From CNBC.com:
Private employers created 133,000 jobs in May, payrolls processor ADP said. That was below economists' expectations for 148,000 jobs.
The report comes ahead of Friday's closely watched employment report for May, which is expected to show that nonfarm payrolls increased 150,000, up from a paltry 115,000 in April.....
Employers announced 61,887 jobs cuts this month, a surge of 52.6 percent from 40,559 in April, according to Challenger, Gray & Christmas Inc....
Separately, gross domestic product increased at a 1.9 percent annual rate in the first quarter, down from the 2.2 percent the Commerce Department had estimated last month. The economy grew at a 3.0 percent rate in the fourth quarter.
The report also showed that after-tax corporate profits dropped for the first time in three years last quarter....
----------------
Link: http://www.cnbc.com/id/47627947
Thursday, May 31, 2012
Beware Bank Runs: money flies out of Spain
From Reuters:
Spaniards alarmed by the dire state of their banks are squirreling money abroad at the fastest rate since records began, figures showed on Thursday, and the credit ratings of eight regions were cut.
Spain is the next country in the firing line of the euro zone's debt crisis, with spendthrift regions and shaky banks threatening to blow a hole in state finances and pushing funding costs towards levels that signal the need for a bailout....
Bank of Spain data showed a net 66.2 billion euros ($82.0 billion) was sent abroad last month, the most since records began in 1990. The figure compares to a 5.4 billion net entry of funds during the same month one year ago.
Spaniards are worried about the health of their banks, hit by their exposure to a 2008 property crash, and have been sending money to deposit accounts in stronger economies of northern Europe....
-------------
Link: http://www.reuters.com/article/2012/05/31/us-spain-economy-idUSBRE84U08N20120531
Spaniards alarmed by the dire state of their banks are squirreling money abroad at the fastest rate since records began, figures showed on Thursday, and the credit ratings of eight regions were cut.
Spain is the next country in the firing line of the euro zone's debt crisis, with spendthrift regions and shaky banks threatening to blow a hole in state finances and pushing funding costs towards levels that signal the need for a bailout....
Bank of Spain data showed a net 66.2 billion euros ($82.0 billion) was sent abroad last month, the most since records began in 1990. The figure compares to a 5.4 billion net entry of funds during the same month one year ago.
Spaniards are worried about the health of their banks, hit by their exposure to a 2008 property crash, and have been sending money to deposit accounts in stronger economies of northern Europe....
-------------
Link: http://www.reuters.com/article/2012/05/31/us-spain-economy-idUSBRE84U08N20120531
Wednesday, May 30, 2012
Job recovery is scant for Americans in prime working years
From the Washington Post online:
The proportion of Americans in their prime working years who have jobs is smaller than it has been at any time in the 23 years before the recession....
By this measure, the jobs situation has improved little in recent years...
While the unemployment rate may be the most closely watched gauge of the economy in the presidential campaign, this measure of prime-age workers captures more of the ongoing turbulence in the job market. It reflects “missing workers” who have stopped looking for work and aren’t included in the unemployment rate.
During their prime years, Americans are supposed to be building careers and wealth to prepare for their retirement. Instead, as the indicator reveals, huge numbers are on the sidelines....
The falloff has been sharpest for men, for whom the proportion had been on a slow decline before the recession. The percentage of prime-age men who are working is smaller now than it has been in any time before the recession, going all the way back to 1948, according to federal statistics. The proportion of prime-age women is at a low not seen since 1988....
...last month, the unemployment rate ticked down from 8.2 percent to 8.1 percent. Ordinarily, a drop in unemployment would be interpreted as a sign of improving economic health. But it dropped largely because so many people stopped looking for jobs.
Shierholz estimates that about 4 million workers have simply stopped looking, and so do not show up in the tally used for the unemployment rate.
------------
Link: http://www.washingtonpost.com/business/economy/job-recovery-is-scant-for-americans-in-prime-working-years/2012/05/29.html
The proportion of Americans in their prime working years who have jobs is smaller than it has been at any time in the 23 years before the recession....
By this measure, the jobs situation has improved little in recent years...
While the unemployment rate may be the most closely watched gauge of the economy in the presidential campaign, this measure of prime-age workers captures more of the ongoing turbulence in the job market. It reflects “missing workers” who have stopped looking for work and aren’t included in the unemployment rate.
During their prime years, Americans are supposed to be building careers and wealth to prepare for their retirement. Instead, as the indicator reveals, huge numbers are on the sidelines....
The falloff has been sharpest for men, for whom the proportion had been on a slow decline before the recession. The percentage of prime-age men who are working is smaller now than it has been in any time before the recession, going all the way back to 1948, according to federal statistics. The proportion of prime-age women is at a low not seen since 1988....
...last month, the unemployment rate ticked down from 8.2 percent to 8.1 percent. Ordinarily, a drop in unemployment would be interpreted as a sign of improving economic health. But it dropped largely because so many people stopped looking for jobs.
Shierholz estimates that about 4 million workers have simply stopped looking, and so do not show up in the tally used for the unemployment rate.
------------
Link: http://www.washingtonpost.com/business/economy/job-recovery-is-scant-for-americans-in-prime-working-years/2012/05/29.html
Quote of the Month:
From Holman Jenkins writing at WSJ.com:
"Mr. Obama's great political talent has been his knack for granting his admirers permission to think highly of themselves for thinking highly of him....
But now there's a problem. In a presidential re-election race, the formula is inconvenienced by the existence of a very public record of things done and said, of persistent joblessness and sluggish growth, and one big issue that threatens to dwarf the Obama allure altogether—the entire industrial world's rendezvous with insolvency."
------------
Link: http://online.wsj.com/article/SB10001424052702303674004577434210092475908.html?mod=WSJ_Opinion_LEADTop
"Mr. Obama's great political talent has been his knack for granting his admirers permission to think highly of themselves for thinking highly of him....
But now there's a problem. In a presidential re-election race, the formula is inconvenienced by the existence of a very public record of things done and said, of persistent joblessness and sluggish growth, and one big issue that threatens to dwarf the Obama allure altogether—the entire industrial world's rendezvous with insolvency."
------------
Link: http://online.wsj.com/article/SB10001424052702303674004577434210092475908.html?mod=WSJ_Opinion_LEADTop
Monday, May 28, 2012
Bernie Madoff Case: $554 Million to Attorneys / $330 Million to Victims
From Andrew Ross Sorkin at Dealbook.nytimes.com:
Irving H. Picard, the court-appointed trustee seeking to recover funds for the victims of Bernard L. Madoff’s multibillion-dollar Ponzi scheme, has been described as a modern-day Robin Hood. For nearly four years, he has been working to pay back those who were swindled by Mr. Madoff, some who lost their entire life savings.
Yet a look at recent court filings shows Mr. Picard has had much more success collecting money for himself and a dozen law firms and consultants than any victim of Mr. Madoff’s crime.
So far, Mr. Picard’s efforts have created a whopping $554 million in legal and other fees. How much have Mr. Madoff’s victims actually received from all of the cases and motions he’s made? Only $330 million. And how much does Mr. Picard estimate the fee spigot will pour out by 2014? A mere $1 billion.
At $850 an hour, Mr. Picard and his law firm, Baker & Hostetler, are starting to look more like the princes of the Full Employment Act for Lawyers than storybook heroes....
---------------
Link: http://dealbook.nytimes.com/2012/05/28/madoff-case-is-paying-off-for-trustee-850-an-hour/
Irving H. Picard, the court-appointed trustee seeking to recover funds for the victims of Bernard L. Madoff’s multibillion-dollar Ponzi scheme, has been described as a modern-day Robin Hood. For nearly four years, he has been working to pay back those who were swindled by Mr. Madoff, some who lost their entire life savings.
Yet a look at recent court filings shows Mr. Picard has had much more success collecting money for himself and a dozen law firms and consultants than any victim of Mr. Madoff’s crime.
So far, Mr. Picard’s efforts have created a whopping $554 million in legal and other fees. How much have Mr. Madoff’s victims actually received from all of the cases and motions he’s made? Only $330 million. And how much does Mr. Picard estimate the fee spigot will pour out by 2014? A mere $1 billion.
At $850 an hour, Mr. Picard and his law firm, Baker & Hostetler, are starting to look more like the princes of the Full Employment Act for Lawyers than storybook heroes....
---------------
Link: http://dealbook.nytimes.com/2012/05/28/madoff-case-is-paying-off-for-trustee-850-an-hour/
The Facebook Illusion
From Ross Douthat at the NYTimes.com:
There were two grand illusions about the American economy in the first decade of the 21st century. One was the idea that housing prices were no longer tethered to normal economic trends, and instead would just keep going up and up. The second was the idea that in the age of Web 2.0, we were well on our way to figuring out how to make lots and lots of money on the Internet.
The first idea collapsed along with housing prices and the stock market in 2007 and 2008. But the Web 2.0 illusion survived long enough to cost credulous investors a small fortune last week, in Facebook’s disaster of an initial public offering....
