The New Global Labor Market

A huge increase workers is having a disastrous effect on US wages and job for low-skilled workers.

You can read the report here.

Unemployment by Class (Income)

There is some really good work being done at the Northeastern University's Center for Labor Market Studies (CLMS) on the severe inequality in the unemployment situation by income.

The authors divide the the labor market into 10 different income sections then determine impact of the recession on each group. They find that the unemployment and under employment rate for the bottom 10 percent of income earners (less than $12,160) is greater than 50%. While the very top income bracket (greater than $138,700) had an under utilization rate of about 6%. In other words, unemployment issues are falling almost completely on lower income people.

Here is the study.

Black U-6 Near 25%!!!

Using the broadest measure of unemployment, U-6, and a basic logical computation, nearly a quarter of Blacks in the US want to work and cannot get it. The BLS U-6 measure includes the all unemployed workers, workers who work part time and want full time work, and discouraged workers who would work if offered.

The BLS releases only a U-6 measure for the general population. It does not release a U-6 measure for specific demographic groups. However, computing U-6 for Blacks is straight forward. Historically, the employment situation for Blacks has always been worse then that of the general population. Theirfore, U-6 would also be worse for Blacks than for the general population, if released. So, if we add the difference between the general U-3 and U-6 to the Black unemployment rate, we would logical get a figure that is the minimum U-6 for Blacks. The real Black figure should be higher. Sadly.

Non Farm Payroll drops only 20,000 Jobs

The BLS revised it's non farm payroll number for November to reflect a 64,000 job increase and disclosed it's January 2010 number was only a drop -20,000. However, the cumulative job loses since the recession began still tops 7 million.

Black Unemployment Hits Record 16.5%

The Black Unemployment rate increased by 0.3% to 16.5% of the total Black labor force. Approximately 2.9 Million Blacks are unemployed, an increase of 86,000 over the prior month. Eighty nine thousand additional Black men became unemployed while 27,000 Black women lost jobs. During the same period all other demographic groups had small decreases.

In the general labor market, the overall unemployment rate may have peaked. The general unemployment rate decreased from 10.0% to 9.7%. The total number of unemployed person dropped by 430,000 to approximately 14.8 million.

Executive Branch Budget Proposal Released

The Office of Management and Budget of the Executive Branch reveled the Whitehouse's proposed budget. The budget will be sent to Congress for revision but serves and the template for Democratic's spending proposals. The budget proposes a 3 year freeze on domestic program and then limiting domestic program growth to the rate of inflation. There would be essentially no increases in spending on domestic programs other than medicare and health. National defense continues to be the biggest spending item. National Defense will grow from $694 Billion in 2009 to $866 Billion in 2020 which is a 25% increase.

The following charts show the major budget items and their growth rates. Basically, the only major areas growing are healthcare, social security and defense.



Here is a graph of all budget categories showing essentially zero growth in the remaining domestic programs.





One of the most striking figures in the budget is continued growth of age related costs including healthcare in the budget. These include Social security, health care and Medicare. These are also the largest expenditure items in the budget. Sadly, the budget includes small long-term decreases in education, community development, natural resources and the environment. Foreign relations, agriculture and income security have zero growth over the budget period.



This graph shows the compound average growth rate (CAGR) over the 2009-2020 budget period of the different budget categories. The growth rates for commerce are affected by the TARP bailout. The growth rate for the energy department is affected by the Stimulus program(ARRA).

Summary

1. The budget will have very little direct stimulative effect for job growth outside of defense and healthcare.

2. We are spending well beyond our long-term means in national defense.

Glossary.

Budget Authroity -- The proposed amount to be spent in a year

Budget Outlay -- The amount planned for actual spending. Some programs have multiyear spending, so outlays are the actual money going out the door.

Phoney debt scams: You can't get much lower than 0% interest

I will never cease to be amazed at the people of the United States. And their lack of economic understanding. The calls to reduce the deficit are being led by some of same people who were big spenders under the Bush administration. I am starting to believe, quite sadly, that this country gets the representation it deserves. "No one ever got conned, who didn't want to be conned."

How can the group that spent $1 Trillion on two wars and $2.5 Billion on tax cuts have any sort of legitimate complaint about the budget deficit. To me, it is just an old recycled excuse to block any sort of spending, that they disagree with, by the national government. When they are in power, they can spend. When the opposition is in power, we must watch deficits.

I am also, amazed at the lack of understanding of basic economic principals such as: deficit increase during recessions(declining tax revenue and fixed commitment spending) or cutting spending during a recession will prolong the downturn.

