Don't celebrate, ScoMo: job ad stats mask ugly truth about the labour market

Thu, 08 Jun 2017  |  

This article first appeared on The Crikey website at this link: 


Don't celebrate, ScoMo: job ad stats mask ugly truth about the labour market

In the aftermath of the release of the ANZ Bank job advertisement series on Monday, Treasurer Scott Morrison proudly tweeted that the figures showed: “almost 170,000 jobs advertised in May. Job ads now at the highest level since August 2011.”

Morrison is not a prolific tweeter and rarely does he comment on the monthly job advertisement series. One can only assume he was pleased to see a data point heading in the right direction.

To be sure, the news of rising job ads is a welcome respite from the general gloom in the recent set of economic news. Most now agree that the economy is sluggish, rolling along without much evidence of a much needed or wanted acceleration in activity.
But in tweeting the fact that there are almost 170,000 jobs advertised in May, Morrison indirectly exposed the current difficulties in the economy more broadly and the labour market in particular.

The latest labour force data show that around 730,000 people are unemployed. So even if every one of those 170,000 job advertisements were filled tomorrow by an unemployed person, there would still be around 540,000 people unemployed. That is a lot of people. And that, of course, in the example, would mean there would be no more job vacancies for the roughly 250,000 people who will enter the labour force over the next year.

Nor would it allow for any inroads to be made to the 1.1 million workers who are currently underemployed and, by definition, looking for opportunities to increase their hours worked — and with that, their take home pay. The sharp rise in underemployment is, to some extent, masking the broader weakness in the labour market. Clearly employers are cutting people’s hours rather than sacking them, which is keeping something of a lid on the unemployment rate. This is a function of Australia’s flexible labour market.

This also means that when the economy finally emerges from its current period of funk, many of those underutilised workers will work more hours — which is good — but the number of new jobs for the unemployed and the new entrants to the labour market are unlikely to be plentiful.

Morrison also missed the point that at the same time the job advertisement data were released, there were data on wages growth from the Australian Bureau of Statistics. Morrison did not tweet that, over the year to the March quarter 2017, wages rose a paltry 0.9%, less than half the rate of inflation. This means that household purchasing power and therefore living standards are falling in real terms.

Little wonder consumer sentiment is in the doldrums and retail sales remain weak.

The weakness in the labour market is arguably one of the biggest issues confronting the Australian economy in the near term. With consumer spending over half of GDP and in itself a vital driver of economic and jobs growth, how can spending pick up if real wages are falling?  Consumers can run down their savings to a point, but they have already been doing this in recent years and with job security fragile, they may be reluctant to do so again. The outlook for consumer spending remains fragile.

The housing market is weak outside Sydney and Melbourne — even cooling in those two property hot-spots — so it no longer seems to be an option to rely on ever increasing housing wealth to fund consumption.

Last month, Morrison delivered the budget, which acknowledged the best Australia can do on unemployment is 5.25%. This capitulation on labour market reform is an issue that will likely come to bite the government even if that target is achieved.

We need policies that kickstart growth. Alas, the budget seemed focused on tax hikes and a return to surplus rather than tackling unemployment. More than 170,000 job advertisements are needed if Australia is to make meaningful inroads into unemployment.

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As house prices fall across Australia, should we be worried for our economy?

Tue, 13 Mar 2018

This article first appeared on the Yahoo7 Finance website at this link: 


As house prices fall across Australia, should we be worried for our economy?

Are you a home owner?

If you are in Sydney, Perth and Darwin, you are losing money at a rapid rate.

In Melbourne and Canberra, prices are topping out and there is a growing risk that prices will fall through the course of this year. If your dwelling is in Brisbane or Adelaide, you are experiencing only gentle price increases, whilst the only city of strength is Hobart, where house prices are up over 13 per cent in the past year.

The house price data, which are compiled by Corelogic, are flashing something of a warning light on the health of the housing market and therefore the overall economy. For the moment, the drop in house prices has not been sufficient to unsettle the economy, even though consumer spending has been moderate over the past year.

The importance of house prices on the health of the economy is shown in the broad trend where the cities that have the weakest housing markets tend to have the slowest growth in consumer spending and are the worst performance for employment and the unemployment rate. The cities with the strongest house prices have strong labour markets and more robust consumer spending.

Trump could cause the next global recession: here's how

Wed, 07 Mar 2018

This article first appeared on the Yahoo7 Finance website at this link: 


Trump could cause the next global recession: here's how

The Trump trade wars threaten the global economy. This is not an exaggeration or headline grabbing claim, but an economic slump based on a US inspired global trade war is a distinct and growing possibility as it would dislocate global trade flows, production chains and bottom line economic growth.

Up until a few weeks ago, there was a strong enthusiasm for the economic policies of US President Donald Trump. Tax cuts and planned infrastructure spending were seen to be good for the US and world economies. US stocks and many around the rest of the world rose strongly, to a series of record highs. At the same time, bond yields (market interest rates) surged as the market priced in interest rate hikes and inflation risks from the ‘pro-growth’ policies. It was seen to be good news.

Very few, it seems, were worried about the consequences for US government debt and the budget deficit from this cash splash, especially when the US Federal Reserve was already on a well publicised path to hiking interest rates.

About a month or two ago, a few of the more enlightened and inquisitive analysts started to focus on the fact that the annual budget deficit under Trump was poised to explode above US$1 trillion with US government set to exceed 100 per cent of annual GDP.

A debt binge fuelled by tax cuts was a threat to the economy after the temporary sugar hit.