Unemploymentcum-pauperization

► There are many ways to measure unemployment, and if you aren’t sure which is which, you may then look at employment and labor participation. I gather that the real unemployment rate writ large is around 25%. This is possibly the second highest rate globally, if we look at unemployment in the large sense.

► First, youth unemployment is rather high – as always, by the way - and remains so. Second, women’s participation to the workforce is low at around 34% – compare this to Italy’s 58% - and this is one of the factors that keeps the overall official unemployment rate at around 13%.

► If we toy with numbers, we can easily see that positing a secular increase in the participation rate that would render women’s labor participation equal to Italy’s should automatically raise the unemployment rate to over 35%. Youth unemployment is likewise quite high.

► The general idea is: Unemployment is not and was not falling. It will never fall, except seasonally and on account of the business cycle chronology. But as time passes, structural unemployment, so to speak, is bound to head north.

► Credit expansion-cum-budget spending-cum-transfers – and negative real rates - delivered (some) growth, and even (some) investment. Seasonally adjusted – narrow or official - unemployment shows a small improvement also. So, 2020 GDP will be read as c. 2% positive. But this is already past.

► Unemployment-neutral growth would be in the vicinity of 5% per annum. Hence the rise in unemployment is a possibly secular trend because this kind of trend growth looks elusive now. That said, this doesn’t even take into consideration the unmanning of shops, cafes, restaurants, banks, and factories going forward.

► Add to this the hidden unemployment caused by COVID, and the changes, technological and organizational, that await laborers in the market. In the absence of a new social compact, there will be less and less jobs and earnings in the coming years.

► Clearly, the weakest link for the incumbent parties is very high additional unemployment and the fast-rising pauperization that accompanies it. This will eat into EBITDAs also. Who will work for what wage and who will buy new products save food, etc.?