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.
It is Wednesday so some snippets and some music – sad music this week because it signals the death of one of the great pioneers of Jamaican music last week. I am holding a Mini-Music Festival today – right here on my blog. Join in an celebrate a legend. But a few economics matters first pertaining to the Job Guarantee and the nonsensical arguments I have been seeing in the media about it being a system of enslavement and not better than a system that forces workers into unemployment.
Last week, the Australian Bureau of Statistics released the latest data – Retail Trade, Australia, Preliminary , July 2020 – which showed that retail turnover in July 2020 had risen by 3.3 per cent, the second month of improvement since it fell off a cliff in the two months from March. The exception was for Victoria, which is now in Stage 4 lockdown, which caused retail sales to fall by 2 per cent. Today, the ABS released the latest data for – Weekly Payroll Jobs and Wages in Australia, Week ending 8 August 2020 – which gives us the most up-to-date picture of how the labour market is coping with the on-going restrictions and the reimposed of harsh Stage 4 restrictions in Victoria. Unsurprisingly, payroll employment fell in the fortnight ending August 8, 2020 in Victoria by 1.6 per cent. But what was also surprising was that employment fell in every other state or territory bar Tasmania and ACT. The Victorian case is about lockdown. The other declines are about failed macroeconomic policy, which goes to the performance of the federal government. Regular readers will know that I have routinely analysed this dataset ever since it first became available in March this year. It uniqueness is that it provides the most recent data upon which an assessment of where the labour market is heading. The data shows that after a partial recovery from the downturn, payroll employment is declining again. 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 that more needs to be done by the Federal government. I am not holding my breath.
Last week was a very busy data release week and so I am still catching up. Last Wednesday (August 12, 2020), the Australian Bureau of Statistics (ABS) released the latest- Wage Price Index, Australia – (June-quarter 2020). The ABS reported that the June-quarter result was “the lowest annual growth in the 22-year history of the WPI”. Private sector grow was just 0.1 per cent and public sector growth was 0.6 per cent. The overall WPI growth was just 0.2 per cent. With annual inflation in the June-quarter recorded at -0.3 per cent, real wages grew. But the inflation result was distorted the federal government decision to offer free child care in the early period of the pandemic (now rescinded). The reality is better reflected in the core inflation rate (excluding volatile items) of 0.4 per cent. Taking that measure, real wages fell overall in Australia in the June quarter. Further, over the longer period, real wages growth is still running well behind the growth in GDP per hour (productivity), which has allowed profits to secure a substantially increased share of national income.
Today, the Prime Minister of Australia indicated that the ‘effective’ unemployment rate in Australia is heading to 13 per cent as a result of the harsh lockdowns that have just begun in Victoria as it reels under a second wave of coronavirus (Source). The effective rate incorporates the official estimate (based on activity tests – search and willingness), the number of workers who have dropped out of the labour force due to a lack of opportunities, and those on wage subsidies who are not working at all. The Stage 4 Melbourne lockdown for the next six weeks will cut GDP by a further 2.5 per cent. While economists fuss about microeconomic losses, the daily output and income losses from the unemployment and underemployment are massive, not to mention the huge personal, family and community losses. A responsible government, which issues its own currency and can procure any productive resources that are idle, would be doing everything it could to ensure these losses do not occur. It is not rocket science. The Federal government could ensure those who are unable to work due to the lockdown maintain their current incomes. The overwhelming impression I am getting as we enter the fourth month of this crisis is that the federal polity in Australia is lost. The scale of the disaster has so confronted the neoliberal DNA of the major parties that they are failing to articulate a coherent and viable short- and medium-term plan to deal with the crisis. The challenge is for the government to abandon its inclination to see a ‘return to surplus’ as a benchmark it aspires to. That mentality is making this disaster a catastrophe. We can do much better.
