Wednesday, September 2, 2009

Sharp, Shocked & Short?

Maybe employers are running out of people to fire? Certainly the speed of decline in the numbers joining the live register appears to be mirroring its rise at the start of the year. Or maybe it's the free market in action: when the economy was growing jobs in the private sector expanded at an unprecedented rate - then they contracted as the economy shrunk?

I've charted the month-on-month increase in the Live Register since February 1967 using the CSO's Database Direct service - including today's latest numbers for August. What is striking about the chart is that even in the worst periods of the 1970s and 1980s the month-on-month increase (seasonally adjusted) rarely spiked above 5,000. Until, that is, late last year/early this year: when it reached a net increase of 31,400 in January. But it has plunged since - back down to 5,000 in August. That's bad of course, but it's right back to the longer run trend we've seen these past 40 years (and relatively better as the numbers in work are much higher than in previous decades).

So what's going on in the Irish workplace that has seen such a sudden fall back in new redundancies? It may be that we have adopted already to the 'New Normal'. Including reduced working hours and pay as alternatives to redundancies. Hence the emergence of the four day week for some, and that old thank God it's Thursday feeling. And perhaps if people are paying more and more of their marginal income over to Brian Lenihan then people might prefer extra leisure time to extra income.

As Fred Dent spells out in an inspiring presentation, we've been here before - and faced even worse crises. How? By letting businesses, workers and consumers figure out for themselves how best to navigate the uncertainties and choices that they face: that way recovery lies. Remember: recessions are mainly macroeconomic phenomena; recoveries are mainly microeconomic.

4 comments:

  1. Faced even worse crises? The fall in GDP is, relative to the state's history, off the scale so I don't think so.
    "Recessions are mainly macroeconomic phenomena; recoveries are mainly microeconomic". Yeah I have been hearing that, it sounds nice & as a micro-economist tired of seeing my macro colleagues in the meedja I would like it to be true. But is it really? The external environment is, to us, a macro phenomenon. Its important the US economy picks up but not really how or why. Any why is a recession macro? Poor regulation, irrational expectations, lousy governance...sounds pretty micro' to me.

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  2. I think the rapid spike is down to the fact that we all knew it was coming, psychologically speaking we were enjoying the boom, but glancing over our shoulders in the knowledge that all good things come to an end (as do bad things in fairness).

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  3. Kevin - what you really need to do is get 46 micro-economists to write an article for the Irish Times explaining why NAMA will work (at the margin, of course)

    That way the media fame your ilk rightly deserve will be all yours.

    Seriously though: I think all economics will eventually end up a sub-discipline of psychology (with the honourable exception of monetary economics).

    It does all seem to boil down to psychology one way or another - as Grow Up observes.

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  4. I know a bit about psychology having done some work in that area. Its a discipline I have a lot of respect for and I think we can learn a lot from each other. Its happening already. But I don't seem either taking over the other nor would I want to, vive la difference.
    As one of the 46 I certainly don't seek fame & my guess is that this is true of the others. Naively perhaps, I also didn't expect the dogs-abuse that's coming from some quarters, particularly from those who should know better.

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