Monday, December 31, 2012

We got a camera for Christmas, so expects some photos

The blog now has photo capability !!! So we hope to make the blog look a little better,

Tuesday, December 25, 2012

Lack of affordable housing in rich areas contributes to income inequality

From Bloomberg Business Week

Bloomberg BusinessWeek has a great story on the lack of affordable housing in the suburbs contributing US income inequality. However, the studies authors make a more startling argument: that rich neighborhoods are using zoning and land use laws to keep the poor from jobs in high income area.. This "discrimination" has stopped the shrinkage of the rate of income inequality that existed from 1880 to 1980.

The business week article is based on a paper by "Peter Ganong and Daniel Shoag" called "Why has regional income convergence in the US Stopped". Both work a Harvard University.

What's new in the paper is they have developed a data set that models communities land use and zoning laws.  The restrictions increase the price of housing. The authors content that the decrease in regional and state to state mobility has increased income inequality.

Monday, December 24, 2012

US Federal Reserve publically link unemployment and interest rate

Federal Reserve Commits to Monetary Targets

The United States Federal Reserve Board  announced on December 12th, 2012, it would link changes in the interest rate to a specific level of unemployment and inflation.  You can read the press release here.
The "Fed" also it would continue to buy mortgage backed securities and to extend the duration of Treasury holdings.

The committee said that it would keep the federal funds rate between 0% and 0.25% as long as the US national unemployment rate stayed above 6.5% and the two year forward interest rate was below 2.5%.  The fed left some room for changes if conditions changes. This is the fist time the fed has directly linked the interest rate to the unemployment rate and the the inflation rate.

The move by the federal reserve should also counter some bogus arguments by conservatives and Republicans that Obama's policies have contributed to uncertainty in the business environment.

If you want to real more about the Fed's internal discussion to fix the rates, you can read a Bloomberg Business Week story here.

Sunday, December 23, 2012

Don't try this at home, Kiddies: UK austerity update.

The New York Times has a long look at UK austerity program under David Cameron's Conservative government. The New York Times article is here.  Cameron recently announced the austerity would continue for another five years.

The UK Independent has a piece on the UK budget deficit worsening.  The article from the UK Independent is here.

Here is a discussion in the London Review of Books calling the Cameron / Osborne policy a failure.  The story by John Lanchester.  He has a great reference in it to the International Monetary Fund's World Economic Outlook (October 2012) publication. On Page 41, of IMF Outlook,  they discuss the multiplier used calculating the effect of government spending cuts on the larger economy.  The IMF suggests that the GDP reduction effect could be as high as 1.7 times the cut.  In other word, removing 100 Billion pounds in spending would reduce economic activity by 170 Billion pounds.  Not something you want to be doing during a recession.

So you have to ask if the savings are worth crippling the economy.

In our opinion, voters want simple solutions to complicated problems and politicians are willing to provide just that. What is missing are leaders who understand the current crisis and are willing to use it was a "teachable" moment for their voters and drag them along. Remember the days when politicians would lead from the from rather than behind (behind the polls that is).

Thank goodness the US federal reserve has the right idea: Low, predictable interest rates for the short and medium term, short term stimulus until unemployment falls to a certain level and pressure on policy makers for gradually reduce long-term healthcare costs.

Can't have a good post without some charts. Below is a chart of the US GDP against the UK GDP.  You can see both economies were smacked by the recession.

Here another chart of the US Debt to GDP ratio.  The projected trend gradually slopes downward as taxes are increased and healthcare costs are reduced.  

No one knows the proper level of debt to GDP.

And finally the UK debt to GDP ratio which is around 66% but rising.  

So to summarize, no one really knows the proper level of national debt, but the UK austerity program dropped GDP growth and increased the debt to GDP ratio.  The austerity program was not the right move during a recession.

Sunday, December 16, 2012

Fiscal Cliff a Joke and so is the coverage

The "Fiscal Cliff" is an over hyped joke.  It is also bad economic policy.  The "Fiscal Cliffs" real name is the Budget Control Act of 2011.  It was passed by congress and signed into law by the president in August 2011.  We will try to break down the history of the act and then tell why the Fiscal Cliff is baloney.

Back in the summer of 2011, President and the Republicans were arguing over raising the debt ceiling.  The debt ceiling is usually raised automatically without issue.  However, due to the TEA party influence on the Republican party, they were forced to take a harder line than usual during the negotiations   The republicans agreed to raise the debt ceiling in exchange for a bill that would automatically curb the debt based on automatic taxes increases and budget cuts at the end of the year 2012 after the presidential election.  The provision would only come into effect if no other budget deal was worked out.

The Republicans thought Obama might lose the 2012 presidential election. So they gave Obama a bill quite favorable to Democrats.  The BCA ends the Bush tax cuts and cuts military spending by about 10%. It cuts helath care spending by 2% and the non defense spending by 8 %.

The term "Fiscal Cliff" was created by Ben Bernanke, Chairman of the Federal Reserve Board, during testimony to congress in February 2012.  We was referring to the effect that a sudden increase in taxes and cuts in spending might push the economy over the "Cliff" and into recession.  May of the provision come into effect over the year 2013, leaving plenty of time to work out better legislation.

If you want to read more, here is a nice write-up from the Congressional Research Service on the Budget Control Act of 2011.

The reason the fiscal cliff act is bad economics is because it is dampens economic activity too much while the country is recovering from a large recession.  During a recession, you typically want to add to government spending to increase employment and growth. European countries like England and France are suffering because they imposed too harsh an economic  austerity trying to reduce their debts.  They ended up pushing their countries into a longer recession, decreasing economic activity and tax revenues, and increasing the period of austerity.

The Fiscal Cliff is also bad economic policy because there is no short term reason to reduce the debt. Especially not during a period of low inflation, high unemployment and low interest rates. In fact with record low interest rates, the government should be borrowing money to make investments in areas such as infrastructure or education.

Long term, we all agree, for reasons of stability, we need to reduce the debt to a manageable level (say 50-70% of GDP). And most reasonable people agree on how to do that:  slight increase in taxes on the wealthy, slight cuts in government programs and reducing the cost of healthcare.  We may also want to reduce social security and medicare payments to wealth individuals, reduce the size of the military (especially the navy), and reduce subsidies and loopholes in the tax code.  Just about everyone agrees on the above proposals

So how did the debt become an issue right now. We believe the issue comes from the Republicans anti-government beliefs pushed on by the new TEA party.

When discussing the debt, I always here two commonly offered reasons to reduce the debt.  they are "I have to live on a balanced budget and so should the government" or "government debt will crowd out private debt lowering private investment."  Actually most people do not live on a balanced budget.  They frequently borrow against future earnings for current consumption (credit cards, Christmas load) or current investments (college tuition, a car to get to a job).  The government should have the ability to do the same thing.

Second, for the "crowding out issue," no one is quite sure of the relationship between private investment and interest rate levels.  And if it does occur, how much business investment was actually affected (probably very small). Current, top rate businesses can borrow for 10 years at 2.35% interest.   But the possible small benefit of reducing interest rates is not in proportion to the damage that might be done to the economy.

The real reason for reducing the debt is ideological and selfish. The don't believe if the government helping people:  not older people, poor people, sick people or minority people. Plain and simple.  The the Fiscal Cliff negotiation is just another political tug of war.

The coverage is also pretty bad.  They cover it like a sporting event with winners and losers. The are missing a great chance to cover the nuts and bolts of national government fiscal policy.  This is a chance to show the American people where their money goes. Instead of explaining where we spend our money or any context about what we are buying, we are stuck with Boehner's latest proposal or Obama's new statement.

Sunday, December 9, 2012

Fix the Debt: Simpson - Bowles Plan

First, let us state outright that the US Debt discussion is a smoke screen to cut social spending and the government. Period. It is just another political maneuver to reward their friends and cut spending for groups they don't like.

