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First signs of a slowdown in the US labour market

Last Friday (July 8, 2022), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – June 2022 – which reported a total payroll employment rise of only 372,000 jobs and an official unemployment rate of 3.6 per cent. While it might seem that the June and May results were steady as she goes, the reality is that the June figures reveal the first signs of a slowdown in the US labour market. The labour survey employment measure fell as did the participation rate. There was a fall in the employment-population ratio, a fairly reliable measure that the demand-side is lagging behind the supply-side. The US labour market is still 524 thousand payroll jobs short from where it was at the end of May 2020, which helps to explain why there are no wage pressures emerging. Real wages continued to decline as the supply disruptions and the greed of increased corporate profit margin push sustain the inflationary pressures. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data. The justification by the US Federal Reserve for pushing up interest rates to quell wages pressure does not stack up with the evidence.

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Why has Japan avoided the rising inflation – a more solidaristic approach helps

A few years ago, various policy makers, but mostly central bankers were keen to disabuse anyone of the notion that they were ‘doing’ Modern Monetary Theory (MMT). Some were aggressive in denial, such as US Federal Reserve boss Jerome Powell, who on February 26, 2019 announced to the US Senate Banking Committee that MMT was ‘just wrong’. There was a general pile on from other central bankers and commentators. No way, they were doing MMT. Okay, they were right, one doesn’t ‘do’ MMT, given it is an analytical framework (see below). But, curiously, now, the commentators are falling over themselves claiming that MMT is dead in the water given that it has been tried over the course of the pandemic to date and failed because inflation is out of control. Hilarious really. But what is interesting is Japan (as always). And I wonder whether any of these MMT critics now have considered why the Bank of Japan has not followed the lead of the other central banks that are rushing to exacerbate the temporary inflation spike by deliberately creating unemployment. It seems that there are different paths that policy makers can take within a capitalist monetary economy. They can allow corporations to profit gouge at the expense of the workers and then turn on the workers (creating unemployment) or they oversee a system where all parties (workers and corporations) take real income hits as a result of imported price pressures and wait it out. Japan is in the second category to its credit.

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Unaccountable central bankers once again out of controls

On August 27, 2020, the US Federal Reserve Chairman, Jerome Powell made a path breaking speech – New Economic Challenges and the Fed’s Monetary Policy Review. On the same day, the Federal Reserve Bank released a statement – Federal Open Market Committee announces approval of updates to its Statement on Longer-Run Goals and Monetary Policy Strategy. I analysed that shift in this blog post – US Federal Reserve statement signals a new phase in the paradigm shift in macroeconomics (August 31, 2020). It appeared at the time, that a major shift in the way central banking policy was to be conducted in the future was underway. A Reuters’ report (August 28, 2020) – With new monetary policy approach, Fed lays Phillips curve to rest – reported that “One of the fundamental theories of modern economics may have finally been put to rest”. At the time, I didn’t place enough emphasis on the ‘may’ and now realise that nothing really has changed after a few years of teetering on the precipice of change. The old guard is back and threatening the livelihoods of workers in their usual way.

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New Keynesian inflation model is unfit for purpose

It’s Wednesday – a day for a few short comments and then relaxing to music. Today I consider some statements from the Bank of International Settlements, which suggest that the mainstream inflation approach, based on the New Keynesian Phillips curve is subjected to “serious practical shortcomings”. In other words, it is unfit for purpose, which means you should not be surprised that central banks are hiking rates to stifle a transient supply-side inflation burst. Quackery leads to quackery. I also consider some recent evidence that supply disruptions are easing. And, then, we learn that that the British Labour Party no longer things workers should strike. And if that has driven you mad, then we restore calm with some great music from Jiro Inagaki.

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US labour market weakens a little – it is madness to be increasing interest rates in this environment

Last Friday (June 3, 2022), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – May 2022 – which reported a total payroll employment rise of only 390,000 jobs and an official unemployment rate of 3.6 per cent. The US labour market is still 822 thousand payroll jobs short from where it was at the end of May 2020, which helps to explain why there are no wage pressures emerging. Real wages continued to decline as the supply disruptions and the greed of increased corporate profit margin push sustain the inflationary pressures. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data. It is madness to be increasing interest rates in this environment.

