Tuesday, July 6, 2010

7/6/10 Post


News
House Job cuts for state and local government workers could deepen in 2nd half of year
States and municipalities are facing gaping budget gaps. Many have responded by slashing services, raising taxes and, for the first time in decades, making deep job cuts.
7.9 million jobs lost - many forever
The job losses during the Great Recession were so off the chart, that even though we've gained about 600,000 private sector jobs back, we've got nearly 8 million jobs to go.
Job gloom at all-time high
A record 1.21 million people want to work, but said they aren't looking because of the weak labor market, according to federal statistics released Friday. The June figure is up from 793,000 a year ago.
Congress fixes Wall Street - and orders up 68 studies
The bill studies, among other things: short selling, reverse mortgages, improved insurance regulation, private student loans, oversight of carbon markets and the "feasibility of requiring use of standardized algorithmic descriptions for financial derivatives."
Treasuries Show 12% Chance of Double Dip to Fed as Yields Near Record Lows
U.S. government bond yields are signaling almost no chance of the economy slipping into another recession even as stocks and commodities tumble.
Service sector weakens a bit in June
The ISM nonmanufacturing index fell to 53.8% last month after holding at 55.4% for the past three months. This is the lowest level since February.
Treasury run-up won't last forever
The best investment by far for the first half of this year has been the one that people like me have been warning against: long-term U.S. Treasury bonds. What goes way up, must come down.
Office Vacancy Rate Keeps Climbing
Vacant office space continued to accumulate in the second quarter, the latest indication that businesses aren't planning significant hiring in the near future.
TSA to Block "Controversial Opinion" on the Web
The Transportation Security Administration (TSA) is blocking certain websites from the federal agency's computers, including halting access by staffers to any Internet pages that contain a "controversial opinion," according to an internal email obtained by CBS News.
Cost of Stimulus Cash Vexes Universities
...the stimulus grants have also required the [University of California] to spend about $69 million that wasn't reimbursed by federal agencies to support the new research projects.
They Did Their Homework (800 Years of It)
Their handiwork is contained in their recent best seller, “This Time Is Different,” a quantitative reconstruction of hundreds of historical episodes in which perfectly smart people made perfectly disastrous decisions. It is a panoramic opus, both geographically and temporally, covering crises from 66 countries over the last 800 years.
'Game Changer' Rule Looms For Health Insurers
How federal regulators interpret a metric known as a medical-loss ratio could affect players from industry giant UnitedHealth Group Inc. down to specialized companies such as American National Insurance Co. Plans could be forced to pay out millions in rebates, while others may be driven out of the market.
Post Office Plans to Announce New Rate Increase
The agency lost $3.8 billion last fiscal year despite cutting 40,000 full-time positions and making other reductions. It has continued to face significant losses this year.

Blogs
Department of Selective Charts: Social Security Tax Cap Division
The fight over Social Security policy has almost nothing to do with low earners; they’ll be taken care of no matter whose reform philosophy gets enacted. The real question is whether to impose higher taxes on high earners in order to pay higher benefits to high earners.
Morning Bell: Reclaiming Our Founding Principles
The Declaration of Independence serves as a philosophical statement of America’s first principles. But since the early 20th century, these principles have been under attack and now there is no need for consent of the governed, just experts who will tell us how to live and how to progress.
“And then He said, ‘Let there be Higher Wages’”
Low wages are not the result of arbitrary company decisions; they are the result of low worker productivity. A pen even as mighty as that of Pres. Obama cannot miraculously invest low-skilled workers with greater skills.
Saving and Identities
In general, I think it is really bad economics to tell stories about accounting identities that blame one side of the identity or the other. Instead, economists should trace movements in saving and investment back to exogenous factors that affect relative prices, including risk premiums.
Is Illinois “Greece on Lake Michigan”?Downgraded by every ratings agency, Illinois’ pension system is likely to run out of money to pay retirees in the next few years.
Are We Suffering from Concealed Inflation?
The conventional explanation for the lack of price inflation is that banks are sitting on the reserve because the interest the Fed is now paying is a better deal than lending in a risky environment. I think this point is largely true, but it also may be that we are suffering from inflation that is not being accurately measured.
Weekly Summary and a Look Ahead
This will be a light week for US economic data.
Repeating Tax History -- From Luxury Tax to Tanning Tax
This isn’t the first time, of course, that a tax has reached people that it wasn’t intended to affect.
When will we know if Irish pre-emptive fiscal austerity is a failure?
The Irish experiment remains an open book. In the meantime, it's simply not true that the pre-emptive austerity advocates are committing some kind of economic malpractice. Three years out from now, let's compare Ireland to the other PIIGS.
Failure
The bottom line. Obama took a gamble. He has tried to achieve a lot. He passed a health care bill that still fails to garner majority support and a financial reform that no one understands. The economy is not improving. Throw in the oil spill and you have an administration that no one wants to embrace. We are in for a lot of change in the next 6 months.
Fewest Teen Jobs added in June since 1951
According to the BLS, only 497,000 teens (ages 16 to 19) found jobs in June 2010 NSA (June is the key months for summer employment).
Global Recession Led to Stricter Immigration Rules
Stemming from increased unemployment rates, many countries made changes to migrant policy that largely encouraged both migrant residents to leave and discouraged new immigration from beyond their borders, according to a study by the Federal Reserve Bank of Dallas.
ISM Non-Manufacturing Index shows slower expansion in June
The June ISM Non-manufacturing index was at 53.8%, down from 55.4% in May - and below expectations of 55. The employment index showed contraction in June at 49.7%.

Research, Reports & Studies
Creating a Crisis: Spending Increase to Fund Bloated Education Bureaucracy
Congress will soon consider spending $10 billion to prevent layoffs in the public education sector. This money comes in addition to the $80 billion awarded to the U.S. Department of Education (DOE) for K-12 education as a result of the stimulus bill.
Heritage Employment Report: June Job Market Jolts Economy
While the unemployment rate dropped from 9.7 to 9.5 percent, this is due to a large drop (–652,000) in the labor force.
Weak Economy, Failed Policies Keep Obama Jobs Deficit High at 7.4 Million
According to the latest jobs report, total U.S. employment stood at almost 130.5 million in June, which means the cumulative Obama jobs deficit—the difference between the end target and the current employment level—stands at almost 7.4 million.
Ask George W. Bush How to Avert a Double Dip
...given the dramatic changes in taxation and the winding down of stimulus spending just over the horizon that the U.S. economy is getting weaker.
Wells Fargo Economics Group: Weekly Economic & Financial Commentary
U.S. Economic Slowdown... Still No Double Dip.
Hudson Institute Economic Report
A disappointing jobs report for June followed May’s weak housing and retail sales data, leading some to forecast a slowdown in the recovery.
Public Interest Comment on the Draft 2010 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities
...a more careful look at economic theory is warranted as the government seeks to intervene in the obesity arena, although we acknowledge that to be a significant public health concern. Drivers in Q3
...even though the markets are as complicated as they've ever been, there are two key drivers that stand out: the European debt crisis and the macro-economy.

Graphic of the Day
Government Growth Outpaces Private Growth This Decade
See: Poverty in the US and Europe
See also: How much a country's leader is paid compared to GDP per person
>VIDEO: How to create one million jobs

Economists’ Comments & Opinions
Lack of jobs increasingly blamed on uncertainty created by Obama’s policies
...fresh fears about another down turn are combining with the regulatory and tax burdens businesses see coming down the pike.
The Government Pay Bonus
Private employees toil 13½ months to earn what federal workers do in 12.
Welcome to the Double-Dip Recession
From a theoretical point of view, another recession is what we should expect right now. This is because both GDP and employment are driven by private business investment, and huge tax increases on both business income and capital investment are now only six months away.
Dear Mr. President: Immigration Reform Won’t Be Enough To Stop The Brain Drain
Fixing immigration policy is an important start, but it won’t be enough to stop the brain drain of highly educated and skilled workers that the U.S. is presently experiencing.
Fed's Fisher sees slower U.S. growth ahead
The U.S. will experience "slower economic growth than we've had in the first and second quarter." He estimated U.S. growth of 2%-3%, saying that the figure will likely come "closer to the low end of that range."
Why are firms saving so much?
Much of the recent increase in private-sector saving comes from businesses. What explains the rise in corporate thrift?

Sadly, we learn so much from fools, economists, & other reverse role models then pay them back with ingratitude. -Nassim Taleb, Twitter

Book Excerpts
"It is the cheap cloth, the cheap cotton and rayon fabric, boots, motorcars and so on that are the typical achievements of capitalist production, and not as a rule improvements that would mean much to the rich man. Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort." -Joseph A. Schumpeter, Capitalism, Socialism, and Democracy (1950)

Did You Know
Since 2007, vice presidents have seen an 11% decrease in overall compensation, while the highest-ranking executives (a category that includes president, CEO, COO, and chairman) have seen their pay drop by 16%. Perks like company cars and club memberships have been hit pretty hard: 51% of employers sweetened the deal with such goodies in 2007, but only 28% still do. Rather ominously, the percentage of companies offering guaranteed severance pay to executives has dropped by half, from 44% in 2007 to 22% today. Also, 23% of companies are still paying sign-on bonuses, down from 36% in 2007, and one-third (33%) are offering stock options or other forms of equity, down from slightly more than half (51%) three years ago.