The real problem continues to be lack of jobs and lack of good paying jobs that are hollowing out the middle class.  Reducing the debt (or it's newborn cousin the Fiscal Cliff) is purely an ideological augment over the size and function of government.  The financial markets could mostly careless and the same goes for consumers.

Given all that, we like the Simpson-Bowles plan. Many of the CEOs who visited the white house recently supported the plan.  Simpson-Bowles raises taxes oh the rich, cuts military spending and curbs social security and health care costs. It also taxes corporate gains at the same rate as income.

Here are some of the CEO's that support the plan. The CEO Council of Fix the Debt recently meet with president Obama. You can read more at these web-sites but they are conservative leaning.  Most want to cut spending by cutting social security and healthcare without touching military spending or raising taxes on upper incomes.

Fix the Debt 
Moment of Truth
Committee for Responsible Federal Budget

You can "Google" Simpson Bowles at "National Commission on Fiscal Responsibility and Reform" or read more here.

A better analysis is presented at
Tax Policy Center

While not directly criticizing the Simpson-Bowles plan, The Institute for Policy Studies has a counter argument here. 

Lastly, we are opposed to any tax change, such as a territorial tax, which would let companies bring revenue's back to the United States without paying their fair share of US taxes. Corporations receive a credit on their US returns for foreign taxes pad. Foreign taxes and US taxes are part of the cost of doing business.

Thursday, December 6, 2012

Economically speaking, Obama has performed better than average for Black people

Obama has also done well for poor people.

I was about to write the standard post about how Obama has not done enough for my personal group of people: African Americans. But them I thought about it for a little while and got a different answer.

First let me say, we know the Presidents hands are tied with regards to Black people and poor people  He cannot directly be seen helping either group especially blacks.  We know he cannot do flashy or targeted programs just for Black or poor people.  They would never get through congress. They would offend many of his weaker support groups like White women and college educated men. The would open him to charges of favoritism by his critics.

But the President has done as good as job as can be expected. Better than previous Democrats with more personality and less values. His economic record is excellent. Even if he had done nothing beside universal health care, he would be good enough, but there is more.

Here is our list of the Obama's top economic accomplishments that benefit African Americans:

Universal Healthcare
Fiscal Stimulus Bill (American Recovery and Reinvestment Act)
Extended Unemployment Benefits (up to 99 weeks)
Expanded food stamps

None of these programs can be seen to directly benefit Blacks.  Instead they are all said to be "Middle-Class" programs. The programs are portrayed as helping people in need.  History will look back very favorably on Obama's economic successes.

You can get a full list of Obama's African American Agena in the links that follow.  The African American Leadership Conference seems more like a political event than a policy conference.

You can watch here:  2011 African American Policy in Action Leadership Conference.  Here is the link from You Tube. 

The White House press release is here.

The Obama's agenda for African American is here. 

It looked like a pretty limited affair designed to give the president cover with the African American Community.  They open ask participants to "spread the word" about the good things Obama has done.
The 40 page report lists every possible program that might benefit Black folks.

The strange part is that you could substitute Hispanic, Latino, poor, or even middle-class for the words "African American" in the report and 99% would be the same.

Sunday, December 2, 2012

Senate Bill S. 1346 - Stop Tax Have Abuse Act

Carl Levin Democratic senator from Michigan is sponsoring a bill, S1346, to stop the abuse of offshore tax havens by US corporations.  The bill was introduced in July of 2011.  The details are here.

Here is a great detailed review from Citizens for Tax Justice. If you want to understand some of the accounting and legal tricks used to avoid US taxes, this document has plenty.

The bill would increase reporting requirements for offshore entities and treat tax entities managed by US companies as domestic corporations.

It also extends anti-money laundering reporting to off shore tax entities.

It would ban tax consultant contingent fees.

It also support the IRS process of issuing "John Doe" summons for tax information.

You can read the full bill summary here. S1346 Stop Tax Haven Abuse Act.

This bill has a snowballs chance in hell of passing.

Republicans: Low Income = Welfare

The Congressional Research Service has issued a comprehensive list of government program that benefit low-income Americans. And the Republicans quickly classified it as "welfare." They completely ignore, middle class welfare (mortgage deduction) or corporate welfare (R&D) tax credit or upper class welfare (low capital gains taxes).

CRS Report on Low-Income Federal Spending. The report has a comprehensive list of all low income programs sponsored by the Federal government.

They still have no fundamental policy on helping poor people.  Their answer is the usual collection of approved behaviors: stay in school, work hard, and get married. Funny part is that based on their ideology,  they may not be able to create one.

Anyway, here is the basic problem I have with the way Republicans have characterized this report. Any government activity that helps poor or low-come people is "welfare."  And not the "good" kind that keeps poor elderly and disabled people from starving or sends bright kids with no money to college. No, their image of welfare is that of the moocher who does not deserve anything because of low morals and bad choices. It just goes back to Romney's 47% remark.  "We Republicans have no responsibility for the poor."

Anyway, here is mis-labeled list of program to benefit low-income Americans.

CRS Report on Welfare spending.

Thursday, November 29, 2012

Mollie Orshansky: Ms. Poverty

There are currently 46.2 million people in the US living in poverty. That is 15.0 percent of the US population.

Do you ever one where the poverty level come from ?  It was first developed by Ms. Poverty: Mollie Orshansky. Ms. Orshansky was responsible for some of the pioneering work on developing US poverty standard.  She started publishing in 1947 on food budgets, family incomes and rural living standards.  Around 1962 she moved on to the general conditions of the poor. and finally around 1965 to 1968 she published some of the first measures of poverty in the United States.

You can read more about Mollie Orshansky on the Federal Health and Human Serveries web site. Here.

Wednesday, November 28, 2012

Jobs hole forecast

When will we return to net positive job growth ?  When will we fill in the job hole from the great recession ?

Using data from establishment non farm payroll numbers since the bottom of the recession, we have forecasted net positive job growth for June 2015.

We have added forecast limits to mean job forecast based on job creation from the bottom of the .  So we could see net positive job growth as early as February 2015 or as late as November 2015.

Sunday, November 25, 2012

Jay-Z's money and charitable donations

We will leave it up to you the reader to decide if Jay-Z should donate more money to charity.

Shawn Carter ("Jay-Z") is reported to have a net worth between $440 million and $576 million. Forbes has estimated his fortune at $460 Million (April, 2012).  Jay-Z was in the news recently for directly contributing only $6000 to his own scholarship fund headed by his mother. It was report by the Daily.  However, Jay-Z donated performances in support of various charities including raising $250,000 during one concert.

Here are some charities Mr. Carter has made donations to as either cash or performance time.

According to, Shawn Carter has donated to

PlayPumps - African water supplies - Fundraising concernt in November 2006
Boys and Girls Clubs
Music for Relief
Red Cross - $1 million for Hurricane Katrina Relief
Grammy Foundation
Broadway Cares/Equity fights AIDS
Artists for Peace and Justice
NYC widows and orphans fund -  Answer the call concert - 2009

Jay-Z has also taken heat for profiting from Occupy Wall Street t-shirts.  However, Jay-Z did hold a fundraiser for president Obama. He also closed the Para Olympics in London.

Actor and activist Harry Belafonte has also questioned the Carters record of giving in this piece in the Hollywood Reporter.

Obama Performance Meter Draft

How should measure the performance of the Obama Presidency ?

Here are some basic metrics the Evil Black Economist will be tracking the in the second term of the Obama Administration.  This is a draft proposal.

