Commonwealth

Yesterday, we talked about whether the labor market would balance in the short term. We also discussed whether there were enough people outside the labor force who might move back in, with higher wages and other inducements, to provide enough bodies to not only fill the current vacancies but also provide enough of a cushion to prevent further dislocations in the future. Although it is close, so far the numbers suggest there are enough people out there to do that. In the next year or so, jobs and employees should move back into a rough equilibrium.

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A couple of weeks ago, we left off our discussion on the labor market with the conclusion that the labor market shifts were real and reflected underlying changes in both the demographics and demand for jobs. Knowing that, however, doesn’t tell us what is likely to happen in the future. So, let’s think through the factors that will determine just that.

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Yesterday was an interesting day. Yes, the headline declines in the stock market made it interesting, and that news is certainly part of it. Still, that kind of volatility is normal. We haven’t seen it for a while, but if you look back, it’s no big deal. In fact, markets are ticking back up again.

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Last week saw a number of important economic updates, with a focus on June’s inflation and retail sales reports. Retail sales were a highlight, as the pace of sales increased by more than expected during the month. This will be another busy week for updates, which will address the housing market, weekly initial jobless claims, and more.

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Australia has been one of the biggest beneficiaries of China’s growth in the past several decades. China’s infrastructure spending after the last two crises—the great financial crisis and the more recent COVID-19 pandemic—created a demand for resources that was largely fulfilled by Australia. Indeed, this demand helped alleviate some of the pain for the Australian economy.

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It was about three weeks ago that I ended the regular coronavirus updates as the medical news had improved sufficiently that the country had largely reopened and the virus was under control. Since then, unfortunately, we have seen infections tick back up, and it is clear that—from a medical perspective—the virus is still with us. Thus, this update discusses where we are now and what it might mean going forward.

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