Whatever way you want to interpret it, the Australian labour market fell off a very steep cliff in the four weeks from around March 12 to April 12. The latest data from the Australian Bureau of Statistics – Labour Force, Australia, April 2020 – released today (May 14, 2020) is shocking. Like all the data releases at the moment. All the main aggregates moved in extremely adverse directions. Employment fell by 4.6 per cent (594,300). Unemployment rose by 104,500 thousand. But that is a gross understatement of the problem given that the participation rate fell by 2.4 points, which meant the labour force fell by 489.8 thousand. Without the fall in the participation rate in April 2020, the unemployment rate would have been 9.7 per cent rather than its current value of 6.2 per cent). Monthly hours of work fell by 9.2 per cent. And the broad labour underutilisation rate is now at 19.9 per cent, after underemployment rose by 4.9 points to 13.7 per cent. There are now 2,639.4 thousand workers either unemployed or underemployed. That number swells to 3,142.6 (or 23.4 per cent) if we add the rise in hidden unemployment back into the ‘jobless’. Any government that oversees that sort of disaster has failed in their basic responsibilities to society. Its fiscal stimulus is totally inadequate.
It is Wednesday, so only some snippets today as I have deadlines and some travel to deal with. We have been finalising a Report on our latest estimates of the investment required to introduce a full-scale Job Guarantee in Australia. As part of that work, I have been going back through my NAIRU (Non-Accelerating Inflation Rate of Unemployment) estimates and updating data. I am also going to talk about that a bit in my presentation to the Economic Society of Australia tonight. That talk is about ultimately aimed at explaining the inflation fighting mechanisms inherent in the Job Guarantee, which is a centrepiece of Modern Monetary Theory (MMT). But to understand why that option is superior in efficiency terms, one has to know what the alternative buffer stock mechanism is. And that, of course, is the NAIRU orthodoxy. Also today, I am announcing some more detail about our plans to launch MMTed Q&A, as a weekly live program that will help people interested in our work to achieve better understandings. And some RIP style music with a suprising inflation result! Who could ask for more on a Wednesday. Tomorrow, the ABS release the Labour Force data and we will see how bad things have become in the Australian labour market over the month (more or less) just gone.
The – RAID (Redundant Array of Inexpensive Disks) – technology marks best-practice in data storage and backup systems. It replaced SLED (single large expensive disk) to improve performance and insure against data loss from hardware failures. I have a series of RAID disks backing up the IT systems that I manage within my research centre. But when it comes to humanity, we do not follow this practice. Neoliberalism clearly subjugates human development and opportunity to the interests of profit. It has created a ‘Just-in-Time’ culture in manufacturing, in work (the gig economy), in our personal finances (debt vulnerability) as part of the deliberate strategy to gain a greater share of national income for profits at the expense of workers. But, in doing so, it has demonstrated a remarkable myopia and created the conditions for massive crises to wreak havoc. In this blog post, I outline my thoughts on how capitalism is now on life support and that we should end this charade forever and ‘reclaim the state’ for progressive ends and build in the essential redundancy that allows us to minimise the damage that arises when unpredictable events confront us.
Last month’s analysis of the US labour force data – Tip of the iceberg – the US labour market catastrophe now playing out (April 6, 2020) – presaged what was to come. We now know more about the size of the iceberg. It is unimaginably large. Words fail really. This is one of those all-time historical events that make the severe crises of the past (early 1980s, 1990s, GFC – look like blips). On May 8, 2020, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – April 2020 – which shows that the US labour market has collapsed into territory never before recorded. And, given that the data released was drawn from samples that went up to April 12 (establishment survey) and April 18 (household survey), and so doesn’t fully capture the extent of the unfolding catastrophe. More recent data released by the US Department of Labor (unemployment insurance claimant data) shows the situation worsened in the last two weeks of April. In the last two weeks of April 2020, more than 9 million extra workers registered unemployment insurance claims. All the aggregates are demonstrating dramatic shifts to the point that graphs are becoming rather binary – the rest of history and now. The employment-population rate plunged 8.7 points to 51.3 per cent, which is the largest monthly fall since the sample began in January 1948. The U6 measure of broad labour underutilisation increased by 14 points to 22.8 per cent. This is the largest monthly rise in this measure since it was first published in January 1994. The situation will get worse. Its already catastrophic and it demonstrates a massive policy failure from the Federal government. Instead of directing trillions into the top-end-of-town, the US government should have guaranteed all incomes and introduced large-scale job creation programs and a Job Guarantee as an on-going safety net. Instead it is watching over people dying and people’s material prosperity being destroyed.
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.
Welcome to The Weekend Quiz. The quiz tests whether you have been paying attention or not to the blog posts that I post. See how you go with the following questions. Your results are only known to you and no records are retained.
It is getting to the stage that one gets bored reading critiques of Modern Monetary Theory (MMT) by leading mainstream economists. As the critiques have escalated over the last few years, I can safely say that not one has really said anything: (a) that the core body of work we have developed hasn’t already considered and dealt with – about 20 years ago!; (b) which means, none of the long line of the would be demolition team has achieved their aim. And when they write Op Ed articles that basically just say – oh, MMT economists ignore “the demand for money” and “MMT falls flat on its face” when inflation emerges as part of the emergence out of this crisis, I get bored. Really, is that the best they can come up with. The latest entreaty in the boring stakes comes from Willem Buiter, who seems to have left the commercial banking sector and gone back into academic life. His latest Op Ed – The Problem With MMT (May 4, 2020) – is not his best work. Boring is the best descriptor. Why did he bother? Did he think he had to establish his relevance. He would have been better concentrating on the archaic mess that his mainstream framework is in. Anyway, sorry to end the week like this.
It is Wednesday and I have a lot of commitments and deadlines hanging over me today. But I thought I would briefly comment on the yesterday’s – Decision – by the Bundesverfassungsgericht (German Federal Constitutional Court) (May 5, 2020) on the legality of the ECB’s Public Sector Purchase Programme. The BVerfG concluded that the ECB has been operating ultra vires and made orders as appropriate, which bind the German government and the Bundesbank and demonstrate once again the myth of central bank independence. There is all sorts of angst being expressed out there about this decision and progressive Europhiles are almost apoplectic. But it won’t surprise you to know that I think the Court made the correct judgement by exposing the complete sham that the European Union and the Eurozone, in particular, has become – an illegal, look-the-other-way, neoliberal cabal that the Union has become.
I reported in this blog post – Policy failure – Australian unemployment rate probably already around 10.9 per cent (April, 2020) – that the The Australian Bureau of Statistics has started publishing weekly employment data on a two-week cycle. The data is drawn from a new series made available as a result of the Single Touch Payroll data provided by the Australian Tax Office and provides researchers like me with much more timely data than the monthly labour force survey. The latest edition came out today (May 5, 2020) – Weekly Payroll Jobs and Wages in Australia, Week ending 18 April 2020 – which covers the new data from April 4, 2020. The results are shocking. The conclusion from my analysis of the latest available data is that some sectors in the Australian labour market have experienced a sudden and catastrophic contraction – like nothing we have ever seen in the data. Both employment losses and major wage losses are underway and the policy response is totally inadequate for the task. A much larger fiscal intervention is required and it has to be directed at workers rather than firms and support direct job creation.
Last Thursday (April 30, 2020), the US Department of Labor’s – Unemployment Insurance Weekly Claims Report – showed a further 3,839,000 workers filed for unemployment benefits in the US, taking the cumulative total since March 14, 2020 to 30,589,000. In a labour force of 164 million odd, that implies the unemployment rate is already around 22 per cent. The highest rate endured during the Great Depression was 24.9 per cent in 1933, which prompted the US President to introduce the major job creation program to stop a social disaster – the New Deal. History tells us that the major job creation programs (starting with FERA then morphing into the WPA) were opposed by the conservative (mostly) Republicans in the Congress. As is now! It wasn’t just the unemployment that mattered. Hours of work were also cut for those who maintained their jobs and some estimates suggest over 50 per cent of America’s labour force were underutilised in one way or another (read David Kennedy’s 2001 book for a vivid account of this period). The problem now is that the US has a Presidency that is unlikely to take the bold steps that Roosevelt took in the 1930s, even though the latter was a fiscal conservative and the former does not appear to be so inclined. However, some nations are leading the way – and they put the more advanced nations to shame in this regard.