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Speaker 1: Welcome to Ask Fear and Greed, where we take your

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Speaker 1: questions and do our best to answer them. I'm Michael Thompson,

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Speaker 1: and good afternoon, Sean Aylmer.

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Speaker 2: Good afternoon, Michael, Sean.

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Speaker 1: Today's question has come from Lou on LinkedIn. Very illiterative.

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Speaker 1: You can obviously send it in via LinkedIn or Facebook

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Speaker 1: or Instagram, or head to our website Fearangreed dot com

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Speaker 1: dot au if you've got a question to ask. And

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Speaker 1: I think Lou has been inspired by last week's unemployment

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Speaker 1: numbers coming in at a shock three point nine percent.

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Speaker 1: He says, Hi, gents, this might be a stupid question, Lou.

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Speaker 1: There are no stupid questions never on this show. But

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Speaker 1: can unemployment ever get close to zero percent? Wouldn't that

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Speaker 1: be classed as full employment? Which is a term that

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Speaker 1: we hear quite a bit. I would appreciate a simplified explanation,

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Speaker 1: if there is one. I mean, the first part of

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Speaker 1: that question is a challenge, that last part short.

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Speaker 2: That me thats a real explanation. Yea, it is a

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Speaker 2: great It is a great question, Lou, because it makes

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Speaker 2: sense what you're saying. However, it's kind of not how

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Speaker 2: the economy works. There's a thing called frictional unemployment. People

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Speaker 2: are always changing jobs, and even if there was a

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Speaker 2: job for every single person, one hundred people, hundred jobs,

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Speaker 2: people would be jumping around because they'd be chasing higher pay.

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Speaker 2: They want to do something different. I mean, there's always

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Speaker 2: someone out there without a job because they're just shifting

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Speaker 2: between jobs. That's called frictional unemployment. Then there's a thing

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Speaker 2: called structural unemployment. Now you never really get a total

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Speaker 2: match in like a skilled worker demands a wage of

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Speaker 2: twelve bucks, the business wants to give them ten bucks.

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Speaker 2: Maybe they agree at eleven bucks, but maybe the skilled

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Speaker 2: worker says, now, I'll just keep looking around, thanks very

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Speaker 2: much much. Or maybe a business wants to pay less

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Speaker 2: than the minimum wages, so might say, hey, i'll give

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Speaker 2: you twelve bucks an hour if you made my lawn,

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Speaker 2: and the minimum wage is fifteen. So they just don't agree.

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Speaker 2: So this sort of structural unemployment kicks in. So when

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Speaker 2: you got frictional unemployment, structural unemployment, it kind of makes

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Speaker 2: it impossible to actually get to zero because people are

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Speaker 2: always changing jobs. The demand and supply never quite matches

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Speaker 2: in terms of wage levels and stuff like that. Now,

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Speaker 2: if you put them together, you're always going to have

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Speaker 2: an unemployment rate. But this comes down to this concept

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Speaker 2: of full employment which Lou's talking about, or the natural

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Speaker 2: rate of unemployment or the non accelerating inflationary rate of unemployment,

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Speaker 2: otherwise known as NEHRU. They're all kind of the same thing.

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Speaker 2: So the natural rate, the full employment rate, the NAHRU.

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Speaker 2: It's the state of bliss for labor markets. Full employment NAHRU,

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Speaker 2: et cetera. It's basically where everyone who wants a job

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Speaker 2: can pretty much get one, but there's not pressure on

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Speaker 2: wages and hence inflation. If you look at this economy

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Speaker 2: right now, we talk about the NAHRU at four point

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Speaker 2: five percent or full employment at four point five percent,

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Speaker 2: we're at three point nine percent. Therefore it's less. You think, oh,

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Speaker 2: that's good. It is good, but it probably puts pressure

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Speaker 2: on wages because people can chop around and get more wages,

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Speaker 2: and that puts pressure on inflation. So but this this

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Speaker 2: is a really interesting concept, the NHRU, because it's probably

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Speaker 2: changed over the years. The knowledge economy has probably given

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Speaker 2: a total shift to it. So Michael, when earlier the

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Speaker 2: New Year, we decide that you're no longer for fear

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Speaker 2: and greed or did I say that out loud? Anyway,

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Speaker 2: Let's pretend.

