The recession of 2008 may be the biggest economic event of our lifetimes. Let me explain. While there is lots of business and economic information(not news), very little actual affects the everyday, average person. We still hear about this company (Walmart, GE) or that business person(Bernake or Bezos), but it is really just background noise. We all have gone on with our lives and shopping hoping it will continue forever. Now the recession has awakened everyone to the key economic question of our time: Where will the jobs come from ?? And by extension, what kind of lives will we and our children have ??
The latest unemployment numbers have been released. There is great worry that only 115,000 private section jobs were created. There was also a reduction in government employment.
Each recession, is a chance for the economy to re-balance itself. We are clearing the real estate, finance and consumer credit bubbles. We are also staring to think about what type of economy and society we want to live in. When most of us were happy and fat, we did not have to think too much, but now that the real world is intruding, we are thinking a little more about economic markets. Are markets always the best way to achieve societies aims ?? Are they the best way to allocate resources ?? What is the best way to design and regulate for the benefit of society ??
And where will the jobs come from ??
v1
Sunday, August 15, 2010
Sunday, August 8, 2010
GDP grows by only 2.4 percent
The US gross domestic product grew by 2.4% in the second quarter of 2010 as reported by the commerce department's Bureau of Economic Analysis. The 2.4% is the quarterly difference between the seasonally adjusted 1st quarter and 2nd quarter output of goods and services scaled to an annual rate (ie, the quarter change was really 0.59% times 4 = 2.36%). The estimate is an advanced estimate which is subject to revision as more data comes in.
There was broad increase in many of the components of GDP that contributed positively to growth. Exports, fixed investment, personal consumption expenditures, inventories, federal government spending, and residential fixed investment. Imports increased by 35% depressing GDP by nearly 4%. The slow down in GDP was due to slower inventory build-up and increased imports.
When you look at the individual components of GDP you can see the huge effect of imports on GDP. However, across the board the growth in investments, consumption spending and inventories boosted GDP. The addiction to imports is holding back the economy.
There was broad increase in many of the components of GDP that contributed positively to growth. Exports, fixed investment, personal consumption expenditures, inventories, federal government spending, and residential fixed investment. Imports increased by 35% depressing GDP by nearly 4%. The slow down in GDP was due to slower inventory build-up and increased imports.
When you look at the individual components of GDP you can see the huge effect of imports on GDP. However, across the board the growth in investments, consumption spending and inventories boosted GDP. The addiction to imports is holding back the economy.
Monday, July 26, 2010
Credit card rewards cost the poor
The NYT has a story about retailers raising prices for everyone to pay for rich peoples credit card rewards.
New York Times
New York Times
Saturday, July 24, 2010
Government Employment has Grown by 39% since 1981
Government employment has grown by 39%. Almost all the growth has been at the local level.
I was reading the current series in the Washington Post called "Top Secret America" and wondering about the intelligence and counter terrorism jobs created since September 11, 2001. The figures for the intelligence community are not broken out in government employment reports. However, we can look at trends in overall government employment.
Before we start, we must look at some general employment trends in the US.
Government employment has remained about 15-18% of the total non farm payrolls since 1981. The number of workers has grown in step with the overall employment situation in the US. Since January 1981, government employment has grown by 39%. During the same period non farm employment grew by 43%. Service sector employment expanded by 68%, while goods producing jobs fell by 25%.
The total number of government employees expanded from 16,360,000 in Jan 1981 to 22,770,000 in Jun 2010. Almost all of the growth occurred at the local level. There has been little hiring at the Federal level. Federal employment rolls have barely expanded compared to the amount of hiring done by local governments. The number of Federal employees has grown by 8%. The number of state workers by 42% and the number of municipal employees has expanded by 48%.
Here are the charts that illustrate the data. The first chart shows the over all increase in government employment from 16.3 million to 22.7 million.
The second chart show the share of government employment. Local percentage has increased from about 60% to about 64%.
