Matt Nolan

June Labour market preview: Employment and hours

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Next week we have the labour market data – an incredibly important data set when trying to figure out what happened over the June quarter.

While most other economists will be talking about their picks for unemployment etc (Note: Unemployment in the 4’s will be a concern), I thought I would discuss some of the things we should keep an eye on whenwe all try to analyse the data next week 🙂

On that note, the Economists View blog discussed some of the issues that have seen employment and unemployment act relatively sluggishly in the face of both economic slowdowns and accelerations over the last decade.

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Matt Nolan

July NBNZ business outlook

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I don’t usually write about his, as I don’t actually have access to the historical numbers, but I thought that this time the July Business Outlook was worth a look.

Three main things stick out of it like an eyesore:

  1. Own activity expectations are down to -8.2%, a bad result. This is mainly to do with a negative outlook for the construction industry.
  2. Employment and unemployment measures have deteriorated – indicating that the labour market is loosening.
  3. Pricing intentions and inflation expectations are up.

Now the low own activity expectations imply that the September quarter has not got off to a good start in terms of economic growth – this will be an important measure to keep an eye on going forward.

Most interestingly, the fall seems to be primarily the result of a weaker outlook for the construction industry and NOT retail. This is a touch surprising, especially given the 16% increase in retail fuel prices over the three months to July.

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Matt Nolan

Institutional Economics column 26/07/2008

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An excellent current affairs column by Dr Stephen Kirchner of Institutional Economics (*).

For all my bleating, the inflation problem in Australia is considerably worse than it is here, just look at this:

Excluding the transport group from the CPI, the component most directly affected by higher oil prices, still yields an inflation rate of 1.2 per cent over the quarter and 4.1 per cent over the year

Damn. For people interested in the data the CPI stuff is here, and the all important labour market stuff is here (note that unemployment fell in Aussie!).

Next weeks labour market data will be all important for us here in New Zealand – I’m still picking that the economy will pick up from about September, just soon enough to prevent non-tradable inflation from easing sufficiently. If September quarter GDP rises by less than 0.5% (with an equivalent fall in June), I might have to take that back – but we won’t get those numbers till December 🙂

Matt Nolan

RBNZ speech: Inflation targeting serves NZ well

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As I said, I will discuss the RBNZ speech from yesterday.

Personally, I thought the speech was spot on – Dr Bollard understands the issues associated with inflation targeting, but he also more than understands the benefits.

Look at this statement surrounding oil prices shocks:

Instead, the key policy requirement in this situation is to allow the initial externally driven relative price changes to occur, but keep monetary policy sufficiently firm to ensure that generalised second-round inflation effects do not take hold – in other words, to keep inflation expectations anchored.

This is all I wanted the Bank to say in their latest statement – that they would react to the second round of price increases stemming from an increase in oil prices if it occurs. Tell the market that, although the CPI figure looks bad, once we’ve cleared the recent shocks inflation will again be the primary concern.

Furthermore, the Bank damned alternatives to inflation targeting – specifically:

Another alternative that could appear superficially attractive is to require monetary policy to target multiple objectives such as growth, employment, export and the balance of payments. This was the approach taken in New Zealand and many other countries in the post-war period up to the early 1980s. It inevitably had a short-term focus, and resulted in stop-go policies and high inflation. We now know that one instrument cannot succeed in achieving multiple objectives over the cycle. The move to inflation targeting, with its single, clear objective, resulted from the lessons learned in that period. We do not want to re-learn those lessons.

Very good 🙂
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Will Taylor

Agnitio on tour: Economic Musings from the US

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I’m currently in the US on business/visiting family and thought I might share with our kiwi readers back home some interesting things (from an economics perspective of course!) that I have come across in my travels. I’ll post any other random things I come across while in the land of the free.

A few things have jumped out so far:

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cpworthington

Sorry, no conspiracy here

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The Standard(*), No Right Turn(*), and Hard News(*) have all commented on a graph showing the declining share of labour compensation in national output over the period 1981-2002. The claim/implication is that right-wing policies have contributed to the drop in labour’s share, and that the Labour government’s policies have reversed that trend somewhat in recent years. Does this explanation make sense?

Source: Stats NZ (national accounts)

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