Mike's Minute: Unemployment number simply not real

Author
Newstalk ZB,
Publish Date
Thu, 6 Aug 2020, 11:16AM

Mike's Minute: Unemployment number simply not real

Author
Newstalk ZB,
Publish Date
Thu, 6 Aug 2020, 11:16AM

Who knew? We have read this all wrong. Covid-19 is actually good for the economy, why didn’t we get it here faster?

The unemployment number, originally forecast to be 9.8 percent, is in fact a jobs machine. 4 percent is your headline rate as of yesterday. It was 4.2, so it's trending down.

That lockdown was good for jobs. All those stories you heard about people getting laid off, the thousands upon thousands, what we didn’t realise is they all went out and got new jobs.

We've got the pivot to infrastructure and the shovel ready projects. Fortunately the fact that none of them are shovel ready, doesn’t matter, because there is work a plenty in an economy that is clearly booming.

How do we explain this? Artificiality, statistics, and distortion is the answer.

In an odd way, what an insult to everyone who has been laid off and joins the in excess of 200,000 on the jobseeker and other benefits. Their plight is clearly forgotten as we celebrate the statistical jobs machine that clearly is the New Zealand economy.

If you've ever struggled with statistics none of this helps. The headline figure is a joke, it's worse than Newshub's rogue poll. It's not real, the real answer is  the underutilised rate and that increased at record levels.  

But it does highlight the danger we are in. If $13 billion can buy you the sort of job protection it clearly has, you have to ask what sort of carnage is coming on as of September 1. Just how much artificiality is there in the economy? We've got the wage subsidy, the mortgage holidays, the deferrals, and the loans system with the banks and Inland Revenue.

That is all a false reality and it can't last. We simply don't have the where with all, to keep printing, keep borrowing, and keep living in la la land. The same way the spending we are currently seeing on cars,  art, and houses is pent up.

The carnage we will see next quarter, the quarter after that, and into the new year will be the flood of trouble and reality that is released when the sugar stops.

I hope ultimately the 9.8 percent unemployment they picked isn't that bad. Banks had yesterday's number at between five and seven percent, they couldn't have been more wrong.

But most of us, I think, suspect its wrong because the carnage is simply better hidden by the printed money than was previously thought. In other words the disease is there, it's currently just masked by a pile of artificial fiscal bandages.