Short Term (1-4 Years)

Good Jobs Created
Good Jobs Created divided by Population Growth
Unemployment Rate
Inflation Rate
Median Income
Approval Rating
Generic short term happiness measure (TBD)
Liberal vs. Conservative Budget and Spending Priorities

Long Term (4-10 Years)

Good Jobs Created
Good Jobs Created divided by Population Growth
Unemployment Rate
Child Poverty
Educational Attainment
Long term happiness measure (TBD)
Debt to GDP

Saturday, November 24, 2012

Don't believe the Hype: Fiscal Downslope not Fiscal Cliff

Once again the media is doing a very poor job of reporting a complex issue.  Some how an agreement to cut federal government spending has turned into a "Cliff" that is 100% guaranteed to plunge the economy into recession.  We don't think so.  Reducing government spending will certainly trim current GDP growth by perhaps 0.5% it has some long term benefits.  Paying down the debt will stabilize government finances, boost confidence and keep interest rates low.

The Fiscal Slope is also gradually phased in over the next year.  It cuts military spending and domestic discretionary spending while leaving social security and medicare untouched. The immediate, January 1st effect is to stop the Bush taxes cuts and return the social security payroll tax to the pre-recession level of 6.2%.

Thursday, November 22, 2012

Hostess Mess: What can we learn ?

There was lots of news this week about Hostess Bakeries.  Hostess makes Wonder bread and Hostess Twinkies along with other bakery items. Hostess employed approximately 18,000 workers mostly bakery and route delivery(salesmen) workers. Sales have been declining for many years. The company went bankrupt in 2004 and emerged from bankruptcy in 2009 during which it's workers took pay cuts.  It is current owned by a private equity firm called Ripplewood Partners.

The company said it would close operations without further concessions for the workforce. As of November 21st, 2012, the company said it would sell it's brands and stop operations.

Here is the story from the St. Louis Post-Dispatch on bad management workers relations.
Here is the best story I have found on all of the details around Interstate Bakeries /  Hostess from the DailyNewsFinder.

Here is how we see the issue.  OK, this is a fantastic, teachable moment for the US in 2012.  But not about union givebacks or job losses.  Instead, it's about straight up bad management and how little power workers have in a tight economy.  It is also about how non-transparent financial reporting by private equity firms is compared to public firms The workers may have had an inkling, but could not accurately judge if the company was in real trouble or management was "lying again".

So, to the Evil Black Economist Blog, it like a simple, "bad" management bankruptcy over a eight year period. The problems were obscured by limited private equity reporting. We will have to wait for all the facts, but it looks like Hostess was not a going concern they way it was structured with huge amounts of debt. And both management and the union were using the company for excessive benefits.  No amount of "good" management would have saved the company. It should have been  liquidated for it's brands and factories years ago. If, I was the owner, I would have been talking to Bimbo for years.

Here are some facts I am looking for in the public bankruptcy filing.
1) Were earnings before interest and taxes positive? growing?
2) Was hostess adding new products? Customers? Increasing prices? or was the company shrinking?
3) What did the cost side look like?  Were commodity prices or wages causing problem? Were management and labor costs similar to the rest of the industry or they overpaid?
4) Why did private equity change leadership so often? (may not be available).

I don't see a lot to support for the political arguments others are reading into the matter.  It is a simple, and sad, bankruptcy where a lot of people get hurt. I challenge everyone to follow-up on the story and really read the chapter 11 filings when they come out.

And now for some personal opinion.

I believe, companies, especially private equity firms, need to be more transparent with their workers (open book accounting) about how the company is doing. So I am calling for regulations to make PE legal entities provide better reporting to their workers and the public.

Second,  he workers need to have some equity in the company.

Third, government institutions worked pretty well.  Bankruptcy court did it's job, the Pension Benefits Guarantee Corporation will bail out the unfunded pension liabilities and state unemployment will handle the workers however everyone comes out a loser.

Wednesday, November 14, 2012

Robert Balfanz: Dropout Predictor

I saw a piece on PBS FRONTLINE about the work of Robert Balfanz a researcher at the Center of Social Organization of Schools at Johns Hopkins University. Dr. Balfanz has done a lot of work on predicting when kids will drop out of high school.

Like us here at the Evil Black Economist Blog, he believes middle school is the key place for determining a kid's life trajectory.

Here is a a long term study of Dropout Trends in the Philadelphia School System.  You can find more of his work on the web.

Sunday, November 11, 2012

Is Amazon a worse employer than Wal-Mart ?

A note about Amazon and the warehouse industry

I keep seeing persistent stories about Amazon warehouses being a tough place to work.  I think Amazon may be a high profile case in a very tough industry.  The fulfillment industry is a very competitive industry with low margins.  The industry is benefiting from a huge surplus of low-skilled unemployed workers in the US and over capacity. Amazon is just applying it's big company know how to squeeze the workers a little more.

Warehousing is a lot tougher now than when I worked in one during a summer in Atlanta.  I regularly worked in 90 degree heat until I found a better job.  Working in a warehouse used to be a "good" job.  The staff was mostly women "pickers" and mostly male equipment operators. The jobs has some good points: you were inside when it rained; we had a break room, you could take items that were damaged or not and there were forklifts for heavy lifting. The work was not that hard.  You got breaks.  The downside was always pay.  It was not much money, but better pay than fast food or retail.

My job was to pick up the printout and walk around picking items from the shelves and put them in a giant laundry cart. I didn't think the work was that bad; just hot. After I left, I discovered the real reason the work was not hard:  The boss did not ask us to pick very many items.

Now, in a modern warehouse everything is measured. Everything is check against "best practice." The work is a lot tougher.  The work can only be done by the young and physically fit. Warehousing has traditionally paid more than retail work.  But the working conditions are so difficult than many people move back to retail jobs when they get tired or injured. Turnover are high.  Many warehouses outsource their personnel need to bogus temporary agencies to skirt pay and benefit regulations.

In many other posts, I have detailed, the number one issue I have with retail sales: low pay and poor benefits.  However, working conditions are decent because I believe, they have contact with the public.  Retail companies do not want disgruntled employees dealing with the public. When I visit retail stores in my area, the workers seem to treat each other with friendship and respect. In a modern warehouse you seem to get low pay and no respect.

Why are warehouse such a bad place to work ?

Warehouse are bad places to work because warehouse productivity is do easy to measure.  You measure the number of "moves" and "picks" per hour. Information technology (like RFID) lets you track everything inside the warehouse.  In warehousing, there is no extra "stuff" to confuse the productivity issue. No customer interaction (some places forbid talking to co-workers). None of this: "Did the person great me with a smile and look me in the eye ?" subjective BS stuff.  Just cold hard facts such as "error free pick rate" or "packages shipped per shift"

And, worse if you can measure productivity, you can increase it. Amazon is large enough and sophisticated with computers and business processes to try and do just that.  The issue is that this increased productivity creates poorer quality jobs for the workers. Note: many of the practices Amazon uses are common in the industry, it just looks like Amazon squeezes a little harder.

There are several physical limits to improving productivity: Physics, Time and People.  1) Physics. People and machines can not move faster than a certain rate without jeopardizing warehouse safety or breaking the laws of physics.  For example, there is a maximum speed a fork lift can travel around a corner. Or a limit to how fast you can pick items in a bulky coat inside a refrigerator. 2) Time.  Everything in the warehouse takes time: travel time, reach (pick) time, sort time, receiving and put-away time. Handling X number of goods takes Y time.  And the time is fixed. 3) People.  People can only work so hard before that make mistakes or won't do the job.

Amazon, using information technology, has optimized the use of all three resources.  The issue is that Amazon has invested enormous amounts of money on warehouses and wants to get a productivity return.  And the only place that can come from is by leaning on the workers.


Loyal readers know we always put in our two cents and propose some solutions.. That is why writing a blog is so good, you can mix fact and opinion.

Standard solutions

Raise the minimum wage. Support living wages in warehouse communities.
Get rid of "sham" subcontractors. Encourage full time work, pay and benefits.
Actively enforce warehouse building code, health and safety laws.
Name and shame: make Amazon warehouse working conditions more visible
Don't buy from Amazon.
Get better terms from Amazon when they locate in a community.  Cut down on the tax breaks.
Convince Amazon that that warehouse "profit centers" can have a lower rate of return than other lines of business.


