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: https://www.crikey.com.au/2017/06/08/scott-morrison-missing-the-point-on-economy-and-employment-statistics/?utm_content=buffer674b5&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer 

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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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Why don’t governments deliver policies that are good for the electorate?

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This article first appeared on The Adelaide Review site at this link: https://adelaidereview.com.au/opinion/politics/paying-fair-share/ 

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Paying Their Fair Share

It’s the age-old question: why don’t governments deliver policies that are good for the electorate? Well, the answers are numerous.

Politics and policymaking should be simple. After all, being in government and delivering what voters want — making them happy in other words — and increasing the chances of re-election seems to be the proverbial win-win scenario.

Which begs the question, why don’t political parties do it?

Why don’t they deliver policies that are good for the electorate and good for their re-election chances?

Let’s cut to what the voters, in general, want.

A policy framework where each person who wants a job gets a job is key. In addition, access to quality and affordable health care and education, from kindergarten to university to trades training is fundamental. There are other issues that are basic, simple and fair.

Voters want the government to provide aged-care services that treat the older members of society with dignity. We want decent infrastructure, especially pubic transport and roads. We want people who are doing it tough to be supported by a welfare safety net — a decent rate of pension, unemployment benefits and disability support.

So far, so good.

Australia has given up on solving unemployment

Sun, 20 Aug 2017

This article first appeared on The New Daily website at this link: https://thenewdaily.com.au/money/finance-news/2017/08/16/stephen-koukoulas-unemployment/ 

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Australia has given up on solving unemployment

 It is a sad state of affairs to realise that the current crop of Australian policy-makers have effectively given up on reducing unemployment.

Treasury reckons that the lowest the unemployment rate can go without there being a wages and inflation breakout is around 5.25 per cent.

The Reserve Bank of Australia notes something similar, forecasting that even when the economy is growing strongly at an above-trend pace, the unemployment rate will hover between 5 and 6 per cent.
The current unemployment rate is 5.6 per cent or some 728,100 people – enough to fill the Melbourne Cricket Ground about seven times.

Given the Treasury and RBA estimates, it looks like Australia will never see fewer than about 700,000 people unemployed – no matter what kind of improvement we see in the latest jobless figures on Thursday.
It seems to be a peculiarly Australian issue. In the US, the unemployment rate is 4.3 per cent, in the UK it is 4.5 per cent, in Japan it is 2.8 per cent while in Germany, the unemployment rate is 3.9 per cent. And none of these countries is experiencing a wage/inflation problem. Indeed, even with the very low unemployment rate in Japan, wages are actually falling.