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Australian labour market rebounds strongly after lockdown ends but still 1.6 million (12.1 per cent) without enough work

The Australian Bureau of Statistics released the latest labour force data today (December 16, 2021) – Labour Force, Australia – for November 2021. With most states now abandoning most Covid restrictions just as the new variant arrives, which evades the vaccine coverage and infection numbers soar to record levels (go figure), the labour market certainly rebounded emphatically. Employment growth was very strong and resulted in sharp falls in unemployment and underemployment. Participation also rose, which prevented the unemployment rate from falling more. Overall, this is an improving situation although whether it will last as infection numbers start to rise rapidly is another question. It is certainly time for the Federal government to take advantage of the strengthening situation in the non-government sector and target some really good job creation initiatives in the regions and demographic cohorts that are still lagging behind.

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Sunak – (bad) comedian of the year

It’s Wednesday and I load up other things to do on this day and thus write less here. I also am in the process of moving offices at the University – and after some 18 years in different locations, I am now returning to the Social Sciences Building where I first had an office when I came to the University from Adelaide. Which feels sort of okay, given by opposition to economics being treated as a business discipline. But thanks to a deal I made with the University in 2007, my research centre left the ‘business faculty’ and went out on our own. Hence, my office doesn’t have to be with the other economists, which I am happy about. This morning, I read the most stupid thing I think one could ever read about economics. It came from a UK Guardian article (December 14, 2021) – Sunak warns over multibillion cost of booster programme – where the Chancellor basically disqualified himself from office. Once we get through the trauma of that sort of news, I promise there is some great music to finish with.

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Teaching disadvantaged adults about child development is an effective way to reduce inequality

Some recent research highlights the point I have made in the past that who your parents are matters for your future prospects. We all make choices as we emerge into the adult world, but the constraints that are dished up to us by our parents are in many cases more important in determining our future outcomes than the choices we make. The mainstream neoclassical explanation for income differentials focus on the choices – for education, training, and other career development pathways. From a policy perspective, I think it is more sensible to focus on the constraints as they are in many cases fairly easily altered by sensible government intervention. However, in the real world, not only are the constraints that individuals face conditioned by the circumstances that they are born into, but those circumstances also influence the choices the individuals make. Recent research has found that educational programs for parents in disadvantaged situations to show them what determines child development not only improves the lives of the adults involved but also delivers much better outcomes for their children. They are able to make better decisions which, in turn, improve the environment in which they are learning and building their skills. The policy implications are clear.

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Central banks are resisting the inflation panic hype from the financial markets – and we are better off as a result

Regular readers will know that I think the current inflationary phenomenon is transitory. They will also know that I see the continual claims by financial market economists that central banks have to increase interest rates now to avoid an accelerating inflationary episode as having little economic content and lots of self interest content. If rates go up, they win their bets and the more they can bully authorities to do their bidding the more certain their bets become profitable. I am glad that central banks around the world are resisting that game of bluff. In previous periods, they have not resisted and have handed the financial speculators (the top-end-of-town) massive and unjustified profits and forced millions of workers to endure joblessness. It is also interesting that the mainstream press is starting to work that out too. Some progress.

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The Weekend Quiz – December 11-12, 2021 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! 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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The NAIRU should have been buried decades ago

In 1983, I started a PhD at the University of Manchester working within the Phillips curve framework. At the time, all the talk was Monetarist – eschewing the use of fiscal policy to reduce unemployment. Unemployment was high after the OPEC oil shocks and governments were abandoning their responsibilities to reduce it because they had drunk the Monetarist Kool-aide. The Monetarists invented a concept – the Non-Accelerating Inflation Rate of Unemployment (NAIRU) or the ‘natural rate of unemployment’, which became part of the dominant macroeconomic approach and influenced policy makers to pursue microeconomic reform (deregulation, privatisation, outsourcing etc) and obsessing about fiscal surpluses. My work was an attempt to show this shift in thinking – away from a commitment to full employment was based on a lie. The whole NAIRU story was a fraud. I was largely ignored along with other progressive economists who were also producing credible research that refuted the main propositions. Some 40 years later, the ECB has produced a research paper which now supports the position I took back then. Millions of jobless people later!

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New German finance minister thinks (27 per cent slump in GDP) Greece is Germany’s new role model for reform

It’s Wednesday so not much today. I offer some comments on the latest data release from Germany (not good) and the probability that the new German finance minister will be anything other than a dangerous dud. An announcement about the edX MMTed course (coming back). And then Blind Willie Johnson serving up Great Depression angst.

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Bank of England finds QE did not increase bank lending: who would have thought

I read an August 2020 Bank of England Staff Working Paper (No.883) – Does quantitative easing boost bank lending to the real economy or cause other bank asset reallocation? The case of the UK – recently, which investigates whether the large bond-buying program of the Bank stimulates bank lending. They find that there was no stimulus to lending. Which would only be a surprise if one thought that mainstream monetary economics had anything useful to say. Modern Monetary Theory (MMT) economists were not at all surprised by this finding.The reality is that the lack of bank lending during the GFC had nothing to do with a liquidity shortfall within the banking sector. It had all to do with a lack of credit-worthy borrowers – which should tell you that bank reserves do not constrain bank lending. The fact that mainstream institutions such as the Bank of England are now publishing this sort of research, which undermines the mainstream theory is the interesting fact.

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US labour market – job shortfall continues with government sector undermining job creation

Last Friday (December 3, 2021), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – November 2021 – which reported a total payroll employment rise of only 210,000 jobs in August and a 0.4 points decline in the official unemployment rate to 4.2 per cent, while participation rose by 0.2 points. This is one of those crazy months when the payroll figure suggests a slowing down while the labour force survey paints a fairly rosy outlook with strong jobs growth stimulating rising participation and a declining labour underutilisation rate. We will have to wait until next month to see how it all works out. But the undeniable facts are that the economy is still creating work – in an unequal pattern across the sectors and the government sector is undermining the benefits of that creation. The US labour market is still 3,912 thousand jobs short from where it was at the end of February 2020, which helps to explain why there are no fundamental wage pressures emerging. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data.

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