We need to get a few things straight. And this is partly for those out there who seem to think that the extent of literature on Modern Monetary Theory (MMT) or the Job Guarantee within MMT is confined to collections of Tweets that allow 280 characters or Unicode glyphs. One doesn’t become an expert on ‘full employment’ or ‘political economy’ because they have suddenly realised there is a major crisis in the labour market and have decided to strategically place their organisations for self-serving purposes to be champions of full employment. There is an enormous literature on the Job Guarantee and I have been a major contributor along with my valued colleagues. This is a crucial time in history and one of the glaring deficiencies in the current crisis and economic management in general is the lack of an employment safety net. This is what MMT has to say about that safety net and stabilisation framework.
On June 19, 2020, Australia’s wage setting tribunal, the Fair Work Commission handed down its – Decision: Annual wage review – which saw the National Minimum Wage (NMW) rise by just 1.75 per cent per cent from July 1, 2020. However some of the flow-on increases (awards linked to the NMW), which would normally have been adjusted on the same date have been staggered (November 1, 2020 for Group 2 Awards and February 1, 2021 for Group 3 Awards). The new minimum wage will be $753.80 per week or $19.49 per hour (a measly 35 cents per hour extra). In terms of any inflation measure you want to choose, the FWC’s decision represents a real wage cut for the lowest paid workers (Group 1) and even larger cuts for the other Groups as a result of the staggered wage rises. There is certainly no joy for workers when the mindless pursuit of austerity by the federal government slows growth (before the pandemic), which the government’s own wage setting tribunal then uses as a pretext (the slow growth) to cut real wages. Meanwhile the major employer groups argued for zero nominal rise while enjoying growth in profits with rising productivity growth. A scandalous indictment of our system.
Today (June 16, 2020), the Australian Bureau of Statistics released their latest weekly employment data taken from Australian Tax Office data. They have slowed the release cycle on this data (for reasons they have not disclosed), so it is a month since I have analysed it. The latest edition came out today – Weekly Payroll Jobs and Wages in Australia, Week ending 30 May 2020 – which covers the new data from May 2, 2020 to May 30, 2020. The monthly labour force data to be released on Thursday covers a period that ends around May 12, 2020, so today’s data provides a more recent snapshot of the state of affairs. At the beginning of May, the data was suggesting that the worst of the job losses were over. The severity of the lockdown has eased a little since then, although the pattern of easing has been quite different across the states and territories. So we might have expected some variations to arise from that. And today’s data shows just that. In the Accommodation and food services sector, where some easing has occurred, jobs are returning, albeit at a slow rate. But in the Arts and recreation services sector, where little change in lockdown restrictions has occurred to date, there has been very little employment growth. The question is how many businesses will go to the wall before we get a more usual scale of operation and interaction. My prediction is that many will disappear and so the recovery in employment will be protracted given how many jobs have been lost to date. A much larger fiscal intervention is required and it has to be directed at workers rather than firms and support direct job creation. The problem now is that the Government is starting to reassert its neoliberal ideology and withdrawing the inadequate stimulus far too early. The future is not looking good. We might be virus free but there will be massive unemployment remaining into the distant future.
Last week, the results of a survey of Australian economists was released which showed that the majority supported freezing minimum wages, which normally are adjusted annually in June. The minimum wage case is currently being heard in the wage setting tribunal (Fair Work Commission) and a host of antagonists have assembled arguments to stop millions of the lowest paid workers getting a pay rise. In effect, they are advocating a real wage cut for these workers given inflation is running at around 1.8 per cent per annum at present. The Australian government is also claiming it will not extend the already inadequate fiscal support measures that have left more than a million low-paid, casual workers without any wage support since the lockdown began. And they have started winding back support in key sectors like child care which will impact disproportionately on low-paid women’s employment opportunities. But, some are still claiming that neoliberalism will not recover from this pandemic. That all the myths we have been fed about government fiscal policy capacity have been exposed for what they are and we will come out of this with a new economic paradigm. Not so fast. Not a lot will change yet. The struggle goes on.