BLS U6 measure which was constant at 11.1 per cent. Participation was steady in February, which when coming off a recession is a sign that employment growth is subdued. I remain wedded to the view that the US will have to stabilise the health situation before they will be able to sustain any reasonable economic recovery. Whether the vaccination process in train allows for that is an unknown at present. But with states like Texas seemingly in denial with respect tot the virus, I suspect bad outcomes will emerge in the month ahead. And with the Blue Democrats trying to be Republicans (denying a reasonable stimulus) that doesn’t augur well.