Of all the major hubs of Internet-era excitement, Mark Zuckerberg’s social networking site has always struck me as one of the most noxious, dependent for its success on the darker aspects of online life: the zeal for constant self-fashioning and self-promotion, the pursuit of virtual forms of “community” and “friendship” that bear only a passing resemblance to the genuine article, and the relentless diminution of the private sphere in the quest for advertising dollars.
But even readers who love Facebook, or at least cannot imagine life without it, should see its stock market failure as a sign of the commercial limits of the Internet. As The New Yorker’s John Cassidy pointed out in one of the more perceptive prelaunch pieces, the problem is not that Facebook doesn’t make money. It’s that it doesn’t make that much money, and doesn’t have an obvious way to make that much more of it, because (like so many online concerns) it hasn’t figured out how to effectively monetize its million upon millions of users. The result is a company that’s successful, certainly, but whose balance sheet is much less impressive than its ubiquitous online presence would suggest....
It’s telling, in this regard, that the companies most often cited as digital-era successes, Apple and Amazon, both have business models that are firmly rooted in the production and delivery of non-virtual goods. Apple’s core competency is building better and more beautiful appliances; Amazon’s is delivering everything from appliances to DVDs to diapers more swiftly and cheaply to your door....
-----------
Link: http://www.nytimes.com/2012/05/27/opinion/sunday/douthat-the-facebook-illusion.html
There were two grand illusions about the American economy in the first decade of the 21st century. One was the idea that housing prices were no longer tethered to normal economic trends, and instead would just keep going up and up. The second was the idea that in the age of Web 2.0, we were well on our way to figuring out how to make lots and lots of money on the Internet.
The first idea collapsed along with housing prices and the stock market in 2007 and 2008. But the Web 2.0 illusion survived long enough to cost credulous investors a small fortune last week, in Facebook’s disaster of an initial public offering....
Of all the major hubs of Internet-era excitement, Mark Zuckerberg’s social networking site has always struck me as one of the most noxious, dependent for its success on the darker aspects of online life: the zeal for constant self-fashioning and self-promotion, the pursuit of virtual forms of “community” and “friendship” that bear only a passing resemblance to the genuine article, and the relentless diminution of the private sphere in the quest for advertising dollars.
But even readers who love Facebook, or at least cannot imagine life without it, should see its stock market failure as a sign of the commercial limits of the Internet. As The New Yorker’s John Cassidy pointed out in one of the more perceptive prelaunch pieces, the problem is not that Facebook doesn’t make money. It’s that it doesn’t make that much money, and doesn’t have an obvious way to make that much more of it, because (like so many online concerns) it hasn’t figured out how to effectively monetize its million upon millions of users. The result is a company that’s successful, certainly, but whose balance sheet is much less impressive than its ubiquitous online presence would suggest....
It’s telling, in this regard, that the companies most often cited as digital-era successes, Apple and Amazon, both have business models that are firmly rooted in the production and delivery of non-virtual goods. Apple’s core competency is building better and more beautiful appliances; Amazon’s is delivering everything from appliances to DVDs to diapers more swiftly and cheaply to your door....
-----------
Link: http://www.nytimes.com/2012/05/27/opinion/sunday/douthat-the-facebook-illusion.html
Members of the Class of 2012: You're screwed.
From former Labor Secretary Robert Reich:
Members of the Class of 2012:
As a former secretary of labor and current professor, I feel I owe it to you to tell you the truth about the pieces of parchment you're picking up today.
You're screwed.
Well, not exactly. But you won't have it easy.
First, you're going to have a hell of a hard time finding a job. The job market you're heading into is still bad. Fewer than half of the graduates from last year's class have as yet found full-time jobs. Most are still looking.
That's been the pattern over the last three graduating classes: It's been taking graduates more than a year to land the first job. And those who still haven't found a job will be competing with you, making your job search even harder.
Contrast this with the class of 2008, whose members were lucky enough to get out of here and into the job market before the Great Recession really hit. Almost three-quarters of them found jobs within the year.
You're still better off than your friends who didn't graduate. Overall, the unemployment rate among young people (21 to 24 years old) with four-year college degrees is now 6.4 percent. With just a high school diploma, the rate is double that.
But even when you get a job, it's likely to pay peanuts.
Last year's young college graduates lucky enough to land jobs had an average hourly wage of only $16.81, according to a new study by the Economic Policy Institute. That's about $35,000 a year - lower than the yearly earnings of young college graduates in 2007, before the Great Recession. The typical wage of young college graduates dropped 4.6 percent between 2007 and 2011, adjusted for inflation....
--------------
Link: http://www.sfgate.com/columns/reich/
Members of the Class of 2012:
As a former secretary of labor and current professor, I feel I owe it to you to tell you the truth about the pieces of parchment you're picking up today.
You're screwed.
Well, not exactly. But you won't have it easy.
First, you're going to have a hell of a hard time finding a job. The job market you're heading into is still bad. Fewer than half of the graduates from last year's class have as yet found full-time jobs. Most are still looking.
That's been the pattern over the last three graduating classes: It's been taking graduates more than a year to land the first job. And those who still haven't found a job will be competing with you, making your job search even harder.
Contrast this with the class of 2008, whose members were lucky enough to get out of here and into the job market before the Great Recession really hit. Almost three-quarters of them found jobs within the year.
You're still better off than your friends who didn't graduate. Overall, the unemployment rate among young people (21 to 24 years old) with four-year college degrees is now 6.4 percent. With just a high school diploma, the rate is double that.
But even when you get a job, it's likely to pay peanuts.
Last year's young college graduates lucky enough to land jobs had an average hourly wage of only $16.81, according to a new study by the Economic Policy Institute. That's about $35,000 a year - lower than the yearly earnings of young college graduates in 2007, before the Great Recession. The typical wage of young college graduates dropped 4.6 percent between 2007 and 2011, adjusted for inflation....
--------------
Link: http://www.sfgate.com/columns/reich/
Friday, May 25, 2012
Are baby boomers to blame?
From MSN Money:
Behind a lot of our current economic woes and hanging over the future is a simple problem: A huge generation that has to keep working because it hasn't saved enough for retirement.
...the longer-term picture is even scarier: If nothing is done, by 2024 -- according to a Credit Suisse estimate -- 100% of U.S. tax revenues will go to entitlement spending and interest payments on the federal debt. That's it. Nothing left for tanks, jets, food stamps and SEC regulators. Nada.
While this seems intractable, the root of the problem is really quite simple: too many old people.
Specifically, the nearly 80 million members of the baby boom generation are quickly aging, with most in their mid-50s now. This simple dynamic is the undercurrent beneath many of our problems, from a stagnant stock market to a bleak jobs outlook and the debt/deficit problem....
Thus, instead of enjoying the twilight of life atop a Harley or upon white sandy beaches, a lot of these folks will be staying in the workforce -- often at low-paying, menial positions -- just to survive. The percentage of respondents expecting to retire before the age of 60 has fallen from nearly 20% in 1991 to just 8% now, while the percentage of workers expecting to clock out at 70 or older has jumped from 9% to 26% over the same period...
It's a vicious cycle. Boomers are working longer because they can't retire, and they can't retire because their homes and nest eggs aren't holding their value, much less gaining. This keeps younger folks from taking over their jobs, which would allow the younger folks to buy those homes and start building their own nest eggs, pouring fresh cash into investments. (Instead, it seems, a lot of those younger folks are moving back in with their boomer parents. The cycle of misery is complete.)...
--------
Link: http://money.msn.com/investing/are-baby-boomers-to-blame-mirhaydari.aspx
Behind a lot of our current economic woes and hanging over the future is a simple problem: A huge generation that has to keep working because it hasn't saved enough for retirement.
...the longer-term picture is even scarier: If nothing is done, by 2024 -- according to a Credit Suisse estimate -- 100% of U.S. tax revenues will go to entitlement spending and interest payments on the federal debt. That's it. Nothing left for tanks, jets, food stamps and SEC regulators. Nada.
While this seems intractable, the root of the problem is really quite simple: too many old people.
Specifically, the nearly 80 million members of the baby boom generation are quickly aging, with most in their mid-50s now. This simple dynamic is the undercurrent beneath many of our problems, from a stagnant stock market to a bleak jobs outlook and the debt/deficit problem....
Thus, instead of enjoying the twilight of life atop a Harley or upon white sandy beaches, a lot of these folks will be staying in the workforce -- often at low-paying, menial positions -- just to survive. The percentage of respondents expecting to retire before the age of 60 has fallen from nearly 20% in 1991 to just 8% now, while the percentage of workers expecting to clock out at 70 or older has jumped from 9% to 26% over the same period...
It's a vicious cycle. Boomers are working longer because they can't retire, and they can't retire because their homes and nest eggs aren't holding their value, much less gaining. This keeps younger folks from taking over their jobs, which would allow the younger folks to buy those homes and start building their own nest eggs, pouring fresh cash into investments. (Instead, it seems, a lot of those younger folks are moving back in with their boomer parents. The cycle of misery is complete.)...
