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Mike's Minute: Job numbers are a serious economic red flag

Author
Mike Hosking,
Publish Date
Thu, 5 May 2022, 10:41am

Mike's Minute: Job numbers are a serious economic red flag

Author
Mike Hosking,
Publish Date
Thu, 5 May 2022, 10:41am

What I wasn’t expecting in yesterday's unemployment number is that it would go nowhere.

Just think about it, how is that possible? Everyone was forecasting 3.1 or 3 percent, down from 3.2 percent.

Why? Because given what we know about work and the desperate shortage of skills and massive demand for labour, how is it possible we have so many people jobless and yet not able to find a single day's work?

Surely, in hospitality as it reopens, or timber yards that are selling everything they can get their hands on, there is a bit of work about the place the last of the jobless can fill?

But no, the headline number went from 3.2 percent to 3.2 percent. Surely that means we have hit bedrock. And surely anyone with half a brain can see the desperate need to get some borders open, some visas issued, and some migrants into the country.

What was also contained in the figures was the wage inflation. It's up 4.8 percent for hourly earnings and 5.7 percent for average weekly earnings. These are sort of good numbers because given the cost-of-living crisis, you need every extra cent you can get your hands on.

But they are only up by that much because of the critical labour shortage. Adding to the misery is even though they are up that much they still don’t cover inflation, so you are still going backwards.

The real tragedy of the wage rises of that size is that they are, of course, adding to the very problem they are trying to solve. If you are paying more because you are making more, selling more, and getting higher returns that’s good. But if you are paying more merely to hold talent so you don’t go bankrupt then that serves no one well in the long run.

As we said yesterday, a low unemployment rate is only any good if it's part of a booming economy. If you are offering work to all who want it through expansion, and as a result of expansion everyone shares in the success with wage increases, that’s your economic sweet spot.

But if you are in a country that doesn't let people in, has an economy that’s stalled because growth is not possible due to lack of staff, but those staff get paid more anyway, then you have a pending disaster.

It's grinding to a halt. It isn't good for anyone. And when your jobless rate doesn’t go down even when there are jobs galore and no one coming in to take them, that is a seriously large red flag.