Unemployment is up a fraction of a percent.

The January Jobs reports are out and for once, there is a modicum of (somewhat) good news. The Labor Department reported 157K new jobs for January 2013 and significantly revised both November and December 2012 numbers upwards:

Employers added 157,000 jobs in January, the Labor Department said, which was right in line with analyst expectations. The best news, though, was that revised estimates put job creation in November and December much higher than earlier estimated; the nation added a whopping 247,000 jobs in November and 196,000 in December, revisions that place those numbers a combined 127,000 jobs above earlier estimates.

The unemployment rate ticked up to 7.9 percent, from 7.8 percent, however, as both the number of people reporting having a job and the number looking for one edged up.

I’m sure we will hear a lot about how the January figures were “…right in line with analyst expectations” given how they are usually “surprised” that their predictions are wrong.

The .1% uptick in the unemployment rate (from 7.8% to 7.9% is not all that much of a surprise – or shouldn’t be – if the economy truly is improving after all these years. The BLS U6 figure for the un/underemployed and marginally attached folks was unchanged at 14.4% (a figure that I believe is low but can’t prove). Bloomberg reported the jobs news as:

Sustained hiring gains will give incomes a lift, buffering American workers from the sting of higher payroll taxes and helping them keep spending. At the same time, bigger employment advances are needed to drive down a jobless rate that Federal Reserve officials say is too high.

We can but hope Bloomberg is correct in this analysis that incomes will be lifted.

This past Wednesday, ADP reported 192K private sector jobs for January (versus 166K reported by BLS – see Bloomberg link).

One of the areas that seems to escape a lot of notice is how the jobs reports impacts the Social Security Trust Fund. Bloomberg touches on this with the mention of higher wages offsetting “…the sting of higher payroll taxes” but still seems to miss how higher employment will provide more funds to keep Social Security running without needing to be “fixed.”

Of course, this in no way will stop people like Robert Samuelson of the Washington Post from offering up his fantasy of cutting Social Security as part of a “sequestration”:

To be effective, a sequester has to hit millions of Americans so hard that, if it took effect, mobs of outraged voters would storm Capitol Hill.

Here’s my modest proposal to do that. Unless congressional negotiators agreed on at least $1 trillion in deficit cuts over a decade — personally, I’d go higher — then the desired amount would be raised in two ways: half from across-the-board income-tax increases and half from across-the-board Social Security cuts. People would see their take-home pay and retiree benefits reduced. There would be no mystery.

…snip…

It won’t happen. Truth in journalism: I have proposed this before. There were no takers. It would astonish me if there were any now. But the point is that there is a path to agreement. The fact that our so-called leaders don’t take it reflects their calculation that disagreeing is better politics.

Thankfully, he has had no takers so he has a sad

Allison Linn at NBC News offers a counter to Samuelson and his gibberish with this report of a survey with results that fly in the face of so much Beltway Conventional Wisdom:

Read the rest of this entry →

FDR Quote on Social Security

Well, it looks like there is a new push on in the long term destruction of Social Security today. Now, I usually write about the plight of the long term unemployed and underemployed but I am getting close to Social Security eligibility so decided I would discuss the anti Social Security effort today.

I’ll start with Fact Free Fred Hiatt’s Concern Troll op-ed in today’s (Monday, January 28) Washington Post. It seems Mr Hiatt wants to offer his advice to President Obama on “entitlement reform” using the guise of how Democrats and Republicans view the past four years:

To achieve a fiscal compromise, Obama agreed in 2011 negotiations with House Speaker John Boehner to changes in Social Security that would be anathema to liberals, but Boehner walked away from the talks.
…snip…

Both histories are factually correct. That coherent accounts can be written either way ought to suggest to partisans that neither version is quite the slam-dunk they imagine.

At a minimum, it ought to propel the White House to continue acting in the national interest, whichever party that seems to serve. And for a long time, Obama has said the national interest requires both revenue increases and reform of entitlement programs.

Once again, Mr Hiatt and the Post are pushing the myth that Social Security is a part of the overall Federal Budget and needs to be “controlled” to “fix the deficit” when in fact, Social Security loans to the Genera Fund have been propping up the Federal Budget for decades, allowing for the tax cuts over the years.

While I expect this type of nonsense from the Washington Post, today’s Tampa Bay Times had a decidedly misleading headline (“US spends far more on seniors than on kids.”) How is it misleading?

In 2008, all government (local state, and federal) spent $26,255 on average for each person 65 or older, most of which is Social Security and Medicare.

The blurb on children spending:

Conversely, the federal government spends relatively little on children and Medicaid is the largest single item. State and local governments spend much more on children because they pay for schools. But overall, governments spend far more than double on seniors than they do on children 18 and younger.

Finally, at the very bottom of this post, the Times offers a couple of caveats to offset the misleading nature of their headline and opening:

Read the rest of this entry →

Photo: Doug Geisler / Flickr

The ADP Report on private sector jobs came out today and showed an increase of 158K jobs. David Dayen at the FDL News Desk discusses this report and the Bureau of Labor Statistics report that will be issued tomorrow morning (Friday, November 2):

Plug this all in and what have you got? The consensus forecast calls for an increase in 125,000 jobs. That would be an increase from last month’s increase of 114,000, but below the increases in July and August (August and September will get revised in the report). This generally matches what we’re seeing in the ancillary reports, and shouldn’t be a number that would arouse joy or sadness in either Presidential campaign. However, with the volatility of last month’s topline unemployment rate, derived from the household survey, I wouldn’t be surprised if you saw it increase from the current level of 7.8%.

Either way, it’s a preliminary report, and we probably shouldn’t put as much weight on it as we will, especially with the political implications headed into the election.

While the weekly report of initial unemployment claims was lower than expected (economists surprised!), even this moderately good news is not all that great.

The reality for many millions of us among the long term un and underemployed is the good jobs just are not there. At the end of August, Catherine Rampell of the NY Times had an article headlined “Majority of New Jobs Pay Low Wages, Study Finds.” As I noted in this post, it was very similar to an earlier post from April ’11 I had written that was based on a Washington Post article. Both the Times article and the Post article were based on reports from the National Employment Law Project.

Sunday in the NY Times, Steven Greenhouse had this article on how employers in retail and hospitality industries use (and abuse) part time workers:

But in two leading industries — retailing and hospitality — the number of part-timers who would prefer to work full-time has jumped to 3.1 million, or two-and-a-half times the 2006 level, according to the Bureau of Labor Statistics. In retailing alone, nearly 30 percent of part-timers want full-time jobs, up from 10.6 percent in 2006. The agency found that in the retail and wholesale sector, which includes hundreds of thousands of small stores that rely heavily on full-time workers, about 3 in 10 employees work part-time….snip…

A 2011 survey of 436 employees at retailers in New York City, as diverse as luxury establishments on Fifth Avenue and dollar stores in the Bronx, found that half of the city’s retail workers were part-time and only one in 10 part-time workers had a set schedule week to week. One-fifth said they always or often had to be available for call-in shifts, according to the survey, which was overseen by researchers at City University of New York.

…snip…

Mr. Flickinger, the retail consultant, said companies benefited from using many part-timers. “It’s almost like sharecropping — if you have a lot of farmers with small plots of land, they work very hard to produce in that limited amount of land,” he said. “Many part-time workers feel a real competition to work hard during their limited hours because they want to impress managers to give them more hours.”

What? Could someone have actually spoken a truth here? The modern day wage slave, complete with sharecropping as the ideal.

While CNN has an article this morning attempting to paint the rosy glasses scenario on how the jobs are not all part time minimum wage, even they have to acknowledge the reality of the lower wage since 24% of the “new” jobs are in hospitality and retail:

Read the rest of this entry →

Employment Population Ratio, Participation and Unemployment Rates (calculatedriskblog.com)

This week has seen the final jobs reports that will be available to make a possibly measurable impact prior to November 6. Wednesday’s report from ADP had 162K new private sector jobs. Yesterday’s (Thursday, October 4) Jobless claims report had a slight increase to 367K new jobless claims and 4 week rolling average of 375K new claims. Finally, today’s (Friday, October 5) Bureau of Labor Statistics report has an increase of 114,000 jobs for September and the jobless rate falling to 7.8%.

It seems the fall in the overall unemployment rate has some folks on the right, led by Neutron Jack Welch, claiming the numbers have been cooked. David Dayen at FDL News puts it this way:

Because data is just fungible to the political leanings of whoever confronts it, we predictably saw a number of conservatives question today’s jobs report, suggesting that the Bureau of Labor Statistics fudged the data to help the President’s re-election campaign. Leading this charge was former GE CEO Jack Welch on Twitter. I think the government should make a deal with Welch – they’ll admit to massaging the data if he cleans up all the PCBs in the Hudson River personally.

On a more serious note, this is really pretty outrageous, and Labor Secretary Hilda Solis, whose department includes the BLS, is right to be insulted. The BLS is a civil service agency that until recently was still run by a Bush appointee. It now has a career bureaucrat in charge. The political team plays no role whatsoever in the derivation of or announcement of the jobs data. And if, despite all this, BLS cooked the books, they’re terrible at it, because they shifted the data in the household survey without corresponding in the establishment survey.

My WAG on this is that the adjustment of the number of jobs for July and August probably had as much affect on the September jobless rate as the actual numbers for September. As far as I can see, this opinion piece from Jay Schalin at Fox News pretty much covers the basic point of the “unemployment” figures:

One thing the current economic slump has made painfully clear is that the unemployment rate is an imperfect tool for gauging the health of the economy. Washington should replace it with a more meaningful and useful benchmark: the labor-force participation rate.

The widely publicized unemployment rate, eagerly awaited each month by pundits and policy wonks, has become little more than a shell game in which officials keep the public guessing about the real state of the economy.

Please do go and read the entire piece, he makes some excellent points.

One item that I find still glaringly obvious is that for the most part, most of the people in charge or talking about jobs and the economy have no more clue about what is happening than they do about what the surface of the moon feels like. Just the past few days, I have seen these headlines as I have surfed the toobz (links embedded in headlines):

“Fiscal cliff” fears may impede faster job growth (Reuters October 2)

‘Discouraged’ workers face tough road back to employment (NBC News, October 4)

S&P 500 on verge of 5-year high day ahead of jobs data (Reuters October 4)

S&P 500 dips after four days of gains; earnings eyed (Reuters October 5)

I think the bottom line point here is any attempt to tie jobs reports, favorable or unfavorable, to the stock market is attempting so much witch craft. There IS no connection or the stock market would not be trading. As Reuters reported back in August, the market is up for the Obama administration by 74% since he took office January 2009:

At 1,400, the S&P 500 on Friday was closing in on a four-year high and was up 74 percent since January 20, 2009, the day Obama took office. Not since Dwight Eisenhower’s first term has a president had such a strong run for their first term.

As most folks reading this know, I am and have been among the long term un/underemployed. The reality for me and many millions of others is, we want to work in decent paying jobs, preferably in our chosen career fields. The dithering in DeeCee from both sides of the aisle, the constant calls for cuts to the budget, “Grand Bargains” to “save” Social Security, Medicare, and Medicaid (especially the non-existent “Bowles-Simpson” plan since there was no formal report and plan adopted by their namesake committee) personally drives me nuckin’ futz. As Mr Pierce often says, “Fck the deficit. People got no jobs. People got no money.”

It really is a simple concept. People want to work. We want to work at decent paying jobs with halfway decent benefits and contribute to the overall commonweal of the nation. Working two or three part time barely above minimum wage jobs does NOT fit this definition.

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor

Every now and then, I seem to run across news articles and/or headlines that seem to be just a bit of an understatement even as they are quite factual. Usually it seems, we get things like this one from NBC News yesterday:

New jobless claims take surprise jump

New claims for unemployment benefits took an unexpected jump in the latest week, raising more concerns about the struggling job market and providing further incentive for the Federal Reserve to jump in and help the economy.

As I have written before, it surely does seem as if the economist are ALWAYS surprised. Which still makes me wonder how they manage to keep their jobs as in most career fields, if you are always surprised by what happens, pretty soon you’re looking for a new career.

A couple of days ago, I saw this piece from Alison Linn at the Today show with the headline:

Many in middle class say they are doing worse financially

The Great Recession and weak recovery have left slightly fewer Americans feeling like they are part of the middle class, and many who do still identify themselves as such say they are now worse off.

A new and comprehensive survey on how the middle class feels, released Wednesday by Pew Research Center, finds 42 percent of people who identify themselves as middle class say they are in worse shape financially than before the recession began. About 32 percent are in better shape, and the rest either don’t know or see no difference.

I am part of that 42% though in fact, I have been forced to accept that by income, I am no longer remotely close to “middle class.” I am poor.

NBC News had this piece last night that is very much a companion to the Linn piece:

Stronger economy delivers smaller paystubs for most of us
With recoveries like this one, who needs recessions?

The average household income has fallen steadily for nearly everyone since the start of the economic expansion in June 2009, with average income dropping 4.8 percent in the three years since the upturn began, according to a report released Thursday.

High unemployment, outsourcing of jobs and generally slow economic growth have restrained income for households during one of the weakest and most prolonged recoveries on record, according to the report from Sentier Research.

Last summer, I wrote this post about the interconnectedness of the global economy. Today, the NY Times has this article on how China is now having to deal with surplus inventory:

GUANGZHOU, China — After three decades of torrid growth, China is encountering an unfamiliar problem with its newly struggling economy: a huge buildup of unsold goods that is cluttering shop floors, clogging car dealerships and filling factory warehouses.

The glut of everything from steel and household appliances to cars and apartments is hampering China’s efforts to emerge from a sharp economic slowdown. It has also produced a series of price wars and has led manufacturers to redouble efforts to export what they cannot sell at home.

This actually does make me wonder how long this headline from CNN will be true:

Romney: ‘Big businesses are doing fine’

It is a global economy and eventually what happens to one piece of that global economy WILL trickle down to the rest of the globe. Meanwhile we get to see pics of Prince Harry acting like a single, 27 year-old man visiting Las Vegas.

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor

As many folks know, I spend a bit of time each day perusing various news sites. My postings have been light the past few weeks and months as I’ve been working through issues after my sister’s death. More recently in the last week I’ve gotten a small piece of good news in my personal life (and not saying anything further as I try to nurture this news and make it grow – but it’s not a job) as well as further bad news for my extended family, so the roller coaster ride does continue.

But then I go and see a headline like this at NBCNews.com:

Fed ready to help economy ‘fairly soon,’ minutes show

Turns out, the article was from Reuters though their headline wasn’t much better:

Fed looks set to ease fairly soon barring swift rebound

Earth to Fed! Earth to Fed! Where in the holy hell have you been for these past few years?

(Reuters) – The Federal Reserve is likely to deliver another round of monetary stimulus “fairly soon” unless the economy improves considerably, minutes released on Wednesday from the U.S. central bank’s August meeting suggested.

While the meeting was held before a recent improvement in economic data, including a stronger-than-expected July reading for U.S. employment, policymakers were pretty categorical about their dissatisfaction with the current outlook.

…snip…

The Fed held policy steady at that gathering, but signaled a renewed readiness to act amid lingering softness in the economy. The minutes showed the central bank is actively considering a “flexible” bond-buying program, which could suggest that no upfront amount will be announced.

Let’s see. The “official” time frame for the Great Recession had a start in December 2007 and ended officially in June 2009. Last June I wrote a blog post where I predicted a double-dip recession. Officially, I was mistaken as the economy has managed to maintain just enough headway to avoid the term “recession.” But also last summer, I wrote a blog post asking Mr Bernanke just where the hell he has been these past few years. I and all the other people in long term un and underemployed situations have the same concerns. We want jobs. The Fed still has a “Mission Statement” that begins with direction for “…pursuit of maximum employment…” So we sit here with the official unemployment rate at 8.3% and the rate of un and underemployeds at 15%. These number still translate to nearly 13 million unemployed and another 10 to 15 million underemployed. And again, these numbers do NOT include new college grads trying to find their first full time jobs in their chosen fields. The numbers do NOT include all the millions who have been forced to become “self-employed, independent contractors. Add these groups into the official numbers and we are probably looking at (as a guesstimate) another 10 to 15 million people. Labor force participation was at 63.7%.

But have no fear! All is not lost. Why just today, one of Willard Mitt Romney’s top economic advisers proclaimed that The Benbernank is doing a smash up job as Fed chair and deserves to remain in the position while the Republican Party has added a plank calling for an annual audit of the Fed. My guess is this is the sop to Ron Paul. And to be honest, I can see this is a good plank. Of course, we still have the Todd Akin Memorial Anti-Abortion Plank Human Life Amendment so some things never change. After all, one of the reasons the Republicans re-took the US House in 2010 was because of the lack of jobs. Yet from the very start, the House concentrated on anti-abortion legislation that included “re-defining rape.”

Todd Akin isn’t an aberration in today’s Republican Party. He is the epitome of today’s Republican Party and Paul Ryan is right there with him. Meanwhile, the denizens of the Beltway wonder what all the fuss is about with jobs and millions of un and underemployed people wonder how they will survive.

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor

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This morning (Sunday, April 8) I was at the laundromat here in beautiful downtown Ruskin, FL and picked up a copy of the local, Tampa area Jobs Finder free newspaper. I’m sure most all of you have seen these free papers for your local area.

As I skimmed this paper, it reinforced for me that there is no economic recovery, at least not in this part of Florida. When I picked the paper up, I noticed it was awfully skinny so I counted pages. Eight whole pages. With large ads covering each page so I counted up all the ads. Thirty-nine ads for 8 pages. Then I looked even closer. Two ads were for the paper itself. Another two ads were for “start your own cleaning company” services. Then I counted nineteen ads for various types of training programs. Not for jobs. For for-profit training programs that might, maybe, if you can afford it and complete it, maybe get you a minimum wage job if you can survive to complete the six month to a year plus training program being offered.

No ads for local delivery drivers. No handyman type ads. No manual labor/construction service ads. No help wanted for local businesses and restaurants. No ads for jobs for any of the thousands of job types one usually sees in these types of free newspapers.

Now granted, this is obviously anecdotal but I would wager that in a lot of parts of the country, this is the current norm. It isn’t much better with the ads on Craigslist or Monster or other online job search services. One of the metrics I use to check for job market improvements is the number of job ads from body shop/consulting services/head hunter agencies versus the number of ads from employers directly. My WAG is that the former ads are running nearly 10 to 1 over the latter. Businesses that are hiring directly are still able to be extremely picky about who they interview and hire.

But I guess we are not to worry. Everything must be getting better since the Beltway Village Idiots Pundits and Politicians seem to be in full pearl clutching mode after DNC Chair Rep. Debbie Wasserman Schultz went on CNN this morning and accused the Republicans of rooting for the economy to fail. Oh the horror of it all. Too bad that it seems to be beneficial to both parties to have the economy in doldrums. They all seem to forget that the 25M to 30M long term un and underemployed are each and every one, living, breathing, feeling human beings and not just statistics on the page full of numbers

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor

(photo: athoshun/flickr)

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As I was surfing through various news sites this morning (April 2), I noticed a number of articles discussing problems with the European and US economies which lead directly to the question I have posed in the title of this post:

How does an interconnected global economy avoid a global recession?

Unfortunately, I do not know the answer but if I had to guess, it would be to say “It can’t.”

The first article I noticed was from tha AP via Yahoo titled, “Euro unemployment spikes to record 10.8 percent.” Reuters reported it as “Euro zone unemployment reaches near 15 year high“:

Unemployment in the euro zone reached its highest level in almost 15 years in February, with more than 17 million people out of work, and economists said they expected job office queues to grow even longer later this year.

Joblessness in the 17-nation currency zone rose to 10.8 percent – in line with a Reuters poll of economists – and 0.1 points worse than in January, Eurostat said on Monday.

Economists are divided over the wisdom of European governments’ drive to bring down fiscal deficits so aggressively as economic troubles hit tax revenues, consumers’ spending power and business confidence which collapsed late last year.

As a companion to these was this blog post from Reuters on youth unemployment across Europe: Read the rest of this entry →

I want to believe (photo: xyotiogyo, flickr)

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In the coming up on two years that I have been writing about the economy, jobs, un and underemployment at this little corner of the Intertoobz, I’ve tried to admit when my predictions have been a bit off. Like here and here where last summer I predicted we would be in a double-dip recession by the end of 2011. While we didn’t fall back into recession on the time frame I envisioned, I still see it as quite possible.

I do hope I get to admit being wrong on that. I so very much want to believe the economy is really improving and the jobs picture will brighten but I just can’t shake the feeling that it is all smoke and mirrors.

Today, (Thursday, January 19), the report of Initial Jobless Claims for last week came out and once again, the economists are surprised. Via Bloomberg:

Claims plunged by 50,000 to 352,000 in the week ended Jan. 14, the lowest level since April 2008, Labor Department figures showed today in Washington. The median forecast of 41 economists in a Bloomberg News survey projected 384,000. A Labor Department spokesman said the decrease reflected volatility seen during this time of year. The four-week average, which smoothes out fluctuations, decreased to 379,000 last week from 382,500.

…snip…

Jobless claims were projected to decrease from 399,000 initially reported for the prior week, according to the Bloomberg survey. Estimates ranged from 363,000 to 405,000. The Labor Department revised the previous week’s figure up to 402,000.

I am not at all surprised that last week’s figures were revised upwards as that is the pattern over the last few months at least. I did not make an official prediction but will admit that I thought this week’s number would be back well above 400K. Once again, I do prefer to be wrong on these.

But then I see articles across the Toobz like this from Tuesday from US News (via Yahoo) with the headline “Are We Entering a Jobless Recovery?” and I just want to weep at the incredible combination of stoopid and duplicity to that gives us such a headline. Read the rest of this entry →

Author’s Note: Please take a few minutes and Join the Firedoglake Membership Program today. FDL provides the tools that help me and others extend our reach with our rants so we need to support FDL when we can.

So there I was, surfing around the intertoobz this morning when I came across this headline at CNN:

Stop vilifying venture capitalists

I have to admit, I was a bit taken aback at the headline as it surely did not reflect anything I had read.

In reading the piece, it starts off in a fairly standard fashion:

From 1984 to 1999, Mitt Romney was in charge at Bain Capital, an investment firm that sought out small and sometimes troubled companies that, with careful management and Bain-provided cash, offered the chance for big profits. Bain, like many venture capital firms, invested in startups with the hope that the profits they made on the successes would outweigh the losses they incurred on the failures.

Venture capital markets are simple things. Two groups of people who want to create new businesses come together. Venture capitalists have money but lack ideas. Entrepreneurs have ideas but lack money. When they get together, they trade and new businesses are born.

Then I realized that the author was not really saying much I could disagree with – other than his implication that Bain Co. was this benign entity only helping entrepreneurs to find the needed funding to bring their ideas to market as wiki defines it.

Today’s Boston Globe addresses this in this article.

Mitt Romney has long called himself a venture capitalist, experience he says helps him understand the economy better than other candidates for president. But he spent much more of his career in leveraged buyouts than in the investments in start-up companies known as venture capital.

Romney’s one true venture deal was Staples Inc., the office supply superstore, two years after he started Bain Capital. He wasn’t the first to discover Staples; another Boston venture firm introduced him to Staples founder Tom Stemberg. But Romney did lead the deal in 1986 in classic fashion – at first investing $650,000 in the start-up, then becoming its chief cheerleader and assisting with strategy to expand the seller of paperclips and pens.

…snip…

With leveraged buyouts, the investment firm purchases a mature company, partially with its money and with debt it transfers to the company. The new owners then usually streamline the business and seek to resell it.

For example, in the same year that Romney invested in Staples, he led the firm in its $200 million acquisition of Accuride, a wheel rim maker that was part of Firestone. Bain put down only $5 million and borrowed the rest, using junk bonds from Drexel Burnham Lambert. Eighteen months later, Bain resold the company and reaped $121 million in its first taste of the big time in the go-go 1980s.

Soon after, Romney steered Bain Capital more toward debt-driven buyouts. There was more money at stake and less risk for Bain than betting on untested technology.

My bold. And there you have it. While maybe starting life as a “venture capital” firm, Bain Co under Romney quickly turned to being Vulture Capitalists using the leveraged buyout.

At this point, I guess I should queue cue the chorus of voices shouting “FREE MARKET! FREE MARKET!”

Point of fact – there is no such thing. The LBO gets to use the debt interest to write down their taxes. By “streamlining” the business, the methods have often included cutting wages and benefits, selling off assets, and dumping pensions onto the taxpayers through the Pension Benefit Guarantee Corp. Dean Baker explains it quite nicely here and here. From the first link:

If private equity firms were successful in making companies more efficient and lowering prices to consumers, then it could lead to more jobs in the economy, even if there were fewer workers directly employed in the firms under its control. (This does not really apply in the current economy, where inefficiency means more workers are employed. This is good in the context of a poorly managed macroeconomy with high unemployment.)

However private equity firms do not profit just by making firms more efficient. Private equity also profits by financial engineering. For example, it is standard practice for private equity firms to load their firms with debt. This means that interest payments, which are tax deductible, are substituted for dividend payments, which are not tax deductible.

Private equity companies also often force firms into bankruptcy to offload debt. This can often include pension obligations, which are then taken over by the Pension Benefit Guarantee Corporation. Insofar as private equity companies are drawing their profit from this sort of financial engineering, it is not providing a benefit to the economy. In fact, it is a direct drain on the productive economy.

So much for the nonexistent “free market.” If a firm has to offload their debts and pensions on the taxpayers, there ain’t a diddly damn thing free about it.

While I am still trying to figure out how it is possible for the LBO group to incur debt for an entity that they are acquiring (don’t you have to actually own something before you can mortgage it?), I’ll close this little rant with this article from today’s Cincinnati Enquirer headlined “Tax breaks for jobs: Half fall short.” A story for another day.

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor