Our Dismal Job Market

Economists–well at least NeoKeynesian economists that look at data–frequently use words like “rigid” and “sticky” to describe the jobs market.  Rigid is a good word.  It means “deficient in or devoid of flexibility”.  The Labor Markets are the biggest empirical hurdles to jump if you want to buy into some variant of supply-side economics or NeoClassical economics.

Wages and quantities of labor used to adjust very slowly.  They appear to be dismally slow these days. Part of this is obviously due to outsourcing.  The substitution of  foreign (e.g. outside of our borders; legal status really doesn’t matter for purposes of macro growth) for US-based workers seems to have made the NeoKeynesian assumptions of sticky and rigid wages even more so.

What’s very interesting about today’s BLS report on jobs is that the unemployment rate inched down but the fundamentals in the job market don’t appear to be changing much.  Plus, the unemployment rate inched down based on the way it’s calculated by more than anything else.  It’s not really fooling people that know economics or finance, but will the public at large embrace the nuance? A huge portion of the populace is simply leaving the job market.

Felix Salmon explains some of the nuances in his Reuters Blog today called “No good news for the long-term unemployed”. He focuses on some of  the buried  numbers rather than the top number.  Yes, he has a nifty graph you should check that out too.

The December jobs report turns recent history on its head. We’ve been used to healthy increases in employment making no dent in the unemployment rate, but this time a mediocre jobs figure—just 103,000 new jobs were created—coincides with a gratifyingly large fall in unemployment, to 9.4% from 9.8%. For those keeping track at home, that’s employment up by 103,000 and unemployment down by a whopping 556,000.

There’s no doubt that the headline payrolls number is a disappointment. The economy just doesn’t seem to be creating jobs: we need to see 150,000 new jobs a month just to keep pace with population growth. But is there some good news, at least, on the unemployment front?

I’m not sure. While unemployment is down from both December 2009 and December 2010, it’s down only for those who have been out of work for less than 26 weeks. The ranks of the long-term unemployed are still rising

Well, it’s not so ‘whopping’  in context–as we’ll see in a moment–but let’s look at some other things.  The underlying numbers appear to be a total disconnect–and Salmon’s analysis is not unique among economists’ take on the situation–with the assessment of the President who just appointed lawyer Gene Sperling to do an economist’s job.  President Obama also continued his rhetoric on substanial job creation being just around the corner and how the trend is just so much rosier under his leadership.  Does any one outside of his circle actually believe this?

Now, read this Bloomberg article and notice the part at the end that I highlighted.

Obama said Sperling has been an “extraordinary asset” over the past two years as a senior adviser to Treasury Secretary Timothy Geithner, helping to pass a small-business jobs bill and a tax-cut compromise.

Obama said one of the reasons he selected Sperling is that “he’s done this before,” a reference to Sperling’s 1996-2000 leadership of the NEC during the Bill Clinton administration.

Obama also named Jason Furman as principal deputy director of the NEC, and nominated Katharine Abraham to the Council of Economic Advisers. He also nominated Heather Higginbottom as deputy director of the Office of Management and Budget.

Obama spoke on the same day that government data showed that the U.S. added 130,000 jobs in December and the unemployment rate dropped to 9.4%.  Read MarketWatch’s story about jobs report.

Obama trumpeted 12 straight months of private-sector job creation and said, “the trend is clear.” But he said there’s a lot of work to do to get more people back in the labor force, and pledged to forge ahead with more job-creation efforts.

Sperling was also deputy NEC director during Clinton’s first term, which was marked by standoffs that resulted in government shutdowns. Sperling helped negotiate a balanced budget agreement in 1997 and was an advocate for the repeal of the Glass-Steagall law that separated commercial and investment banking.

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Economist Heidi Shierholz: “There’s never been a pool of missing workers this large”

Economics isn’t my area of expertise, but I can read, and the top story at Huffpo right now is pretty disturbing. Author Lila Shapiro spoke to some economists, including Heidi Shierholz, about the December jobs report, which came out today.

Although the unemployment rate fell to 9.4 percent from 9.8 percent in December, bringing the total number of officially unemployed Americans to 14.5 million, only 103,000 jobs were added in December according to the Labor Department’s BLS report — a number significantly lower than expected. (The Wall Street Journal reported that many Wall Street analysts were predicting “at or above 200,000” new jobs.)

The news gets worse: less than half of the drop in unemployment rate can be attributed to new job creation — the other half came from 260,000 Americans who have dropped out of the labor force altogether.

This brings the percentage of Americans who are either employed or actively looking for work down to 64.3 percent, what economist Heidi Shierholz calls “a stunning new low for the recession.”

[….]

“We have now added jobs every single month for a year,” Schierholz said. “So you would think that there would be labor force growth, these missing workers starting to come back in. Not only is that not happening, it’s actually starting to go in the other direction. There’s never been a pool of missing workers this large. It’s not clear to me when they’ll come back.”

That can’t be good, no matter what the White House and CNN try to get us to swallow.

At the Wall Street Journal the reaction to the jobs report doesn’t make things sound much better. One headline reads: Markets Whipsawed After Jobs Report. Here’s the gist:

Investors hoped that the jobs report would confirm expectations that a robust recovery was finally filtering through to long-stagnated labor markets. But after traders positioned aggressively this week on lofty expectations of a strong payrolls figure, the disappointing data had a relatively muted impact.

[….]

The Labor Department reported that the U.S. economy created 103,000 new positions last month, far below market consensus expectations for a 150,000 gain. In November, the economy added 39,000 jobs. The unemployment rate fell sharply to 9.4% from 9.7%.

Sustainable job creation has been elusive in an economy that is still recovering from the 2008 financial crisis. As a result of the troubled job market, analysts think the Federal Reserve is likely to continue full steam ahead with its controversial $600 billion plan to reinflate the economy.

Dakinikat can give us her expert take on this, but as a layperson, I think it’s obvious that the country is on the wrong track and some one needs to light a fire under the President and his incompetent economic advisers.

HEY VILLAGERS! WE NEED JOBS!!!


Thursday Reads

Out of Town News, Harvard Square

Good Morning!!

Gee, it’s great to be back in Beantown, even though my house looks like it was hit by a tornado. I already had books stacked all over the place because of my book selling project. I brought more books with me from Indiana, and I haven’t completely unpacked and put my stuff away. I’ll be cleaning up for a couple of days. At least I got everything out of the car today and went to the grocery store. Driving 1,000 miles in two days makes me really spacey though, so if I don’t make sense in this post, please try to make allowances.

You’ve probably heard already that Robert Gibbs plans to leave the White House in February to be an “outside political adviser” to Obama’s 2012 campaign. It’s the top story on Memeorandum right now.

“Robert, on the podium, has been extraordinary,” Mr. Obama said, declining to answer questions about who he intends to hire for any position. “Off the podium, he has been one of my closet advisers. He is going to continue to have my ear for as long as I’m in this job.”

Mr. Gibbs will remain part of the president’s inner circle of political advisers, along with David Axelrod, a senior adviser, and Jim Messina, a deputy chief of staff, who also are leaving the White House to focus on the president’s re-election effort. Mr. Gibbs will defend Mr. Obama on television – and will expand his presence on Twitter and other Internet platforms – as well as beginning to define the field of 2012 Republican presidential candidates.

“Stepping back will take some adjusting,” Mr. Gibbs said in an interview Wednesday morning. “But at the same time, I have a feeling that I will keep myself quite busy, not just with speaking, but continuing to help the president.”

He said he has no intention of establishing a political consulting or lobbying business, but he intends to work from the same downtown Washington office where David Plouffe has spent the last two years.

When I first heard this news, my first thought was about the role that Gibbs played in 2004, when he resigned from the Kerry Campaign and joined an “independent” group that produced the infamous attack ad that showed a photo of Osama bin Laden while the announcer described Howard Dean’s supposed deficiencies in foreign policy. It sounds like Gibbs will be more out front in 2012, but I’m betting he’ll still play the attack dog role–smearing opponents and generally saying the things Obama doesn’t dare say himself.

According the NYT story,

The leading potential replacements for press secretary include Jay Carney, a spokesman for Vice President Joseph R. Biden Jr., along with Bill Burton and Josh Earnest, who work as deputies to Mr. Gibbs. Other candidates also could be considered, an administration official said.

Emptywheel says Robert Gibbs will now become part of the group he derided as press secretary: “the professional left.”

Back when Gibbs was attacking the Professional Left, he made a distinction between the Progressives outside of DC and those inside DC squawking on the cable programs.

But if Gibbs is going to stay in DC, hanging out on Twitter, and appearing on the speaking circuit, doesn’t that make him a card-carrying member of the Professional Left?

Except the bit about him being so conservative, of course.

LOL

Out in the land of real Americans, 1 of 6 of us lives in poverty–including many senior citizens.

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US Financial Regulation and Arbitrage

There is no doubt that we have had a major world wide financial collapse drastically affecting many innocent people in terms of livelihood and life long savings. It is fair to say that if the regulators had done their job, the country would have not had the hard landing that was experienced in 2008. The 2010 Financial Reform Bill kicked the can down to the Regulators for implementation and the bankers still have influence. This article takes a look at who the regulators were and how they did or did not do their job. The Obama people in the regulator domain are identified along with examples of Bush regulator failures.  Hopefully this will give insight into what is being done to preclude another crisis

The financial industry has a gaggle of regulators, each with its politically protected turf.

From Wikopedia: Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system.

Regulation is an unnecessarily a complex subject. It is important to understand that in some cases financial entities can choose their regulator. Some regulators were much more lenient and in many cases banks switched to them, hence the term Regulatory Arbitrage.  The following are the major Federal regulators: FED, SEC, OCC, OTS, FDIC, CFTC and FINRA described below. Except for the FED, most of these organizations have direct or indirect ties to the Treasury organization.

FED – Federal Reserve System

From Wikopedia: Its duties today, according to official Federal Reserve documentation, are to conduct the nation’s monetary policy, supervise and regulate banking institutions, maintain the stability of the financial system and provide financial services to depository institutions, the U.S. government, and foreign official institutions.Current chairman is  Ben Bernanke, the former chairman was Alan Greenspan. Much more on Mr Greenspan later.

SEC – Securities and Exchange Commission

From Wikopedia: It holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation’s stock and options exchanges, and other electronic securities markets in the United States. Mary Schapiro is the current Chair. Predesessors were; Christopher Cox – 2005-2009, William H. Donaldson – 2003-2005, Harvey Pitt – 2001-03

OCC – Office of Comptroller of the Currency

From Wikopedia: US federal agency established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all national banks and the federal branches and agencies of foreign banks in the United States. Current Acting Chairman is John Walsh. Previous Chairman were John C. Dugan – (2005 – 2010) John D. Hawke, Jr. – (1998–2004)

OTS – Office of Thrift Supervision ( recently folded into OCC)

From Wikopedia: United States federal agency under the Department of the Treasury. It was created in 1989 as a renamed version of another federal agency (that was faulted for its role in the Savings and loan crisis). Like other US federal bank regulators, it is paid by the banks it regulates. The OTS was initially seen as an aggressive regulator, but was later lax. Declining revenues and staff led the OTS to market itself to companies as a lax regulator in order to get revenue.

FDIC – Federal Deposit Insurance Corporation

From Wikopedia: United States government corporation created by the Glass-Steagall Act of 1933. It provides deposit insurance, which guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. The FDIC insures deposits at 7,895 institutions. The FDIC also examines and supervises certain financial institutions for safety and soundness, performs certain consumer-protection functions, and manages banks in receiverships (failed banks).

Sheila Bair is the current chairman of the FDIC and is viewed as a serious regulator with the right incentives for all concerned.

CFTC – Commodity Futures Trading Commission

From Wikopedia: The stated mission of the CFTC is to protect market users and the public from fraud, manipulation, and abusive practices related to the sale of commodity and financial futures and options, and to foster open, competitive, and financially sound futures and option markets.

CFTC is considered to be the primary regulator for Credit Default Swaps in the Dodd Frank regulation scheme.

FINRA – Financial Industry Regulatory Authority

From Wikopedia: In the United States, the Financial Industry Regulatory Authority, Inc., or FINRA, is a private corporation that acts as a self-regulatory organization (SRO). FINRA is the successor to the National Association of Securities Dealers, Inc. (NASD). Though sometimes mistaken for a government agency, it is a non-governmental organization that performs financial regulation of member brokerage firms and exchange markets.

Previously run by Mary Shapiro, FINRA has been critisized as being a ineffective regulator. Most notable was their (and SEC)  allowing Bernie Madow to continue for 10 years to operate despite being warned by a whistle blower. When testifying before congress, the whistle blower (Harry Markopolos) said SEC was incompetent, FINRA was corrupt.

It must be said that Financial Regulation in the United States is done by committee of political bureauocrats. It is important to be aware of the fact that many of them are funded by fee’s assessed to the agencies they regulate. So opportunity for Regulatory Capture and Regulatory Arbitrage is prevalent in these agencies. The clear example is Office of Thrift Supervision bowing to their clients. The opposite example is that of Sheila Bair who tries to do the right thing for her clients despite critisizm.

Read the rest of this entry »


Tuesday Reads

Good Morning!

The first week of the New Year continues to bring College Football bowls and weird news.

The BBC thinks that Arkansas bird mystery may be solved. You may have heard that thousands of birds fell out of the sky on New Year’s Eve in the small town of Beebe.  Poison was ruled out since many of them wound up as midnight snacks for local cats and dogs that didn’t get sick. Now, investigators believe that fireworks may have caused the birds to panic and fly into each other and other things.

Initial laboratory reports said the birds had died from trauma, the AGFC said.

Residents reported hearing loud fireworks just before the birds started raining from the sky.

“They started going crazy, flying into one another,” said AGFC spokesman Keith Stephens.

The birds also hit homes, cars, trees and other objects, and some could have flown hard into the ground.

“The blackbirds were flying at rooftop level instead of treetop level” to avoid explosions above, said Ms Rowe, an ornithologist.

“Blackbirds have poor eyesight, and they started colliding with things.”

Here’s an interesting thing at The Economist on the PornoScans used by the TSA.    Evidently, they efficiently humiliate us, but terrorist find them pushovers.  They’re expensive, offensive, and they don’t work.

BOINGBOING’s brilliant Cory Doctorow has dug up a paper (published in the Journal of Transportation Security) outlining how easy it would be for terrorists to beat the new backscatter “full-body” imaging scanners that are being installed at major airports worldwide. Leon Kaufman and Joseph W. Carlson, two professors at the University of California, San Francisco, submitted their paper, “An evaluation of airport x-ray backscatter units based on image characteristics” ( PDF) on October 27, way before the John Tyner/”Don’t touch my junk” incident pushed the controversy over airport security rules into the cultural mainstream. The findings are pretty clear-cut: a smart terrorist could defeat backscatter units (or “pornoscanners,” as Mr Doctorow dubs them) with relative ease …

Here’s a story from NPR that should bring more shame to the Texas justice system that imprisons and kills people at an unbelievably high rate. Where’s the DOJ when you need them to investigate violations of civil rights on things like this?

Prosecutors declared a Texas man innocent Monday of a rape and robbery that put him in prison for 30 years, more than any other DNA exoneree in Texas.

DNA test results that came back barely a week after Cornelius Dupree Jr. was paroled in July excluded him as the person who attacked a Dallas woman in 1979, prosecutors said Monday. Dupree was just 20 when he was sentenced to 75 years in prison in 1980.

Now 51, he has spent more time wrongly imprisoned than any DNA exoneree in Texas, which has freed 41 wrongly convicted inmates through DNA since 2001   more than any other state.

“Our Conviction Integrity Unit thoroughly reinvestigated this case, tested the biological evidence and based on the results, concluded Cornelius Dupree did not commit this crime,” Dallas County District Attorney Craig Watkins said.

Dupree is expected to have his aggravated robbery with a deadly weapon conviction overturned Tuesday at an exoneration hearing in a Dallas court.

There have been 21 DNA exonerations in Dallas since 2001, more than any other county in the nation. Only two states — Illinois and New York — have freed more of the wrongly convicted through DNA evidence, according to the Innocence Project, a New York-based legal center representing Dupree that specializes in wrongful conviction cases.

I’ve been posting some links down thread on some of the names floating around for the people on the probable list to replace Rahm and Summers at the White House.  Their main qualifications appear to be working for Investment Banking firms.  Leading contender for Rahm’s replacement as White House Chief of Staff is J.P Morgan’s William Daley.  Former Economic Adviser Larry Summer may be replaced by a Goldman Sach’s  beneficiary Lawyer Gene Sperling whose been an adviser to Timothy Geithner. Yes, that’s right; a lawyer for an economic adviser.  You’d think our economics-disabled POTUS would want an actual economist.  It seems, however, that Obama is highly worried that Big Business and Wall Street don’t like him.  Oh dear, we wouldn’t want any donations to dry up to the re-election campaign, would we?  Daley is close to Axelrod and Chicago’s Mayor Daley.  Feel all better now?

Antonin Scalia provided yet another reason why we need to reconsider resurrecting the ERA.  He just gave an interview and said women don’t have constitutional protection under the 14th amendment. He said this last September also.  There are lots of feminist blogs writing on this and you can find their links on Memeorandum.

Marcia Greenberger, founder and co-president of the National Women’s Law Center, called the justice’s comments “shocking” and said he was essentially saying that if the government sanctions discrimination against women, the judiciary offers no recourse.

“In these comments, Justice Scalia says if Congress wants to protect laws that prohibit sex discrimination, that’s up to them,” she said. “But what if they want to pass laws that discriminate? Then he says that there’s nothing the court will do to protect women from government-sanctioned discrimination against them. And that’s a pretty shocking position to take in 2011. It’s especially shocking in light of the decades of precedents and the numbers of justices who have agreed that there is protection in the 14th Amendment against sex discrimination, and struck down many, many laws in many, many areas on the basis of that protection.”

Greenberger added that under Scalia’s doctrine, women could be legally barred from juries, paid less by the government, receive fewer benefits in the armed forces, and be excluded from state-run schools — all things that have happened in the past, before their rights to equal protection were enforced.

Republicans are once again using Islamphobic slams to motivate the base and set ground for their continuing radical assault on constitutional rights.  We should be so lucky to have Shari’a compliant finance and banking.  Think no usurious interest and fees.   Also, the aim of investing in Shari’a compliant finance is ethical and moral investing and hoarding is prohibited.  Money must be used for the good of the community.   Plus some revenues must be set aside to take care of widows and orphans.  The most outrageous thing about some of these lies is that Orthodox Jews in places like New York have similar laws and practices already in place.  You don’t hear complaints about that though, do you?

Rep. Allen West (R-FL), a newly-elected member who has loudly scapegoated Muslims and campaigned on a promise to oppose religious diversity, appeared on Frank Gaffney’s radio program last week. Gaffney, who routinely says that Obama is both a secret Muslim and a member of the “Muslim Brotherhood,” asked West about how the new Republican Congress plans to “take on Sharia as the enemy threat doctrine?” West said that, although he has not spoken with all of the new members, he hoped that Congress would focus on the “infiltration of the Sharia practice into all of our operating systems in our country as well as across Western civilization.” He explained that targeting Sharia should be part of America’s “national security strategy” and that a response to Sharia would somehow include “tailor[ing]” American “security systems, our political systems, economic systems, our cultural and educational systems, so that we can thwart this”

Propublica reports that Obama is trying to expand his options on Guantanamo.  The problem is that they also expand executive power in a way that would give a pretty good hard on to Dick Cheney.  Obama may use a signing statement.

Obama has issued a number of signing statements taking issue with more than a dozen legislative provisions and has come under some criticism for it from both Republicans and Democrats. Shortly after he took office, Obama promised to use them with less frequency than former President Bush, noting in a presidential memorandum in March 2009: “I will act with caution and restraint, based only on interpretations of the Constitution that are well-founded.”Bush established Guantanamo through executive order and issued over 150 signing statements, more than any other president. The practice was especially controversial when Bush applied it to legislation dealing with detainee treatment.

The American Bar Association issued a report in 2006 that called signing statements “contrary to the rule of law and our constitutional separation of powers.” The report was signed by a number of legal scholars including Harold Koh, who was then dean at Yale Law School and is today the top lawyer at the State Department and one of several advisers involved in the administration’s Guantanamo policy.

It seems that deceit webs–once woven–keep entangling the rule of law.

Robert Reich calls Obama and the Democrats enablers of Republicans and Their BIG Lie on his latest blog thread.

Republicans are telling Americans a Big Lie, and Obama and the Democrats are letting them. The Big Lie is our economic problems are due to a government that’s too large, and therefore the solution is to shrink it.

The truth is our economic problems stem from the biggest concentration of income and wealth at the top since 1928, combined with stagnant incomes for most of the rest of us. The result: Americans no longer have the purchasing power to keep the economy going at full capacity. Since the debt bubble burst, most Americans have had to reduce their spending; they need to repay their debts, can’t borrow as before, and must save for retirement.

The short-term solution is for government to counteract this shortfall by spending more, not less. The long-term solution is to spread the benefits of economic growth more widely (for example, through a more progressive income tax, a larger EITC, an exemption on the first $20K of income from payroll taxes and application of payroll taxes to incomes over $250K, stronger unions, and more and better investments in education and infrastructure.)

But instead of telling the truth, Obama has legitimized the Big Lie by freezing non-defense discretionary spending, freezing federal pay, touting his deficit commission co-chairs’ recommended $3 of spending cuts for every dollar of tax increase, and agreeing to extending the Bush tax cuts for the wealthy.

Will Obama stand up to the Big Lie? Will he use his State of the Union address to rebut it and tell the truth?

No and No.  Robert, you should know by now that Obama believes The Big Lie and that Democrats won’t stop him.  Raise your hand if you think The Big Question will be how long into the State of the Union Adress will it take before Obama tries to sell us The Big Lie and tells us we need to hand over and cut our Social Security?

We don’t appear to be the only group of liberals worried about Obama betraying the Democratic position on Social Security according to The Hill.

Maria Freese of the National Committee to Preserve Social Security and Medicare said she thinks Social Security is “more at risk than it was in 2005,” when President George W. Bush proposed far-reaching changes to the program, including personal accounts. The plan was vigorously opposed by Democrats and liberal groups and never came up for a vote in Congress.

Now, with Social Security coming to the forefront once again, liberal groups are preparing a campaign to oppose any “backroom” deals on retirement benefits.

“What I am really afraid of is another deal behind closed doors,” said Nancy Altman, the co-director of Social Security Works. “At least with President Bush, he went around the country on a tour and presented his plan, and people didn’t like it.”

This is such a true statement.  We saw that Obama was more than willing to sell us out–behind close doors–to big Pharma interests during health care reform.  We witnessed Obama dropping a public option so  quickly–despite campaign promises–that it must  been prearranged.   There’s got to be a connection to all these Investment Banker people showing up in the West Wing and that big pool of  money and investments in Treasury Bills out there that are pledged to those of us that have paid into the program since our first day of work.

Whats on your reading and blogging list today?