She seems happy, but the stress of dad's unemployment could be hiding behind that smile. (Photo Credit: CC BY/Vicci/Moon Stars and Paper)

According to a new interdisciplinary academic study by the National Bureau of Economic Research, the stress of unemployment hits children hard. The study, entitled “Children Left Behind: The Effect of Statewide Job Loss On Student Achievement,” finds a correlation between community job loss and decreased performance on math and reading scores, reports the Huffington Post. This applies to the children of both the unemployed and the employed.

Significant effects on academic performance

In analyzing the math and reading test scores taken from fourth- and eighth-grade sample groups compiled by the National Center for Education Statistics, the study found that the stress of unemployment had significant effects. Specifically, for every 1 percent of a state’s working age population that is unemployed, the average math test score declined by 3 percent.

Study co-author Dr. Elizabeth Ananat of Duke University’s Public Policy and Economics department sees how uncertainty can create anxiety.

“Research has found that the stress and anxiety of losing your job is actually not so much greater than the stress of worrying about losing your job,” she said. “When there is a lot of job loss going on, the community gets depressed, and anxious. … That makes it harder for kids to learn.”

Growth recession indicates no real improvement

The current state of the U.S. labor market does not indicate to economic experts that a turnaround is in store, and thus the study authors expect the negative student achievement trend to continue. As many as 13.9 million Americans are officially unemployed, and another 8.5 million pursuing full-time work have had to settle for part-time jobs. Millions more face a kind of unemployment coma that keeps them from looking because of discouragement.

“When kids are at vulnerable times in their development, the impact of events like this can have long-lasting consequences,” Ananat said.

Low test scores in particular can remain on a child’s record for years, as numerous NBER studies have shown before.

‘The tip of the iceberg’

Study co-author Dr. Anna Gassman-Pines of Duke University said actions such as lowering class size can help counteract the negative effect of unemployment somewhat. However, many schools don’t have the economic means to make such changes.

Co-author Dr. Christina Gibson-Davis suggested that while the NBER’s test-score findings imply a problem, the implications likely run deeper.

“These are just test scores — not the greatest measure of the kids’ behavior,” Gibson Davis said. “This is probably the tip of the iceberg.”

Such scenarios as parents working multiple part-time jobs and multiple families living in the same household are no doubt issues that also contribute to the general sense of stress, experts believe.

Unemployment is a family affair

Sources

Huffington Post

National Bureau of Economic Research

Another casualty of the growth recession. (Photo Credit: CC BY/khteWisconsin/Flickr)

Think it’s time to celebrate economic recovery? Don’t get cocky, suggests Investor’s Business Daily. In this job-starved economy, we’re already living a kind of double-dip recession that economists call a growth recession.

What’s a growth recession?

When economic growth is so low that it creates net unemployment, that’s growth recession. Growth recession can also suggest underachievement, or below-potential growth in such areas as job creation. Job contraction typically means that a country’s real gross domestic product is expanding, but too slowly.

Numbers in a tailspin

Here are just a few of the signs that a growth recession is here, writes Investor’s Business Daily:

• ADP Payroll Services found that 38,000 private-sector jobs were created in May 2011. That’s 100,000 short of the minimum goal economists had marked for economic growth.
• Employment consultant company Challenger, Gray & Christmas noted that 37,135 jobs were cut in May, a 2 percent increase from the previous month.
• U.S. housing prices fell 4.2 percent in the first quarter.
• The Mortgage Bankers Association’s mortgage application index fell 4 percent in May’s final week.
• The Institute for Supply Management’s factory activity index – an indicator of U.S. manufacturing health – dropped from 60.4 in April to 53.5 in May, the lowest score on the index since September 2009.

Re-enter the recession

U.S. gross domestic product growth was reported at 2.7 percent in May, which most economists believe is insufficient to create private sector jobs and beat back unemployment. Match this uninspiring growth with continued frantic borrowing by the U.S. government ($1.5 trillion estimated for 2011), and avoiding a prolonged double-dip recession seems impossible.

According to Michael Pento, senior economist at Euro Pacific Capital, the U.S. is following the wrong formula for economic health.

“Genuine government stimulus comes from low taxes, stable prices, reduced regulation and low debt,” said Pento. “Our economic policymakers have scrupulously avoided such remedies.”

Summer 2011 will bring economic déjà vu , says The Indypendent. The Federal Reserve is backpedaling; spending cuts and tax increases on the city and state level are in progress, and federal spending is pointing downward. Combine everything, and the U.S. will likely face not just a growth recession, but a full-blown return to depression.

Growth recession at teatime

Sources

Growth recession Wiki

The Indypendent

Investor’s Business Daily

Before you agree to relocate for a new job, do the math on the cost of living change. Flickr/MoneyBlogNewz/CC-BY-SA

Finally, businesses are starting to hire again. Many people will be faced with the choice of whether they should move in order to take on a new job. Before you accept a job and a salary offer, be sure to take into consideration the cost of living in the location you’re moving to. Also, if you must sell your home, be smart about home-staging — getting your home ready to sell for the best price.

Small businesses making new hires

Thanks in large part to small businesses, unemployment is receding and people are finding jobs. For those who have been unemployed for a long time, taking the first job and salary offer that comes along is tempting. However, when that job offer comes with the caveat that you must relocate, take careful consideration. First, check the cost of living comparison. Second, if you own a home, consider what it will cost and how long it will take to prepare it for sale.

Cost of living comparison

A great salary in Spokane, Wash., might be only enough for Ramen Noodles and a studio apartment in Portland, Ore. Any time you receive a salary offer in another area, make sure that salary will be enough to maintain your lifestyle. CNN Money has a cost of living comparison calculator (linked below) that calculates what salary you’d need to make in a different area to maintain your current expenses. It also breaks down where the extra money goes. For example, housing in Portland is 53 percent more expensive than housing in Spokane.

Selling a home in a down housing market

If you are looking to sell your home, there are plenty of inexpensive ways to spruce up the place. Replacing bathroom and kitchen hardware and new paint are common ways to make an old home look new. However, many of the most important aspects of making a home attractive are free — but easy to overlook. HGTV provides a comprehensive that covers everything from clutter cleanup to furniture arrangement. Follow the link below to a solid checklist of ways to improve your chances of selling your home.

Sources

CNN Money Cost of Living Comparison

HGTV 15 home-staging tips

Even Cylons have trouble finding work. (Photo Credit: CC BY/Nik Hewitt/Best of Both Worlds)

A lower percentage of Americans held jobs last year than at any point since 1983, reports USA Today. After a peak of 49.3 percent employment in 2000, only 45.4 percent of Americans were employed. In addition, only 66.8 percent of men were employed in 2010, the lowest figure on record.

Challenges to U.S. social programs

The dramatic shift in employment numbers over the past decade springs from the three-pronged attack of a bad economy, aging Baby Boomer population and a relative plateau in the number of working women, according to Marc Goldwein of the non-partisan Committee for a Responsible Federal Budget.

“What’s wrong with the economy may be speeding up trends that are already happening,” Goldwein told USA Today.

Considering that jobs have been more difficult to come by since the recession, fewer adults have been working until later in life. Hence, more stress falls upon an already overtaxed Social Security system. Also, from 2000 – when the U.S. had roughly the same number of non-working adults and non-working children under 18 – to today, there has been a shift. Now, there are nine times more non-working adults.

Other key findings from the 2010 Census

Until the 1960s, more than 80 percent of adult men were employed. Since then, U.S. Census data has reflected a long, slow downward slide. When construction and manufacturing jobs began to dry up from December 2007 through June 2009, the percentage of working men plummeted to record low levels.

The trend of women obtaining work helped offset the dwindling numbers of men until the late 1990s, according to USA Today. From 1995 to 2010, the percentage of working women has hovered around 56 percent. Part of the reason women have not experienced the same job decline as men over the past few decades, suggests Heather Boushey, a senior economist at the Center for American Progress, is that women have traditionally been employed in fields like education and healthcare. These professions have been less prone to market fluctuation over time.

“Given how stark and concentrated the job losses are among men, and that women represented a high proportion of the labor force in the beginning of this recession, women are now bearing the burden — or the opportunity, one could say — of being breadwinners,” Boushey told the New York Times.

The expense of looking after retirees

As more than 77 million Baby Boomers reach retirement, the costs of caring for seniors becomes painfully apparent. In today’s dollars at current life expectancies, the National Center for Policy Analysis estimates that it costs $500,000 to care for a senior in post-retirement years. As the average retiree only receives $25,000 a year in benefits (between Social Security and Medicare), the proportion of unemployed Americans who aren’t contributing to the tax base becomes a mathematical conundrum.

Sources

New York Times

USA Today

The Anti-Poverty Coalition of Greater Dallas wants payday lending in Texas to end. (Photo Credit: CC BY-ND/Nik Hewitt/Best of Both Worlds)

Jobs fight poverty. Gainful employment grants motivated, enterprising consumers with the means to provide. Yet groups like the Anti-Poverty Coalition of Greater Dallas seem to have missed the memo, suggests the Payday Pundit. The Dallas Observer reports that the Dallas coalition is working hard to shut down personal loan and installment loan companies in Texas, as if eliminating thousands of jobs resembles a blow against poverty.

Blazing a trail out of poverty through scorched earth

Larry James, the CEO of Dallas-based non-profit CitySquare, told local media via press release that the coalition has a burning desire to find pathways out of poverty:

“The Anti-Poverty Coalition of Greater Dallas is a new coalition that seeks to move 250,000 people out of poverty permanently by 2020 by coordinating efforts to keep people from falling into poverty and increasing pathways out of poverty,” writes James.

‘A treadmill of debt’

The attack against the personal loans and installment loans industry amounts to keeping people from falling into poverty – “a treadmill of debt” – said James. Legislation such as Texas HB 410 and SB 253that bars payday lenders from being classified as credit service organizations would challenge existing zoning ordinances. By instituting a “strong zoning ordinance to decrease the clustering of payday and auto title lending stores,” the Anti-Poverty Coalition of Greater Dallas believes the shackles of poverty would lift from the wrists and ankles of the poor citizenry. Allegedly, there would be no more tears for those who were financially razed, not by bad personal spending habits and the exploitation of Wall Street, but by the so-called evils of payday lending. In truth, eliminating payday lenders limits consumer choice and costs Texas jobs, both dire consequences in light of the recession-ravaged economy.

An indirect attack, at best

Instituting zoning ordinances via HB 410 and SB 253 that would require personal loan and installment loan outlets to be at least 1,000 feet apart would only be the beginning, industry experts believe. Direct attacks against payday lenders such as demanding an untenable 36 percent APR cap have proven unpopular when it comes to battling poverty, as it would shut payday lenders down, which means people would lose their jobs.

Attacks through zoning fail to disguise the true intent of such “anti-poverty” coalitions. If groups like the Anti-Poverty Coalition of Greater Dallas took the time to understand the extant independent research that shows the connection between the absence of access to short term loans in a community and higher levels of poverty, perhaps charitable groups could find a more worthwhile target for their efforts.

Sources

Dallas Observer

Payday Pundit

Texas HB 410

Texas SB 253

Texas Secretary of State

Jobs fight poverty

McDonald's will hire 50,000 people on April 19. (Photo Credit: CC BY/David Neubert/Flickr)

McDonald’s is doing its share to melt through the recession hiring freeze, reports MSNBC. On April 19, through its U.S. stores and website, McDonald’s will hold a hiring spree event in which as many as 50,000 people will be hired. The company acknowledged that the hiring spree has been made possible by improved business on the domestic front.

McDonald’s hiring spree boosts workforce 7 percent

All positions, from restaurant workers to senior managers, will be involved in the McDonald’s hiring spree, which will boost the chain’s total workforce by 7 percent to approximately 700,000. On average, that will equate to three or four new hires per restaurant.

On the money

Estimates by a California State University professor indicate that McDonald’s wages and salaries will increase by more than $518 million in 2011. That will also translate into $54 million in additional payroll taxes and nearly $1.4 billion in annual expenditure, or $3.5 million per day, reports FOX Business.

The numbers bode well for the U.S. job market as a whole, writes FOX. Currently on a warming trend, the U.S. job market added 216,000 jobs in March after taking on 192,000 in February. In the private sector, 230,000 new jobs were created in March after a 240,000-job infusion the previous month.

The 24-hour goal for the Golden Arches

McDonald’s currently operates 14,000 restaurants across the U.S., 90 percent of which are administered by franchisees. The McDonald’s hiring spree (alternately called “McDonald’s Hiring Day”) will enable more of those restaurants to remain open 24 hours per day. Such is the case with the 111 Golden Arches locations in southern Nevada, where the unemployment rate is currently 13.7 percent – 14.2 percent in Las Vegas – and 193,000 Nevadans are unemployed.

McDonald’s Co-op Vice President Ron Smith is well aware of the difficult job landscape.

“We feel that it’s very important, especially in light of the critical economic situation, that we put as many people as possible back to work,” he said.

Even though McDonald’s jobs in Nevada will be part time, benefits like free meals and flexible schedules will help people who are struggling financially.

A strong foundation

McDonald’s USA President Jan Fields affirmed via a statement how important employees are to the success of the company.

“Our restaurant employees are the foundation of our business. They are the men and women who interact with our customers every day, enhance the McDonald’s experience and continue to help make our business strong,” she said.

For additional information about the McDonald’s hiring spree, see the McDonald’s Careers website or visit your local McDonald’s restaurant. Applicants must be at least 16 years old.

Sources

FOX Business

FOX 5 Las Vegas

McDonald’s Careers

MSNBC

McDonald’s hiring spree set for April 19

Even people with jobs have to stretch a dollar a little further, as real wages are still stagnating. Photo Credit: MoneyBlogNewz/Flickr.com/CC-BY

Middle-income Americans have struggled as real wages and real estate values have plummeted in the past few years. Businesses are reluctant to give raises or hire new employees, and the jobs that are returning may not be the deliverance some think it is. Getting ahead will be getting harder for some time.

Pay for working stiffs barely moves

Though the news of accelerated hiring was considered a sign of a possible return to health for the economy, real wages are still in the gutter for most people. As of March of 2011, according to CNN, American workers made an average of $22.87 an hour, which was an increase of 1 cent from January of 2011. Average wages have been barely growing, increasing by 0.7 percent for all workers in the same period, according to Bloomberg. Wages differ from earnings, as earnings are money received and wages are rates at which people are paid. The average workweek of 34.3 hours didn’t change from February to March.

Household wealth tumbling

American household wealth has also been on the decline, as the Federal Reserve estimates the average American household lost about 18 percent of its net worth in the recessionary period, according to USA Today. The loss was biggest for the wealthy, as the wealthiest of Americans have greater holdings in stock markets and other investments as well as larger real estate holdings. A survey that the Federal Reserve used found that the median home value for survey subjects fell from $207,000 to $176,000 from late 2007 to 2009. The survey was conducted by re-surveying more than 3,800 families who had participated in the 2007 Survey of Consumer Finances. Americans who have the bulk of their net worth in their primary residence will have a harder time recovering losses the longer that real estate values stay low.

Dismal year ahead

Economic indicators are pointing to conditions becoming harsher. Employers are hiring, but won’t pay workers more than they have to. Because the job market has been dismal over the past few years, employers feel that employees will take whatever they can get. Making matters worse is the increasing price of oil and price of gasoline, and the rising cost of food and other consumer items. If price increases keep up, things are likely to get quite warm for the middle class, who will have to cut back to afford the necessities on lower wages.

Sources

CNN

Bloomberg

USA Today

A credit card debt settlement agreement may seem like security, but typically it's too expensive and is limited in its usefulness. (Photo Credit: CC BY-ND/CCQC.com)

If you have credit cards, you’ve heard the credit card balance protection sales pitch. It used to be that for the price of 99 cents per month for every $100 of outstanding balance on the card, your credit card company would allow you to skip the minimum monthly payment for as many as six months in the event you were suddenly hospitalized or unemployed. Now it goes under a new name – debt settlement agreement – and consumer finance experts are urging consumer to just say “no.”

How a debt settlement agreement works

According to Consumer Reports, a debt settlement agreement is a promise to maintain your FICO score in the event that you become disabled, lose your job or experience a major life-disrupting event like the death of a child or spouse. While it may sound nice not having to worry about your credit rating during a personal crisis, the U.S. Government Accountability Office has issued a report stating that the product is not worth the price – it’s a moneymaker for banks, plain and simple.

The GAO says debt settlement agreements raised $2.4 billion in 2009. For each $1 consumers paid for debt protection, the bank pocketed 55 cents in pre-tax earnings. Consumers only benefit from 21 cents of each dollar they pay for a debt settlement agreement. The GAO study also showed that only one in 20 credit card holders who were paying for the service actually used it.

Why debt settlement agreements are wrong for consumers

• Debt settlement agreements are loaded with fees. Depending upon the credit card company, consumers must pay from 85 cents to $1.35 monthly per $100 of outstanding balance for the service. Over the course of a year, that’s as much as a 16.2 percent APR, on top of the finance charges that come standard with the credit card. Sock that money away for a rainy day, instead.
• Most debt settlement agreements only cancel the minimum payment, but interest continues to accrue. At best, a consumer may find a card that freezes both the minimum monthly and interest, but the principal balance is still there.
• Read the fine print. Not all change-of-life conditions provide the full extent of benefits, particularly if the credit card carries a high balance ($10,000 or more).

Sources

Consumer Reports

Government Accountability Office

Is credit protection a good deal?

To trick consumers into paying more for less, food manufacturers have made an art form of shrinking packaging in unnoticeable ways. Image: CC pawpaw67/Flickr

During the economic downturn, food manufacturers have been quietly shrinking food packaging. As the rate of food inflation has been accelerating, so has the rate of food package shrinkage. As shoppers start to notice they are paying more for less, the spin from food manufacturers is that smaller food packaging is good for the environment and more convenient for consumers.

The incredible shrinking food package

Shrinking food packaging isn’t a recent phenomenon. When unemployment is high and wages are stagnant, companies can’t overtly raise prices to pad profits. In recessions over the last 20 years, food manufacturers have hidden price increases by subtly reducing the quantity of the product.  During the latest recession, food packaging began to noticeably shrink in the summer of 2008. As unemployment has remained high for years, food packaging continues to get smaller. The recent emergence of food inflation has led to higher prices, as well as smaller packages. Rising prices for energy and commodities such as corn, cotton and sugar are expected to continue, and consumers can expect to pay even more to get even less in the future.

The spin on shrinking food packaging

Food manufacturers figured out long ago that consumers notice rising prices more than shrinking quantities. Marketing departments have made an art form of shrinking food packaging in unnoticeable ways. The height and width of a box may stay the same, but the depth will be reduced so that the package looks unchanged on the shelf. Glass jars will have larger indentations in the bottom to reduce volume. Chips and other salted snacks will be filled with more air and less product. But as food packaging continues to shrink, companies are resorting to clever positioning as the reduction in quantity becomes impossible to hide. According to the New York Times, Procter & Gamble has branded smaller, more expensive products as “Future Friendly” because they use less energy, water and packaging. Tropicana reduced the size of its orange juice container with an “easy-pour lid”, which the company said retained the value of the product with added features.

Grocery budgets and unit cost

Food manufacturers bet most consumers don’t read labels in detail. According to the Times, a can of Chicken of the Sea albacore tuna now holds five ounces instead of six and costs more. Bags of Doritos, Tostitos and Fritos contain 20 percent less product than in 2009. The best way for consumers to protect themselves is to quit tossing things in the shopping cart without looking. They should pay close attention to the price panels on the shelf that list the unit cost, or price per ounce. Consumers can also accurately gauge how much they’re getting gouged by saving grocery receipts over several months. Most grocery receipts show the quantity of items along with the price. By comparing a receipt from March with one a month later, the true impact of shrinking food packaging on a grocery budget becomes crystal clear.

Sources

New York Times

USA Today

TIME

Social welfare benefits are expected to rise as more Baby Boomers reach retirement age. (Photo Credit: CC BY/chrstphre campbell/Flickr)

An independent study utilizing Bureau of Economic Analysis data indicates that more than one-third of total U.S. wages and salaries go toward government payouts like Social Security, Medicare and other social welfare benefits. This has shocked numerous economists. CNBC Fast Money Executive Producer John Melloy suggests that this record figure will continue to expand as the majority of the Baby Boom generation retire.

Solving the US wage equation

The U.S. wage survey, which was conducted by TrimTabs Investment Research, indicated that the percentage of salaries has grown significantly, even since 2000. The chunk of wages derived from government aid in 2010 was 35 percent, but in 2000 it was 21 percent. In 1960 it was only 10 percent. As a small consolation, data indicates that the welfare wage is 44 percent in the U.K.

The United States’ dependence upon government stimulus must be broken, said TrimTabs’ Director of Macroeconomic Research, Madeline Schnapp.

“The U.S. economy has become alarmingly dependent on government stimulus,” she said. “Consumption supported by wages and salaries is a much stronger foundation for economic growth than consumption based on social welfare benefits.”

Increasing salaries by 35 percent (from $6.5 trillion to $8.8 trillion) or a 23 percent cut to social welfare payouts (tumbling down 23 percent to $1.7 trillion) are the best options available, according to Schnapp. Considering that the federal government is already stringing together short-term, shoestring measures to avert a government shutdown, experts believe only a serious compromise will turn the tide for U.S. salaries versus social welfare services.

Will the US approve of cutting Social Security?

Difficult decisions must be made to keep the U.S. government from reaching terminal bankruptcy velocity. Yet two of the most often discussed options – cutting Social Security and Medicare – are quite unpopular, according to a Wall Street Journal/NBC News poll. Across all age groups in the survey, a vast majority checked “unacceptable” when it came to the question of drastically reducing Social Security. That included 67 of respondents who labeled themselves tea party supporters, who generally do not support big government programs.

A majority of poll participants did voice their support for two alternative measures: cutting Social Security and Medicare payments to U.S. citizens in higher income brackets (which received 60 percent support) and increasing the U.S. retirement age to 69 by 2075. Currently, full retirement benefits kick in at age 66. The age isn’t scheduled to increase until 2027, and then it will be 67.

Resources for battling the recession

The recession that set in during 2008 hit the U.S. hard. Thus, it comes as little surprise that welfare payments increased by a mind-boggling $514 billion since then, reports TrimTabs. As the the U.S. housing market remains on shaky ground, dramatic recovery may still be far away. Thus, a cure for the 35 percent welfare wage percentage may still be far away.

Sources

CNBC

Wall Street Journal

For those who can’t afford to work

The February jobs report indicates that unemployment is starting to consistently decline. Photo Credit: Nightscream/Luigi Novi/Wikimedia Commons/CC-BY 3.0

The February jobs report indicates that unemployment has declined slightly since January. The rate of unemployment declined .01 percent to 8.9 percent over February. It is the third month in a row that unemployment has decreased.

Employers adding jobs

The February jobs report was recently released by the Department of Labor, and it showed that the increase in hires during the month of February was a small one, but an increase nonetheless. The unemployment rate decreased by a paltry 0.1 percent, from 9 percent in January to 8.9 percent in February, according to CNN. Employers added 192,000 jobs to the economy, which was a dramatic improvement over January. In January, employers added 63,000 jobs to the overall economy, but January was slower than February as winter weather brought many areas to a near standstill, according to the Los Angeles Times. Besides an increase in hiring once the snow relented, December and January jobs reports were revised by the Labor Department to reflect that 50,000 new hires had gone previously unreported.

Third consecutive month of decreasing unemployment

The unemployment rate has declined for the third month in a row. The rate of unemployment has waxed and waned for the past several years, and there have been declines noted all along the way, but the unemployment rate declined nearly an entire percentage point from December to February, marking significant progress. The number of initial unemployment claims fell to 368,000 recently, marking a three-year low for new filers. More than 9 million people are claiming unemployment benefits, according to Forbes.  The economy is projected by the Federal Reserve to grow between 3.5 and 4 percent during 2011, though rising gas prices are sure to cause some hiccups over the next few months.

Government spending cuts could scuttle recovery

Congressional Republicans are on a mission to drastically cut the federal budget down to size, which some economists believe will negate any progress made toward curbing the high rate of unemployment, according to CBS. Mark Zandi, the chief economist for Moody’s Analytics, predicted that the House Republican plan to cut $61 billion from the federal budget could result in more than 700,000 people losing their jobs. A similar projection was also released by Goldman Sachs, though the objection was raised immediately that Zandi had been one of the most prominent supporters of the various stimulus packages and had claimed that unemployment would stay below 8 percent with stimulus spending.

Sources

CNN

Los Angeles Times

Forbes

CBS

Consumer spending is up with the CCI, but new jobs remain scarce. (Photo Credit: BY-SA/Quinn Dombrowski/Flickr)

The Associated Press reports that the U.S. Consumer Confidence Index (CCI) rose in January to the highest level experts have seen in the past eight months. The CCI climbed to 60.6 in January, up 53.3 from December, according to the global non-profit organization Conference Board. Shrinking unemployment and improving business conditions are believed to be key factors in the increased optimism U.S. consumers have shown in both their spending and saving habits.

Consumer Confidence Index better, but still not healthy

While economists are encouraged by the CCI’s rise to 60.6, that level is still far below the 90 that indicates at least semi-healthy consumer confidence in spending and use of short-term credit like payday loans. The Consumer Confidence Index measures how people feel about the state of the U.S. economy. The figure is based upon a survey of 5,000 households, according to the blog Banker Notes. The CCI hasn’t been above 90 since December 2007.

January’s 60.6 CCI is the highest since a 62.7 mark in May 2010, when it appeared that the U.S. economy was ready to take off again. Yet the summer was sluggish economically, and the CCI flagged. Unemployment surged to the highest levels seen in the U.S. since the 1930s, and unemployment levels still haven’t regained their footing since they hit bottom in June 2009.

Hope of job deliverance

The AP reports that a survey from the National Association for Business Economics shows that the number of companies optimistic about hiring is at a 12-year high. This coincides somewhat with the reaction consumers gave to a Conference Board survey regarding the state of the job market, as the percentage of respondents who feel jobs are too hard to come by is down to 43.4 percent. That’s about a 3 percent drop from December. The percentage of those polled by the Conference Board who expect to see more jobs available in six months was also on the rise, from 14.2 percent in December to 16 percent in January.

Consumer spending up, unemployment down

The 2010 holiday shopping season was a boon for consumer spending, as sales increased at the fastest rate in six years. The new Social Security tax cut is expected to contribute to further consumer spending. Meanwhile, unemployment was down 0.4 percent from November to December, yet U.S. job creation only produced 103,000 jobs.

Sources

Associated Press

Banker Notes

Plunkett Research on U.S. retail

The tax bill has passed through Congress and will be signed by the President after a huge bipartisan effort. Image from Wikimedia Commons.

The tax bill that has been the subject of a fair amount of partisan bickering has been passed by Congress. The bill extends cuts in taxes instituted during the Bush administration, thus they’re commonly referred to as the Bush tax cuts. The bill was passed by a coalition of Republicans and Democrats.

House of Representatives passes tax bill

Despite objections from members of both parties over the final, compromised version of the bill, the tax bill extending the Bush era tax cuts has passed the House of Representatives, according to the Washington Post. After the Senate tax bill passed, the bill had to clear the House before legislators left on a break. President Obama has said that the bill contains flaw, but that not signing it would do more harm than good. Criticisms were made about the bill from both sides of the aisle, but the bill passed after some bipartisan collaboration. The House voted 277 to 148 in favor of the bill, with 36 Republicans and 112 Democrats voting against.

What the bill does

Current income tax rates remain unchanged, according to CNN. The ceiling for exemptions from the Alternative Minimum Tax is raised to $47,450 for individuals and $72,450 for couples filing jointly. For 2011, it increases to $48,450 and $73,450. Payroll tax going to Social Security for workers earning $106,000 a year or less is being cut from 6.2 percent in 2010 to 4.2 percent in 2011. The child credit is being raised to $1,000 from $500 for 2011 as well. The controversial estate tax measure exempts any estate less than $5 million for individuals, $10 million for couples, left to heirs, but estates worth more than that will be taxed at 35 percent.

Benefits extended along with deficit

The bill also includes a federal unemployment benefits extension for unemployed workers in states with high rates of unemployment. Benefits usually last for 26 weeks, but they are extended to 99 weeks in states with high unemployment rates. Other tax credits are being kept as well, such as the Opportunity credit for college students. The bill has rubbed some people the wrong way, as the cuts in government revenue will add to the near $14 trillion federal deficit.

Sources

Washington Post

CNN

The kind of employment infusion GOP supporters would be happy to see. (Photo Credit: CC BY/Paul Keller/Flickr)

Unemployment continues to run rampant in America and reports of a hiring thaw have been somewhat exaggerated. This news has failed to derail the partisan train, however. The Washington Post reports that Senate Republicans have managed to block a Democratic bill that would penalize U.S. companies for outsourcing jobs. Motion to debate the anti-outsourcing bill on the Senate floor failed, 53 to 45.

Anti-outsourcing bill could have brought jobs back to U.S. soil

According to the Post, the Democratic outsourcing bill would have raised taxes on corporations that move jobs overseas and rewarded companies that return jobs to the U.S. in the form of payroll tax hiatus incentives that would last two years. Outsourcing was viewed as a big issue by Senate Democrats, particularly after they’d decided to jettison middle class tax cuts before midterm elections. Showing concern for the manufacturing jobs lost by the American Midwest and East Coast could have scored Democrats major political points, writes the Post.

Wait until after the elections to decide

Such gamesmanship is common when seats are on the line. House Majority Leader Steny Hoyer (D-Md.) and White House senior adviser David Axelrod may be determined to act before middle-class tax cuts expire in January (raising taxes on income, dividends, capital gains and inheritance), but first things first, politically speaking. Republicans want the cuts to be extended – perhaps because their version of the cuts would extend to wealthy campaign supporters – and while Democrats fear the political impact of raising taxes, they may also be uneasy about the economic impact of keeping taxes down. Whatever the case, America is waiting for a decision from Congress. Unfortunately, that decision appears to be on the back burner.

No tax news, no jobs returning home, no business but the usual

The Democrats estimate that the proposed “anti-outsourcing” measure would have cost $720 million over 10 years. While those numbers may seem as staggering as any other measure proposed by Congress, the potential influx of jobs back onto American soil could be a boon. That is, if businesses even maintain such jobs when they’re essentially forced to pay more for the same labor. If a business cannot compete from the U.S. against foreign markets, one might wonder what’s to stop them from seeing if the grass is greener on the other side? “Cash now” business as usual no longer fits the global economic climate.

Sources:

Washington Post

Cenk Uygur on GOP view of outsourcing

The job market is still in ruins. Image from Wikimedia Commons.

A lot of people lost their jobs during the worst parts of the recession. The idea was that if the government doled out a huge cash advance, the unemployment rate would decrease. Instead, the number of unemployed has only increased. In the month of August, there were 27 states that recorded an increase in unemployment. There were only 13 states that marked an improvement, and 10 that did not change. The recession is supposedly over, yet the economy as a whole does not seem to be improving fast enough.

Spike in unemployment rate

The unemployment rate has shot through the roof over the last month. According to CNN, there were 27 states that recorded an increase in the unemployment rate. Nevada still has the highest unemployment rate in the nation at 14.4 percent.  Michigan and California have unemployment rates of 13.1 and 12.4 percent, respectively. These have been the hardest-hit states throughout the recession. It appears emergency loans that went to these states to stimulate job growth, such as the auto bailout for Detroit, have not helped as much as was hoped.

Census accounted for losses

The end of the 2010 Census had a heavy hand in the increase in unemployment, according to USA Today. The Census employed about 114,000 people nationwide. That said, private employers are slowly starting to add jobs. About 67,000 private sector jobs were added, which has to be a relief for people looking for a pay day again. The end of the Census was anticipated to have a negative impact on the unemployment rate and jobless claims, as there isn’t enough instant cash floating around to hire all of them back into the private sector.

Slow but steady wins the race

Recent data was released indicating that the recession was supposedly over. However, it is difficult to reconcile that idea with the levels of unemployment and decreased spending and credit activity.

Sources

USA Today

CNN

As so-called "jobs Americans won't do" are important to the U.S. economy, there are actually Americans willing to do the work. (Photo Credit: CC BY-SA/Hillary Hartley/Flickr)

The recession continues to leave many Americans grasping for cash, wherever they may find it. They’re even reaching for those so-called “jobs Americans won’t do,” reports the Wall Street Journal. Day labor, once considered to be the almost-exclusive domain of undocumented workers, is now on the rise among  former white-collar employees, male and female. Reports indicate crowds of aspiring day laborers waiting on street corners for jobs are increasingly non-Latino.

From auto, skilled construction and finance to day labor

When survival is at stake for oneself and one’s family, per diem day labor work becomes necessary. Certain towns in California where undocumented workers customarily come north looking for day labor jobs are witnessing the odd appearance of illegal immigrants protesting that Americans are taking away their jobs — and thus their cash now. Considering that construction jobs have mostly gone stagnant, day laborers are scrambling for jobs such as moving and landscaping, which pay less because fewer hours are required. The competition has become fierce, as skilled, educated American workers are vying for the low-paying jobs undocumented workers previously owned.

Center for Immigration Studies: Dispelling the illusion

A recent study by the Center for Immigration Studies (CIS) indicates that the concept of “jobs Americans won’t do” is a popular illusion. Available data points to the falsehood of this idea; Census Bureau data collected from 2005 to 2007 indicate that even before the recession, “there were only a tiny number of majority-immigrant occupations.” And for jobs thought to be predominantly performed by undocumented workers – such as housekeeping, maintenance, construction site labor and janitorial – Census data shows that the majority of employees are American-born. The CIS study sampled 4.4 million individuals, approximately 560,000 of which were immigrants. Even taking into account undocumented workers who fly under the radar, the sample size remains significant.

Depressed wages, meet the depressed economy

Jon Dougherty, author of the book “Illegals: The Imminent Threat Posed by Our Unsecured U.S.-Mexico Border,” points to what may very well be the economic shift that helped create the “jobs Americans won’t do” illusion. The exodus of “poor, uneducated laborers from south of the border has already worked to depress American wages,” particularly in areas with high rates of illegal immigration. As undocumented workers are often willing to accept less money to do the same work as American laborers, contractors choose to pay less. Americans – particularly those with families – can’t afford to work for $8 per hour if they were previously making just enough to cover expenses at $15 per hour. The cost of living in America makes the pay cut nearly impossible to swallow. Many undocumented day laborers can retreat back across the border at the end of a day’s work and survive – if not comfortably – on wages they typically cannot earn in their native country.

Sources:

Center for Immigration Studies
Newsmax.com
Wall Street Journal

Undocumented workers protesting Americans taking their day labor jobs

The economic mountain has come to Mohamed El-Erian, and a "new normal" may be the result. (Photo Credit: CC BY-SA/Mattbr/Wikipedia)

Pacific Investment Management Co. (Pimco) CEO Mohamed El-Erian, a sought-after commentator on the United States’ economic condition, has called the past decade a “lost decade” of unemployment and dismal tidings for the nation’s labor market, reports Bloomberg. The economic waters the U.S. has become accustomed to sailing have turned back, never to return, suggests El-Erian. More people than ever need a loan, but the credit market will not currently bear the demand. There will be, in his words, a “new normal” to which America must adjust.

Unemployment and labor continue to suffer

Unemployment remains at a high level, credit markets are on their guard and additional federal stimulus isn’t likely to solve the issues plaguing the nation’s labor market, said El-Erian. Charles Nenner of the Charles Nenner Research Center is even more pessimistic. On Bloomberg Television’s “On the Move,” Nenner predicted that the Dow Jones will fall to 5,000 within two years, underscoring El-Erian’s belief that the U.S. economy isn’t as flexible as policy experts believe. Playing with interest rates and holding hands out for an instant money bailout aren’t necessarily the best springboards to long-term recovery. People and institutions that look for cash now without understanding the long-term impact of borrowing from the future to prop up the present are doomed to fall from the trapeze and strike bottom.

“This country has very weak safety nets,” El-Erian said on “Bloomberg Surveillance.” “It is built on the assumption that our labor markets are very flexible, that if you lose your job in California you move somewhere else, you get another job, and what we’re seeing is structural unemployment.”

Stocking up on high-quality assets

Pimco’s strategy has been to stock up on high quality assets. The company’s Total Return Fund, which has returned 11.8 over the past year (besting return on peer bonds by 67 percent, writes Bloomberg), is the largest of its kind in the United States. But for the country as a whole, a more dramatic focus on structure is needed, says El-Erian. In addition to the mildly ineffective bouts of stimulus, the dead-in-the-water U.S. housing market isn’t producing the assets needed for recovery. The U.S. economy needs to restructure the way business is done. “It needs other agencies to help and in particular, it needs structural policies to be there,” El-Erian informed Bloomberg. “Put another way, you need to stimulate not just demand, but also you need to make supply more flexible.”

El-Erian’s concept of a “new normal” could act as a fresh rubber band that will snap back after economic calamity, or a faux safety net made from IOUs and dreams of wild market speculation.

Sources:

Bloomberg

Pimco

Understanding the “new normal”

Fewer people are asking for a spare dime, as new jobless claims have fallen over the last week. Image from Wikimedia Commons.

For the first time in weeks, the number of new jobless claims has sharply dropped. The last six months have been somewhat dismal for employment, though temporary boosts were provided by seasonal employment around the holidays and the U.S. census. That is some good news on that front, though housing remains abysmal. However, the news is a nearly Pyrrhic victory, as unemployment has held somewhat steadily since November of 2009. As word of the mild respite broke, stock markets were given a slight boost.

Drop in new jobless claims

A drop was recorded in the number of new claims for unemployment benefits by the Department of Labor. The number of jobless claims still sits, adjusted seasonally, at 473,000, but that number dropped by 31,000 over the last week. A drop in new unemployment claims is encouraging, but the average of the last four weeks is still 486,750, the highest levels since November 2009, according to Forbes. That said, winter jobless claims have to be taken with a grain of salt, as holiday seasonal employment provides a slight spike for the busiest part of the retail year. The U.S. Census also employed a fair amount of people seasonally.

Jobless claims spur stock market climb

The news of lower jobless claims led to an uptick in the stock market, according to the Wall Street Journal. The uptick was modest at best; the greatest gain was a 0.3 percent boost for Standard & Poor’s. The Nasdaq climbed only 0.2 percent, and the Dow Jones managed a paltry 0.1 percent gain. However, the big news is less the fall in unemployment claims, but the activity concerning 3Par and Dell, as Dell has acquired the data storage company. A bidding war between Dell and Hewlett-Packard for 3 Par has been the huge story on Wall Street over the last week, after last week’s rampant coverage of Potash Corp.

Not even close to out of the woods

This is not really an indicator of much in the way of unemployment radically decreasing. Fewer employers are currently hiring. The real estate market has been nothing short of dismal, and it is estimated that 10 percent of all homeowners are at risk of foreclosure.

Further reading

Forbes

Wall Street Journal

A decline in worker productivity after several quarters of gains could be a sign that employees are maxed out and companies need to start hiring. Think Stock photo.

A drop in worker productivity for the first time in 18 months is actually good news for the struggling U.S. economy and high unemployment rate. Companies that slashed payrolls during the recession have been raking in profits by getting more output from fewer workers. But the latest report from the Labor Department on worker productivity may indicate that employees have reached their limit. If that is the case, U.S. companies will have to engage in job creation to maintain growth and boost the flagging economic recovery.

Worker productivity in an upside down economy

Worker productivity declined at an annual rate of 0.9 percent in the April-to-June quarter after posting large gains throughout 2009, the Labor Department said Tuesday. The Associated Press reports that U.S. worker productivity is the key ingredient to boosting living standards. It allows companies to pay workers more because of increased production without raising the cost of goods. In most cases a slip in productivity would be a troubling sign for the U.S. economy. But economists believe the unemployment rate has become a threat to the companies that are slashing their work forces. If they start hiring, the job creation will give households the income boost they need to increase consumer spending, which accounts for 70 percent of economic activity. And that would ultimately lead to more demand for those companies’ products.

Workers sacrificed for corporate earnings

For companies that may have believed the U.S. had entered a period where output could keep climbing without bringing people back to work, CNN reports that the latest worker productivity numbers are a dose of reality. Companies did more with less during the worst of the recession. But in the latest Labor Department report, the amount of hours worked rose at a faster pace than actual economic output. Nariman Behravesh of IHS Global Insight in Lexington, Mass., told CNN that companies probably “overdid it” with layoffs during the recession. He said that if for no other reason than keeping employee morale up, companies may have to hire more to avoid worker burnout.

Job creation needed to thwart deflation

Job creation is likely to remain weak for the next few months, Behravesh told CNN. But he’s optimistic that the private sector may be adding more than 100,000 jobs a month by the end of this year and 150,000 jobs a month by the middle of 2011. But ABC News reports that weak productivity is in line with other signs that U.S. economic recovery is losing momentum. The overall economy grew at only a 2.4 percent annual rate in the second quarter, down from a 3.7 percent rate in the first quarter. Some Federal Reserve officials worry that with the unemployment rate stuck at 9.5 percent, employers will seize the chance to push wages down for those still working and prices will follow suit, possibly triggering a vicious cycle of deflation.

Existing home sales are down, thanks to the tax credit expiration and high unemployment numbers, to name just two factors. (Photo Credit: CC BY-ND/David/Flickr)

While new home sales showed an increase in June (but a marked decrease in July), the Association of Realtors has revealed the dirty underbelly of those statistics, reports Bloomberg. Contracts to buy previously owned homes were down that month, something that experts did not predict. The indication here is that as the home buyer tax credit expired, demand spiraled downward.

Economists predicted 4 percent growth in existing home sales

The median forecast by the National Association of Realtors had a much rosier outlook on June 2010. Existing home sales weren’t predicted to fall as far as they did immediately following the April 30 deadline for the government tax credit, when a massive 30 percent drop occurred. Bloomberg reports that 30 percent drop in May 2010 was the largest decrease in existing home sales since the association began the median forecast in 2001.

No more $8,000 credit means people need to earn more

Of course America remains in a recession, which means that unemployment is still high and wage gains remain stagnant. As Treasury Secretary Tim Geithner predicts that unemployment will increase in August, existing home sales probably aren’t going to be trending upward for a while. Stocks are down in anticipation of the bad news, as the Standard & Poor’s 500 recently went down 0.6 percent.

Existing home sales are the bulk of the housing market

In fact, 90 percent of the U.S. housing market consists of existing home sales, so the recent downturn doesn’t bode well for a housing market recovery. Lawrence Yun, chief economist of the National Association of Realtors, told Bloomberg that “There could be a couple of additional months of slow home sales activity before picking up later in the year, provided the job market improves.”

The specter of home seizure

Then there are those pesky foreclosures. Even though 30-year fixed mortgages are down to 4.54 percent at July’s end, foreclosure was up 38 percent from the year previous, according to RealtyTrac, Inc. Donald Horton of home builder D.R. Horton Inc. remarked that market conditions have become quite challenging, and there’s no immediate end in sight.

Sources:

Bloomberg

Homeowners who are staying put