Wednesday, May 14, 2014

Our new normal

UK unemployment falls to lowest in more than five years

I'm surprised nobody posted this earlier. However some here may feel about it, HPC seems pretty unlikely when unemployment has fallen to a five year record low. I also listened to Carney on the news earlier today (http://www.telegraph.co.uk/finance/personalfinance/interest-rates/10830376/Bank-interest-rates-wont-be-used-to-cool-housing-market.html) Mark Carney indicates Bank won't use interest rates to cool housing market, as he says economy is 'heading back to normal.' Does anybody know what normal is these days?

Posted by quiet guy @ 07:48 PM (3118 views)
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14 thoughts on “Our new normal

  • Putting aside the fact that the figures are likely fudged, you have to ask yourself what sort of jobs?

    Good quality, skilled, high earning, such that would keep a big economy like the UK afloat? Or would they be low skilled, low (zero hours) wage, part time service type jobs?

    We all know that the GDP figures are now false i.e. counting consumption – as opposed to production – so I would not expect the figures to be completely misleading too.
    In fact, governments publishing misleading figures, seems to be a sad characteristic of the present political class – in both the UK and the US.

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  • * I would expect the employment figures to be completely misleading too.

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  • stillthinking says:

    Carney has no intention of raising interest rates irrespective of the economy being normal or not, which is why all the other measures are proceeding apace.

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  • Bank of England governor Mark Carney has suggested interest rates may be some way off saying there is still slack in economy that needs to be absorbed before a rise is considered. In the February inflation report the Bank axed forward guidance based on employment falling below 7 per cent and moved to a system of looking at 18 indicators, among which is spare capacity in the economy.
    When questioned about market expectations of a rate rise in Q2, Carney declined to comment but suggested the Bank is unlikely to raise interest rates soon.

    The Bank’s May inflation report, published this morning, says: “Although the margin of spare capacity has probably narrowed a little since [February], the Monetary Policy Committee continue to judge that there remains scope to make greater inroads into slack before raising the Bank rate.”

    In a press conference, Carney said: “That slack is evident in the 1.4 million people who are working part-time because they are unable to find full-time work, as well as in an unemployment rate of 6.8 per cent.”

    Today’s inflation report also maintains the Bank’s position that when a rate rise comes it will be gradual and to a “level materially below its pre-crisis average”.

    It also predicts growth of 2.9 per cent for next year, up from the Bank’s February forecast of 2.7 per cent. The forecast for this year remains unchanged at 3.4%.

    On concerns the housing market is in danger of stalling economic recovery, the Bank of England said the Financial Policy Committee will take responsibility for taking action on cooling the market if necessary.

    SOURCE http://www.mortgagestrategy.co.uk/news-and-analysis/news/carney-suggests-rate-rise-is-still-some-way-off/2010210.article

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  • As said, Carney doesn’t make these decisions in isolation, i.e. he is not in control of the global currency markets. You need to watch the ECB to gain insight into the next move. They are talking about deflation and QE. They may mis-read the beneficial deflationary impacts of new technology by loosening monetary policy at the wrong time. This will not result in prices rising because technology is keeping a lid on them BUT, house prices will rise because they are more finite, though technology allowing more home working may cause prices to rise outside of the normal boom centres like London and Paris, which is probably why many towns an hour from London now cost similar to London for houses.

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  • @libertas – This new deflationary technology does not seem to be deflating the price of fuel, electricity, food, water, gas – can you explain this?

    What exactly is deflating (except for living standards)?

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  • The official.inflation figures include 645 items many of which are falling like flat screen tv’s etc

    Essential such as gas elect petrol food rent property prices/ mortgages are rising

    In all my years I have never seen as much spin the make people believe we are on the up unless this is
    The new new then when things unravel its going to be a real eye opener……

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  • The official.inflation figures include 645 items many of which are falling like flat screen tv’s etc

    Essential such as gas elect petrol food rent property prices/ mortgages are rising

    In all my years I have never seen as much spin the make people believe we are on the up unless this is
    The new new then when things unravel its going to be a real eye opener……

    Reply
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  • In all my years I have never seen as much spin the make people believe we are on the up unless this is
    The new new then when things unravel its going to be a real eye opener……

    The US have made outright economic lies and propaganda the new norm.

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  • hpw @1 and 9

    Yes. The decrease in unemployment is a fake. Apart from London no region has seen an increase in the number of employees over the past few years. The increases have been in ‘self-employment’ (up by 600,000 since the Coalition came in) and these are largely people who cannot get jobs. A recent study by the Resolution Foundation found that incomes and the % contributing to a pension among the self-employed were significantly lower than for employees. Government programmes like the Enterprise Allowance scheme get the unemployed to reclassify themselves as self-employed. They receive slightly less in benefits in return for being able to take the odd part-time job without being ‘sanctioned’ by benefit reduction. But they need working tax credit to get back up to the level of Jobseekers Allowance benefits.

    See http://www.theguardian.com/society/2014/may/11/fake-self-employment-unreal-jobs

    For the US see http://jackrasmus.com/2014/05/01/a-may-day-2014-lament-for-labor

    He talks of the churning out of good jobs and replacing them with low pay ‘contingent’ jobs. He says, e.g., that 79% of the jobs lost during the recession paid >$14 an hour but 58% of those created since the recession paid <$14 an hour.

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  • letthemfall says:

    Official figures are disguising too much now. The question is how this new employment – low hours, low pay – will pan out in the housing market. At present the amount of money going into housing from multiple owners and those who can scrape enough together is supporting prices as we move steadily back towards the Victorian era, as I feared might happen. This can’t support prices indefinitely, although it might be able to keep them out of reach of the majority indefinitely.

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  • Mark Carney indicates Bank won’t use interest rates to cool housing market, as he says economy is ‘heading back to normal.’
    Is it just me or does that not make sense… if it said:
    Bank WILL use interest rates to cool housing market, as he says economy is ‘heading back to normal.’, or…
    Bank won’t use interest rates to cool housing market, as he says economy is NOT ‘heading back to normal.’ then I could understand it.
    Or am I mad?

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  • Keeping the party going is the only goal.

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  • The unemployment figure is fairly meaningless.

    Anyone looking ‘at the latest data’ would be making incorrect assumptions predictions by using this data. It would be far more to look a a bread range of metrics to get a good understanding of the under/unemployment situation in the UK. In reality the situation would not have changed a great deal over the las 15 years, it’s just people have been shifted from the sick to unemployment benefits to self employment benefits.

    A better picture of under employment/unemployment would come from the total benefits bill including tax credits per head.

    Public sector current expenditure (PSCE) Table 4.19

    budgetresponsibility
    more here

    Tax credits:
    2009/10 = 27,6
    2010/11 = 28,9
    2011/12 = 29,8
    2012/13 = 28.7
    2013/14 = 28.8 *est.

    Total benefits bill exc.tax credits:

    2010-2011 =160.08
    2011-2012 =166.98

    Quite clearly the benefits bill is going up, therefore the population must be working less/for less.

    Quite clearly the headline unemployment figure is now used as a circus to keep people from looking at the real issues.

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