Here are some resources from the internet related to Amazon and warehousing.

Amazon promotes warehouse jobs at Amazon Fulfillment Careers.
Mother Jones has a story on poor conditions warehouse workers face.
NJ.Com has a story on Amazon planning to open two NJ warehouses including one in Robbinsville, NJ.  Here. Local businesses are complaining about Amazon not collecting state sales taxes and receving location subsidies.
Allentown,PA morning call has another story here.

Fulfillment Center Definition:

Hey when did a warehouse become a fulfillment center ?  Fulfillment centers provide more than just warehousing, order picking and shipping.  These new centers also provide customer service, packaging and relabeling and light manufacturing. They service multiple retailers while a standard were is own by the company. They also operate as separate profit centers as opposed to traditionally being part of the cost of goods sold.


Tuesday, November 6, 2012

CRS says no link between high income tax cuts and growth

There was an important piece of research that came out from the Congressional Research Service about a month ago. The report called "Taxes and the Economy: An economic analysis of the top tax rate since 1945," demonstrated that there is NO link between the rate the top 10% of income earners paid in taxes and the overall growth of the economy.

We thought the story was important but it got only a small amount of little bit of coverage in the national press. The New York Times has a link here to the original document. You can also find copies by googling the title.

Well now the congressional Republicans have forced the CRS to withdraw the report. The withdraw has led to more publicity and attention for the report.

Tuesday, October 30, 2012

September Unemployment Report Review

Unemployment rate drops to 7.8%; Broad employment gains in most areas.

US national unemployment rate fell to 7.8% from an August rate of 8.1%. The BLS household survey reported an additional 873, 000 people found employment in September. The number is a crazy, high number and well above the yearly average of 150K.  You can bet it will be reduced in later reports. The establishment (non farm payroll) survey showed companies hired an additional 114000 more workers. The NFP number is from the BLS business survey and is considered more accurate than the household survey. All major employment rates declined from the previous month. The president reacted positively to the numbers. Mitt Romney said they were too low and the country could do better. The stock market was slightly down on the news.

Adding some comedy to the mix were the wacky comments of Jack Welsh (CEO of GE – 1981 to 2001). Jack said in a twitter message that the numbers were manipulated to benefit Obama. The funny part is that Neutron Jack’s public ignorance of unemployment statistics calls in to question his reputation and leadership at GE. Was firing 100,000 GE employees strategic or lucky ? Either way, Jack Welch, like Donald Trump, has moved from business leader to entertainer.

The black unemployment rate moved down to 13.4%. The historic average since 1972 is 12.3%. The size of the black labor force dropped by about -34K overall and was affected by 84K additional people who found jobs and 70K who dropped out of the labor market. Add in the fact that the black population grew by 37K and you get a declining black unemployment rate. The national labor force participation rate rose to 63.6%. Black labor force participation was 61.7 (67% for Black men, 62% for Black women and 29% for black teenagers) Unemployment by race dropped in all major groups. The black national rate shrank to 13.4%, the white rate dropped to 7.0% and the Hispanic rate also fell to 9.9%. The black teenage unemployment was reported at 37%.

The long-term unemployed (27 weeks or more) decreased to 4.84 million people which represents 40% of the unemployed. The “work part-time wants full-time” number was 8.6 million. These people are considered under employed. Two and a half million workers were marginally attached to the labor pool. They have looked for work in the last 12 months but not in the last four weeks. And there were 802K discouraged workers (part of marginally attached) who are not looking because they believe there is no jobs for them.

Non-Farm Payroll Increased by 114,000 jobs. It was the 24th straight month of job growth.

The economy has recovered more than half of the jobs lost during the recession.

A very rough estimate predicts all recession jobs will be recovered by about June 2014 regardless of who is president. Below is a crude regression line based on job gains in the household survey and the business survey which is used to predict the June 2014 date.

Non-Farm Payrolls

As we mention in the summary, non-farm payrolls added 114,000 jobs.  Private sector hiring added 104,000 jobs (vs. 142,000 last month) and government employment added 10K jobs. Job growth was concentrated in healthcare and transportation.   The losers were manufacturing(-16K), information technology and local government.

Manufacturing employment has continued to fall since president Obama mention a resurgence in US manufacturing.

Non-farm payrolls were revised in July upward by 40,000 (from 141K to 181K) and upwards for August by plus 46,000 from (96K to 142K). That’s an addition of 86,000 jobs additional jobs.

The chart below shows the job growth was broadly based with healthcare creating the highest number of jobs.

Average work week was unchanged at 34.5 hours and wages added 7 cent in September.

ADP reported an increase in private payrolls of 114,000 positions for September.

US Monster Employment Index moved down 2% to 153 from 56 in August. Hiring was down 2% compared to same month last year. 

Jack Welch is the next Donald Trump

When the September 2012 jobs report,  Jack Welsh (former CEO of GE – 1981 to 2001), sent a twitter message questioning the accuracy of the results. He even suggested the results were manipulated to benefit the Obama administration. The funny part is that Neutron Jack’s ignorant comments abouth unemployment statistics makes everyone questions his reputation and leadership at GE. Is Jack Welch really a have talent or is he just another lucky, rich guy.

You then have to ask was firing 100,000 US GE employees strategic or lucky ?  Was replacing them with 100,000 off shore employees strategic or lucky ? Were GE profits under Welch, pumped-up by financial risk taking by GE Capital taking ?

Either way Mr. Welch has moved in to the Donald Trump category of business leader: business leader as entertainer.

So how are the statistics collected ?. By a panel of experts who work for the Bureau of Labor Statistics. 

Saturday, October 20, 2012

Three people got fired from my job on Friday

Getting fired sucks. I overheard three people getting fired on Friday.   I work in the computer field.  The company I work recently outsourced it's computer systems to a hosting facility last January.  Very few corporations actually own their own computer systems any more.  Instead the lease time and space on remote computers on a monthly or yearly basis at a managed hosting facility.

One of the network guys, Reggie, who I only talked to a little bit, left immediately.  I guess he knew what was up and had good skills.

But two other guys, Sam and Kevin, stayed.  Sam, had been with the company for 15 years and worked as a computer operator.  He was a local guy with a high school education.  When they outsourced the computer systems, they gave Sam a job on the helpdesk. But Sam had trouble keeping up and answering calls.

Kevin, the late shift operator, who used to cover 4pm to 12am really had no work at all.  I think he had a second job some place.  He was an immigrant from a west Asian country.  He was down to managing backup tapes.

That, along with a 3rd guy, in computer support, whom I did not know at all, were let go a 4:30 on Friday.  Bam !  Pack your stuff, give me you access card, get out.

So, I am trying to decide if the company did the right thing and if it even matters.  They did know the computers were gone and they had very little work.  The company did try to give one a job on the helpdesk.

But I also see, read and hear how tough it is in the labor market in the US.

Long story short, I gotta look for a job with more job-security like teaching or the government.

Saturday, October 13, 2012

US investment in high speed rail non-existent

If you are lucky enough to travel, you find your self making frequent comparisons between home and the place you are visiting. This time we were fortunate enough to go to visit Italy.

Most people compare the people, the food, the weather and the general environment. We compare the economic and business climate, employment opportunities and infrastructure. Always a tall order in a country where you don't speak the language.

But some things do jump out immediately. One is how good the roads are. They all seem to be built in the last 20 years. The second is the number of people using public transit especially trains. The united states has virtual no passenger rail infrastructure, while Europe's is extensive.

The US has completely ignored passenger rail service and infrastructure for the past 40 years. All the big countries: Spain, Italy, Germany and France, have high speed rail.  The Italian high speed service travels from Milan to Rome (a little more than 320 Miles) in 3 hours.

What we also don't see is the extensive web of industries behind the scenes making this advanced equipment.