--------
Link: http://money.msn.com/investing/are-baby-boomers-to-blame-mirhaydari.aspx
Wednesday, May 23, 2012
6 Reasons You'll Never Retire
From Forbes.com:
1. Corporate pension slashed
2. Dropping income
3. Higher childcare expenses due to rise in dual working couples
4. Collapsing investment returns
5. Insufficient savings
6. Inheritance too small
Link to full article: http://www.forbes.com/sites/petercohan/2012/05/21/six-reasons-youll-never-retire/
1. Corporate pension slashed
2. Dropping income
3. Higher childcare expenses due to rise in dual working couples
4. Collapsing investment returns
5. Insufficient savings
6. Inheritance too small
Link to full article: http://www.forbes.com/sites/petercohan/2012/05/21/six-reasons-youll-never-retire/
How the Recovery Went Wrong
At the WSJ.com, Harvey Golub, former chairman of American Express, writes:
Of the 11 recoveries in the last 60 years, this one is at or near the bottom in job growth and every other economic indicator.
President Obama, in speech after speech, proudly makes the following point: Although we inherited the worst recession since the Great Depression, we have generated net new jobs every month, and while we need to do more, we are going in the right direction.
Of course, recoveries always go in the right direction—that is, things get better over time. But merely going in the right direction is an incredibly low performance standard. Moreover, since deep recessions are generally followed by more robust recoveries, this should have been one of the strongest recoveries ever...
There's little doubt that this level of spending—$5 trillion in an economy with an annual GDP of about $15 trillion—has a temporary stimulative effect. The question is, was it a good investment? For the most part the money was spent poorly and we will get very little future value from it. Billions were spent to reward favored constituencies like government employees and the auto industry. Billions more were spent on training programs that don't work and unemployment insurance that reduces incentives to actually find work. Little went toward building infrastructure or other assets that will help the nation create wealth over time.
So, yes, we are going in the right direction—but far too slowly to create reasonable economic growth and needed jobs. By their very nature, recoveries involve people and businesses making investments and spending money and borrowing to do both. However, for rational people to spend or invest requires confidence in the future. The "animal spirits" so necessary for a true recovery have been dampened by this administration's policies and rhetoric.
Indeed, this administration has been overtly hostile to business across the economy except for progressive favorites like electric cars or wind and solar power.....
In this negative environment, businesses are less willing to invest in the future, and individuals are less willing to spend what they can. Meanwhile, savers and retirees have seen much of their income decline because of low interest rates. The massive costs of all the stimulus have been wasted because of the heavy counterweight put on the economy by the administration's antibusiness and pro-redistribution policies.
---------------
Link: http://online.wsj.com/article/SB10001424052702304019404577418311631098508.html
Of the 11 recoveries in the last 60 years, this one is at or near the bottom in job growth and every other economic indicator.
President Obama, in speech after speech, proudly makes the following point: Although we inherited the worst recession since the Great Depression, we have generated net new jobs every month, and while we need to do more, we are going in the right direction.
Of course, recoveries always go in the right direction—that is, things get better over time. But merely going in the right direction is an incredibly low performance standard. Moreover, since deep recessions are generally followed by more robust recoveries, this should have been one of the strongest recoveries ever...
There's little doubt that this level of spending—$5 trillion in an economy with an annual GDP of about $15 trillion—has a temporary stimulative effect. The question is, was it a good investment? For the most part the money was spent poorly and we will get very little future value from it. Billions were spent to reward favored constituencies like government employees and the auto industry. Billions more were spent on training programs that don't work and unemployment insurance that reduces incentives to actually find work. Little went toward building infrastructure or other assets that will help the nation create wealth over time.
So, yes, we are going in the right direction—but far too slowly to create reasonable economic growth and needed jobs. By their very nature, recoveries involve people and businesses making investments and spending money and borrowing to do both. However, for rational people to spend or invest requires confidence in the future. The "animal spirits" so necessary for a true recovery have been dampened by this administration's policies and rhetoric.
Indeed, this administration has been overtly hostile to business across the economy except for progressive favorites like electric cars or wind and solar power.....
In this negative environment, businesses are less willing to invest in the future, and individuals are less willing to spend what they can. Meanwhile, savers and retirees have seen much of their income decline because of low interest rates. The massive costs of all the stimulus have been wasted because of the heavy counterweight put on the economy by the administration's antibusiness and pro-redistribution policies.
---------------
Link: http://online.wsj.com/article/SB10001424052702304019404577418311631098508.html
Tuesday, May 22, 2012
UPDATED: Auto Industry Rebound Fires Animal Spirits
From today's WSJ.com:
What a difference a year has made to the auto industry.
A survey of some 200 auto industry executives by Booz & Co. finds that 94% of the auto maker executives and 92% of automotive-technology-supplier executives are bullish, saying the sector is somewhat better off or much better off than last year.
...Significant majorities of supplier and auto-company executives — 86% and 72% respectively, — said they expect the Detroit Three auto makers to hold or gain market share next year. Those beliefs that could translate to increased production and hiring in North America.
At the same time, industry executives voted Hyundai/Kia and Volkswagen AG as most likely to increase their market shares over the next five years. More than half the executives surveyed said they expect Chinese auto makers will achieve a 4% share of the U.S. market by 2020...
(Link: http://blogs.wsj.com/economics/2012/05/22/auto-industry-rebound-fires-animal-spirits)
---------------------
UPDATE:
Flat U.S. Wages Help Fuel Rebound in Manufacturing
The celebrated revival of U.S. manufacturing employment has been accompanied by a less-lauded fact: Wages for many manufacturing workers aren't keeping up with inflation.
The wage lag is a key factor contributing to the rebounding competitiveness of U.S. industry. A recent uptick in factory employment and the return of some production to U.S. shores from abroad both added jobs that probably otherwise wouldn't exist. But sluggish wages also are squeezing workers' incomes and spending. That, in turn, hurts retailers who target middle-income earners and restrains the vigor of the economic recovery....
Manufacturing wage trends:
---------------------------
Link: http://online.wsj.com/article/SB10001424052702304065704577421960042778548.html
What a difference a year has made to the auto industry.
A survey of some 200 auto industry executives by Booz & Co. finds that 94% of the auto maker executives and 92% of automotive-technology-supplier executives are bullish, saying the sector is somewhat better off or much better off than last year.
...Significant majorities of supplier and auto-company executives — 86% and 72% respectively, — said they expect the Detroit Three auto makers to hold or gain market share next year. Those beliefs that could translate to increased production and hiring in North America.
At the same time, industry executives voted Hyundai/Kia and Volkswagen AG as most likely to increase their market shares over the next five years. More than half the executives surveyed said they expect Chinese auto makers will achieve a 4% share of the U.S. market by 2020...
(Link: http://blogs.wsj.com/economics/2012/05/22/auto-industry-rebound-fires-animal-spirits)
---------------------
UPDATE:
Flat U.S. Wages Help Fuel Rebound in Manufacturing
The celebrated revival of U.S. manufacturing employment has been accompanied by a less-lauded fact: Wages for many manufacturing workers aren't keeping up with inflation.
The wage lag is a key factor contributing to the rebounding competitiveness of U.S. industry. A recent uptick in factory employment and the return of some production to U.S. shores from abroad both added jobs that probably otherwise wouldn't exist. But sluggish wages also are squeezing workers' incomes and spending. That, in turn, hurts retailers who target middle-income earners and restrains the vigor of the economic recovery....
Manufacturing wage trends:
---------------------------
Link: http://online.wsj.com/article/SB10001424052702304065704577421960042778548.html
Friday, May 18, 2012
An Unemployment Crisis for Older or Younger Workers?
From RealClearMarkets.com:
Diana Furchtgott-Roth writing about her testimony before the Senate Special Committee on Aging:
Workers in their fifties are at their peak earnings, and there are fewer openings at these levels than entry-level positions....
It's important to examine unemployment among older Americans because of the aging of the workforce, which is accelerating now that the Baby Boomers are approaching retirement. On average, older workers can expect to live until their mid-80s, and dropping out of the labor force at 55 could mean 30 years of retirement. Not many have saved for 30 years of retirement. One implication is that a larger older population is supported by a smaller younger population, the essential problem going forward with Social Security.
But despite the narrow focus of the Senate Special Committee on Aging (note that the House has no such panel), the unemployment problem is not age-limited. It is general, and worrisome for all ages....
In fact, the problems facing older workers are not dissimilar from the problems facing all other workers, the lack of robust job growth. America needs policies that will contribute to stronger job growth broadly, policies that will benefit all....
Tougher regulations lead employers to locate elsewhere. Friendlier regulations draw them back home.
Already, it is easier to employ workers overseas than in the United States. The Wall Street Journal reported on April 27 that three-quarters of new jobs created by U.S. multinationals were offshore over the past two years.
The larger reality is that this administration's policies have failed across the board and resulted in a serious deficit of job opportunities for all workers. The problem will not be solved by special policies that favor one group over another.
The GAO report advocates shifting some jobs to older workers but at the expense of younger workers. This sort of redistributionist policy is both unfair and unwise. It amounts to intergenerational class warfare. What we need are policies that broadly create more job opportunities for all.
