Chronic unemployment plagues the jobless

From the Wall Street Journal online:

"An emergency jobless-benefits program due to expire this weekend would pinch the finances of more than a million Americans..."

"Sheri Minkoff is among those who would lose benefits.

Ms. Minkoff, who is 50 years old and divorced, has been looking for work since being laid off from a Pittsburgh nonprofit group in January.

In the past year, Ms. Minkoff's résumés "hit brick walls," she said,

and she often later learned employers went with someone "about 
20 years younger, with a master's degree, who will take a much smaller salary."

The government benefit she receives "pays my rent, it pays the electric, and that's all," said Ms. Minkoff, who has a 20-year-old son...."

----
Link: http://online.wsj.com/news/articles/SB10001424052702304483804579280902013763832?

CNN: things aren't always as good as they seem

From CNN online:

For many Americans, all the good news in the larger economy isn't translating over to everyday life.

Only 24% of the public believe economic conditions are improving, while nearly four-in-ten say the nation's economy is actually getting worse, according to a recent CNN poll. Meanwhile, the Consumer Confidence Index declined two months in a row.

The economy still feels depressing because for many people, it is, said Elise Gould, a labor economist at the liberal-leaning Economic Policy Institute.

"Those at the very top have bounced back, but we have not seen that for people at the middle or at the bottom," she said...

Sure, companies are flush with cash, but workers' wages are up only about 1% from a year ago, making it harder for average folks to make ends meet. Union-led strikes by fast-food workers are on the rise...

About 11 million Americans remain unemployed, and 37% of them have been out of a job for at least six months....

With the Fed's decision to begin pulling back on economic support for the economy, mortgage rates will likely continue to rise, making homes less affordable for average Joes.

So yes, there are positive signs in the economy that will hopefully continue.

But will 2014 be the economy's breakout year? Probably not, says Jim O'Sullivan, chief economist for High Frequency Economics.

"The word 'break-out' is too strong," he said. "We're four-and-a-half years into the recovery, and if we haven't got a V-shape recovery now, we're certainly not going to get one."

----
Link:  http://money.cnn.com/2013/12/18/news/economy/economy-outlook/index.html?

"Just pick the good ones" -- Chinese investors are buying up Detroit

From Forbes Digital and MSN:

...Chinese shoppers can't resist a bargain.

Where else can you buy a two-story home in the U.S. for $39? China Central Television, the state broadcaster, in March reported that two houses in Detroit cost the same as a pair of leather shoes.

No wonder a poster on Sina Weibo, the Twitter-like service, pitched, "Seven-hundred thousand people, quiet, clean air, no pollution, democracy -- what are you waiting for?"

Who says the Chinese are waiting? Dongdu International Group of Shanghai bought, sight unseen, two downtown icons, the David Stott building for $4.2 million and the Detroit Free Press building for $9.4 million, both at auction this September.

Moreover, Chinese purchasers are making bulk purchases of inexpensive properties -- those selling for $25,000 or less -- in the rings surrounding the city center.

"They're banking on the downtown resurgence spiraling out into those rings," explains Kelly Sweeney of Coldwell Banker Weir Manuel. Mainland parties often buy at tax and foreclosure sales, hold their property and patiently wait for appreciation.

The Chinese certainly have made an impact on the locals in Detroit.

"I have people calling and saying, "I'm serious -- I wanna buy 100, 200 properties,'" said Caroline Chen, a real estate broker in nearby Troy, Michigan, to Quartz.com.

"They say 'We don't need to see them. Just pick the good ones.'" Chen reports that one of her colleagues sold 30 properties to a Chinese investor.

----
Link: http://money.msn.com/investing/post--chinese-investors-are-buying-up-detroit

--------------------------------

Robin Hood policies hurt poor

From Nolan Finley at the Detroit News:

President Barack Obama has some bad news for poor and working class Americans: He’s going to spend the final three years of his presidency attacking the income gap.

“The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American dream, our way of life, and what we stand for around the globe,” the president said in a recent speech.

No coincidence the pledge to stamp out inequality comes at the same time Obama’s popularity and performance ratings are plunging due to the Obamacare fiasco. He always pivots to populism when he gets in trouble.

But this is no grand shift. Obama has been playing Robin Hood since Day One. All his major initiatives have been built on soaking the rich.

And what’s happened? Those on the bottom rungs of the economic ladder have less disposable income than they did when he took office, and the fat cats are fatter than ever...
----
Link: http://www.detroitnews.com/article/20131215/OPINION01/312150003/1008/OPINION01/Robin-Hood-policies-hurt-poor

-------------------------------------

Poverty nation: How America created a low-wage work swamp

From Joan Walsh at Salon.com:

2013 is the year many Americans discovered the crisis of the working poor. It turns out it’s also the crisis of the welfare poor.

That’s tough for us: Americans notoriously hate welfare, unless it’s called something else and/or benefits us personally. We think it’s for slackers and moochers and people who won’t pull their weight.

So we’re not sure how to handle the fact that a quarter of people who have jobs today make so little money that they also receive some form of public assistance, or welfare – a proportion that’s much higher in some of the fastest growing sectors of the workforce. Or that 60 percent of able-bodied adult food-stamp recipients are employed.

Fully 52 percent of fast-food workers’ families receive public assistance – most of it coming from Medicaid, food stamps and the Earned Income Tax Credit — to the tune of $7 billion annually, according to new research from the University of California-Berkeley’s Labor Center and the University of Illinois....
----
Link: http://www.salon.com/2013/12/15/poverty_nation_how_america_created_a_low_wage_work_swamp/

-----------------------------

Economic Reality and the Minimum Wage

From Steve Chapman at Realclearpolitics.com:

If you offer people something that is too good to be true, you will always find takers.

Ask Bernie Madoff. Or ask Barack Obama. He recently proposed an increase in the minimum wage -- an idea that suits the natural predilections of many people enough to distract them from the unsentimental and unwelcome logic of economics.

One poll found that 63 percent of Americans favor raising the federal floor from the current $7.25 to $10.10, as the president recommends doing over two years.

The reasons are obvious. Wages have stagnated, low-income Americans are getting a smaller share of national income and many working people are stuck in poverty despite their best efforts.

A higher minimum wage is the obvious solution.

Obvious, but wrong.

The proposal rests on the assumption that the government can decree the price of a commodity -- in this case, labor -- in defiance of the dictates of the market, without ill effects. But that view requires a heroic suspension of disbelief.

When stores want to move slow-selling merchandise, they cut prices.

When customers clamor for more of an item than sellers can provide, they raise prices. Lower prices result in higher demand, and higher prices do the opposite.

This is not exotic free-market dogma but elementary economics. Any CEO who proposed to boost sales by jacking up prices would see the company's stock price plummet in response to this lunacy.

But supporters of a higher minimum wage would have us believe that low-wage workers are magically exempt from these phenomena. They claim companies will employ just as many employees at $10.10 an hour as they do at $7.25...
----
Link: http://www.realclearpolitics.com/articles/2013/12/15/economic_reality_and_the_minimum_wage_120957.html

The Challenge Is Growth, Not Banal Inequality Cliches

From Larry Kudlow at RealClearMarkets.com:

Can anyone think of a more boring, banal, irrelevant, or stale speech than the one (President Obama) gave this Thursday in Washington D.C.?

The speech was allegedly on the economy, but more likely it was to divert attention from the Obamacare catastrophe.

Whatever the motive, his idea that the defining challenge of our time is to reduce income inequality is completely wrong.

In truth, the defining challenge is to restore more rapid economic growth, create substantially more jobs, and significantly reduce unemployment.

This is the worst recovery in the modern era going back to 1947.

But Obama is always more interested in income redistribution than growth.

He never speaks the language of growth, such as a rising tide would lift all boats. That's the basic economic truth of the remarkable prosperity of the '80s and '90s, a period during which tax, regulatory, trade, and monetary barriers were reduced, and the door opened to innovation, entrepreneurship, capital formation, and job creation.

Obama comes from a long line of liberals whose guiding star is the equality of result, i.e., income leveling, rather than the equality of opportunity, which is the heart of free-market capitalism....
----
Link: http://www.realclearmarkets.com/articles/2013/12/06/the_challenge_is_growth_not_banal_inequality_cliches_100781.html

The long emergency for US workers continues

From AEI.com:

...here’s your trouble:

1. There are still 1.1 million fewer employed Americans today than right before the recession started, despite a potential labor force that’s 14 million larger. And there are 3.6 million fewer full-time workers than back in 2007.

2. The employment rate, the share of Americans with a job, is 58.6% — exactly where it was in November 2009.

3. If the labor force participation rate were where it was a year ago, the jobless rate would be 7.9%, not 7%.

4. More than 4 million Americans remain out of work for 27 weeks or longer.

5. Overall ... it will take another five years to return to 2007 employment levels even at the improved job creation pace of the past four months.
----
Link: http://www.aei-ideas.org/2013/12/a-new-normal-november-jobs-report-the-long-emergency-for-us-workers-continues/

Obama's Recovery: Still 7.3 Million Jobs Below Average

From Investors.com: 

Now at 7%, the unemployment rate has fallen to the lowest level in five years...

but there's no cause for celebration...

The country is still 1.3 million jobs shy of its previous peak, set in January 2008. And that's to say nothing of the fact that the country has added 14 million to its working-age population since then.

Labor force participation remains at decades-long lows and the ranks of the long-term unemployed at historic highs.

This weak job market continues to depress wages.

In fact, median household income is 4.3% below where it was when the recovery started, and it moved sideways all year.

