Tag Archives: unemployment

Obama the Luddite

Barack Obama believes that unemployment is high, in part, because of ATM machines.

Our President is totally right. It’s totally the ATMs fault. I think we should go around destroying all ATM machines. Think about how many jobs we’ll create by destroying all those machine.

Luddites of the world, unite!

Federal Reserve discovers that paying people not to work equals fewer people working.

In case you didn’t know, the Chicago Fed reports:

A research paper published by the Chicago Fed has concluded that extra jobless benefits — unemployed workers can now get up to 99 weeks of benefits — may be contributing up to 0.8 percentage points to the current unemployment rate, which was 9% in January. The Chicago Fed paper said the extra benefits may still be worthwhile, given that in their absence workers may be forced to take jobs that represent poor matches for their skill levels. Also on Thursday, Minneapolis Fed President Narayana Kocherlakota said the natural rate of unemployment — basically, the smallest rate of unemployment that won’t lift inflation — ranges between 5.9% and 8.9%.

For those who are not economically literate, let me summarize: If the government pays people not to work, fewer people will work.

I don’t know why the Fed had to do a study to determine that. Maybe they were just trying to figure out not if it had an effect but how large the effect is. Or maybe it was just a study devised to keep a few economics employed during the recession.

What I really don’t understand is this line:

The Chicago Fed paper said the extra benefits may still be worthwhile, given that in their absence workers may be forced to take jobs that represent poor matches for their skill levels.

So the Chicago Fed thinks it is better to have people sitting around doing nothing rather than do a job below their current skill level? These people really do live in ivory towers.

Teachers Unions only care about money

With the massive teachers strikes and protests in Wisconsin, I am very afraid for this country. The Bolshevik Revolution began with protests and union strikes. The Fascists in Italy and Nazis in Germany took over in part to stop the socialist/communist strikes. This country hasn’t seen strikes like these since the 1920s.

The teachers in Wisconsin don’t care about their customers: the students. We hear the cry over and over that “it’s for the children,” but when the teachers’ benefits are called into questions, they abandon the children during the school year to protest about money.

Just so you know, US Airways is protesting today down at Phoenix Sky Harbor over some contract dispute. Airline employees complain they aren’t making enough money. What about your customers? Airfares have gone up and quality of service has declined as we are packed into planes like cattle, and we now are poked, prodded, scanned, and molested to get through airport security. And through taxes and airfares, we pay for the right to do so.

Teachers unions. Airline unions. All other unions. All you care about is money, so stop pretending otherwise. “Fairness.” “Quality education.” “Safety.” You don’t care about any of that. You just want your share, more than your share, of the money.

Why should those struggling to make ends meet subsidize unions. Why can’t union employees compete in the free market like the rest of us? Because they are not worth what they are being paid? When did the land “of the people, by the people, for the people” become the land of “from the people, against the people, at the expense of the people?”

Jobs reports: US versus Canada

As mentioned in the previous post, the United States economy created fewer jobs than expected, but the unemployment rate unexpectedly declined. In Canada, the exact opposite occurred:

Canada’s job creation in January was more than four times the median forecast, pushing the Canadian dollar to its strongest level since May 2008 and adding to evidence the country’s economic recovery may be accelerating.

Employment rose by 69,200 and the labor force increased by 106,400, Statistics Canada said today in Ottawa. The jobless rate rose to 7.8 percent from December’s 7.6 percent, as more people sought work. Economists forecast 7.6 percent unemployment and job growth of 15,000, according to the median estimates of 25 and 26 economists surveyed by Bloomberg News.

So which would you rather have?

  • US: Unemployment rate declines but few jobs are created.
  • Canada: Many jobs were created but unemployment rate rose.

Let me know what you think in the comments.

Jobs report not as good as the unemployment rate implies

Being the lazy person that I am and not wanting to reinvent the wheel, I decided to wait until some other blogger analyzed the latest employment report data. The people at No Money No Worries explains how today’s report showed a small increase in jobs but a large decline in the unemployment rate:

Today’s unemployment headline proclaims that the “Unemployment Rate Falls to 9.0%.” However, the number of nonfarm jobs increased very little (+36,000).

So, unless we’ve all changed careers to become farmers, something doesn’t add up.

All else being equal – with roughly 153 million in the US labor force – a 0.1% drop in the unemployment rate would require the creation of 153,000 jobs. A decline of 0.4% would require payroll employment to increase by 4x that amount, or 612,000 jobs.

So, one suspects that the headline unemployment rate fell because these workers dropped out of the labor force entirely – and BLS data confirms that is indeed what happened.

According to the BLS, the civilian labor force in Dec 10 was 153,690,000.  January 2011′s dropped to 153,186,000 – a difference of 504,000 workers.

So, to sum it up, the 0.4% drop in unemployment was due to:

1.   36,000 new jobs; and

2. 504,000 workers dropping out of the labor force.

Not exactly a stellar report.

I think that sums it up well. If you enjoy economics and statistics (and some cool charts), I highly recommend No Money No Worries.

Legal Insurrection: Key Numbers In Unemployment Report Not So Good

Le·gal In·sur·rec·tion analyzes today’s employment report and the results are not good despite the headline decline in unemployment from 9.8% to 9.4%. (Reposted with permission. Original post here.)

Needless to say, administration supporters will be touting that the unemployment rate released by the Bureau of Labor Statistics this morning dropped from 9.8% to 9.4%.  Politically, this is good news for Obama, at least in the short run.

Dig just a bit deeper, and you will see that 0.2% of that drop (or half the total drop) was from a decrease in the “participation rate” from 64.5 to 64.3 of the population.  So half of the good news reflects that people have dropped out of the work force and have given up looking for work.

To put this in context, I ran a chart from the BLS website historical statistics database, showing the participation rate over the past 20 years, which shows that we are at a 20-year low:

The other disheartening statistic is reflected in the chart combining the unemployment, marginal and discouraged workers (in short, everyone who is not working but currently or at one time wanted to work, or who is employed part time because full time work was unavailable).  Combine all those and the total is 16.6% up from 16.3% November not seasonally adjusted (seasonally adjusted it is 16.7% down from 17%).  This is the highest number since 1994 (first year data available):

Here are two other charts showing the depth of the problem.  The first shows the average length of unemployment (in weeks) and the second the median length of unemployment:

While the drop in the unemployment rate from 9.8% to 9.4% is good political news, it’s hard to see any real improvement below the surface.

This gives further evidence that the American economy is still in decline. All that government stimulus accomplished nothing except for putting us further in debt.

Sovereign debt crisis spreading to first world countries.

I’ve written about the sovereign debt crisis numerous times already. See here, here, here, here, and here. But so far, I’ve only written about those “at-risk” countries such as Portugal, Greece, Spain, and Ireland or individual states such as Illinois. In other words, the sovereign debt crisis has so far been limited to “small” countries or states. Debt defaults among these countries or states certainly would cause problems and a sharp decline in financial markets, but likely wouldn’t break the bank. But if this crisis spreads to larger, more financially important countries, it would obviously have a much larger impact, possibly one similar to the stock market crash of 1929.

Marketwatch reports that the sovereign debt crisis may in fact be spreading to a first world nation:

There’s no ‘B’ in PIIGS, but Belgium could eventually cause headaches of its own for the euro zone if a bitter and protracted political fight prevents the country from hitting its deficit-reduction targets.

Belgium, in northern Europe, has seemed an unlikely candidate for sovereign-debt troublemaker. From a fiscal perspective, the country, whose capital Brussels is the home of the vast EU bureaucracy, has been associated more with the so-called core of the euro zone than the troubled “periphery.”

But an increasingly bitter political divide along linguistic lines has left Belgium without a government since April and is beginning to raise some concerns.

Belgium, which has enjoyed solid growth, appears on track to reduce its budget deficit to 4.8% of gross domestic product this year from 5.6% in 2009, economists said. The nation’s deficit is among the lowest in the euro zone and compares well with other core countries, including Germany at 4.5% of GDP, France at 8% and the Netherlands at 6%.

But if a government isn’t formed soon, the 2011 fiscal target of a reduction to 4.1% could be in jeopardy, said Philippe Ledent, an economist at ING Bank in Brussels. That in turn would make it all the more difficult for Belgium to meet its target of bringing its deficit down to 3% of GDP, the EU limit, in 2012.

In reality, a 4.1%, 4.8%, or 5.6% don’t seem too bad, especially considering the 10.6% deficit here in the US for 2010 and 8.3% deficit expected for 2011.

Belgium’s deficit figures raise few alarms, but government debt stands at around 100% of GDP, which compares more closely with Greece and Italy.

U.S. debt, by comparison, also stands at about 100% of GDP.

The financial markets are starting to notice Belgium’s problem:

Belgium has had no problems selling its government bonds. Borrowing costs have risen, however, with the yield premium demanded by investors to hold 10-year Belgian debt over benchmark German bunds standing at around 0.8 percentage point, up from around 0.4 percentage point around the same time last year.

But borrowing costs are far from problematic, Ledent said. Belgium’s premium remains nowhere near comparable to Spain’s, for example, which is at around 1.6 percentage points, much less Ireland’s at around 4 percentage points.

The cost of insuring Belgian debt against default is up sharply since the April elections, but well off the peak seen in mid-June. The spread on five-year sovereign credit-default swaps was at 119 basis points last Thursday, according to data provider CMA. That means it would cost $119,000 a year to insure $10 million of Belgian government debt against default for five years.

The spread stood at around 60 basis points in mid-April before the latest round of political turmoil and peaked at 149 basis points in late June.

“Up to now, there has been no strong impact [on borrowing costs], but I’m not sure it will continue like that,” Ledent said. “If in two, three, four months we still don’t have any government, financial markets will consider that we won’t reach the [budget] target and then there could be an impact on the spread.”

How long can countries like Belgium or the United States continue to borrow at low interest rates? These are countries with deficits exceeding 4% of GDP, in Belgium’s case, or 8-10%, in the United States, with debts equal to 100% of GDP. Logic tells us that in these countries, either taxes have to rise significantly or government spending has to fall sharply. Neither Belgium nor the U.S. is doing much to reduce their deficits and even less to cut government spending. Both countries, along with all other nations, are hoping for and relying on an economic recovery to lift their finances. What if we enter another recession? What if the recovery is slower than they expect, as it has been so far? All this talk of deficit reduction will be gone and we’ll be looking at even larger deficits and debt levels.

Worse yet, what happens when investors demand higher interest rates? As mentioned above, Belgium is already paying an extra 0.4% interest on its debt. That does not sound like much, but with government debt at 100% of GDP, the deficit increases by 0.4% just from the interest payment. This is an additional cost on government at a time when it needs to reduce its costs. It increases the deficit just as the country is trying to reduce it. Furthermore, this creates a self-fulfilling prophecy: worries of a debt crisis will cause a country’s interest payment to rise and deficit to increase, thus increasing the chances of a crisis.

So I will repeat what I’ve written many times: The sovereign debt crisis is far from over. In fact, it is just beginning.