22% seems rather high though.  I know a lot of people.... familt, friends, etc of all classes, ages and backgrounds.  I am trying to rack my brain right now and all I can think of is 3 people that are unemployed (not including stay at home moms).  One friend just got laid off and is hot on a couple leads, one friend is laid off seasonally like every year, and a cousin of mine got axed from his factory a few months ago and has had trouble finding another job.  But that is out of hundreds.  Sure, not everyone is working the ideal job, but they are working nonetheless.  Maybe I'm just lucky.  Anybody here that can actually say that 1 out of every five people they know are legitimately (not volitionally) unemployed

 

The same is true for me, but I think that has something to do with our education level and the circles we run in.  Even though "all classes" are represented in our samples, the proprotions might be skewed.

 

That's not the case for me.  I have more blue collar friends than white collar.  Waaaaaaay more.  My closest circle of friends consists of 1 lincoln electric factory worker, 1 ford plant worker, 2 lanscapers, 1 tree service worker, 1 accountant, 1 restaraunt manager, 1 bartender, 1 carpenter, 2 service department workers, 1 firefighter, 1 real estate developer and myself.  All friends since HS.  We're a diverse bunch.  Only the tree service guy is unemployed, but that happens every winter (don't ask why he doesn't plan ahead or why ODJFS gives him unemployment comp every year this happens.... I will never know.

22% seems rather high though.  I know a lot of people.... familt, friends, etc of all classes, ages and backgrounds.  I am trying to rack my brain right now and all I can think of is 3 people that are unemployed (not including stay at home moms).  One friend just got laid off and is hot on a couple leads, one friend is laid off seasonally like every year, and a cousin of mine got axed from his factory a few months ago and has had trouble finding another job.  But that is out of hundreds.  Sure, not everyone is working the ideal job, but they are working nonetheless.  Maybe I'm just lucky.  Anybody here that can actually say that 1 out of every five people they know are legitimately (not volitionally) unemployed

 

The same is true for me, but I think that has something to do with our education level and the circles we run in.  Even though "all classes" are represented in our samples, the proprotions might be skewed.

 

That's not the case for me.  I have more blue collar friends than white collar.  Waaaaaaay more.  My closest circle of friends consists of 1 lincoln electric factory worker, 1 ford plant worker, 2 lanscapers, 1 tree service worker, 1 accountant, 1 restaraunt manager, 1 bartender, 1 carpenter, 2 service department workers, 1 firefighter, 1 real estate developer and myself.  All friends since HS.  We're a diverse bunch.  Only the tree service guy is unemployed, but that happens every winter (don't ask why he doesn't plan ahead or why ODJFS gives him unemployment comp every year this happens.... I will never know.

 

I think it also depends on what part of the country you live in, and what part of those area you live in.

 

I have many friends in Florida, Ohio and places like Arizona or Nevada that worked in the RE industry, construction industry, architect industry that are no long employed and have not found new employment. I have also notice that many people that did lose their jobs were unable to find a replacement job any place near the old pay.

 

As far as the stats go, I am sure reality is some place in the middle. But, I do believe that middle is between the U6 number and the SGS number, which would put it much higher than U3 and close to the lower levels of the great depression.

 

Once you look at food stamp numbers and how fast they are rising you realize the pain is very real for more and more Americans.

WOW :-o

 

This is a jobs depression and the biggest power grab in history (bank bailouts and the continued public money flow into toxic assets). The government needs to stop blowing smoke up our asses, and the media needs to start headlining these U-6 and SGS numbers. It almost seems like their job is to just repeat press releases.

 

That does seem to be the case, I find that a lot of direct MSM information on our economic stituation has to come more and more from the British media and other place than the MSM in the US.

22% seems rather high though. I know a lot of people.... familt, friends, etc of all classes, ages and backgrounds. I am trying to rack my brain right now and all I can think of is 3 people that are unemployed (not including stay at home moms). One friend just got laid off and is hot on a couple leads, one friend is laid off seasonally like every year, and a cousin of mine got axed from his factory a few months ago and has had trouble finding another job. But that is out of hundreds. Sure, not everyone is working the ideal job, but they are working nonetheless. Maybe I'm just lucky. Anybody here that can actually say that 1 out of every five people they know are legitimately (not volitionally) unemployed

 

The same is true for me, but I think that has something to do with our education level and the circles we run in. Even though "all classes" are represented in our samples, the proprotions might be skewed.

 

That's not the case for me. I have more blue collar friends than white collar.   Waaaaaaay more. My closest circle of friends consists of 1 lincoln electric factory worker, 1 ford plant worker, 2 lanscapers, 1 tree service worker, 1 accountant, 1 restaraunt manager, 1 bartender, 1 carpenter, 2 service department workers, 1 firefighter, 1 real estate developer and myself. All friends since HS. We're a diverse bunch. Only the tree service guy is unemployed, but that happens every winter (don't ask why he doesn't plan ahead or why ODJFS gives him unemployment comp every year this happens.... I will never know.