------------
Link:http://www.realclearmarkets.com/articles/2012/05/17/an_unemployment_crisis_for_older_or_younger_workers_99672.html
Diana Furchtgott-Roth writing about her testimony before the Senate Special Committee on Aging:
Workers in their fifties are at their peak earnings, and there are fewer openings at these levels than entry-level positions....
It's important to examine unemployment among older Americans because of the aging of the workforce, which is accelerating now that the Baby Boomers are approaching retirement. On average, older workers can expect to live until their mid-80s, and dropping out of the labor force at 55 could mean 30 years of retirement. Not many have saved for 30 years of retirement. One implication is that a larger older population is supported by a smaller younger population, the essential problem going forward with Social Security.
But despite the narrow focus of the Senate Special Committee on Aging (note that the House has no such panel), the unemployment problem is not age-limited. It is general, and worrisome for all ages....
In fact, the problems facing older workers are not dissimilar from the problems facing all other workers, the lack of robust job growth. America needs policies that will contribute to stronger job growth broadly, policies that will benefit all....
Tougher regulations lead employers to locate elsewhere. Friendlier regulations draw them back home.
Already, it is easier to employ workers overseas than in the United States. The Wall Street Journal reported on April 27 that three-quarters of new jobs created by U.S. multinationals were offshore over the past two years.
The larger reality is that this administration's policies have failed across the board and resulted in a serious deficit of job opportunities for all workers. The problem will not be solved by special policies that favor one group over another.
The GAO report advocates shifting some jobs to older workers but at the expense of younger workers. This sort of redistributionist policy is both unfair and unwise. It amounts to intergenerational class warfare. What we need are policies that broadly create more job opportunities for all.
------------
Link:http://www.realclearmarkets.com/articles/2012/05/17/an_unemployment_crisis_for_older_or_younger_workers_99672.html
Thursday, May 17, 2012
Greeks not alone in bank savings exodus
From Reuters:
Worries about a run on Greek banks has rattled Athens this week, after savers withdrew at least 700 million euros on Monday alone...
It is not only Greeks who are worried about their savings. Data shows depositors have taken flight from banks in Belgium, France and Italy....
-----------
Link: http://www.reuters.com/article/2012/05/17/us-banks-deposits-idUSBRE84G0MG20120517
Worries about a run on Greek banks has rattled Athens this week, after savers withdrew at least 700 million euros on Monday alone...
It is not only Greeks who are worried about their savings. Data shows depositors have taken flight from banks in Belgium, France and Italy....
-----------
Link: http://www.reuters.com/article/2012/05/17/us-banks-deposits-idUSBRE84G0MG20120517
Job Market's Vanishing Act
From David Wessel at the WSJ.com:
Where have all the workers gone?
In the past two years, the number of people in the U.S. who are older than 16 (and not in the military or prison) has grown by 5.4 million. The number of people working or looking for work hasn't grown at all.
Is this because members of the big baby-boom generation are now beginning to retire? Have a lot of people dropped out of the workforce temporarily, and are likely to return when there are more jobs to be had? Or are more of the long-term unemployed becoming the never-again employed?
The short answer is yes. But how much of each? The mystery of the missing five million is preoccupying Federal Reserve policy makers....
But the falling participation rate could signal a more worrisome dynamic: More jobless and disheartened workers turning to disability benefits or reluctant retirement, or otherwise leaving the workforce for good.
Not only is this a waste of human potential, but it diminishes the rate at which the U.S. economy can safely grow. It also creates a growing cadre of Americans who will need the support of the working population and makes the government budget deficit worse because there will be fewer workers to pay taxes. There's no precise way to measure the size of this contingent. Official estimates of "discouraged workers" understate the problem; they count only those who say they want to work and have looked for a job in the past 12 months.
One thing is clear: The longer people remain out of work, the more risk they will fall out of the workforce altogether.
---------------
Link: http://online.wsj.com/article/SB10001424052702303879604577407864232528118.html
Where have all the workers gone?
In the past two years, the number of people in the U.S. who are older than 16 (and not in the military or prison) has grown by 5.4 million. The number of people working or looking for work hasn't grown at all.
Is this because members of the big baby-boom generation are now beginning to retire? Have a lot of people dropped out of the workforce temporarily, and are likely to return when there are more jobs to be had? Or are more of the long-term unemployed becoming the never-again employed?
The short answer is yes. But how much of each? The mystery of the missing five million is preoccupying Federal Reserve policy makers....
But the falling participation rate could signal a more worrisome dynamic: More jobless and disheartened workers turning to disability benefits or reluctant retirement, or otherwise leaving the workforce for good.
Not only is this a waste of human potential, but it diminishes the rate at which the U.S. economy can safely grow. It also creates a growing cadre of Americans who will need the support of the working population and makes the government budget deficit worse because there will be fewer workers to pay taxes. There's no precise way to measure the size of this contingent. Official estimates of "discouraged workers" understate the problem; they count only those who say they want to work and have looked for a job in the past 12 months.
One thing is clear: The longer people remain out of work, the more risk they will fall out of the workforce altogether.
---------------
Link: http://online.wsj.com/article/SB10001424052702303879604577407864232528118.html
Jobless Claims in U.S. Were Unchanged
From Bloomberg.com:
"More Americans than forecast filed applications for unemployment benefits last week, a sign the labor market is making little progress.
Jobless claims were unchanged at 370,000 in the week ended May 12, Labor Department figures showed today in Washington..."
"The number of people continuing to receive jobless benefits rose by 18,000 in the week ended May 5 to 3.27 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.
Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 68,000 to 2.97 million in the week ended April 28...."
-------------------
NOTE: Over 6 million people collect one or another form of unemployment.
-------------
Link: http://www.bloomberg.com/news/2012-05-17/jobless-claims-in-u-s-were-unchanged-at-370-000-last-week.html
"More Americans than forecast filed applications for unemployment benefits last week, a sign the labor market is making little progress.
Jobless claims were unchanged at 370,000 in the week ended May 12, Labor Department figures showed today in Washington..."
"The number of people continuing to receive jobless benefits rose by 18,000 in the week ended May 5 to 3.27 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.
Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 68,000 to 2.97 million in the week ended April 28...."
-------------------
NOTE: Over 6 million people collect one or another form of unemployment.
-------------
Link: http://www.bloomberg.com/news/2012-05-17/jobless-claims-in-u-s-were-unchanged-at-370-000-last-week.html
Spanish banks next?
From Forbes.com:
Moody’s has already slashed its ratings on European banks, which remain in the spotlight Thursday after reports that the European Central Bank has halted some liquidity operations with Greek banks and that the country is seeing depositors move cash outside its borders.
Meanwhlie, Bankia, the subject of a recent bailout by the state, has reportedly seen over $1 billion in withdrawals over just a few days since the Spanish government takeover, sending its shares down more than 11% in Madrid....
--------------
Link: http://www.forbes.com/sites/steveschaefer/2012/05/17/as-european-bank-run-threatens-fitch-says-global-firms-need-another
Moody’s has already slashed its ratings on European banks, which remain in the spotlight Thursday after reports that the European Central Bank has halted some liquidity operations with Greek banks and that the country is seeing depositors move cash outside its borders.
Meanwhlie, Bankia, the subject of a recent bailout by the state, has reportedly seen over $1 billion in withdrawals over just a few days since the Spanish government takeover, sending its shares down more than 11% in Madrid....
--------------
Link: http://www.forbes.com/sites/steveschaefer/2012/05/17/as-european-bank-run-threatens-fitch-says-global-firms-need-another
Wednesday, May 16, 2012
Greek Bank Run?
From Bloomberg.com:
Greek President Karolos Papoulias was told by the nation’s central bank chief that financial institutions are worried about their survival as Greeks pull out euros amid a deepening political crisis.
Central bank head George Provopoulos told Papoulias that Greeks have withdrawn as much as 700 million euros ($891 million) and the situation could worsen, according to the transcript of the president’s meeting with party leaders on May 14 that was published yesterday....
The risk of a run on Greek banks is “a very serious problem,” Yannis Ioannides, professor of economics at Tufts University in Massachusetts, told Bloomberg Television. He said the European Central Bank needs to guarantee deposits held by the region’s lenders to guard against contagion. “That’s the only way to kill a bank run: not words but deeds.”
----------
Link: http://www.bloomberg.com/news/2012-05-15/greek-president-told-banks-anxious-as-deposits-pulled.html
Greek President Karolos Papoulias was told by the nation’s central bank chief that financial institutions are worried about their survival as Greeks pull out euros amid a deepening political crisis.
Central bank head George Provopoulos told Papoulias that Greeks have withdrawn as much as 700 million euros ($891 million) and the situation could worsen, according to the transcript of the president’s meeting with party leaders on May 14 that was published yesterday....
The risk of a run on Greek banks is “a very serious problem,” Yannis Ioannides, professor of economics at Tufts University in Massachusetts, told Bloomberg Television. He said the European Central Bank needs to guarantee deposits held by the region’s lenders to guard against contagion. “That’s the only way to kill a bank run: not words but deeds.”
