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You might have seen some headlines from yesterday on the weekly report of Initial Unemployment claims about those claims "falling sharply" (Reuters headline phrase):
Applications for unemployment benefits fell by 37,000 to a seasonally adjusted 391,000 in the week ending September 24 from an upwardly revised 428,000 the prior week, the Labor Department said on Thursday.
My first prediction today is that the 391K figure first announced will be revised upwards when next week's report comes out. My second prediction is whatever good news that can be wrung from this report will have a limited overall effect.
CNN's report was a bit more circumspect with this:
The recent drop to 391,000 maked the lowest level since the week of April 2, when 385,000 new claims came in.
Still, economists cautioned against getting too excited about the better number. It's just one week of data, and according to a government spokesman, seasonal adjustments could have impacted the calculation.
...snip...
For the country overall, the unemployment rate is still at 9.1%...
Continuing claims -- which include people filing for the second week or more of benefits -- decreased by 20,000 to 3,729,000 in the week ended Sept. 17, the most recent data available.
That figure only includes people who are receiving benefits though, which typically run out after 99 weeks.
Including people who aren't currently receiving those benefits, about 14 million people remain unemployed in the United States.
Nice of CNN to point out that the unemployment figure does include those folks who persist in looking for jobs without finding them, even after they have exhausted all benefits.
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If you read me often enough, you have probably noticed that I tend to check various news and opinion sites throughout the TradMed each morning, after I've spent a few minutes reviewing emails and jobs sites. Most of the time, I just shake my head at the various levels of stupidity I find, not being able to quite give it the full YOU HAVE GOT TO BE F*CKING KIDDING ME! treatment so richly deserved. Then there are days like today where teh stoopid is so truly dumbfounding.
Today, we have Henry Kravis, co-founder of private equity firm KKR, sending up a fine whine to Bloomberg on how tighter credit rules are forcing the private equity firms to kick in more of their own money and making buy-outs more expensive. Sayeth Mr Kravis:
“As the debt markets tighten and the cost of capital goes up, something has got to give,” Kravis said yesterday at the Bloomberg Dealmakers Summit in New York. “You just have to pay more.”
Kravis, 67, said the cost of capital for a leveraged buyout has risen more than 2 percentage points since the firm agreed to buy Pfizer Inc.’s Capsugel unit in April, forcing buyers to put up more cash for deals and borrow less. Uncertainty in the equity markets also is making it more difficult to reap profits through initial public offerings or sales of companies owned by private-equity funds, he said.
...snip...
Buyout firms typically use loans secured on the targets they acquire to finance more than half of the purchase price and cash from their own funds for the rest. The firms seek to improve performance at the companies they acquire or expand them before selling them within about five years.
KKR, which Kravis created in 1976 with George Roberts and Jerome Kohlberg, is expanding into hedge funds, real estate and underwriting to reduce reliance on buyouts after the firm gained a listing on the New York Stock Exchange last year. KKR this year hired a group of former Goldman Sachs Group Inc. (GS) traders led by Bob Howard to start KKR’s first hedge fund.
Private Equity firms use small per cents of their own funds and large debt in leveraged buy-outs. There seem to be as many articles saying LBOs are bad as there are good. I'm sure it is no surprise that I lean towards the LBO = bad perspective. While there may be some benefits in efficiencies, there are far too many examples of lost jobs, high interest payments on those loans, and destroyed pensions. The pattern seems to be Private Equity firm creates huge debt to take over Business. Business then has to service the resulting debt before investing in R&D, employees, pensions, whatever. In order to streamline costs, Private Equity firm is within a couple of years "forced" to declare bankruptcy, turning their pension obligations over to the Pension Benefit Guaranty Corporation. At the end of approximately five years, the private equity firm files for an "Initial Public Offering" for all or part of the firm they had taken private five years before. IN the intervening years, they have cut employees, destroyed the pension, used company assets to pay off the debt (which never seems to be in their names, but only in the name of the company they used the debt to acquire) and walk away with more millions to off set the devastation they leave in their wake.
Congratulations Henry Kravis, your whine even managed to top that of folks CNN found who complained that they were more like Joe Schmuck than Warren Buffett and shouldn't have to pay a "Millionaire's Tax":
Only 24% of millionaires said higher taxes on higher incomes is the fairest way to go, according to recent survey from Spectrem Group, a research firm specializing in finances of affluent Americans. The biggest chunk of millionaires, 44%, think a flat rate tax across all income brackets is the fairest system.
