Tag Archives: unemployment

A UK jobs miracle and the continuing death of Keynesian theory

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Let’s start with the conventional view which is from an article whose title begins, A jobs miracle is happening in Britain:

At the start of this government, Ed Miliband predicted a jobs armageddon — austerity would inevitably mean mass unemployment. Osborne would cut 500,000 public sector jobs, he said, with ‘no credible plan to replace them’. And surely government spending is synonymous with prosperity? Boldly, he forecast a ratio: one private job would be lost for every public sector job lost — leading to the loss of ‘a million jobs in all’.

The conventional Keynesian wisdom, to which Miliband subscribed, is that government spending cuts make the economy weaker: fewer public sector workers means less money spent in the shops, so less demand, therefore more unemployment. Osborne saw things differently. What if the problem was not the supply of jobs, but the supply of willing workers? If you cut taxes on low-paid work, it becomes more attractive: more people want to move from welfare. Especially if welfare reform makes it harder to game the system.

What else would someone who learns his economics from a Keynesian text believe? So let us then go to the actual situation as it has now turned out:

In five short years, Britain has gone from having mass unemployment to jobs galore. Unemployment is falling at a rate that confounds the economists, and employers are starting to panic. Maths teachers, chefs — the list of ‘shortage occupations’ grows ever longer. Construction companies are not tendering for work in London because they can’t find bricklayers. Financially this is a headache, but economically it’s a problem of success. The Prime Minister set out to get rid of the deficit. He failed. But instead he has presided over a jobs miracle — one that economists and policymakers are still struggling to understand.

Just before the Budget was published, the latest figures came out — all of them smashing records. There are 30.9 million of us in work, the most ever. That’s an employment ratio of 73.3 per cent, the highest in history. Employment is up by 1.7 million since Cameron took power and 1.5 million of these jobs are full-time. The number on Jobseekers Allowance fell by 30 per cent last year alone and the youth claimant count stands at its lowest since the 1970s. Birmingham added more jobs to its economy last year than the whole of France; Britain is adding more than the rest of Europe. David Cameron can take credit for creating more jobs than any first-term prime minister in postwar history.

The article attributes this turnaround entirely to tax cuts. Even though he notes that the central feature of Government policy has been the “austerity” program, even the writer here, who no doubt was mis-educated on Keynesian aggregate demand, cannot see, really see, what is happening before his eyes, even though he can see the outcome. Of course taxes should also be cut, which is part of the way we reduce even the ability of governments to spend. But the diversion of our resource base into productive activities is the key.

It’s this Keynesian economics that will blind you to reality. But slowly but ever so surely it is entering the dust bin of history. Shame the same cannot be said about our economics texts which still continue with the same as before.

[And my deep thanks to DB for sending this article along.]

Surrounded by lies

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unemployment gallup numbers feb 2015

Anyone who understands that it is impossible to raise employment by raising public-spending – admittedly a very small number – would understand that unemployment in the US was never going to improve given the economic policies of the Obama administration. But you can get the official unemployment rate down either by creating more jobs or by getting those who used to have jobs to drop out of the labour force. The above graph is from this story, with its quite ominous heading, Gallup CEO: I May “Suddenly Disappear” For Telling Truth About Obama Unemployment Rate. There really is a reason to worry for anyone who says anything that is even a step or two outside the accepted PC grid, although I think he is a tad on the paranoid side. Getting fired and left in disgrace is more the modern style. As for the unemployment data, this is the full story:

Years of unending news stories on U.S. government programs of surveillance, rendition and torture have apparently chilled the speech of even top business executives in the United States.

Yesterday, Jim Clifton, the Chairman and CEO of Gallup, an iconic U.S. company dating back to 1935, told CNBC that he was worried he might “suddenly disappear” and not make it home that evening if he disputed the accuracy of what the U.S. government is reporting as unemployed Americans.

The CNBC interview came one day after Clifton had penned a gutsy opinion piece on Gallup’s web site, defiantly calling the government’s 5.6 percent unemployment figure “The Big Lie” in the article’s headline. His appearance on CNBC was apparently to walk back the “lie” part of the title and reframe the jobs data as just hopelessly deceptive.

Clifton stated the following on CNBC:

“I think that the number that comes out of BLS [Bureau of Labor Statistics] and the Department of Labor is very, very accurate. I need to make that very, very clear so that I don’t suddenly disappear. I need to make it home tonight.”

