A Recovery With Crippled Small Businesses Looks Awkward — Brian Romanchuk

We have just seen the beginning of post-COVID economic data, and the numbers are literally off the charts. My feeling is that aggregate numbers will be meaningless, and we will need to look at industry-level data. I just wanted to look a bit ahead, to the post-lockdown future. My main concerns revolve around the small business sector, which I fear will be taking a bigger hit than larger businesses. The issue is that small businesses are a major driver of employment -- and we are likely to start with elevated unemployment levels, even after the "re-start" phase hits....

Bond Economics
A Recovery With Crippled Small Businesses Looks Awkward
Brian Romanchuk

Bill Mitchell — Racial prejudice in Britain rises with unemployment

When I was a relatively junior academic, one of the things I was interested in was how labour market prejudice is influenced by the state of the economic cycle. This was a period when Australia was undergoing a deep recession (early 1990s) and it was clear that hostility to immigrants had risen during this period. I was interested to see whether this was related. The interest goes back to my postgraduate days when I was studying labour economics and we considered labour market discrimination in some detail. Then, it was clear from the literature, that employers who used racial profiling to screen job candidates would lose out if the labour market was strong, but could indulge their negative views about different racial groups without loss in times of recession. But we didn’t do much work on supply-side attitudes – that is, what do other workers think? In more recent times, I have done detailed research projects with mental health professionals studying the best way to provide job opportunities for young people with episodic illnesses. The research revealed that one of the problems in placing these workers in conventional workplaces is the prejudice that other workers displayed towards them. We worked on ways to attenuate that resistance. So I have had a long record of studying and being interested in these matters. In this blog post, I consider whether prejudice is counter-cyclical. In the UK, for example, the British Social Attitudes survey found that in 2014, around a third of British people were racially prejudiced and this ratio spiked during the GFC. Clearly, there are many factors contributing to this rather distasteful result, but if austerity is exacerbating the underlying factors, then we have another reason to oppose it. This research also bears on the Brexit debate....

Bill Mitchell – billy blog
Racial prejudice in Britain rises with unemployment
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — The adult unemployment benefit in Australia should be immediately increased by $A200 per week

At present, the Australian Parliament is debating whether the unemployment benefit (called Newstart) should be increased. The conservative government is refusing to budge claiming it prefers to create jobs and get people of benefits – arguing that it will generate 1.25 million jobs over the next 5 years. The Opposition Labor Party are attacking them for being mean but are just rehearsing the massive hypocrisy that has defined that party since it became a voice for the ‘neoliberal lite’ path. Every time the Labor Party spokespersons criticise the Government for not bringing unemployment benefits above the poverty line, Australians should remember that when they were in office the Labor Ministers ran the same line – they wanted to move people into jobs and would not compromise their obsessive pursuit of a fiscal surplus. Same logic. Disgusting and dishonest then. As it is now.…

Same old trickle down. Neoliberals will be neoliberals, regardless of party.

Bill Mitchell – billy blog
The adult unemployment benefit in Australia should be immediately increased by $A200 per weekBill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Is There a Relationship between Inflation and Unemployment? — Menzie Chinn

While the equation fits relatively well, clearly it’s not perfect. As of 2019Q2 (first two months), year-on-year PCE inflation is underpredicted by 40 bps. I estimated the equation on a restricted sample ending in 2014; this imparts only a marginal difference — so it’s not that something has changed substantially over the last 4 and a half years. Rather the specification could be improved.

In other words, perhaps a different measure of NAIRU, or a nonlinearity might improve the fit. However, these specification or measurement errors do not invalidate the concept of the Phillips curve. More graphs (from my undergrad course), using the output gap, here.

For more on a cross country basis, see a recent working paper by Blanchard, Cerutti, and Summers (2015). They show that the slope of the Phillips curve has dropped around the early 1990’s; those who rely upon very old stylized facts might be excused for thinking the Phillips curve had gone AWOL.

Econbrowser
Is There a Relationship between Inflation and Unemployment?
Menzie Chinn | Professor of Public Affairs and Economics, Robert M. La Follette School of Public Affairs, University of Wisconsin–Madison, co-editor of the Journal of International Money and Finance, and a Research Associate of the National Bureau of Economic Research International Finance and Macroeconomics

See also

Information Transfer Economics
The Phillips Curve: An Overview
Jason Smith

FRED Blog — One rate does not rule them all : Unemployment is uneven across U.S. counties

The graph above shows the annual civilian unemployment rate from 1948 to 2018, and here are some highlights: Ten years ago, after the Great Recession, the U.S. unemployment rate peaked at 9.6%. (The only higher unemployment rate in this series was 9.7%, in 1982.) It gradually came down to 3.9% in 2018, the lowest in fifty years. (The rate in 1969 was 3.5%.)

