Wednesday, March 21, 2018

Job creation by entrepreneurs at historically low levels

Bloomberg reported that the Small Business Optimism Index reached its highest value since 1983. Read Bloomberg's story here.

Our experience with small business is a little different.  So we want to check in with the US census on the state of small and new business.

We have been looking at the US Census's web page on "Entrepreneurship and the US Economy" which collects statistics on small and new businesses. The produce a great set of charts show how job creation by new business and fallen off since 1997. The numbers tanked during the recession. Read the story here.

The web page has a bunch of great overview charts with links to the statistics. Charts 1,2 and 7 capture the issue.

(Chart 1). Shows the number of new businesses is trending up after the recession, but (Chart 2) the number of jobs created by new business is near it's all time low.  New businesses are creating far fewer jobs than the peak in 1997.  Chart 7 shows the majority of jobs for new business are created by firms larger than 250 employees while the number of jobs created by firms 1-250 has been decreasing. The trend accelerated during the recession.

We can speculate about what the charts are telling us

Basically, it looks like the many new firms are just freelancers and contract employees forced to start firms. They have no intention of growing a business.  They simply want to get paid by an employer looking to avoid benefits.

Second, job growth comes from larger firms which are over 250 employees. Small, small business is not generating jobs the way it used to.

Tuesday, March 20, 2018

New York Times Upshot finds racism limits Black boys opportunity. Read the story.

Black boys from similar backgrounds earn less then White boys as they grow into adults. Note the words: Similar Backgrounds !!!

Hats off to Raj Chetty, Nathaniel Hendren, Maggie R. Jones, and Sonya R. Porter for a really sharp analysis on a couple different levels.

1) They compared the opportunity for White/Black boys and girls showing the gaps are related to being a Black male.

2) Black women show no opportunity gap with White women, so the difference is not caused by single parent homes, education or ability. Sadly, you can also conclude that gender discrimination is equal across races.

3) The inequality gap persist as boys grow into men even when both groups grow up in households that have similar income, wealth, education, and family structure.

4) "If family cannot explain the difference, then what matters may lie outside the home: Neighborhood, the economy and society."

The real world is worse

The study looks at end points for people with similar starting points; but in real life Whites have an overwhelming wealth and income advantage, making real outcomes even worse.

Side notes: Black men may do poorly in the service economy which requires face-to-face contact. Also second generation Asian Americans are less mobile than new Asian immigrants.

Tuesday, March 6, 2018

Propublica's Story: "Black people forced into bankruptcy over parking tickets in Chicago" is really a larger story about shaking down poor people for money

Propublica has a great set of articles linking auto tickets in Chicago to a high number of bankruptcies in that city.  But the story is much larger than that. Cities like Chicago and Ferguson, Missouri would rather raise fees and fines than reduce the size of government. It's also a story about lawyers prey on poor people and how Black people get a bad deal from Chapter 11 bankruptcy in the south. Finally, the whole debt industry is stacked against poor people.  All the links are here.

Sadly, many of the rich are parasites of the poor. 

Some detailed interviews with people in the story

Here is the series overview page

A related article on poor people not being able to afford Bankruptcy

and finally two more article on Black people and chapter 13(reorganization and repayment) in the South

And finally, a couple stories about the debt industry

Monday, February 26, 2018

Trump budget proposes harsh cuts to social programs and huge jump in military spending

The Trump Administration released its 2019 budget proposal on February 12th, 2018

Here are some highlights. The budget has large reductions in social programs such as: HHS budget would be cut by 21%. HUD down 18%. Interior slashed 16%. Labor drops 21%. State cut 26%. Transportation reduced by 19%.

In the proposed budget, Defense spending is increased by 13% next year including $24 billion more for nuclear weapons. Defense spending would increase by 80% over the next 10-years compared to social spending.

There is also a separate two-penny (2%) across the board cut for all domestic, discretionary spending each year.  That’s about a 30% cumulative cut over the 10-year budget period.

Treasury budget includes an “integrity” program to reduce the gap between “taxes owed vs. taxes collected” by $29 Billion. IRS enforcement created a big issue with the XXX administration.

In S-2, you see some really brutal cuts to welfare, healthcare (Obamacare), student loans, disability, retirement, and Medicare. It also includes huge reductions in “other,” unnamed programs. Interestingly, it includes $1-2 billion for paid parental leave. The paltry item is split out on its own line in the appendix.