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US inflation is moderating while a massive fiscal contraction is underway – recession looming

Yesterday (May 11, 2022), the US Bureau of Labor Statistics released the latest – Consumer Price Index Summary – April 2022 – which showed the monthly increase in the CPI to be 0.3 per cent, the lowest monthly increase since August 2021 and, as it happens, just about right on the average monthly growth rate from January 1947 and April 2022. The result suggests a tapering of price pressures. The Energy component fell by 2.7 per cent in April after spiking at 11 per cent in March. Further, the growth in food prices fell for the third consecutive month. All of this has nothing to do with the recent interest rises imposed on the economy by the US Federal Reserve. They were already in train and confirm the transitory nature of this period of price instability. The US Treasury Department also published its most recent fiscal statistics yesterday – Monthly Treasury Statement – for April 2022, which reports a staggering $US533,794 fiscal shift between April 2021 and April 2022 – the fiscal drag embodied in that shift is massive and calls into question the conduct of the US Federal Reserve – why did they think they needed to push the economy towards recession? Fiscal policy is already working in that direction!

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US labour market showing signs of faltering as real wages continue to decline

Last Friday (May 6, 2022), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – April 2022 – which reported a total payroll employment rise of only 428,000 jobs and an official unemployment rate of 3.6 per cent. However, the Labour Force survey provided the opposite impression with employment and the participation rate falling. It is difficult at this stage to reconcile the two messages except to say that the US labour market has probably reached an inflection point and a deterioration is emerging as the Federal Reserve continues to hike interest rates. The US labour market is still 1,190 thousand payroll jobs short from where it was at the end of April 2020, which helps to explain why there are no wage pressures emerging. Real wages continued to decline as the supply disruptions and the greed of increased corporate profit margin push sustain the inflationary pressures. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data.

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The Left/Right distinction is as relevant as ever as corporations gouge profits out of pushing inflation

Apparently, the Left/Right Paradigm is dead. This narrative keeps coming back. In the 1980s, when governments, coopted by corporate lobby groups, went on a privatisation spree, which transferred billions of dollars worth of public assets into the hands of private wealth holders, and enriched lawyers, management consultants etc into the bargain, we were told that we are all capitalists now because our pension funds bought the assets. Joke. Anyway, I keep reading and being told that there is no longer any meaningful distinction between Left and Right, with both falling into the hands of totalitarian discourse. Even so-called progressives advocate that the traditional Left should partner up with the traditional Right (and far Right) to keep ‘centrists’ out of power or to stop governments taking basic actions to protect public health. It is the ultimate victory for the neoliberals to have persuaded the Left that they have more in common with the Right than ever before. This is another example of how duped the Left has become.

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Deliberately creating mass unemployment now would be the work of vandals and New Keynesians

Last week, the New York Times published the latest Paul Krugman article on inflation (which is behind its paywall). It is syndicated elsewhere and you can access it here at The Berkshire Eagle (April 13, 2022) – Paul Krugman: Inflation is about to come down — but don’t get too excited. I wondered whether the author had offered his services cheaper to the NYTs and elsewhere given his concern for inflation, and, apparently, his assertion that wages are a critical factor in sustaining it. What this article highlights is mainstream New Keynesian macroeconomics – the dominant paradigm in our teaching, research and policy circles. What it also highlights is how different the mainstream is to Modern Monetary Theory (MMT), despite characters like Krugman and his fellow New Keynesians trying to tell the world that there is nothing particularly different about MMT and the way they do economics. It also provides another chance for me to add nuance to the Job Guarantee.

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US employment continues to grow but still 1.6 million jobs short of pre-pandemic levels

Last Friday (April 1, 2022), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – March 2022 – which reported a total payroll employment rise of only 431,000 jobs. Fortunately, employment growth was strong enough to drive the unemployment rate down by 0.2 points to 3.6 per cent. But there is still room for the unemployment rate to fall even further. The US labour market is still 1,579 thousand jobs short from where it was at the end of March 2020, which helps to explain why there are no wage pressures emerging. Real wages continued to decline. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data.

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