Category Archives: Employment

Using jobs to lure Taliban

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At least they are starting to understand the power of employment.

Too bad they haven’t figured out how to do it in local currency.

Wonder how this will sell politically to unemployed voters here in the States:

Afghans Offer Jobs to Taliban Rank and File if They Defect

The meeting is part of a battlefield push to lure local fighters and commanders away from the Taliban by offering them jobs in development projects that Afghan tribal leaders help select, paid by the American military and the Afghan government.

By enlisting the tribal leaders to help choose the development projects, the Americans also hope to help strengthen both the Afghan government and the Pashtun tribal networks.

These efforts are focusing on rank-and-file Taliban; while there are some efforts under way to negotiate with the leaders of the main insurgent groups, neither American nor Afghan officials have much faith that those talks will succeed soon.

Afghanistan has a long history of fighters switching sides — sometimes more than once. Still, efforts so far to persuade large numbers of Taliban fighters to give up have been less than a complete success. To date, about 9,000 insurgents have turned in their weapons and agreed to abide by the Afghan Constitution, said Muhammad Akram Khapalwak, the chief administrator for the Peace and Reconciliation Commission in Kabul.

But in an impoverished country ruined by 30 years of war, tribal leaders said that many more insurgents would happily put down their guns if there was something more worthwhile to do.

“Most of the Taliban in my area are young men who need jobs,” said Hajji Fazul Rahim, a leader of the Abdulrahimzai tribe, which spans three eastern provinces. “We just need to make them busy. If we give them work, we can weaken the Taliban.”


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Data

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Karim writes:

Data ‘mixed’, with durables and income weak, but claims strong.

  • New capital goods orders ex-aircraft and defense -2.9%; 3rd drop in 4mths
  • Personal income 0.2%, but wage and salary income flat and down 3.6% y/y
  • Core PCE deflator +0.2% m/m and 1.4% y/y
  • Initial claims down 35k to 466k (prior week revised down 4k)
  • Continuing claims down 190k; extended and emergency benefits down 18k
  • Some seasonals may be at play in the claims data from now thru year-end but still opens possibility of positive payrolls next week


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Galbraith on what can be done

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Old Mistakes Die Hard

As part of the Roosevelt Institute’s 10-part series on the Jobs Crisis, running on the New Deal 2.0 blog from Nov. 12-25, I was asked to reflect on what can be done to get Americans working again. Here’s my take.

I’m tempted to say that the United States is plainly unable to cope with the economic crisis in a serious way. The barriers are philosophical, procedural, and constitutional. So long as economic thinking is mired in a world that disappeared with the collapse of the Bretton Woods system in 1971, so long as any action requires 60 Senate votes, and so long as political capital erodes from the start of a fixed four-year presidential term, we’re stuck.

Technically it would have been fairly easy, 10 months ago, to get this bus back on the road. There could have been open-ended fiscal assistance to stop the budget hemorrhage of the states and cities. There could have been a jobs program and effective foreclosure relief. There could have been a payroll tax holiday. There could have been a strategy for sustained massive effort on infrastructure, energy and climate. There could have been prompt corrective action to resolve, instead of coddle, the worst of the banks.

I mostly don’t blame President Obama; he and his team went as far as they felt they could. I blame the head-in-the-sand politicians in Congress, the over-optimistic forecasters, the half-educated press, and the power of the financial lobby. I blame the avatars of fiscal virtue, the public debt scare-mongerers, the astrologers for whom thirteen significant digits (a trillion) for the stimulus package was just too much. I blame the Senate, which hands the balance of power to small states at the expense of disaster areas like California, Florida and New York. I do blame the Bush-Obama financial policy team, who either believed that “credit would flow again” if you stuffed the banks with money, or knew that it wouldn’t.

The Bretton Woods point deserves another word. According to the system established in 1944, the U.S. current account deficit — and by extension our public budget deficit — was limited by an obligation to exchange foreign-held dollars for gold. Richard Nixon abolished that arrangement. Since the early 1980s, the world has held the Treasury bonds that the U.S. chose to issue. The system is fragile. But so long as it lasts, it doesn’t discipline our budget (and if it broke, we could replace it). Low interest rates prove this: despite all the dire predictions, there is no difficulty in placing Treasury debt. Hence, we are free to pursue high employment, if we choose to do it.

Can anything be done now? Well yes, technically: the same steps that could have been taken in January 2009 could be taken in January 2010. But they won’t be, because for the moment we are seeing the inventory bounce, a productivity surge, real GDP growth, and other “good signs.” So we’ll be told to wait, to be patient, and to make sure we don’t buy what we can’t afford. And double-digit joblessness will linger on, breeding frustration and anger — perhaps all the way through to the mid-term elections. After which, what will be possible is anyone’s guess.

