I have been travelling for most of today and unable to write very much. But there were are few things I penned which might be of interest. I was sent a news report today which appeared in the local Fairfax press and related to yesterday’s ABS release of the detailed labour force estimates by region. This usually garners a lot of regional interest and the estimates are used by politicians, business groups etc to further their own vested interests. Rarely do any of the public statements that are made about this detailed data actually tell an accurate story. The news report in question was a classic case of this. What we should always understand is that the labour force framework is complicated and falling unemployment is not necessarily a good outcome.
The Australian Bureau of Statistics (ABS) released the Labour Force data for November 2010. As usual the bank economists got it wrong and underestimated the growth in employment. The data shows that the labour market is improving – employment growth positive and biased towards full-time jobs; a rising participation rate; and falling unemployment – the troika we look for. The commentators are almost demanding that the RBA increase interest rates sooner rather than later. But that would be a very stupid thing to do. The growth we have seen in November is required to be sustained for an extended period to ensure that we continue to eat in to the pool of unemployment and underemployment. Deliberately curtailing that growth with contractionary policy initiatives would be an act of vandalism and would deny those workers who remain idle (12.4 per cent of available labour) the chance to enjoy income earning opportunities. The data definitely doesn’t support the claims by the Government and the RBA that there is an inflation threat building. There is still plenty of slack in the Australian labour market and for the first time in several months the degree of slack fell marginally. I am not complaining – just cautious.
The Australian economy is growing and adding jobs and the unemployment rate is 5.4 per cent (having risen 0.3 points in the last month). But we avoided the recession courtesy of a timely and sizeable fiscal intervention followed up by strong growth in China (also courtesy of their significantly larger fiscal intervention (as a % of GDP)). But the treatment of the unemployed by our government is appalling. Across the Pacific, the US economy is starting to grow but only just adding jobs and not in sufficient quantities to reduce the unemployment rate and it is persisting at around 9.6 per cent. They didn’t avoid the recession and have laboured for nearly 3 years with the devastating consequences of it. The treatment of the unemployed by the US government is more than appalling. So it doesn’t matter if things are brighter or not, we still vilify the victims of the macroeconomic policy failure. That is what this blog is about. It is a depressing message!
The Australian Bureau of Statistics (ABS) released the Labour Force data for October 2010. As usual the bank economists got it wrong predicting the unemployment rate would drop to 5 per cent. In fact it rose from 5.1 per cent to 5.4 per cent because employment growth was too weak to match the expansion of the labour force. Further, employment growth fell this month and full-time employment declined. The only reason there was any employment growth was courtesy of the expansion of part-time employment. Finally, some of the bank economists recognised today (in their comments) that business conditions are easing. The previous rhetoric about an economy exploding at the seams now seems very wan indeed. There is no jobs boom going on at present. The mining states are showing deteriorating labour conditions (falling participation and rising unemployment). The data definitely doesn’t support the claims by the Government and the RBA that there is an inflation threat building. There is still plenty of slack in the Australian labour market and last month the degree of slack rose sharply.
The national ABC news carried the headline – Jobs surge smashes expectations after the ABS released the Labour Force data for September 2010. Which expectations are we talking about? Answer: the estimates of the bank economists. So that fact they were wrong – as usual – doesn’t give us very much information at all. After the data release that lot quickly resumed their inflation-obsessive mantra claiming that the RBA would now have to hike rates in November. They had said that the RBA would have to hike this week and were wrong. I often wonder if their employers (the banks) actually ever take their advice seriously. Perhaps the fact the banks keep making huge (unseemly) profits suggests they don’t. Anyway, the labour market showed signs of improvement this month (full-time employment up) although unemployment rose. But I would hardly call this jobs boom. It is true that participation rose by 0.2 percentage points which is usually a good sign when employment growth is positive because it means the labour force is expanding and more people are confident of finding work (reducing hidden unemployment). But employment growth is still not strong enough to reduce unemployment and total hours of work fell slightly. Does this data signal an inflation threat as per the ranting of the bank economists? Answer: no! The signs of improvement are suggesting just some better alignment of the stars. There is still plenty of slack to be absorbed yet (total labour underutilisation remains around 12.5 per cent).
The national ABC news carried the headline – Unemployment slashed by jobs boom after the ABS released the Labour Force data for August 2010. While the net employment change was more than the market economists predicted (why would that surprise anyone given their tendency to continually get it wrong) I would hardly call the outcome a jobs boom. Further, the broader indicators of labour underutilisation deteriorated in the August quarter of 2010 with underemployment rising by 0.4 percent. There are 12.5 per cent of workers (at least) idle in one way or another (unemployed or underemployed). The fact that our teenagers continue to experience negative employment growth is also telling. While the bank economists have hailed today’s figures as indicative of “very strong across the board” performance and are whipping up the inflation bogey, the reality is different. We continue to waste a huge amount of our potential capacity and there are no inflationary pressures coming from the labour market at present.
Today the ABS released the Labour Force data for July 2010 which show that the unemployment rate is rising (now 5.3 per cent up from 5.1 per cent) and hours worked declining for the second consecutive month. Full-time employment is falling with net job creation being driven by part-time. Employment growth overall has been struggling to keep pace with the population growth and now it has fallen behind. The decline in full-time employment is also translating into declining aggregate hours worked which suggests that underemployment will also be rising. But a positive note is the reversal in the falling participation rate. While the bank economists have hailed today’s figures as indicative of “a healthy labour market”, the reality is that the data is consistent with a broad array of statistics showing the Australian economy is slowing as the effects of the fiscal stimulus dissipate and and private spending remains subdued. It is not a healthy labour market at all.
There is an election campaign upon us in Australia now and one of the themes the government is developing by way of garnering credit for its policies is that Australia is operating at near full employment thanks to their economic policy framework. Nothing could be further from the truth – both that we are close to full employment and that their policy framework is moving us towards full employment. But this claim, which is repeated often these days and was a catchcry of the former conservative government as well, is a testament as to how successful the neo-liberal orthodoxy has perverted the meaning of signficant concepts (like full employment) and convinced the community that you can be near full employment and therefore there is no real problem to address when you have at least 12.2 per cent of your willing labour resources being wasted. It continually amazes me.
Today the ABS released the Labour Force data for June 2010 which show that the unemployment rate is stable at 5.1 per cent (last month was revised down to 5.1 per cent) with virtually no change in the number of jobless. While employment growth is remains positive it is just keeping pace with the growth in the labour force. Further, the recent trend towards full-time employment growth has moderated and part-time growth dominated this month’s employment gains. As a result, aggregate hours worked fell in June which suggests that underemployment will have risen slightly. But a positive note is the reversal in the falling participation rate. While the bank economists have hailed today’s figures as indicative of an economy “near full capacity”, the reality is that the data is consistent with a broad array of statistics showing the Australian economy is slowing as the effects of the fiscal stimulus dissipate and and private spending remains subdued.
Today the ABS released the Labour Force data for May 2010 which show that the unemployment rate has fallen by 0.2 percentage points ostensibly, if you believe the press reports and the comments from the bank economists, on the back of continued strong growth in full-time employment. The truth is different. While full-time employment growth was positive it is not accelerating and overall employment growth slowed in May 2010. More importantly, all the fall in unemployment was due to a further drop in the labour force participation rate. So employment growth remains sluggish and is barely keeping pace with the growth in the population. The good news is that aggregate hours worked continued to increase which is reducing underemployment a little. While the bank economists have hailed today’s figures as indicative of an economy “near full capacity”, the reality is that the data is consistent with a broad array of statistics showing the Australian economy is slowing as the effects of the fiscal stimulus dissipate and and private spending remains subdued. It is amazing how a few headlines can distort what is actually going on.