The latest data from the Australian Bureau of Statistics – Labour Force, Australia, October 2020 – released today (November 19, 2020) shows that the labour market has improved largely due to the recent easing of the lockdowns in Victoria as that state overcomes the second virus wave. All states and territories experienced employment gains in October 2020. Even though employment increased by 1.4 per cent in the month (which is a very strong result), unemployment rose marginally (0.1 points) as a result of the very strong growth in participation (up 0.9 points). Underemployment also fell by 1 point and the broad labour underutilisation rate (sum of unemployment and underemployment) fell by 0.9 points. But the recovery is still too slow and more government support by way of large-scale job creation is required given total employment is still 233 thousand below the level in March 2020 and unemployment is 245 thousand higher.
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. He indicated that he would like to contribute occasionally and that provides some diversity of voice although the focus remains on advancing our understanding of Modern Monetary Theory (MMT) and its applications. It also helps me a bit and at present I have several major writing deadlines approaching as well as a full diary of presentations, meetings etc. Travel is also opening up a bit which means I can now honour several speaking commitments that have been on hold while we were in lockdown. Anyway, over to Scott …
On November 6, 2020, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – October 2020 – which shows that employment continues to grow, but will take a long time at this rate to make up the job losses incurred in March and April. Further, the unemployment rate fell by 1 point to 6.9 per cent and the participation rate rose by 0.3 points. So, on the face of it, this is a positive outcome – jobs growth, participation increasing and unemployment falling. There is some doubt about the strength of the labour force employment estimates but the payroll data also shows steady employment increases. Worrying trends were in the loss of government employment, particularly at the state and local government level. Those losses will worsen if there is no extra fiscal support applied at that level by the federal government. The impasse at Congress on the the size and design of the next tranche of fiscal support is not helping. And then the data shows the lax health policy is allowing the virus to run out of control and how that plays out is anyone’s guess. I suspect a nation has to get the health problem sorted before they can really sort out the economic problem. The US appears to be going in the opposite direction to that. I doubt it will turn out well.
Today, I celebrate – my home town of Melbourne has recorded zero new infections for the first time since June 9, 2020 and zero deaths. But things are not so hot elsewhere in the world. As the US labour market started to rebound over the summer, I stopped updating my analysis of the claimants data horror story that had earlier demonstrated how sharp the decline in March and April had been. But I have still been monitoring it on a weekly basis and the information we are now getting from the US Department of Labor’s weekly data releases are indicating that as the virus escalates, seemingly out of control, the labour market recovery has all but stalled and a reasonable prediction would be that it will deteriorate somewhat if the infection rate leads to tighter restrictions (which it should). A relatively short blog post today (tied up with things today) – just some notes as I updated the data to see what was going on. The conclusions are obvious. Much more fiscal support is needed in the US, especially targetted at the bottom end of the labour market. Devastation will follow with the sorts of numbers that appear to be entrenched at present.
On Tuesday (October 20, 2020), the ABS released the latest data for – Weekly Payroll Jobs and Wages in Australia, Week ending 3 October 2020 – which gives us the most up-to-date picture of how the labour market is coping with the on-going restrictions. Last week, the ABS released the monthly labour force survey data which covered the period up until September 14. Today’s data gives us an extra two weeks of information to gauge what is happening. It also provides us more accurate estimates of the impact of the harsh Stage 4 restrictions that have been imposed in Victoria to address the Second Wave of the coronavirus. Those restrictions were eased last weekend after the government has brought the outbreak under control. So hopefully, today’s data will signal just about the trough before the slow recovery begins as more activities open up. Overall, payroll employment has fallen by 0.7 points since July 25, 2020, when the lockdowns began in earnest. Unsurprisingly, payroll employment fell in the six-week period ending October 3, 2020 in Victoria by 2.3 points. Employment has also fallen in NSW by 0.7 points over the same period. The Victorian case is about lockdown. NSW is in decline because of failed macroeconomic policy, which goes to the performance of the federal government. The fact that the first recovery period failed to regain the jobs lost was an indicator that the policy intervention was insufficient. The second-wave job losses tell us clearly that more needs to be done by the Federal government. The problem is the federal government is now engaging itself in trivial political point scoring instead of showing economic leadership.