In S-4, the proposed budget, Trump wants to increase defense spending by 80% relative to social programs. Right now, the money spent on social needs and defense is roughly equal. Trump proposes to make defense spending roughly 80% larger than social program by 2028.
Eliminates the MBDA – Minority Business Development Centers. Turns MBDA into a “policy” office for the federal government

The GDP is expected to grow by 2.8% and the inflation rate will average 2.3% over the time span of the budget. The year deficit falls from $665 B (2017) to $363 B in 2028.

 Major Categories in the Budget

% Change

$19 Billion
-$3.7 Billion
$9.8 Billion
+$546 MM
$686 Billion
+$80 Billion
$60 Billion
-$7.1 billion
$29 billion
-$900 Million
$46 B
+$3.4 Billion
$39.2 billion
$11 B
-$2.2 B
$28 B
-$345 MM
$9.4 B
-$2.6 B
$25.8 B
-$9 B
$15.6 B
-$3.7 B
$12.3 B
-$392 MM
$83.1 Billion
+$8.7 B

Army COE
$4.8 B
-$480 MM
$5.4 B
-$2.8 B
$19.6 B
+$500 MM
-$53 MM

Friday, February 16, 2018

Top Black Business and Economic Stories for Jan Feb 2018

Top Stories

The US African American unemployment rate recorded an all time low of 6.8 percent in December, 2017. The rate was the lowest ever recorded by the Bureau of Labor Statistics. However, the rate jumped back to 7.7 in January (when the author was laid off from his current job).

The current employment press release plus additional historical releases are available here:

President Trump and Jay-Z feuded publicly over the Black unemployment rate.

The low unemployment rate is also a distraction from another important issue: Basically the new jobs created really stink! The jobs feature low pay, poor working conditions, few benefits, no training and no promotional path. So, who cares how many bad jobs we create; give us some good jobs!

As of Feb.14th, VP Mike Pence is stilling claiming the Black unemployment rate is at a record low despite a spike up to 7.7%. 

The mistake illustrates two points: One, the Black unemployment rate is volatile and moves around a lot.  Two, the current presidential administration is incredibly uninformed and naive about economics, Black unemployment or the stock market. Facts just don’t seem to matter.

Finally, Brookings has a more detailed piece on the same issue. Black Unemployment at Record Low.

Reveal has a big, important story on continuing mortgage loan discrimination (redlining) in cities against Blacks

and another story about  specific banks who are discriminating in mortgage lending

Associated Press also has the story in an easier to read form

General News

Entrepreneur magazine has a slide show of 7 female black entrepreneurs.

Interesting entrepreneurs in the article include:

Arlan Hamilton – Back Stage Capital
Tracy Reese – Tracey Reese Designs
Jessica O. Matthews -- Uncharted power – power from movement including toys and soccer balls

Janice Bryant Howroyd seems to be the media’s favorite Black entrepreneur of the month during February. She is pretty much everywhere.
Several publications have profiles of Janice Bryant Howroyd, who is founder and chief executive of ACT-1 group, a personnel services company. The company has done well as large corporations down-size and outsource Human Resource functions.

Another story about lack of diversity in tech. Article speculates on diversity increasing revenue by $400 Billion. A little bit of a stretch. 

The week of Feb. 11th to Feb. 18th, 2018 is also Black restaurant week

National Public Radio also has a story

Jessie Jackson is calling for southern corporations in Tennessee, Arkansas and Mississippi to increase Black hiring and support of Black Business. The Memphis Commercial Appeal has the story.

Politics and Policies

The partisan creation of election districts (gerrymandering) has polarized the political process.

Research Papers

Here is an old but important link to “Diversity in High Tech,” May 2016, US EEOC

Executive Summary

Full report

Interesting / Other

T-shirts with famous Black people as colleges and universities. We like university of Baldwin.

The “Buy the Block” website aims to get Blacks to invest in real estate.

And finally, deeper reads

Go back and read the Reveal story on mortgage discrimination right now!!!

Monday, February 5, 2018

Hispanic/Latino Unemployment Rate also Hits Record Low

The Hispanic or Latino unemployment rate in the United States also hit a record low of 4.8% during June 2017 and November 2017. The recent record high was in August 2009 when the rate hit 13.0%.

There are large difference between Hispanic male and female labor participation rates. About 80% of Hispanic men 20 and older work while only 58% of Hispanic females work. The male unemployment rate for Hispanic men is 4.3% while the female rate is 4.5%.