You can see that the US has a much smaller central (federal government) than many other countries. Power has been devolved to states and the localities. However, this "sharing" comes at the price of duplication and inefficiencies. And higher taxes. Luckily, some of the "waste" is in the form of employment. Good thing for COPS, teachers and firemen.
Is is interesting to note that when people talk about government waste, they are usually talking either about the federal government or a different jurisdiction. They never talk about their own, local government.
Here in NJ, we have over 600 local municipalities each with it's own Department of Public Works, police and fire, parks, administration and purchasing departments and local government. Yet no one wants to consolidate jurisdictions out of fear of losing something. So as much as they complain, people don't seem to mind the high taxes. They are just accept it, but people like to complain. Politicians and administrators have a vested interest, so they have little interest in consolidation.
Another note: It is very difficult to find the number of private employees performing work for the government as contractors. I would consider them government employees since they perform government functions, however they are reported as private service employees. "Top Secret America" showed how difficult it is to find information in this area.
I was reading the current series in the Washington Post called "Top Secret America" and wondering about the intelligence and counter terrorism jobs created since September 11, 2001. The figures for the intelligence community are not broken out in government employment reports. However, we can look at trends in overall government employment.
Before we start, we must look at some general employment trends in the US.
Government employment has remained about 15-18% of the total non farm payrolls since 1981. The number of workers has grown in step with the overall employment situation in the US. Since January 1981, government employment has grown by 39%. During the same period non farm employment grew by 43%. Service sector employment expanded by 68%, while goods producing jobs fell by 25%.
The total number of government employees expanded from 16,360,000 in Jan 1981 to 22,770,000 in Jun 2010. Almost all of the growth occurred at the local level. There has been little hiring at the Federal level. Federal employment rolls have barely expanded compared to the amount of hiring done by local governments. The number of Federal employees has grown by 8%. The number of state workers by 42% and the number of municipal employees has expanded by 48%.
Here are the charts that illustrate the data. The first chart shows the over all increase in government employment from 16.3 million to 22.7 million.
The second chart show the share of government employment. Local percentage has increased from about 60% to about 64%.
You can see that the US has a much smaller central (federal government) than many other countries. Power has been devolved to states and the localities. However, this "sharing" comes at the price of duplication and inefficiencies. And higher taxes. Luckily, some of the "waste" is in the form of employment. Good thing for COPS, teachers and firemen.
Is is interesting to note that when people talk about government waste, they are usually talking either about the federal government or a different jurisdiction. They never talk about their own, local government.
Here in NJ, we have over 600 local municipalities each with it's own Department of Public Works, police and fire, parks, administration and purchasing departments and local government. Yet no one wants to consolidate jurisdictions out of fear of losing something. So as much as they complain, people don't seem to mind the high taxes. They are just accept it, but people like to complain. Politicians and administrators have a vested interest, so they have little interest in consolidation.
Another note: It is very difficult to find the number of private employees performing work for the government as contractors. I would consider them government employees since they perform government functions, however they are reported as private service employees. "Top Secret America" showed how difficult it is to find information in this area.
I started to new area under the Blog called mistakes
Just a quick, public place to complain about stupid mistakes I made as I write for the Blog.
This time I was trying to compare employment for government: Federal, State and Local. I wanted to check out the size of the government at the different levels.
Conservatives always complain about the government size but they usually mean the federal government, rarely the state and never the local government. But the local government is 4 times as large. Cops, teachers and firemen plus good pensions and benefits.
Anyway, I picked the wrong data set. A set which was NOT seasonally adjusted and here is my chart. See that annoying saw-tooth pattern in data. That is seasonality, which just confuses the whole picture. Oops.
This time I was trying to compare employment for government: Federal, State and Local. I wanted to check out the size of the government at the different levels.
Conservatives always complain about the government size but they usually mean the federal government, rarely the state and never the local government. But the local government is 4 times as large. Cops, teachers and firemen plus good pensions and benefits.
Anyway, I picked the wrong data set. A set which was NOT seasonally adjusted and here is my chart. See that annoying saw-tooth pattern in data. That is seasonality, which just confuses the whole picture. Oops.