----------
Link: http://www.bloomberg.com/news/2012-05-15/greek-president-told-banks-anxious-as-deposits-pulled.html
Tuesday, May 15, 2012
Let’s bring back Glass-Steagall
From MarketWatch.com:
You remember Glass-Steagall. It was the Depression-era law that separated investment banking and trading activities from retail and commercial banking. It split, for example, J.P. Morgan’s empire into a bank, J.P. Morgan & Co., and a brokerage, Morgan Stanley.
When the law was repealed in 1999, the brokerages and banks were allowed to come together again. And, of course, that’s when the problems began, the biggest of which was the use of traditional banking assets as chips in the casino, mortgages as mortgage-backed securities, for instance.
Actually by 1999, most traditional commercial banks were doing some form of securities dealing through loopholes created in the 1990s. J.P. Morgan, for instance, had actually migrated to an investment bank, and a minority of its business was commercial banking.
After the financial crisis in 2008 and 2009, regulators and lawmakers tried to scale back the free-for-all that “financial modernization” had wrought. The Dodd-Frank Act clocked in at 849 pages in an effort to basically regulate every little piece of the financial markets.
By contrast, Glass-Steagall comprised 37 pages....
-----------
Link: http://www.marketwatch.com/story/dimon-may-be-stupid-but-hes-right-on-banks-2012-05-15
You remember Glass-Steagall. It was the Depression-era law that separated investment banking and trading activities from retail and commercial banking. It split, for example, J.P. Morgan’s empire into a bank, J.P. Morgan & Co., and a brokerage, Morgan Stanley.
When the law was repealed in 1999, the brokerages and banks were allowed to come together again. And, of course, that’s when the problems began, the biggest of which was the use of traditional banking assets as chips in the casino, mortgages as mortgage-backed securities, for instance.
Actually by 1999, most traditional commercial banks were doing some form of securities dealing through loopholes created in the 1990s. J.P. Morgan, for instance, had actually migrated to an investment bank, and a minority of its business was commercial banking.
After the financial crisis in 2008 and 2009, regulators and lawmakers tried to scale back the free-for-all that “financial modernization” had wrought. The Dodd-Frank Act clocked in at 849 pages in an effort to basically regulate every little piece of the financial markets.
By contrast, Glass-Steagall comprised 37 pages....
-----------
Link: http://www.marketwatch.com/story/dimon-may-be-stupid-but-hes-right-on-banks-2012-05-15
Monday, May 14, 2012
The Expansion Limps Ahead
From Gene Epstein at Barrons.com:
Rumors of its death have been greatly exaggerated, although it has often resembled the walking wounded, if not occasionally the walking dead. While the economic expansion has set records for sickliness, it does celebrate its third birthday next month, which offers some evidence of its durability....
Growth over the 12 calendar quarters has averaged a bit less than an annual 2.4%, assuming the Blue Chip consensus of 50 forecasters is right about real GDP growth in the current quarter (+2.2%). How sickly is that? So sickly, in fact, that if you go back to 1950, and examine all previous cycles of expansion, you find there has never been a 12-quarter period of expansion that ran as slow as 2.4%.
Add the fact that growth usually runs much faster following a deep recession, and this three-year period's dubious distinction gets even starker. Following the deep recessions of 1974-75 and 1981-82, the first 12 quarters of growth averaged 4.5% and 5.8%, respectively.
Even following the mild recessions of 1990-91 and 2001, growth over the first 12 quarters ran, respectively, 3.2% and 2.9%....
----------
Link: http://online.barrons.com/article/SB50001424053111904370004577398063019217658.html?mod=BOL_hpp_dc
Rumors of its death have been greatly exaggerated, although it has often resembled the walking wounded, if not occasionally the walking dead. While the economic expansion has set records for sickliness, it does celebrate its third birthday next month, which offers some evidence of its durability....
Growth over the 12 calendar quarters has averaged a bit less than an annual 2.4%, assuming the Blue Chip consensus of 50 forecasters is right about real GDP growth in the current quarter (+2.2%). How sickly is that? So sickly, in fact, that if you go back to 1950, and examine all previous cycles of expansion, you find there has never been a 12-quarter period of expansion that ran as slow as 2.4%.
Add the fact that growth usually runs much faster following a deep recession, and this three-year period's dubious distinction gets even starker. Following the deep recessions of 1974-75 and 1981-82, the first 12 quarters of growth averaged 4.5% and 5.8%, respectively.
Even following the mild recessions of 1990-91 and 2001, growth over the first 12 quarters ran, respectively, 3.2% and 2.9%....
----------
Link: http://online.barrons.com/article/SB50001424053111904370004577398063019217658.html?mod=BOL_hpp_dc
NYT: The Human Disaster of Unemployment
From the NYTimes.com:
The American economy is experiencing a crisis in long-term unemployment that has enormous human and economic costs.
In 2007, before the Great Recession, people who were looking for work for more than six months — the definition of long-term unemployment — accounted for just 0.8 percent of the labor force. The recession has radically changed this picture. In 2010, the long-term unemployed accounted for 4.2 percent of the work force. That figure would be 50 percent higher if we added the people who gave up looking for work....
While older workers are less likely to be laid off than younger workers, they are about half as likely to be rehired .... older workers have seen the largest proportionate increase in unemployment in this downturn. The number of unemployed people between ages 50 and 65 has more than doubled.
The prospects for the re-employment of older workers deteriorate sharply the longer they are unemployed. A worker between ages 50 and 61 who has been unemployed for 17 months has only about a 9 percent chance of finding a new job in the next three months. A worker who is 62 or older and in the same situation has only about a 6 percent chance. As unemployment increases in duration, these slim chances drop steadily.
The result is nothing short of a national emergency. Millions of workers have been disconnected from the work force, and possibly even from society. If they are not reconnected, the costs to them and to society will be grim....
-------------
Link: http://www.nytimes.com/2012/05/13/opinion/sunday/the-human-disaster-of-unemployment.html
The American economy is experiencing a crisis in long-term unemployment that has enormous human and economic costs.
In 2007, before the Great Recession, people who were looking for work for more than six months — the definition of long-term unemployment — accounted for just 0.8 percent of the labor force. The recession has radically changed this picture. In 2010, the long-term unemployed accounted for 4.2 percent of the work force. That figure would be 50 percent higher if we added the people who gave up looking for work....
While older workers are less likely to be laid off than younger workers, they are about half as likely to be rehired .... older workers have seen the largest proportionate increase in unemployment in this downturn. The number of unemployed people between ages 50 and 65 has more than doubled.
The prospects for the re-employment of older workers deteriorate sharply the longer they are unemployed. A worker between ages 50 and 61 who has been unemployed for 17 months has only about a 9 percent chance of finding a new job in the next three months. A worker who is 62 or older and in the same situation has only about a 6 percent chance. As unemployment increases in duration, these slim chances drop steadily.
The result is nothing short of a national emergency. Millions of workers have been disconnected from the work force, and possibly even from society. If they are not reconnected, the costs to them and to society will be grim....
-------------
Link: http://www.nytimes.com/2012/05/13/opinion/sunday/the-human-disaster-of-unemployment.html
Sunday, May 13, 2012
At JPMorgan: What goes around comes around
From Gretchen Morgenson at the NYTimes.com:
What goes around comes around. Sometimes it happens sooner than you’d think.
That round wheel turned on JPMorgan Chase last week, which disclosed that it had suffered a $2 billion trading loss in credit derivatives. That such a hit had befallen the mightiest of banks was perhaps more stunning than the size of the loss.
The loss, and the embarrassment it held for Jamie Dimon, the bank’s imperious chief executive, came just one month after a private dinner party in Dallas at which he assailed two respected public figures who have pushed for policies that would make banks like JPMorgan smaller and less risky.
One was Paul Volcker, the former Federal Reserve chairman, whose remedy for risky trading by too-big-to-fail banks is known as the Volcker Rule. The other was Richard W. Fisher, president of the Federal Reserve Bank of Dallas, who has also argued that large institutions should be slimmed down or limited in their risky trading practices....
During the party, Mr. Dimon took questions from the crowd, according to an attendee who spoke on condition of anonymity for fear of alienating the bank. One guest asked about the problem of too-big-to-fail banks and the arguments made by Mr. Volcker and Mr. Fisher.
Mr. Dimon responded that he had just two words to describe them: “infantile” and “nonfactual.”
...Mr. Dimon has gained in stature in recent years. Hailed for his management skill, he has also become the financial industry’s point man in the war against tighter regulation of derivatives and proprietary trading. Almost since the financial crisis began, JPMorgan Chase and its legion of lobbyists have swarmed lawmakers and regulators in an effort to beat back efforts to bring transparency to derivatives and to separate risk-taking activities like proprietary trading from commercial lending units....
The hypocrisy is that our nation’s big financial institutions, protected by implied taxpayer guarantees, oppose regulation on the grounds that it would increase their costs and reduce their profit. Such rules are unfair, they contend. But in discussing fairness, they never talk about how fair it is to require taxpayers to bail out reckless institutions when their trades imperil them. That’s a question for another day....
--------
Link: http://www.nytimes.com/2012/05/13/business/jpmorgan-shooting-itself-in-the-foot-fair-game.html
What goes around comes around. Sometimes it happens sooner than you’d think.
