This Government Definition of “Employment” Is Laughable

08.09.2017 • Australia

Vern Gowdie – Markets and Money (Australia) –

Our world record breaking recession-free run continues.

The miracle economy continues to defy the odds.

In the second quarter, the Australian economy grew by 0.8%…more than double the previous quarter.

What’s behind the latest surprisingly good GDP figures?

According to The Australian on 6 September 2017: ‘The upbeat GDP data reflect rising business confidence in Australia, which has played out in the much stronger employment growth and rising non-mining investment, in recent months.

Stronger employment growth? Well, that depends on whether you use the Australian Bureau of Statistics (ABS) numbers or not. The ABS definition of employment is so broad, and so far removed from reality, that it’s a joke.

How laughable?

This is the definition from the ABS site (emphasis mine):

Paid employment includes persons who performed some work for wages or salary, in cash or in kind

Self-employment includes persons who performed some work for profit or family gain, in cash or in kind

What’s the ABS definition of ‘some work’…

The notion of ‘some work’ is interpreted as work for at least one hour.

Work at least one hour per week for cash or — wait for it — in kind, and you, my friend, are employed. Congratulations; you’re now officially a bread winner…provided the baker will accept ‘in kind’ payment.

This data is what policymakers use to guide our economy… Now you can start to realise why we are in the mess we’re in. Garbage in, garbage out.

Roy Morgan Research conduct their own monthly employment survey using a process and definition that would pass the pub test.

According to Roy Morgan’s more accurate data, un- and under-employment numbers have actually deteriorated in 2017…not strengthened.

Roy Morgan’s unemployment rate data January - August 2017

Source: Roy Morgan Research
[Click to enlarge]

Make-believe employment numbers create a make-believe world. One that deludes us into thinking our economy is a miracle…when in fact it’s a mirage.

The ABC News report on the stronger GDP numbers was a bit more accurate:

GDP rebounds from weak first quarter, driven by 0.7pc rise in household spending…Increased spending has pushed household savings down to a nine year low.

But did households spend their savings or go deeper into debt?

The Australian Debt Clock calculates we have a national — public, corporate and private — debt-load exceeding $6.4 trillion…around 370% of GDP.

The debt clock is ticking over at around $750,000–$800,000 per minute. Quick arithmetic would tell you that our nation’s debt-load is increasing by about $100 billion every three months.

All that newly-fractionalised money goes into our economy and is recorded as part of our GDP.

The ABS tells us that our $1.7 trillion economy ‘grew’ by 0.8% in the second quarter…expanding by $136 billion.

And that’s the story behind our miracle economy. We’re just going deeper and deeper into the brown stuff and being told it’s a bed of roses.

The fake news about our economy is not confined to the ABS or Treasury.

In late March 2017, the Australian Trade and Investment Commission (ATIC) published a report titled: ‘Australia has experienced the longest period of economic growth in the developed world’.

Here’s what ATIC had to say about our ‘uninterrupted economic growth’…

Australia’s economy grew a strong 1.1 per cent in the fourth quarter (Q4), lifting Australia’s annual economic growth to 2.5 per cent in 2016, according to the latest National Accounts figures released by the Australian Bureau of Statistics. The latest result is a positive sign that our economy has maintained the solid momentum that has already delivered Australia 26 years of uninterrupted economic growth. More dramatically, I estimate that Australia now holds the record for the longest period of recession-free growth for a developed country.

To support this view, ATIC published this table…

Australia has the longest economic growth among major developed world, 08-09-2017

Source: Australian Trade and Investment Commission
[Click to enlarge]

The report went on to extoll our ‘relative growth performance’:

My [Edmund Tang] estimates for Australia’s relative growth performance are based on the growth accounts assembled by the OECD, which are available here. This data shows only two other economies come close to matching Australia’s recent economic record. The first is Japan, where the total number of positive quarterly consecutive growth rates was 63 from Q1 1975 to Q1 1993, according to the OECD…

You can see the writing on the wall

With regards to duration, we’ve outperformed second-placed Ireland.

The Irish economy delivered uninterrupted economic growth from Q3 1986 to Q1 2007.

The Economic and Social Research Institute of Ireland released a journal article in February 2016, titled: ‘Economic Stress and the Great Recession in Ireland: Polarization, Individualization or “Middle Class Squeeze”?’

Here’s an extract (emphasis mine):

Following an unprecedented boom, since 2008 Ireland has experienced a severe economic and labour market crisis. Considerable debate persists as to where the heaviest burden of the recession has fallen. Conventional measures of relative income poverty and inequality have a limited capacity to capture the impact of the recession in terms of social exclusion. This is exacerbated by a dramatic increase in the scale of debt problems including significant negative equity issues.

Ireland’s economic miracle was nothing but a mirage. Economic expansion was simply a function of its citizens’ willingness to believe the BS and borrow like there was no tomorrow.

Well, tomorrow did come with a ‘dramatic increase in the scale of debt problems including significant negative equity issues’.

All that debt funded growth came back to bite them hard. ‘Negative equity issues’ is a nice way of saying ‘people owe the bank more than what the asset is worth’.

And then the second-place getter in relative growth performance is Japan — Q1 1975 to Q1 1993.

In 2009, University of Huddersfield Business School released an economics paper on Japan:

Japan has experienced a severe economic recession since the early 1990s, despite a short lived recovery in between, is one of the most significant developments in the recent history of capitalism.

Are you noticing a pattern here?

Remember Japan’s miracle economy of the 1980s?

This is a copy of The New York Times on 7 September 1988:

Tokyo Journal: A real estate market no one can afford anymore, 08-09-2017

Source: The New York Times
[Click to enlarge]

An out of control real estate market.

Sounds eerily familiar.

There’s no secret as to what propelled Japan to ‘miracle economy’ status: rising private debt. Take a look:

Japan Debt to GDP Ratios graph, 08-09-2017

Source: Debt Deflation
[Click to enlarge]

Note when Japan’s private sector debt hit its high…early 1993. Exactly when Japan’s record-breaking period of relative growth performance ended.

Both Ireland and Japan have paid a very high price for their so-called economic success.

Our recession-free run is completely contingent upon Australian households’ willingness and ability to increase their debt-loads. Once households reach debt fatigue — and they will — our economy will go from ‘hero to zero’ very quickly.

The problem is that it’s far too late to stop this disaster from happening.

The debts have been accumulated. The assets purchased. People are locked in.

Government agencies — the RBA, the Treasury, ABS, and the Trade Commission — are knowingly or unknowingly aiding and abetting our nation’s plunge into the economic abyss.

Unless this time is different — and it never is — Australians are about to pay a very high price for being deluded into believing we could live beyond our means indefinitely.

Will you be on the right or wrong side when the carnage hits?

Regards,

Vern Gowdie,
Editor, The Gowdie Letter

-Read more at www.marketsandmoney.com.au-

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