Tuesday, July 20, 2010
Top Secret America: Another secret jobs program
Well, I have complained in the past about the large number of police and firemen in our town which basically has no crime or fires. Now comes word from the Washington Post about contractors and companies getting rich from 9-11. Companies have exploited fear of an attack by terrorist to fund a massive increase in Counter Terrorism and Intelligence services. And private companies have grown rich in the process.
Washington Post's Top Secret America
Washington Post's Top Secret America
What happened to those missing manufacturing jobs
When we look at the manufacturing sector we can see where the job losses came from. We can project job growth as some function of the rate of GDP growth over time. We can then calculate a manufacturing job deficit.
But why did those jobs disappear. Well the obvious answer is because they could. Underneath our economy is a political system that believes in free-trade and free-markets. The US has one of the most open markets in the world. The government plays a very small part in the markets and provides only the regulation to support functioning markets. Import tariffs are low. There are few cultural and non-business barriers. Few limits on foreign ownership.
The assumption is that higher competition gives the consumer a better value at a lower price. Free trade will also generate more jobs and higher incomes as countries specialize in different areas.
The second answer is global competition and productivity
The US lost to both China (items with a high labor content) at the low end and Korea, Germany and Japan at the high end (automobiles).
The third answer is productivity
The other sectors such as food, energy, construction materials which are not as import sensitive appear untouched but have trended downward because of productivity gains.
Services are relatively insensitive to productivity improvement, so the labor component has remained high.
But why did those jobs disappear. Well the obvious answer is because they could. Underneath our economy is a political system that believes in free-trade and free-markets. The US has one of the most open markets in the world. The government plays a very small part in the markets and provides only the regulation to support functioning markets. Import tariffs are low. There are few cultural and non-business barriers. Few limits on foreign ownership.
The assumption is that higher competition gives the consumer a better value at a lower price. Free trade will also generate more jobs and higher incomes as countries specialize in different areas.
The second answer is global competition and productivity
The US lost to both China (items with a high labor content) at the low end and Korea, Germany and Japan at the high end (automobiles).
The third answer is productivity
The other sectors such as food, energy, construction materials which are not as import sensitive appear untouched but have trended downward because of productivity gains.
Services are relatively insensitive to productivity improvement, so the labor component has remained high.
Where to look for jobs?? Look where H1-B visa holders work
Good paying jobs can be found in industries that employ H1-B workers.
The US issues visa to certain classes of foreign nationals to come for work. The visas are call H1-B visa and they are used to import workers in fields where the US has a shortage. The visa is for three years but is typically extended to six years. There are 65,000 H1-B visas issue each year. The visa is filled by highly educated foreign who have skills in areas where the US believes it has a shortage of workers. Skills like Math, Science and Information Technology.
The reasoning is that the imported workers provide missing skills to help the economy grow which benefits everyone. For example, one programmer may be the missing person on a large team launching a new website to sell sneakers. Ten other people at the company's jobs in marketing, manufacturing and finance may depending on the programmer who may not otherwise be available.
Also the programmer may buy a car, visit a doctor, rent and apartment and visit the local grocery store and pay taxes, all of which contribute to the economy. If the programmer, did not exist, there would be no secondary economic activity.
The imported workers can help an economy during periods of low unemployment. Corporation may also pay lower wage rates for H1-B workers thus helping increase there profits.
The number of imported foreign workers is small compared to the total US work force. Workers here as H1-B visa employees number less than 100,000. The total US work force is about 130 million. But the jobs pay well above the average wage.
In the US, we can also practice import subsitituion in the jobs market. The US currently imports a large number of workers in many high-tech fields such as engineering, math, sciences, nursing, biology, and medicine. The holders also include teachers and academics and Department of Defense contractors.
However, during high unemployment, the government reduces the number of imported foreign workers opening up jobs for US citizens in these same areas. So, if you are looking for a job consider one of the H1-B areas for employment.
The H1-B visa debate is a hot one. Here are some links to read about it.