This picture won't get much better unless the economy can produce jobs — month after month — at a faster pace than it did in November, and at a much faster pace than since the Obama recovery began in June 2009.

In the 53 months since the recovery started, there have been only 16 where job growth exceeded 200,000. The average monthly growth over the past four years is just 158,000.

During the Reagan recovery, in contrast, monthly job growth averaged 244,000 (at a time when the U.S. had a much smaller population).

Indeed, had Obama's recovery been merely as good as the average recovery since World War II, there would be 7.3 million more people employed today...
----
Link: http://news.investors.com/ibd-editorials/120613-682143-november-jobs-report-good-but-not-nearly-good-enough.htm

Payroll Gains in U.S. on Track for Best Year Since 2005

From Bloomberg.com:

Job growth in November was probably strong enough to keep payroll gains on track for the best year since 2005, economists said before a report today....

The unemployment rate dropped to 7.2 percent, matching an almost five-year low...

The pickup in employment over the last three months signals companies are confident that demand will improve and gives American workers the means to spend....
----
Link: http://www.bloomberg.com/news/2013-12-06/payroll-gains-in-u-s-probably-on-track-for-best-year-since-2005.html

The Rich Make Bad Investments, too

From Bloomberg online:

...anyone who ever felt bad about the fact that their stock trading could serve as a road map for how not to make money, here is some comfort: Really rich people make the same mistakes managing their money as everyone else. Unless they’re really, really rich.

A group of researchers...analyzed households with an average net worth of $90 million during the years 2000 to 2009.

They looked at where such folks put their money, how diversified it was, the level of risk they took, and the taxes they paid on their earnings.

They found that most of the ultrawealthy aren’t privy to a secret formula that helps ensure profit no matter the market conditions. They make about an equal share of dumb mistakes.

For one, they are more than willing to pile into the latest faddish investment, according to the Financial Times. For example, they poured money into hedge funds after 2005 when most funds had already reached their peak, and they piled into mortgage securities right before the bubble burst.

One thing that wealthy investors have been doing right, according to the researchers, is regularly rebalancing their portfolios to maintain consistent proportions of their assets in different classes such as stocks, bonds, and alternative investments like hedge funds and private equity funds.

...although, the rich folks didn’t seem to do this after the market collapse of 2008 and instead engaged in panic selling like everyone else.

But: The very richest among the group—the top 10 percent of the research sample—resisted this urge.

Exhibiting what might be described as billionaire’s telepathy, many of them started liquidating their investments in 2007, thereby avoiding the financial bloodbath that swept up nearly everyone else in 2008 and beyond.

This might help explain why, even as the top 1 percent of Americans have done multitudes better than the bottom 99 percent over the last 20 years, the incomes of the top 0.01 percent have gone up even more, rising 32 percent in 2012 alone.
----
Link: http://www.businessweek.com/articles/2013-11-22/the-rich-make-bad-investments-just-like-you-and-me-sort-of

The new American nightmare: 80 is the new 60

From the NYPost.com:

Call it the new American nightmare: Running out of money in retirement is scaring the hell out of record numbers of older workers, forcing them to stay in the workforce.

Now 80 is the new 60 when it comes to retirement. Many older workers who finally clock out have sharply underestimated their financial needs in retirement, raising the specter of personal financial disaster....

By putting off retirement, the Baby Boomers are a large reason for the high levels of unemployment for those looking to enter the workforce. According to the latest Bureau of Labor Statistics the rate of joblessness in people 20- to 25-years old is 12.5 percent, twice the rate of people 25 and older.

These Boomers have plenty of company. The American Dream of retirement at 65 is looking more like a pipe dream to many.

Nearly half of older workers are on the job longer than they had planned to be — on average, by three more years than they estimated at age 40, according to a recent survey of Americans 50 and over by the Associated Press-NORC Center for Public Affairs Research.

And the latest studies shed additional disturbing light:

* Pre-retirees underestimate how much it will take to finance a long and phased-in retirement. Their average expectation is that 58 percent of prior annual income will sustain them. The industry recommends 75 percent to 80 percent.

* The percentage of older middle-class Americans who said their day-to-day financial concern is “paying the monthly bills” has climbed from 52 percent last year to 59 percent today ... Saving for retirement comes in second. Four in 10 say saving and paying the bills is “not possible.”  

* Older adults are now the fastest-growing share of the US labor force.

----
Link: http://nypost.com/2013/11/16/80-is-the-new-60-when-it-comes-to-retirement/

Here is why Labor's share of Income has fallen: Welfare Payments

From Investors.com:

So far in 2013,

• employee compensation is up 11.5% from 2007, 
• proprietors' income is up 3.7%, and 
• income from transfer payments is up 41.5%. 
• Investment income, by contrast, was barely 1% higher this year than in 2007, and that gain was entirely due to rental income. Interest income is down because of the Fed, and dividends have not regained their 2007 level.

In short, the only reason income from work has fallen as a share of personal income in the past six years is not because investors have been collecting a larger share (they haven't), but because the U.S. government has been energetically transferring a much larger share from those who earned it to those who didn't.
----
Link: http://news.investors.com/ibd-editorials-viewpoint/111513-679471-entitlement-state-is-to-blame-for-decline-in-labor-income-not-profits.htm?p=full

From Forbes.com: Imagine For A Moment If President Obama Ran Disneyworld

By Jeffrey Dorfman, professor of economics at the University of Georgia and consultant on economic issues to corporations and local governments:

...it seems worthwhile to conduct a hypothetical experiment about what it would be like if the federal government ran a theme park.

First, if tourists planning a trip to our theme park try to get information about the park or make reservations online, they will fail. Unfortunately, our government-run theme park has very little information on its website, you need to create an account and provide personal financial information before you can find out more about visiting the park, and the website will freeze when you try to actually purchase tickets for your planned visit.

There is a phone number you can call and after an average three hour wait, tickets can be purchased over the phone.

If our tourists still show up for a theme park vacation, the first surprise will be the admission price to the park. Instead of the usual tickets with set prices for adults, children, and senior citizens, the government-run theme park has prices that vary by family income. If the family makes less than $40,000 per year, the tickets are free. Families earning between $40,000 and $75,000 per year pay $25 per ticket and those earning from $75,000 to 100,000 pay $50 per ticket. All these families get to visit the theme park for prices less than the true cost of a visit to the park; the government is subsidizing their vacations.

The government pays for these subsidies partly by over-charging the wealthier tourists. If a family makes between $100,000 and $200,000 per year, they pay $100 per ticket. Families that earn over $200,000 per year must pay $500 per ticket.

Once in the park, the family is faced with three hour waits for the popular rides, but the park managers don’t care that customers have to wait; after all, they are government employees and their pay in no way depends on the profitability of the theme park or on customer satisfaction.

In fact, the employees are paid an average of $30 per hour with great benefits, more pay and better benefits than the average private sector worker. Plus, the park closes at 5:00 p.m. every day because the government employee unions fought against longer work hours in their latest contract negotiation.

At lunchtime, you have to go to the far corner of the theme park to find the single restaurant. Once there, you wait 30 minutes to order your lunch and another 30 minutes for the food to arrive.

The prices are again based on income, with free lunches for anyone with family income below $40,000, lunch prices of $5 per person if the family income is between $40,000 and $100,000, and lunches costing $20 per person for families earning over $100,000 per year. About one quarter of the orders are wrong when the food is delivered, but nobody sends the food back because it would be another 30 minute wait for the corrected order.

Another surprise for the vacationers is that 40 percent of the park is Senior Land, a special section of the theme park designed for senior citizens.

People over 65 years old get free admission to the park and are the only visitors allowed into Senior Land. There, they can enjoy gentle rides and live shows for entertainment all designed especially for the older visitor. The seniors are not disturbed by unruly children and there are very rarely any lines in the Senior Land section of the theme park.

Even with the higher-priced tickets for wealthier families, the park loses money, partly due to the cheaper tickets for poorer families but mostly due to all the expenses of running Senior Land without any offsetting ticket revenue.

However, the politicians and bureaucrats in charge of the government-run theme park do not consider cutting back on the expenses in Senior Land nor do they consider charging senior citizens for the benefits enjoyed because seniors vote at much higher rates than other citizens and so have a lot of political clout.

To improve the park’s finances the government passes a new regulation and a new tax. The regulation requires everyone to make one visit per year to the theme park.

If a family does not visit the park, they must pay a penalty on their income taxes. The government knows it can require actions under threat of a tax penalty thanks to the Supreme Court ruling on the Affordable Care Act. The new tax charges every working adult in the country $50 per year in exchange for the free admission to the park once they turn 65.

It turns out that these changes are not sufficient to fix the park’s finances because the extra tax revenue is offset by the (mandatory) extra visits by lower-earning families who get in for free or reduced prices. Unable to solve the problem by tax increases and unwilling to cut the subsidies to lower-income or elderly park visitors, the government decides to take a different route.

The government declares that its attempt to reform the theme park industry with a hybrid model combining private sector features with government control has failed because of the private sector components and competition from corporate theme parks who are too interested in profit and keeping customers happy instead of social engineering. Therefore, the government nationalizes the theme park industry.

All privately owned theme parks are forced to close or sell to the government.

The government leaves many of the parks closed, but it operates several using the same system as in the theme park described above. While the government is now losing several hundred billion dollars per year on theme parks, it forgoes further actions to address this deficit and declares its new theme park reform a success because all families in the country can now afford to go to a theme park.