 

Not to belabor this... but your friends sound fairly well-situated, even moreso if they didn't need multiple degrees to get there.  I was talking about the underclass.  On another thread it's noted that Cleveland added 4900 manufacturing jobs in 2010.  But I doubt random dude from Mt Pleasant with a GED would qualify, for those or for any decent blue collar jobs.  He's lucky to get into McDonalds.  And we don't hang out with that dude.  We don't hang out in Perry County either.  I find 20% very believable.

Is your example going to have steady employment in any economy?

A generation ago, yes.  In the city they could do well as general laborers, and in rural areas small farms were still profitable.  None of that is true anymore and I think that's why a lot of people are more or less permanently unemployed.  Trade school or a 2-year degree might help, but those aren't necessarily golden geese, and they're not necessarily available to someone who's destitute.  I guess if grain prices keep going up that might change the equation for small farming, though not for livestock, and certainly not for the urban underclass.   

Just for giggles: http://www.nationalreview.com/articles/214729/housing-bears-are-wrong-again/larry-kudlow

 

Ahh, pundits.

Service Sector Expands

 

The Institute for Supply Management, a private trade group, says its index of service sector activity rose to 59.4 last month, up from December’s reading of 57.1. That’s the 14th straight month of growth. Any reading above 50 indicates expansion.

 

The report follows a strong reading on Monday from the institute’s manufacturing index for January, which rose to its highest level in nearly seven years.

 

This is really not news, becuase if you look at the BLS monthlies for Ohio for the 2000s it was the private sector services that added jobs and counteracted the ongoing declines in manufacturing employment (which was declining througout the decade).

 

So one would expect this pattern to reassert itself once the economy enters recovery.

 

However, for Ohio, what should be pointed out, and pointed out repeatedly, that the "Great Recession" was so devasting in job loss that the economy will require a better jobs-production performance than past recoveries, not a "typical" performance, to make up the losses. 

 

So far that's not happening, even with economic growth. 

 

 

This is good news for Ohio, since the state is still pretty heavy into manufacturing:

 

Factory Activity Fastest in Seven Years

 

...heres' the leading indicator:

 

>snip<

 

...Factories healthy pace of expansion is likely to continue in the coming months. Manufacturing firms surveyed by ISM said their backlog of orders jumped in January, pushing an index measuring that activity to 58 from 47...

 

>snip<

 

 

 

 

 

 

Now with this gaurded good news I exepct y'all to shift the discussion to inflation worries, since the ethos of this particular thread is the find the dark cloud around that silver lining.

 

 

^And slip in the talking points under a guise of objectiveness whenever possible.

Inflation worries are driven mostly by the amount of monetary expansion the Federal Reserve has been engaging in, not the green shoots of economic growth.  It is possible to have growth in the economy without growth in the money supply; the two are not completely unrelated, but they are not perfect correlates, either.

 

And, of course, as Jeffrey noted, the good news on the economic growth front is still somewhat guarded.  We're not out of the woods yet.  We haven't even found a navigable trail through the woods yet.  What we've done is left the part of the woods where the Huorns are, so we at least have less chance of the woods eating us alive.

There was an op-ed piece in the latest issue of Time saying the real estate/housing market decline is indeed acting as a brake on the economy, dampening economic growth in this recovery.  There could be a bit of chicken-egg thing (or a negative feedback loop, if you want to put it another way), where weak job growth leads to reduced housing demand, which also slows recovery which leads to weak job growth.

 

The inflation thing would be maybe more of a concern if we had the wage-price spiral kicking in.  That's not going to happen since there will be zero pressure on wages, due to minimal (7% and dropping) unionization of the private sector workforce.

 

In ths case for inflation I think we are seeing two things fighting each other; the anemic recovery pushing back against price increases caused by rising energy & maybe food prices, due to shortages combined with global demand (as has been reported on-&-off for awhile now)

 

Since we are so vehicle, and oil-dependent, energy prices will find their way into prices in general (distribution costs) and food costs, but reduced domestic demand due to weak jobs growth and lower incomes will push back, acting as a damper maybe?  So I think there would be a moderating influence given the current situation?

 

I dont really understand the Feds quantitative easing policy, maybe its to increase credit or money in the economy?  The big issue during the crisis period in late 2008 was credit markets shutting down, so maybe this has something to do with it?

 

I have to say I am looking at this economy thing more from an employment perspective, not so much a monetary one, so havn't paid much attention to that.

