Last Friday (December 3, 2021), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – November 2021 – which reported a total payroll employment rise of only 210,000 jobs in August and a 0.4 points decline in the official unemployment rate to 4.2 per cent, while participation rose by 0.2 points. This is one of those crazy months when the payroll figure suggests a slowing down while the labour force survey paints a fairly rosy outlook with strong jobs growth stimulating rising participation and a declining labour underutilisation rate. We will have to wait until next month to see how it all works out. But the undeniable facts are that the economy is still creating work – in an unequal pattern across the sectors and the government sector is undermining the benefits of that creation. The US labour market is still 3,912 thousand jobs short from where it was at the end of February 2020, which helps to explain why there are no fundamental wage pressures emerging. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data.
One of the important concepts one learns in studying the way firms work with respect to pricing and markups is the distinction between quantity and price adjustment over the course of an economic cycle. When economists talk of supply and demand, they usually refer to price adjustment, where prices adjust up or down when there is an imbalance between these aggregates. Orthodox economics presumes that prices adjust, for example, to eliminate an excess supply, which they apply to the labour market and conclude that the cure for mass unemployment is wage cutting. The problem is that in many circumstances, firms use quantity adjustments long before they contemplate price adjustments, because the former involves lower costs. The Australian Broadcasting Commission (ABC) ran a story from its business reporters today (November 16, 2021) – As migration restarts, will it hold down wages for everyone? – which has also become a feature news segment on its television coverage today. The analysis presented is seriously misleading. It not only fails to characterise the problem properly but buys into a highly contentious debate about whether migration has negative impacts on the labour market prospects for local workers. It behoves analysts to actually construct the problem correctly before they start taking sides in this debate. The ABC article fails in that regard which is disappointing. Their failure also reflects the lack of diversity in opinion they seek these days. They chose to simply rehearse the arguments presented by one pro-migration analysis as if it was definitive rather than seek expert opinion from neutral analysis. But it also demonstrates why understanding the difference between quantity and price adjustment is crucial to getting the conclusions right.
The Australian Bureau of Statistics released the latest labour force data today (November 11, 2021) – Labour Force, Australia – for October 2021. The background is that the entire East Coast has now come out of an extended lockdown over the last few months. The October 2021 data reveals the damage that those lockdowns have caused. But, given that today’s data reflects what was happening about a month ago, it is still too early to say what the speed of recovery will be although more recent payroll data suggests that employment growth is rebounding. But the story of today’s data is that total employment and the unemployment rate are worse than before the pandemic – so the nation has lost ground over the last 20 months. And that is largely because the federal government withdrew its fiscal stimulus too early. The summary results are clear: employment continues to contract, the unemployment and broader underutilisation rates soared. There are nearly 2 million Australian workers without work in one way or another (officially unemployed or underemployed) and several hundred thousand who have left the active labour force due to lack of employment opportunities. Overall, the labour market is in poor shape and the federal government is doing nothing to help. The lack of any significant stimulus from the federal government is telling. There is now definite evidence that further and rather massive fiscal support is required.
I have been researching the so-called labour shortage that business types are talking about relentlessly as part of their on-going strategy to undermine the conditions of work and make more profit. In the course of that enquiry, I came across an interesting juxtaposition between two US companies that illustrate a lot of what we have known about for years but have allowed this relentless, neoliberal, race-to-the-bottom to obscure. Well-paid workers with job security, work better and are happy workers. Companies that pursue the ‘race-to-the-bottom’ strategy and seek to build profits by trashing the conditions they offer workers eventually struggle to prosper because their bad reputation undermines their ability to attract productive workers. In the case we discuss today, the so-called ‘labour shortage’ is really just a signal of management caprice. Rather than being a shortage of workers, there is a shortage of workers who will tolerate the indignity of low wages, onerous conditions and capricious management. It is also a union versus non-union type of discussion where the unionised work places generate high productivity and worker attachment, while the non-unionised workplaces find it hard to attract reliable staff and blame it all on ‘labour shortages’.
Last Friday (November 5, 2021), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – October 2021 – which reported a total payroll employment rise of only 531,000 jobs in August and a 0.2 points decline in the official unemployment rate to 4.6 per cent. With participation unchanged, this was a stronger result than the previous month and the employment-population ratio rose by 0.1 points. It is still well down on the February 2020 peak though. The US labour market is still 4,204 thousand jobs short from where it was at the end of February 2020, which helps to explain why there are no fundamental wage pressures emerging. An occupational analysis shows that the lower paid occupations have not participated proportionally in the jobs growth and many groups have endured real Median weekly earning cuts over the course of the pandemic. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data.