This hypothetical discussion of theme parks may seem silly to some readers, but nobody should believe that big government aficionados are planning to stop with health care.

Theme parks are unlikely to be the next government takeover target, but some industry will be targeted. Make no mistake about that.
----
Link: http://www.forbes.com/sites/jeffreydorfman/2013/11/07/imagine-for-a-moment-if-president-obama-ran-disneyworld/

Why Don’t More People Want a Job?

From the Wall Street Journal online:

The Labor Department publishes estimates of “discouraged workers” — those who have given up looking because they can’t find a job — but it uses a narrow definition.

Someone who decides to take care of the kids rather than keep looking for work might not count as discouraged — even if the person wants a job and plans to look for one in the future.

But in a new paper, economists ... divide up those out of the labor force using a simpler standard: whether or not the person says they want a job.

And they uncover an interesting previously unnoticed trend: As a share of all those “not in the labor force,” the number of people who want a job has been generally declining since the early 1980s.

Three decades ago, more than 10% wanted a job; on the eve of the latest recession, the share dipped below 6%....

What’s behind the decline? ... the decline in those who want a job is concentrated among three groups: Young people, women and the less educated.

The decline among young people mirrors a long-term decline in employment rates among young adults, especially teenagers. The reasons for that aren’t entirely clear, but may include a rising focus on college attendance, the disappearance of many low-skilled jobs and cultural factors that put less of a premium on working while in school.

The decline among women yields perhaps the authors’ most intriguing hypothesis: They note that the trend was strongest in the mid-to-late 1990s, also a period of strong income growth. Among married couples, at least, rising incomes could have made it less attractive — or less necessary — for both spouses to work. Indeed, the trend flattened out during the 2000s, a period of much weaker income growth.

Whatever the reason, the shift has significant implications for the labor market in both the short and long term...

The long-run decline in the share of people who want a job, then, means there’s less movement in and out of the labor market than there was in the past, and especially less movement from “not in the labor force” to “unemployed.”

That means that today’s unemployment rate is lower than it would have been under the same economic conditions two decades ago, which means the unemployment rate could be giving policymakers an artificially rosy view of the labor market.

“It’s one more argument saying that unemployment is not necessarily a very good measure of the state of the labor market,” Mr. Barnichon says.

The trend identified by Messrs. Barnichon and Figura also has long-term implications for economic growth. Right now, with unemployment high and hiring weak, whether people want a job or not doesn’t make much difference –there aren’t many jobs for them anyway.

But when hiring picks up, people who want a job will be far more likely to rejoin the labor market. Those who don’t want job, though, might not return, even in a strong job market. That could mean slower growth in the decades ahead.
----
Link: http://blogs.wsj.com/economics/2013/11/02/number-of-the-week-why-dont-more-people-want-a-job

Obamacare's Fatal Flaw

From Martin Feldstein, Professor of Economics, Harvard:

Individuals who do not receive insurance from their employers are required to purchase insurance on their own, with low-income buyers receiving a government subsidy.

But neither the employer mandate nor the personal requirement is likely to prove effective. Employers can avoid the mandate by reducing an employee’s workweek to less than 30 hours (which the law defines as full-time employment).  

But even for full-time employees, firms can opt to pay a relatively small fine rather than provide insurance. That fine is $2,000 per employee, much less than the current average premium of $16,000 for employer-provided family policies.

Not providing insurance and paying the fine is a particularly attractive option for a firm if its employees have incomes that entitle them to the government subsidies (which are now available to anyone whose income is below four times the poverty level).

Rather than incur the cost of the premium for an approved policy, a smart employer can pay the fine for not providing insurance and increase employees’ pay by enough so that they have more spendable cash after purchasing the subsidized insurance policy. Even after both payments, employers can be better off financially. News reports indicate that many employers are already taking such steps.

But the biggest danger to Obamacare’s survival is that many individuals who do not receive insurance from their employer will choose not to insure themselves and will instead pay the fine of just 1% of income (rising permanently after 2015 to 2.5%). The preferred alternative for these individuals is to wait to buy insurance until they are ill and are facing large medical bills.

That wait-to-insure strategy makes sense if the medical condition is a chronic disease like diabetes or a condition requiring surgery, like cancer or a hernia. In either case, the individual would be able to purchase insurance after he or she receives the diagnosis....
----
Link: www.project-syndicate.org/commentary/on-how-america-s-health-care-reform-could-unravel-by-martin-feldstein

A True Blessing for Investors: Fidelity starts a low cost ETF price war

From MarketWatch.com:

Fidelity Investments proved that an 800-pound gorilla gets to sit “anywhere it wants” Thursday when the company announced a new suite of sector-oriented exchange-traded funds — squatting squarely in the territory of low costs, essentially ensuring that investors will benefit from a cost-cutting war as the industry’s big apes slug it out.

Fidelity launched 10 new passive sector exchange-traded funds — they started trading at 9:30 a.m. — each with a total expense ratio of 0.12% and available commission-free through the company’s brokerage platforms. The expense level represents roughly an 80% discount off the average ETF in the space, and the costs are 0.02 points below Vanguard’s offerings tracking essentially the same indexes.

“These companies are embarking on a pretty ugly price war,” said industry consultant Geoff Bobroff of East Greenwich, R.I. “For investors, this has the potential to be a pretty glorious time, because once prices have dropped, there’s really no way for the companies to bring them back.”

While Fidelity has been slow to enter the ETF space, Thursday’s announcement changed all that.

“Fidelity is not just seeking entry into the ETF business, but is clearly seeking market share from the get-go in the sector ETF sleeve” of the business, says Jim Lowell, editor of the Fidelity Investor newsletter.

Industry watchers note that Fidelity has played this game before, and with great success. Years ago, Fidelity engaged in a price war with Dreyfus in the money-market fund space, each waiving fees to create the highest yield possible, hoping to capture market share even if the business model was showing minimal if any profits as a result.

Fidelity could engage in that kind of war because its core revenues were not particularly tied to the money-market business....
----
Link: http://www.marketwatch.com/story/a-price-war-to-benefit-etf-investors-2013-10-25

How Obama and entitlements are helping the Baby Boomers rip off future generations

From the Wall Street Journal weekend interview:

(An interview with retired hedge fund manager Stanley Druckenmiller)

...lately [Druckenmiller] has been touring college campuses promoting a message of income redistribution you don't hear out of Washington.

It's how federal entitlements like Medicare and Social Security are letting Mr. Druckenmiller's generation rip off all those doting Barack Obama voters in Generation X, Y and Z.

...And this president, despite what he says, has shown time and time again that he needs a gun at his head to negotiate in good faith. All this talk about, 'I won't negotiate with a gun at my head.' OK, you've been president for five years."

His voice rising now, Mr. Druckenmiller pounds his fist on the conference table. "Show me, President Obama, when the period was when you initiated budget discussions without a gun at your head."

Which brings him back to his thieving generation. For three decades until 2010, Mr. Druckenmiller ran the hedge fund he founded, Duquesne Capital. Now retired from managing other people's money, he looks after his own assets, which Forbes magazine recently estimated at $2.9 billion. And he wonders why in five years the massively indebted U.S. government will begin sending him a Social Security check for $3,500 each month. Because he earned it?

"I didn't earn it," he responds, while pointing to a bar chart that is part of his college presentation. Drawing on research by Boston University economist Laurence Kotlikoff, it shows the generational wealth transfer that benefits oldsters at the expense of the young.

While many seniors believe they are simply drawing out the "savings" they were forced to deposit into Social Security and Medicare, they are actually drawing out much more, especially relative to later generations.

That's because politicians have voted to award the seniors ever more generous benefits. As a result, while today's 65-year-olds will receive on average net lifetime benefits of $327,400, children born now will suffer net lifetime losses of $420,600 as they struggle to pay the bills of aging Americans...

Are the kids finally figuring out that the Obama economy is a lousy deal for them?

"No, I don't sense that," says Mr. Druckenmiller, who is a registered independent. "But one of my points is neither party should own your vote. And once they know they own your vote, you're not going to get any action on this particular issue."

When the former money manager visited Stanford University, the audience included older folks as well as students. Some of the oldsters questioned why many of his dire forecasts assume that federal tax collections will stay at their traditional 18.5% of GDP. They asked why taxes should not rise to fulfill the promises already made.

Mr. Druckenmiller's response: "Oh, so you've paid 18.5% for your 40 years and now you want the next generation of workers to pay 30% to finance your largess?" He added that if 18.5% was "so immoral, why don't you give back some of your ill-gotten gains of the last 40 years?"

He has a similar argument for those on the left who say entitlements can be fixed with an eventual increase in payroll taxes. "Oh, I see," he says. "So I get to pay a 12% payroll tax now until I'm 65 and then I don't pay. But the next generation—instead of me paying 15% or having my benefits slightly reduced—they're going to pay 17% in 2033. That's why we're waiting—so we can shift even more to the future than to now?"

He also rejects the "rat through the python theory," which holds that the fiscal disaster will only be temporary while the baby-boom generation moves through the benefit pipeline and then entitlement costs will become bearable. By then, he says, "you have so much debt on the books that it's too late."

Unfortunately for taxpayers, "the debt accumulates while the rat's going through the python," so by the 2040s the debt itself and its gargantuan interest payments become bigger problems than entitlements....
----
Link: http://online.wsj.com/news/articles/SB10001424052702303680404579141790296396688

For sale by owner: Homeowners ditching brokers

From CNN Money:

Bolstered by the housing recovery, a growing number of homeowners are going it alone when selling their homes hoping to save thousands of dollars in commissions.