But these national unemployment numbers mask the variation that exists across different regions in the U.S. Fortunately, we have GeoFRED to paint a clearer picture: The map below shows the unemployment rate for 2018 for 3,133 U.S. counties. The counties are split into two equally sized groups according to their unemployment rates: Those with lower unemployment are in blue, and those with higher unemployment are in red. Specifically, the blue group had a rate lower than 3.87%, and the red group had a rate between 3.87% and the maximum of 18.08%. (By the way, all counties in New Hampshire are blue and all counties in Arizona are red.) 

FRED Blog
One rate does not rule them all : Unemployment is uneven across U.S. counties

Chris Dillow — Obstacles to full employment

Is full employment sustainable? For me, this is one question posed by the row between Richard Murphy and Jonathan Portes and Simon Wren-Lewis over Labour’s proposed fiscal rule....

Disappointing for a someone that is sympathetic to Marx, as Chris Dillow identifies himself.

Stumbling and Mumbling
Obstacles to full employment
Chris Dillow | Investors Chronicle

Ramanan — Michal Kalecki On The Effect Of Wages On Employment

Kalecki quote.

The Case for Concerted Action
Michal Kalecki On The Effect Of Wages On Employment
V. Ramanan

See also

@Brankomilan leads us to this (french) pieceabout Austria. It states that the Austrian government enacted a new law which authorizes working days of 12 hours and working weeks of 60 hours.
A). This is a clear case of retrogression. It’s good to read what, in 1921, the International Labor Office stated in its first annual report….

Real-World Economics Review Blog
Productivity in the Eurozone (and why it matters)

Merijn Knibbe

Bill Mitchell — A cartoon to enjoy while I am travelling …

Given yesterday’s theme (unemployment etc), this First Dog on the Moon analysis which appeared in the UK Guardian last week (December 12, 2018) – Unemployment: individual character flaw or mere feature of capitalism? – is worth reflecting upon.

Bill Mitchell – billy blog
A cartoon to enjoy while I am travelling …
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Reuters — Fed plans major review of how it pursues inflation, employment goals

The Federal Reserve will conduct an extensive review next year of how it tries to guide the U.S. economy, the U.S. central bank said on Thursday.

“Now is a good time to take stock of how we formulate, conduct, and communicate monetary policy,” said Federal Reserve Chairman Jerome Powell, noting that the Fed was close to meeting its goals of maximum employment and a 2 percent inflation rate. 

In a statement, the Fed said it would reach out to a “broad range” of stakeholders and that it planned to host a research conference in June to support the review. The research conference will be held at the Federal Reserve Bank of Chicago.

Admission that current policy is not working?

Reuters
Fed plans major review of how it pursues inflation, employment goals

Merijn Knibbe — Thomas Sargent discovered his inner Marxist. Really. Two graphs.

The ‘Matching functions’ mentioined in the quote explain unemployment by assuming that finding a job or a worker takes time. And this does explain unemployment – part of it (2%-point?). The rest must be explained by crises and the inability of the market system to create jobs. As is clear from comparing graph 2, short-lived crises cause lower levels of job creation and higher levels of job destruction. Basically, these swings are not even that large. But together they lead to a fast increase in unemployment which take years to overcome. Sargent and Ljundqvist did re-invent the wheel. If they had red Rodbertus, Sismondi, Marx, Owen or Mitchell they would have known.

Fun fact: the neoclassical ‘DSGE’ model of Bokan e.a. distinguishes a class of bankers, a class of entrepreneurs (let’s call them ‘capitalists’, as they own all the capital) and a class of households which have nothing else to sell than their labour… The model knows a ‘positive wage mark-up’ but change this into a ‘wage mark down’ (for instance caused by ‘monpsonie’ on the labor market, i.e. by strong labor market power of employers, and it’s starting to look pretty Marxist, too.

Real-World Economics Review Blog
Thomas Sargent discovered his inner Marxist. Really. Two graphs.
Merijn Knibbe

Heiner Flassbeck — The economic situation in Bulgaria and Romania – Part 2

How little the two Eastern European countries that we have focused on can be compared with Western countries can be seen very clearly in the development of unemployment (Graph 1). Following the major crisis of 2008/2009, the unemployment rate in Romania hardly rose at all. In Bulgaria it increased significantly, but despite weak economic development after 2013 it is falling at an astonishing rate, almost to the relatively low Romanian level.