Sorry to be defeatist — it’s the way I feel. Prove me wrong.


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Today’s Data

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Karim writes:

Data on the weak side:

CPI

  • Initial claims unch at 505k (prior week revised up 3k)
  • Total ongoing benefits up 81k
  • Some saying that standard error of claims-based model as a predictor of NFP may lead to a CHANCE of positive payroll growth in November

Housing

  • Philly Fed up 5.2pts to 16.7
  • Prices paid down 6.4, orders up 8.6, inventories up 14.5, employees up 6.3
  • Going in opposite direction to Empire survey earlier in week, but converging to similar levels
  • Modest expansion in manufacturing

Latest foreclosure chart (loans in foreclosure as a % of total loans)


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bernanke

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Karim writes:

DOVISH-Focus largely on headwinds to growth; token paragraph (new) on the dollar; repeats the ‘2Es’ (exceptionally low for an extended period)

Excerpts

* Today, financial conditions are considerably better than they were then, but significant economic challenges remain. The flow of credit remains constrained, economic activity weak, and unemployment much too high. Future setbacks are possible.

* My own view is that the recent pickup reflects more than purely temporary factors and that continued growth next year is likely. However, some important headwinds–in particular, constrained bank lending and a weak job market–likely will prevent the expansion from being as robust as we would hope.

* access to credit remains strained for borrowers who are particularly dependent on banks, such as households and small businesses.. the fraction of small businesses reporting difficulty in obtaining credit is near a record high, and many of these businesses expect credit conditions to tighten further.

* With the job market so weak, businesses have been able to find or retain all the workers they need with minimal wage increases, or even with wage cuts. Indeed, standard measures of wages show significant slowing in wage gains over the past year. Together with the reduction in hours worked, slower wage growth has led to stagnation in labor income. Weak income growth, should it persist, will restrain household spending. The best thing we can say about the labor market right now is that it may be getting worse more slowly… a number of factors suggest that employment gains may be modest during the early stages of the expansion.

* I expect moderate economic growth to continue next year. Final demand shows signs of strengthening, supported by the broad improvement in financial conditions. Additionally, the beneficial influence of the inventory cycle on production should continue for somewhat longer. Housing faces important problems, including continuing high foreclosure rates, but residential investment should become a small positive for growth next year rather than a significant drag, as has been the case for the past several years. Prospects for nonresidential construction are poor, however, given weak fundamentals and tight financing conditions.

* The foreign exchange value of the dollar has moved over a wide range during the past year or so. When financial stresses were most pronounced, a flight to the deepest and most liquid capital markets resulted in a marked increase in the dollar. More recently, as financial market functioning has improved and global economic activity has stabilized, these safe haven flows have abated, and the dollar has accordingly retraced its gains. The Federal Reserve will continue to monitor these developments closely. We are attentive to the implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability. Our commitment to our dual objectives, together with the underlying strengths of the U.S. economy, will help ensure that the dollar is strong and a source of global financial stability.

* The Federal Open Market Committee continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.


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Employment

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It is the hangover from the budget surpluses of the late 90’s that drove us to use private sector credit to support demand, first by the dot.com phase of funding impossible business plans, and, after the 2003 proactive deficit policies, the sub prime fraud kicked in with a last burst of private sector credit expansion that pushed it well beyond the limits of the underlying incomes to support it.

The tragedy is how easy it would have been to avoid the entire rise in unemployment, and how easy it is to fix it now:

Payroll tax holiday
Per capita revenue distribution for the states
$8/hr job for anyone willing and able to work

On Wed, Nov 11, 2009 at 12:48 PM, Russell Huntley wrote:

Rosenberg piece … appears he is using Soss’s analysis.

There are serious structural issues undermining the U.S. labour market as
companies continue to adjust their order books, production schedules and
staffing requirements to a semi-permanently impaired credit backdrop. The
bottom line is that the level of credit per unit of GDP is going to be much, much lower in the future than has been the case in the last two decades. While we may be getting close to a bottom in terms of employment, the jobless rate is very likely going to be climbing much further in the future due to the secular dynamics within the labour market that need to be discussed:

• For the first time in at least six decades, private sector employment is
negative on a 10-year basis (first turned negative in August). Hence, the
changes are not merely cyclical or short-term in nature. Many of the jobs
created between the 2001 and 2008 recessions were related either directly
or indirectly to the parabolic extension of credit.

• During this two-year recession, employment has declined a record 8 million.
Even in percent terms, this is a record in the post-WWII experience.

• Looking at the split, there were 11 million full-time jobs lost (usually we see
three million in a garden-variety recession), of which three million were shifted
into part-time work.

• There are now a record 9.3 million Americans working part-time because they
have no choice. In past recessions, that number rarely got much above six
million.

• The workweek was sliced this cycle from 33.8 hours to a record low 33.0
hours — the labour input equivalent is another 2.4 million jobs lost. So when
you count in hours, it’s as if we lost over 10 million jobs this cycle.
Remarkable.

• The number of permanent job losses this cycle (unemployed but not for
temporary purposes) increased by a record 6.2 million. In fact, well over half
of the total unemployment pool of 15.7 million was generated just in this past
recession alone. A record 5.6 million people have been unemployed for at
least six months (this number rarely gets above two million in a normal
downturn) which is nearly a 36% share of the jobless ranks (again, this rarely
gets above 20%). Both the median (18.7 weeks) and average (26.9 weeks)
duration of unemployment have risen to all-time highs.

• The longer it takes for these folks to find employment (and now they can go on the government benefit list for up to two years) the more difficult it is going to be to retrain them in the future when labour demand does begin to pick up. Not only that, but we have a youth unemployment rate now approaching a record 20%. Again, this is going to prove to be very problematic for employers in the future who are going to be looking for skills and experience when the boomers finally do begin to retire.


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Payrolls

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Karim writes:

Apart from net revisions, this employment report pretty much stinks:

  • Jobs -190k
  • UE rate from 9.8% to 10.2%; ‘Total’ unemployment rate from 17% to 17.5%
  • Hours down 0.2%
  • Difffusion index down from 37.5 to 33.8
  • Median duration of unemployment up 1.4 weeks to 18.7
  • Manufacturing jobs -45k to -61k (so much for ISM employment index as a leader)
  • Retail and construction still soft; modest improvement in temp jobs and education


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ISM Employment/Small Business Employment

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Karim writes:

The employment component of ISM yesterday was much stronger than expected at 53.1.

Based on the chart below, one would expect to see claims near 350k and payrolls turn positive.

We should find out soon enough if true or not, but the lower chart shows good reason for skepticism.

Small businesses have been the largest contributor to job losses (way more than the typical downturn). ISM companies typically have more than 1000 employees.

Small businesses also depend most on small and regional banks for credit; helping to explain the Fed’s sensitivity to this issue


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Obama Says U.S. Must Reduce Debt, Spur Job Growth

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This is a ridiculous notion that further shows there is no understanding of the monetary system at the highest levels, or the ‘debt’ per se would not be a concern. They obviously don’t understand taxes function to regulate aggregate demand (spending) and not to raise revenue per se.

Reminds me of a story Phil Harvey used to tell about sending 100 dogs into a room with 95 bones in it.
5 dogs don’t get bones.
The sociologists and micro economists examine them, and find that the 5 least intelligent, least aggressive etc. dogs didn’t get bones.
So they train those 5 dogs and repeat the experiment, and this time those dogs do get bones.
Of course, 5 others don’t, because the bone shortage is a macro problem.

Same with unemployment.
The problem is a lack of funding for paid jobs because people would rather save their incomes than spend them on goods and services that require labor to produce.
Short of trying to figure out how to get the population to spend by going deeper into debt (reduce savings) which is about as impossible as it is undesirable, the only solution is to cut taxes or increase govt. spending to provide the needed funding.

If this misunderstanding continues, look for high unemployment, a deflationary backdrop, and the Fed on hold until something changes to reduce the output gap.

Obama Says U.S. Must Reduce Debt, Spur Job Growth

By Kate Andersen Brower

Nov. 2 (Bloomberg) — President Barack Obama said the U.S. economy has pulled “back from the brink” and the government must now “get serious” about reducing debt and helping spur job growth.

Addressing a panel of business and labor leaders and economists, the president said it will require “bold, innovative action” on the part of the government and private industry to bring the unemployment rate down and lay the foundation for future growth.

“We just are not where we need to be yet,” Obama told his Economic Recovery Advisory Board, headed by former Federal Reserve Chairman Paul Volcker. Along with helping spur job growth, “The government is going to have to get serious about reducing our debt levels.”

This was the second time the full board has met to brief the president on ways to create jobs and encourage economic growth. Obama formed the advisory panel in February to provide an “independent voice on economic issues.” Today’s meeting is focusing on creating jobs through innovation.

Along with Volcker, board members include former Securities and Exchange Commission Chairman William Donaldson; Robert Wolf, chairman and chief executive officer of UBS Americas; Penny Pritzker, who led Obama’s campaign fundraising effort and is chairman of Pritzker Realty Group; Jeffrey Immelt the chief executive of General Electric Co.; Caterpillar Inc. Chief Executive OfficerJim Owens; and AFL-CIO President Richard Trumka.


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Unemployment Benefit Extension Stalls in U.S. Senate

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Just in case you thought any of them understand the monetary system.

Truly the blind leading the blind.

Unemployment Benefit Extension Stalls in U.S. Senate

By Brian Faler

Oct. 21 (Bloomberg) — Legislation to extend unemployment
benefits is stalled in the U.S. Senate amid a partisan dispute
over how to finance the plan, among other issues.
Republicans are blocking the measure that would extend
benefits by as much as 20 weeks because they want votes on
several amendments, including on how to pay for the $2.4
billion measure so it doesn’t add to the federal budget
deficit. Democrats plan to finance the aid by extending an
employer payroll surtax due to expire at the end of this year.

Senator Dick Durbin of Illinois, the chamber’s second-
ranking Democrat, said the unemployment benefit extension is
being delayed because Republicans are demanding votes on
unrelated issues such as immigration.

‘Pertains to the Subject’

Arizona Senator Jon Kyl, the No. 2 Republican, said his
side wants amendments on “stuff that pertains to the subject –
-how do you pay for it, for example.” He said the measure has
been further delayed by Democrats’ decision to take up a
measure that would scrap scheduled cuts in Medicare
reimbursements to doctors.

Pelosi, a California Democrat, met behind closed doors
today for four hours with economists Mark Zandi, Alan Blinder
and others to discuss possible measures to boost the economy.

She said proposals under consideration include expanded
subsidies to help the jobless buy health insurance, tax breaks
for money-losing companies and increased funding for food
stamps.

She said the measures won’t be compiled into a second
stimulus package. Instead, lawmakers plan to attach them to
other pieces of legislation moving through Congress such as the
annual appropriations bills funding government agencies, she
told reporters.

No New Stimulus Package

“We do not have plans for an additional stimulus package,
but we do have plans to stimulate the economy in the work that
we are doing,” said Pelosi.

The House approved legislation in September that would
extend benefits for 13 weeks in 27 states with unemployment
rates topping 8.5 percent. Democrats said they had hoped to
forward the bill to President Barack Obama by the end of last
month, before an estimated 400,000 Americans exhausted their
benefits.

At first, the Senate vote was delayed by 17 Democrats who
objected their states would be excluded under the House plan.
They agreed to accept a revised Senate plan extending benefits
by 14 weeks in all states, with an additional six weeks for
states with jobless rates of at least 8.5 percent.

Democrats are divided over what to do about the $8,000 tax
credit for first-time homebuyers set to expire at the end of
next month.

Expanded Tax Credit

Senate Banking Committee Chairman Christopher Dodd, a
Connecticut Democrat, has proposed a $17 billion plan that
would extend and expand the plan until June 2010. Dodd’s
proposal, cosponsored by Georgia Republican Senator Johnny
Isakson, would expand the credit to all homebuyers and increase
those eligible to couples earning as much as $300,000. Isakson
is pushing to attach the plan to the Democrats’ unemployment
aid bill.

Senate Finance Committee Chairman Max Baucus, a Montana
Democrat and the chamber’s chief tax writer, said today he
opposes the Dodd-Isakson proposal, saying any extension should
continue to be limited to first-time buyers. He said the break
should be extended until mid-2010 and financed with offsetting
savings so it doesn’t add to the government’s $1.4 trillion
deficit.

“We are going to pay for things around here,” said
Baucus.

House Majority Leader Steny Hoyer, a Maryland Democrat,
favors a one-month extension of the tax credit to be financed
with offsetting savings, said spokeswoman Katie Grant.

Cost Billions

Extending such provisions would cost billions, while
letting them lapse may be difficult because the unemployment
rate is higher than when the stimulus plan was approved. The
national unemployment rate last month was 9.8 percent, the
highest since 1983, while the share of unemployed who have been
jobless for at least six months reached the highest level in at
least a half- century. More than 5.4 million people have been
unemployed for at least 27 weeks, according to the Labor
Department.

About 1.3 million people will exhaust their benefits by
the end of the year, according to the National Employment Law
Project.

Federal Reserve Chairman Ben Bernanke said earlier this
month that economic growth next year probably won’t be strong
enough to “substantially” bring down the unemployment rate,
which may remain above 9 percent through the end of next year.


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