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Economists try to explain why they were wrong on March jobs forecasts

10:49 am in Economy, Jobs by dakine01

Percent Job Losses in Post WWII Recessions, calculatedriskblog.com

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Once again, the economic community is scrambling to find the reasons why they were suprised by the March 2012 jobs report. The monthly report from ADP had private sector jobs at 209K increase for March 2012 which apparently led many economists to predict a similar number for the official report from the Bureau of Labor Statistics that was released on Friday.

Oops. Wrong again.

We have been seeing stories such as this from today’s NY Times about the “strong” jobs growth from earlier this year:

Although signs pointed to a strengthening economy earlier this year, the jobs report on Friday came with a message: don’t get ahead of yourself.

The country’s employers added a disappointing 120,000 jobs in March, about half the net gains posted in each of the preceding three months. The unemployment rate, which comes from a separate survey of households rather than employers, slipped to 8.2 percent, from 8.3 percent, as a smaller portion of the population looked for work.

120K jobs is not much more than is necessary to maintain the status quo of population growth (90K is the figure Dean Baker uses) and even 200K, while growing, does not appreciably put a dent in the long term un and underemployment rates. When there are 13M to 14M unemployed and 25M to 30M un and underemployed, 200K jobs is just not going to help all that much.

Surprisingly to me, the Benbernank may have been more realistic than many others (via Bloomberg.) Of course, the article goes on to quote Fed regional presidents as saying that the numbers, no matter how soft, probably won’t cause the Fed to actually, you know, do something to ease the un and underemployment problem. No matter that a primary part of the stated Federal Reserve Mission statement is to pursue “maximum” employment.

It does appear that the consensus being reported is to blame the warm weather from January and February for the lighter number for March. Here’s Dean Baker’s take: Read the rest of this entry →

I really do want to believe in the economy…

2:56 pm in Uncategorized by dakine01

I want to believe (photo: xyotiogyo, flickr)

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 →

Improvement, yes, but not that much improvement

1:32 pm in Economy, Jobs, Unemployment by dakine01

The Scariest Chart - Calculated Risk

The Scariest Chart – Calculated Risk. Click to embiggen

 

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OK, so you might have noticed a few headlines the last few days talking about how the economy is getting better, unemployment is dropping, and we’re all going to win Powerball tonight and retire tomorrow with our sparkly ponies.

Yeah, I ain’t holding my breath on any of those things either.

Yes, the economy is getting a little better. Slightly. But not to a level to make an appreciable difference to the millions of long term un and underemployed. As David Dayen noted at FDL News on Friday:

The reason that the unemployment rate was able to tick down, however, is that the labor force participation rate remained unchanged at 64.0%. This low participation rate means that, even with the economy growing and the job market improving, a fair number of able-bodied workers have not rejoined the labor force. When they do, and when the labor force participation rate increases, that will put upward pressure on that topline unemployment rate. And unless everyone came into found money, that’s fated to happen. The employment-population ratio also remained unchanged in December (58.5%), despite the job additions. The average workweek and average pay went up very slightly over the month.

Even if those folks who have given up and left the workforce were to stay away and not return, it will still take years for the current problems to right themselves.

Let’s pretend that we stay on the current level of seeing the official unemployment rate drop .2% each month. At the end of 2012, the unemployment rate would be at 6.1%, a number that sounds much better than it has been. But that number would still not be addressing the millions of folks working part time (probably minimum wage) jobs who want full time employment. Nor does it account for all the folks forced into being “independent contractors” or all the college grads from 2008, 2009, 2010, and 2011 still trying to get their first position in their fields.

Just today (Wednesday, January 11), MSNBC had this post with the headline, “Four job seekers for every opening, report shows”: Read the rest of this entry →

Limited Good Economic News Won’t Last

10:11 am in Uncategorized by dakine01

"Perishable!" by Young Master Sunshine on flickr

"Perishable!" by Young Master Sunshine on flickr

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You might have seen some headlines from yesterday on the weekly report of Initial Unemployment claims about those claims “falling sharply” (Reuters headline phrase):

Applications for unemployment benefits fell by 37,000 to a seasonally adjusted 391,000 in the week ending September 24 from an upwardly revised 428,000 the prior week, the Labor Department said on Thursday. 

My first prediction today is that the 391K figure first announced will be revised upwards when next week’s report comes out. My second prediction is whatever good news that can be wrung from this report will have a limited overall effect.