The hot housing market in Cambridge, Mass., gave Jon LaRosa the confidence to sell his condo on his own. So in late May, the 34-year-old freelance IT worker listed it for $429,000 on ForSaleByOwner.com and scheduled an open house for the weekend.

"I figured that even if I sold it for $5,000 less... I was still making out well," he said.  In the next week or so, more than 100 people came to see the place. LaRosa received 7 offers and sold for $450,000, closing the deal by mid-July...

Sellers say they also go it alone because they want more control of the deal. Tara and Brent Anderson didn't want to rush the sale of their three-bedroom Dallas home, which they listed for $500,000.

"Real estate agents are willing to take a lower price to make a quick sale, but that would cost me a lot of money," said Tara.

A study by Stanford University economists Douglas Bernheim and Jonathan Meer supports the Andersons' concern.  They found that homes on campus using real estate brokers sold for 5.9% to 7.7% less than homes sold without brokers. The National Association of Realtors, however, maintains that homes sold using agents usually fetch much higher prices....
----
Link: http://money.cnn.com/2013/10/11/real_estate/for-sale-by-owner/

WSJ: Workers Stay Put, Curbing Jobs Engine

From the Wall Street Journal online:

Gridlock in Washington delayed last week's jobs report. But blame gridlock of a different kind for holding back the job market itself....

Even when the numbers are released, however, there is a strong argument that they aren't the most important gauge of the health of the labor market, at least right now. That's because the headline figure measures net growth—all the new jobs that were created in a month minus all the ones that were destroyed....

But focusing on net growth masks what's going on beneath the surface—or rather, what isn't going on. Workers aren't quitting their jobs to pursue better opportunities. Companies aren't filling positions when they do open up.

Economists refer to job turnover that doesn't change the overall number of employees at a company as "churn." In normal times, churn dwarfs job creation and destruction, as millions of workers resign or are fired and are replaced. By a wide array of measures, however, rates of churn remain far below normal...

Churn doesn't get as much attention as new-job creation, but to people looking for work, it's just as important. The unemployed don't care whether the jobs they're applying for are new positions or were vacated by other workers. In fact, they may have a better chance at landing pre-existing jobs: Economic research suggests companies tend to be pickier when filling new positions, which tend to be more discretionary. When fewer people quit their jobs, there are fewer opportunities for the unemployed to come in behind them.

"Nobody's leaving for a better job," said Jason Faberman, an economist at the Federal Reserve Bank of Chicago. "These guys aren't moving on to better jobs, which means their positions aren't opening up for the unemployed."

...Nor is it just the unemployed who suffer from reduced turnover. Changing jobs is one of the most important sources of wage growth, particularly for younger workers. With unemployment for those under age 25 still elevated at 15.6%, many of those lucky enough to have jobs are playing it safe by staying put—and as a result may put themselves at a permanent earnings disadvantage.

"If you miss that window when you're young, that could have really long-term consequences," said Toshihiko Mukoyama, a University of Virginia economist. "They cannot go up the job ladder."

That kind of ladder-climbing doesn't just matter to individual workers. Churn acts like a kind of grease in the economy's gears, helping workers move to jobs that are a better fit for their skills and helping to shift workers away from poor-performing companies and toward better ones. Recessions slow that process, making the economy as a whole less productive.

"People are getting stuck" at less productive companies, said Lisa Kahn, a Yale University economist. "That very likely has consequences even after the recovery."
----
Link: http://online.wsj.com/article/SB10001424052702303492504579113703779249002.html

Even people who should know, don't know

From the NYTimes.com:

Financial Literacy, Beyond the Classroom

Even if we grade on a very generous curve, many Americans flunk when it comes to financial literacy. Consider this three-item quiz:

   • Suppose you had $100 in a savings account and the interest rate was 2 percent a year. After five years, how much do you think you would have if you left the money to grow? More than $102, exactly $102 or less than $102?

   • Imagine that the interest rate on your savings account was 1 percent a year and that inflation was 2 percent. After one year, would you be able to buy more than, the same as or less than you could today with the money?

   • Do you think this statement is true or false: “Buying a single company stock usually provides a safer return than a stock mutual fund”?

Anyone with even a basic understanding of compound interest, inflation and diversification should know that the answers to these questions are “more than,” “less than” and “false.”

Yet in a survey of Americans over age 50 conducted by the economists Annamaria Lusardi of George Washington University and Olivia S. Mitchell of the Wharton School of the University of Pennsylvania, only a third could answer all three questions correctly...


(Writer Richard H. Thaler is a professor of economics and behavioral science at the Booth School of Business at the University of Chicago.)
----
Link: http://www.nytimes.com/2013/10/06/business/financial-literacy-beyond-the-classroom.html?

Forget stock picking, stick with the indexes

From Mark Hulbert at MarketWatch.com:

 Is it a stock market, or a market of stocks?

The market has been unusually selective of late, with an abnormally large percentage of stocks hitting new 52-week lows even as the S&P 500 was itself recording new highs.

At first glance, that would suggest that stock picking is more important than ever. Not so, according to several academic researchers.

The typical stock always tends to move in lock step with the overall market, they say. That reality is just being masked by the bull market’s strength.

If they are right, it means you are kidding yourself if you think there are greater-than-normal odds of beating the market when picking individual stocks.  

Buying and holding a broad-market index fund remains the best course of action for most investors....

Stocks — at any time and with no warning — could once again begin moving in lock step with the overall market.

As a result, stock selection has no greater odds of success now than at any other time.

And those odds are depressingly low, according to Terrance Odean, a finance professor at the University of California, Berkeley.

Research he and others have conducted, he says, suggests that “less than 1% of individuals who trade frequently can consistently outperform the market through skill."

"Over the long run, the rest would be better off investing in low-cost index funds benchmarked to the broad market.”
----
Link: http://www.marketwatch.com/story/forget-stock-picking-stick-with-the-indexes-2013-09-27

Obama administration killing jobs pointlessly

From the New York Post:

...The Obama administration is prepared to sacrifice your jobs even when it can’t show any benefit to the United States.

The environmental laws of the 1970s aimed to clean up America’s air and waters. They were about curbing local pollution and making the environment better for Americans.

Cutting carbon-dioxide emissions is completely different. Unless the rest of the world joins in, it’s pointless for America to act by itself. Remember, we’re talking about global warming.

Acting alone, the sacrifice of blue-collar jobs is entirely about political symbolism and appeasing wealthy green activists.

...And without an effective international agreement, there are no benefits. Any cuts in emissions from the EPA’s war on coal will be outweighed by the fast-growing carbon footprints of developing nations.

...Today, even as Obama’s EPA starts to shut down US coal plants, China is building around 40 coal-fired power plants a year. Coal provides India with over half its electricity. Even green Germany is burning more coal and its emissions of carbon dioxide have been increasing.

President Bill Clinton also aimed to save the planet from global warming — but he was pragmatic. His efforts were in the context of the Kyoto Protocol, which US negotiators crafted with escape hatches so the United States could buy its way out if the “solution” threatened the economy.

By contrast, Obama is acting unilaterally when the prospects of a global accord to cap emissions are as distant as ever.

Politically, the president can afford the pain. He has fought his last election, so is not directly threatened by the economic sacrifice he wants Americans to make.

But the effect of the EPA regulations may well be to ensure that many others in his party are also enjoying their final term in elective office when they can’t explain why Americans should lose their jobs for a cause that makes no sense.
----
Link: http://nypost.com/2013/09/26/obama-administration-killing-jobs-pointlessly/

Washington Post: U.S. disability rolls swell in a rough economy

From the Washington Post online:

The fast expansion of disability ... is part of a national trend that has seen the number of former workers receiving benefits soar from just over 5 million to 8.8 million between 2000 and 2012. An additional 2.1 million dependent children and spouses also receive benefits.

The crush of new recipients is putting unsustainable financial pressure on the program. Federal officials project that the program will exhaust its trust fund by 2016 — 20 years before the trust fund that supports Social Security’s old-age benefits is projected to run dry.

The growth of the disability rolls has accelerated since the recession hit in 2007. As the labor market tightened, workers with disabilities that employers previously accommodated on the job — painful hips, mental disorders, weak hearts — were often the first to go. Finding new work often proved difficult, causing many to turn to the disability rolls for support.

The migration of so many people from work to the disability rolls is raising concern among lawmakers in Congress that the program is being stretched beyond its original intent of providing a safety net for former workers whose medical problems make them unable to work.

Last week, the Government Accountability Office found that the program made $1.3 billion in potentially improper payments to people who had jobs when they were supposedly disabled. The allegedly improper payments represent less than 1 percent of disability payments....
----
Link: http://www.washingtonpost.com/business/economy/us-disability-rolls-swell-in-a-rough-economy/2013/09/20/

Job Security Never Better, but that's Bad News

From Donald Luskin writing for Investors Business Daily:

When is job security a bad thing? Right now.

Believe it or not, for all the scare-mongering about downsizing, outsourcing and Walmartizing, job security has never been stronger. But all it really indicates is that the U.S. labor market is the least dynamic it's ever been.

To be sure, it's counterintuitive that job security is so strong when 11.3 million Americans are still officially unemployed — 3.7 million more than at the peak of the last business cycle expansion in 2007. But it's true.

Today an employed person faces only a 2% probability of losing his job in a given month, according to data from the Department of Labor. That probability has never been lower.

But job security for the employed doesn't help the unemployed.