The global industry is huge.  Here are some publications that cover the industry.
Railway Gazette.
Railway Technology

In contrast, the US has focused on the Airline and Car industries.  We are still the leader in airline equipment and technology

We believe the reason the US has not developed a mid range transportation infrastructure is due to low energy prices. The US has very low gas prices and airline fuel prices compared to the rest of the world.  Right now fuel prices in Italy for Jet Fuel A-1 is around $4.00 dollars a gallon.  Car gasoline is about $7 dollars a gallon.

A second reason is the low density of the population in the US outside of the Boston to Washington corridor.

Third, Europe has many incentives to discourage driving: higher gas taxes, road tolls and vehicle taxes.

Friday, September 28, 2012

Unemployment by President

US National Unemployment rate under different US Presidents

This chart is based on the statement ex-president Bill Clinton made during the national convention for Democratic party. The chart compares compares the unemployment rate under different presidents. The presidents are: Nixon, Ford, Carter, Reagan, Bush, Clinton, Bush and Obama. Over the past 40 years the unemployment rate dropped the most under Bill Clinton.


Here is a link to the data on Google Docs if you want to make your own charts. You can compare the stock market, fed policy, inflation rate, or capital gains tax rates, to see how little effect the president has on the US economy.

Here is the data.

Tuesday, September 18, 2012

July Unemployment Review

July Unemployment Report Review of BLS Employment Data

Summary: Better than expected employment results; Economy growing slowly.

The Bureau of Labor Statistics announced the US economy created an amazing 163,000(+/- 100,000) new jobs in July 2012.  The unemployment rate rose to 8.25% as job seekers returned to the market. The financial markets reacted favorably to the report as the Dow-Jones index moved to over 13,000 points. All major employment indicators were nearly the same as last month. Many of the indicators have not moved outside of a narrow range for the year. The following chart show the change in major categories for non farm payrolls:


 Absent some external shock, economists see little improvement for the next year, regardless of promised action by the fed. The best hope for an improved economy is spending by the congress, consumers paying down some of the debt and improvements in the housing market.

The other interesting number in the employment report is a 23,000 worker increase in manufacturing jobs.

The black unemployment rate stayed at 14.1%. The historic average since 1972 is 12.3%. The measured black labor force dropped by about -160K of which -75K were people who lost jobs and -85K were unemployed. The black population grew by 33K, so people were basically dropping out of the labor market. As a result the “black not in the labor force” number grew by 189,000 people. The national labor force participation rate rose to 63.7%. Black labor force participation was 61.4 (67.8% for Black men, 62.0% for Black women and 29% for black teenagers) While the black national rates stayed at 14.1%, the white rate was parked at 7.4% and the Hispanic rate stayed at 10.3%. The black teenage unemployment was reported at 37%.

Both Obama or Romney campaigns held national party conventions and made statements on jobs and economics. Romney promised wide spread tax cuts to stimulate the economy. President Obama offer more targeted set of tax-cuts and infrastructure spending.

The long-term unemployed (27 weeks or more) increased to 5.2 million people which represents 41% of the unemployed. The “work part-time wants full-time” number was 8.2 million. These people are considered under employed. 2.5 million workers were marginally attached to the labor pool. They have looked for work in the last 12 months but not in the last four weeks. And there were 852K discouraged workers (part of marginally attached) who are not looking because they believe there is no job for them.

Non-Farm Payrolls 

As we mention in the summary, non-farm payrolls add 163,000 jobs. Private sector hiring added 172,000 jobs (vs. 64,000 last month) and government employment dropped again by -9K. Job growth was concentrated in durable goods manufacturing(+24K), business services and healthcare. The losers were construction employment again down -1K and government employment which was down by -9,000 spots. 

Non-farm payrolls were revised in May upward by 10,000 (from 77,000 to 87,000) and in June downward from 80,000 to 64,000 for a loss of 16,000 jobs.

 The following chart show where the non farm payroll jobs were added by minor category:


Average work week was unchanged at 34.5 hours and wages added 2 cent in July.

ADP reported an increase in private payrolls of 163,000 positions for July.

US Monster Employment Index moved up to 147 in July from 153 in June. Hiring was up 2% compared to same month last year.

Sunday, September 16, 2012

NY Times: Top Tax Rates and Economic Growth

Here is a great piece by NYT's David Leonhardt on a CRS study that top taxes rates have little effect on economic growth. We don't usually reference stuff directly, but this is really powerful stuff.

Basically, the research say there is no link between top taxes rates and economic growth. So the rich could pay more without affecting the economy. Also, tax cuts for the top earners don't necessarily stimulate the economy.

NY Times

Here is a link from the NY times website.
Congressional Research Service Report

Saturday, September 15, 2012

Question: How much does the US President matter to the US economy ?

From time to time we get a good question sent into our blog. This one came in this morning.

Question: Exactly how much power does the US president have over the US economy ? What power or influence does the president have over the economy ? Should we praise/blame the President for the good/bad economy ?

Answer:  The US president, has surprisingly little power or influence over the US economy.  His influence is has waned recently because of a deeply ideological split congress. It is congress which has the ability to spend money, pass laws and raise and lower taxes. This power is called "Fiscal Power". Historically, presidents, when they have had majorities in congress, have had more power over the economy by proposing where to spend money. Congress would agree approving the expenditure. There are lots of examples: the space program, the war on poverty, the Vietnam and Iraq Wars, and the Bush tax cuts.

Congresses "power of the purse" come from the US constitution. Article 1, section 9.  The constitution reads "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; ..." Which basically mean all spending and taxing is done by congress. So the president has little direct ability to spend other than when congress has delegated the power. In the past, US presidents have had more influence over congress and thus more control over the economy. For example, Barack Obama was able to pass only limited spending bill during the current recession. Franklin Roosevelt, Kennedy/Johnson and Nixon, Clinton and George W Bush were able to exert a much wider effect on the economy through legislation. Many of Lyndon Johnson great society programs were passed during the Nixon administration.

The president does have veto power over congressional legislation which will stop a bill from becoming law. Veto power can stop a bill but it cannot pass a bill in congress.

The president does have some very limited spending authority where authorized by congress. The President can spend money on executive branch functions and national disasters. That's pretty much it.

Indirectly, the president has a much longer term and wider influence on the economy. They can influence congress to pass legislation to reduce the debt, spend money or make investments. The president has also come to own the budget process. He puts forward the central fiscal legislation for his political party and the executive branch as the starting point for congressional negotiation.

The president has a limited ability to promote economic policies like home ownership, medicare and social security reform or increased exports through speeches and executive branch policies. The ability to affect public sentiment is called the "bully-pulpit".

The president has some power over the economy through appointees to the financial and regulatory agencies such as the Federal Reserve, CFTC, the SEC and the department of justice (anti-trust).

So, the reality is that the president, has some small, indirect and long-term influence on little control over the economy. And the American people are fine with this situation.


Wednesday, September 12, 2012

No state support for affordable housing in New Jersey

It looks like support for affordable housing has disappeared from the official New Jersey state website. If you type in "Affordable Housing" on the website you are directed to the page for the state housing and mortgage finance page.

The page for the Council on Affordable Housing redirects to a page called "Fair Housing Act Administration" under the department of community affairs.

Connecticut recently announced additional funds for affordable housing.

New York state also has program for affordable housing which is clearly show on the state web site.

The Evil Black Economists blog support affordable housing and housing desegregation based on income and class.

Saturday, August 4, 2012

Residential Segregation is a huge problem in the US

One of the biggest problems in the US is that social benefits are linked to where you live. Benefits like good(great) schools, safe neighborhoods, police, fire and public services, jobs and stores with good prices. Plus there are more subtle benefits that come from living in middle or upper middle class neighborhoods.

Instead we have segrated area like Anaheim, CA

Friday, July 27, 2012

Entrepreneurship shrinking for last 30 years

Here is a very important story about the number and rate of entrepreneurship shrink for the last 30 years. In Washington Monthly.