CNN’s report was a bit more circumspect with this:

The recent drop to 391,000 maked the lowest level since the week of April 2, when 385,000 new claims came in. 

Still, economists cautioned against getting too excited about the better number. It’s just one week of data, and according to a government spokesman, seasonal adjustments could have impacted the calculation.

…snip… Read the rest of this entry →

These are only problems for the top 1%

12:12 pm in Uncategorized by dakine01

Sign reads: "War On Greed - starring Henry Kravis and his homes" Photo: Brave New Films, on flickr

Sign reads: "War On Greed - starring Henry Kravis and his homes" Photo: Brave New Films, on flickr

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If you read me often enough, you have probably noticed that I tend to check various news and opinion sites throughout the TradMed each morning, after I’ve spent a few minutes reviewing emails and jobs sites. Most of the time, I just shake my head at the various levels of stupidity I find, not being able to quite give it the full YOU HAVE GOT TO BE F*CKING KIDDING ME! treatment so richly deserved. Then there are days like today where teh stoopid is so truly dumbfounding.

Today, we have Henry Kravis, co-founder of private equity firm KKR, sending up a fine whine to Bloomberg on how tighter credit rules are forcing the private equity firms to kick in more of their own money and making buy-outs more expensive. Sayeth Mr Kravis:

“As the debt markets tighten and the cost of capital goes up, something has got to give,” Kravis said yesterday at the Bloomberg Dealmakers Summit in New York. “You just have to pay more.” 

Kravis, 67, said the cost of capital for a leveraged buyout has risen more than 2 percentage points since the firm agreed to buy Pfizer Inc.’s Capsugel unit in April, forcing buyers to put up more cash for deals and borrow less. Uncertainty in the equity markets also is making it more difficult to reap profits through initial public offerings or sales of companies owned by private-equity funds, he said.

…snip… Read the rest of this entry →

Wait! I thought the South was where all the jobs are!

12:30 pm in Uncategorized by dakine01

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Jobs.

Although the official time frame for “The Great Recession” was December 2007 through June 2009, for the millions of long term un and underemployed, the daily reality is that not only has the recession never ended, it is more applicable to The Great Depression than it is to any of the various acknowledged recessions since the end of WWII. One of the articles of faith from the always surprised Economists is that job creation lags other indicators, yet here we are, over two years since the “end” of the last recession and the official unemployment rate is still at 9.1% with the underemployed figure at 16.2% for August 2011.

Each week on Thursday, there’s a report of the Initial Jobless Claims for the week before. Like many of the earlier weeks, last week’s report forced the headline writers to find the lone tidbit of almost good news to concentrate on in their ledes. From Reuters:

(Reuters) – Americans filed fewer new claims for jobless benefits last week but the decline was not enough to dispel worries the economy was dangerously close to falling into a new recession.

Applications for unemployment benefits dropped 9,000 to 423,000 in the week ended September17, the Labor Department said on Thursday. That was roughly in line with expectations.l

Of course, once again, the earlier report had been revised upwards (from 428K reported on September 15). It is not going too far out on a limb to predict that the 423K reported for September 22 will be revised upwards on September 29.

I did not go too far out on a limb back in June when I first predicted a “double-dip” and it still was a short limb when I reiterated the prediction in July. Nouriel Roubini has made the same prediction last Thursday documented from his tweets (via Business Insider). A few days earlier (September 19), Roubini had written this op-ed on how to keep the coming Recession from being a Depression.

Economist Magazine offered this analysis of Growth and jobs across the country on September 15. Their close:

Two things seem clear, however. Across the country, a greater level of demand growth is necessary to boost employment. And at the same time, there are places within the country experiencing strong growth which aren’t producing the jobs we’d expect them to. If America could find ways to make San Jose just a little more like Dallas, that might make a meaningful dent in America’s employment problems.

MSNBC offered this article with a touch of good news involved, i.e., that there is some hiring going on, although not to a level necessary to reduce the official un and underemployment rates. One point to note from that MSNBC link – all the reasons offered for the slow hiring have to do with demand levels and not the skills of the workers.

Today’s (Tuesday, September 27) NY Times had this article analyzing some BLS figures on how the economic map is being redrawn due to the lingering economic ill-effects:

When the unemployment rate rose in most states last month, it underscored the extent to which the deep recession, the anemic recovery and the lingering crisis of joblessness are beginning to reshape the nation’s economic map.