Today an unemployed person enjoys only a 26% probability of becoming employed in a given month. That's some improvement over the horrifying 19% probability the jobless faced at the worst of the Great Recession. But it's now more than four years since that recession officially ended.

At this stage in the previous two expansions, an unemployed person had at least a 40% chance of getting work. In earlier expansions it was even better.

The labor market is frozen now, with joblessness just as secure as employment. Yes, today you are less likely to lose your job than at any time since records started being kept in 1948. But if you don't have a job, you're very unlikely to get one.

In one sense it's a vicious circle. When it is so difficult to find a job, no one will risk leaving the job he has. And with no one willing to leave his job, there are fewer openings to accommodate the unemployed.

A healthy labor market is one in which there is a dynamic interplay of employment and unemployment, where human capital rapidly transfers itself to where it is most valuable in a classic process of creative destruction.

But this is a vicious circle we can break any time we wish. All we have to do is reverse the policy errors that exacerbate and prolong it by destroying supply-side incentives — for those who supply their labor, and for those who supply the jobs.

On the labor-supply side, of the 11.3 million unemployed, 1.5 million are receiving special extended unemployment benefits. While surely not princely, these benefits defer from months to years the crunch-time that forces recipients to seek taxable work rather than enjoy tax-free leisure.

The end in January of the two-year "holiday" exempting half the employee share of Social Security taxes was a brutal tax hike on every working American. For the median earner, it's a hit of more than 2% of take-home pay. It's another disincentive for the unemployed to seek taxable work.

At the same time, on the job-supply side, the hike in January in the tax rate on dividends and capital gains undermines the after-tax rewards that compensate capitalists for taking the risks that lead to job creation.

ObamaCare — and its arbitrary on-again off-again implementation — adds both costs and uncertainty to employment, especially for smaller businesses that historically have accounted for a substantial majority of new jobs.

The Dodd-Frank bill, and the new Consumer Financial Protection Bureau it spawned, promise years of uncertainty about how credit intermediation will be regulated, exerting a chilling effect on the capital markets that finance job creation.

Federal Reserve policy is exerting its own chilling effects — notwithstanding Ben Bernanke's repeated claims that the labor market is improving. The Fed's unconventional operations may be supporting risk-taking in securities markets, but they have done little to restore commercial and industrial bank lending that directly finance job creation, especially among small businesses.

Now uncertain and loudly debated prospects for unwinding those operations imply a risky trial-and-error process by an institution known for error even in the best of times.

The most tragic drag on the dynamism of the labor market is energy regulation, which is inhibiting the rapid adoption and proliferation of revolutionary new shale oil and gas extraction technologies.

It's not just a matter of the thousands of semi-skilled jobs that go uncreated in the energy sector itself, while the Obama administration wastes taxpayer money on "clean energy" boondoggles like Solyndra and delays construction of the Keystone pipeline.

Today growth of all kinds — including job creation — is inhibited by oil and gasoline prices, which on average over the last 10 years have been the highest in history, even on an inflation-adjusted basis. Unlocking America's shale wealth could return energy prices to the low growth-conducive levels enjoyed throughout most of the booming 1980s and 1990s.

So let's not take false comfort from the recent headlines, like those about new claims for jobless benefits stabilizing at pre-recession levels. The last thing we should want now is for the labor market to stabilize, with 11.3 million still unemployed, and no indication they will get employed anytime soon.

It's time to stop paying people not to work, taxing them more when they do and creating tax and regulatory barriers to the risk-taking and innovation that make job creation possible.

• Luskin is chief investment officer of Trend Macrolytics LLC, a strategic consultant to institutional investors.
----
Link: http://news.investors.com/ibd-editorials-viewpoint/091313-671007-labor-market-is-frozen-unemployed-cant-find-work.htm

Consumers Skip Dining for Cars as Sales Slow

From Bloomberg.com:

Restaurant sales contracted in June and July, even as spending on other discretionary categories such as automobiles and homes grew, a sign some Americans remain budget conscious.

This marked the first two consecutive declines in the monthly index of restaurant sales after the industry was rocked by its worst streak in almost three years between December and February.

Preliminary data suggest that August sales still are weak, though “better than July,” said Malcolm Knapp, a New York-based consultant who created the index and has monitored the industry since 1970. The summer slowdown is a symptom of a “reallocation nation,” in which people choose between different discretionary items to purchase each month, he said.

“Consumers’ priorities change every month based on what they can afford,” Knapp said. Many Americans don’t eat out as often as they would like, and they’ve had to cut back “very begrudgingly” on meals away from home to help subsidize other purchases....

Americans bought 5.39 million existing homes in July, up 17.2 percent from a year ago and the strongest month of demand since November 2009, according to data from the National Association of Realtors.

Cars and light-duty trucks sold at a 15.7 million seasonally adjusted annualized rate, keeping the U.S. on track for its best year since 2007, when 16.1 million vehicles were sold.

With “only so much income coming in,” many consumers had put off auto purchases for several years, said Rob Morgan, who oversees $1 billion as chief investment strategist in Exton, Pennsylvania, at Fulcrum Securities LLC.  Now, a “forced replacement cycle” for cars on the road more than a decade is helping boost sales, he said.

Douglas Benn, chief financial officer of Cheesecake Factory, cited auto and home sales during a July 24 conference call as a reason why “consumers, at least temporarily, are cautious about spending their discretionary dollars” at restaurants...

The Bloomberg U.S. Full-Service Restaurant Index -- made up of 21 companies including Cheesecake Factory, Brinker, Bloomin’ Brands and Darden Restaurants Inc. (DRI) -- has lagged behind the Standard & Poor’s 500 Index by 4.5 percentage points since July 9. That followed about five months when these stocks led the broader market by about 20 percentage points.

Weaker demand at restaurants “speaks to the bifurcated nature of this recovery,” said Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC....
----
Link: http://www.bloomberg.com/news/2013-08-23/consumers-skip-dining-for-cars-as-sales-slow-ecopulse.html

Get a life! Facebook is bad for you

From The Economist:

Those who have resisted the urge to join Facebook will surely feel vindicated when they read the latest research.

A study just published by the Public Library of Science, conducted by Ethan Kross of the University of Michigan and Philippe Verduyn of Leuven University in Belgium, has shown that the more someone uses Facebook, the less satisfied he is with life.

Past investigations have found that using Facebook is associated with jealousy, social tension, isolation and depression. But these studies have all been “cross-sectional”—in other words, snapshots in time.

As such, they risk confusing correlation with causation: perhaps those who spend more time on social media are more prone to negative emotions in the first place. The study conducted by Dr Kross and Dr Verduyn is the first to follow Facebook users for an extended period, to track how their emotions change....

Dr Kross and Dr Verduyn therefore conclude that, rather than enhancing well-being, Facebook undermines it...
----
Link: http://www.economist.com/news/science-and-technology/21583593-using-social-network-seems-make-people-more-miserable-get-life?

WSJ: Teens Face Worst Labor Market (what has the Obama economy done for black teenagers?)

From the Wall Street Journal online:

12%: The share of the unemployed who are teenagers.

The entire working population has suffered from a slow jobs recovery, but no group has had a harder time than teenagers.

The unemployment rate for people 16 to 19 years old is 23.7%, compared to 7.2% for the population as a whole...

Teenagers make up less than 4% of the labor force, but 12%, or about one in eight, of the 11 million unemployed is between 16 and 19 years old.

Education is a major factor. The unemployment rate for those with a bachelor’s degree or higher is just 3.8%, but almost necessarily teenagers haven’t finished college. Workers without a high school diploma, even those over 25 who have more on-the-job experience, face an unemployment rate almost three times higher than university graduates.

One subset of teen workers has it even worse: African Americans. The unemployment rate for black 16 to 19-year-olds is a whopping 41.6%. 
----
Link: http://blogs.wsj.com/economics/2013/08/10/number-of-the-week-teens-face-worst-labor-market/?

Wal-Mart's New Goal: Sell All the Beer

From Businessweek.com: 

When Wal-Mart (WMT) began buying a greater number of locally grown fruits and vegetables in 2010, it made sure its efforts got plenty of publicity.  But when Walmart decided it wanted to double its alcohol sales by 2016, it didn’t exactly issue a press release.

Customers noticed, and those in the alcohol industry—or, as Walmart prefers, the adult beverage business—certainly took note of the change.

“They’ve said they want to be the No. 1 beer seller in the world,” Cameron Smith, the president of an executive search firm that works closely with Walmart’s supplier network, told Bloomberg News. 

“They’re getting there quick. Everyone in the supplier community is on cloud nine.”

So far, Walmart seems pretty pleased with the results...
----
Link: http://www.businessweek.com/articles/2013-08-08/walmarts-new-goal-sell-all-the-beer#r=rss

July's jobs bummer: Want fries with that?

From Fortune magazine online: 

July's report on the state of America's job market, released Friday, marked the 34th month in a row in which the economy created jobs at a slow and steady clip.  This is better news than very few or no jobs created at all, but it's best to judge by quality vs. quantity.

While the economy generated 162,000 jobs last month, the bulk of those jobs is neither highly paid nor full-time work.

This suggests why the economy isn't growing as fast as the pace of job creation...

To be sure, there are more low-wage jobs in the economy overall than there are high-wage jobs. Nonetheless, low-wage jobs have made up more of the recent job gains than usual. Retail, restaurant, and bar workers make up about 22% of the overall workforce. But in July, those categories accounted for over 52% of the job growth....

