Sunday, August 22, 2010

$3 Trillion Dollar War

The true cost of the wars in Afganistan and Iraq may be $3 Trillion dollars.

US Navy is just another expensive jobs program in disguise

US Navy is just another expensive jobs program in disguise

On paper the budget for the Navy is $149.3 billion dollars. A heck of a lot of money, but not historically over the top. However, the real War money comes from continuting operations which are not subject to budget constraints.

If you look at the Navy budget: $42 Billion on Personnel, $42 Million on operations and Maintenance, $41 million on purchases, $5 billion on facilities and $20B on R&D, nothing but the size jumps out at you. The budget supports 325,000 Sailors and 194K Marines.

In FY10, the budget is projected at $156 Billion dollars.

Paul Ryan's Roadmap for America's Future

Rep. Paul Ryans's Roadmap for America's Future

This is an evolving article as we dig deeper into the details. Paul Ryan appears to be the architect of the republican economic strategy.

The "roadmap" has three sections
Debt and Debt reduction strategies
Reducing health and retirement benefits and as a afterthought "Jobs and Competitiveness"

Part I

Every now and then you see an idea that sounds pretty good. And when it pops out from the Republicans, it can be surprising. Congress Paul Ryan, R-Wisconsin-1, has several good ideas for controlling spending. He wants to cap Medicare spending and entitlements for the middle and upper class: those making more than $149,000. He says the government cannot afford the current policies. Makes sense right.

Well he is right economically. Politically, the key to Medicare and social security is broad based, public support. As long as everyone get something, we can support the program. But heaven forbid that someone gets a handout, that I am not getting. That is waste, welfare and breeds a culture of dependency.

But I do admire Mr. Ryan for trying. Considering his party is bankrupt of any new economic ideas, he does twist some old ones.

Saturday, August 21, 2010

Trade deficit expands by 19% to 50 Billion dollars in June

The US Census Bureau and the US Bureau of Economic Analysis reported on August 11th, that the trade deficit widen by 19% to $49.9 Billion dollars from $42 Billion dollars in May 2010. The jump was unexpected, since the economy is in recession, and was blamed on retailers stocking up for the fall and winter buying season. The willingness to add the stocks was taken as a positive economic sign.

Some of the other highlights in the report were a $5.4 Billion dollar jump in imported goods and a $2.3 Billion drop in exports creating a $7.7 net goods deficit. "May to June" increase in imports includes $3.1 Billion increase in consumer goods, $1.3 increase in Autos and parts and a $0.5 billion dollar increase in capital goods.

You can see the increase in imports and drop in exports during June.

This second chart shows the increase in the trade deficit (a negative number) to about $50 Billion dollars.

Sunday, August 15, 2010

Job creation slow in July BLS Labor report

Household data report

In the July labor report, the Bureau of Labor Statistics said the unemployment rate was unchanged at 9.5% nationally and 15.6% for Blacks in the US. non-farm payrolls dropped by 131,000 jobs. Federal government employement decreased by 143,000 mostly due to the end of the census. Hispanic unemployment was 12.1%.

The long term unemployed (27 weeks or longer)remained at 6.6 Million. The labor force participation rate 64.6% was also unchanged but is up %0.6 since April. The declining participation rate explains the why the unemployment rate remained at 9.5%. The actual labor force is shrinking as people give up looking for work.

The BLS also reported there were 2.6 million marginally attached workers(MAW). MAW's want to work and have looked for a job in the last 12 months but have not looked in the last four weeks.

In one of the worst signs in the report, discouraged workers increase to 1.2 million from only 389K a year earlier. Discouraged workers are not looking for work because they believe there are no jobs available for them.

Business Establishment data

Total private employment increased by 71,000. A small number by historical recovery standards but probably as good as could be hoped in the current economic situation. Manufacturing added 36,000 jobs, health care added 27,000 and the average work week moved up 0.1 hour. Average hourly earnings increased by 4 cents or %0.2 percent.

In summary the economy is growing slowly as american adjust to the "new" normal.

Where will the jobs come from ?? Is the unemployment change structural ?

The recession of 2008 may be the biggest economic event of our lifetimes. Let me explain. While there is lots of business and economic information(not news), very little actual affects the everyday, average person. We still hear about this company (Walmart, GE) or that business person(Bernake or Bezos), but it is really just background noise. We all have gone on with our lives and shopping hoping it will continue forever. Now the recession has awakened everyone to the key economic question of our time: Where will the jobs come from ?? And by extension, what kind of lives will we and our children have ??

The latest unemployment numbers have been released. There is great worry that only 115,000 private section jobs were created. There was also a reduction in government employment.

Each recession, is a chance for the economy to re-balance itself. We are clearing the real estate, finance and consumer credit bubbles. We are also staring to think about what type of economy and society we want to live in. When most of us were happy and fat, we did not have to think too much, but now that the real world is intruding, we are thinking a little more about economic markets. Are markets always the best way to achieve societies aims ?? Are they the best way to allocate resources ?? What is the best way to design and regulate for the benefit of society ??

And where will the jobs come from ??

Sunday, August 8, 2010

GDP grows by only 2.4 percent

The US gross domestic product grew by 2.4% in the second quarter of 2010 as reported by the commerce department's Bureau of Economic Analysis. The 2.4% is the quarterly difference between the seasonally adjusted 1st quarter and 2nd quarter output of goods and services scaled to an annual rate (ie, the quarter change was really 0.59% times 4 = 2.36%). The estimate is an advanced estimate which is subject to revision as more data comes in.

There was broad increase in many of the components of GDP that contributed positively to growth. Exports, fixed investment, personal consumption expenditures, inventories, federal government spending, and residential fixed investment. Imports increased by 35% depressing GDP by nearly 4%. The slow down in GDP was due to slower inventory build-up and increased imports.

When you look at the individual components of GDP you can see the huge effect of imports on GDP. However, across the board the growth in investments, consumption spending and inventories boosted GDP. The addiction to imports is holding back the economy.

Blog Archive