Saturday, December 5, 2009

Is Economic Recovery Just Around the Corner????

Are we at the bottom of the fall in employment?  Hard to say for sure but a net loss of "only" 11,000 jobs is significant given the situation for the last 9 months or so.  We are still going to behind the 8-ball for a long time, however.  It is estimated that the US economy must created at least 125,000 rto 150,000 net NEW jobs EVERY month to keep up with population increases (immigrants/birth rate) AND new entrants into the job market (yes, that is you graduating high school student and/or graduating college student!).  So when we start the economic recovery we will still be behind, technically, by 1 to 2 million jobs. There are a couple of charts in the WSJ today that are informational.  This one...

has a couple of interesting points. The number of temporary workers hired helped stem an increase in the unemployment rate.  Businesses are hesitant to hire permanent workers right now for a couple of reasons.  One, the spike in GDP (demand for new goods and services) is encouraging to businesses, but there is uncertainty as to the sustainability of that demand.  Statistically, few businesses are going to add to their workforce if they are unsure that new orders for their products/services are going to be demanded longer-term.  What they will tend to do is hire temporary workers, if needed, to fill in labor gap they may be experiencing in production.  Second, perhaps along with, or before, hiring temporary workers, businesses will give "extra" hours to workers who had their hours cut because of lack of demand for their good/service.  As you can see from the chart, the average work week increased slightly.  There is still under-utilized capacity in most businesses so, the prudent business owner is going to try to get the most out of the trimmed down workforce as possible (and the workers may be greatful for the increased hours/overtime) before realizing it will be more cost effective to hire additional workers as they reach/surpass capacity.  Only then will "new" (NOT jobs that were lost then the SAME job re-filled --that is NOT job creation!!)  jobs be actually created. 
The second chart shows where the jobs were lost and where gained...

We know 7,000 of the "new" jobs were created in the public sector and most (I assume) of the Education AND  probably a good portion of the healthcare jobs (approx half of all healthcare spending originates from government, Fed/State).  These jobs are ALL taxpayer financed and are made possible by revenues from individuals, business, or borrowing (since revenues are falling and these plans are not already budgeted, I am guessing they are paid for with borrowed money).  I am sure a good number are residuals of the fiscal stimulus that makes its way through the bureaucracy and necessitates the hiring of people to oversee the vast sums of money going to designated "shovel-ready" projects.  My question is, will these jobs disappear when the stimulus money runs out or are they going to be so embedded that they will be impossible to eliminate?  Does this lead to a permanently enlarged public sector?  Is this good? Bad? or will the economic growth resulting from it be so significant that these jobs will eventually pay for themselves?  Whaddaya think???

Wednesday, December 2, 2009

America as Texas vs. California

How does Texas stack up against California as a place to do business?? Texas gets criticized for being "stingy" in the area of social services and the environment, and it is an area for improvement.  However, there is something to be said for not being over-extended in fiscal obligations, when in good economic times are relatively easy to fund, but when there is a down-turn in the business cycle those same programs that people come to rely on get funding cuts and people "suffer".  For better or worse, we tend to be on an even keel in terms of the size of state government and what we promise in future financial obligations.

Sunday, November 29, 2009

Past Recessions Explained---GREAT interactive graphic

Click HERE for an excellent graphic and short 2 minute explanations of recessions since 1960...Highly recommended!!

Food Stamp Usage Across the Country

Automatic Stablizer at work...Food stamps(Link to NYTimes article) are a Non-Discretionary Fiscal Policy that "kicks in" whenever the state of the economy demands it...Govt spending will INCREASE to meet the need...

Supply is GREATER than Demand---Should we SUBSIDIZE Apple Growers???

Becaue of a bumper crop of apples (for story click HERE), the price that apples growers are getting in the market are at their lowest levels in a long time.  In fact it is a money losing propostion to even pick the apples off the tree (lots of wasted apples).  What is the opportunity cost of picking the apples? Of NOT picking the apples?  Because this may cause some growers to go out of busines, should the Federal Govt offer subsidies to the farmers so they can stay in business and assure a future supply of apples? (Link courtesy of Mankiw)

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