Given that Alan Bollard felt compelled to get out his crystal ball when it comes to discussing the next year, I feel like I should get hold of my tarot cards to see what the year ahead holds.
As I have said previously, the general justification for tarot card reading is the same as for any sort of forecasting, or even policy analysis – it provides a framework, which is objectively verifiable, which you can hang your value judgments off and get conclusions from. Tarot cards use theoretical archetypes as its framework, while economic forecasting uses supply and demand and a bunch of measured data. We may not feel that the framework used in tarot card reading is particularly well suited to this task – as it isn’t. But that isn’t going to stop me trying.
So without further adieu, here is the Celtic Cross reading for the New Zealand economy over 2011 – with a specific focus on the labour market.
Note: I read the CC differently to those instructions – all will be explained. The main difference is that the “cross” is treated as a self-contained general reading, while the “staff” is a ‘sort of self-contained’ specific reading – in this case solely on the labour market.
Note 2: In case it isn’t obvious, the comparison between the relatively holistic tarot card reading framework and the more reductionist economic framework is meant to be facetious
Note 3: No offence intended for professional economists or tarot card readers 😉
Card one: Current situation
Queen of Pentacles
This card should be read in conjunction with the next card. The element of the current situation, which will take us to the outcome predicted (and as a result, this is the most likely path we will take), involves self-sufficiency, a focus on the material elements of our nature, hard work and self-focus.
In context, this card suggests that the New Zealand economy is moving along a path where there is a significant focus on material issues – eg the recession. Furthermore, the concepts of self-sufficiently (read sustainability) are becoming more important in a policy context – this doesn’t mean they are the right goals, just the goals we are moving towards, and that will lead to the outcome described later on.
An additional point of note is that this card also has us moving along our current production path and focus – we aim towards sustainability in some sense, but with a continued focus on our primary and tourist industries. On top of this our current SENTIMENT and feeling remain unchanged – in some sense we are moving forward but with uncertainty.
Card two: Obstacle to path between past and future outcomes
Six of Wands
Obstacle is a big word – often with negative connotations. However, sometimes it describes an alternate path that is available from the present – one that will not lead to the outcome described below.
This card drives towards creativity and a push for acclaim and reward. Effectively, this card is telling us that if the economy wants to move forward, if agents within the economy were not subject to such a high level of uncertainty and concern, the outcome would be very different.
However, current policy actions and general sentiment appear to be pointing towards the central outcome.
Card five: The situation that surrounds the NZ economy
Ten of Wands
This card describes external pressures – and as a result, is the card that the NZ economy as a whole will least relative to.
Effectively, this card states that the NZ economy is in its current situation, and making its current choices, because of a lack of confidence. Note that this card framed an important situation for us – it is this lack of confidence that is a major factor around the economy.
This is fascinating, as the economic surveys tell us that a large number of people expect things to get better – but is it really just a case of lots of people expecting things to get a touch better because they are so bad, rather than some true level of confidence?
Card three: The skills the NZ economy has
Seven of Cups
This card tells us of the skills inherent in the NZ economy that can deal with this over-arching situation of low confidence.
Simply put, it is saying that there is potential in the economy – and if individuals were aware of the available possibilities they would make choices that would improve the situation. However, any such choices will not be evident until the individuals in the economy do something – sounds like a typical demand side recession to me.
Card four: The situation leading to now
Seven of Wands
New Zealand has faced stiff competition from overseas, with regards to ideas and product sales. As individuals we have found it difficult to respond, and so have retreated towards what we are comfortable with – leading to the present set of choices.
Card six: The outcome
Three of swords
Strife, and a breakdown of the way we currently view our society and our way of thinking – the necessary change in thinking required to move forward will occur at some point. However, on our current path it occurs in the future – when it is relatively more costly to adapt than if we were on our alternative path.
Card seven: The labour market situation
Nine of Swords
Uncertainty and concern, on both ends of the labour market, are dominating trends. Firms are unwilling to hire, and households are unwilling to spend given job security. Without some type of impetus, the labour market is currently in strife.
Card eight: How others see the NZ labour market situation
Outside of New Zealand, people have a positive view of NZ’s labour market. There is a security net, and yet there is a lot of market flexibility. There are opportunities for temporary work, and the unemployment rate is still low relative to much of the world.
What seems like a terrible situation within NZ is actually viewed surprisingly positively overseas.
Card nine: NZ’s hopes and fears regarding the labour market
Four of Wands
Our hopes are relatively contained. We hope that new ventures, and new industries, can provide a fillip for growth in jobs. However, there remains a deep seated concern that there is a long road ahead before the labour market returns to “normal”
Card ten: The outcome for the labour market
Strong, unyielding, job growth will occur – however, the once firms find the confidence to hire they may do so in an adhoc way, making some of the improvements in the labour market over the next year unsustainable.
Tying this in with the cross section – it appears that the unwillingness to look for the best alternative among some firms may lead to over-investment (including hiring) in areas that both ex-ante and ex-post are “wrong”. Keeping this point in mind and looking for opportunities is key.
Looking through the cards it appears that the economy, and labour market, will recover over the next year. However, there is a concern regarding the composition of growth – and whether private actors will respond to the actual market signals that appear, or merely try to “hide” from them given the long period of sub-trend growth experienced in New Zealand.
Should private agents recognise this, then a more creative, and robust, recovery can be expected to take hold – but that isn’t the central picture.