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Speaker 1: Let's pretend, all right, so far, I'm very heavily invested

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Speaker 1: in this hypothetical scenario.

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Speaker 2: Sure, so that you were, you know, let's say you

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Speaker 2: weren one hundred dollars a week. Now, you've got a mortgage,

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Speaker 2: you've got kids, you're going to school, if you've got

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Speaker 2: if you lost your job on Friday.

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Speaker 1: Oh, specific a hypothetical date of Friday.

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Speaker 2: All right, so if you did, what would you do?

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Speaker 2: I would have made I mean, you'll meet it, look

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Speaker 2: for another job. But it's Christmas, it's time that you

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Speaker 2: need money. You're in media, so you're probably not really

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Speaker 2: going to get a job till February or March. If

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Speaker 2: you don't have savings, you probably become an uber driver

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Speaker 2: or you do deliveries or stuff like that, just to

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Speaker 2: get some cash coming in. And so there's this big

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Speaker 2: discussion in Australia. Now that the full employment rate, the

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Speaker 2: natural rate the nay room reserve banks is four and

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Speaker 2: a half percent, it may actually be a lot less

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Speaker 2: than that because people like you and me, if we

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Speaker 2: lost our job, would actually become employed off around bat

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Speaker 2: because we can couldn't have done that ten years ago.

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Speaker 2: So maybe Nayru is three percent three and a half percent,

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Speaker 2: not four and a half percent. So Lou, the upsht

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Speaker 2: of all this, right, you might have I thought that

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Speaker 2: was a stupid question. I thought that was a cracking

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Speaker 2: question because there's so much to it.

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Speaker 1: Okay, So the rise of like the gig economy and

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Speaker 1: all of these creates more opportunities for more people to

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Speaker 1: get the work. Like it might not be full time work,

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Speaker 1: but it might just be enough work to me that

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Speaker 1: they are not classified as unemployed.

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Speaker 2: So you and I four or five years almost five

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Speaker 2: years ago, we both found ourselves looking for work, and

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Speaker 2: so we started fear and Great. Now. We did that

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Speaker 2: because you and I had some skill base. We had technology,

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Speaker 2: because we have a software platform that we can use.

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Speaker 2: We could do it from home and back then and

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Speaker 2: start a job and kind of build an audience and

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Speaker 2: sell ads into it and do partnerships and stuff like that.

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Speaker 2: Like fifteen years ago, we probably couldn't have done that

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Speaker 2: because it wasn't the software to do it.

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Speaker 1: Like, so we would be out there looking for another

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Speaker 1: formal job that would take us into an office, working

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Speaker 1: full time and for that I'd have had to wait

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Speaker 1: three months or something.

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Speaker 2: To find that right job might have been a bit longer.

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Speaker 1: Yeah, indeed, especially when you're getting on a bit.

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Speaker 2: Yeah, thanks very much mate.

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Speaker 1: Thanks indeed, there we go. That's the hypothetical situation.

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Speaker 2: We lose it by job on Friday, get back. Yeah.

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Speaker 1: Indeed, I feel like we are even and I feel

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Speaker 1: like we have answered the question. That was a really

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Speaker 1: good question. Thank you Lou for sending it in, and

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Speaker 1: thank you Sean for answering it. And I would argue

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Speaker 1: in a way that was simple. Did what did leuwant?

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Speaker 1: He wanted a simplified explanation. I love the fact that

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Speaker 1: you use me to simplify things. Yeah, yeah, jeers, thanks

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Speaker 1: a lot, Thank you Sean.

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Speaker 2: Thank you Michael, Thank you loum.

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Speaker 1: If you have your own question that you would like

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Speaker 1: us to answer, you can send it on through via

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Speaker 1: LinkedIn as Lou did, or Instagram, Facebook, or Fearangreed dot

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Speaker 1: com dot au and we will pop it on the list.

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Speaker 1: I'm Michael Thompson and this is pasked Fear and Greed