...snip...
One millionaire CNNMoney reader said that for the past five years, his tax rate (including state income taxes) has ranged from 40% to 55% -- which he thinks is more than enough money to be forking over to Uncle Sam.
Uh, Earth to CNN Money reader - taxes going to the state are not going to Uncle Sam. You might also check with the folks making $30K or $40K per year and find out how much they are paying in taxes and fees at all levels.
DoG, but these WATBs do tend to irritate, don't they?
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Each week on Thursday, there's a report of the Initial Jobless Claims for the week before. Like many of the earlier weeks, last week's report forced the headline writers to find the lone tidbit of almost good news to concentrate on in their ledes. From Reuters:
(Reuters) - Americans filed fewer new claims for jobless benefits last week but the decline was not enough to dispel worries the economy was dangerously close to falling into a new recession.
Applications for unemployment benefits dropped 9,000 to 423,000 in the week ended September17, the Labor Department said on Thursday. That was roughly in line with expectations.l
Of course, once again, the earlier report had been revised upwards (from 428K reported on September 15). It is not going too far out on a limb to predict that the 423K reported for September 22 will be revised upwards on September 29.
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So apparently, the phrase of the week from Republicans is "Class Warfare!" as a response to President Obama's proposal for a new Millionaire's Minimum Tax. Paul Ryan and Lindsey Graham both used the phrase yesterday on the Bobble head shows. The proposed tax has also become known as the "Buffett Tax" in honor of billionaire investor Warren Buffett who has long noted the irony of his paying a lower tax rate for his investments (aka Unearned Income) than the rate paid by his secretary (Earned Income). Of course, the folks at Forbes Magazine and the Murdoch NY Post think it is a bad idea to do such a thing.
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It is an article of faith among Republicans (and far too many Democrats) that all those pesky "regulations" are to blame for the lack of jobs today and the ongoing economic slowdown. Just the first of this month, McClatchy had an article where they had surveyed small business owners across the country and the consensus was that in fact regulations are not the problem for small business but lack of demand is:
When it's asked what specific regulations harm small businesses _which account for about 65 percent of U.S. jobs — the Chamber of Commerce points to health care, banking and national labor. Yet all these issues weigh much more heavily on big corporations than on small business.
...snip...
None of the business owners complained about regulation in their particular industries, and most seemed to welcome it. Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-09 and its grim aftermath.
...snip...
Other small firms say their problem is simply a lack of customers.
My bold and I think we see where the folks complaining about regulations are really coming from. While the small businesses are struggling to make traction and find customers, the big businesses are squeezing every penny out of their operations in order to meet the quarterly demands of Wall St. And the anti-regulations crowd show an incredible level of short-sightedness. Instead of a knee-jerk "regulations bad" approach, they should be looking on regulations as an opportunity for innovation and building new businesses.
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Today's report of Initial Unemployment Claims from last week is out and once again, the economists are "surprised" at the figures reported (via Reuters):
The number of Americans filing new claims for state unemployment aid rose unexpectedly to 428,000 in the week ended September 10 from a revised 417,000 in the prior week, the Labor Department said.
It was the second straight weekly increase and took initial claims to their highest level since the week ended June 25. Wall Street analysts expected a modest dip in new claims.
Once again, that is an upwards revision from the previously reported figure. I'm feeling a tad too lazy to go back through all my blog posts to find the last week when there wasn't an upwards revision from the previous week's report but I know that it has been months since there has been anything but upward revisions. At best there might have been a week when the numbers reported were not revised at all a couple of months ago but that's it.
Realistically, I have to admit that the continual 'surprise' by the economists is just a continuation of the overall cluelessness shown by the financial elites as evidenced by this yesterday from the World Bank head (also via Reuters):
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On Tuesday morning, September 11, 2001, I was living in Springfield, IL. I had been laid off from my previous employer back at the end of July so my usual routine was to get up, make the coffee, check my email and the various job hunting sites for anything within my skills and career field to apply to, then surf the news sites. That routine stayed pretty much the same, even the week before when I had visited my best friend in Jacksonville, FL for a week, having returned to Springfield on Saturday, September 8.
