Monday, November 13, 2017

October Jobs Report: Jobs rebound in October; Wages drop one cent.


Note: The Evil Black Economist is  demphasizing the monthly labor market report. The labor economy is close to full-employment a the current wage.  It is likely to remain there for the forcible future. Instead,  the fundamental problem in the US economy is now wages and inequality not employment. 

October Jobs Report

The labor economy in the US is added 251,000 jobs in October 2017 as the unemployment rate dropped to 4.1% . It has been stable within a narrow band for the past two years. Wages dropped by -0.01 cents in October. The number of unemployed was 6.5 millon down 281k from last month and the number of long-term unemployed was recorded at 1.621 million.

However, the unemployment rate dropped because a record 765,000 people left the labor force. Different racial groups left the labor market at different rates: -662,000 Whites left the labor force while only -88,000 Blacks and -310,000 Hispanic/Latinos left.  And 21,000 Asians joined. Of the 765K that left 367,000 were men and 241,000 were women.

There were gains in healthcare, business services and food services. Since October 2015, the national unemployment rate has dropped about one percentage point (from 5.5% to 4.1%).  Blacks have made the largest gain during the period as the Black unemployment fell from 10.2% in October 2015 to 7.5% in October 2017.

Black Labor Force Participation Rate set to pass White Rate in next two years

On an interesting economic note, the Black labor force participation rate is going to pass the White and US average participation rate in the next year or two. Whites are dropping out of the labor force at record numbers. 







The chart below looks at participation rates by race.


Black Unemployment Rate




The calculated Black U-6 rate, the widest measure of unemployment. 




Ratio of Black Unemployment to White Unemployment Remained Close to the Average

Economists look at the ratio of Black Unemployment to White Unemployment as a good proxy for discrimination in the employment market. The long term Black unemployment rate has remained at about 1.8 times the White unemployment rate for 20 years.














Friday, November 10, 2017

Economic Challenges in the Black Community: Nice Summary


The Joint Economic Committee of the US Congress issued a report in April, 2015 on the Economic Challenges in the Black Community.  It looked at three areas: Unemployment, Wealth and Poverty. Black people are still far below Whites by many economic measures.

So little has changed that the report could have been written yesterday.

Tuesday, November 7, 2017

Off Shore Tax Avoiders in the Spot Light



Paradise Papers

The International Consortium of Investigative Journalists has released a collection of articles on global tax avoiders called the "Paradise Papers." They look at strategies corporations like Apple, very rich people like Wilbur Ross or public figures like the Queen of England use to minimize their taxes.

The OCED estimate that tax avoidance costs governments around the world up to $240 Billion dollars a year.

The exposure of the super-rich tax avoiders is a good way to build support for cracking down on these tax cheaters. All of us honest taxpayers have subsidized these tax avoiders for too long. Mixed into the money from these tax avoiders is money from drug dealers, kleptocrats, greedy corporations, and oligarchics. It is passed through shell companies and hidden by legal foreign and domestic secrecy laws.

People are realizing how much damage this missing tax revenue does to the real economy.

1) Tax avoiders cheat all of us. They make us all pay more for education, cops, schools, roads, military and social programs.
2) The show there is no need for a corporate tax cut as proposed by the Trump administration and the US republicans. Nor should there be a lower rate on the repatriation of foreign profits. If anything, a tax cut will force other jurisdictions to lower their own taxes.
3) States and nations have to work together to stop tax rate shopping by companies
4) The US and the UK are the biggest sponsors of tax avoidance.

Tax avoidance issues previously arose in 2015 when Google, Apple and Starbucks reported close to zero taxes on more than $200 billion in income. The EU is in court seeking to force Ireland to collect back taxes from Apple.

The US also practices tax avoidance. Delaware is the largest US tax haven

https://qz.com/656998/if-you-think-panama-is-bad-wait-until-you-hear-about-delaware/

Delaware generates about a quarter of it's $4 billion dollar budget from business fees. Last year they earn $976 million in fees, while letting companies avoid much larger tax bills.

http://budget.delaware.gov/budget/fy2017/documents/operating/vol1/budget-book.pdf


Monday, November 6, 2017

Social Trust: Why the common good is so hard to achieve



Selfishness in the United States

A while back I was looking at the research on selfishness in the US. We all believe that people in the US have become more selfish over time as their economic opportunities have declined.

There was a lot of the research, but it was on individual selfish decision making not the larger effect on society. It's the kind of stuff that get a researcher academic tenure, but keeps policy makers and the public in the dark.

The best I could do was a Pew Research Survey from 2015 that said 68% of Americans believed their fellow countrymen were selfish.   Or another Pew study about how much people: "Trust their neighbors." There is some good news: a lot of research says people are naturally inclined to help one another and not be selfish.

But trying to research and measure selfishness for a whole group or population was much more difficult.  There was no selfishness index. Enter "Social Trust."

Social Trust

It turns out I was using the wrong term. Selfishness is the individual behavior; Social Trust is the collective behavior. Social trust is a great predictor of a country's economic performance; it's more accurate than skill level. It is as important as capital investment.

It's also associated with non-financial measures of happiness and well-being. Pew Research has a survey from 2007, which documents the basics of social trust.

So does a UK Goverment website. The Behavioral Insights Team has a discussion from November, 2015 on social trust.

If you are interested in how other countries score, you can check the World Values Survey.

Sunday, November 5, 2017

"Economic Despair" tied to poor student performance in high inequality states



A study from March 2016 describes one of the rotten effects of inequality: "Economic Despair." People give if they don't think their efforts will be rewarded. The study finds that low-income boys in high inequality states drop-out a higher rates than low income boys in low inequality states. Regardless of school performance.

The authors attribute this to student believing: "they cannot climb the economic ladder," so they give up and drop out of high-school. They call this effect "economic despair."

The study from the Brookings Institute, is called: "Income Inequality, Social Mobility, and the Decision to Drop Out Of High School."




Tuesday, October 31, 2017

Study find no change in racial discrimination in hiring for past 25 years!


Sad but True. Hiring Discrimination has not Changed Since 1989

A study published in the Proceedings of the National Academy of Sciences found that discrimination in hiring has not changed for Blacks since 1989. There was a slight decrease for Latinos during the same time period.

The four researchers looked at every hiring discrimination study since 1972. They chose to focus on the period 1989 to 2015 when better studies became available. They gathered up all the data from each of the individual studies to build a larger, "meta" data set.  The data contained about 56,000 applications for 26,000 positions in total. The studies took into account education, gender, and local labor market conditions.

Based on the studies, Whites receive about 36% more call backs than Blacks and 24% more callbacks than Latinos. The results have not changed in 25 years.

The study was published in the Proceedings of the National Academy of Sciences. Here is a link tothe  PNAS study on hiring discrimination. And the abstract. The paper looks at an assembled data set from multiple hiring discrimination studies.

It's sad to say: We have made NO progress on hiring discrimination in 25 years.

It is also interesting to note that during approximately the same period, 1980 to 2017, wages for the majority of workers have been flat. So, with more workers fighting over fewer good jobs there is no  incentive to reduce hiring discrimination.

EBE Note #2: You have to hand it to the National Academy of Sciences for solid, large scale, impactful research.  They tackled immigration and pretty much settled the debate about the true cost of immigration to US soceity.  Now the produce a great and sad study about hiring discrimination.




Monday, October 23, 2017

Top Black Business and Black Economic Stories for the Month of October, 2017

Top Stories


Forbes report that Mented, a Cosmetics company, raised more than $1 million in venture capital financing.  Mented, which is short for pigmented and was found by two black women who met at Harvard business school.


The Colin Kaepernick foundation has almost reached his pledge to donate $1 million dollars to charity.  The money comes from his 2016 season salary plus football jersey sales.


New data show African American Student loan crisis
This story shows Blacks are more likely to have large student loan debt.  Also for profit colleges targeted African Americans contributing to the student debt crisis. 




Employment Discrimination and Harassment







Personnel Moves





Universal Basic Income

Stockton has a Black mayor

Cities and Urban Affairs



Black Celebrity Business News



Main Steam Economics

President Trump and the Republicans propose tax cut for corporations and the rich

GOP Tax Plan from the Washington Post

The Whitehouse Council of Economic Advisers tax study uses poor economic reasoning

Council of Economic Advisers Study on Tax Cuts and Wages

The Council of Economic Advisers study supports cutting the official corporate tax rate from 35% to 20%. The CEA says that the effort will boost middle class wages. Here are some initial problems with the study

There is a huge assumption that corporations would use the extra money from tax reduction to fund wages and investments rather than pay dividend to the rich. There are lots of reasons to doubt those assumptions

1) Corporations already have a record amount of cash holdings that they are not investing nor using for wages.  Reports say corporations are sitting on nearly $2 Trillion in cash.
2) There is no pressure to raise wages in the current globalized environment.
3) Most corporations don’t pay that actual 35% tax rate. Instead they pay an effective tax rate for about 18% on average.
4) Other countries would respond to our tax rate change, creating a race to the bottom. The only winner would be corporations. Ireland has been ripping of the EU for years with "shell" corporations.
5) And finally, there is no proven link between corporate tax rates and wages. Yikes.

Also, the study says the average tax payer would reap a $4000-$9000 dollar benefit.  So with 315 million people that

The figures are pure speculation.  Any realistic economic model would be too complex to making a prediction with any kind of accuracy.  Instead, a real model would produce an average number (say $6000) and a upper for lower range(like -$10,000 to $20,000). That's a range of $30,000 and some people would be losers under the plan.

The CEA is just producing economic cover for a tax proposal that benefits the rich. 



Richard Thaler wins nobel prize in economics. Dr. Thaler won for work in behaviorial economics.

We are more Homer than Spock. An interesting look at behavior economics.

Interesting / Other


Wednesday, July 12, 2017

State Budget Issues Make Headlines



There are some good articles out there on state budget issues. We are looking at articles on budget issues in key states like Illinois, Connecticut, Texas, California and New Jersey.

State budgets are in a trouble because pension, healthcare and education budgets have continued to increase while state income tax revenues(and average state incomes) have not grown above inflation. Only the top 1-2% of income earners have seen growth. State legislators are afraid to taxes the super rich because they don't want the label of "raising taxes." The rich, who generate an lot of passive income from investments, may simply move elsewhere. State governments are caught in a grip of powerful civil service employees want pension benefits, corporations who want tax breaks and the public wants safety and aid for education.

To take a closer look, we reviewed state finances at State Credit Ratings. Some states have great ratings, but for what purpose? The don't borrow or invest much money in their own state so why keep a good credit rating. The states fall into two groups: states with low debts and pension obligations because they historically have not done much for their citizens (south, conservative west and conservative mid-west) and and states that deliver high government benefits (like education) and have good credit ratings. Minnesota seem be the best managed of the states, but Massachusetts is also up there.

Overall, it looks like tough times in northeast and liberal Midwest as growth slows. Both areas may have over promised pensions to civil servants and teachers.

In all jurisdictions (except CA and MA) there is huge pressure from White voters not to raise taxes(tea party) as a code for not helping the poor and minorities. Most articles also indicate that the top 1% (2%-5%) of income earners has done very well. 


Connecticut

The Atlantic: Connecticut Inequality Vol. 1
This is really good story which details why employment in the finance industry does not create middle class jobs



Illinois

Illinois passed it first budget in two years and voted to increase income taxes and sales taxes


Texas


New Jersey

New Jersey Passes Budget thanks to Chris Christie's beach antics.

California

No news in california. The state added money for education and refinanced public pensions.

Jerry Brown signs $125 billion dollar budget

The good news

There is some good news that we frequently forget: California, New Jersey and Connecticut are among the best states for quality of life and education. For example: Where I live in New Jersey, almost all of the schools are above the national average in achievement.


Friday, June 30, 2017

Black Business and Economics Stories for Month of June, 2017

There are few Black Business stories in the main steam media this month

The chaos causing Trump presidency has sucked all the news-oxygen out of the room.  He makes the lazy news media's job very easy. An very profitable. And he makes the deep, complicated real-life media's jobs irrelevant. The media and Trump are making us dumber all the time. But which came first the dinosaur or the egg?

Me, Me, Me

So (me) how (me) does (it's all about me) this (me) affect me ? Basically there is no Black Business news coverage any more. It's like unions, education, pensions, and the homeless. If we don't cover it, maybe the problem will go away.

Some of this is our own fault.  We need to do more original material rather than stealing the work of others. We need to do more long form stories and detailed research projects. So, to fund this new, expanded coverage, we are actively pooling our resources and investing in: Lottery Tickets.

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Anyway, here are some of the top Black Business and Economics stories for the month

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Johnson Publishing Company, which publishes Ebony and Jet, is closing shop in Chicago. It was sold to an investment company in Texas. JPC recently relocated its staff to Los Angeles.

Crain's Chicago has the story

Desiree Rodgers bailed out in May

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CNN covers the Black vs. White wealth gap. Same story; new day. (note: Watch out the CNN website is a gigantic ad-pump with very little in depth content.)

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MarketWatch looks at Mellennials. Why black and Latino millennials are struggling more than their white peers.

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Chicago Defender has an update on the Black Bank surge at Citizens Trust Bank in Atlanta

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The Root does an interesting analysis of police killings and payouts.  It's called "How much is a Black life worth? We calculate it."

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We have started watching "Cleveland Hustles" with Bonin Bough on CNBC
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The national urban league released the State of Black America 2017 report on May 2017. The report shows a slight overall improvement in many of the indexes. Thanks Obama.