Here is the site for US Citizenship and Immigration Services
v2
The US issues visa to certain classes of foreign nationals to come for work. The visas are call H1-B visa and they are used to import workers in fields where the US has a shortage. The visa is for three years but is typically extended to six years. There are 65,000 H1-B visas issue each year. The visa is filled by highly educated foreign who have skills in areas where the US believes it has a shortage of workers. Skills like Math, Science and Information Technology.
The reasoning is that the imported workers provide missing skills to help the economy grow which benefits everyone. For example, one programmer may be the missing person on a large team launching a new website to sell sneakers. Ten other people at the company's jobs in marketing, manufacturing and finance may depending on the programmer who may not otherwise be available.
Also the programmer may buy a car, visit a doctor, rent and apartment and visit the local grocery store and pay taxes, all of which contribute to the economy. If the programmer, did not exist, there would be no secondary economic activity.
The imported workers can help an economy during periods of low unemployment. Corporation may also pay lower wage rates for H1-B workers thus helping increase there profits.
The number of imported foreign workers is small compared to the total US work force. Workers here as H1-B visa employees number less than 100,000. The total US work force is about 130 million. But the jobs pay well above the average wage.
In the US, we can also practice import subsitituion in the jobs market. The US currently imports a large number of workers in many high-tech fields such as engineering, math, sciences, nursing, biology, and medicine. The holders also include teachers and academics and Department of Defense contractors.
However, during high unemployment, the government reduces the number of imported foreign workers opening up jobs for US citizens in these same areas. So, if you are looking for a job consider one of the H1-B areas for employment.
The H1-B visa debate is a hot one. Here are some links to read about it.
Here is the site for US Citizenship and Immigration Services
v2
Monday, July 12, 2010
Private sector job growth lags
Well there is more trouble in the labor market as private sector job growth stays below 100K. On Friday, July 2nd, 2010, the Bureau of Labor Statistics report private hiring increased by only 83,000, which is well below the 125K-150K need to reduce the unemployment rate.
Non farm payrolls actual decreased 125,000 person as 225,000 temporary employee finished US census jobs.
In detailed job news, manufacturing added 9000 jobs and construction contracted by 22,000 jobs. Two other signals of a tough labor environment were also reported: The average work week declined 0.1 hours and average wages dropped $0.02.
Two pictures(below) tell the story of Non Farm Payrolls during the recession and in the longer term. Here is the recession graph. You can see, for the first time, private service employment contracted. Add in the huge loss in goods producing jobs and you get 10% unemployment
Here is a chart of non farm payroll from Jan 1981 to June 2010. You can see the manufacturing jobs have slowly decreased. But service employment doubled! The growth was completely due to private sector services. Government employment remained between 16% and 18% for the entire period. During the 40 year period the economy grew by more than 2% per year. Yet manufacturing employment decreased.
So, you really have to ask what happened to those manufacturing jobs during the past 40 years.
Non farm payrolls actual decreased 125,000 person as 225,000 temporary employee finished US census jobs.
In detailed job news, manufacturing added 9000 jobs and construction contracted by 22,000 jobs. Two other signals of a tough labor environment were also reported: The average work week declined 0.1 hours and average wages dropped $0.02.
Two pictures(below) tell the story of Non Farm Payrolls during the recession and in the longer term. Here is the recession graph. You can see, for the first time, private service employment contracted. Add in the huge loss in goods producing jobs and you get 10% unemployment
Here is a chart of non farm payroll from Jan 1981 to June 2010. You can see the manufacturing jobs have slowly decreased. But service employment doubled! The growth was completely due to private sector services. Government employment remained between 16% and 18% for the entire period. During the 40 year period the economy grew by more than 2% per year. Yet manufacturing employment decreased.
So, you really have to ask what happened to those manufacturing jobs during the past 40 years.