Today, we have a guest blogger in the guise of Professor Scott Baum from Griffith University who has been one of my regular research colleagues over a long period of time. Today, he has taken a breather from teaching and exam marking to write about the long-run uneven labour market impacts of the COVID-19 pandemic. The COVID-19 pandemic has been the global emergency that just keeps giving. And not in a good way! Daily figures from around the world show that the pandemic’s health impacts continue to be widely felt. So, it’s over to Scott to explain how.
The US Bureau of Labor Statistics published the latest JOLTs data last week (October 12, 2021) – Job Openings and Labor Turnover Summary – August 2021 – which has raised a possible shift in bargaining power in the US labour market towards workers. The most obvious sign of that is the rising quit rates, which are most prevalent in the low-wage sectors. While there is still some slack in the US labour market, the evidence suggests that workers are taking advantage of the improved job opportunities to pursue better wages and conditions. We will have to wait and see whether there are any significant wage outcomes arising from this behaviour or whether workers are just jumping from very bad to bad jobs. Time will tell.
The Australian Bureau of Statistics released the latest labour force data today (October 14, 2021) – Labour Force, Australia – for September 2021. The background is that the entire East Coast is in or has been in lockdown over the last few months and for the two largest labour markets (NSW and Victoria) that lockdown has been very tight. Both states are in the process of easing restrictions as vaccination rates rise. The September 2021 data reveals that the longer NSW lockdown is now impacting heavily on employment growth which is now 4.7 points below the March 2020 level. Similarly, Victoria’s employment level has fallen and is 2.1 points below the pre-pandemic level. Overall for the nation, employment fell for the second consecutive month as did the participation, the latter cushioning the rise in official unemployment. But if we take into account the participation decline, the actual unemployment rate would be 5.7 per cent rather than the official rate of 4.6 per cent. Quite a difference. The turbulence caused by the pandemic has really masked the steady decline before that and my estimates are that the true unemployment rate, taking into account the rise in hidden unemployment since August 2019, is close to 7 per cent. Again, quite a difference. The more stable ratio – the Employment-to-Population ratio plunged again in September – two months of massive declines. Last month, I predicted the situation will would worse in September – and it did. So while the unemployment rate might be relatively low by recent historical standards, the situation is dire. The lack of any significant stimulus from the federal government is telling. There is now definite evidence that further and rather massive fiscal support is required.
Last Friday (October 8, 2021), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – September 2021 – which reported a total payroll employment rise of only 194,000 jobs in August and a 0.4 points decline in the official unemployment rate to 4.8 per cent. The combination of rising employment and falling unemployment might suggest that things are improving. But the reality is that the active labour force shrunk significantly as the participation rate fell by 0.1 points in the face of declining employment opportunities. The results suggest that the labour market recovery has slowed quite significantly from the situation mid-year. The US labour market is still 4,970 thousand jobs short from where it was at the end of February 2020, which helps to explain why there are no fundamental wage pressures emerging. Further, it is clear that there has been a slight bias towards low pay jobs being added in the recovery at the expense of above-median wage jobs, particularly in the service occupations.
Part of my working day is spent updating databases and studying the additional observations. I learn a lot that way about trends and how far off the mark my expectations of a particular phenomenon might be. Today I updated various labour market datasets from Britain and did some digging into the relationship between vacancies and pay. It is clear that as the British economy opens up again, that unfilled job vacancies have grown very strongly over the Northern summer. While that is a good thing because it means there are opportunities for workers to gain employment, shift employment to better paying jobs etc, the message is no unambiguous. If the vacancy growth is biased towards low-pay work then the chances for upward mobility might be stifled. Such a trend might also reflect the fact that employers are now finding that their old practices of accessing vast pools of EU labour willing to work at low wages are being constrained and that will signal the need for a change in strategy, including restructuring, capital investment and better paid jobs. It is too early to discern which way that will go. But what I found while looking at this new data is that while job vacancies are booming, the majority of them are in below-average pay sectors. More analysis is needed to fully assess the implications. Here is where I started on this path …