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The Federal Reserve Bank of Atlanta named Raphael Bostic as a regional governor. Apologies if this was posted before even though it is a big deal


Tuesday, June 27, 2017

Unemployment stable in May 2017. More than 600,000 people left labor force.


The labor economy in the US is unchanged in May 2017. It has been stable within a narrow band for the past two years. The national unemployment rate dropped to 4.3%. Wages grew by only 4 cents. The number of unemployed was 6.9 millon down 200k from last month and the number of long-term unemployed was recorded at 1.6 million (up 37K from last month). 

However, the unemployment rate dropped for a bad reason: A record 608,000 people left the labor force. Different racial groups left the labor market at different rates: 534,000 Whites left the labor force while only 67,000 Blacks and 82,000 Hispanic/Latinos left.  And 21,000 Asians joined. Of the 608K that left 367,000 were men and 241,000 were women. 




There were gains in healthcare, business services and food services. Employment revisions were down -66K for the prior two months. Hours worked were the same.


  
Since May 2015, the national unemployment rate has dropped about one percentage point (from 5.5% to 4.3%).  Blacks have made the largest gain during the period as the Black unemployment fell from 10.2% in May 2015 to 7.5% in May 2017.

The Big Story(s)

The big story is the smooth running of the economy. Thanks to Obama,Yellen and a host of others, plus the natural gas boom, the economy is in great shape. Unemployment is low. Wage inflation is low. We are are in a long-term growth pattern with a rate of about 2% growth for the next 2-3 years.

The second big story is the lack of wage pressure in the economy. Lack of wage growth fuels inequality in our society.  We see no sign of "full employment."

Missing wage inflation is linked to two trends: hidden unemployment and decreased worker bargaining power. Lack of power has led to workers expectations being "whipped" by corporations. Labor has stopped asking for higher wages and feels lucky to have a job (healthcare is a bonus). Employers think the same way and do not feel an pressure to compete for workers based on wages.
The recession of 2007 finalized a huge, on-going reset in employer and employee relations.  We are seeing the end result. 

The third big story is how well the country runs with little guidance. Its true; we have many large, long-term problems that are being ignored. Since the economy running great, we can afford to do so. Large problems such as poverty, jobs, wages, inequality, a shrinking middle class, entitlement costs and healthcare costs can be pushed further down the road.

Finally, the other big story, of course, is the ongoing chaos in Washington. The confusion of the past six months has yielded little action.   We are a progressive blog. We think nothing good can come from the Trump administration however we are getting used to him. We are worried they will get their act together and do some real damage to progressive causes. Thank goodness our economy and our system of government are mostly self correcting. 

The Black Unemployment Rate

The Black unemployment rate dropped to 7.5% from 8.6% last month as 46,000 more people reported to work. The unemployment rate for Black men, 20 and order, was 6.5% while Black women in the same age group were unemployed at a rate of 7.0%.  Black men participate in the labor market at a 68% rate while the participation rate for Black women is 63%. Black teenage unemployment was calculated at 27%. 


The chart below shows the Black unemployment rate and the LFP rate but smoothed out by using a 4 month moving average. 



As is our custom, we calculate the real Black unemployment rate. It was determined to be 11.6% in May. Both the Black unemployment rate and the US U-6 rate declined during the period.   U-6 is the broadest measure of unemployment. U-6 is basically anyone who wants to work and has looked for a job in the past 12 months plus part time people who want full time work.



Business Establishment Payroll Changes

Again, Non Farm Payrolls added 138,000 workers in May 2017. Government employment saw a slight reduction.



There usual categories led the job growth: business services, healthcare and hospitality. A lot of important categories were down.  Construction added 11,000 jobs. 



Just a reminder that the United States is a service economy.    Only 19% of new jobs produce goods (15% if you include government as a service).



Hourly wages for all employees increased by by $0.04 cent in May to $26.22.  Hourly wages are up about 2.5% (1.2% when adjusted for inflation) in the past year. Hourly wages for non-supervisory employees rose by 3 Cents.


The average growth in wages has been below 1% after inflation between 2006 to 2016.




March NFP jobs were revised down from 79K to 50K (-29K). April was revised downward from 211,000 to 174,000 (-37,000). 

ADP reported 253,000 non farm payroll jobs were created.  The jobs were split among small businesses (+83K), medium sized businesses (+113K) and large businesses (+57K).  According to ADP goods producing business increased jobs by +48K while services hired 205K workers. Manufacturing lost 8K jobs.

Paychex small business jobs index was flat at 100.34; a completely neutral value. It's down -0.25% for the year.





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