For Romania, this can only mean that unemployment is not recorded as such or that the outflow of labour is so rapid that, despite significant declines in production, the labour force does not register as unemployed at home. In the case of Bulgaria, there have probably been considerable migration effects in recent years, which have ensured that official unemployment has remained within limits.…

The neoliberal solution to unemployment at the national level—emigration to other countries where employment may be available.


Heiner Flassbeck joins Dirk Ehnts in backing MMT in Germany?

flassbeck economics
The economic situation in Bulgaria and Romania – Part 2

Heiner Flassbeck

Bill Mitchell — US labour market – muddling along and real wages growth goes negative

On July 6, 2018, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – June 2018 – which showed that total non-farm employment from the payroll survey rose by 213,000 and the unemployment rate rose by 0.2 per cent to 4 per cent in June 2018. The employment-population ratio was unchanged in June at 60.4 percent and has been largely stable since February 2018. The Labour Force Survey data, however, showed that employment only rose just 102 thousand in June 2018 and was accompanied by a substantial rise in the labour force (601 thousand) on the back of a surge in participation (up 0.2 points), which meant that total unemployment rise by 499 thousand. The broad labour underutilisation measure (U-6) also signalled weakness, rising by 0.2 points. There is still no evidence of a wages breakout going on although wages growth for blue-collar occupations has surpassed the white-collar occupations over the last 8 quarters. However, the data shows that real wages fell in June 2018 by 0.4 points. Taken together, the US labour market is showing no definite trend up or down at present and it is still some distance from being at full employment.…

Bill deconstructs and interprets the latest US BLS report.

Bill Mitchell – billy blog
US labour market – muddling along and real wages growth goes negative
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Ramanan — Joan Robinson And Nicholas Kaldor On Antagonism To Keynesian Ideas

Some good quotations.

The Case for Concerted Action
Joan Robinson And Nicholas Kaldor On Antagonism To Keynesian Ideas
V. Ramanan

Bill Mitchell — Poverty among the unemployment now close to 50 per cent in the EU

Last week, Eurostat released it updated data covering people who are at risk of monetary poverty. In the press release/news page (February 26, 2018) – Almost half the unemployed at risk of monetary poverty in the EU – we learn that 48.7 per cent of unemployed persons in the EU “were at risk of poverty” in 2016, even “after social transfers” were taken into account. The situation has deteriorated significantly since 2005 as a result of the impacts of the GFC and the policy response taken by the European Commission and the Member States (under the EC’s thumb). While the usual suspects perform badly on these indicators (Spain, Greece, Italy), a stark result is that 70.8 per cent of German unemployed persons are at risk of poverty. This proportion has jumped from 40.9 per cent in 2005 (a 29.9 percentage point shift). So, even in the strongest Eurozone economy, the policy frameworks are delivering terrible outcomes. Increasing divergence and inequality and rising social exclusion are the most striking characteristics of the 13 years of European Union history since 2005. It doesn’t look like a policy bloc that any sensible nation should aspire to be part off (or remain within).

A vast swath of the developed world is slipping toward Third World status as a result of policy decisions.

Bill Mitchell – billy blog
Poverty among the unemployment now close to 50 per cent in the EU
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

NewDealdemocrat — China, not automation, is by far the biggest factor in the decline of prime age labor force participation

Perhaps the biggest mystery in economic analysis in the last few years has been trying to find an explanation for the big decline in labor force participation since 1999. A recent NBER working paper by Abraham and Kearney has posited the most comprehensive answer to date. Since it was summarized in this Washington Post article, I’m just going to quote a few paragraphs and suggest that you read the entire article....

Angry Bear
China, not automation, is by far the biggest factor in the decline of prime age labor force participation
NewDealdemocrat

See also

As is clear from the chart above, the employment-population ratio (the blue line) has collapsed from a high of 64.4 in 2000 to 59 in 2014 (and had risen to only 60.1 by the end of 2017).* During the same period, the average real incomes of the bottom 90 percent of Americans have stagnated—barely increasing from $37,541 to $37,886.

That should be indicator that the problem is on the demand side, that employers’ demand for workers’ labor power has decreased, and not the supply side, that workers are choosing to drop out of the labor force.