The once-booming South, which entered the recession with the lowest unemployment rate in the nation, is now struggling with some of the highest rates, recent data from the Bureau of Labor Statistics show.

Several Southern states — including South Carolina, whose 11.1 percent unemployment rate is the fourth highest in the nation — have higher unemployment rates than they did a year ago. Unemployment in the South is now higher than it is in the Northeast and the Midwest, which include Rust Belt states that were struggling even before the recession.

…snip…

The long cycle of “lose jobs, gain jobs, lose jobs” that kept Georgia’s unemployment rate at 10.2 percent in August — the same as it was a year earlier — is illustrated by Union City, a small city on the outskirts of Atlanta.

It suffered a blow when the last store in its darkened mall, Sears, announced that it would soon close. But the city had other irons in the fire: a few big companies were hiring, and earlier this year Dendreon, a biotech company that makes a cancer drug, opened a plant there, lured in part by state and local subsidies.

Then, this month, Dendreon said it would lay off more than 100 workers at the new plant as part of a national “restructuring.”

…snip…

In a sign of how severe the downturn has been, the Brookings analysis found that only 16 of the nation’s 100 largest metropolitan areas have regained more than half of the jobs they lost during the recession.

So here we are. After all the years of hearing about the Rust Belt failing everyone and how the South was the leader in everything, well, maybe not so much. Businesses will accept all the subsidies and tax breaks in the world, but they will cut and run at the slightest sign of problems. Of course, I’m from a small town in Kentucky that bragged over the years about bringing in jobs from the Rust Belt (make sure you use plenty of Post-It Notes to keep the folks in my hometown working). I would almost suggest the governors of Georgia and South Carolina might want to contact their rust belt counterparts for some advice except that most of the governors involved seem to be intent on learning the wrong lessons.

And because I can:

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

“Good News” but Not that Good.

7:54 am in Uncategorized by dakine01

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In this post I wrote Tuesday, I predicted that the ADP Jobs report for June would come in at around 50K private sector jobs versus the economists prediction of 100K. Well the report is out (via Reuters) and I was way wrong while the economists were also under:

Payrolls processor ADP said on Thursday private sector employment increased 157,000 after a modest 36,000 gain in May, and beating economists’ expectations for a 68,000 rise.

The original report in May (as I quoted and linked to Reuters in this post) was actually at 38K jobs so 36K is a downward revision. For what it’s worth, I do like when I am wrong on these points, especially when I’m wrong and the numbers come in far better than I thought.

Now 157K jobs sounds like something to cheer about and I guess in a way it is but we shouldn’t get all giddy with excitement quite yet. After all, the economy needs to add 100K to 150K jobs each month just to absorb new folks coming into the work force each month so 157K jobs does not dent the long term un and underemployment numbers by much. Tomorrow’s numbers from the BLS for June will include public sector as well as private sector and it is likely the public sector jobs lost will push the 157K number down significantly. And I’ll say right now that July will be worse. How can I say that? Many states start their fiscal years on July 1 and the budget axes will be showing the results as Politico discusses here: Read the rest of this entry →

Sluggish Economy Stubbornly Resists Lack of Effort to Stimulate It

9:04 am in Uncategorized by dakine01

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This past week, President Obama was in Pittsburgh to tout a government/industry/academia initiative for technology. CNN had this to say:

President Barack Obama — whose poll numbers have dipped in recent weeks amid a stubbornly sluggish economic recovery — touted the hard-hit manufacturing sector Friday, saying the country’s best production days may well lie ahead.

“We are inventors, we are makers, and we are doers. If we want a robust growing economy, we need a robust manufacturing sector,” Obama told a crowd at Carnegie Mellon University, the school founded by steel industrialist Andrew Carnegie nearly 100 years ago.

The NY Times:

President Obama visited a university research center in Pittsburgh on Friday to announce a new partnership between the government, industries and leading universities to speed the movement of technological advances to commercial users. The trip was the latest of his increasingly frequent travels to battleground states to showcase administration efforts to create manufacturing jobs.

