During my postgraduate study years I read a 1954 article by American economist Clark Kerr entitled – The Balkanization of Labor Markets – which attacked the mainstream labour market views that there was mobility within labour markets such that poverty arising from low-pay was a function of workers’ preferences for low education and more leisure (that is, unemployment). As such, there was no reason for the government to intervene to improve wages or job security. Kerr’s thesis was that there was not a ‘single’ labour market accessible to all, where individual mobility would result from personal investment in education and skill development. Instead, he argued that the US labour market was “segmented” by institutional arrangements, which trapped some demographic cohorts into low-pay and insecure jobs. Poverty could arise from these traps. The idea morphed into the segmented labour market literature of the late 1960s and early 1970s. The applications were mostly Anglo because in non-Anglo countries there appeared to be more resistance to institutional arrangements that undermined the chance for workers to enjoy job security with decent pay. However, in recent years (decade) the trend towards precarious work where certain groups (women, youth, migrants) are trapped in low pay and frequent spells of unemployment has spread, with devastating consequences. The largest European economies – Germany and France – are now bedevilled with this issue and with a bias towards fiscal austerity, the path for workers out of the trap is limited.
The latest labour force data released today by the Australian Bureau of Statistics – Labour Force data – for November 2017 shows that total employment growth was relatively stronger than October with a bias towards full-time employment growth. Unemployment rose because of the sharp rise in the participation rate following on the stronger employment growth. The combination of a rising participation rate and relatively strong employment growth is a good sign even as unemployment rises in the period that the labour force adjusts to its new cyclical high. Whether this virtuous cycle continues remains to be seen. Broad labour underutilisation (underemployment and unemployment) was at 13.7 per cent summing to 1,799.7 thousand persons, which tells you that there is still considerable slack in the labour market. TThe teenage labour market improved (if we consider total employment growth) but teenagers failed to share in the full-time employment growth (going backwards). Overall, my assessment remains – the labour market has improved over 2017 but still fluctuates between good and bad from month to month and has a lot of slack remaining. We are not in a position to say that there is a sustained growth path ahead.
On December 8, 2017, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – November 2017 – which showed that total non-farm employment from the payroll survey rose by 228,000 in November, slightly less than the October net increase. While the payroll data showed a fairly strong employment outcome, the Labour Force Survey data estimated a weaker rise in employment (57 thousand) in November. The labour force was estimated to have risen by 148 thousand after October’s results showing a sharp contraction. The BLS thus estimated that unemployment rose by 90 thousand and the official unemployment rate rose slightly from 4.07 to 4.12 per cent. There is still a large jobs deficit remaining and other indicators suggest the labour market is still below where it was prior to the crisis. I also update my ‘low-wage jobs bias’ to November 2017 and conclude that in the recovery, there has been a bias towards low wage and below-average wage job creation.
The latest labour force data released today by the Australian Bureau of Statistics – Labour Force data – for October 2017 shows that total employment growth was weak although there was relatively good full-time employment growth. Unemployment (and the rate) fell, but only because the participation rate fell. If not, then the unemployment rate would have risen marginally. So no signs of a sustained growth path is emerging. Broad labour underutilisation (underemployment and unemployment) was at 13.3 per cent summing to 1,724 thousand persons, which tells you that there is still considerable slack in the labour market. The teenage labour market deteriorated in October although this cohort shared in the full-time employment growth, which is a good outcome. Overall, my assessment is that there is no discernible trend in the Australian labour market. It shows signs of strength one month, and then backs away from that the next. We are not in a position to say that there is a sustained growth path ahead.
On August 19, 1964, the then US President Lyndon B. Johnson established the – National Commission on Technology, Automation, and Economic Progress. He established the Commission in response to growing concern during the deep 1960-61 recession that the unemployment had been created by the pace of technological change. Ring a bell! He wanted to an inquiry to explore this issue and come up with recommendations on how to deal with the possibility that automation was wiping out jobs and the future would be bleak. Before the Commission had reported, the Federal government had reversed its fiscal austerity and the resulting stimulus had driven the unemployment back down to relatively low levels. The Commission noted that unemployment was largely the result of inadequate total spending and that the Government had the tools at its disposal to eliminate it. They considered that there would be workers (low-skill etc) who would suffer more displacement from technology than those with more skill etc, but that ultimately even those workers would be able to get jobs if the public deficit was large enough. In this regard, they eschewed pointless training programs that did not provide immediate access to jobs. Instead, they recommended (among other things) the introduction of a Job Guarantee (Public Service Employment) financed by the Federal government but administered at all levels of government. It would pay the Federal minimum wage and be available on demand. This is the preferred Modern Monetary Theory (MMT) approach and rejects solutions that rely on the provision of a basic income guarantee to resolve the problems created by unemployment.
Yesterday, I discussed the latest US labour market data, including the 0.4 percentage point drop in the participation rate, which is a large decline for a month. Whether that is subject to revision or not remains to be seen. The monthly data fluctuates quite a bit due to sampling errors and uncertainties regarding population benchmarks. It is clear that during the recession, many workers opted to stop searching for work because there was a dearth of jobs available. As a result, national statistics offices considered these workers to have stopped ‘participating’ and classified them as being ‘not in the labour force’, which had had the effect of attenuating the official estimates of unemployment and unemployment rates. These discouraged workers are considered to be in hidden unemployment. But the participation rates are also influenced by compositional shifts (changing shares) of the different demographic age groups in the working age population. In most nations, the population is shifting towards older workers who have lower participation rates. Thus some of the decline in the total participation rate could simply be an averaging issue. This blog updates my previous estimates for the US. The aggregate participation rate has been in decline since the beginning of this century and the compositional shifts account for around 73 per cent of the decline over that time.
On November 3, 2017, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – October 2017 – which showed that total non-farm employment from the payroll survey rose by 261,000 in October, which the BLS said “mostly offset … a decline in
September that largely reflected the impact of Hurricanes Irma and Harvey”. For more on that issue see my analysis from last month – US labour market – hit by two hurricanes but improvement suggested. While the payroll data showed a strong rebound in employment, the Labour Force Survey data estimated a sharp drop in employment (484 thousand) in October while the labour force was also estimated to have contracted sharply by 765 thousand. The latter was due to a rather implausible decline in the participation rate (0.4 points), which will probably be revised next month. But, taking the data on face value, the BLS estimated that unemployment fell by 281 thousand and the official unemployment rate fell by 0.2 points to 4.1 per cent. There is still a large jobs deficit remaining and other indicators suggest the labour market is still below where it was prior to the crisis. What was striking about the October data though was the dramatic fall in the labour force participation rate – by 0.4 percentage points allied with the decline in the Employment-Population ratio (0.2 points). I analyse those movements in this month’s focus section of this blog. On the face of the aggregate data, the US labour market is getting back to its pre-GFC position but there is evidence that the quality of work has declined and negative cyclical effects remain in the system.
The latest labour force data released today by the Australian Bureau of Statistics – Labour Force data – for September 2017 shows that total employment growth was positive but weaker than last month with most of the action coming via part-time employment. However, total hours worked continued to rise, which suggests that employers are offering extra hours to existing jobs. Unemployment declined with a constant labour force participation rate, which says that employment growth was slightly stronger than the underlying population growth – a good sign. Labour underutilisation overall (underemployment and unemployment) was at 13.6 per cent summing to 1,814 thousand persons, which tells you that there is still considerable slack in the labour market. The teenage labour market showed modest improvement but remains in a poor state. Overall, my assessment from last month remains – it still to early to conclude that the uncertainty of the last few years is giving way to sustained growth.
On September 1, 2017, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – September 2017 – which showed that total non-farm employment from the payroll survey fell by 33,000 in September, which reflected the impact of the two hurricanes that have ravaged southern US states in the survey period. The Labour Force Survey data showed that employment rose by 906 thousand in September and the labour force rose by 575 thousand. Thus, the BLS estimated that unemployment fell by 331 thousand and the official unemployment rate fell by 0.2 points to 4.22 per cent. There is still a large jobs deficit remaining and other indicators suggest the labour market is still below where it was prior to the crisis. Further, the bias towards low-pay and below-average pay jobs continues and the fortunes of university graduates has declined relative to other cohorts in the labour force.
Today, I am writing from the Brighton, UK and today the first event of the British part of our Reclaim the State tour is to be held. See below for details. Last week, I attended the first International Modern Monetary Theory (MMT) conference, which although there have been many MMT-focused workshops or conferences in the past, was truly a gathering of the clan. The large number who attended (over 200 I believe) shows we are making progress. There is a snowball rolling and it will inevitably get bigger. The only danger of these focused events is that the ‘group’ can easily get trapped into thinking that the views expressed are the norm, which is the first step towards Groupthink. They are clearly not the norm and further work is required, but the fact that we can hold such a large conference focused exclusively on MMT is a significant step forward. I will write more about the MMT conference another day. Today, I want to focus on some statistics analysis – I had time on the plane journey across the Atlantic (Kansas City to London) to delve into the latest Gross Flows data from the Australian Bureau of Statistics. Gross flows analysis provides a different way of viewing the labour force data and often reveals some interesting trends that are hidden in the net analysis of labour market data.