While all the green shooters out there are constantly searching for signs that things are improving the fact is they are typically focusing on financial variables. So they feel good that the share market is recovering a bit (for the time being). But I almost always focus on real variables and then more usually on the labour market. Employment is the connection that the vast majority of us have with the economy and the distribution system and the quality and quantity of employment is a crucial indicator of how well things are travelling. The latest data out today reinforces the data from last week and shows one thing and one thing only – the labour market is sick. It also points to the urgent need for a third stimulus package which unlike its predecessors should be “job laden”. If the Government fails to take responsibility in the coming weeks and funds direct job creation projects on a massive scale then the situation will worsen and we will be stuck with high rates of labour underutilisation for the next several years.
Today’s ABS Labour Force data confirms one thing. Whatever else the commentators say about the figures are not as bad as expected or that employment is still growing or whatever – there are 13.4 per cent of the willing and available labour resources not being fully utilised by this economy. Around 657 thousand have no jobs at all and another 866 thousand have a job but want more hours and cannot find the work. 1.5 million wasted workers is an appalling state that demands urgent action – like direct public sector job creation. Each day that we waste the capacity of those workers is another day of income and opportunity lost down the drain. It should be the absolute number one policy priority. And what it tells me is that the budget deficit is way to low as a percentage of GDP at present.
Everyday brings surprises as a social science researcher. Today I was gearing myself up for the lunchtime current affairs radio onslaught from the budget nazis – “see unemployment is still rising and stimulus doesn’t work” – that sort of thing. But then at 11.30 (or just after) I looked up today’s Labour Force data released by the Australian Bureau of Statistics and was … to say the least … surprised. Here is what I was expecting – the labour participation rate would fall a little and unemployment to continue rising. I expected full-time employment to fall and perhaps part-time employment to rise a little but for total employment overall to fall. However, given three other pieces of information, two of which were released yesterday, I was thinking that all these “bad movements” would be fairly moderate in size. So a surprise indeed but … we should be careful before we get too carried away.
Today CofFEE released our latest quarterly labour market indicators (CLMI) which are hours-based measures (see below) that I have developed to more accurately measure the state of the labour market. The data shows that the impact of the global economic crisis is now manifesting in the Australian labour market with a marked deterioration in conditions in the February 2009 quarter. Total labour underutilisation in February has jumped to 11.2 per cent, up from 9.7 per cent in the November 2008 quarter. Things are heading south.
Today’s labour force data revealed the the world recession is starting to impact directly on jobs in Australia. Last month’s data surprised people because it suggested the labour market was resisting the global trends. At the time I indicated that the inaccuracy in the data due to the large sample errors was likely to be a factor. Today’s data also carries some surprises although the trends it is indicating are clear enough.
Australia is not alone in mistreating our disadvantaged and unemployed citizens. As a portent of things to come in Australia after July 2005, tough new labour market reforms came into law in Germany on January 1. The Hartz IU reforms received a bit of European press in the last few days. I read two stories over the last few days, one in the German paper Bild am Sonntag (BamS) under the heading – Hartz-IV-Chaos! Kann ich meine Stütze bar abholen? – and another from the French daily Le Monde that provided some useful insights into the how a country that refuses to provide enough work for its citizens turns on the same.
In the Melbourne Age today (January 3, 2005), the forecasts of 18 economists for the year ahead. The group was overwhelmingly comprised of economists with vested corporate sector interests with only one academic economist being included. They make interesting reading given I also indulge in a bit of crystal ball gazing myself.