It was a sunny morning and my then feline companion had joined me at the computer when I saw the first news article about a plane hitting the World Trade Center. My first thought was something small like a single engine Cessna or something. Then I saw the reports of a second plane having hit the World Trade Center and knew my first thoughts had been so very wrong.
When I saw the news of the second plane, I turned on the TV and checked CNN. I think I hit there just as the South Tower was collapsing because all I really remember from that point was the confusion. I spent the rest of the morning in front of the TV, watching, just as millions of others around the country. I was sitting there feeling impotent and wanting to do something so contacted the local Red Cross. I wound up going in to the their offices and giving blood. Along with a couple of hundred other folks in the Springfield area (my guess is that most blood banks across the country hit their capacity for at least a few weeks after 9/11).
I had spent most of the previous year (2000) officially living in Manchester, CT but commuting into Manhattan on Mondays and home to Manchester on Fridays via Amtrak and living during the week in a furnished studio in Battery Park City. Most mornings, I would walk up South End Ave to the World Financial Center where I would duck into the lobby, up to the walkway over West St and down to Liberty St. The first few months, I had been working down on John St near the South Street Seaport. I would head on up Liberty Street, past the Deutsche Bank Building, crossing over Broadway and down through the financial district. Occasionally, I would go to the local offices of my then employer on Wall St, so would head down past the Stock Exchange (and The Bull) but nothing at that end of Manhattan was much more than a ten to fifteen minute walk. After a few months, I was going over to offices on 16th St, near Union Square, so I would catch the N or R lines of the subway in the basement of the South Tower.
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So, here we are, waiting for President Obama to give his long awaited "Jobs" speech tonight. However, from the news reports and "analyses" in the TradMed speculating on the content and potential proposals I will not be holding my breath on there being much if anything worthwhile coming out of the speech. The cliche of "too little, too late" most comes to mind. While CNN had this report today on the stimulus from February 2009 having created jobs, it was nowhere near large enough. This article from Center for Economic and Policy Research from October '10, points out that there was a need for a stimulus nearly three times the size of the $787B from February '09.
We are and have been in an employment/jobs crisis for years now. Even while the official unemployment figure stays above 9%, even optimistic projections have unemployment to stay high through 2012, some projections have the high unemployment continuing as far out as 2020. Unfortunately, the current White House seems to be more willing to pretend to do something for show rather than actually doing something that will be effective.
As always, there are just some things that I do not understand. A large part of President's Obama's plan is further tax cuts (or rather, extending existing tax cuts such as the payroll tax cut). We have fairly strong evidence starting with the initial Bush tax cuts in 2001, that tax cuts have created few if any jobs over the past ten years yet we continue to be presented with tax cuts as a job creating panacea.
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Today is Monday, September 5, 2011. Since it is the first Monday of September, it is the national holiday known as Labor Day. Supposedly, it is the day when our politicians and pundits proclaim their unrelenting love for all things worker related - even as they spend the other 364 days a year doing all in their power to destroy the lives of workers by cutting salaries, limiting benefits. Just today, the Washington Post's Robert Samuelson had a column decrying the state of labor in the US:
On this Labor Day, there is little good news about labor. We have entered a long period of crushing unemployment and downward pressure on wages that may well transform the nation’s economic and political landscape. There was no job growth in August, and the overall numbers are stupefying: 14 million unemployed; nearly 9 million part-time workers wanting full-time jobs; 6.5 million who want jobs but have given up looking and are, therefore, not counted in the official labor force. People are only gradually recognizing the magnitude of the problem.
...snip...
It’s not only the jobless who will be affected. No one has yet repealed the law of supply and demand. At last count, there were 4.5 unemployed workers for every job opening. Bargaining power has shifted from labor to capital. Sure, some workers will get promotions and seniority raises. Otherwise, gains will be slim. Since September 2008, annual wage and salary increases have averaged 1.6 percent, the slowest pace in 30 years, reports EPI’s Lawrence Mishel.
...snip...
Still, the harshest effects of joblessness fall on the jobless. “We’re creating a bifurcated society,” worries Harvard economist Lawrence Katz. “We’re talking about a lost generation of younger workers and displaced workers.” Younger workers have a harder time starting careers. Because many skills are developed on the job, long unemployment spells can lower lifetime earnings. The same is true of older workers. Even when those who lose stable jobs get new work, they often suffer a 20 percent earnings loss for 15 years or more, reports economist Till von Wachter of Columbia University.
