Wednesday, December 29, 2010

What is the effect of the Black prison rate on the Black unemployment rate

Well, some times you go looking for a good story but you are glad you did not find one. I recently speculated that the huge incarceration rate in the US would affect the Black unemployment rate.

Well it does affect the rate but only in a small way. We can estimate that the rate would be only about 1.5% higher due to the incarceration rate. In other words the rate would move from 15.2% to 16.7% due to people in jail.

Sunday, December 26, 2010

What is a human life worth ?

The debate over the cost of healthcare and security revolve around an very important concept. What is a single human life worth ? The answer has implications in economics, insurance, law-enforcement, safety, and environmental regulations.

We all know human life is precious. We are all taught you cannot put a price on a life. However, to have a rational and coherent debate about many areas where money is spent you must make an estimate. You can never put an exact price on a life, you can put and approximate value. The value helps us make good, fair economic decisions for society.

While we may be unconfortable with the concept, businesses and government routinely make the calculation for US. Life and health insurance conpanies have sophisticaed acturial models. The government uses the value in calculations of pensions and social security. State and local governments calculate survivor benefits. So does the military.

Another, related concept is whether one specific person's life is worth more than another. And, if so, is the concept important ? Should it be used to make decisions in society ??

The answer seems to depend on the event causing the loss of life. Individual events would require individual estimates.

Juries and judges currently pay amounts based on a persons projected life earnings. Payout from the government were based on life earnings.

However, the special master of the 9/11 victims compensation fund has said that the system rewards bond-traders and Enron lawyers as much as fire and policemen. It may be time to consider a fixed, equal payout in certain circumstances.

According to Time Magazine.

1) National Healthcare systems including Canada, United Kingdom and Netherlands value each additional year at $50,000
2) Research on kidney failure patients states each individual year may be worth as much as $129,000

US Grows at 2.5% in BEA 3Q GDP Final Release

The use Economy grew by 2.5% in the 3rd quarter after a 1.7% in 2Q. The rates was boosted by growth in private inventories and reduced imports.

Saturday, December 25, 2010

Revised 2Q Gross Domestic Product

The Gross Domestic Product was revised in September downward to 1.7% annual rate in the second quarter from 2.4%. This revision reduced GDP by almost 7/10th of a percentage point signaling a very slow economic growth rate.

Based on this revision, it looks like policy makers were right to fear a double dip recesson. Bernake and the federal reserve were also justified in using a second round of quantative easing(QE2)to increase the money supply. There is no inflation or inflationary expectation in the short or medium term.

Monday, December 13, 2010

Construction companies commit fraud to avoid hiring Minorities

This is the number one, underreported, Black economic new story.

If you have ever driven by a construction site, even in a Black neighborhood, and wonder why only white, men were working, now you know why.....

Two giant construction companies are being investigated for fraudulently creating "fake" Minority shell companies. The companies were used to get around requirements to employ Women, Minority and Disadvantaged businesses as subcontractors.

The companies would hire a "Minority" company as a pass though company or have the company run the "payroll" while they continue to collect the money and employ the workers.

The Schiavone Construction Company admitted it had evaded requirements for 5-years and agreed to pay back $20 million dollars.

"Such schemes are wide spread in public works projects" the newspaper quoted law enforcement officials.

Well there you have it plain, old corruption in the construction industry.

Sunday, December 12, 2010

What is structural unemployment ?

What is structural unemployment ??

Structural unemployment is unemployment due to the mismatch of skills and geographic location between the labor force and the jobs market. Structural Unemployment includes workers who do not have the skills to fill open positions or workers who do not want to move to fill an open position.

For example, even during the recession the US has a shortage of engineers and computer technicians. Another example, is technology and globalization have reduced the need for manufacturing technicians leading to a a surplus of manufacturing workers. An example of geographic unemployment is fishermen and oil workers from the Gulf Coast who did not want to move to Alaska after hurricane Katrina. Workers may not want to move because of family, community, or investment decision (a house they cannot sell).

Some economist add discrimination, monopoly power, and government policies as factors that contribute to structural unemployment. There is also speculation that worker attitudes and perceptions may play a part. For example,"I am not working at Wal-Mart or MacDonalds my friends will make fun of me."

In the perfect world, employees would have exact skills in the right place to satisfy labor demand perfectly. However, in the real world

Economists define several different types of unemployment

Wage unemployment. Wages are set higher then what the market demands resulting in an over supply of labor for the number of positions. An example is minimum wage laws which may cause business to hire less employees than they would otherwise.

Structural unemployment. A mis-match between labor skills, labor geography and jobs demand.

Cyclical unemployment. Unemployment due to economic fluctuations and shocks like the collaspe of the housing bubble and the effect on residential construction unemployment. This type is caused by lack of demand.

And search unemployment. The time a workers spends looking for the best possible job. There is never a perfect match between worker and job; both must compromise. This is the time workers spend between jobs before accepting an offer.

During a recession, economists argue over how much of the unemployment rate is structural versus cyclical. Structure unemployment can only be reduced by long-term changes such as training, relocation, new industries opening or government policies. Cyclical unemployment can be reduced by stimulating demand either through government spending or reduced taxes.

Finally, another important concept is natural rate of employment or NAIRU - the non accelerating inflation rate of unemployment. This is the rate of unemployment below which inflation is created in a economy.

Sunday, December 5, 2010

A bad jobs report for November; unemployment rate is 9.8%

On Friday, December 3rd, 2010, the Bureau of Labor Statistics reported that the rate of unemployment was 9.8% of the total labor pool. There were bad unemployment signs across the board.

Non-farm payrolls were almost unchanged adding only 39,000. Unemployment rates for many major population groups increased for adult men, adult women, whites and Hispanics. The Black unemployment rate was 16.0%.

The number of long-term unemployed (6 months or longer) was 6.3 million. The number of marginally attached workers (people who looked for a job in the last 12 months but are not currently working) was reported at 2.5 million up from 2.3 million a year ago.

U-3 Unemployment Rate

U-6 People who want full-time work plus people working part time who want full-time.

In the establishment data categories, non farm payrolls increased by 39,000. Private firms added 50,000 jobs while government cut 11,000. Temporary help and healthcare added jobs while retail shed 28,000 positions. Manufacturing dropped 13,000 jobs. The average work week remained unchanged. Average earning increased by 1 cent.

The only positive item was the upward revision of the September and October Non-farm payroll numbers.

The misery rate, or the percent of the labor force who want work and cannot find it, grew to 17.0 . This is about 1/6 of the people in the labor force.

The jobs "deficit" is an incredible 8 million jobs lost since the start of the recession. Worse, job growth is flat for the past 5 months, with the growth rebound stopping in May.

Job growth has been flat on average since May 2010.

The Black unemployment rate was 16.0%.

This chart is always incredibly sad. This chart is the "real" black underemployment reate. If you take the trend for people who want work and cannot get it plus the black unemployment rate you get "real" underemployment rate: about 25%.

Another view of same data.

In related (unrelated ?) news, based on the unemployment report, the Dow-Jones index moved up 20 points, the NASDAQ closed higher by 12 points, and the S&P moved 3 points higher. The rise of the indexes shows the increasing separation of the jobs and unemployment issue from world of investments and corporations.

Finally, the consensus forecast from economists predicted a rise of 130,000 jobs for the month. Not even close to the actual rate of 39,000.

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