All this makes for a troubling trend, given that consumer spending drives the U.S. economy: Whereas the average weekly pay of U.S. workers overall is $824, leisure jobs pay $349 a week, while retail pays only slightly more at $520 a week.

Good jobs are much harder to come by these days: Take manufacturing, for instance. We often hear that U.S. manufacturing could turn the U.S. economy around. Manufacturing jobs that pay an average of nearly $1,000 a week added just 6,000 jobs in July.

The health care industry used to be the bright spot in an otherwise weak jobs market, but growth in that area is shrinking. So far, health care has added an average of 16,000 jobs a month, compared with an average monthly increase of 27,000 in 2012.

A not-so-great job is indeed better than no job, but is part-time work any better?

The number of people with part-time jobs who want to work full-time totaled 8.2 million in July, up slightly from the month before. And the number of people who landed part-time jobs in July was far larger than those who were hired as full-time workers, 170,000 vs. 90,000.

Part-time jobs generally offer less job security and few, if any, health and retirement benefits. And when workers aren't sure how much or where they might work tomorrow or next year, they're less likely to spend.
----
Link: http://finance.fortune.cnn.com/2013/08/02/jobs-report-july/

WSJ: Low Pay Clouds Job Growth

From the Wall Street Journal online: 

The U.S. labor market's long, slow recovery slowed further in July—and many of the jobs that were created were in low-wage industries.

... hiring was also weaker in May and June than initially reported. Moreover, more than half the job gains were in the restaurant and retail sectors, both of which pay well under $20 an hour on average.

"These jobs count as jobs in the jobs reports, but there's very little attention paid to the kind of jobs these are," said Arne Kalleberg, a sociology professor at the University of North Carolina and the author of the book "Good Jobs, Bad Jobs." "They tend to be low-wage jobs, they tend to be in retail and personal-service-type sectors, many of them are part time."

...the proliferation of low-wage jobs is leading to anemic growth in incomes. Average hourly wages were up by less than 2% in July from a year earlier, continuing a pattern of weak wage growth in the recovery. A broader measure of income released by the Commerce Department on Friday showed that inflation-adjusted incomes actually fell slightly in June...

Heidi Shierholz, an economist with the left-leaning Economic Policy Institute, said such trends are likely to continue as long as unemployment stays high and hiring remains weak.

"There's nothing putting upward pressure on wage growth," Ms. Shierholz said. "Your employer doesn't have to pay you big wage increases when they know you don't have outside options."
----
Link: http://online.wsj.com/article/SB10001424127887324635904578643654030630378.html

“We've Become a Nation of Hamburger Flippers”

From Yahoo Finance:

At 162,000, the July jobs report fell short of expectations and well shy of “whisper” numbers for payroll figures above 200,000.

In addition, job tallies were revised down for May and June...

69% of the jobs created in the second quarter – and 57% in the first half of 2013 – were in the three lowest-paying sectors of the economy: retail trade, administrative and waste services, and leisure and hospitality. These jobs, which account for 33% of all private sector jobs, pay an average of $15.80 per hour.

“What you’re seeing is now the spreading of low wage growth,” [Dan Alpert] says, noting those trends continued in Friday's July jobs report.

“Really we have become a nation of hamburger flippers, Wal-Mart sales associates, barmaids, checkout people and other people working at very low wages.”

The growth of low-wage jobs helps explain why the majority of Americans continue to believe the economy is in recession, despite a falling unemployment rate – now down to a four-year low of 7.4% – a record-setting stock market rally and a rebound in the housing market.

Taking it a step further, Alpert says the low-wage trend also explains why GDP growth remains so weak despite monthly average private sector job growth of nearly 200,000 in the past year.

“The bottom line is a lot of people are coming off unemployment,” which works out to around $12 per hour if you include Food Stamps, he says. “So a $15 wage to work has no impact… you’re not increasing consumption or the ability [of workers] to go out and buy stuff."

As a result, the economy isn't getting the usual "second derivative" benefit of payroll growth whereby more people working leads to more economic activity and additional job creation, Alpert says.

"That’s why GDP and retail sales numbers are so lackluster.”
----
Link: http://finance.yahoo.com/blogs/daily-ticker/become-nation-hamburger-flippers-dan-alpert-breaks-down-145831220.html

We should be horrified at 1.7 percent GDP growth

From the Washington Post: 

...we’ve now faced nine months of an expansion at a bit less than a 1 percent annual rate. Every two steps forward for growth seems to be accompanied by a step and a half back.

It would be one thing if that kind of slow growth was happening in a time of full employment, when the economy was basically sound. But with 7.6 percent unemployment, the nation could really use a few quarters in a row of 4, 5 or 6 percent growth to get us back to where people can really be pleased with the economy. It’s not an outlandish view; that’s exactly what happened in the early 1980s, in the aftermath of the last very deep recession....

Those of us who pore over government economic statistics have on some level become so accustomed to mediocrity in the U.S. recovery ... that we grade these economic reports on a curve.

... 1.7 percent growth isn’t good in the environment we’re in, even if it is a little better than economists thought the number would be. It isn’t even mediocre. It’s terrible. It’s a sign of the diminished economic expectations that economy-watchers have set for themselves that it’s anything to crow about at all.
----
Link: http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/31/we-should-be-horrified-at-1-7-percent-gdp-growth/

IRS employee union does not want Obamacare

From the Washington Examiner:

IRS employees have a prominent role in Obamacare, but their union wants no part of the law.

National Treasury Employees Union officials are urging members to write their congressional representatives in opposition to receiving coverage through President Obama’s health care law.

The union leaders are providing members with a form letter to send to the congressmen that says “I am very concerned about legislation that has been introduced by Congressman Dave Camp to push federal employees out of the Federal Employees Health Benefits Program and into the insurance exchanges established under the Affordable Care Act.”
----
Link: http://washingtonexaminer.com/irs-employee-union-we-dont-want-obamacare/article/2533520

Chicago Tribune: Obamacare will push employers - and workers - to cut hours

Opponents of Obamacare have long predicted that the 2010 law would lead to reduced working hours for many Americans. We all know from high-profile announcements that some employers, notably restaurants, plan to avoid hiring full-time workers because of the new health care rules...

Under Obamacare, employers with 50 or more full-time workers will be required to offer health insurance to those putting in at least 30 hours a week, or pay a penalty. That's a big incentive to keep the staff at 49 full-timers or, if the business demands more bodies, a big incentive to have as many employees as possible working a maximum of 29 hours.

Turns out the incentives to go part time will be even greater than we suspected: Several million employees could work fewer hours for as much take-home pay by shifting to part-time labor.

University of Chicago economist Casey Mulligan has his finger on how that will work. As the law kicks in, the incentive for some workers will be so strong that free-market champion Mulligan says only "chumps" would resist it.

...He notes that a key advantage of most full-time jobs is access to company-provided health benefits. He estimates that a middle-income, full-time worker pays $4,667 a year, and his or her employer pays $9,333, for family medical insurance.

Under Obamacare, that advantage will be reversed for some workers. The law subsidizes health costs for families that earn up to 400 percent of the federal poverty line, which is about half of all U.S. households (excluding the elderly, who have Medicare and Medicaid). But the government subsidies only will go to workers whose employers don't offer insurance. That is, most people who work full time will be ineligible for subsidies. Those workers and their employers will be expected to keep paying a bundle for coverage.

Not so for the part-timer. The law limits premiums he or she will pay to $2,149 a year. His or her employer need pay nothing at all.

The Affordable Care Act also subsidizes part-timers' deductibles, co-payments and other out-of-pocket expenses, that exceed $2,193. By Mulligan's estimate, Washington could pay some $12,658 in premiums, and $2,907 in out-of-pocket costs, for a part-timer earning $42,000.

Hence Mulligan's revelation: This deal is so generous that several million workers will be able to earn as much take-home pay in part-time positions with lower pay as they would in higher-paying full-time jobs that don't get the federal health subsidies. The government — that is, taxpayers — will cover most of the part-timer's costs.

The law's potential economic distortions are so damaging, he says, that he never thought it would go into effect: "I guess I would have been (one of) those people in 1916 who said that communism would never happen."

We have yet to see Obamacare's full impact. The mandate requiring individuals to have coverage starts in January 2014; the mandate requiring employers to offer coverage has been postponed for at least another year. But if nothing changes, America will have a reason to go increasingly part time...

It's troubling, though, that ... too many part-timers who would rather have full-time jobs just aren't finding them. The question going forward is whether those workers ever will attain what they want — or whether they and their potential employers will decide that full-time jobs are too costly for both of them.

Part-time work does become a problem when Washington tilts the balance of incentives against full-time work. Not only will Obamacare raise costs for the government, it stands to make one of the most competitive features of the U.S. economy — a flexible labor market — less efficient.

One more reason to rewrite, or halt, Obamacare.
----
Link: http://www.chicagotribune.com/news/opinion/editorials/ct-edit-parttime-0728-jm-20130728,0,2990367.story

Honest Tea: the most dishonest place in the US: Washington D.C.

From money.MSN.com: 

Coca-Cola's Honest Tea tested whether Americans would pay for the drink at self-service kiosks.

One location ranked far below the others.

When Coca-Cola's (KO) Honest Tea tested whether Americans would voluntarily pay up for the drink at unmanned kiosks, one place fell far below the national average for honesty.

That turns out to be the nation's capital, Washington, D.C., where only 80% of people honored the test's system of putting a dollar in a box to pay for a bottle of the iced tea. In fact, the town was so dishonest that the CEO's bike was stolen during the test.

Overall, Americans are 92% honest...
----
Link:http://money.msn.com/now/post--heres-the-most-dishonest-place-in-the-us

Really? Half of Obama Care call center jobs will be part-time

From Contra Costa Times.com:

Earlier this year, Contra Costa County won the right to run a health care call center, where workers will answer questions to help implement the president's Affordable Care Act. Area politicians called the 200-plus jobs it would bring to the region an economic coup.

Now, with two months to go before the Concord operation opens to serve the public, information has surfaced that about half the jobs are part-time, with no health benefits -- a stinging disappointment to workers and local politicians who believed the positions would be full-time.

The Contra Costa County supervisor whose district includes the call center called the whole hiring process -- which attracted about 7,000 applicants -- a "comedy of errors."

"The battle for the call center was over jobs with good working wages and benefits; I never dreamed they would be part-time," said Karen Mitchoff, who has heard from complaining constituents and expressed her "extreme displeasure with how it was handled" to call center supervisors.

One recent hire, who last week learned the job would be part-time, said the new "intermittent" employees feel like they've been used as a political tool, and many now regret applying for the positions.
----
Link: http://www.contracostatimes.com/rss/ci_23733819

Why Tight U.S. Labor Markets Are Here to Stay

From Gary Shilling at Bloomberg.com:

The outlook for the labor market remains bleak. Older Americans are holding on to their jobs longer, limiting openings for newcomers, and employers are cutting costs by extending working hours and paying overtime, rather than hiring.

Layoffs and discharges remain low. Voluntary departures have risen a bit, but are still sluggish as workers stay put in uncertain times.

Meanwhile, job openings have risen rapidly after a collapse, though new hires have increased much more slowly. After firing so many people in the recession and since, employers are waiting to hire the right people with the right skills.

Declining real wages also discourage many from entering the labor force, as does the likelihood that if they do find work, it is often at lower pay. Surveys show that of those out of work six months or more, a third earn less when they find a new job. Those out of work for extended periods also tend to lose their skills...
----
Link: http://www.bloomberg.com/news/2013-07-23/why-tight-u-s-labor-markets-are-here-to-stay.html 

Different view: Most new jobs are full-time, but that doesn’t mean they’re good jobs

From Marketwatch.com:

...since the recession ended four years ago, the vast majority of new jobs have been full time: Full-time jobs have increased by 3.3 million, while part-time jobs are up by 564,000 (including 360,000 in June). The percentage of workers who are part-timers has declined from a peak of 20% to 19.5%.

That’s still way too high, considering that about 8 million part-timers would like to work full time. But the problem isn’t getting any worse. Contrary to what you hear from Durden et al, the economy is slowly becoming less of a part-time ghetto.

When we suggest that all part-time jobs are bad, we forget that the vast majority of part-timers want to work part-time. They prefer it.

Who are the part-timers? As of the end of 2012, there were 27.6 million part-time workers. Of that total, 30% were between the ages of 16 and 24, and another 25% were over 55. These are people who are easing into or easing out of full-time work. Most of the growth in part-time work since 2009 has been among people over 65.

 What about people in their prime working years of 25 to 54? They account for about 65% of the labor force, but just 45% of part-time workers. Of the 12.4 million part-timers aged 25 to 54, 8.8 million were women and 3.6 million were men.

In other words, part-timers are largely students, housewives and retirees.

Hidden in the sky-is-falling rhetoric of Zuckerman, Ferrara and Durden is a real concern that must be addressed: The economy is not nearly creating enough good jobs that take advantage of all the skills our workers have. Anyone willing to work should be able to find a job, and should be adequately compensated for the work they do, including health-care benefits, overtime pay, a pension, and paid time off.

The chicken littles may have their facts wrong, but they have their finger on a real problem. The quality of jobs matters a lot, and the quality of jobs has been deteriorating for a while.

It’s not only part-time jobs that are terrible. Many full-time jobs also count as bad jobs: Low pay, dangerous or boring working condition, inadequate benefits, with no job security.

So by all means, let’s talk about how pathetic this recovery has been. But let’s not confuse things by complaining that we have too many part-time jobs. We have too few good jobs.
----
Link: http://www.marketwatch.com/story/no-part-time-jobs-arent-only-ones-being-created-2013-07-19

"Detroit is America’s future"

From Jonathan S. Tobin at CommentaryMagazine.com: 

The collapse of what was once one of America’s great cities should also inform us about the way the liberal project is dooming municipal and state governments around the country as well as Washington to a sea of debt that cannot be sustained.

Detroit isn’t just the most spectacular example of urban blight.  It’s the poster child for the consequences of liberal governance...

While other large cities, such as New York and Philadelphia, underwent crises that were met and overcome in the last generation before undergoing revivals, Detroit has been going downhill for more than 60 years.  While Detroit had particular problems that may not have been faced elsewhere, the basic conundrum is not unique.  But rather than face up to the need to change the old liberal formula of expanding government and letting corruption go unchecked, this bastion of liberalism refused to alter its course...

The lesson here is that a government that continued to overpromise and create unfunded liabilities to please political constituencies cannot survive indefinitely.  And that goes straight to the glaring problem that was the foundation of President Obama’s false boasts about “saving Detroit” that caused Romney so much trouble last fall.

Detroit’s bankruptcy shows that federal bailouts for industries can’t solve all the country’s problems, especially when cities are sinking under the weight of generous municipal contracts for public employees.  It’s true that many other cities that are facing shortfalls because of debts they’ve signed off on to pay off unions are working better than Detroit, where 40 percent of the street lights don’t work and it takes nearly an hour for police to arrive at an average high-priority emergency.

But unless the power of unions to bankrupt municipalities and state governments is cut back—much as Wisconsin’s Governor Scott Walker and New Jersey Governor Chris Christie have tried to do—everywhere, Detroit won’t be the last city to go bankrupt. The accumulation of debt to pay off the promises made by liberals is a problem that threatens cities all over the country, even some that are seemingly in much better shape than Detroit.

The Obama paradigm of building more entitlements like ObamaCare and throwing federal money at regional problems is based on the liberal assumption that the government piper will never have to be paid.  Democrats have blasted their Republican counterparts as heartless Tea Party extremists and obstructionists for refusing to play along and let the system go on as it has for decades building debts that can’t ever be met.

But unless someone or some group is able to enact real change, Detroit is America’s future, not, as some are telling us, an exception to the rule.
----
Link: http://www.commentarymagazine.com/2013/07/19/didnt-obama-already-save-detroit/

Crisis for the very old: outliving their assets

From the LATimes.com:

As if you haven't been scared enough by the projections that most Americans haven't saved enough to maintain their lifestyles as they enter retirement, here's something even more terrifying:

Nearly half of all Americans will outlive their assets, dying with practically no money at all.

Even more worrisome, that's true even among households that met the traditional standards for secure retirement income. Economic factors and changes in employer pensions and in economic reality have made it much harder to stretch income and assets so they last, especially as people live longer....

Americans ages 75 and older lost one-third of their household financial assets and one-sixth of their net worth from 2007 to 2010, reflecting the devastation of the 2008 crash. Their balance sheets may have improved since then, but obviously they have less time than other age groups to make up the losses.

The 75-plus generation is struggling more than others to keep up....

Economist James Poterba of MIT put it all together with colleagues at Dartmouth and Harvard's Kennedy School and estimated that about 46% of Americans die with less than $10,000 in assets, many of them lacking even home equity and relying almost entirely on Social Security.

The results can be measured in more than merely dollars and cents. Poterba's paper found that this group is "disproportionately in poor health," in part because they have no resources to cover medical expenses outside Medicare.

Most shocking, many of these households were considered to have entered retirement in good financial shape; they didn't count on outliving their plans....
----
Link: http://www.latimes.com/business/la-fi-hiltzik-20130717,0,2211926.column

Obama to Detroit: Drop Dead

From Walter Russell Mead at Via Meadia:

...This is where blue governance has brought Detroit in the end: not even a liberal Democratic administration will step in to save the pensions of thousands of public workers and African Americans, condemning countless innocents to having their pensions and health benefits gutted in bankruptcy court.

Blue model defenders will point to the cruel exodus of General Motors, the unjust outsourcing of American manufacturing, and the general unfairness of life in the big city as the culprits in the slaying of Detroit. But these champions of the marginalized should keep a few facts in mind.

Detroit has been spending on average $100 million more than it has taken in for each of the past five years. The city’s $11 billion in unsecured debt includes $6 billion in health and other retirement benefits and $3 billion in retiree pensions for its 20,000 city pensioners, who are slated to receive less than 10 percent of what they were promised. Between 2007 and 2011, an astounding 36 percent of residents lived below the poverty line. Last year, the FBI cited Detroit as having the highest violent crime rate for any major American city. In the first 12 years of the new century, Detroit lost more than 26 percent of its population.

And now Detroit’s desperate request for a bailout has been turned down by the Obama White House.

Progressive politicians, wonks, and activists can only blame big corporations and other liberal bogeymen for so long. The truth is that corrupt machine politics in a one-party system devoted to the blue social model wrecked an entire city and thousands of lives beyond repair. The sooner blues come to terms with this reality, the greater chance other cities will have of avoiding Detroit’s fate.
----
Link: http://blogs.the-american-interest.com/wrm/2013/07/18/obama-to-detroit-drop-dead/

Jobs Disaster Continues

From the New York Times online:

Don’t worry about labor force participation. It’s not coming back....

The unemployment rate has dropped almost entirely because of this decline in labor force participation.

In other words, it has not fallen because people are finding jobs.

It has fallen because fewer people are looking for jobs.

----
Link: http://economix.blogs.nytimes.com/2013/07/18/labor-force-participation-is-not-coming-back/

Detroit’s Greek tragedy

From Charles Lane at the WashingtonPost.com: 

Liberal economists have a ready response to conservatives who fret that U.S. debt might spiral out of control, a la Southern Europe: “America is not Greece.”

It’s true. Greece has much more public debt than does the United States, relative to economic output...

Certain parts of the United States, however, are like Greece. Just read emergency manager Kevyn Orr’s134-page report on Detroit, which has $20 billion in unpayable debt.

...the document nevertheless tells a harrowing story of institutional rot and social collapse, brought on by decades of government of, by and for special-interest groups.

Prominent among them are public-employee unions — 47 in all, from organized crossing guards to the Association of Professional Construction Inspectors. Contracts permitted employees to “bump” from job to job based solely on seniority, “without regard to merit, relevant qualifications or experience,” the report says.

Generous pension and retiree health benefits gobbled up tax dollars — more than 38 percent of the city’s revenue in fiscal 2012 alone — that would otherwise have paid for public services.

Small wonder that, per the report, the effectiveness of Detroit’s police force is “extremely low” and the city’s rate of violent crime is five times the national average; or that the average fire station is 80 years old; or that the number of city parks has dwindled from 317 to 107 in the past half-decade.

Detroit could not have financed its bloat without Wall Street. Like German and French banks that bought Greek debt long past the point of reason, Detroit’s financial enablers cheerfully synthesized such securities as $1.43 billion in pension-funding “certificates of participation” — about whose “validity and/or enforceability” the Orr report expresses circumspect but ominous doubts.

Spare some blame for Detroit’s log-rolling and — it must be said — mostly Democratic politicians, including spectacularly corrupt former mayor Kwame Kilpatrick, who faces more than 20 years in prison on bribery and extortion charges related to rigging city contracts.

Greece’s state-owned money pits include a railroad and ports. The political class in Detroit saw fit to own water works and parking garages. Much as Greece ended up contemplating renting out the Acropolis, cheap, to foreign film crews, Detroit is pondering the sale of masterpieces in its art museum.

...difficult as Detroit’s economic issues were, bad governance made all of them worse. For too long, too many people whose first concern was supposed to be serving citizens concentrated instead on feeding off whatever public resources Detroit had.

...Of course, Detroit should never have reached the point where it needed an enlightened dictator. Motor City residents, public employees, financiers and politicians should have practiced the shared sacrifice Orr is belatedly attempting to impose.

...Maybe Americans have nothing to learn from Greece. Detroit, though, is closer to home, and its lessons are not so easily ignored.
----
Link: http://www.washingtonpost.com/opinions/charles-lane-detroits-greek-tragedy/2013/07/08/

Detroit files for bankruptcy

From the Associated Press:

 DETROIT (AP) -- Once the very symbol of American industrial might, Detroit became the biggest U.S. city to file for bankruptcy Thursday, its finances ravaged and its neighborhoods hollowed out by a long, slow decline in population and auto manufacturing.

The filing, which had been feared for months, put the city on an uncertain course that could mean laying off municipal employees, selling off assets, raising fees and scaling back basic services such as trash collection and snow plowing, which have already been slashed....
----
Link: http://hosted.ap.org/dynamic/stories/U/US_DETROIT_BANKRUPTCY

Economy dangerously close to contraction

From MarketWatch.com: 

U.S. economic growth has again slowed sharply, skidding dangerously close in the second quarter to an outright contraction in gross domestic product.

Following the releases Monday of tepid reports on retail sales and inventory accumulation, forecasters marked down their GDP expectations from 1.4% to 1.1%. It’s probable that U.S. GDP rose less than 2% for the third quarter in a row, and it’s possible that growth was less than 1% for the second quarter in the last three....

But we thought that the household sector was holding up a little better. The surprise Monday was that U.S. consumers were more cautious as well. Retail sales rose 0.4% in June, with most of the growth coming from automobile sales. Most retailers reported weak sales for the month....
----
Link: http://www.marketwatch.com/story/economy-skids-dangerously-close-to-contraction-2013-07-15

Key Statistic of the Year

From the WSJ.com:

For the entire U.S. workforce, employers have added far more part-time employees in 2013—averaging 93,000 a month, seasonally adjusted—than full-time workers, which have averaged 22,000. 
----
Link: see next story

WSJ: Restaurant Jobs - Sorry, Just Part-Time

From the WSJ.com:

Ken Adams has been turning to more part-time workers at his 10 Subway sandwich shops in Michigan to avoid possibly incurring higher health-care costs under the new federal insurance law.

He added approximately 25 part-time workers in May and June as he reduced some employees' hours and replaced other workers who left. The move showed how efforts by some restaurant owners and other businesses to remake their workforces because of the Affordable Care Act may be turning the country's labor market into a more part-time workforce.

Restaurants and bars have been adding an average of 50,000 jobs monthly since April—about double the rate from 2012.

In June, they added a seasonally adjusted 51,700 jobs, up from May's 47,900 tally, but below April's 51,800.

Overall, leisure-and-hospitality establishments hired more workers than any other industry in June, accounting for 75,000 of the 195,000 jobs added last month...
----
Link: http://online.wsj.com/article/SB10001424127887324694904578601922653718606.html

Poverty rarely mentioned by president

From James Rosen at Foxnews.com:

...Barack Obama partly used his 2008 nomination acceptance speech in Denver to showcase a subject he has mostly seen fit, ever since, to avoid. "We are more compassionate," he said back then, "than a government that lets veterans sleep on our streets and families slide into poverty."

But since then, the poverty rate has increased: from 13.1 percent in 2008 to 15.1 percent in the most recent measurements released by the U.S. Census Bureau. And while he is widely seen as an ally of those Democratic constituencies most apt to focus on the plight of the underclass, Obama has actually mentioned the poor less frequently than any of his modern predecessors in the Oval Office.

A new study by Georgetown University's Center for Applied Research in the Apostolate, a non-profit center whose social scientists study issues of concern to Catholics, tabulated all references to an economic class that have appeared in the public papers of each president dating back to John F. Kennedy, the nation's first -- and to date only -- Catholic president.

The study found that Lyndon B. Johnson, architect of the 1960s "War on Poverty," was most apt, among the modern presidents, to mention the poor in some form or fashion: 84 percent of the time he made reference to any economic class. Kennedy and Jimmy Carter came next, with both mentioning the underclass approximately three-quarters of the time. Presidents Ford, Reagan, and George W. Bush all rated in the mid-to-high 60s, with Richard Nixon and Bill Clinton not far behind. George Herbert Walker Bush, the study found, was apt to speak about the poor fully half the time.

Only then -- dead last in the Georgetown rankings -- comes Barack Obama, who mentions the nation's least well-off only 26 percent of the time....
----
Link: http://www.foxnews.com/politics/2013/07/12/obama-avoids-discussing-poverty-study-finds/

The Economic Blunders Behind the Arab Revolutions

From the Wall Street Journal online: 

....Half a century of socialist mismanagement has left the two Arab states [Egypt and Syria] unable to meet the basic needs of their people, with economies so damaged that they may be past the point of recovery in our lifetimes.

This is the crucial background to understanding the state failure in Egypt and civil war in Syria. It may not be within America's power to reverse their free falls; the best scenario for the U.S. is to manage the chaos as best it can.

Of Egypt's 90 million people, 70% live on the land. Yet the country produces barely half of Egyptians' total caloric consumption. The poorer half of the population survives on subsidized food imports that stretch a budget deficit close to a sixth of the country's GDP, about double the ratio in Greece...

Egyptians are ill-prepared for the modern world economy.

Forty-five percent are illiterate.

Nearly all married Egyptian women suffer genital mutilation.

One-third of marriages are between cousins, a hallmark of tribal society.

Only half of the 51 million Egyptians between the ages of 15 and 64 are counted in the government's measure of the labor force.

If Egypt counted its people the way the U.S. does, its unemployment rate would be well over 40% instead of the official 13% rate.

Nearly one-third of college-age Egyptians register for university but only half graduate, and few who do are qualified for employment in the 21st century.

That is the tragic outcome of 60 years of economic policies designed for political control rather than productivity....
----
Link: http://online.wsj.com/article/SB10001424127887323740804578597502771627238.html

Jobs - just not well paying jobs

From Felix Salmon at Reuters.com:

America is creating jobs — but they’re not well-paid jobs, and they don’t seem to be going to the previously unemployed.

Today’s headline figure is certainly impressive: 195,000 new jobs were created in June, in the wake of a super-strong 207,000 new jobs in May. But the headline unemployment rate went nowhere, stuck at 7.6%, while the broadest measure of underemployment, the U6 unemployment rate, saw a worrying and substantial rise, to 14.3% from 13.8%.

Good jobs, like those in government, continue to get cut, while most of the jobs growth came in the most low-wage sectors, like hospitality. And while the data on wages was pretty healthy, remember that wage data applies overwhelmingly to people who have been employed for some time, rather than to people newly entering the workforce. 

Basically, if you’re employed, you’re doing OK, but if you’re underemployed, the options available to you — the new jobs being created — are pretty underwhelming. Partly as a result, the number of discouraged workers — people who have given up looking for work because they can find nothing available — has gone up, sharply, to more than 1 million....
----
Link: http://blogs.reuters.com/felix-salmon/2013/07/05/when-the-government-outsources-employment-policy/