But, as I explained back in 2015, that hasn’t stopped mainstream economists from blaming workers themselves—especially women and young people, for being unwilling to work and turning instead to public assistance programs and raising children and being distracted by social media and digital technologies, as well as Baby-Boomers, who are choosing to retire instead of continuing to work....

Occasional Links & Commentary
Where have all the workers gone?
David F. Ruccio | Professor of Economics, University of Notre Dame

See also

EconoSpeak
Begun the Trade War Has
ProGrowthLiberal

also

Michael Roberts Blog
Robots: what do they mean for jobs and incomes?
Michael Roberts

Bruce Lesnick — The Unemployment Conspiracy

JG v. UBI

Counterpunch
The Unemployment Conspiracy
Bruce Lesnick

Bill Mitchel — Unemployment is miserable and doesn’t spawn an upsurge in personal creativity

Here is a summary of another interesting study I read last week (published March 30, 2017) – Happiness at Work – from academic researchers Jan‐Emmanuel De Neve and George Ward. It explores the relationship between happiness and labour force status, including whether an individual is employed or not and the types of jobs they are doing. The results reinforce a long literature, which emphatically concludes that people are devastated when they lose their jobs and do not adapt to unemployment as its duration increases. The unemployed are miserable and remain so even as they become entrenched in long-term unemployment. Further, they do not seem to sense (or exploit) a freedom to release some inner sense of creativity and purpose. The overwhelming proportion continually seek work – and relate their social status and life happiness to gaining a job, rather than living without a job on income support. The overwhelming conclusion is that “work makes up such an important part of our lives” and that result is robust across different countries and cultures. Being employed leads to much higher evaluations of the quality of life relative to being unemployed. And, nothing much has changed in this regard over the last 80 or so years. These results were well-known in the 1930s, for example. They have a strong bearing on the debate between income guarantees versus employment guarantees. The UBI proponents have produced no robust literature to refute these long-held findings.

Bill Mitchell – billy blog
Unemployment is miserable and doesn’t spawn an upsurge in personal creativity
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Biagio Bossone — John Maynard Keynes and Effective Macroeconomic Policy

Summary of Keynes on liquidity preference and his liquidity preference theory (LPT).

EconoMonitor

John Maynard Keynes and Effective Macroeconomic Policy
Biagio Bossone | founder and chairman of "The Group of Lecce" on global financial governance, and member of the Surveillance committee of the Centre d'Études pour le Financement du Développement Local

He has served as Head of the Evaluation Unit of Public Investments at Italy's Presidency of the Council of Ministers. He has been President of the Central Bank of the Republic of San Marino. He has been Executive Director of the World Bank Group, member of the IMF Executive Board, and advisor to the Executive Board of the Asian Development Bank. He has advised the Independent Evaluation Office of the IMF, the World Bank Group, and the African Development Bank, and has been a member of the group of experts assisting the High Commission on World Bank Reform chaired by former President of Mexico, The Hon. Ernesto Zedillo. He has been a consultant to national governments and private corporations on financial sector development projects and project financing operations.

As an economist and former official of the Banca d’Italia, he headed the international payment system division and has been involved in international financial analysis and relations issues. He has been a member of various EU and G10 central banking groups and task forces. He has been Professor of international financial markets at Universita' degli Studi di Palermo and Universita' del Salento, Italy. He has (co-)authored various academic and policy studies in the areas of money and banking, payment systems, international and development finance, and international financial relations. — World Bank

J. W. Mason — The Big Question for Macroeconomic Policy: Is This Really Full Employment?

The question behind the question is how this question is answered optimally. It is methodologically loaded.

J. W. Mason's Blog
The Big Question for Macroeconomic Policy: Is This Really Full Employment?
JW Mason | Assistant Professor of Economics, John Jay College, City University of New York

Bill Mitchell — US labour market improves and interest rates will rise as a consequence

On March 10, 2017, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – February 2017 – which showed that total non-farm employment from the payroll survey rose by 235,000, which built on the 227,000 net change in January 2016. The unemployment rate fell to 4.7 per cent. The Labour Force also grew strongly as participation rose by 0.1 points. The signs are more positive than a few months ago, even if broader indicators (the U6 measure supplied by the BLS ) suggest caution. Overall, there is a large jobs deficit remaining and previous analysis has shown that the jobs that have been created in the recovery are biased towards low pay. One suspects though that the Federal Reserve Bank will take the chance offered by a stronger monthly result (February) to increase interest rates a notch when it meets this week....

Bill Mitchell – billy blog
US labour market improves and interest rates will rise as a consequence
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia