Article 43
Dying America
Monday, September 06, 2010
Labor Day Blues 2010
On Labor Day, jobs crisis persists
By Andrea Orr
Economic Policy Institute
September 3, 2010
Monday September 6 will mark the third straight Labor Day that the country has been mired in an unemployment crisis. This year, the Labor Department kicked off the long holiday weekend with a new report that wasnt as bleak as expected: the private sector added 67,000 jobs during the month of August. In fact, while the country was still losing jobs a year ago, it has added jobs to the payroll for the past eight months.
But for the typical worker, this is not cause to celebrate. Far too many Americans cannot find work: The nationwide unemployment rate remains just short of double digits. The August 2010 unemployment rate of 9.6% is barely changed from the 9.7% rate this time one year ago, and it actually rose from 9.5% in July.
This persistently high unemployment rate even as job growth slowly resumes speaks to the depth of the jobs hole resulting from the Great Recession and the tepid nature of the recovery. The United States needs to create about 100,000 new jobs each month just to keep up with population growth, and many more than that to see unemployment rates fall substantially. While RECOVERY ACT INVESTMENTS SUCCEEDED in slowing the pace of job loss and moving the job market in the right direction, job creation is now moving at a pace that EPI Economist Heidi Shierholz recently described as “excruciatingly slow.”
And its not just America’s 14.9 million unemployed and 26.1 million underemployed workers who are feeling the pain. For decades, wage growth has been falling far short of gains in productivity and in recent years the gap has widened, making it difficult even for working Americans to prosper. Earlier this week, EPI published the paper Recession Hits Workers Paychecks, showing that wages are growing at half the rate at which they expanded in the period before the start of the recession in late 2007.
This latest trend of slower wage growth compounds a longstanding problem of workers failing to enjoy the fruits of their labors. Even during the last business expansion, which ran from 2002 until the start of the recession in late 2007, productivity grew but hourly compensation fell for both high school and college-educated workers. In fact, this EPI report shows that workers - including those with college degrees earned less in 2009 than they did in 2000, when adjusted for inflation.
Trends of persistently high unemployment and slow wage growth stand in contrast to other segments of the economy such as corporate profits. Over the summer EPI President Lawrence Mishel compared the change in corporate profits since the start of the recession to the change in the labor market. He found that corporate profits had fully recovered while the labor market remained weak. By the first quarter of 2010, corporate profits were 5.7% higher than in the final quarter of 2007, but the total number of jobs had declined by 5.9% over the same period.
While the official unemployment rate is often used to sum up the health of the labor market, unemployment today would be higher were it not for a large number of workers who have either dropped out of the workforce or not entered it during the recession. Shierholz notes that although unemployment has fallen from its recent peak of 10.1% last October, that does not mean that a larger share of the population is working, but rather reflects the fact that 3.5 million workers are missing from the labor force.
Other troubling signs this Labor Day include the large number of long-term unemployed. Forty-two percent of unemployed workers have been seeking work for more than six months; 21.9% for more than a year. And several segments of the working population are seeing staggering rates of unemployment that make the nationwide rate look mild. The unemployment rate is 16.3% for black workers, 12% for Hispanic workers, and 13.8% for those with less than a high school degree. The share of youth age 16 to 24 who are neither employed nor enrolled in school is 17.9%.
And while Labor Day often calls to mind the sort of well-paying jobs in manufacturing and construction that were once the backbone of the nation’s economy, the United States has lost close to 15% of its manufacturing jobs and more than 25% of all construction jobs since the start of the recession. By contrast, many of the fastest-growing occupations today pay close to minimum wage.
For more detailed data on unemployment by demographic breakdown, consult EPIs new Labor Day Fact Sheet as well as our EconomyTrack Web site.
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Wednesday, August 25, 2010
Prepare For Another 4-5 Million Job Cuts
By David Rosenberg
Business Insider
August 24, 2010
The article in yesterdays WSJ titled Specter of Layoffs Stalks Wall Street really resonated with us. As we said in yesterday’s note, the size of the securitized loan market has shrunk 60% in the past two years. Balance sheets, production, order books and staffing requirements are all rightsizing to this new semi- permanent landscape of reduced credit availability.
