Weak Growth, Tight Job Markets Are a Global Phenomenon
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Weak Growth, Tight Job Markets Are a Global Phenomenon

Economists cite ageing populations and relatively low immigration as factors that became more pronounced during the pandemic

By TOM FAIRLESS
Mon, Aug 8, 2022 11:40amGrey Clock 4 min

From Berlin to Tokyo to Sydney,  economic growth is slowing or turning negative across advanced economies, yet labour markets remain historically tight.

Talk of a “jobful recession” has centred on the U.S., where payrolls grew by more than half a million in July and the unemployment rate declined to its prepandemic low of 3.5% even as economic output contracted in the three months through June. The same conundrum crops up around the world.

In Germany, growth stalled in the three months through June, and the country faces imminent recession as its energy supplies dry up. But the unemployment rate remains close to a 40-year low, and almost half of companies say worker shortages are hampering production. The jobless rate in the wider eurozone is at a record low. New Zealand’s economy shrank in the first three months of the year, but its jobless rate, at 3.3%, has stayed close to a multidecade low.

It is the opposite of the “jobless recovery” diagnosed after the 2008 global financial crisis, when economic growth in the U.S. and parts of Europe picked up but unemployment remained painfully high for years.

The current dichotomy might not last. Central banks are raising interest rates to rein in high inflation, which could in time undercut labour demand. The Bank of England on Thursday raised its policy rate by 0.5 percentage point, to 1.75%, and forecast a lengthy recession that would likely boost unemployment to 5.5% from its current 3.8%, which matches the prepandemic low.

Still, subdued growth may coincide with ultralow unemployment more often in coming years, judging by the country that experienced it first. For three decades Japanese growth has been low or negative, averaging 0.8%, but its unemployment rate has never been more than 5.5% and has ratcheted steadily lower since 2010 to stand at 2.6% now—close to its prepandemic low of 2.2%.

The reason, economists say, is a tight labour market because of an aging population and relatively few immigrants, features that have become more pronounced in other advanced economies during the pandemic.

In the years before the pandemic, Japan took steps to make it easier for mothers of small children to work, keep older workers on the job, and loosen restrictions on migrant labour, such as allowing foreign students to work 28 hours a week. But just as those measures were making an impact, the pandemic hit and Japan closed its borders to most new workers.

A shortage of workers forced Masaya Konno, a business owner in Tokyo, to temporarily close his Japanese-style pub last month. Even after he increased pay to ¥1,300  an hour, which is ¥100 to ¥200 above the wages prevailing a year ago, he still can’t find enough workers. “We couldn’t overcome a labour shortage,” Mr. Konno said.

Unemployment and growth usually show a predictable relationship known as Okun’s Law, named for the Yale University economist Arthur Melvin Okun, who first proposed it in 1962. In the U.S., Okun’s law predicts that a 1% decline in output below its potential causes an increase in unemployment of half a percentage point.

However, that relationship can shift depending on factors such as workers‘ output per hour and labour-force growth, said Laurence Ball, an economics professor at Johns Hopkins University. If there are fewer workers and job seekers, the labour market can remain tight even if growth is weak.

Since February 2020, the U.S. labour force has shrunk by about half a million. In Germany, the labour force shrank by about 350,000 over the same period, while in the U.K. it shrank by about 550,000.

Migration has slowed across advanced economies as governments restricted entry to keep out Covid-19 and its variants. In New Zealand, the number of people arriving with work visas shrank from about 240,000 in the year through June 2019, to just 5,000 in the year through June 2021, government data show. In the U.S., the slowdown in immigration began in 2017, when the Trump administration adopted a range of policies to curb both illegal and legal immigrants. The annual net inflow has fallen from more than one million in 2015-16 to about a quarter of a million in 2020-21, according to the U.S. Census Bureau.

Meanwhile, older workers dropped out of the workforce, in some cases to avoid exposure to Covid-19. Some younger adults quit work to care for children or other family members.

There are signs that as vaccines cut the risk of severe illness or death from Covid, workers have returned to the labour force and migration has resumed. In New Zealand, the number of people arriving with work visas surged to almost 5,000 this past June. That suggests unemployment may start to respond more to changes in economic output.

Other forces might be more durable, however. Older people aren‘t yet returning to work in the U.S.: The labour-force participation rate of workers aged 65 or older has fallen to about 23% from 26% in early 2020. Rapidly aging Germany and Italy are expected to lose millions of workers to retirement over the next decade, which suggests labour shortages will persist.

While sustained low unemployment is generally a boon, Japan’s experience also shows the downsides: It means that the economy isn’t able to quickly direct workers to growth areas, which can limit “creative destruction”—the elimination of obsolete industries so that new industries can grow.

Takahide Kiuchi, an economist at Nomura Research Institute and former Bank of Japan policy board member, said, “Japan’s economy may look more stable with mild inflation. But the flip side of a stable economy is the negative impact of slow changes in the industrial structure.”

Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: August 7, 2022.