After getting that out of the way, Clifton went on to eviscerate the legitimacy of the cheerful spin given to the unemployment data, telling CNBC viewers that the percent of full time jobs in this country as a percent of the adult population “is the worst it’s been in 30 years.”

That he has much he has much to worry personally about I have my doubts, but professionally, he will have become a target. This transgresses the Democrat narrative and he will be savaged by the usual far-to-the-left media liars the US is full of (see Brian Williams).

But as important as the labour market is, this is the major story at Drudge, and it really ought to be on the front page of every paper in the world, given its significance. It won’t be, but if we are hoping to lower unemployment and raise living standards, the kinds of lies we are now so used to will have to be called out a bit more often.

PAPER: ‘GLOBAL WARMING’ BIGGEST SCIENCE SCANDAL EVER

So it is, and we small band of brothers (and sisters) know it all too well. But what about the media, and our political leaders and the scientific grants-receiving community and those who seek wealth and power through green-related scares. From the story:

Two weeks ago, under the headline “How we are being tricked by flawed data on global warming”, I wrote about Paul Homewood, who, on his Notalotofpeopleknowthat blog, had checked the published temperature graphs for three weather stations in Paraguay against the temperatures that had originally been recorded. In each instance, the actual trend of 60 years of data had been dramatically reversed, so that a cooling trend was changed to one that showed a marked warming.

This was only the latest of many examples of a practice long recognised by expert observers around the world – one that raises an ever larger question mark over the entire official surface-temperature record.

Following my last article, Homewood checked a swathe of other South American weather stations around the original three. In each case he found the same suspicious one-way “adjustments”. First these were made by the US government’s Global Historical Climate Network (GHCN). They were then amplified by two of the main official surface records, the Goddard Institute for Space Studies (Giss) and the National Climate Data Center (NCDC), which use the warming trends to estimate temperatures across the vast regions of the Earth where no measurements are taken. Yet these are the very records on which scientists and politicians rely for their belief in “global warming”.

Homewood has now turned his attention to the weather stations across much of the Arctic, between Canada (51 degrees W) and the heart of Siberia (87 degrees E). Again, in nearly every case, the same one-way adjustments have been made, to show warming up to 1 degree C or more higher than was indicated by the data that was actually recorded. This has surprised no one more than Traust Jonsson, who was long in charge of climate research for the Iceland met office (and with whom Homewood has been in touch). Jonsson was amazed to see how the new version completely “disappears” Iceland’s “sea ice years” around 1970, when a period of extreme cooling almost devastated his country’s economy.

It may surprise them, but how many here will be surprised? No one any longer even reacts to the lying, so routine has it become. Just imagine if we didn’t have the net.

Depression economics

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If you want further reason to be depressed about our economic future, this article Janet Yellen and the Phillips Curve will supply it. If you believe this thing called the Phillips Curve relationship works, then you believe that higher inflation can bring faster growth and lower unemployment along with it. It is exactly this that Janet Yellen apparently believes. This is a direct quote:

“Each percentage point reduction in inflation costs on the order of 4.4 percent of gross domestic product, which is about $300 billion, and entails about 2.2 percentage-point-years of unemployment in excess of the natural rate.”

That is, reducing inflation slows growth and raises unemployment. If you want growth, inflation is therefore the way to go.

Yellen believes that the central bank should maintain enough inflation to prop up business activity, because ‘uncertainty about sales impedes business planning and could harm capital formation just as much as uncertainty about inflation can create uncertainty about relative prices and harm business planning.’ This approach extends the Fed’s mission beyond even the dual mandate of Humphrey-Hawkins and into the sphere of American corporate activity, a place that the business economist Greenspan was reluctant to go. Yellen, a disciple of predictive modeling, dismisses the notion that the Fed could go too far. To her the record shows that ‘tuning works even if it is not “fine.”‘

Here’s the article’s conclusion:

It isn’t just the 1970s, but the last few years, that show how money creation does not produce permanent employment gains. This was raised time and time again at Yellen’s recent Senate Banking Committee hearing, when several Democrats bemoaned the absence of any ‘trickle down’ effect from quantitative easing. Do we want the Fed to double-down on that folly with Janet Yellen at the helm?

This is not going to end well.