That round wheel turned on JPMorgan Chase last week, which disclosed that it had suffered a $2 billion trading loss in credit derivatives. That such a hit had befallen the mightiest of banks was perhaps more stunning than the size of the loss.
The loss, and the embarrassment it held for Jamie Dimon, the bank’s imperious chief executive, came just one month after a private dinner party in Dallas at which he assailed two respected public figures who have pushed for policies that would make banks like JPMorgan smaller and less risky.
One was Paul Volcker, the former Federal Reserve chairman, whose remedy for risky trading by too-big-to-fail banks is known as the Volcker Rule. The other was Richard W. Fisher, president of the Federal Reserve Bank of Dallas, who has also argued that large institutions should be slimmed down or limited in their risky trading practices....
During the party, Mr. Dimon took questions from the crowd, according to an attendee who spoke on condition of anonymity for fear of alienating the bank. One guest asked about the problem of too-big-to-fail banks and the arguments made by Mr. Volcker and Mr. Fisher.
Mr. Dimon responded that he had just two words to describe them: “infantile” and “nonfactual.”
...Mr. Dimon has gained in stature in recent years. Hailed for his management skill, he has also become the financial industry’s point man in the war against tighter regulation of derivatives and proprietary trading. Almost since the financial crisis began, JPMorgan Chase and its legion of lobbyists have swarmed lawmakers and regulators in an effort to beat back efforts to bring transparency to derivatives and to separate risk-taking activities like proprietary trading from commercial lending units....
The hypocrisy is that our nation’s big financial institutions, protected by implied taxpayer guarantees, oppose regulation on the grounds that it would increase their costs and reduce their profit. Such rules are unfair, they contend. But in discussing fairness, they never talk about how fair it is to require taxpayers to bail out reckless institutions when their trades imperil them. That’s a question for another day....
--------
Link: http://www.nytimes.com/2012/05/13/business/jpmorgan-shooting-itself-in-the-foot-fair-game.html
Friday, May 11, 2012
High Unemployment the New Normal
From Reason.com:
...The unemployment rate headline number would actually be higher if it counted people who want a job, but have not looked for one in the past month because they are so discouraged by their prospects...
In April 2012, labor force participation was 63.4, the lowest rate since January 1981...
Over the last 20 years, the usual trend is for labor participation to expand as unemployment falls. This is because workers are being added to payrolls, and thus cutting down on unemployment. However ... after the recession ended in the summer of 2009, both participation in the labor market and unemployment numbers have been falling. This suggests that the lower unemployment number is really just because so many people have stopped looking for work. Annoyingly, it doesn’t mean that the nation has increasing employment....
Labor force participation is important for economic growth because productivity is directly related to the number of people working in an economy. You can get productivity (increased economic output) from efficiency gains — i.e., bringing in robots to make goods in a factory faster then 100 people can. But usually, American economic output comes from innovation and new businesses that are staffed with living, breathing humans.
Different workers have different productive values, but it is a general rule that as a nation increases its labor pool, its economic growth expands. So part of the reason for the jobless faux-recovery has been the declining size of the American productive work force....
Ironically, the growing productivity numbers actually help make the case that the labor market and economy could be setting into a “new normal” pattern. Consider that growing productivity despite high unemployment does not create incentives for firms to hire. A circular problem then develops where the productivity from efficiency gains leads to weak hiring practices pushing labor force participation further down, which in turn leads to more output gains coming from efficiency rather than economic expansion.
This cycle can be broken, and perhaps it will in the coming years. However, the Congressional Budget Office suggested earlier this year that because the labor force decline is so “unusually large decline over so short a time,” it does not anticipate the situation will change for at least another five years.
-------------
Link: http://reason.com/archives/2012/05/10/high-unemployment-the-new-normal
The headline unemployment statistics are wrong. Unemployment is higher than 8.1 percent and it will be for a while.
...The unemployment rate headline number would actually be higher if it counted people who want a job, but have not looked for one in the past month because they are so discouraged by their prospects...
In April 2012, labor force participation was 63.4, the lowest rate since January 1981...
Over the last 20 years, the usual trend is for labor participation to expand as unemployment falls. This is because workers are being added to payrolls, and thus cutting down on unemployment. However ... after the recession ended in the summer of 2009, both participation in the labor market and unemployment numbers have been falling. This suggests that the lower unemployment number is really just because so many people have stopped looking for work. Annoyingly, it doesn’t mean that the nation has increasing employment....
Labor force participation is important for economic growth because productivity is directly related to the number of people working in an economy. You can get productivity (increased economic output) from efficiency gains — i.e., bringing in robots to make goods in a factory faster then 100 people can. But usually, American economic output comes from innovation and new businesses that are staffed with living, breathing humans.
Different workers have different productive values, but it is a general rule that as a nation increases its labor pool, its economic growth expands. So part of the reason for the jobless faux-recovery has been the declining size of the American productive work force....
Ironically, the growing productivity numbers actually help make the case that the labor market and economy could be setting into a “new normal” pattern. Consider that growing productivity despite high unemployment does not create incentives for firms to hire. A circular problem then develops where the productivity from efficiency gains leads to weak hiring practices pushing labor force participation further down, which in turn leads to more output gains coming from efficiency rather than economic expansion.
This cycle can be broken, and perhaps it will in the coming years. However, the Congressional Budget Office suggested earlier this year that because the labor force decline is so “unusually large decline over so short a time,” it does not anticipate the situation will change for at least another five years.
-------------
Link: http://reason.com/archives/2012/05/10/high-unemployment-the-new-normal
Thursday, May 10, 2012
One in Three Young U.S. Workers Are "Underemployed"
From Gallup.com:
Gallup's unemployment measures show that April has also brought gloomy job news for young Americans and underscores that this group has been struggling disproportionately for some time. Those aged 18 to 29 are more than twice as likely as those in any other age group to be underemployed.
Additionally, while the unemployment rate among young adults in April is unchanged year over year, the underemployment rate has increased.
A larger percentage of younger American workers are working part time but looking for full-time work today than were doing so in April 2011. That is, employers appear to be hiring younger Americans in greater numbers on a part-time basis this year than last, possibly in response to the current high level of economic uncertainty.
Not surprisingly, given their relative lack of resources and experience, only 3.1% of young adults in April say they are self-employed. This compares with the 7.3% of all Americans in the workforce who report being self-employed. Thus, self-employment is also a job alternative that is less available to younger, less experienced Americans.
Today's slow economic growth is a disaster for those unemployed and underemployed as they look for jobs when so few new jobs are being created. For younger Americans as a group, this is a particularly acute issue.
Nearly one in three young adults in the workforce are not now able to gain full-time job experience. This not only hurts them temporarily, but deprives them of the experience they need to get a better job in the future. It also deprives U.S. companies of the skilled and experienced workers they will need for their businesses to prosper in the years ahead.
-------
Link: http://www.gallup.com/poll/154553/One-Three-Young-Underemployed.aspx
Gallup's unemployment measures show that April has also brought gloomy job news for young Americans and underscores that this group has been struggling disproportionately for some time. Those aged 18 to 29 are more than twice as likely as those in any other age group to be underemployed.
Additionally, while the unemployment rate among young adults in April is unchanged year over year, the underemployment rate has increased.
A larger percentage of younger American workers are working part time but looking for full-time work today than were doing so in April 2011. That is, employers appear to be hiring younger Americans in greater numbers on a part-time basis this year than last, possibly in response to the current high level of economic uncertainty.
Not surprisingly, given their relative lack of resources and experience, only 3.1% of young adults in April say they are self-employed. This compares with the 7.3% of all Americans in the workforce who report being self-employed. Thus, self-employment is also a job alternative that is less available to younger, less experienced Americans.
Today's slow economic growth is a disaster for those unemployed and underemployed as they look for jobs when so few new jobs are being created. For younger Americans as a group, this is a particularly acute issue.
Nearly one in three young adults in the workforce are not now able to gain full-time job experience. This not only hurts them temporarily, but deprives them of the experience they need to get a better job in the future. It also deprives U.S. companies of the skilled and experienced workers they will need for their businesses to prosper in the years ahead.
-------
Link: http://www.gallup.com/poll/154553/One-Three-Young-Underemployed.aspx
Sunday, May 6, 2012
A teen with a job becomes a rarity in US economy
From MSNBC:
Only about 25 percent of 16- to 19-year-olds currently are working, a drop of 10 percentage points from just five years ago, according to the Bureau of Labor Statistics.
The percentage of teenagers who have jobs, expressed as the ratio of employment to population, hovered between 40 and 50 percent for much of the 1980s and 1990s. The percentage began dropping about a decade ago, but the declines have been especially steep since the beginning of the Great Recession in late 2007....
The job market is unquestionably difficult for all teens, but experts say it’s especially hard for those who may need the money most: Teens from poor families and families in which a parent is out of work.
“It’s the opposite of what everybody thinks,” said Andrew Sum, director of the Center for Labor Market Studies at Northeastern University.
Sum said the disparity is partly because many kids get jobs through family and community connections such as parents, neighbors or relatives.
That can also have a ripple effect: The likelihood of working increases significantly once a teen has already held a job, according to his research....
