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Australian labour market – flat and not looking very prospective

Today’s release of the – Labour Force data – for August 2015 by the Australian Bureau of Statistics shows that the Australian labour market stalled this month with fairly weak employment growth, a falling participation rate, and flat hours worked. Unemployment decreased as did the unemployment rate but it that was all due to the decline in the participation rate – that is, unemployment was replaced by hidden unemployment as a result of the weak employment growth. The teenage labour market went backwards in August and their situation remains parlous. In a sense, this is the calm before the storm as private investment is forecast to decline rather sharply in the coming year and the government is intent on cutting its net spending. Either outcome will see the labour market retreat rather quickly.

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Australia’s crawling Internet speed signifies wider fiscal failure

One of the small things I noticed (and enjoyed) in Europe in the last few weeks is the speed of the Internet connections available. Even if one takes the so-called ‘low speed’ option at the hotel (invariably free), the connectivity speeds were far superior to anything I have available in Australia. That matters when large datasets are involved. We often wait minutes for datasets to download here from say the Australian Bureau of Statistics. Watching streaming video is often a case of getting it started, pausing it, and waiting an hour or more for the download to occur so that you can watch it without interruption. Australia is very backward in this regard and the reasons that we are set to become even more disadvantaged are the same reasons that the economy are heading towards recession – a neo-liberal fetish against government spending and an ideological blindness to innovation.

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US labour market – not as strong as in 2014

Last week, the US Bureau of Labor Statistics released the August – Employment Situation – which provides some guide as to the health of the US labour market. The degree to which the guide is very clear is another question altogether. Total non-farm employment rose by only 173,000 and the unemployment rate fell to 5.1 per cent, which on the face of it sounds like a positive development. However, the employment growth was well below the expectation (although the banking economists are rarely close) and deeper analysis shows that the sectors that lead the cycle up and down and therefore provide a signal for the future movement of other sectors, have slowed quite significantly and are growing at 2012 levels when the US was still mired in the GFC downturn. I had a brief look at the gross flows data from the US this morning and the fall in unemployment is being driven by larger outflows from unemployment into employment while flows out of employment into unemployment are much smaller. There are other uncertainties relating to hours of work are growing faster than employment in persons, indicating that firms are now bringing their hoarded labour back into more intensive use. In this blog, I report on what is happening with the hiring and firing rates in the US to broaden our understanding of how things stand at present. The conclusion certainly doesn’t add any weight to the claim that the US Federal Reserve Bank should raise interest rates.

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Monday travel and some austerity stories

There is no detailed blog today as I am travelling from Brussels to Sydney. I will resurface again on Tuesday after the long flight. When I wrote my blog on Friday documenting the austerity tour around Porto I forgot to mention a few things. This blog adds some more observations I have made of conditions in this part of the world at present.

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Saturday Quiz – September 5, 2015 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you understand the reasoning behind the answers. If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

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Friday lay day – the ‘worst tour’ in the world

Its my Friday lay day blog and I am on the austerity trail. I have been in Porto, Portugal for the last few days, ostensibly taking a short break by the beach. There has been no swell at all. The beach area to the south of the Douro River is like beach areas everywhere. They give little hint of what austerity has done to this country. Porto is the northern capital of Portugal and a town of around 240 thousand people (in 2012) with the wider region containing around 1.4 million people. It is considered one of “the major urban areas of Southwestern Europe.” But it is also disintegrating as an urban centre with an extraordinary number of derelict buildings and many shops closed as austerity ate into incomes and spending. There are decaying buildings everywhere some with for sale signs on the front. The urban infrastructure is falling apart – the main market is being held up with scaffolding and weeds overtake sporting arenas. In many respects, it looks like a city in the poorest nations rather than being part of Europe. Around a third of the inner city population has left. A large number of people in the greater urban area have left. The mobile are dominated by the young and the educated with the skills leaving behind an elderly population. There is little hope for the city under the current policy structures. A nation and its cities destroyed by austerity. There is no exaggeration here. I invite people to see for themselves. An extraordinary outcome of an out of control recession cult ideology reinforced by neo-liberal Groupthink ruining the prosperity of a people. I had quite a day yesterday as I went on a field trip around Porto organised by the – The Worst Tours.

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There is no need to issue public debt

At the London event last week, I indicated that governments should not issue any public debt as the benefits of doing so are small relative to the large opportunity costs. The Modern Monetary Theory (MMT) position is that there is no particular necessity to match public deficits with debt-issuance for a currency-issuing government and deficits should be accompanied by monetary operations which we now call Overt Monetary Financing (OMF). Surprisingly there was some arguments by audience members that governments should continue to issue debt, largely, as I understand them, to provide a safe haven for workers to save for the future. So the idea is that we maintain the elaborate machinery that is associated with the public debt issuance just to provide a risk free asset that workers can use to park their hard-earned savings in. It is a strange argument given the massive opportunity costs associated with debt issuance. A far simpler solution is to exploit the currency-issuing capacity of the government to guarantee a publicly-owned National Saving Fund. No debt would be required.

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Australia national accounts – heading for recession at this rate

When the March-quarter 2015 National Accounts came out three months ago I wrote that “the fragility of growth increases”, as the economy descended into a state of weak growth well below the accepted trend rate. The latest data – June-quarter 2015 National Accounts data – released by the Australian Bureau of Statistics today suggests that that fragility has worsened as net exports contracted sharply. Only household consumption and government spending (both consumption and investment) kept the Australian ecoomy growing, albeit at an aneamic rate of 0.2 per cent for the quarter and 2 per cent for the year to June 2015. But the trend is towards near zero growth and the ABS wrote that “Nominal GDP growth was 1.8% for the 2014-15 financial year”, which was “the weakest growth in nominal GDP since 1961-62.” The other notable result was that ‘income recession’ that Australia entered in the last quarter has consolidated wth the total market value of goods and services (GDP) outpacing the flow that Australian residents enjoy as income. Real net national disposable income fell by a further 0.9 per cent over the quarter and 1.1 per cent over the last year. While private consumption growth remained positive, the savings ratio continues to fall indicating indebtedness in on the increase as wages growth remains weak. The other notable result is that despite the call for austerity by the Federal government, gross fixed capital formation (investment) rose by only 0.4 per cen, driven entirely by public sector investment spending. Without the contribution of public spending overall, the Australian economy would have been in negative growth territory. Today’s data paints a very negative outlook for the Australian economy for the remainder of this year and into 2016. With real GDP growth well below that needed to reduce unemployment and underemployment, the government needs to stimulate the economy to boost income and employment growth. This would also allow wages to grow and take the squeeze off households.

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