After touring the National Robotics Engineering Center at Carnegie Mellon University, a high-technology facility adjacent to a rusted factory symbolic of the area’s industrial past, Mr. Obama said federal agencies would invest more than $500 million to seed the initiative. Of that, $70 million is to go to robotics projects like one he viewed at the center: a boom-box-size robot that inspects sewer pipelines, made by a company started by a Carnegie Mellon professor.

Now, I am all for technological advances. My professional field is Software Quality Assurance and Testing and I have worked in every phase of software development projects. I remember all the “world of the future” type stories that Disney and other film makers would do, showing their visions of how robots would affect the world of the 21st century, making life so much easier for everyone from the assembly line worker to the housewife in her kitchen. Yet for all the potential this initiative may have for the long term future, it does nothing for the “stubbornly sluggish economic recovery.” The US economy needs something along the lines of $500B investment (and that is probably no where near enough) in initiatives that bring jobs now, not five or ten or twenty years from now.

We need good jobs for people so that they don’t need to juggle four jobs just to eke out a living (via the NY Times):

Some of these workers are patching together jobs out of choice. They may find full-time office work unfulfilling and are testing to see whether they can be their own boss. Certainly, the Internet has made working from home and trying out new businesses easier than ever.

But in many cases, necessity is driving the trend. “Young college graduates working multiple jobs is a natural consequence of a bad labor market and having, on average, $20,000 worth of student loans to pay off,” said Carl E. Van Horn, director of the John J. Heldrich Center for Workforce Development at Rutgers.

…snip…

An entry-level salary often doesn’t go very far these days. According to a study by the Heldrich Center, the median starting salary for those who graduated from four-year degree programs in 2009 and 2010 was $27,000, down from $30,000 for those who graduated in 2006 to 2008, before the recession. (Try living on $27,000 a year — before taxes — in a city like New York, Washington or Chicago.)

Many earn even less than $27,000. Maureen McCarty, 23, who graduated from American University in 2010 with a journalism degree, makes $25,000 before taxes as managing editor of TheNewGay.net, a blog focusing on gay issues, with no benefits like health insurance or a 401(k). The salary doesn’t cover her expenses, so she often baby-sits five nights a week for six families in the Washington area.

See this for my wag on trying to survive on minimum wage – and I was not describing trying to do so in New York City or Dee Cee.

MSNBC had this the other day on how people who are un and underemployed pay their bills:

Transamerica enlisted polling firm Harris Interactive to survey 668 people who had been fully employed but are now unemployed or underemployed, meaning they are working part-time but would like to be working full-time.

Not surprisingly, the most common source of funds were savings and unemployment benefits, with half of those surveyed reporting that they rely on each of those. About one-third also reported relying on credit cards and/or a partners’ income.

When the unemployment runs out, the retirement funds don’t last a whole lot longer either, believe me.

MSNBC also had this article last week on jobs going unfilled due to “lack of qualified applicants:

Despite an unemployment rate of 9.1 percent in May, nearly three million job openings went unfilled — up from roughly 2.1 million when the recession ended in June 2009. To be sure, that’s not nearly enough jobs for the roughly 15 million Americans who are out of work.

But many of those positions remain unfilled because employers can’t find qualified candidates to do the work. From manufacturing to health care, employers report that they can no longer rely on hiring entry level workers and training them on the job.

…snip…

Darlene Miller, CEO of Permac Industries in South Burnsville, Minn., said the days are long gone when a new hire could learn how to operate machinery on the job. Miller said she would add another half-dozen workers to her payroll of 38 workers — if she could find people skilled at operating the high-tech equipment she recently purchased to boost productivity.

…snip…

Miller is a member of President Barack Obama’s Council on Jobs and Competitiveness, which recently announced a goal of turning out an additional 10,000 American engineers annually by leaning on the private sector to boost university funding, add internships and create other incentives.

So apparently while sitting on record amounts of cash, industry is willing to invest in technology but not people. Again from the MSNBC article:

“In the ’60s and ’70s you could go from an entry level job on the loading dock to manufacturing engineer or accountant to maybe a manager in a corner office,” said Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce. “It doesn’t work that way anymore. The qualifications have gone up. The commitment between employer and employee has gone down. And (employers) don’t want to take five years to get you ready. They want you ready to start working — and learning — the day you walk in the door. “

What this article conveniently misses is that a lot of businesses, in their search for a better deal in a new location, create these types of problems for themselves. They want the state and local governments to subsidize the building of new facilities; they want the long term tax breaks and credits to “create new jobs” in the new locale but they are still not willing to bring a corresponding level of investment in the people to develop the necessary skills themselves. Friday’s Hartford Courant had the results of a poll of area businesses:

Fully 25 percent of the firms in the Hartford-Springfield region said they had been approached by other states, according to a report issued Friday by the Connecticut Business and Industry Association. More than 650 firms participated in the 2011 Hartford-Springfield Business survey.