----------
Link: http://lifeinc.today.msnbc.msn.com/_news/2012/05/03/11489527-a-teen-with-a-job-becomes-a-rarity-in-us-economy?lite
Only about 25 percent of 16- to 19-year-olds currently are working, a drop of 10 percentage points from just five years ago, according to the Bureau of Labor Statistics.
The percentage of teenagers who have jobs, expressed as the ratio of employment to population, hovered between 40 and 50 percent for much of the 1980s and 1990s. The percentage began dropping about a decade ago, but the declines have been especially steep since the beginning of the Great Recession in late 2007....
The job market is unquestionably difficult for all teens, but experts say it’s especially hard for those who may need the money most: Teens from poor families and families in which a parent is out of work.
“It’s the opposite of what everybody thinks,” said Andrew Sum, director of the Center for Labor Market Studies at Northeastern University.
Sum said the disparity is partly because many kids get jobs through family and community connections such as parents, neighbors or relatives.
That can also have a ripple effect: The likelihood of working increases significantly once a teen has already held a job, according to his research....
----------
Link: http://lifeinc.today.msnbc.msn.com/_news/2012/05/03/11489527-a-teen-with-a-job-becomes-a-rarity-in-us-economy?lite
People Not In Labor Force Soar By 522,000
From Zerohedge.com:
It is just getting sad now.
In April the number of people not in the labor force rose by a whopping 522,000 from 87,897,000 to
88,419,000. This is the highest on record.
The flip side, and the reason why the unemployment dropped to 8.1% is that the labor force participation rate just dipped to a new 30 year low of 64.3%.
Labor force participation Rate:
People not in labor force:
----------
Link: http://www.zerohedge.com/news/people-not-labor-force-soar-522000-labor-force-participation-rate-lowest-1981
It is just getting sad now.
In April the number of people not in the labor force rose by a whopping 522,000 from 87,897,000 to
88,419,000. This is the highest on record.
The flip side, and the reason why the unemployment dropped to 8.1% is that the labor force participation rate just dipped to a new 30 year low of 64.3%.
Labor force participation Rate:
People not in labor force:
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Link: http://www.zerohedge.com/news/people-not-labor-force-soar-522000-labor-force-participation-rate-lowest-1981
Friday, May 4, 2012
CYNICAL: Unemployment Rate drops because more people without work are not counted
From Markets Pulse at the WSJ.com:
So another 522,000 people are counted as out of the work force last month. And unemployment falls a tick to 8.1%.
Remind us again how that’s good news? There are 2.7 million more people out of the work force the past year, versus a mere 945,000 going into it. As such, the participation rate hits another cycle low of 63.6%. No worries, somehow today’s news–including the lower-than-expected job growth–will be spun positively....
The U.S. unemployment rate dropped to 8.1% in April but a broader measure was unchanged at 14.5% and a separate survey noted that the economy added a paltry 115,000. Why the drop?
This month, the decline in the jobless rate wasn’t a positive sign, as it primarily came from people dropping out of the labor force....
Even though the broader rate dropped, there were more discouraged workers in April and the number of part-time employees who want full-time work also increased.
------------
Link: http://stream.wsj.com/story/markets/SS-2-5/
So another 522,000 people are counted as out of the work force last month. And unemployment falls a tick to 8.1%.
Remind us again how that’s good news? There are 2.7 million more people out of the work force the past year, versus a mere 945,000 going into it. As such, the participation rate hits another cycle low of 63.6%. No worries, somehow today’s news–including the lower-than-expected job growth–will be spun positively....
The U.S. unemployment rate dropped to 8.1% in April but a broader measure was unchanged at 14.5% and a separate survey noted that the economy added a paltry 115,000. Why the drop?
This month, the decline in the jobless rate wasn’t a positive sign, as it primarily came from people dropping out of the labor force....
Even though the broader rate dropped, there were more discouraged workers in April and the number of part-time employees who want full-time work also increased.
------------
Link: http://stream.wsj.com/story/markets/SS-2-5/
Thursday, May 3, 2012
Even After Jobless Claims, Jobs Picture Isn’t Pretty: real rate over 14% unemployed
From the Market Beat blog at WSJ.com:
(W)here exactly do we stand on the jobs front? Here’s a scorecard:
-Weekly jobless claims are sitting around 383,000, the four-week average.
-ADP pegs April private-sector job growth at 119,000.
-TrimTabs pegged April jobs growth at 116,000.
-Announced layoffs are rising, as per Challenger, Gray.
-Last month, the BLS reported 120,000 jobs were created in March. The Street expects that tomorrow, the BLS will report 168,000 jobs were created.
-The official unemployment rate is 8.2% — the so-called U-3 — but everybody understands by now that numbers excludes millions who have either dropped out of the labor force, or can’t find full-time work. A broader measure, the U-6, is at 14.5%.
Where’s that leave us? Well, it leaves us where our doctor said it does. People without jobs are still having a hard time finding jobs.
And take two of these and call him in the morning.
--------------
Link: http://blogs.wsj.com/marketbeat/2012/05/03/after-jobless-claims-a-scorecard-and-new-jobs-measuring-tool/
(W)here exactly do we stand on the jobs front? Here’s a scorecard:
-Weekly jobless claims are sitting around 383,000, the four-week average.
-ADP pegs April private-sector job growth at 119,000.
-TrimTabs pegged April jobs growth at 116,000.
-Announced layoffs are rising, as per Challenger, Gray.
-Last month, the BLS reported 120,000 jobs were created in March. The Street expects that tomorrow, the BLS will report 168,000 jobs were created.
-The official unemployment rate is 8.2% — the so-called U-3 — but everybody understands by now that numbers excludes millions who have either dropped out of the labor force, or can’t find full-time work. A broader measure, the U-6, is at 14.5%.
Where’s that leave us? Well, it leaves us where our doctor said it does. People without jobs are still having a hard time finding jobs.
And take two of these and call him in the morning.
--------------
Link: http://blogs.wsj.com/marketbeat/2012/05/03/after-jobless-claims-a-scorecard-and-new-jobs-measuring-tool/
Why Small Business Owners Are Hesitant to Hire
From CNBC:
Many small business owners aren't hiring or expanding because the outlook for the economy, or their own companies, is uncertain.
That raises the question of whether small businesses will give the economy the boost that it needs. Economists say that in past recoveries, small companies were the first to hire. When the economy was improving, they were more nimble than large companies because they didn't have the bureaucracy that can slow the hiring process. Their hiring helped propel the economy forward.
The economy is growing, but that growth has slowed — and so has the pace of hiring among business with less than 500 employees. The U.S. economy grew at an annual rate of just 2.2 percent from January through March, according to government figures. That's down from the moderate 3 percent growth during the last three months of 2011...
Small business owners don't want to take chances because they can see how troubled the national economy is, says Paul Merski, chief economist with the Independent Community Bankers of America, a banking trade group.
"If you go through the litany of economic data, it is just not giving small businesses the confidence to hire, to expand," Merski says. "They don't see the future return on that (expansion), or the future cash flow to take on additional debt." One sign that small businesses may be poised to do more hiring is that they would take out loans to fuel expansion.
But it's not just that companies aren't applying for loans.
"Small businesses haven't even tapped their open lines of credit," Merski says. "I hear from community bankers saying, `I wish I had loan demand."
Wells Fargo & Co. is seeing the trend firsthand. "More people are paying down their lines of credit than are drawing down on them," says Mark Bernstein, head of the bank's small business division.
The Great Recession is still fresh in the minds of many small business owners. "Who would expect small business people not to be a little bit cautious after this experience?" Bernstein says...
----------------
Link: http://www.cnbc.com/id/47278193
Many small business owners aren't hiring or expanding because the outlook for the economy, or their own companies, is uncertain.
That raises the question of whether small businesses will give the economy the boost that it needs. Economists say that in past recoveries, small companies were the first to hire. When the economy was improving, they were more nimble than large companies because they didn't have the bureaucracy that can slow the hiring process. Their hiring helped propel the economy forward.
The economy is growing, but that growth has slowed — and so has the pace of hiring among business with less than 500 employees. The U.S. economy grew at an annual rate of just 2.2 percent from January through March, according to government figures. That's down from the moderate 3 percent growth during the last three months of 2011...
Small business owners don't want to take chances because they can see how troubled the national economy is, says Paul Merski, chief economist with the Independent Community Bankers of America, a banking trade group.
"If you go through the litany of economic data, it is just not giving small businesses the confidence to hire, to expand," Merski says. "They don't see the future return on that (expansion), or the future cash flow to take on additional debt." One sign that small businesses may be poised to do more hiring is that they would take out loans to fuel expansion.
But it's not just that companies aren't applying for loans.
"Small businesses haven't even tapped their open lines of credit," Merski says. "I hear from community bankers saying, `I wish I had loan demand."
Wells Fargo & Co. is seeing the trend firsthand. "More people are paying down their lines of credit than are drawing down on them," says Mark Bernstein, head of the bank's small business division.
The Great Recession is still fresh in the minds of many small business owners. "Who would expect small business people not to be a little bit cautious after this experience?" Bernstein says...
