Last Friday (July 8, 2022), the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – June 2022 – which reported a total payroll employment rise of only 372,000 jobs and an official unemployment rate of 3.6 per cent. While it might seem that the June and May results were steady as she goes, the reality is that the June figures reveal the first signs of a slowdown in the US labour market. The labour survey employment measure fell as did the participation rate. There was a fall in the employment-population ratio, a fairly reliable measure that the demand-side is lagging behind the supply-side. The US labour market is still 524 thousand payroll jobs short from where it was at the end of May 2020, which helps to explain why there are no wage pressures emerging. Real wages continued to decline as the supply disruptions and the greed of increased corporate profit margin push sustain the inflationary pressures. Any analyst who is claiming the US economy is close to full employment hasn’t looked at the data. The justification by the US Federal Reserve for pushing up interest rates to quell wages pressure does not stack up with the evidence....Bill Mitchell – billy blog
First signs of a slowdown in the US labour market
Bill Mitchl | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australiael
4 comments:
Let's take this quote from the Hugh Hendry and Matthew Pines discussion.
" The principle objective of China is the preservation of the party. They need a consumer boom but that has too much freedom implications and they haven't yet mastered how to recycle their economic surplus via their own domestic goods and services markets. So they need to go through a Japanese type style restructuring. Need to take the next step up to create more domestic industries that can absorb the consumer surpluses at home. Like Japan hope to get through it by using technology gains.
However, at the moment and for many years...
There is an explicit policy decision by the Chinese party that the Yuan should appreciate. To try and enrich their consumers as a rewarded for the productivity gains and expansion of the Chinese economy that they brought about. The party says no credit card that cause boom bust cycles that could threaten the ruling party. So all of the surplus savings are dumped on the US instead.
Surplus savings are not scare in the US anyway and it just keeps getting more and more as China, Russia and other countries dump their surplus savings into the US as they can't deal with them at home. By swamping the world with excess savings you are always applying pressure on the interest risk rate to zero or even negative interest rates. Which cause asset prices in the US to go to 7 x GDP. Increase asset prices in Europe.
When asset prices go to 7 x GDP this increases private sector debt the debt that really matters domestically. "
Not saying the above is right or wrong merely a quote from the discussion. What I want to know is how much of this goes into FED decision making ?
Cleary it must from not only a domestic standpoint but from a geopolitical viewpoint also which throws up some interesting questions.
1. Is having the reserve currency a curse or a cure ? In fact the recent shift away from the US $ could help the US in the long run.
2. Is this why QE became a thing ?
3. Is this why western central banks decided to go Japanese and start offering to buy the debt ?
4. Is there way too much focus on domestic policy rather than geopolitical and foreign policy when it comes to rate hikes and rate cuts and unemployment at home they have decided is a price worth paying. To bring down asset prices from 7 x GDP ?
5. Are they using rate hikes to create a foreign spending boom in the US economy ?
6. Are they stuck in a catch 22 as they bring down asset prices from 7 x GDP by hiking rates to avoid a private sector debt crises to what extent is hiking going to cause one anyway in the mortgage sector ?
7. Is this why they are so anti government spending as it will add even more domestic savings to the savings pool of domestic and foreign excess savings ?
8. Why do they give tax cuts to those at the top who spend less of their savings rather than workers, what is the net effect on the savings pool if they want to bring asset prices down to avoid a private sector debt crises?
9. Was a financial crises that helped to consolidate the banking sector the only way to bring asset prices down why nobody got jailed ?
10. US voters are fooked as there is no way out of this flow of savings trap and crises are always going to happen because of it. Either increased asset prices that will cause more lending or forced unemployment to control it ?
A real opportunity for MMT ?
How much of all of this is a selling point for MMT. Could a marketing campaign be put together that shows MMT can fix it ? That lists all the issues and how MMT fixes them ?
Or is the geopolitical map far too important as the US becomes even more terrified of both China and Russia. They see damage done to the domestic economy as a price worth paying. Politically never adopt a job guarentee?
Have MMT economists taken the geopolitical map seriously enough when it comes to their analysis ?
For me That is a definite no they have not. It has all been concentrated on domestic economic policy. Keep asking myself to what extent has MMT been blindsided by the war games that take place.
The main part of this discussion is from around the 50 minute mark onwards. A lot more nuanced than the one quote I put up.
https://m.youtube.com/watch?v=XmqRjrcgwD4
Where does it leave the core MMT zero interest rate policy when it comes to geopolitics. Once you start moving away from just thinking about it as a domestic economic policy tool ?
An oppertunity or a hindrance ?
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