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New York Watch Auctions Record Uptick in Sales in the Face of Market Slowdown
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Luxury watch collectors showed ongoing strong demand for Patek Philippe, growing interest in modern watches and a preference for larger case sizes and leather straps at the June watch sales in New York, according to an analysis of the major auctions.

Independent and neo-vintage categories, meanwhile, experienced declines in total sales and average prices, said the report from  EveryWatch, a global online platform for watch information. Overall, the New York auctions achieved total sales of US$52.27 million, a 9.87% increase from the previous year, on the sale of 470 lots, reflecting a 37% increase in volume. Unsold rates ticked down a few points to 5.31%, according to the platform’s analysis.

EveryWatch gathered data from official auction results for sales held in New York from June 5 to 10 at Christie’s, Phillips, and Sotheby’s. Limited to watch sales exclusively, each auction’s data was reviewed and compiled for several categories, including total lots, sales and sold rates, highest prices achieved, performance against estimates, sales trends in case materials and sizes as well as dial colors, and more. The resulting analysis provides a detailed overview of market trends and performance.

The Charles Frodsham Pocket watch sold at Phillips for $433,400.

“We still see a strong thirst for rare, interesting, and exceptional watches, modern and vintage alike, despite a little slow down in the market overall,” says Paul Altieri, founder and CEO of the California-based pre-owned online watch dealer BobsWatches.com, in an email. “The results show that there is still a lot of money floating around out there in the economy looking for quality assets.”

Patek Philippe came out on top with more than US$17.68 million on the sale of 122 lots. It also claimed the top lot: Sylvester Stallone’s Patek Philippe GrandMaster Chime 6300G-010, still in the sealed factory packaging, which sold at Sotheby’s for US$5.4 million, much to the dismay of the brand’s president, Thierry Stern . The London-based industry news website WatchPro estimates the flip made the actor as much as US$2 million in just a few years.

At Christie’s, the top lot was a Richard Mille Limited Edition RM56-02 AO Tourbillon Sapphire
Richard Mille

“As we have seen before and again in the recent Sotheby’s sale, provenance can really drive prices higher than market value with regards to the Sylvester Stallone Panerai watches and his standard Patek Philippe Nautilus 5711/1a offered,” Altieri says.

Patek Philippe claimed half of the top 10 lots, while Rolex and Richard Mille claimed two each, and Philippe Dufour claimed the No. 3 slot with a 1999 Duality, which sold at Phillips for about US$2.1 million.

“In-line with EveryWatch’s observation of the market’s strong preference for strap watches, the top lot of our auction was a Philippe Dufour Duality,” says Paul Boutros, Phillips’ deputy chairman and head of watches, Americas, in an email. “The only known example with two dials and hand sets, and presented on a leather strap, it achieved a result of over US$2 million—well above its high estimate of US$1.6 million.”

In all, four watches surpassed the US$1 million mark, down from seven in 2023. At Christie’s, the top lot was a Richard Mille Limited Edition RM56-02 AO Tourbillon Sapphire, the most expensive watch sold at Christie’s in New York. That sale also saw a Richard Mille Limited Edition RM52-01 CA-FQ Tourbillon Skull Model go for US$1.26 million to an online buyer.

Rolex expert Altieri was surprised one of the brand’s timepieces did not crack the US$1 million threshold but notes that a rare Rolex Daytona 6239 in yellow gold with a “Paul Newman John Player Special” dial came close at US$952,500 in the Phillips sale.

The Crown did rank second in terms of brand clout, achieving sales of US$8.95 million with 110 lots. However, both Patek Philippe and Rolex experienced a sales decline by 8.55% and 2.46%, respectively. The independent brand Richard Mille, with US$6.71 million in sales, marked a 912% increase from the previous year with 15 lots, up from 5 lots in 2023.

The results underscored recent reports of prices falling on the secondary market for specific coveted models from Rolex, Patek Philippe, and Audemars Piguet. The summary points out that five top models produced high sales but with a fall in average prices.

The Rolex Daytona topped the list with 42 appearances, averaging US$132,053, a 41% average price decrease. Patek Philippe’s Nautilus, with two of the top five watches, made 26 appearances with an average price of US$111,198, a 26% average price decrease. Patek Philippe’s Perpetual Calendar followed with 23 appearances and a US$231,877 average price, signifying a fall of 43%, and Audemars Piguet’s Royal Oak had 22 appearances and an average price of US$105,673, a 10% decrease. The Rolex Day Date is the only watch in the top five that tracks an increase in average price, which at US$72,459 clocked a 92% increase over last year.

In terms of categories, modern watches (2005 and newer) led the market with US$30 million in total sales from 226 lots, representing a 53.54% increase in sales and a 3.78% increase in average sales price over 2023. Vintage watches (pre-1985) logged a modest 6.22% increase in total sales and an 89.89% increase in total lots to 169.

However, the average price was down across vintage, independent, and neo-vintage (1990-2005) watches. Independent brands saw sales fall 24.10% to US$8.47 million and average prices falling 42.17%, while neo-vintage watches experienced the largest decline in sales and lots, with total sales falling 44.7% to US$8.25 million, and average sales price falling 35.73% to US$111,000.

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