Thursday, July 8, 2010
Time for more stimulus money and long term austerity
Opinion
This blog writer is in favor of a second, moderate sized government stimulus
The US economy needs another federal spending stimulus boost to continue growing. The economy is sputtering along, trapped in cycle of high unemployment feeding low consumer confidence. We all know that consumption is 70% of the direct economic output in the US. Another fiscal cash injection is need in the short term.
I would recommend spending the money on extending unemployment benefits, aid to state and local governments(SLG), student loans and grants, low income tax relief and long term R&D projects (like oil pollution control). We may have to get used to high unemployment and long-term subsidies for the unemployed. However, the money cannot be given with some productivity benefits to "pay" for the extra money. State and Local Governments must hold the line on pay, retirement and healthcare costs.
The stimulus should be about $400-500 billion dollar area (about 1/3 less than the original 787 Billion investment). Enough to cement the continued growth of the US economy. We must try to get the unemployment rate down to the 7% range to make the recovery psychologically self sustaining.
Longer term, the US economy has some issue to face. We need to shift from a "bubble" economy to a more structurally sound economy, like Germany or Canada, and that won't be easy. We have had tech bubble, a tax cut bubble and now a real estate bubble. Americans need to stop looking for the easy way out. Right now there is no alternative but hard work.
There is some good news. Interest rates at an all time low. Inflation is effectively zero, but not deflationary. We have taken steps to fix healthcare and the banking system. The US still generates the highest per capita income for the most people on the plant.
But there is also bad news. A large number of Americans will be retiring and living longer. This puts tremendous pressure on social security, medicare, private retirement plants and health insurance. Income inequality is growing. Fifteen percent of the working population is unemployed or underemployed.
But luckily, we are in far better shape than other countries to handle the problems.
Our debt to GDP ratio is low compared to other countries. Out growth rate is usually above other western democracies.
It is time to make some painful choices around taxes. We may need to get rid of home mortgage deductions. Put a true price on gasoline and carbon. And learn to live with a lower level of material wealth. We must stop funding wars.
Bling-Bling is out-out. Helping your neighbor is in-in.
EBE
v2
This blog writer is in favor of a second, moderate sized government stimulus
The US economy needs another federal spending stimulus boost to continue growing. The economy is sputtering along, trapped in cycle of high unemployment feeding low consumer confidence. We all know that consumption is 70% of the direct economic output in the US. Another fiscal cash injection is need in the short term.
I would recommend spending the money on extending unemployment benefits, aid to state and local governments(SLG), student loans and grants, low income tax relief and long term R&D projects (like oil pollution control). We may have to get used to high unemployment and long-term subsidies for the unemployed. However, the money cannot be given with some productivity benefits to "pay" for the extra money. State and Local Governments must hold the line on pay, retirement and healthcare costs.
The stimulus should be about $400-500 billion dollar area (about 1/3 less than the original 787 Billion investment). Enough to cement the continued growth of the US economy. We must try to get the unemployment rate down to the 7% range to make the recovery psychologically self sustaining.
Longer term, the US economy has some issue to face. We need to shift from a "bubble" economy to a more structurally sound economy, like Germany or Canada, and that won't be easy. We have had tech bubble, a tax cut bubble and now a real estate bubble. Americans need to stop looking for the easy way out. Right now there is no alternative but hard work.
There is some good news. Interest rates at an all time low. Inflation is effectively zero, but not deflationary. We have taken steps to fix healthcare and the banking system. The US still generates the highest per capita income for the most people on the plant.
But there is also bad news. A large number of Americans will be retiring and living longer. This puts tremendous pressure on social security, medicare, private retirement plants and health insurance. Income inequality is growing. Fifteen percent of the working population is unemployed or underemployed.
But luckily, we are in far better shape than other countries to handle the problems.
Our debt to GDP ratio is low compared to other countries. Out growth rate is usually above other western democracies.
It is time to make some painful choices around taxes. We may need to get rid of home mortgage deductions. Put a true price on gasoline and carbon. And learn to live with a lower level of material wealth. We must stop funding wars.
Bling-Bling is out-out. Helping your neighbor is in-in.
EBE
v2
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