Friday, January 26, 2018

Decreased competition to blame for flat wages: Both Monopoly and Monopsony contribute to the problem

We are finally getting some good research on why wages have not grow in the US for 45 Years.  The answer is decreased competition and corporate over-consolidation.  When companies have monopoly and monopsony power they raise prices and lower the cost of inputs. Labor is a key input.

Monopoly is a market with a limited number of sellers. Monopolists charge higher prices because they face little selling competition. Monopsony is a limited number of buyers. The pay lower buying prices because of limited buying competition.

Once again, it's corporate concentration, greed and power. Yes, we were just as surprised as you.  Corporations are using monopoly and monopsony power to drive up prices and pay low wage to increase their profits. Who knew?

Bloomberg has a good write up of the issue. The Bloomberg article refers to a paper, from Simcha Barkai at the London School of Business. He examines the declining returns to labor, also known as the labor share of income in the economy.  The paper also finds a declining return of income for capital as well.  So where does this "missing" money go? To profits.  Corporate profits are again at record levels.

The author suggests the reason for surging profits is decreased competition and monopolization. A link to the paper can be found here at "Declining Labor and Capital."

Slate has similar article and link to a NBER paper which finds that employers are using monopsony powers to hold down wages. Monopsony is the condition of a market with too few buyers.

Tuesday, January 23, 2018

EEOC quietly cancels gender pay data collection in August 2017

On August 29, 2017, the Equal Employment Opportunity Commission, quietly canceled the planned data collection from US business for pay by gender. You can read the announcement here:

EEOC cancels pay data collection

The EEOC was planning to collect data on pay and hours worked in addition to the current mandate of employees by race, sex, ethnicity and job category. The additional data to be collect was pay by salary bands. The information is a relatively simple addition to the current data.  Many HR departments already perform the same analysis internally.

The data would have provided a view of how widely women are paid less than men.

The move to cancel the Obama era regulation was widely expected. Industry groups lobbied heavily against the proposal during review phase calling it burdensome.

Proponents, including this blog, argued the data was needed to measure the gender pay gap.

Some HR consultants already started preparing for the change last year. A quick look at a presentation by HR consulting company: Gerstco shows the power of collecting the data.

The company has a great presentation on the change which can be viewed here.

The data would have allowed HR professionals to create reports and graphics such as the one of page 28 of the presentation which shows which job categories have pay equity and which do not. Green categories have gender pay equality while the red do not. Absolutely brilliant.

Monday, January 22, 2018

Mo'nique calls for Boycott of Netflix over Gender and Racial Pay Differences

The comedian, Mo'Nique, (Real name Monique Hicks)  posted a video on Instagram accusing Netflix of gender bias and racial bias. She claimed she was paid $500,000 for her show while Amy Schumer was paid $11 million.

While we believe the bias is true, it's true, this type of accusation is very hard to prove. Also an entertainers appeal is linked to biases in the larger world not just the entertainment industry.

Obviously Chris Rock, Dave Chappelle and Amy Schumer are bigger than Mo'Nique. But how much bigger ?? And how about Wynda Sykes ?  What is a fair amount these artists should be paid?

You would want to regress the artist Pay, Sex, Race and Age against studio earnings or some measure of popularity. You might want to check over time and at different career points.  Definitely worth a quality economic research paper for someone.

Tuesday, January 16, 2018

Black Unemployment Rate Drops to Historic Low: 6.8%

The Black unemployment rate dropped to a record low of 6.8% as reported in December 2017.  The rate was the lowest recorded by the Bureau of Labor Statistics. The Black Unemployment data series goes back to 1972.  The previous low was 7.0% in April 2000.  The high was recorded in 1983 when the rate hit 21.2%.  The Black unemployment rate has averaged 12.0%. over the 47 years the data series has been collected,  

Also of interest is the Black / White unemployment ratio. It also dropped to one of it's lowest reported values: 1.66 or 166%.  Historically, the ratio between Black and White Employment rates has been about 2 to 1. Some economists believe the ratio is a proxy for discrimination in the labor market against Black people.

That's the good news.  The bad news is that the Black Labor Force participation rate is a 62.1% or only 62 percent of Black workers participate in the civilian labor market.  The rest are choosing not to work:  They are retired, disabled, incarcerated or working outside the formal economy.

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