Wednesday, July 25, 2012

$11 Trillion Dollars in off shore accounts

We applaud the work of the tax justice network's reporting of off shore tax avoidance schemes. The TJN report covered here in the Guardian. Estimates of funds held off shore accounts are around $21 trillion dollars.

There are proposals to use some of the money held in off shore accounts to resolve the global debt crisis.

You then think about how to unwind the off shore accounts.

So let first examine what these shelters are. The are country specific legal entities designed to avoid home country taxes. They use home country tax laws, foreign country sovereignty, international tax treaties and the international banking system to avoid home country taxes. They are operated by resource poor countries to generate jobs and income.

A typical example is a US company set-ups up a Cayman Island(0% income tax) or Irish company (10% income tax. They transfer or sell their assets (like a manufacturing plant) to the new company. So while the assets, site in a high tax country (Germany, France, Italy or UK), the profits accumulate in the Cayman Island (which has no income tax). These profits can be used anywhere in the world to purchase additional plants, equipment or supplies. If the profits were send back to the US they would be taxes at corporate rate of 35%.

Again, the Tax Justice Network reports between $11.5 trillion and $21 trillion in funds is sitting off shore.

So, how do we close down such schemes ? How do we minimize the impact on countries that were "poor" before off-shore banking. How do we make sure everyone takes a hit but no one group takes all the pain.

1) Enforce internal standards of transparency and information sharing
2) Reduce off shore repatriation rates
3) Provide foreign aid or incentives to countries to give up their off-shore business.

For example, the country of the Cayman Island has only 58,000 people yet hold $1.5 Trillion in deposits. There are over 250 banks in the Cayman Islands. Fifty percent of the income and jobs come from the financial services sector.

Unfortunately, the wealth and success come at the expense of the US tax payer.

I would propose tightening regulations and creating a long-term development plan to turn the tax-haven economies into a back office / outsourcing / service center for the banking and financial service sector. Plus additional subsidies for tourism.

Here is the link to the Tax Justice Network website.

Monday, July 23, 2012

Corporate Crime Watch

Just a general round-up of recent corporate crime and malfeasance

Libor rate setting scandal
Best coverage is at the Financial Times.

Wells Fargo Mortgage Discrimination

Well Fargo settled a discrimination suit with the department of justice for $175 million. The DOJ charged a pattern or pracitce of discrimination aginst Black and Latino borrowers who were steered to sub-prime mortgages and paid higher fees or rates than whites. Department of Justice Press Release.

HSBC laundering Mexican drug profits. There is a little less coverage of HSBC laundering money for Mexico drug lords and handling transactions for Iran and Syria.
Al-jazeera has the story.

UPS / Fedex price fixing has been alledged by a 3rd party shipping consultant called AFMS. Here is that story.

Glaxo Smith Kline was fined 3.0 Billion dollars for misrepresenting products. This story is from the NY Daily News but come from AP.

Sunday, July 22, 2012

Another reason companies aren't hiring: Bad internal accounting

Beside being picky and risk adverse, ompanies have poor HR accounting systems. They can tell you what a new hire costs but they cannot tell how much profit a new hire brings. The have no clue as to their HR cost structure other than a top level view. So when they cut 10% they either cut 10% across the board. Or they cut 10% from support and ask everyone to work harder.

A second factor is increased productivity from long hours and more work from existing employees. Many white collar employees routinely work more than 40 hours a week as the norm. Through the fear of layoffs, employers have expanded employee hours while reducing benefits and time off. The recession has reset everyone's job expectations. The sad part is we may be heading back to a 12 hour work day. Unfortunately, this productivity means firms do not have to hire.

US manufacturing is performing poorly without Computer and Electronics Industry

The press and the Obama administration have been talking about a resurgence of US manufacturing. Here is a great piece of research that refutes that premise. It shows the real, poor performance of US manufacturing. The low and negative numbers are hidden by the effect of the computer and electronics industry's high productivity and value add.

Here is the link but you must still press the download button. The Debate over the State of U.S. Manufacturing: How the Computer Industry Affects the Numbers and Perceptions

Basically: manufacturing value added is distorted by consumer electronics; we are net importers of 18 out of 19 categories; and manufacturing employment has fallen dramatically since 2000.

The real reasons for slow US job growth

Just want to review the real reasons for slow US job growth.

The real reasons for slow US hiring are
1) lack of sales demand: now and expected demand in the future;

2) improved business processes including automation,

3)high profit expectations;

4) import growth (off shore manufacturing and outsourcing)

5) lack of government spending and hiring

Let look a little deeper into each one.

Skills Gap Smoke Screen: Socialize worker training costs

I recently read several news articles that blamed unemployment on workers not having the right skill sets. This just another cop out excuse for large and medium size firms to not hire. They also fail to mention the skill shortages exists only at the (low)price they want to pay. If they paid more, there is no skills gap.

Companies successfully got rid of their human resource, training and development departments during the business process re-engineering craze of the 1990's. The departments were viewed as non-value added (no direct bottom line contribution) so they were reduced, automated and outsourced.

In the tight labor market, companies have basically socialized employee training and development costs. They have gotten the workers, the government, and society to pay for something they used to provide.

Peter Cappelli at the Wharton HR Center has discussed this problem in more detail. His book is called "Why good people can't get good jobs".

Sunday, July 15, 2012

Non Farm Payroll rose by 80,000. Black rate up to 14.4%. National rate stayed at 8.2%

June Unemployment Report Review

The BLS announced the US economy created only 80,000 net new jobs in June. The seasonally adjusted number job is a large drop from the 12 month average of 150,000 since June 2011. The slow jobs growth is linked to weak demand both domestically and internationally, consumer debt overhang, lack of government spending and a soft housing market. The US GDP growth rate was reported at 1.9% on May 31st, 2012.

The household survey reported an additional 128,000 people working but the population grew by 189,000 so unemployment remained steady. The participation rate (63.8%), the EM rate (58.6%) and the unemployment rate (8.2%) did not move.

Economists and economic writers have now reset their expectations to about 100K or less jobs each month, so the 80K number was in line with new expectations.
The average work week rose a small part of an hour (0.1) to 34.5 and average hourly wages rose slightly ($0.06) to $23.50.

Below is the median weekly wage in constant (inflation adjusted) dollars.

Wages have been basically flat since 1980. The second chart is median wages since 2000 by race: Total, white, black and Hispanic/Latino.

There was a little good news in the report: the household survey said the number of people who self reported they were working increased by 128,000 on a seasonally adjusted basis. An additional 156,000 people came back into the labor market which kept the unemployment steady. Many unemployment people are losing their benefits in the coming months.

Black Unemployment

The black unemployment rate rose to 14.4%. The black labor force participation rate was 62.0 (68.4% for black men over 20 and 63.0% for black women over 20). The black teenage unemployment was reported at 39%. For comparison, the white unemployment rate stayed at 7.4% and the Hispanic rate stayed at 11.0%.

Employment Stats

The long-term unemployed (27 weeks or more) stayed at 5.4 million people which represents 42% of the unemployed. The “work part-time, wants full-time” number was 8.2 million. These people are considered underemployed. About 2.5 million workers were classified as marginally attached to the labor force. They want work but have not looked in over four weeks. Finally, there were 821K discouraged workers (part of marginally attached) who are not looking because they believe there is no job for them.

Non-Farm Payrolls

As stated earlier, there were 80,000 jobs were added to the US economy in June. The private sector added 84,000 jobs (vs. adjusted 105,000 last month) and government employment dropped again by -4,000. Job growth came from increases in durable goods manufacturing, temp help, leisure and hospitality, computer information systems and business consulting. The losers were construction (-7K) and retail trade (-5K).
Manufacturing added 11,000 positions; Construction added 2, 000 jobs; business services was up 47,000 jobs and healthcare added only 11,000 new positions. US manufacturing continues to impress with solid gains (+500,000) from the bottom of the recession.