Another, more basic economic principle called "crowding out" is rarely discussed. It is the level of national debt at which the US government starts to compete with private investors for loans(debt) thus raising interest rates. No one knows what level of National Debt (as measured by Debt-to-GDP) will start to affect interest rates. Many economists believe it is around the 90% - 100% ratio when there is some pressure on interest. But interest rates, which are near 0%, also affected by private demand which is lessened during a recession. In other words, the US national debt does not seem to be affecting interest rates. You can't get much lower than 0%.

Luckily Obama's pollsters have gotten out in front of this one. Obama has proposed some modest deficit reduction plans.

Real help for Haiti: Impose Martial Law Now.

Haiti needs martial law now. Run by foreigners. It needs stability and to root put corruption. Yes, there are certain situations were other forms of government are better than democracy. We have martial laws in the US for just such situations. Haiti needs similar laws imposed now. The Haitian government, which was barely functioning prior to the earthquake, need to be totally reorganized. Democracy, is expensive, divisive and subject to corruption. You might be able to keep some sort of local representatives, but, nationally, the country needs to be run under martial law.

The new Haitian martial law government must tackle three issues: Stability, corruption and long-term capacity building. It must use Haitian nationalism and pride as a tool to achieve it's goals.

Haiti should be run as a protectorate of the UN, France or US. Kind of like a benign dictatorship. Run in a fashion similar to how China and Iraq operate. This type of governance would help Haiti "move from misery to poverty." The protectorate would need large subsidies from France, US, and Canada to operate.

France gives the residents of Martinique and Guadeloupe about $3000-$4000 in subsidies per capita (Martinique and Guadeloup per capita income is about $20000) per year. With 9 million Haitians, that would be about $27-36 Billion per year subsidy. Perhaps a figure of $500 to $1000 per capita ($4.5 to 9.0 Billion is required). That is the size of the yearly effort.

That much money requires a large effort to spend wisely and for the long term. Building capacity is a very large effort which has been master by few: only Korea, China and Brazil come to mind. The money must be spent to develop and educated ruling class (military, political, judicial and economic) and then expanded from there.

That would involve a gigantic commitment of cash by many nations to fix the problem. The amount is still less than what was spent Iraq and Afghanistan($1 Trillion Dollars). Any other approach is a just a band aid.

So what can you do to really help. Well, unfortunately, there aren't many options:
1. Give money to a charity. Fund charities that use Haitian workers and buy Haitian products.
2. Buy Haitian products: Coffee, Mangos(the best in the world), peanut butter, and textiles and manufactured products.
3. Visit Haiti as a tourist. Or make sure one of your cruise stops is Labadee.
4. Lobby your congressman or senator to allow 100,000 Haitian refugees into the US both temporarily and permanently.

Other ideas include
1. Free or cheap money transfer to Haiti. It can cost up to $100 dollars to send $1000 to Haiti.
2. Closer integration with CARICOM states. Sadly CARICOM imports more from China than from Haiti.
3. Capacity building efforts around education.
4. Stop US agriculture subsidies on products sent to Haiti or raise local tariffs to stop low cost food imports.
5. Encourage other countries to take refugees. Haiti needs to export about 1 million people to be stable. Those 1 million would send money back and return to build the country.
6. Increase the US limit on Haitian immigration from 21,000 at year to 50,000.
7. Promote family planning. The population is out of control leading to extreme poverty. China is a world model for family planning and now they are a middle class country.
8. Promote investments in education. Haiti need to expand its small educational system by 3X - 5X to develop a nation of leaders.
9. Promote Haitian nationalism.


Ok, here are some of the best Haiti articles I could find.

http://www.jamaica-gleaner.com/gleaner/20100201/lead/lead1.html
http://www.nytimes.com/2010/02/01/opinion/01mon1.html
http://www.nytimes.com/2010/01/31/world/americas/31reconstruct.html

v2

Stimulus update

The white house released the second quarterly report on the economic stimulus bill. The bill, formally known as the American Recovery and Reinvestment Act of 2009 (ARRA), has a large tracking requirement which gives a detailed view of the spending.

The summary press release is here. The report can be read here.

Here are some highlights from the press release:
$263 billion of $787 billion have been spent or deducted from tax receipts. The spending raised GDP by around 2% and increased employment 640,000 jobs. Total mployment was projected to expand by 1.5 to 2 million jobs due to multiplier effects.

Research File Dump

This entry is a list of research ideas to be checked out.


Offshoring american jobs: What response from US economic policy
bhagwati and blinder
Manikew light-skinned black article in book
contractor hiring of minorities
NJ contractor hiring
minority non-college youth
youth unemployment
where do blacks work ( started)
carver federal saving -- examination
franz liechter 10-block rule
education charts and graphs
minorities and innovation
depth of recession prediction. Compare highering with past recessions and recover. Job growth is slow
Productivity is slowing toward covergence
What is EPA cheif Lisa Jackson up to
fdic study: Black use of check cashing places