The ANZ Job ads series was soft in January after a tough December and today we found out that February was the toughest month so far in the history of the series: a record drop of more than 10% on January.
The latest figures showed a 10.4% fall in the number of jobs advertised in newspapers and on the internet in February, and a fall of almost 40% on the same month of 2008.
That was after a 6.3% fall in January and a 9.7% fall in December.
Vacancies advertised in newspapers and on the Internet averaged 161,583 a week last month, the lowest number since November 2005, and 41% down from the April 2008 record of 275,326.
The figures again indicate the outlook for employment is worsening, but they have been signalling that since last May, without the same impact showing up in the monthly jobless figures.
But according to economists that could change when the February Labour Force figures are released on Thursday. They are tipping the loss of 20,000 jobs and an unemployment rate of 5% (from January’s 4.8%).
The ANZ’s head of economics, Warren Hogan said in a statement that “new labour demand continues to contract across Australia in the early part of 2009.”
“This in turn suggests that the current downturn in the economy is likely to last throughout 2009, with little prospect of a meaningful recovery before 2010.”
MARGINAL PATH TO INSTANT FULL EMPLOYMENT
The carrot: Give every employer an EMPLOYMENT TAX CREDIT proportional to the growth of its in-house workforce since a certain reference date. The proportionality constant would be in dollars per year per full-time-equivalent worker.
The stick: Allow the tax “credit” to be negative, so that downsizing the workforce after the reference date incurs a tax penalty.
The anti-rorting provisions: The “reference date” must be BEFORE the policy is announced, so that employers can’t get a tax advantage by sacking people before the reference date and re-hiring them after it. Employers that materialize after the reference date must be subject to separate rules; they cannot be treated as if they had a workforce of zero at the reference date, because that would invite old employers to find ways to disappear and reappear.
The concession to hard times: Give employers an unconditional tax cut if you wish, but be sure to apply the above carrot and stick in addition thereto. In those circumstances, an unconditional tax cut is affordable because the carrot and stick would expand the economy and hence the tax base — not so much the corporate income-tax base, against which the proposed tax credit would be given, but certainly the personal and consumption tax bases.
Note that the employment tax credit by itself is revenue-neutral: if employers keep the same workforce, they pay the same tax.
Would the restoration of full employment by the above method be inflationary? On the contrary, the tax credit would reduce the marginal cost of hiring additional labour, hence the marginal cost of the associated additional production, hence the market price of that production. This anti-inflationary effect means that the tax credit would reduce not only the ACTUAL rate of unemployment, but also the “natural” rate — that is, the minimum unemployment rate consistent with stable inflation.