Government Employment

Total government employment drop by -4,000: the federal government lost 7,000 employees and the state governments lost 1,000 people while local employment was up 4,000. Since the recession started in December, 2007 the government has lost 433,000 jobs. The private sector has added 4.3 million jobs since December 2009.
Basically the lack of government hiring is slowing the economy. If government hiring continued at the same rate as private sector hiring and additional XXX,XXX jobs would have been created.

Seasonal Adjustment

One controversial aspect of the report is how the BLS handles seasonal adjustments. The household survey has reported an average of 500,000 new jobs each month since January on an unadjusted basis, yet the seasonally adjusted number shows only 150,000 new jobs on average. The seasonally adjusted number shows much lower employment growth. The establishment survey reported similar results. Since January, in the business establishment survey, there were about 460,000 non-seasonally adjusted new jobs on average. But the adjusted establishment numbers since January come in at an average of 150,000.

Other news

Average work week increased by 0.1 hours to 34.5 hours and wages added 6 cent in June.

ADP reported an increase in private payrolls of 176,000 positions.

Monster Employment Index moved up to 153 in June from 147 in May. Hiring was up 5% compared to same month last year.

Monday, July 9, 2012

ADP Payroll Report might be better than BLS

I heard some commentators on the radio discussing the difference between the ADP employment report for June (+176,000) and the BLS non farm payroll number (+80K).

We believe the ADP numbers are more accurate actual number. Here's why.

The number are projections from an actual payroll system, not surveys. The data are based on new employees paid from ADP. Each one unique and trackable. There is much less bias in the these numbers because people want to get paid. The same

The BLS survey is subject to sampling error and seasonal fluctuations. There is less of an incentive to answer the BLS survey.

So right now, we are watch the ADP payroll number and the weekly jobless claims

Wednesday, June 27, 2012

Government drug discoveries account for 9% to 21% of New Drugs

Some one asked me to research an interesting question. What percent of drugs originated at government labs ?

The answer, depending on how you measure, is between 9-21%. Here is an article in the New England Journal of Medicine discussing the success of government funded drug research. The report uses a broader definition of public sector research that includes universities and non-profit hospitals. Here.

Here is a summary of the article in the LA Times. Here.

In related news, the NIH announced a new center to work more closely with drug companies to develop new compounds. The NY Times has a piece here.

Here is the web site of the organization, the National Center for Advancing Translational Sciences. NCATS is Here.

When you look at the success of the US drug industry, you have to acknowledge that the money invested by the government in basic research was well spent.

Saturday, June 23, 2012

Low pay at Apple Stores

Why does Apple pay it's retail employee's so little ?

Well, obviously, because it can. But the real answer is way more complex. And very little can be done to raise the pay in the short term except for a "shaming" article in the NYT.

The real answer is that corporations have changed how they develop talent. They no longer develop internal people who grow up with the company but instead purchase talent on the open market.

So the 21st century corporation is a silo's of experts: HR, product design, engineering, accounting and retail store operations. They only work together when forced to, for example design, manufacturing engineering and cost accounting. Marketing would jump in later at a typical company. Apple had design and marketing embodied in Steve Jobs. Apple is a "product" company and retail operations are important but secondary. Their stores could look like a cell phone store and they would sell the product.

Large, US corporations no longer develop expertise in-house. They have found it too expensive. Especially in areas like HR or retail operations. Instead they have hired experts from the outside. Sure the executives claim Apple values but they did not grow up there.

So apple brought in an expert from the gap, or best buy, or Verizon to run retail. And they were devoted to the bottom line of their area, not the company as a whole. We all know that labor costs are a large piece of the bottom line. HR and retail operations were look at their own internal bottom line at the cost of the companies reputation.

You think Apple would wise up after bad press for poorly treated overseas manufacturing workers at Foxconn, for the designed in "California tag," and for record CEO pay. Now we find out they are underpaying their retail workers.

We are in a new era of large scale corporate dominance of politics and the media leave only guilt and shame as a way of increasing wages.

Sunday, June 17, 2012

Number of Employed Whites Drops Dramatically During Recession

Five million less whites are in the workforce

I was working on a longer term project on data from the Equal Employment Opportunity Commission. The EEOC is the only source for private employment data by race. The idea is to measure how under-represented blacks and Hispanics are in different fields. If you are going to measure a difference then you need a standard. So the benchmark I chose was the percentage of whites, blacks and Hispanics employed in the general economy. For example: in May 2012 approximately 75% of the workforce was white, 14% were Hispanic and 11% of workers were black. So we would think that 75% of managers are white, 14% Hispanic and 11% are black.

While building the standard, I realized that during the recession, white employment had dropped by close to 5 million workers from the beginning of the recession. The actual drop during the recession was 6.2 million workers but has since recovered to closer to 5 million. Definitely time for some quick charts.

This chart shows the total number of employed people during the recession. You can see about 5 million whites have left the workforce. Black and Hispanic employment is starting to rebound.

This is a chart of the percent composition by race of the work force since 2007. The end of year "bumps" is the chart come when the census bureau adjusts the population totals.

For some perspective, here are the longer term trends since 1980. While the work force has grown, the largest percentage of new employees comes from the black and Hispanic populations.

The chart below show the big historic drop in white workers.

Here is the long term percentage of work force compositions.

Note: Since Hispanics can be of any race they can be double counted in the black / white statistics. So we typically compute the total white + black + Hispanic employment (which is more than 100%) then divide each groups individual employment amount by the total employment which reduces or "normalizes" the totals.

Saturday, June 2, 2012

May jobs report: Only 69K new jobs. New Normal.

The new normal: 69,000 net new jobs; Black rate up to 13.6%. National rate increased to 8.2%

Jobs report shows 69,000 net new jobs created in May. This is statistically near the new standard rate of 100,000 but below the 12 month average of 150,000. Economists and commentators said the low figure was due to low demand domestically and internationally.

On June 1st, 2012, the BLS announced the US economy created only 69,000 net new jobs in May. The jobs number is a large drop from the 12 month average of 150,000 since June 2011. We also got negative revisions of the March and April jobs reports. March was reduced by -11,000 to 142,000 new jobs and April was reduced by -38,000 to 77,000 new positions. The slow jobs growth is linked to weak demand both domestically and internationally. The US GDP growth rate was reported at 1.9% on May 31st, 2012.

The BLS Jobs report has become the one economic statistic everyone watches. The press headline coverage was "poor" with some reports calling the report "dismal","gloomy" and a "train wreck". However, coverage of the details was quite good. The Romney immediately attacked the president on jobs. He called the report “devastating.” However he appeared a little overzealous and gleeful at the bad news. The administration called for additional stimulus from congress. A more likely scenario is stimulus activity by the Federal Reserve.

Economists had expecting 100K to 150K new jobs, however the actual number can vary by plus or minus 100,000 jobs. The Dow Jones equity index lost about 274 index points on the announcement but recovered early next week based on expected Fed intervention.

As always, employment figures must be considered over several months. Some of the changes are due to random statistical variation. The average work week declined by 0.1 hours to 34.4 and average hourly wages were stagnant at $23.41. (I don’t even know why I bother to write stagnant, wages adjusted for inflation, have not changed in more than 30 years. See chart below).

Average Weekly Earning from Jan 1979 to May 2012

There was a little good news in the report: the household survey said the number of people who self reported they were working increased by 422,000. An additional 622,000 people came back into the labor market which pushed the unemployment rate up.
The national labor force participation rate increased 0.2% to 63.8%.

Black Unemployment

The black unemployment rate rose to 13.6%. The black labor force participation rate was 61.3 (68.1% for black men over 20 and 62.1% for black women over 20). The black teenage unemployment was reported at 36%. The white unemployment rate stayed at 7.4% and the Hispanic rate jumped up to 11.0%.

Employment Stats

The long-term unemployed (27 weeks or more) rose to 5.4 million people which represents 43% of the unemployed. The “work part-time, wants full-time” number was 8.1 million. These people are considered underemployed. The same monthly number of people: 2.4 million were marginally attached to the labor pool. They want work but have not looked in over four weeks. And there were 830K discouraged workers (part of marginally attached) who are not looking because they believe there is no job for them.

Non-Farm Payrolls

As stated earlier, only 69,000 jobs were added to the US economy in May. The private sector added 82,000 jobs (vs. adjusted 77,000 last month) and government employment dropped again by -13K. Job growth was concentrated in durable goods manufacturing, trade and transportation and healthcare. The losers were construction (-28K).

Now let’s look at some of the key areas of the economy. Manufacturing added 12,000 spots; Construction lost -28,000 jobs; Business services was flat at -1K jobs and healthcare added 46,000 new positions.

Average work week shrank 0.1 hours to 34.4 hours and wages added 2 cent in May.

ADP reported an increase in private payrolls of 133,000 positions.

Monster Employment Index moved up to 147 in May from 146 in April. Hiring was up 1% compared to same month last year.

Sunday, May 20, 2012

Black Labor Force Participation Rate

We have been watching the labor force participation rate closely as it falls during the recession. The rate, which be blow the long term average, measures how many Black people have jobs and are participating in the labor force.

Saturday, May 19, 2012

Total New Jobs: 115,000; Black rate drops to 13.0%; US rate at 8.1%

BLS April Unemployment Report Review

The BLS announced the US economy created only 115,000 new jobs in April. Economists had expected at least 150,000 new jobs, however the number can vary by plus or minus 100,000 jobs. The amount of new jobs was below what was expected but in line with US GDP growth rate of 2.2%. The US national rate was reported at 8.1%.

The US national rate continues to slowly drop which is good news for President Obama's election campaign.

The Dow Jones equity index lost about 100 points on the announcement (and 400 index points for the week) based on the poor job creation news. Almost every other employment indicator was the same as the previous month.

The biggest news was a large increase in people who were not in the labor force. An additional 522,000 people dropped out of the labor force. The national labor force participation rate decreased 0.2% to 63.6% which is the lowest since December 1981. Black labor force participation was 61.3 (63.2% for Black men and 59.7% for Black women) which is also similar to the rate during the early 1980s. The black rate peaked at over 66% during the late 1990s. Both the participation rate and the “not in the labor force” rate affect the unemployment rate which dropped by 0.1%. Rate is dropping for the wrong reason: people leaving the labor force not growth in the jobs market.

The black unemployment rates is displayed below.

The black rate bounced down to 13.0% because of a drop in the size of the labor force and an increase in the number of people working. The white unemployment rate increased ten basis points to 7.4% and the Hispanic rate stayed at 10.3%. The black teenage unemployment was reported at 38%.

The "real" black underemployment rate was above 20% but declining. It has dropped by 15% in the last year.

There was no major news from the Obama or Romney campaigns on jobs or economics.

The long-term unemployed (27 weeks or more) dropped slightly to 5.1 million people which represents 41% of the unemployed. The “work part-time wants full-time” number was 7.9 million. These people are considered under employed. Two million, four hundred thousand people were marginally attached to the labor pool. They want work but have not looked in over four weeks. And there were 968K discouraged workers(part of marginally attached) who are not looking because they believe there is no job for them.

Non-Farm Payrolls

Private sector hiring added 130,000 jobs (vs. 166,000 last month) and government employment dropped again by -15K (local government -12,000). Job growth was concentrated in durable goods manufacturing, business services and healthcare. The losers were construction (-2K) and transportation and warehousing(-16,600 jobs). Government employment was down by -15,000.

Let’s review some of the key areas of the economy. Durable goods manufacturing added 16,000 spots; Construction lost -2000 jobs; Business services added 62K(21K temp help) and healthcare added 18,000 new positions.

The chart below shows the breakdown by minor category. You can see that the biggest jump was in business services. Growth was broad based coming from several technical areas. Construction is still hurting. Construction is about 5% of GDP. Manufacturing continue grow.

You can see from the chart below that job growth slowed this month compared to the recent winter months where more than 200,000 jobs were created.

The US is making progress in recovering from the recession. We are still down about 5 million jobs since the start of the recession. Approximately 2.5 million jobs have been created since the end of the recession.

At the current rate of growth, we will regain the lost jobs some time in the year 2016 based on a linear forecast. However, are more realistic recovery curve would flatten as the recovery continues, so we expect the real date to be around 2018.

Non-farm payrolls were revised in February upward by +19K (from 240,000 to 259,000) and in March by +34,000(from 120K to 154K).

Average work week was unchanged at 34.5 hours and wages added 1 cent in March.

ADP reported an increase in private payrolls of 119,000 positions.

Monster Employment Index moved up to 146 in April from 143 in March. Hiring was up 1% compared to same month last year.

Thursday, May 3, 2012

All Labor...

All labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence.
Martin Luther King, Jr.

Sunday, April 29, 2012

InterPublic Group sued for Racial Discrimination

A long term employee of the InterPublic Group (IPG) has filed a racial discrimination suit accusing the firm of denying her promotion because she is Black and a visible minority. Joy C. Noel filed a $50 Million dollar lawsuit alledging discrimition in promotion and then subsequent retailation which is illegal under NY State law. The legal paperwrok was filed on her behalf by the plantiff by Eric Sanders of the Sanders Firm, PC.

You can read the full petition here. And here.

When you read the details in the position, you get a real feel for the day to day stress the plaintiff was under. Really very sad.

Advertising Age (Ad Age) also has an article on the topic. Here.

And finally, according to Ad Age, John Liu, has asked the four top companies to disclose personnel information by race, gender and position. The companies are IPG, Omnicom, Publicis and WPP. The advertising industry has long had a reputation for discriminating against Blacks and Hispanics.

Three reporters: Alexandra Bruell, Kunar Patel and Rupal Parekh at Advertising Age plus the editorial staff, have done a great job convering the topic. Here is one more story. Here.

The Navy is the easiest place to cut

The best place to cut the military is the Navy. They are the largest service. They have huge capital expenditures. They produce relatively few jobs for the money spent. And they have relatively little impact in a land warfare world.

Nine out of ten of the worlds navies are allies of the united states. And the tenth, China, is in love with the shipping container. The would rather have world trade than Taiwan.

The Navy, is currently looking for a mission. It is close to irrelevant in the global war on terror or the wars in Afghanistan and Iraq.

currently there are thirteen Battle Carrier Battle Groups and about 320,000 active personnel. There are an astounding 200,000 civilian employees. An probably another 200,000 contractors (20% of 500K personnel). That's an incredible 700,000 people.

Another huge waste of money is our submarine fleet. Especially our Nuclear submarine fleet. These sub are clearly left over from another age with no strategic purpose.

We should reduce our Carrier Battle groups to either while keeping the current ones on station longer. We should reduce out sub fleet by 50%-75% to approximately twice that of next largest sub fleet. Any we should consider closing some of the non strategic bases around the globe.

Monday, April 9, 2012

Bidding for Labor on the Internet

When I was not working, I looked at some of the freelance web site. I guess the industry has continued to growth because several small job / task level web sites have appeared. Now, there are more popping up. I spent a little time going back and checking them out. These website let users post small jobs and tasks or find freelance positions. The small task sites use the internet to take competitive bids and the lowest price worker gets the job.

Most of the small job sites feature really low bids. I mean below minimuum wage level bids. But when you answer the ad, you are operating as an "independent contractor", which not subject to minimum wage laws, so we will see how that stands up to state regulators.

There was also a recent radio feature that started me writing on the subject. You can listen to it, to get an idea of how these sites work. Here, from the On Point Radio show, which spent some time discussing some of the implications.

As a amateur economist, I can see the efficiency of offering jobs over the internet. The advantage is greatly reduced transaction costs. But it seems like most of the benefits go the the person posting the job not the worker.

Here are some sites to check out:

Task Rabbit
and you must include Craigslist

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