Wednesday, July 10, 2013

The jobs will come, as they always have

I can't make myself sleep on the long plane trip to or from Europe. These days I just keep myself distracted by the plane's entertainment system. Returning at the weekend from a walking holiday in England, I really enjoyed rewatching the Jack Nicholson movie As Good As It Gets, with its theme tune, an American-sanitised version of Always Look on the Bright Side of Life.

In Australia we're usually a land of bright-siders, though this hardly makes us unique. It's actually this optimism about the future that keeps our economy moving onwards and upwards.

At present, however, we're looking on the dark side. Until recently it was fashionable to complain that, whoever was benefiting from the resources boom, it wasn't you or me. These days, the worry is that with the initial stages of the resources boom passing its peak, it's hard to know where the growth and the jobs will be coming from.

Did you detect the logical inconsistency between those two worries? They can't both be true. If most of us gained nothing from the boom, most of us have little reason to mourn its departure. All the two positions have in common is their pessimism.

Yet despite all the political and economic commentary to which we're exposed, it took a speech last week from Reserve Bank governor Glenn Stevens to point out the contradiction.

The truth is you and I got plenty of benefit from the resources boom. The reason so few of us realise it is that most of those benefits were indirect. We often have trouble joining the economic dots.

One of the most easily detected indirect benefits of the boom is the high dollar which, among other things, has made it so much cheaper for us to take overseas holidays (and, until recently, left the world crawling with Aussie tourists).

Now, with the resources boom receding and the American economy finally picking up, the dollar is coming down again, allowing those who never acknowledged the high dollar's benefit to complain about its departure.

But the trick is that everything that happens in the economy - whether popularly judged to be good or bad - has both advantages and disadvantages. So to every seemingly good thing that happens there's always a downside, while to every bad thing there's an upside.

The disadvantage of the high dollar was that it made it harder for Australian businesses to compete on export markets and against imports in the domestic market. So the advantage of a lower dollar is that it takes pressure off a lot of Australian businesses - not least of which are our tourism operators - making it easier for them to expand their sales and employment.

When I was younger I used to dread times like this, where the economy was looking flat and everyone was demanding to know where the jobs would be coming from. How should I know?

Usually that question is asked in the later stages of a severe recession, when people are depressed and doubtful whether the economy has a future. We haven't had a severe recession for more than 20 years - a record for us and better than any other rich country can say - and yet we're feeling down. (Sometimes I think we're feeling down precisely because so many of us have no recollection of what genuine economic hardship feels like.)

By now, however, I no longer dread being asked where the jobs will be coming from. I know from the experience of three severe recessions that there's always a tomorrow. I don't know the precise details, but I do know the jobs will come. Always have in the past and no reason to doubt they will again.

What's more, in this case past performance does offer a reasonable guide to the future. As Stevens reminded us in last week's speech, over the 21 years to mid-2012, our production of goods and services roughly doubled. Only 3 percentage points of that 100 per cent increase came from manufacturing.

The largest contributions came from financial services (13 percentage points), mining (10 points), construction (9 points), professional services (8 points) and healthcare (7 points).

But though production and employment are related, they're not the same, with some industries being a lot more labour-intensive than others. Over the same period the number of jobs in the economy has increased by about half. About two-thirds of this increase is attributable to growing employment in the provision of various kinds of services to businesses and households.

There's been growth across the board in services sector employment, but healthcare accounts for 9 per cent of the increase and professional services for 7 per cent.

One beauty of the services sector is that it provides unskilled jobs - for waiters, cleaners, shop assistants and the like - but also, and increasingly, highly skilled jobs for managers, medicos, teachers, lawyers and all manner of professionals and para-professionals.

So that's where the jobs will come from, and come they will. It's not the government's job to ''create'' those jobs any more than it was its job to conjure up the resources boom. That's the job of business and, indirectly, households.

It will happen when businesses and householders get their confidence back - which we can be sure they will. What we can't be sure of is that this will happen on cue.