 

I think there's a lot to that chicken-egg notion.  Also, I think a significant part of the "brake on the economy" from home-price declines flows from people not wanting to admit how much their real estate (residential or commercial) has declined in value.  That prevents the realization of losses and the reduction of prices to market-clearing levels.  House prices, like wages, are "sticky," in econospeak.  That's particularly true in Ohio, I think, given our minimum bid at foreclosure auctions of 2/3 of appraised value.  Many houses simply won't sell for 2/3 of appraised value in this market (not until the appraisals themselves begin to reflect the market, of course).

 

Energy prices definitely find their way into food costs, both due to production and transportation of that food.  The problem is that it's still more efficient than many proposed alternatives, including many proposals for more local agriculture (but with less industrial efficiencies/economies of scale built in).

 

As for quantitative easing: It was definitely to increase the supply of money in the economy.  The government now owes a significant amount of money effectively to itself, i.e., to the nominally independent Federal Reserve.  The U.S. Treasury sold bonds and received Federal Reserve notes--a.k.a. cash--to spend domestically, in the hopes of getting the economy moving again.  Assuming that the results we see today were in fact materially affected by that move (i.e., not just results that happened in spite of that move), then is a qualified success story: we have seen a stock market recovery (so that extra money has founds its way into the American economy) but no major employment recovery (so the money is apparently circulating buying things other than labor).  Of course, that story is a long way from its conclusion yet.  Some people say we're going to lose the gains (via a double dip recession or renewed inflation at dangerous levels).  Some say we're going to compound the gains (i.e., we'll keep the stock market gains and employment gains will catch up).

^

Ive noticed this denial about lack of value or drop in value re downtown real estate here in Dayton, but I can very well see this psychology operating for the housing market, too.

 

Thx for you explanation and discussion on the QA issue. 

 

I should have also said a push-back on wage growth is that the relatively high true unemployment (ie fewer jobs than people, vs the "official" unemployment rate) will provide a damping effect on demand for higher wages.  People look around and note there is still a lot of unemployment around or the economy isnt doing so good on the jobs front, so they wont be asking for raises.  Or management can always move a department "offshore" (so globalization also acts to push back on wages/payroll, depending on the buisness).

 

There would be more inflationary pressures under a tighter labor market, I think. Which might be the longer term risk...but that is always the tendancy (sort what people talk about when they talk about an economy "overheating", maybe?)

 

There is some truth to that, but at the macro level, that effect can be countered or at least partially ameliorated.

 

It's definitely true that an oversupply of labor in any particular sector depresses wages in that sector.  (I think it's important to differentiate by sector, because while I'm a worker and an electrician is a worker and a fast food burger-flipper is a worker, the three of us aren't really competing directly against one another.)

 

A tight labor market is one source of inflationary pressure, and a loose labor market is one source of deflationary pressure (or at least lack of inflationary pressure).  There are other sources, though.  I'm not even sure that I would call the labor markets the largest one.  Monetary policy can be inflationary or deflationary.  Fiscal (taxing and spending) policy can be inflationary or deflationary, too, though of course the capability to use it is highly dependent on political factors.

 

Ideally, if the unemployment rate (the official version) ever dropped into the 5% range again (whatever that meant for the shadow version--assuming they move roughly in tandem, which seems to be the lesson of that graph) and we started seeing inflationary pressure again, the best way to cool the overheating economy would be to raise taxes and start paying down the national debt.  This would be the reverse of quantitative easing, basically.  It would take money out of circulation, which would ease inflationary pressures--and, of course, would pay off debt, saving the country future interest and giving us political advantages as well.

 

Technology is actually another source of counter-inflationary pressure, however, and it may even be the largest one.  Inflation is a monetary phenomenon: it occurs when you have too much money chasing too few goods.  Technology, specifically any kind that increases productivity, allows for the production of more goods and services with the same level of inputs (including both labor and capital).  In other words, if we are constantly producing more and more goods and services every year, it really doesn't matter as much if there's more money sloshing around out there: If there's $100 out there chasing 50 loaves of bread, and later, there's $1000 out there chasing 500 loaves of bread, there's no inflation *and* our standard of living has gone up because we have more bread to eat.  Of course, if the money supply had been held constant, the price of a loaf of bread would have dropped, not just stayed constant.

U.S. home values post largest quarterly decline in 2 years

 

"Foreclosure moratoriums caused by robo-signing disputes and the expiration of  home buyer tax credits led to a painful decline in home prices during the fourth quarter of 2010, with home values falling 2.6% from the previous quarter, the largest quarterly drop in nearly two years, says Zillow.com in its latest fourth-quarter Real Estate Market Report.

 

Zillow says a market consumed with tax credits in the early part of 2010 kept home values stabilized. But, the end of those credits caused a hangover, leading to a 5.9% drop in year-over-year fourth quarter home values and a 27% decline in home values from the market's peak in June 2006."

http://www.housingwire.com/2011/02/09/u-s-home-values-post-largest-quarterly-decline-in-2-years

 

For comparison, in 2010 the US had 1 million foreclosures.

 

Joseph Stiglitz Predicts Another 2 Million Foreclosures In 2011

 

"Stiglitz now expects the housing situation at the root of the crisis to get worse. He expects an addition 2 million foreclosures in 2011, adding to the 7 million that have already occurred in the U.S."

Read more: http://www.businessinsider.com/stiglitz-there-are-going-to-be-another-2-million-foreclosures-in-2011-2011-2#ixzz1DUI5HD5t

 

With this type of growth in the number of upside down mortgages, the number of foreclosures will remain high.

 

30% of mortgages are underwater

 

"Now 27% of homeowners with mortgages owe more than their homes are worth. That's up from 23.2% a quarter earlier."

http://money.cnn.com/2011/02/09/real_estate/underwater_mortgages_rising/

It's certainly too early to break out any champagne as labor participation continues to decline, especially among young people.

 

Fri Feb 11, 11:36 am ET

America’s labor force hasn’t grown since ’08

By Zachary Roth

 

Call it the Mystery of the Missing Workers.

 

Since 2008, the American labor force--that is, the number of people either working or actively working for work--hasn't grown at all, The Economist reports, looking at Labor Department numbers.

That's not unusual during a recession, which typically leads some of the unemployed to become discouraged and give up looking for work, or to retire early. At the other demographic end of the labor market, recessions can also prompt some young people to go to school instead of entering the workforce, The Economist explains.

 

But things usually turn around during the recovery. This time, however, that's not happening: Since the Great Recession officially ended in mid 2009, the "participation rate"--the share of the population in the labor force--has continued to decline, especially among the young.

 

CONTINUED ON YAHOO

http://news.yahoo.com/s/yblog_thelookout/20110211/bs_yblog_thelookout/americas-labor-force-hasnt-grown-since-08

I actually admit I'm surprised at this.  The reason is that I've started to see "Now Hiring" signs in places that are often places where the young go to work: bars, restaurants, mainline retail establishments, and so on.  Not everywhere, of course, but in enough places (particularly compared to, say, two years ago) that I'd have expected some young people to have been lured back into the labor force.  (I'd also expect that at some point, parents would get sick of having their 27-year-old son on the couch in the basement playing Call of Duty all day and suggestively start leaving Bed Bath & Beyond job applications at strategic points between the aforementioned couch and the fridge or bathroom.)

We'll need to wait for all those folks who lost their bar/restaurant/retail jobs and went back to school.  It will take a while for them to get their degree/certificate and then become jaded enough after applying to a dozen jobs and being refused because they lack experience.  After that they'll surely return to apply for the just above minimum wage jobs they were laid off from a few years earlier.

The kicker:

 

But the problem appears to have deeper roots. In the 1990s, the labor force grew by 1.3 percent a year. Last decade, that figure dropped to 1 percent. And the Congressional Budget Office predicts that over the next decade, it will grow by only 0.7 percent.

 

Long term trend excaberated by the recession?

 

 

I think very few American cities will avoid a noticable drop in home values by the time this is over.

 

Housing crash hitting cities thought to be stable

New wave of distress now affecting areas where boom was relatively restrained

 

"SEATTLE — Few believed the housing market here would ever collapse. Now they wonder if it will ever stop slumping."

 

"In the last year, home prices in Seattle had a bigger price decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix."

 

"Seattle is down about 31 percent from its mid-2007 peak and, according to Zillow’s calculations, still has as much as 10 percent to fall. Mr. Humphries estimates the rest of the country will drop a further 5 and 7 percent as last year’s tax credits for home buyers continue to wear off."

http://www.msnbc.msn.com/id/41569256/ns/business-the_new_york_times

 

^Seattle is an economic gold mine and one of the top migration magnets in America, so that is pretty shocking.

Housing crash could go even further if Fannie/Freddie get trimmed back and more highly regulated.  Think what could happen in addition if the tax deduction for mortgage interest were to go away...  then again, these are both major changes that would be gradually phased in and not implemented over night.

Housing crash could go even further if Fannie/Freddie get trimmed back and more highly regulated.  Think what could happen in addition if the tax deduction for mortgage interest were to go away...  then again, these are both major changes that would be gradually phased in and not implemented over night.

 

The mortgage interest deduction and possible reform or dismantling of Fannie and Freddie are actually two different things.  (The way you wrote this sort of suggests that the two are connected, though I wasn't sure if you really meant it that way or not.)

 

^Seattle is an economic gold mine and one of the top migration magnets in America, so that is pretty shocking.

 

Seattle is indeed an economic powerhouse, and the news about the housing market there shouldn't take anything away from that.  However, Seattle, like many coastal markets, also experienced a more significant run-up in prices than basically any Ohio market.  I have a friend from OSU who went out there to work for Boeing as an aerospace engineer, so he's got a nice, solid, stable, middle-class, knowledge-economy income.  Even with that, there's no way he could have afforded what many places in Seattle were costing four years ago.  Even now, my eyes widen when we sometimes compare costs of living (we're good enough of friends that we can talk about finances with each other) with him in Seattle and me in Akron.  Seattle has come down in price, but that doesn't mean that it's cheap.

 

I own as much Seattle property as I care to: I own Amazon stock.  Meanwhile, I pay Akron prices to keep a roof over my head.  I may not have Seattle's social scene, but there's a lot more to do in even a comparatively small Midwestern city than a lot of people (especially those not from around here) appreciate.  And, of course, the Internet is everywhere.

Housing crash could go even further if Fannie/Freddie get trimmed back and more highly regulated.  Think what could happen in addition if the tax deduction for mortgage interest were to go away...  then again, these are both major changes that would be gradually phased in and not implemented over night.

 

The mortgage interest deduction and possible reform or dismantling of Fannie and Freddie are actually two different things.  (The way you wrote this sort of suggests that the two are connected, though I wasn't sure if you really meant it that way or not.)

 

^Seattle is an economic gold mine and one of the top migration magnets in America, so that is pretty shocking.

 

Seattle is indeed an economic powerhouse, and the news about the housing market there shouldn't take anything away from that.  However, Seattle, like many coastal markets, also experienced a more significant run-up in prices than basically any Ohio market.  I have a friend from OSU who went out there to work for Boeing as an aerospace engineer, so he's got a nice, solid, stable, middle-class, knowledge-economy income.  Even with that, there's no way he could have afforded what many places in Seattle were costing four years ago.  Even now, my eyes widen when we sometimes compare costs of living (we're good enough of friends that we can talk about finances with each other) with him in Seattle and me in Akron.  Seattle has come down in price, but that doesn't mean that it's cheap.

 

I own as much Seattle property as I care to: I own Amazon stock.  Meanwhile, I pay Akron prices to keep a roof over my head.  I may not have Seattle's social scene, but there's a lot more to do in even a comparatively small Midwestern city than a lot of people (especially those not from around here) appreciate.  And, of course, the Internet is everywhere.

 

So true, Seattle, and many other markets still have a ways to go before income and cost of living rebalance to historic norms.

Good thing we had some inflation going on to help sales increases stay above 0.

 

Sales at U.S. retailers rise 0.3% in January

Monthly increase in spending is lowest since last summer

 

"The increase in sales fell short of Wall Street’s expectations. Economists surveyed by MarketWatch had forecast sales to rise by 0.6% overall and by 0.6% excluding the auto segment."

 

"The government also revised sales data for December 2010 lower — to a 0.5% increase from 0.6% as originally reported."

 

"The biggest increase in retail sales last month occurred at gas stations, which isn’t a good thing for most consumers since it reflects higher fuel prices. Sales at gas stations rose 1.4%, following a 1.8% increase in December."

 

"Yet spending fell at clothing and building-supply stores. Consumers also spent less at bars and restaurants and bought fewer leisure items."

http://www.marketwatch.com/story/us-retail-sales-increase-03-in-january-2011-02-15-854310

Why Isn't Wall Street in Jail?

Financial crooks brought down the world's economy — but the feds are doing more to protect them than to prosecute them

 

"Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people."

 

"The rest of them, all of them, got off. Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What's more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even "one dollar" just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick "The Gorilla" Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars."

http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216?print=true

Bluntly, the reason they're not in jail is that none of them have been found to do anything illegal.  There were even one or two attempted prosecutions, I think--they failed.

 

Idiocy, even to the point of self-delusion, is not a crime.

 

The real crime wasn't that these people shot themselves in the foot; it was that after they did so, Congress forced us all to chop off our own feet to hand to them to make the banks whole.

Anybody think this current mess of overblown state budgets and massive budget slashing is just a temporary thing or more of a lasting trend? 

 

Article about Kasich has some interesting stats:  Ohio's projected fiscal 2012 deficit of 11 percent of the state's 2011 budget is serious, but far from the calamities facing California (29.3 percent), Texas (31.5), New Jersey (37.4), Illinois (44.9) and Nevada (45.2). 

 

http://www.washingtonpost.com/wp-dyn/content/article/2011/02/04/AR2011020404211.html

 

Those are some staggering numbers when you consider the size of some of those state budgets...

The Cleveland Fed has a report on the decline in labor force participation, which we've discussed earlier in this thread.

 

Who Is Driving the Decline in the Labor Force Participation Rate

..."who" in this case means what demographic group. 

 

The conclusion is that its an across-the-board phenomenon, with an interesting wrinkle in that the older men seem to be partipating more than expected?

 

In summary, the lowest U.S. labor participation rate since the mid-1980s is being driven by lower participation across all demographic groups, and especially by those under 29. The biggest exception is older men, whose labor force participation rate has actually increased since the beginning of the recession.

 

 

 

 

...perhaps what is happening is that younger people..younger men...who can't find work drop out...or "don't participate"  of the labor force and are living at home?

 

 

 

Anybody think this current mess of overblown state budgets and massive budget slashing is just a temporary thing or more of a lasting trend? 

 

Depends on the state.  The budgets themselves are probably not overblown (in the case of Ohio), but the recession has so hit revenue that we are running a deficit.  The issue is if there is a broad-based decline in incomes (lower wages and less work for most), than income tax revenue are going to drop as will sales tax revenue. 

 

If this is a permanent "reset" in the Ohio ecomomy...we are locked into lower employment numbers and lower paying jobs for most people (vs the college educated elite)...  the state budget will have to be reduced accordingly, so there will have to be reductions in staff and probably services.  This is if the revenue generation model is based on broad-based "living wage" middle class incomes (ie a state with a large blue-collar workforce).

 

The way you'd make up for this shortfall without a lot of cutting is to increase the progressivity of the income tax system by increasing taxes on the top earners, since that is were the money is at.  If there is an increasing bifurcation in incomes this means the top earners are going to be a) increasing in number and b) increasing in income.  So the money is still in the system just that the economy is redistributing it differently.

 

Of course the politics in this situation is that these top earners don't want to be taxed  more (who does?) and have the economic and political clout to ensure their taxes won't increase.  So the result is a budget deficit and reductions in state governement to match them.

 

We are talking about the "state" level.  Below that, at the local government level, Its been said Ohio has a fairly high cost of local government (in the top 10), and there are real questions if this is sustainable given the direction of the state economy.  My opinion is that cuts should come at the local level, since that's where things seem to be out-of-whack. 

 

 

 

 

 

 

 

 

Great comments & statistics.  One other wrinkle I'd add to the discussion is making Ohio "more competitive".  I'm seeing this phrase come up more & more. 

 

http://online.wsj.com/article/SB10001424052748704071304576160721023104538.html?mod=WSJ_hp_MIDDLETopStories

 

Some Republicans and conservative groups also argue that pro-union laws and policies are putting states in the industrial Midwest at a disadvantage in competition for jobs with right-to-work states, where unions are weak and they cannot compel workers to join or pay dues.

 

"Being a right to work state would bring jobs to Indiana," said Republican State Rep. Jerry Torr, a sponsor of the right-to-work measure in Indiana.

 

"Government figures show that inflation-adjusted per capita income in six right-to-work states increased at a 6.9% annual rate over the past 10 years. In contrast, incomes contracted at a 0.5% rate in six unionized upper-Midwest states over the same period, as many high-paying automotive and other manufacturing jobs disappeared and foreign auto makers concentrated nearly all of their new investment in right-to-work states."

 

Raising the tax rates on the wealthier residents will definitely help the budget shortfall without making significant cuts, but will it also have the unwanted effect of driving these wealthier citizens away to other states with lower tax rates?  Then what?

No connection between public sector collective bargaining and state budget deficits:

http://www.themonkeycage.org/2011/02/the_relationship_between_union.html

 

States by income per capita:

http://en.wikipedia.org/wiki/List_of_U.S._states_by_income

 

States by union membership:

http://www.infoplease.com/ipa/A0882960.html

 

Not clear whether there is much connection between the two.

but will it also have the unwanted effect of driving these wealthier citizens away to other states with lower tax rates?  Then what?

 

...this probably explains why a lot of rich Daytonians retire to Florida (anecdotal evidence, no stats to back that up).

 

 

Government figures show that inflation-adjusted per capita income in six right-to-work states increased at a 6.9% annual rate over the past 10 years. In contrast, incomes contracted at a 0.5% rate in six unionized upper-Midwest states over the same period, as many high-paying automotive and other manufacturing jobs disappeared and foreign auto makers concentrated nearly all of their new investment in right-to-work states."

 

Except Kentucky isn't a right-to-work state and Ford is expanding operations in Louisville and Toyota located its assembly plant near Lexington, followed by other supplilers.  So yeah, I guess one can have correlation without causation.  I do agree labor cost/flexibility issues in the upper Midwest are one reason manufacuturing is declining there.  Probably no longer the only reason.

 

The labor cost/flexibility issue is being addressed by automation and a mix of offshoring and outsourcing (this was Delphi's strategy, to move a lot production to Mexico), so i doubt right-to-work is such a big economic development tool any more.  Probably other factors are in play, too, as per that Kentucky example (Lexington...with that Toyota plant... is the fastest growing metro area in the Ohio Valley).  Right-to-work is more about removing unions from the equation, but with the relatively low rates of unionization across the board (and in growth sectors like IT, professional services, FIRE, biotech, and so forth) unions are not the big deal they were in, say, the 1970s, which was the heyday of the right-to-work movement.

 

But we are digressing from the recession discussion. 

 

I think the issue of declining revenue due to declining incomes is playing out here, sure.  Also at the national level.  Brookings released a great study on suburbanization of "poverty" (really more than just poverty as officially defined...more "low income"), but their data set runs only through 2007.  I'll be posting on that elsewhere, but their conclusion re the Earned Income Tax Credit (EITC) has some interesting implications:

 

"Preliminary data show that nationally, the number of EITC recipients trended

upward between 2007 and 2008, matched by an increase of about 5 percent

in EITC dollars received.17 This growth in EITC receipt likely refl ects the

effects of the recession’s fi rst year, in which many workers faced reduced

wages and hours.18 By 2009, a spell of unemployment for the typical worker

was 15.5 weeks—almost double what it was in 2007 (8.5 weeks)—and the

underemployment rate reached 16.2 percent.19 As the recession deepened and

spread in its second year, partial data on 2009 tax returns reveal an increase of

as much as $10 billion over 2007 in EITC dollars claimed."

 

"The increase in EITC filers and dollars in 2009 partly refl ects changes in the

EITC’s eligibility parameters. Passed in February of 2009, the American

Recovery and Reinvestment Act (ARRA) temporarily expanded eligibility and

increased benefi ts for targeted groups of working families, specifi cally married

couples fi ling jointly and families with three or more children. That means

hundreds of thousands of families who were not previously eligible for the credit

could qualify for the credit in tax years 2009 and 2010.21 Tax legislation adopted

in late 2010 preserved those expanded benefi ts for 2011 as well. This means

that more Americans will be able to benefi t from the economic buffer the EITC

provides as the economy struggles to fi nd a fi rmer footing in a thus-far weak

employment recovery."

 

source(section IV, Discussion and Conclusions).

 

So you can see as more people are claiming the EITC you will be taking in less money in taxes (this is at the Federal level).  For the state and local levels you'd see the same phenomenon...less revenue generation (though there are no state/local versions of EITC as far as I know).  So sure something is going to have to give if you want state and local budgets to balance based on an assumed lower-wage economy in Ohio.

 

 

Wow!! What shocking news? The NAR has been so trust worth throughout the housing implosion, they would never fudge the numbers?!.

 

CoreLogic Blasts NAR for Overstating Home Sales

 

"The "most popular measure" of existing home sales, the National Association of Realtors' Existing Home Sales, has increasingly overstated home sales for ten years as measured by five other sources, and reached a level in 2010 that is 15 to 20 percent higher than actual sales, according to CoreLogic, which made the charges in its US Housing and Market Trends Report.

 

CoreLogic reported sales totaled only 3.6 million in 2010, down 12 percent from 2009. By comparison, NAR reported sales fell only 5 percent in 2010 after rising in 2009, and were flat relative to 2008. CoreLogic said sales did not actually rise in 2009."

 

Read more: http://www.upi.com/Real-Estate/2011/02/15/CoreLogic-Blasts-NAR-for-Overstating-Home-Sales/4181297811217/#ixzz1F05Maw3U

Bluntly, the reason they're not in jail is that none of them have been found to do anything illegal.  There were even one or two attempted prosecutions, I think--they failed.

 

Idiocy, even to the point of self-delusion, is not a crime.

There are some arguments to the contrary, though this is more about retail lenders than investment bankers:

 

http://www.nakedcapitalism.com/2011/02/nyts-joe-nocera-defends-failure-to-bring-wall-street-execs-to-justice.html

 

 

This is one of the first times I have seen the labor numbers and how sigificant the paycuts have been for many.

 

Your Incredible Shrinking Paycheck

 

"And fall they have, to an extent not seen since the 1930s. Labor Department figures show that from 2007 to 2009, more than half the full-time workers who lost jobs and then found new work took pay cuts. A depressing 36% had to take positions paying 20% less than the ones they lost."

http://news.yahoo.com/s/time/09171205001900;_ylt=Al.8esiGDc.LC5gqsUJ7F9Os0NUE;_ylu=X3oDMTNrYnE1N25tBGFzc2V0A3RpbWUvMjAxMTAyMjgvMDkxNzEyMDUwMDE5MDAEY2NvZGUDbW9zdHBvcHVsYXIEY3BvcwM0BHBvcwMxBHB0A2hvbWVfY29rZQRzZWMDeW5faGVhZGxpbmVfbGlzdARzbGsDeW91cmluY3JlZGli

 

 

The USA of 1950-1999 is gone forever.

Not to be all Zen, but so is the USA of 1900-1949, and the USA of 2000-2010.  The USA of 1970 was gone by 1980, too, and that was gone by 1990.

 

Also, the 1950-2010 period was rosier than it deserved to be because the America of those years kept borrowing and borrowing from the America of the years we're just beginning to enter.  We're in for a rough transition from an economy based on borrowing from the future to an economy based on paying off the past.  I think, in one form or another, that's the real reason that young and old alike in this country are increasingly coming to believe that the younger generation will be worse off than its parents' and grandparents' generation.  Of course, it's still sacrilege to point out that the elderly in fact are largely responsible for that.  I predict that that heretical statement will become far, far more mainstream by 2020, however.

This movie is worth watching.

 

Inside Job - Who Maimed the Economy, and How

 

"Meanwhile, some investment bankers — at Goldman Sachs in particular — were betting against the positions they were pushing on their customers. An elaborate house of cards had been constructed in which bad consumer loans were bundled into securities, which, were certified as sound by rating agencies paid by the banks and then insured via credit-default swaps. One risky bet was stacked on top of another, and in retrospect the collapse of the whole edifice, along with the loss of jobs, homes, pensions and political confidence, seems inevitable."

 

"How did this happen? Mr. Ferguson is no conspiracy theorist; nor is he inclined toward structural or systemic explanations. Markets are not like tectonic plates, shifting on their own. Visible hands write laws and make deals, and in this case a combination of warped values and groupthink seems to have driven very intelligent men (and they were mostly men) toward folly. In addition to business and government, Mr. Ferguson aims his critique at academia, suggesting that the discipline of economics and more than a few prominent economists were corrupted by consulting fees, seats on boards of directors and membership in the masters of the universe club."

http://movies.nytimes.com/2010/10/08/movies/08inside.html?pagewanted=2

 

^Masters of the Universe Club? Sounds like fun! "By the power of Grayskull, I empower thee to run the economy into the ground."

More like..."where's my bonus?"

 

Unemployment rate dips below 9% and not a peep in this thread.  Hmmmmmm.....

You just peeped. :-)

If you really study the trends in unemployment numbers, it's not always a very good indication that the economy is back on track.  A downward dip could just as easily mean that more people have given up looking for work and are therefore no longer counted as unemployed.  Most likely trend is to see a tick upward in unemployment as the economy recovers, because those who are removed from the workforce, re-enter and begin actively searching when they feel that job opportunities actually exist.

Unemployment rate dips below 9% and not a peep in this thread.  Hmmmmmm.....

Unemployment rates don't matter (since people age out of the system so often). Labor participation and pay is what matters, and that had the far more encouraging news. There was a lot of private sector growth. Pay didn't go up, but it also didn't go down (which is very encouraging considering what happened over the past three years). We're going to have about 200,000 private sector jobs created a month this year, and by the end of the year, there is a real chance for wage growth to help match inflation.

 

Burst of hiring could mark turning point for jobs

Private employers add the most jobs in nearly a year as unemployment slips below 9 percent

 

WASHINGTON (AP) -- Companies added more workers in February than in any month in almost a year -- a turning point for the economy that finally pushed the unemployment rate below 9 percent. Economists say the stronger hiring should endure all year. The 222,000 jobs the private sector created more than offset layoffs by financially squeezed state and local governments. They slashed 30,000 jobs, the most since November. The unemployment rate sank to 8.9 percent, the lowest since April 2009. The rate has now fallen almost a full percentage point in just three months -- the sharpest drop in a generation.

 

FULL STORY ON YAHOO FINANCE

http://finance.yahoo.com/news/Burst-of-hiring-could-mark-apf-797302123.html?x=0&sec=topStories&pos=5&asset=&ccode=

 

Ok, corporate profits and the booming stock market tell me that the economy is back on track.

Nope, the economy is still in the toliet.  Housing hasn't even begun to get better with any macro consistency. 

TBideon: Why do you look to housing as the barometer of whether the economy is still in the toilet?

 

Any money sunk into housing gets locked into a fixed asset.  I actually think that the weak housing market is, on balance, good for the rest of the economy at this point.  I would consider a rise in home prices to be a drag on the real economy little different than a rise in food or oil prices.