Saturday, November 3, 2012

"Price Gouging" myth. Just had to get this off my chest.

Politician with courage: "I will let the price of gasoline rise so that most people will be able to purchase some gasoline. Not as much as they want/need, but they will have some. I will hear cries that I am allowing price gouging and I will be despised for this. But I know many more people will have gasoline than they otherwise would have in this emergency. I dont think I will be re-elected".

Politician without courage: "I will tell gas station owners they cannot raise the price of gas. When the stations run out of gas (because so many more people are wanting more gasoline than usual) I will blame the greedy station owners, suppliers or someone else. Most people will not have ANY gasoline (except for the lucky few in the front of the line with all their extra gas containers) but they will love me for standing up to the price gougers. I am pretty sure I will be re-elected. Gee, how did I just get away with that?"

Friday, November 2, 2012

Quick Snapshot of the JUST RELEASED jobs report for November. This is positive news.

A quick snapshot of the jobs report for October just released.  Numbers are in "thousands" so add 3 zeros to the end of each number you see.

Gainers were the usual suspects--Healthcare, Professional Services, Leisure and Hospitality.  Manufacturing showed an increase after a couple of months of decline.

Government was down after gaining for a couple of months. See more analysis below the graphic directly from the report.
Bureau of Labor Statistics

Total nonfarm payroll employment increased by 171,000 in October. Employment growth
has averaged 157,000 per month thus far in 2012, about the same as the average monthly
gain of 153,000 in 2011. In October, employment rose in professional and business
services, health care, and retail trade. (See table B-1.)

Professional and business services added 51,000 jobs in October, with gains in
services to buildings and dwellings (+13,000) and in computer systems design (+7,000).
Temporary help employment changed little in October and has shown little net change
over the past 3 months. Employment in professional and business services has grown by
1.6 million since its most recent low point in September 2009.

Health care added 31,000 jobs in October. