The ire against Wall Street is largely--not entirely, but largely--misplaced.  Remember that if it had not been for trillions in taxpayer bailouts (both direct payments and indirect supports), Wall Street would have suffered far more grievously than it did.  The ire there is more properly directed at the government that failed to resist the power of Wall Street lobbying, though of course I hardly hold Wall Street blameless there.

 

Nevertheless, the vast majority of Wall Street wants the American economy to be healthy.  Companies going bankrupt make bad investments, hurting shareholders.  They also don't repay their loans, hurting bondholders and other creditors.  Yes, sophisticated investors can make money even a bear market, but it's still easier in a bull market--and sophisticated investors can make even more money in a healthy economy with a rising stock market.  Short selling, options strategies, and similar advanced securities and derivatives plays can minimize downside risk and even allow for profits on falling stocks, but there are limits to how much money can be made with strategies like that.  Healthy companies make a lot more people a lot more money than sick ones.

 

Of course, sometimes what makes a company healthier involves conserving resources, including hiring freezes, layoffs, wage reductions, delaying investments in inventory and equipment, and so forth.  People don't like to admit that that might be the best things for the company--and they always celebrate companies who manage to keep hiring and spending and still profit even during downtimes (Panera, which has enjoyed a very successful run the last couple of years, has done that, for example), but the sad truth is that not every company is capable of that.

 

I think the blame and ire is clearly placed in the right direction, when you talk about Wall Street (financial corporations) and government that supported their actions and continue to do so today. They built the house of cards, they magnified the house of cards with all the toxic derivatives, and then asked the taxpayer to bail them out so that they could report record earning for the last year or two. That house of cards has also caused major financial issues for pension funds, states, and other companies who are still in the middle of the economic storm.

 

I post this in the past, but it makes this house of cards and the fraud very easy to see - http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216?print=true

Oh, for Pete's sake, more "prosecute the bankers" tripe?

 

I read that article when it first came out and I've read several others in that general "make up a reason and throw them in jail, we're mad at them" vein.  The law doesn't work that way.  If you want to push this, you'd better start talking about specific crimes (criminal fraud?  I have no idea) and specific entities (not just "Wall Street" or "the bankers").

Yes, criminal fraud.  A thousand times yes.

^Second that.

+3

Oh, for Pete's sake, more "prosecute the bankers" tripe?

 

I read that article when it first came out and I've read several others in that general "make up a reason and throw them in jail, we're mad at them" vein.  The law doesn't work that way.  If you want to push this, you'd better start talking about specific crimes (criminal fraud?  I have no idea) and specific entities (not just "Wall Street" or "the bankers").

 

Just a quick glance at the article. There is plenty more in the articles just in this thread alone. We are not talking about thousands of dollars or even millions of dollars, we are talking about billions and in the case of the derivatives market there is estimates of trillion+. If they didn't think what they were doing was illegal, why hide it, or not disclose the info as regulations require?

 

"- Bank of America, was caught hiding $5.8 billion in bonuses from shareholders as part of its takeover of Merrill Lynch.

 

- Lehman Brothers hid billions in loans from its investors

 

- Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling"

quoting "Rolling Stone" articles in a political discussion is like quoting "Wall Street Journal" for music news

quoting "Rolling Stone" articles in a political discussion is like quoting "Wall Street Journal" for music news

 

Go back through the thread and you can find the same type of info throughout articles from Financial Times, Telegraph, Marketwatch, Bloomberg, etc. Plus, this Rolling Stone article received a lot of props in the media industry for its in depth report.

I'll concede the Goldman Sachs double-dealing example; the excuse of that they were just "market makers" and never assumed any fiduciary duties or contractually obligated themselves to avoid playing both sides of the table do ring hollow to me, though I'll admit I'm no expert on securities laws.  The BoA and Lehman assertions above, I know less about, though I know that there are different disclosure requirements for off-balance-sheet vehicles, and if that was what was meant by Lehman "hiding" loans from its investors, that may well have been kosher (i.e., the liabilities it ultimately had to assume might well have not been subject to SEC disclosure rules when those disclosures were made).

 

 

Nevertheless, the vast majority of Wall Street wants the American economy to be healthy. 

 

They don't necessarily need the economy as a whole to be healthy... just their customers and potential customers economies to be healthy. I'd also argue that many companies flourish when the economy is slower -- including mine. People aren't going to sit inside playing video games when they have a bunch of money for speedboats, racecars and season tickets.

LOL. People who play video games aren't the type of people who enjoy speed boats. They would rather ride a speedboat on an MMORPG. If they get out of the house it might be to get a dime sack or go to a LAN party or to play MTG with someone. Haha I need to quit stereotyping. I bet the video game industry thrives though when people collect unemployment or get their giant tax returns.

13% of all U.S. homes are vacant

By Les Christie, staff writer

March 28, 2011: 8:28 AM ET

 

 

NEW YORK (CNNMoney) -- High residential vacancies are killing many housing markets, as foreclosed homes sit on the market and depress sale prices and property values.

 

And it's only getting worse: The national vacancy rate crept up to just over 13% according to last week's decennial census report. That's up from 12.1% in 2007.

 

http://money.cnn.com/2011/03/28/real_estate/us_housing_vacancy_rates/index.htm

Just as an observation, I know here in Colorado, that attendance at the ski resorts was running above last years numbers until the end of the year, since then the numbers are now treading below last years levels. Snow levels have stayed very steady all season.

 

Disposable income falls as prices jump, data show

U.S. PCE inflation up 0.4%, most since July 2008; spending up 0.3%

 

"WASHINGTON (MarketWatch) — Real disposable income declined in February as consumer prices jumped by the largest amount in 2 1/2 years, the Commerce Department reported Monday.

 

Economists said the data show that higher prices for gasoline is starting to take some of the steam out of the economy."

http://www.marketwatch.com/story/disposable-income-in-february-falls-as-prices-jump-2011-03-28

 

 

While this could be good for longer term stability of the housing market and our economy, it could really put the current RE industry down for the count.

 

Mortgage Reform Storm Is Brewing

 

"When it rains, it pours, but we're looking at a hail storm in housing finance this week, as government starts the business of taking itself out of the housing business. Tomorrow morning the FDIC will release and vote on proposed risk retention rules for the mortgage market. This includes the "Qualified Residential Mortgage" definition. A QRM would be exempt from risk retention, where the banks have to hold on to 5 percent of the risk when securitizing loans.

 

The QRM will likely require a 20 percent down payment on the loan, as well as other underwriting criteria, and loans sold to Fannie and Freddie (while still in conservatorship), as well as FHA loans, would be exempt. At the same time, Fannie, Freddie and the FHA are making themselves more expensive, as they try to shrink their currently overwhelming market share.

 

Barely a few hours after the vote, House Republicans will introduce a slew of, possibly six, bills designed to reform/shrink/eliminate Fannie and Freddie. Then comes more at a hearing on Thursday on housing finance."

http://www.cnbc.com/id/42309859?__source=RSS*blog*&par=RSS

Pretty sure that article is sensationalizing all of this quite a bit.  The risk retention rules have definite medium/long term implications, but they won't themselves make the market any worse than it is now, because private securitization is already dead.  And as far as I know, there aren't any major GSE and FHA pricing and eligibility changes in our immediate future that haven't already been enacted over the past 3 years- not sure what exactly the article is referring to in that regard.  And finally, the bills the house republicans are introducing regarding the GSEs won't go anywhere.  Nobody is expecting any serious GSE decisions to be made in the next year or two.  And it's entirely likely a more restrained GSE-like structure emerges when the dust settles.

 

But yeah, long term, will be very interesting to see how this shakes out.

 

 

Just as an observation, I know here in Colorado, that attendance at the ski resorts was running above last years numbers until the end of the year, since then the numbers are now treading below last years levels. Snow levels have stayed very steady all season.

 

The conventional wisdom on the east coast is that the snow was so good in New England and upstate NY this winter that fewer people were making the longer trip to the good stuff in your state and in Utah.  I have no idea if that's true, but it's a comforting thought that nature is to blame for this and not the economy for once :)

NBC always does their job. :wink:

 

1 hr 36 mins ago

Nightly News stays mum on GE’s $0 tax bill

By Chris Lehmann

 

As the New Yorker's former press critic, A.J. Liebling, famously said, "Freedom of the press is guaranteed only to those who own one." Perhaps that quotation is framed somewhere in a boardroom at the General Electric Corp., which owns NBC News. In spite of robust profits of $14.2 billion worldwide, GE has calculated a corporate tax bill for 2010 that adds up to zero, via a creative series of tax referrals and revenue shifts. (This was, indeed, the second year running that the company—which has an enormous, and famously nimble, 975-employee tax division, led by former Treasury official John Samuels—paid nothing in U.S. taxes; indeed by claiming a series of losses and deductions, GE came up with a negative tax of 10.5 percent in the admittedly dismal business year of 2009, and realized a $1.5 billion "tax benefit.")

 

The curious thing about this year's tax story is that it turned up in many major news outlets, with one key exception: NBC News. As the Washington Post's Paul Farhi notes, the network's "Nightly News" broadcast, hosted by Brian Williams, has not mentioned anything about its corporate parent's resourceful accounting, even though the story has been in wide circulation in the business and general-interest press for nearly a week. "This was a straightforward news decision, the kind we make daily around here" network spokeswoman Lauren Kapp told the Post.

 

http://news.yahoo.com/s/yblog_thecutline/nightly-news-stays-mum-on-ges-0-tax-bill

 

 

The more I read and study the more I realize just how 'rigged' the system is becoming. It's is amazing to watch the fraud and unethical conduct that is growing in the system under the name of 'legalities'. As far as the MSM media goes in the US, its has become more and more centrally controlled and polorized in its view points. I think we are down to like 6 companies owning the majority of the main MSM outlets.

Perhaps that quotation is framed somewhere in a boardroom at the General Electric Corp., which owns NBC News.

 

I don't think it changes the point of the article, but pretty sure GE no longer has controlling ownership of NBC.  I believe Comcast's majority interest purchase closed this past January.

Another step in the right direction on the job front. It should be interesting to see what the job growth number is on Friday after taking into accounts job loses.

 

Private sector adds 201,000 jobs in March: ADP

 

"WASHINGTON (MarketWatch) — Private-sector employment climbed 201,000 in March, according to Automatic Data Processing Inc.’s employment report released Wednesday, in a preview of the more closely followed U.S. government data later this week.

 

The gain was roughly in line with economists’ forecasts.

 

In February, private payrolls rose by 208,000, down slightly from the initial estimate of a 217,000 increase."

http://www.marketwatch.com/story/private-sector-adds-201000-jobs-in-march-adp-2011-03-30

 

Weekly jobless claims dip 6,000 to 388,000

Changes in how data is calculated show slightly elevated levels

 

"WASHINGTON (MarketWatch) — New applications by people seeking unemployment benefits edged lower last week after taking into account revisions in the how the U.S. government calculates the data.

 

The number of people who filed first-time claims for jobless benefits fell by 6,000 to a seasonally-adjusted 388,000 in the week ended March 26, the Labor Department reported Thursday. Yet that decline occurred after claims in the prior week were revised up to 394,000 from an originally reported 382,000."

 

"The average of new claims over the past four weeks, meanwhile, rose by 3,250 to 394,250. The four-week average is considered more accurate a gauge of employment trends because it lessens week-to-week volatility in the data."

http://www.marketwatch.com/story/weekly-us-jobless-claims-dip-6000-to-388000-2011-03-31

 

U.S. Feb. factory orders fall 0.1%

 

"WASHINGTON (MarketWatch) -- New orders for U.S. factory-manufactured goods fell by 0.1% in February, the Commerce Department reported Thursday. Economists polled by MarketWatch were expecting overall U.S. factory orders to rise by 0.5% in February. Shipments of manufactured goods rose by 0.3%."

http://www.marketwatch.com/story/us-feb-factory-orders-fall-01-2011-03-31-103400

The labor force is heating up out of control. We better hope gas prices jack up consumer prices, or else Americans might start paying off their student loans or have discretionary income. This excessive amount of private sector growth threatens the tripod (education, healthcare, defense) and could lead to a shrinking public sector.

Inflation Comes at Us Like a Knuckleball

Michael Pento

 

For the past 40 years or so, every country on the planet has relied on fiat money. To a very large extent, this means that the national economies are far more exposed to the whims of their central bankers than they have been in the past. So, if central bankers go off their meds, the danger to the currency becomes profound. Unfortunately, at America's Federal Reserve, it seems the inmates are now running the asylum.

 

We are being led to believe that falling prices are evil, and that only an increase in inflation can save our economy. From the moment the financial crisis took hold in 2008, Fed Chairman Ben Bernanke has looked to lower the dollar's value and cause asset prices to rise - especially in real estate. But his pitch is wildly off the mark. The Fed can't control the exact rate of inflation, nor can it direct where inflation will be distributed across the economy. In other words, inflation is like a knuckleball: once you let it loose, you're never really sure where it's going to go. And Bernanke's pitches are so wild it would make Tim Wakefield jealous.

 

Thus, we are seeing rising prices everywhere except where Bernanke really wants them - real estate. Data released last week shows that the median price of existing homes declined 5.2% in February compared to the previous year, to $156,100. New home prices fared even worse; the median sales price dropped to $202,100 in February, from $221,900 a year earlier - a tumble of some 9%!

 

* * *

 

Since the real estate market was in a prolonged and lofty bubble, it will be the last asset class to respond to the Fed's dollar debasement strategy. Although Bernanke is noted for his Great Depression scholarship, it should be obvious by now that he never spent much time studying asset bubbles. If he did, he would have learned that gold took decades to recover from its crash in 1981. The NASDAQ is still 45% below its all-time nominal high set over a decade ago. And, unlike housing prices, these markets were allowed to clear themselves after their respective crashes. Prices dipped more than 70% before turning north in earnest. In contrast, home prices are being kept in a rump bubble by Fed stimulus. Amazingly, since 40% of the core CPI is owner's equivalent rent, Bernanke will continue to miss the mark about the true level of the inflation he has created.

 

http://www.realclearmarkets.com/articles/2011/03/30/inflation_comes_at_us_like_a_knuckleball_98937.html

"Amazingly, since 40% of the core CPI is owner's equivalent rent, Bernanke will continue to miss the mark about the true level of the inflation he has created." - From the article above

 

I am very certain Bernanke know exactly how much inflation he has created, is creating and is about to create, here in the US and in many parts of the world. He just has the benefit of using formula's that the FED created that conveniently masks real inflation. This allows the FED to create headline news articles that say 'Inflation is well contained'. Just like all the headlines that said, subprime was contained, unemployment  was contained, the foreclosures crisis was contained, etc. In the end none of these items were contained.

 

Just came across a very timely article for the discussion above. Looks like Bernanke and the FEDs are just as right as they have been on many of the other issues. Just like subprime, foreclosures, etc. the FED will only admit there is a huge problem, after it can no longer be hidden or explained away. It has become their standard process to follow.

 

Wal-Mart CEO Bill Simon expects inflation ~ USA TODAY

 

"U.S. consumers face “serious” inflation in the months ahead for clothing, food and other products, the head of Wal-Mart’s U.S. operations warned Wednesday.

 

The world’s largest retailer is working with suppliers to minimize the effect of cost increases and believes its low-cost business model will position it better than its competitors.

 

Still, inflation is “going to be serious,” Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY’s editorial board. “We’re seeing cost increases starting to come through at a pretty rapid rate.”

http://www.usatoday.com/money/industries/retail/2011-03-30-wal-mart-ceo-expects-inflation_N.htm?csp=hf

To the extent there is inflation right now, how much of it is due to US monetary policy v. forces outside the Fed's control (e.g., worldwide commodity bubble, oil fears)?  Honest question, I really haven't been following.

To the extent there is inflation right now, how much of it is due to US monetary policy v. forces outside the Fed's control (e.g., worldwide commodity bubble, oil fears)?  Honest question, I really haven't been following.

 

Good questions. This potential inflation issue is not just US induced. The european union, and up to recently Japan and many others have been flooding the world markets with 'money'. This money has to go someplace, and a lot of it is going into the stock market, commodities, etc. So in a roundabout way they are creating the inflation. Bernanke clearly stated several years back that he would do everything in his power to ensure we don't have deflation (hasn't works so well for housing). Of course supply and demand is playing its roll in all of this as well. But, supply and demand is clearly not the only driving force behind this. The bad part for main street is, the greatest 'asset' that most people on main street have, is their house and its value continue to decline. Add in that income growth is not even close to keeping up with inflation and you have main street taking a double hit. Not a good combination.

 

Bubbles,

I firmly believe that commodities, oil, etc are more economic bubbles. If inflation represses the economy then these bubbles will bust and Wall street and the FEDs will look for the next thing to inflate. This has become Wall Streets (banks, etc) favorite way to make a quick buck and to show economic growth, they did it with the DOT com's, housing, commodities, etc.

Another quick look across the pond. Those pesky Euro Zone debt/default problems just won't go away. I guess things are only good until they are not. If Spain or Italy finally ends up in a Greece, Portugal, Ireland state, it will make this current economic crisis look small.

 

Portugal debt crisis takes turn for worse

 

"Portugal's financial tailspin gathered speed despite political efforts to contain the acute debt crisis that is also unnerving the 17-nation eurozone.

 

The interest rate on Portugal's 10-year bond surged to a euro-era record of 7.9 per cent yesterday - an unsustainable borrowing cost for the cash-strapped country."

 

"Analysts predict Portugal will soon need a bailout like those given to fellow eurozone nations Greece and Ireland."

http://www.nzherald.co.nz/economy/news/article.cfm?c_id=34&objectid=10715749

 

Ireland: Banks Need euro24B More, Will Be Overhauled

Irish Central Bank says Ireland's banks need euro24 bln ($34 bln) more to withstand future shocks

 

"Ireland's ailing banks need another euro24 billion ($34 billion) in cash in a move that will leave all of them under state control and facing a complete overhaul, officials announced Thursday in a long-awaited effort to cap a 3-year banking crisis."

http://abcnews.go.com/Business/wireStory?id=13263215

So let me get this straight, everything in America is going to be OK because we are not Portugal or Ireland.

So let me get this straight, everything in America is going to be OK because we are not Portugal or Ireland.

 

Nope. We have our own issues that are more than enough and if we keep printing we may find that the markets may lose their appetite for our debt at reasonable prices.

I wonder where they go next. One answer is gold, but that has no long term value. Oil and other commodities can work for a time, but eventually that fails when the spikes cause economic catastrophe. Japan will be internally focused for a decade or more I'd imagine. China is too opaque and lacks the rule of law for serious money investment - bond traders have long memories - avoiding revolutions and all (that is pretty much the only explanation for the continuing value of British debt and the pound). If Europe blows up the Euro, I'm not sure we'll have much to worry about. The rest of the world can't absorb that cash w/out blowing the top off their economies (see Brazil). Long and short, we are screwed maybe, but never completely.

Why exactly is gold not fiat money?  Or any other commodity for that matter?  There certainly isn't enough to gold to circulate for the money that is actually circulating (not to mention that there isn't enough gold to hold in reserve, but I'll ignore that for the moment).  So if you don't have gold circulating, you're left with demand notes and convertability, and unlike the U.S. government going bankrupt, we have actual recent experience with the government unilaterally suspending gold convertability.

 

Gold backed currency is still fiat money.  Gold backed currency has a notable history of suspension of convertability.  Gold (for governments) doesn't pay interest (unlike Treasuries) when they are sitting around in a vault.  It requires protection and physical space (unlike Treasuries).  Gold back currency is a stupid idea that for some reason will not die in spite of all the facts lying about to kill it.

Solid job growth numbers. We are definitely headed in the right direction at this time for job growth. We still have a very long ways to go to overcome the loses over the last 2 or 3 years, but its moving in the right direction. Hopefully this can keep going.

 

Payrolls climb to 216,000, jobless rate 8.8%

Economy enjoys fastest rate of employment growth since May

 

"WASHINGTON (MarketWatch) — Nonfarm payrolls grew by a seasonally adjusted 216,000 in March, their fastest pace since last May, the Labor Department said Friday, in an indication of an improving labor market.

 

According to the survey of 400,000 business establishments, private-sector payrolls increased by 230,000 jobs after rising by 240,000 in February, marking the first time that private-sector job gains have been over 200,000 for two straight months in five years."

 

"Unemployment dropped by 131,000 to 13.5 million for March, while employment rose by 291,000 to 139.9 million.

 

An alternate measure of employment, which includes discouraged workers and those forced to work part-time because of the weak economy, fell to 15.7% from 15.9%."

http://www.marketwatch.com/story/us-payroll-climbs-to-216000-jobless-rate-88-2011-04-01

That's the good news. Now for the bad:

 

Jobs returning — but good ones not so much

By Zachary Roth

 

When it comes to jobs, it's not just quantity that matters--it's also quality. It's great news that the economy is finally producing jobs again--even if it'll take another few years of this kind of growth to get us back to where we were before the Great Recession. But that also means it's now time to ask what kind of jobs are being created. And on that front, things are a lot less encouraging. Several recent studies suggest that the new jobs pay less and offer fewer work hours than the ones they have replaced. Let's look at the numbers:

 

• Lower-wage industries -- things like retail and food preparation -- accounted for 23 percent of the jobs lost during the recession, but 49 percent of the jobs gained over the last year, a recent study (pdf) by the National Employment Law Project found. Higher-wage industries, by contrast, accounted for 40 percent of the jobs lost, but just 14 percent of the jobs gained. In other words, low paying jobs are increasing as a percentage of total jobs, while high-paying jobs are on the decline.

 

• Meanwhile, the percentage of those working who have part-time jobs and want full-time ones surged in mid-February to 19.6 percent -- almost as high as it was a year ago before the recovery began, according to Gallup numbers. That suggests, of course, that a large number of the new jobs created over the last year are part-time.

 

• And a recent Wall Street Journal analysis found that even though productivity rose 5.2 percent from mid 2009 to the end of 2010, wages increased by just 0.3 percent. That means only 6 percent of productivity gains were shared with workers. In past recoveries, that figure has averaged 58 percent. This time around, far more of the gains went to shareholders, in the form of profits, which are at record levels.

 

FULL ARTICLE

http://news.yahoo.com/s/yblog_thelookout/20110309/ts_yblog_thelookout/jobs-returning-but-good-ones-not-so-much

^That's OK because those shareholders are re-investing those profits and creating new high paying jobs...oh wait....well at least they are paying lots of taxes on those profits so society as a whole can benefit...oh wait...hmmm....somebody better tell the Republicans about this.

^That's OK because those shareholders are re-investing those profits and creating new high paying jobs...oh wait....well at least they are paying lots of taxes on those profits so society as a whole can benefit...oh wait...hmmm....somebody better tell the Republicans about this.

 

They might be buying boats and toys? That should be more than enough, right?

All the big boys seem to be scrabbling to reduce their GDP estimates over the last few weeks. If we get this type of GDP number, look for the case for QE3 to become much stronger. I wonder how much more inflation we are willing to create?

 

If inflation continues at this rate or speeds up it will clearly put a major dent in this fragile economy (unless wages start to really rise). But, I also believe inflation will only go so high before commodity prices come falling back to earth, do to the reduction in growth that it will cause to the US, European and world economies.

 

Maybe this is what the FED is banking on. If they do QE3, 4, 5 (whatever) it will cause enough inflation that the economy will tank, bring inflation pressures down allowing for more QE. Rinse and repeat.

 

BofA's new 1.5% growth view now lowest on Street

 

"WASHINGTON (MarketWatch) -- Bank of America Merrill Lynch has taken their first-quarter growth estimate down to 1.5%, from 2.2% recently, in what is now the lowest estimate for GDP growth on Wall Street. Though the jobs market is improving, wage growth is muted and not keep up with inflation, and the weak construction data also is weighing, the brokerage points out. Even if there are modest revisions to January and February data and monthly consumption grows 0.3% in March, annualized consumption will be just 2.3% in the first quarter. Economists polled by MarketWatch are expecting 2.5% first-quarter growth."

http://www.marketwatch.com/story/bofas-new-15-growth-view-now-lowest-on-street-2011-04-04

 

Economy gains steam, but inflation a brake

Consumer spending, a key to U.S. growth, hurt by rising prices

 

"In the meantime, economists have been busy redoing their math and recalculating their forecasts for first-quarter growth. Many firms have already trimmed their estimates based on data showing that consumer spending slowed during the first three months of 2011.

 

The consensus of economists surveyed by MarketWatch, for example, now puts first-quarter growth at 2.8%, down from 4.0% just a month ago.

 

One of the big reasons for slower spending: wages are barely growing, and whatever increases workers do get in their paychecks are being eaten up by the rising price gas and food."

http://www.marketwatch.com/story/economy-gains-steam-but-inflation-a-brake-2011-04-03

The big question is whether the fed is willing to let inflation go long enough that wages do eventually start to follow. It might be worth the risk.

^Or, to raise this again, we might question how much of this inflation has anything to do with Fed policy.  Unless we think Barnanke himself is going to solve Middle Eastern governance and global food demand.

^Or, to raise this again, we might question how much of this inflation has anything to do with Fed policy.  Unless we think Barnanke himself is going to solve Middle Eastern governance and global food demand.

 

If Fed policy has the ability to partially mitigate the effects of inflation even if the initial driver of inflation was from another source, then it's fair to look to Fed policy (as well as dealing more directly with those sources of inflationary pressure) as a counterweight.  The government didn't cause Hurricane Katrina, and it takes more than just government action to respond to a hurricane, but criticizing the government's response was still perfectly fair because the government did have some responsibility and did not do its fair share properly.  Same with inflation.  Is the existence of inflation entirely the Fed's fault?  Of course not.  Does that mean that the Fed is immune from attack regarding its handling of the issue?  That doesn't necessarily follow.

^Fair enough- I'm not trying to shield the Fed from criticism, just pointing out that its ability by itself to influence oil and food prices may be somewhat limited.  Certainly the Fed could try to prop up the value of the dollar to try to lower the costs of imported energy, but that obviously has its own consequences, especially for US exports.  I don't pretend to habla much Macro, but I think there's a bit of sleight of hand in the pundit-sphere right now where people point to "inflation" (whatever the driver) which in a lot minds means it's automatically or primarily a fiscal monetary policy issue rather than an energy or food policy issue.

Here is some more detailed information about the most recent employment and unemployment numbers. As you can see the number of unemployed has really not moved over the last several months and the ability to return to pre-recession levels will take years at this rate.

 

Comments on Friday's employment numbers

 

"Nonfarm payroll employment increased by 216,000 in March, and the unemployment rate was little changed at 8.8 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, leisure and hospitality, and mining. Employment in manufacturing continued to trend up.

 

The number of unemployed persons (13.5 million) and the unemployment rate (8.8 percent) changed little in March. The labor force also was little changed over the month. Since November 2010, the jobless rate has declined by 1.0 percentage point.

 

According to the household survey, total employment is still about 6.3 million jobs below the 2008 peak level. To return to more "normal" unemployment rates, the economy will need to add back these 6.3 million jobs while also adding additional jobs to absorb new workers who have entered the labor force since the recession began in December 2007. (This will take several years even at March's robust rate of job creation.)"

http://www.divisionofhousing.com/2011/04/comments-on-fridays-employment-numbers.html

^Fair enough- I'm not trying to shield the Fed from criticism, just pointing out that its ability by itself to influence oil and food prices may be somewhat limited.  Certainly the Fed could try to prop up the value of the dollar to try to lower the costs of imported energy, but that obviously has its own consequences, especially for US exports.  I don't pretend to habla much Macro, but I think there's a bit of sleight of hand in the pundit-sphere right now where people point to "inflation" (whatever the driver) which in a lot minds means it's automatically or primarily a fiscal policy issue rather than an energy or food policy issue.

 

You are right, many things affect inflation and other economic issues. Weather, wars, etc. But, I firmly believe that the FED and other world economic agencies clearly have an impact on inflation and many other economic issues. If they didn't, then why do they exist?

"According to the household survey, total employment is still about 6.3 million jobs below the 2008 peak level. To return to more "normal" unemployment rates, the economy will need to add back these 6.3 million jobs while also adding additional jobs to absorb new workers who have entered the labor force since the recession began in December 2007. (This will take several years even at March's robust rate of job creation.)"

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Let's think about that for a minute...

 

The economy needs to add approx 150,000 net new jobs each month to absorb new people entering the workforce.

 

We are approx 30 months from the peak employment of 2008.  That means 4.5 million jobs needed to be created over the past 30 months to absorbe population growth, but were not created. Let's call these 4.5 mm missing jobs.

 

So, in total, to keep the same (albeit unusually low) unemployment rate that we had at the time of peak employment in 2008, we need to create a net 10.8 million new jobs (6.3 mm lost + 4.5mm missing).  Let's call this a 10.8 mm job backlog.

 

Since we still need to create 150k jobs/month to meet current employment growth needs, that means we only created 66,000 net new jobs last month to address the 10.8 million job backlog we have.

 

 

At last month's new job's growth rate of 216k/month, it will take 163 months, or 13.6 years (10,800,000 / 66,000 = 163 months, /12 = 13.6 years)  to whittle down the backlog to nothing and get us back to where we were in 2008.

 

 

 

And I suspect the long-term trend of the monthly new job growth needed is slowly going up, so 150k new jobs/month may turn out to be an understatement 10 years from now, meaning the monthly net will be less than 66,000.  That will further extend the time-frame.

"According to the household survey, total employment is still about 6.3 million jobs below the 2008 peak level. To return to more "normal" unemployment rates, the economy will need to add back these 6.3 million jobs while also adding additional jobs to absorb new workers who have entered the labor force since the recession began in December 2007. (This will take several years even at March's robust rate of job creation.)"

-----

 

Let's think about that for a minute...

 

The economy needs to add approx 150,000 net new jobs each month to absorb new people entering the workforce.

 

We are approx 30 months from the peak employment of 2008.  That means 4.5 million jobs needed to be created over the past 30 months to absorbe population growth, but were not created. Let's call these 4.5 mm missing jobs.

 

So, in total, to keep the same (albeit unusually low) unemployment rate that we had at the time of peak employment in 2008, we need to create a net 10.8 million new jobs (6.3 mm lost + 4.5mm missing).  Let's call this a 10.8 mm job backlog.

 

Since we still need to create 150k jobs/month to meet current employment growth needs, that means we only created 66,000 net new jobs last month to address the 10.8 million job backlog we have.

 

 

At last month's new job's growth rate of 216k/month, it will take 163 months, or 13.6 years (10,800,000 / 66,000 = 163 months, /12 = 13.6 years)  to whittle down the backlog to nothing and get us back to where we were in 2008.

 

 

 

And I suspect the long-term trend of the monthly new job growth needed is slowly going up, so 150k new jobs/month may turn out to be an understatement 10 years from now, meaning the monthly net will be less than 66,000.  That will further extend the time-frame.

 

Kind of sobering. It also makes you realize just how much job lose has occured. Wouldn't be nice if someone in the MSM would do a little math, instead of just printing what the press release had to say.

Dark times. I wouldn't bring a child into this world with these conditions.

I actually don't find the unemployment numbers too worrying. Quality of jobs matters more than quantity of jobs at least as far as a happy, functioning society goes. Even with U-6 figures, under 20% of the population is unemployed. The thing I find much more disturbing is the growth of wage slavery industries. We're also seeing lots of previously good jobs turning into hellish wage slavery with much higher skill requirements and stress levels than traditional wage slavery (hence why retail is much better than some jobs requiring college degrees). Regardless of unemployment, the majority of jobs we are creating suck and will not support most people, especially people thinking of having kids. Hell, I'd be fine with a 50% unemployment rate if all the jobs we had were good (I suppose that's kind of how labor participation worked before women entered the workforce). The growth of low-wage jobs is by far the most disturbing trend in this, as is the lack of anger in the workforce. The working class is going out with a whimper, not a bang.

Regardless of unemployment, the majority of jobs we are creating suck and will not support most people, especially people thinking of having kids.

 

We've seen this redeployment of the workforce with every recession since, at least, the early 1980s.  With every recession the unemployed from lost "living wage" jobs  come back to work to low-wage/low-benefit jobs.  Back in the comeback out of the early 1990s recession the joke was that there were a lot of new jobs, but you needed three of them to make ends meet. 

 

That was 20 years ago.  See how things havn't changed. 

Dark times. I wouldn't bring a child into this world with these conditions.

 

I would.  For one thing, any child of mine is likely to have two college-educated parents, possibly even two with advanced degrees.  We give lip service to the mantra that all men are created equal, but realistically, any child of mine would have significant competitive advantages getting one of those jobs that go to 80% of the population--even one of the high-quality ones that actually puts you in the tax-paying rather than tax-taking classes.

 

If anything, we have far too few successful, intelligent, and educated people in this country having children--my sense is that this is out of both personal career concerns for the parents as well as concerns about the expense of giving a child a white-collar upbringing in modern America.

 

I actually don't find the unemployment numbers too worrying. Quality of jobs matters more than quantity of jobs at least as far as a happy, functioning society goes. Even with U-6 figures, under 20% of the population is unemployed. The thing I find much more disturbing is the growth of wage slavery industries. We're also seeing lots of previously good jobs turning into hellish wage slavery with much higher skill requirements and stress levels than traditional wage slavery (hence why retail is much better than some jobs requiring college degrees). Regardless of unemployment, the majority of jobs we are creating suck and will not support most people, especially people thinking of having kids. Hell, I'd be fine with a 50% unemployment rate if all the jobs we had were good (I suppose that's kind of how labor participation worked before women entered the workforce). The growth of low-wage jobs is by far the most disturbing trend in this, as is the lack of anger in the workforce. The working class is going out with a whimper, not a bang.

 

Really?  50% unemployment as long as the other 50% have good jobs?  Why not 90% unemployment as long as the other 10% have good jobs?

 

Quantity matters.  Even someone employed at minimum wage for 40 hours a week, or even 20 hours a week, is helping both themselves and the economy significantly more than someone doing nothing and collecting unemployment.  For one thing, even holding down a part-time job increases one's career prospects later when the labor market starts to get tighter again; extended periods of unemployment make employers uneasy.

 

"Wage slavery" is a demagogue's phrase.  It does not exist, except in the entirely benign sense that most people need to work for a living.

Quantity matters.  Even someone employed at minimum wage for 40 hours a week, or even 20 hours a week, is helping both themselves and the economy significantly more than someone doing nothing and collecting unemployment.

 

I never said they should collect unemployment. They'd be U-6, or drop out of the labor force. I'm saying it's better to have half the country employed in good jobs than the majority of the country employed in bad jobs. Realistically, that probably won't happen again. There would have to be an explosion of stay-at-home parents.

 

even one of the high-quality ones that actually puts you in the tax-paying rather than tax-taking classes.

 

Key point. The public sector has gotten gigantic. For the past 30 years, the majority of good jobs we were creating were in the tax-taking class.

 

If anything, we have far too few successful, intelligent, and educated people in this country having children--my sense is that this is out of both personal career concerns for the parents as well as concerns about the expense of giving a child a white-collar upbringing in modern America.

 

It's all choice. People put careers before kids. To be successful these days, you almost have to, at least until your 30's. For women, the peak fertility years are already gone. We have yet to come up with a good way for women to produce kids at any age (though I think it will happen in the future).

Wage slavery is definitely demagoguery.  So is "tax-taking class".