…snip…

Forty-three percent of respondents said the region’s quality-of-life is its greatest asset; 30 percent of firms surveyed said the area’s best asset is its proximity to customers, while 17 percent cited the area’s skilled work force as its primary asset.

If management does not actually value proximity to a skilled labor force, then management should probably not whine about not being able to find workers with appropriate skills.

Now, poaching of businesses has long been a staple of life in the US. Growing up in small town Kentucky, I remember when the factories first came to town from the upper parts of the Midwest. I also recall how easily a factory could shut down and move on if a union were brought in.

I saw this story this week on the governor of the state in which I reside wooing of the Chicago Mercantile Exchange. Of course, if the CME were to move from Chicago to Florida, it would not help the overall economy of the US as it would destroy a corresponding job in Illinois for every job it created in Florida. And how soon would it take for the CME folks to start whining about not being able to find qualified workers in Florida.

It just seems that too many corporate executives look only at the next quarterly profit statement rather than at a long term sustainable future, for their companies and for their workers.

And because I can:

Cross posted from Just A Small Town Country Boy

Executive Pay and “Irrational Exuberance”

11:07 am in Uncategorized by dakine01

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This weekend, the Washington Post started a series on Executive compensation. The first article highlights the compensation discrepancies between the rich and the rest of us while the second covers stock options and bonuses. From the first article:

It was the 1970s, and the chief executive of a leading U.S. dairy company, Kenneth J. Douglas, lived the good life. He earned the equivalent of about $1 million today. He and his family moved from a three-bedroom home to a four-bedroom home, about a half-mile away, in River Forest, Ill., an upscale Chicago suburb. He joined a country club. The company gave him a Cadillac. The money was good enough, in fact, that he sometimes turned down raises. He said making too much was bad for morale.

Forty years later, the trappings at the top of Dean Foods, as at most U.S. big companies, are more lavish. The current chief executive, Gregg L. Engles, averages 10 times as much in compensation as Douglas did, or about $10 million in a typical year. He owns a $6 million home in an elite suburb of Dallas and 64 acres near Vail, Colo., an area he frequently visits. He belongs to as many as four golf clubs at a time — two in Texas and two in Colorado. While Douglas’s office sat on the second floor of a milk distribution center, Engles’s stylish new headquarters occupies the top nine floors of a 41-story Dallas office tower. When Engles leaves town, he takes the company’s $10 million Challenger 604 jet, which is largely dedicated to his needs, both business and personal.

The evolution of executive grandeur — from very comfortable to jet-setting — reflects one of the primary reasons that the gap between those with the highest incomes and everyone else is widening.

And from the second article: Read the rest of this entry →

Just How Many Speeches Did Ben Bernanke Give Yesterday?

6:46 am in Uncategorized by dakine01

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Federal Reserve Chairman Ben Bernanke gave a speech yesterday (Tuesday, June 7) to the International Monetary Conference in Atlanta, GA. Only one speech. Yet looking around the Toobz at the various headlines at news sites on this speech, it must have been an all things to all people speech as I’ve found at least four different perspectives presented, some of them directly contradictory.

The most prevalent theme appears to be The Benbernank as cheerleader (links embedded in titles):

Then there are the deficit hawk headline writers:

AP via USA Today: Bernanke: We ‘urgently’ need to fix the debt problem (with the same AP article as MSNBC)

NY Times: Fed Wants Priority Put On Deficit

The almost cheerleader:

And finally, the seemingly contradictory:

So taken all together, it seems that things are bad but getting better except where they aren’t; everything is going to be just fine; we need a stimulus except where we don’t; and except for that pesky jobs thing, it’s all good.

Meanwhile, in today’s ‘water is wet’ articles, Jamie Dimon whines to the Benbernank about the new banking rules:

JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon asked Federal Reserve Chairman Ben S. Bernanke whether regulators have gone too far by reining in the U.S. banking system and are slowing economic growth.
Read the rest of this entry →