Archive for Economy

Le Marché, C’est Moi

Kevin D. Williamson, National Review:

The Institute of Supply Management issued a study warning that American manufacturing growth had come to a standstill in September, and the Labor Department’s latest employment figures, the worst jobs report of the year, tell the same story from another perspective: unemployment rate stagnant, wages stagnant, hours worked down, number of new jobs far below forecast, previous reports revised downward, labor-participation rate at 38-year low, with nearly 95 million eligible American workers sidelined.

That the Obama administration is foundering from an economic-policy point of view is not news. Barack Obama & Co. represent the very freshest and most imaginative thinking of the 1930s — stimulus, public works, monkeying with the minimum wage, political favoritism for union constituencies, the ancient superstition that simply putting money in somebody’s pocket makes the nation richer through the miraculous power of the economic multiplier, etc.

There’s an old joke about an engineer, a priest, and an economist trapped at the bottom of a deep pit: The engineer looks for a way to get a handhold on the wall, the priest prays for deliverance, and the economist says, “No problem. First, assume a ladder.” Assume you know what the balance of trade in sugar should be, assume you know what McDonald’s fry guys should earn per hour, assume you know what the mix of energy sources used in electricity generation should be . . .

There’s much more, all good, but let me comment. Rather than having faith in “the market” to provide, Obama and his liberal ilk distrust it. The market leads to income disparity, hence the market must be controlled, hobbled, put down. You see it throughout what we wryly call Obama’s “career” (if community organizer and “present” state senator can be so described).

Then there was his stint as a “law” professor (senior lecturer, actually):

In 2008, he called for raising the capital gains tax rate—even if total revenue to the government fell—for “purposes of fairness”. ObamaCare was not about insuring the uninsured, but about government takeover of health insurance. Mere redistribution was inadequate; the president seized power to make law as his whims commanded.

It’s no wonder the market responds warily to Obama. More than six years removed from recession (yay!), this is a “recovery” fairly long in duration, but profoundly short on fizz. It’s not Carter’s era of stagflation and the Misery Index, but it’s not Reagan either.

In case you forgot:

Compared with:

That sound you hear is the country in one collective “meh”.

PS: I’ve posted many times before that picture of Obama lecturing (prating, yammering, droning, braying, choose all that apply), but it still fascinates me. He’s displaying a “power analysis” of “relationships built on self interest”. Corporations are reliant on banks, who are reliant on utilities (they are?), who are reliant on De Glop (whatever that is). From that unholy polygamy shoots a ray of money that pierces the “mayor”, with fragments of the ordnance taking out “aldermen” with collateral damage. What, if anything, have we learned? We already knew the Left hates business, suspecting it of owning politicians and buying influence. Did we need a chart? The one thing we don’t know, the meaning of De Glop, is never provided.

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Welcome, 579,000 Newcomers! [UPDATED] [AGAIN]

Not “Syrian” “refugees”—deadbeats!

Scoot over, the 94,031,000 rest of you!

The number of people not in the labor force jumped by 579,000 in September as well to hit 94.61 million. That is the highest level yet recorded, and it is more than 2 million more than in January of this year.

Among other lowlights:

The civilian labor force participation rate declined to 62.4 percent in September; the rate had been 62.6 percent for the prior 3 months. The employment-population ratio edged down to 59.2 percent in September, after showing little movement for the first 8 months of the year.

The change in total nonfarm payroll employment for July was revised from +245,000 to +223,000, and the change for August was revised from +173,000 to +136,000. With these revisions, employment gains in July and August combined were 59,000 less than previously reported.

Has Obama brayed about these listless numbers? I haven’t heard if he has. He’s been too busy politicking over the still-warm bodies of the Oregon dead.

Oy. Spoke too soon.

Americans not working just passed Vietnam to be the 14th most populous nation in the world! A toast! Look out Ethiopia and the Philippines, we’re comin’ for ya!

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For 94,031,000, It’s Not Labor Day

A little insensitive to rub it in their face, wouldn’t you say?

A record 94,031,000 Americans were not in the American labor force last month — 261,000 more than July — and the labor force participation rate stayed stuck at 62.6 percent, a 38-year low, for a third straight month in August, the Labor Department reported on Friday, as the nation heads into the Labor Day weekend.

The number of Americans not in the labor force has continued to rise, partly because of retiring baby-boomers and fewer workers entering the workforce.