----------------
Link: http://www.cnbc.com/id/47278193
Wednesday, May 2, 2012
Drop in private-sector hiring spurs worry
From Reuters:
The S&P 500 and the Dow edged lower on Wednesday as data showed that private sector hiring fell far more than expected in April, sparking concerns that Friday's U.S. jobs report will also disappoint investors.
Private employers added 119,000 jobs in April, well short of the 177,000 expected, the ADP report showed. That sparked market rumors that Friday's payrolls data will show the economy added just 125,000 to 150,000 jobs last month, well below a Reuters consensus forecast of 170,000....
Link: http://www.reuters.com/article/2012/05/02/us-markets-stocks
---------------------
From WSJ.com:
Hiring Data Reinforce View That Job Market Has Cooled
A gauge of private-sector hiring showed weakness in April, the latest data to suggest the labor market has cooled a bit from its healthy early-year pace.
The U.S. added 119,000 nonfarm private-sector jobs last month, the slowest pace since September, according to a report Wednesday by payroll giant Automatic Data Processing Inc. and forecasting firm Macroeconomic Advisers.
Link: http://online.wsj.com/article/SB10001424052702304743704577379702035789484.html
The S&P 500 and the Dow edged lower on Wednesday as data showed that private sector hiring fell far more than expected in April, sparking concerns that Friday's U.S. jobs report will also disappoint investors.
Private employers added 119,000 jobs in April, well short of the 177,000 expected, the ADP report showed. That sparked market rumors that Friday's payrolls data will show the economy added just 125,000 to 150,000 jobs last month, well below a Reuters consensus forecast of 170,000....
Link: http://www.reuters.com/article/2012/05/02/us-markets-stocks
---------------------
From WSJ.com:
Hiring Data Reinforce View That Job Market Has Cooled
A gauge of private-sector hiring showed weakness in April, the latest data to suggest the labor market has cooled a bit from its healthy early-year pace.
The U.S. added 119,000 nonfarm private-sector jobs last month, the slowest pace since September, according to a report Wednesday by payroll giant Automatic Data Processing Inc. and forecasting firm Macroeconomic Advisers.
Link: http://online.wsj.com/article/SB10001424052702304743704577379702035789484.html
Is the GM Success Story false?
From Investors Business Daily:
The Obama camp can't stop clucking about how he saved GM and the car industry. But if the GM bailout is such a success story, why can't it pay back its debt to taxpayers?
...Of the top bailout recipients, GM is the biggest laggard, the TARP watchdog says in his latest quarterly report to Congress. Bank of America, Citigroup, Chrysler and Chrysler Financial all have paid off their debt and left the TARP program. Even AIG has paid back more than 75% of what it owes taxpayers.
GM, on the other hand, still owes more than half the $50 billion in federal funds it received when the combination of the recession and its costly union contracts drove it into bankruptcy. And its lending arm, GMAC (now Ally Financial), still owes $14.5 billion.
What's worse, it's not clear that GM actually repaid what it's gotten credit for repaying. Check out this note buried in the inspector's report: "As part of a credit agreement with Treasury, $16.4 billion in TARP funds were placed in an escrow account that GM could access only with Treasury's permission."
As it turns out, GM got Treasury's OK to "repay" more than $6.7 billion "using a portion of the escrow account that had been funded with TARP funds." So GM is merely paying the government back with government money, not money GM is earning selling cars, as the administration has claimed.
Worse, GM in effect is still borrowing money. Consider this item from the report: "What remained in escrow was released to GM." Bottom line: Taxpayers have not been paid back and are still on the hook as GM continues to require government help. Yet Obama has hailed the GM bailout as the signature achievement of his big government programs....
------------
Link: http://news.investors.com/article/609777/201204301847/general-motors-not-really-repaying-taxpayer-bailout.htm
The Obama camp can't stop clucking about how he saved GM and the car industry. But if the GM bailout is such a success story, why can't it pay back its debt to taxpayers?
...Of the top bailout recipients, GM is the biggest laggard, the TARP watchdog says in his latest quarterly report to Congress. Bank of America, Citigroup, Chrysler and Chrysler Financial all have paid off their debt and left the TARP program. Even AIG has paid back more than 75% of what it owes taxpayers.
GM, on the other hand, still owes more than half the $50 billion in federal funds it received when the combination of the recession and its costly union contracts drove it into bankruptcy. And its lending arm, GMAC (now Ally Financial), still owes $14.5 billion.
What's worse, it's not clear that GM actually repaid what it's gotten credit for repaying. Check out this note buried in the inspector's report: "As part of a credit agreement with Treasury, $16.4 billion in TARP funds were placed in an escrow account that GM could access only with Treasury's permission."
As it turns out, GM got Treasury's OK to "repay" more than $6.7 billion "using a portion of the escrow account that had been funded with TARP funds." So GM is merely paying the government back with government money, not money GM is earning selling cars, as the administration has claimed.
Worse, GM in effect is still borrowing money. Consider this item from the report: "What remained in escrow was released to GM." Bottom line: Taxpayers have not been paid back and are still on the hook as GM continues to require government help. Yet Obama has hailed the GM bailout as the signature achievement of his big government programs....
------------
Link: http://news.investors.com/article/609777/201204301847/general-motors-not-really-repaying-taxpayer-bailout.htm
Tuesday, May 1, 2012
Obama Fails to Stem Middle-Class Slide He Blamed on Bush
From Bloomberg.com:
Barack Obama campaigned four years ago assailing President George W. Bush for wage losses suffered by the middle class.
More than three years into Obama’s own presidency, those declines have only deepened.
The rebound from the worst recession since the 1930s has generated relatively few of the moderately skilled jobs that once supported the middle class, tightening the financial squeeze on many Americans, even those who are employed.
“It started long before Obama, but he hasn’t done anything,” said John Forsyth, 58, a railroad-car inspector and political independent from Lebanon, Ohio. “He kept pushing this change, change, change, and he hasn’t done anything.”
---
...As a candidate in 2008, Obama blamed the reversals largely on the policies of Bush and other Republicans. He cited census figures showing that median income for working-age households -- those headed by someone younger than 65 -- had dropped more than $2,000 after inflation during the first seven years of Bush’s time in office.
Yet real median household income in March was down $4,300 since Obama took office in January 2009 and down $2,900 since the June 2009 start of the economic recovery, according to an analysis of census data by Sentier Research, an economic- consulting firm in Annapolis, Maryland....
While there is no settled definition of middle class, the middle 60 percent of households nationwide in 2010 earned between $20,000 and $100,000, according to the U.S. Census....
---
...Ninety-five percent of the net job losses during the recession were in middle-skill occupations, such as office workers, bank tellers and machine operators, according to research by economists Nir Jaimovich of Duke University in Durham, North Carolina, and Henry Siu of the University of British Columbia in Vancouver.
The job growth since has been clustered in either high- skill fields inaccessible to workers without advanced education or low-paying industries, they found.
In March, 3.2 million fewer Americans held sales and office jobs than five years earlier, and 1.2 million fewer were employed in transportation and production fields, all areas that typically pay middle-income wages, according to the Bureau of Labor Statistics....
-----------
Link: http://www.bloomberg.com/news/2012-05-01/obama-fails-to-stem-middle-class-slide-he-blamed-on-bush.html
Barack Obama campaigned four years ago assailing President George W. Bush for wage losses suffered by the middle class.
More than three years into Obama’s own presidency, those declines have only deepened.
The rebound from the worst recession since the 1930s has generated relatively few of the moderately skilled jobs that once supported the middle class, tightening the financial squeeze on many Americans, even those who are employed.
“It started long before Obama, but he hasn’t done anything,” said John Forsyth, 58, a railroad-car inspector and political independent from Lebanon, Ohio. “He kept pushing this change, change, change, and he hasn’t done anything.”
---
...As a candidate in 2008, Obama blamed the reversals largely on the policies of Bush and other Republicans. He cited census figures showing that median income for working-age households -- those headed by someone younger than 65 -- had dropped more than $2,000 after inflation during the first seven years of Bush’s time in office.
Yet real median household income in March was down $4,300 since Obama took office in January 2009 and down $2,900 since the June 2009 start of the economic recovery, according to an analysis of census data by Sentier Research, an economic- consulting firm in Annapolis, Maryland....
While there is no settled definition of middle class, the middle 60 percent of households nationwide in 2010 earned between $20,000 and $100,000, according to the U.S. Census....
---
...Ninety-five percent of the net job losses during the recession were in middle-skill occupations, such as office workers, bank tellers and machine operators, according to research by economists Nir Jaimovich of Duke University in Durham, North Carolina, and Henry Siu of the University of British Columbia in Vancouver.
The job growth since has been clustered in either high- skill fields inaccessible to workers without advanced education or low-paying industries, they found.
In March, 3.2 million fewer Americans held sales and office jobs than five years earlier, and 1.2 million fewer were employed in transportation and production fields, all areas that typically pay middle-income wages, according to the Bureau of Labor Statistics....
-----------
Link: http://www.bloomberg.com/news/2012-05-01/obama-fails-to-stem-middle-class-slide-he-blamed-on-bush.html
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