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. 

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.

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.

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.

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.

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

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.

v2

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.

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