In fact, we could see a situation where another 4 to 5 million jobs could be shed in the United States, and in the three sectors that were, and remain, the most affected by the housing crisis and financial collapse.
For example, historically, the construction industry employed three workers for every housing start. Today, that ratio is closer to 10. This could easily mean that we see 3 to 4 million CONSTRUCTION jobs being lost going forward, barring a major revival in the housing market, which isn’t happening.
The ratio of employees in the financial sector to outstanding private sector credit is at a new and lower level that would warrant around a workforce 500,000 lower than is the case today just to get to productivity ratios that prevailed in the pre-bubble era. And the third sector, which is the fiscally-challenged STATE and LOCAL government segment, for payrolls there to mean revert to the level commensurate with the ever-declining level of public spending would also mean roughly 500,000 employment cutbacks. No doubt there are other sectors that will provide some offset in health and education and even manufacturing, but it took 25 years for these areas combined to rise five million and something tells us that the downsizing that is left in the housing, financial and state/local government sectors will occur in a much shorter period (and the latter too, if what happened recently in New Jersey is any indication, the social contract with public sector unions will soon go the way of the dodo bird).”
Note that the year-on-year trend in layoff announcements, after a brief period of declines, is now re-accelerating in the three above-mentioned affected sectors. For the first time since late 2007, the financial sector posted no hiring announcements in each of the last two months and this has also been the case in three of the past four months in the real estate sector. Government sector hiring announcements, as an aside, have plunged 75% from year-ago levels. The signs are already there - get ready for another downleg in employment as the jobless claims are now suggesting especially as it pertains to this 33 million or 25% chunk of the total workforce.
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Monday, August 23, 2010
The Doomed US Homeowner
Housing Fades as a Means to Build Wealth, Analysts Say
By David Streitfeld
NY Times
August 23, 2010
Housing will eventually recover from its great swoon. But many real estate experts now believe that HOME OWNERSHIP will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.
The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.
More than likely, that era is gone for good.
There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow. “All those theories advanced during the boom about why housing is special - that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land didn’t hold up.”
Instead, Mr. Humphries and other economists say, housing values will only keep up with inflation. A home will return the money an owner puts in each month, but will not multiply the investment.
Dean Baker, co-director of the Center for Economic and Policy Research, estimates that it will take 20 years to recoup the $6 trillion of housing wealth that has been lost since 2005. After adjusting for inflation, values will never catch up.
ԓPeople shouldnt look at a home as a way to make money because it wonҒt, Mr. Baker said.
If the long term is grim, the short term is grimmer. Housing experts are bracing themselves for Tuesday, when the sales figures for July will be released. The data is expected to show a drop of as much as 20 percent from last year.
The supply of homes sitting on the market might rise to as much as 12 months, about twice the level of a healthy market. That would push down prices as all those sellers compete to secure a buyer, adding to a slide that has already chopped off as much as 30 percent in home values.
Set against this dismal present and a bleak future, buying a home is a willful act of optimism. That explains why Adam and Allison Lyons are waiting to close on a $417,500 house in Deerfield, Ill.
“Were trying not to think too far ahead,” said Ms. Lyons, 35, an information technology manager.
The couples first venture into real estate came in 2003 when they bought a condo in a 17-unit building under construction in Chicago. By the time they moved in two years later, it was already worth $50,000 more than they had paid. ғWe were thinking, great! said Mr. Lyons, 34.
That quick appreciation started them on the same track as their parents, who watched the value of their houses ascend for decades. The real estate crash interrupted that pleasant dream. The couple cannot sell their condo. Unwillingly, they are becoming landlords.
‘I don’t think we’re ever going to see the prosperity our parents did, but I don’t think it’s all doom and gloom either,” said Mr. Lyons, a manager at I.B.M. “At some point, you just have to say what the heck and go for it”.
Other buyers have grand and even grander expectations.
In an annual survey conducted by the economists Robert J. Shiller and Karl E. Case, hundreds of new owners in four communities ԗ Alameda County near San Francisco, Boston, Orange County south of Los Angeles, and Milwaukee once again said they believed prices would rise about 10 percent a year for the next decade.
With minor swings in sentiment, the latest results reflect what new buyers always seem to feel. At the boomגs peak in 2005, they said prices would go up. When the market was sliding in 2008, they still said prices would go up.
“People think it’s a law of nature,” said Mr. Shiller, who teaches at Yale.
For the first half of the 20th century, he said, expectations followed the opposite path. Houses were seen the way cars are now: as a consumer durable that the buyer eventually used up.
The notion of housing as an investment first began to blossom after World War II, when the nesting urges of returning soldiers created a construction boom. Demand was stoked as their bumper crop of children grew up and bought places of their own. The inflation of the 1970s, which increased the value of hard assets, and liberal tax policies both helped make housing a good bet. So did the long decline in mortgage rates from the early 1980s.
Despite all these tailwinds, prices rose modestly for much of the period. Real home prices increased 1.1 percent a year after inflation, according to Mr. ShillerԒs research.
By the late 1990s, however, the rate was 4 percent a year. Happy homeowners were taking about $100 billion a year out of their houses, which paid for a lot of good times.
The experience we had from the late 1970s to the late 1990s was an aberration,Ӕ said Barry Ritholtz of the equity research firm Fusion IQ. People shouldnӒt be holding their breath waiting for it to happen again.
Not everyone views the notion of real appreciation in real estate as a lost cause.
Bob Walters, chief economist of the online mortgage firm Quicken, acknowledges that the recent collapse will create a ԓmind scar just as the Great Depression did. But he argues that housing remains unique.
ԓYou have to live somewhere, he said. ԓIn three or four years, people will resume a normal course, and home values will continue to increase.
All homes are different, and some neighborhoods and regions will rebound more quickly. On the other hand, areas where there was intense overbuilding, like Arizona, will be extremely slow to show any sign of renewal.
ԓIts entirely likely that markets like Arizona will not recover even in the 15- to 20-year time frame,Ҕ said Mr. Humphries of Zillow. The demand doesnӒt exist.
Owners in those foreclosure-plagued areas consider themselves lucky if they are still solvent. But that does not prevent the occasional regret that a life-changing sum of money was so briefly within their grasp.
Robert Austin, a Phoenix lawyer, paid $200,000 for his home in 2000. Five years later, his neighbors listed a similar home for $500,000.
Freedom beckoned. ԓI thought, when my daughter gets out of school, I can sell the house and buy a boat and sail around the world, said Mr. Austin, 56.
His home is now worth about what he paid for it. As for that cruise, ԓit may be a while, Mr. Austin said. Showing the hopefulness that is apparently innate to homeowners, he added: ԓBut I wont rule it out forever.Ҕ
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Sunday, August 22, 2010
Deceptive Economic Statistics
While the economists lied the US economy died
By Paul Craig Roberts
Information Clearing House
August 18, 2010
On August 17, Bloomberg reported a US government release that industrial production rose twice as much as forecast, climbing 1 percent. Bloomberg interpreted this to mean that increased business investment is propelling the gains in manufacturing, which accounts for 11 percent of the world’s largest economy.
The stock market rose.
LET’S LOOK at this through the lens of statistician John Williams of SHADOWSTATS. Williams reports that the primary driver of a 1.0% monthly gain in seasonally-adjusted July industrial production was warped seasonal factors caused by the irregular patterns in U.S. auto production in the last two years. Industrial production shrank by 1.0% before seasonal adjustments.
If the government and Bloomberg had announced that industrial production fell by 1.0% in July, would the stock market have risen 104 points on August 17?
Notice that Bloomberg reports that manufacturing accounts for 11 percent of the US ECONOMY. I remember when manufacturing accounted for 18% of the US economy. The decline of 39% is due to jobs OFFSHORING.
Think about that. Wall Street and shareholders and executives of transnational corporations have made billions by moving 39% of US manufacturing offshore to boost the GDP and employment of foreign countries, such as China, while impoverishing their former American work force. Congress and the economics profession have cheered this on as the New Economy.
Bought-and-paid-for-economists TOLD US that the “new economy” would make us all rich, and so did the financial press. We were well rid, they claimed, of the old industries and manufactures, the departure of which destroyed the tax base of so many American cities and states and the livelihood of millions of Americans.
The bought-and-paid-for-economists got all the media forums for a decade. While they lied, the US economy died.
Now, back to statistical deception. On August 17 the census Bureau reported a small gain in July 2010 residential construction housing starts. More hope orchestrated. In fact, the gain, as John Williams reports, was due to a large downward revision in June’s reporting. The reported July gain would have been a contraction without the downward revision in June’s gain.
So, the overestimate of June housing not only made June look good, but also the downward correction of the June number makes July look good, because starts rose above the corrected June number. The same manipulation is likely to happen again next month.
If the government will lie to you about Iraqi weapons of mass production, Iranian nukes, and 9/11, why won’t they lie to you about the economy?
We now have an all-time high of Americans on food stamps, 40.8 million people, about 14% of the population. By next year the government estimates that food stamp dependency will rise to 43 million Americans. So last week Congress cut food stamp benefits. Let them eat cake.
Wherever one looks--food stamps, home foreclosures, bankrupted states, mounting joblessness, the message to long-suffering Americans from their governmentӔ is the same: go eat cake, while we fight wars for Israel that enrich the military/security complex and while we bail out banksters whose annual incomes are in the tens of millions of dollars and up.
It is impossible to get any truth out of the US government about anything. If private companies used US government accounting, the executives would be prosecuted, convicted, and incarcerated.
Our governmentӔ is committed to fighting wars to enrich the military/security complex and Israels territorial expansion at the expense of cuts in Social Security and Medicare.
All most members of Congress, especially Republicans, want to do is to pay for the pointless wars by cutting Social Security and Medicare.
When they worry about the deficit, it is usually Social Security and Medicare--so-called “entitlements” that are in the crosshairs.
You don’t have to be smart to see that Wall Streets and the government’s response to the amazing US budget deficit is not to stop the senseless wars and bailouts of mega-millionaires, but to cut entitlements.
I will end this column on unemployment. Our government tells us that the unemployment rate is just under 10 percent, a figure that would have wrecked any post-Great Depression administration. But, again, our government is LYING. The reported UNEMPLOYMENT RATE is just below 10% because the US government no longer, since the corrupt Clinton administration, counts Americans who have been unemployed for longer than one year. Once the unemployed hit one year and one day, they are dropped from the unemployment roles and no longer counted as unemployed.
Compare this fact with the number you read from the financial press. Right now, if measured according to the methodology of 1980, the US unemployment rate is about 22%. Thus, the reported rate of unemployment hides more than half of the unemployed.
And Secretary Treasury Tim Geithner welcomed us in the August 2 New York Times to the recovery.
Utterly amazing.
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Missing workers not counted
By Heidi Shierholz
Ecomic Policy Institute
August 20, 2010
The July unemployment rate held steady at 9.5% in July, but the primary reason it did not rise is that the labor force shrank by 181,000 workers. This points to the backlog of missing workers, who dropped out of, or never entered the labor force during the downturn. In the last three months, the labor force has declined by 1.2 million workers, reversing much of the 1.7 million increase in the labor force in the first four months of the year. This clearly shows how the forward momentum from earlier this year has largely evaporated.
To get an idea of the size of the current backlog of missing workers, consider the following: The labor force should have increased by around 3.6 million workers between December 2007 and July 2010, given that the working-age population grew over this period. Instead the size of the labor force actually decreased by 309,000. This means that the pool of “missing workers now numbers around 3.9 million, none of whom are reflected in the official unemployment count. As these workers enter or re-enter the labor force in search of work, this will contribute to keeping the unemployment rate high.
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Friday, August 20, 2010
Furlough Friday
State agencies close as workers go on furlough in California
CNN
August 20, 2010
Closed signs went up at CALIFORNIA agencies Friday as a mandatory furlough went into effect for government employees in an effort to resolve the state’s $19 billion budget deficit.
Gov. Arnold Schwarzenegger, according to the governor’s office, ordered state workers to take three unpaid days off per month until a new budget is in place and the Department of Finance certifies that California has enough cash to meet its financial obligations through the end of the fiscal year.
The furloughs were to have started August 1 but were temporarily blocked by a lower court decision. But Wednesday, the state Supreme Court allowed the furloughs to resume.
The Professional Engineers in California Government union, which had previously sued on the grounds that the governor did not have the authority to furlough employees, said it will urge the supreme court to rule that the furloughs are illegal. Employees are entitled to full paychecks, the union said in a statement.
The furloughs affect about 150,000 state employees and will save $150 million a month, the governors office said.
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