I gave some advice to a politician last week who had read some MMT literature that he said indicated that using the Job Guarantee reduces inflationary pressures in a recovery relative to a situation where a nation had an unemployment buffer stock. I was surprised by the question because the assertions didn’t appear congruent with the facts. It appeared to be rehearsing and endorsing the standard neoliberal supply-side agenda that defined the so-called ‘activation’ approach to unemployment, which militated against job creation programs in favour of training initiatives – the full employability rather than the full employment mindset. The fact is that long-term unemployment always lags behind the overall unemployment movements given it takes time for people to work their way through the duration categories until they get to 52 weeks, after which the national statistician terms a person long-term unemployed. The longer the recession the higher average duration of unemployment becomes and the larger the pool of long-term unemployed as people start to flow into that category. However, the way we think about solutions has been influenced by the myths about the way long-term unemployment behaves, which we summarise as the – ‘irreversibility hypothesis’. This idea has influenced governments to rely on training approaches rather than job creation as solutions to unemployment. And, it has led to the various pernicious unemployment management policies where the victims of the system’s failure to create enough jobs are considered culpable in their own misfortune and shunted through a series of compliance processes in order to receive income support, which do little to get them work.
The latest data from the Australian Bureau of Statistics – Labour Force, Australia, October 2020 – released today (October 15, 2020) shows that the recovery has stalled on the back of the Stage 4 restrictions in Victoria as that state dealt with the second virus wave. However, Tasmania and the Northern Territory also experienced employment losses in September 2020 and that is in part due to the locked internal borders that remain throughout Australia. Employment growth declined by 29.5 thousand but the rise in unemployment was only 11.3 thousand because the participation rate fell by 0.1 points. So, hidden unemployment rose (the slack sitting outside the official labour force). If we take a broader view of the labour underutilisation rate, underemployment rose by 0.1 points to 11.3 per cent and combined with the uneployment rate, the broad labour underutilisation rate rose by 0.2 points to 18.3 per cent. If we add in the rise in hidden unemployment then that figure rises to 20.3 per cent. 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.
In my monthly labour market updates for Australia, I always examine the teenage labour market. Not much media coverage is given to that cohort in this context. But as our societies age and require our younger workers to be more productive than their parents to maintain material living standards (even though we should be reappraising what is an environmentally feasible benchmark to maintain), how we deal with school-to-work transitions, vocational training, university education is a major issue. The fact that governments all around the world have been prepared to impose massive costs on the younger generation as they obsessively pursue fiscal surpluses is one of the scandals of the period and will have long-term consequences for society. Recent Australian research evidence, which is consistent with outcomes from similar international studies, provides strong evidence to support the case that governments should always ensure there are enough jobs for our young population and that fiscal austerity undermines that requirement. Running fiscal deficits doesn’t undermine our children’s futures. Starving them of job opportunities at crucial transition points in their lives definitely undermines their future. We should understand that and stop listening to economists who say otherwise.
On October 2, 2020, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – September 2020 – which shows that while employment continued to grow, the rebound has moderated significantly. Further, the unemployment rate fell by 0.5 points to 7.9 per cent but only because the participation rate fell by 0.3 points, which saw less workers in the labour force. If the participation rate had not fallen, then there would have been only a marginal improvement in the unemployment situation. The sources of that participation decline are not disclosed. 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. 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.
On Tuesday (September 22, 2020), the ABS released the latest data for – Weekly Payroll Jobs and Wages in Australia, Week ending 5 September 2020 – which gives us the most up-to-date picture of how the labour market is coping with the on-going restrictions. This data provides more accurate estimates of the impact of the harsh Stage 4 restrictions that have been imposed in Victoria to address the Second Wave of the coronavirus. Overall, payroll employment has fallen by 0.9 points since July 25, 2020, when the lockdowns began in earnest. Unsurprisingly, payroll employment fell in the six-week period ending September 5, 2020 in Victoria by 2.8 points. Employment has also fallen in NSW by 0.5 points in the last 6 weeks. The Victorian case is about lockdown. NSW is in decline because of failed macroeconomic policy, which goes to the performance of the federal government. The fact that the first recovery period failed to regain the jobs lost was an indicator that the policy intervention was insufficient. The second-wave job losses tell us clearly that more needs to be done by the Federal government. I provide some clues as to where an extra $100 billion might be spent below.