Thursday, November 10, 2005

More good news on unemployment

Unemployment has fallen to 3.4%. That's the lowest rate since the Household Labour Force Survey began, and once again it is due to an absolute drop in the number of unemployed. There has also been a growth in the number of people in work, and in the number of hours worked - and to the extent that this represents people doing what they want, then this is good. But I think it's the low unemployment (meaning fewer frustrated desires) rather than higher participation rates (meaning less leisure time) that is really the result to be pleased about here.

This really does provide a contrast with Don Brash's policy as Reserve Bank Governor of encouraging unemployment to keep wages down...


According to In A Land of Plenty, he also seemed to be concerned about the inflationary effects of higher wages if unemployment went below 7%, and took active steps to maintain it at that level or above. This is still driven by a desire to decrease inflation, and so you can still regard it as uncaring rather than evil - but its getting awfully close to the line.

Posted by Idiot/Savant : 11/10/2005 05:09:00 PM

Personally I think brash's approach (as it is presented here) is incorrect in some regards but I recognise that if he is correct then he can be just as caring as anyone else. If you beleive that lowering the unemployment rate beyond a certain point will have side effects that systematically disadvantage your counry in the long run (unemployment is not the only potential goal) then it is rational to not lower it beyond that point. You would be uncaring to do it anyway just for some political gain or whatever.

Posted by Genius : 11/11/2005 06:41:00 AM


The mistake you make here is to assume that moderate levels of inflation are more harmful to society than moderate levels of unemployment. This is far from clear. Hyper-inflation certainly is, but an inflation rate of 10% may not be (although this depends a bit on wage vs price inflation).

Posted by Anonymous : 11/11/2005 07:04:00 PM

Actually I agree with you Terence. BUT having said that I don't have all the statistics infront of me to say for sure (and I am not a reserve bank governor) and if those statistics did suggest Brash was right then he would, of course, be right and even if he was wrong if the statistics he had seen suggested what he believes he would merely be "honestly wrong".

Posted by Genius : 11/11/2005 08:21:00 PM