That’s what I used to think. But it’s not exactly true:

Yes, Baby Boomers are retiring, but the Millennial generation is larger and is having trouble replacing them.

Yep, there are more Millennials than Boomers—but where are their jobs? If Boomers are retiring—the oldest of them are 69 years old—why isn’t that an opening for someone in her 20s and 30s? Who would come cheaper, being at the beginning of her earning curve?

One hint: the number of Americans working part-time not by choice increased by 158,000 last month to 6,483,000. The reasons are legion—ObamaCare, unaffordable minimum wage, a high corporate tax rate, etc.—but so what? Obama can thunder against business and the rich who don’t pay “their fair share” during his seventh “recovery summer” and no one will call him on it. If it’s not important to them, I don’t know why it should be to me.


Look Out Below!

With China down almost nine percent, and Europe hemorrhaging billions, the NYSE is set to open.

Here goes nothing:

The New York Stock Exchange is invoking Rule 48 for the Monday stock market open, Dow Jones reported.

The rule allows NYSE to open stocks without indications. “It was set up for situations like this,” said Art Hogan, chief market strategist at Wunderich Securities. It was last used in the financial crisis.

The Dow futures held about 700 points lower, with the S&P futures off about 80 points, and the Nasdaq 100 futures off about 5 percent, which marks the lower end of the price limit.

The major averages are on track for one of their worst opens since the financial crisis of 2008.

They’re calling it the Great Fall of China.

PS: The Dow and the S&P are already down 5%.

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Quit Your Beachin’

Earlier today, I asked you which you feared more, another Korean War, or the collapse of the Chinese economy.

I repeat the question:

Growth worries pounded stock markets from China to Germany and the U.S., with the Dow industrials careening to their lowest finish of the year.

Deepening worries over the pace of global growth spurred the latest tumble in stocks. Investors have been struggling in recent sessions with a plunge in commodity markets, upheaval in global currency markets and a growing sense that the Federal Reserve remains too uncomfortable with the health of the U.S. economy to raise interest rates at its meeting next month.

The selloff sent the Dow Jones Industrial Average to its biggest one-day percent loss since February last year and tipped the S&P 500 into negative territory for 2015.

The Dow shed 358.04 points, or 2.1%, to 16990.69, its lowest finish since October 2014.

The S&P 500 lost 43.88 points, or 2.1%, to 2035.73, wiping out its gains for the year. The Nasdaq Composite dropped 141.56 points, or 2.8%, to 4877.49.

President Obama didn’t exactly say “The only thing we have to fear is fear itself.”

More like: “What, me worry?”

President Obama continued his vacation on Martha’s Vineyard today, spending the afternoon at the beach with his family and the family of U.S. Ambassador Caroline Kennedy.

According to 2013 reports, Kennedy is worth between $250 million and $500 million in various financial assets and trust funds.

Obama’s 16 day vacation on Martha’s Vineyard is expected to end on Sunday, after which he will travel to Las Vegas.

After today, I’d say Ambassador Kennedy is worth nearer the $250 million end of the spectrum, if that.

And who wouldn’t follow a 16-day vacay with a trip to Vegas—his 14th? Makes sense to me.

It’s just that…well, let him tell you:

It turns out you can fly your corporate jet to Las Vegas on the taxpayer’s dime—14 times! What a great country.

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Which Worries You More?

A hot war on the Korean peninsula?

South Korea fired tens of artillery rounds toward North Korea on Thursday after the North launched shells to protest South Korea’s anti-Pyongyang propaganda broadcasts along the border, as tension escalated on the peninsula.

North Korea did not return fire but later warned Seoul in a letter that it would take military action if the South did not stop the loudspeaker broadcasts within 48 hours, the South’s defense ministry said.

Or an economic collapse in China?

China’s aura of strength, growth and shrewdness is giving way to the reality of a developing country (albeit huge) suffering growing pains and the excesses borne from overconfidence and misplaced optimism. Unfortunately, there is only one cure: A retrenchment back to a sensible base (economic, financial and political), accompanied by a return of natural humbleness by businesses, investors and government leaders.

The Chinese government is aggravating the problems by attempting market-overriding cures long proven to be harmful in the developed world: mainly, capital controls (including in the stock market), banking controls and (continuing) exchange rate controls. This combination of controls has broad, adverse effects that spurs skeptical parties, including the rest of the world, to act so as to avoid being trapped in a losing situation.

There follows a readable and informative detailed analysis which I recommend. To conclude:

The bottom line

The Chinese leaders’ policies and actions are intensifying and prolonging the country’s economic and financial problems. Moreover, the fallout extends well into the rest of the world, adversely affecting both emerging and developed countries. With the return of global recession risk, the best investment approach appears to be (1) holding limited or no Chinese and emerging market securities, and (2) building cash reserves for both protection and potential opportunities.

To wit:

Disclosure: Author holds 100% in cash reserves

Let the Koreans incinerate each other (not really). But China is big enough to take us all down, hard. Straight cash, homie, as Randy Moss once said.


It’s Unexpected!™

Been a long time, huh?

The number of Americans filing new applications for unemployment benefits unexpectedly rose last week, but the trend continued to point to a strengthening labor market.

Initial claims for state unemployment benefits increased 5,000 to a seasonally adjusted 274,000 for the week ended Aug. 8, the Labor Department said on Thursday. Claims for the prior week were revised to show 1,000 fewer applications received than previously reported.

Though claims have risen for three straight weeks, they have remained below the 300,000 threshold, which is associated with a firming jobs markets, for 23 consecutive weeks.

Economists had forecast claims to be unchanged at 270,000 last week. A Labor Department analyst said there were no special factors influencing the data and no states had been estimated.

Nothing dire, the numbers are still fine (for a half-assed recovery). But it’s fun to play the old game now and again.

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Maybe Rename Detroit Phoenix?

As in risen from its own ashes?

One by one, 61 entrepreneurs marched onto the stage at Wayne State University’s St. Andrews Hall, where they were greeted with a standing ovation by relatives, friends and colleagues.

It was second graduation for the Goldman Sachs 10,000 Small Businesses initiative in Detroit, more intimate than the first, which featured a long list of high-profile business leaders, including billionaire Warren Buffett.

But, the atmosphere this morning, was just as uplifting.

“There is momentum building in this great city,” Wayne State University President M. Roy Wilson said. “It’s happening right now. You can feel it and see it. Opportunity and will power and creativity are converging in Detroit, and entrepreneurs are at the heart of it. Programs like this that support small businesses fuel this reinvention and are our top priority.”

The $500-million Goldman Sachs program is designed to help entrepreneurs boost revenues and create jobs. The program began in 2010 and has spread to 26 cities. The goal is to graduate at least 10,000 entrepreneurs. Goldman’s commitment to the Detroit program is $15 million.

We’ve been pretty hard on Detroit over the years, all deserved. But once Detroit declared bankruptcy, it didn’t seem sporting. And, anyway, the damage was done, the money gone; no use going on anymore about six decades of ruinous mismanagement.

Besides, having declared unconditional surrender, maybe Detroit was ready to follow a different model.

Call it the pickles and slime model:

Hamtramck-based McClure’s Pickles and Plymouth-based Algal Scientific Corp. have been named the first Endeavor Entrepreneurs by the nonprofit Endeavor Detroit, a designation that means they will be able to boost their businesses by meeting local and international business mentors and volunteers from Fortune 500 consulting firms.

The two companies are among the 34 “high-impact entrepreneurs representing 23 companies from 15 countries,” according to an announcement on the Endeavor website. Endeavor is a New York-based nonprofit that helps support companies on the brink of rapid growth; it opened an office in Detroit earlier this year. Endeavor also has a Miami office.

“The amazing entrepreneurs and high-impact businesses we saw this week demonstrate all of the entrepreneurial potential still waiting to be uncovered around the world,” Linda Rottenberg, co-founder and CEO of Endeavor, said in the announcement.

McClure’s produces pickled products, salty snacks, adult beverages and mixers for drinks such as Bloody Marys from locally sourced ingredients. “McClure’s is at the forefront of the movement to redefine food from a commodity to an experience,” the announcement said.

Algal Scientific is a manufacturer of algae-based chemicals for the food and beverage industries. It uses the immune-boosting power of algae to support animal health and growth without the use of antibiotics. Earlier this year, it closed on a Series B funding round of $7 million.

Gone are my posts about the death of Detroit. That’s reserved for Chicago, California, and other sloughs of Democrat despond. Detroit is either dead already or on life support; either way, no place to speak ill of. When I think of Motown in the future, I’ll look for stories like these.


Minimum Wage In NYC

One of the things that I most despise about the “progressive” movement is the way in which they treat each little group differently, thereby generating class hatred. They’re getting better at this by creating intra-class hatred.

New York’s Fast Food Wage Board, a panel appointed by Gov. Andrew Cuomo, has recommended increasing the minimum wage to $15 an hour from $8.75 for quick-service restaurant businesses with 30 or more locations. The target, according to Mr. Cuomo, is “large, national companies which have been making extraordinary profits” while “underpaying their workers,” who are supported by public-welfare programs such as Medicaid.

So, you can work at McDonald’s for $15.00 per hour, or Joe’s Sub Shop for $8.75. Hmmm, let me think about this. One the one hand, Joe’s is gonna lose people, on the other hand, McDonald’s will surely need to raise prices. Sounds like a lose-lose! :)

But there’s even more intelligence in this plan than you might suspect:

But the higher labor costs that the New York state labor commissioner is expected to approve will not hit large companies. That’s because small business owners own and operate all of New York’s Burger King restaurants, and about 95% of its McDonald’s restaurants, as franchisees. These business owners set the compensation for the workers they employ. Burger King and McDonald’s, on the other hand, are paid a percentage (generally a 3% to 5% royalty fee) of the restaurant’s gross sales, regardless of the franchisees’ profits.

There are 7,303 franchised restaurants in New York operating under agreements with 116 brands, and like other restaurant owners, many pay some of their employees the starting wage of $8.75 an hour. Yet the owner of even a single franchised restaurant would automatically have to pay a minimum $15 an hour, simply because of his affiliation with a brand that has more than 30 restaurants nationwide. That’s not fair.

Get it? The companies themselves won’t be hurt because they are receiving a percentage of gross profits – in other words, the poor sap that owns the store will make less because labor costs will jump, while the sub shop down the street can probably undercut him on pricing. Brilliant.

How will these poor saps cope?

Could these restaurant owners cope with such a huge increase in operating costs by reducing their profits? Quick-service restaurant franchises operate on slim profit margins—on average 2 to 4 cents on the dollar according to an Employment Policies Institute study. And to the extent they make lower profits, these business owners will be less likely to open new restaurants.

Well, if you want to read more, go to the link. It is quite depressing.

– Aggie


Fabulous Economic News!

1 in 3 millenials live with mom and dad

It appears that culture has as much to do with this as the economy; it is a preference.

Even though the number of people in the 18-34 age bracket has gone up by around 3million since recession started to bite in 2007, half a million fewer of them are now living independently.
In 2010, the U.S. economy’s lowest ebb, 69 per cent of young adults lived apart from their families, but five years on the proportion has fallen to 67 per cent – leaving a full third still in the family nest.

The findings, published by the Pew Research Center, come as youth unemployment fell from 12.4 per cent in 2010 to 7.7 per cent now, while average weekly earnings have increased to $574, from a low of $547 in 2012.
The figures do not include students who are enrolled full-time.
Although it remains true that better-educated young adults are more likely to branch out on their own, both those with and without degrees have become less likely to be independent householders.

Obama has transformed America – back to the olden days. Now, instead of branching out, getting jobs, starting families, people live in vertical arrangements; they remain in the family home, and if they have kids they just raise them in the basement. Now we can have (great) grandma and grandpa, grandma and grandpa, mom and dad, Sally, and the three kids. It is a new America, perhaps with shades of the Lower East Side in the nineteenth century.

But, of course, it isn’t all cultural. We are experiencing the Worst Expansion Since WWII

The economic expansion—already the worst on record since World War II—is weaker than previously thought, according to newly revised data.

From 2012 through 2014, the economy grew at an all-too-familiar rate of 2% annually, according to three years of revised figures the Commerce Department released Thursday. That’s a 0.3 percentage point downgrade from prior estimates.

The revisions were released concurrently with the government’s first estimate of second-quarter output.

Since the recession ended in June 2009, the economy has advanced at a 2.2% annual pace through the end of last year. That’s more than a half-percentage point worse than the next-weakest expansion of the past 70 years, the one from 2001 through 2007. While there have been highs and lows in individual quarters, overall the economy has failed to break out of its roughly 2% pattern for six years.

While exercising this morning, I learned that the second quarter increase was 2.3%, lower than the expected 2.5% And one of the reasons given was that businesses refuse to invest. Elizabeth Warren will have something to say about that one, let me assure you!!! But until the government takes over the means of production, I think we need to acknowledge that businesses are afraid to invest because they never know what sorts of weird regulations or taxes will be imposed. ObamaCare was a disaster, and continues to be a disaster. And of course, there is the attitude of hatred toward any individual or any business that doesn’t toe the progressive line.

I had the thought – please tell me, Gentle Reader, if this is crazy – that the Donald Trump phenomenon is largely that he is the anti-Obama. He struts around, loudly proclaiming how rich he is. He is relatively clear about labeling our problems (whether he is accurate is a different matter; he is clear), he is dismissive on the metrosexual thing. He is pro-conservative. He is easy to understand. He doesn’t have perfect creases in his trousers.

Now, the case has been made that in many ways he is similar to Obama, Mr. I-Will-Make-The-Oceans-Recede. That they are both pompous assholes. Personally, I’d rather have Walker, Rubio, Kasich, Perry, Carson, etc., in other words, a grown-up, but Trump is resonating. I think it is that people are so sick of double-speak, lawyerly crap.

– Aggie

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How Clinton Will Hurt Your Investments

She proposes doubling taxes on short term gains – to 39.6%

I get that they don’t like people playing momentum games, but it is not their business. And she’s talking about investment lengths of 1-2 years. Leave people alone, for god’s sake.

Democratic presidential candidate Hillary Clinton will propose nearly doubling the U.S. capital gains tax rate on short-term investments to 39.6 percent, the Wall Street Journal reported Friday.

A Clinton campaign official said the Clinton rate plan would affect investments held between one and two years, which are currently taxed at a 20 percent capital gains rate, the newspaper reported.

Clinton, the front-runner for the 2016 Democratic presidential nomination, will outline her plan in a speech Friday in New York. She will argue that corporate efforts to boost stock prices in the short term undercuts longer-term economic growth and hurts American workers, the newspaper said.

Top-bracket single earners with taxable income higher than $413,201 and married couples filing jointly with income above $484,850 would be affected, the newspaper reported.

And this is lovely:

The plan would not count an extra 3.8 percent tax on net investment income included as part of the federal healthcare law, it said.

– Aggie

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Perfect. Just Perfect.

$15 minimum wage causes problems for businesses, employees

Who could have seen this coming?

Seattle’s $15 minimum wage law is supposed to lift workers out of poverty and move them off public assistance. But there may be a hitch in the plan.

Evidence is surfacing that some workers are asking their bosses for fewer hours as their wages rise – in a bid to keep overall income down so they don’t lose public subsidies for things like food, child care and rent.

The notion that employees are intentionally working less to preserve their welfare has been a hot topic on talk radio. While the claims are difficult to track, state stats indeed suggest few are moving off welfare programs under the new wage.

Despite a booming economy throughout western Washington, the state’s welfare caseload has dropped very little since the higher wage phase began in Seattle in April. In March 130,851 people were enrolled in the Basic Food program. In April, the caseload dropped to 130,376.

At the same time, prices appear to be going up on just about everything.

Some restaurants have tacked on a 15 percent surcharge to cover the higher wages. And some managers are no longer encouraging customers to tip, leading to a redistribution of income. Workers in the back of the kitchen, such as dishwashers and cooks, are getting paid more, but servers who rely on tips are seeing a pay cut.

Some long-time Seattle restaurants have closed altogether, though none of the owners publicly blamed the minimum wage law.

Already, though, there are unintended consequences in other cities.

Comix Experience, a small book store in downtown San Francisco, has begun selling graphic novel club subscriptions in order to meet payroll. The owner, Brian Hibbs, admits members are not getting all that much for their $25 per month dues, but their “donation” is keeping him in business.

“I was looking at potentially having to close the store down and then how would I make my living?” Hibbs asked.

To date, he’s sold 228 subscriptions. He says he needs 334 to reach his goal of the $80,000 income required to cover higher labor costs. He doesn’t blame San Francisco voters for approving the $15 minimum wage, but he doesn’t think they had all the information needed to make a good decision.

Let’s see… these guys voted for the folks who implemented the minimum wage laws. Now businesses are closing and employees are seeking fewer hours… oh, and businesses are finding creative ways to charge more. Sounds like a progressive success story to me! :)

– Aggie


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