Thursday, June 13, 2013

On the not-recession and how it is playing out, down our way

I keep reading that Australia is doing well economically. That we weren't bashed up by the GFC in the way that the US and much of Europe was; that our dollar is strong (clearly!), our GDP has not declined (OK); and that, overall, inflation is restrained at a manageable level. Our economy is considered credit-worthy and stable, and this is undoubtedly a good thing, and the result of a steady hand on the monetary and economic policy tiller over the past 5 years (all hand-wringing and mud-slinging to the contrary).


We may not be, technically and by the books, in a recession - GDP hasn't declined in any serious sense, and that's the gold standard for recesssion measurement. But for a lot of people around here, an increasing number in fact, it's starting to *feel* awfully like a recession. If it walks like a duck and quacks like a duck, then what other kind of waterfowl is it?

In the past six weeks alone, I know of 15 people just within my personal circles who have been laid off or had hours of work or salary reduced. Payrises are a thing of the past in many industries, and small businesses are struggling. Cost of living continues to rise, and every mortgagee is living in fear of interest rate rises, and hoping they won't gallop like they did in the notorious 80s. Tenants are getting squeezed by rent increases, insurers are putting up premiums, etc etc etc.

By far the best explanation of why it feels recession-y, even though it isn't, is provided by Greg Jericho at The Drum. Basically, he argues that GDP might be the measure that economists use to determine if we are in recession, but for most people, employment trends is a more realistic and useful measure. (As he writes, "you don't pay your bills with GDP"). He shows, with quite compelling evidence, that when you look at labour market participation, the downward trend is palpable and painful. In fact, "the decline in the percentage of adults in employment is now worse than that experienced in the 1980s recession" - which makes it a lot less surprising to hear that more and more people are struggling with their circumstances.

The thing that Jericho doesn't even discuss, but that I'd identify as another massive structural reason for the *feeling* of harder times, is underemployment. While I do have three friends and two acquaintances who have been made redundant (lost jobs altogether), the more common story around here is of people having hours cut, pay reduced, or failing to get much work if they are casuals or contractors. All of these people - myself included - do not appear in unemployment figures, but that does not mean that a large number of them are working either to their capacity or to a level to support their needs and commitments.

No-one is immune to the effects of this kind of labour-recession. Sure, lots of people still have fulltime jobs - indeed, a majority of those jobs will survive, depending on your industry. But as more people have less disposable income, doesn't this imply a slowing of the economy, and soon, with all the knock on effects this has?

So yeah, we're not in recession, technically. We've been carefully husbanded past the worst dangers of the GFC, and the regulation of our financial market has protected us from the horrors of subprime and all its dismal children. But for a lot of people, especially non-professional people and those without permanent fulltime positions, it is feeling a lot like recession, as we all tighten belts a bit harder.

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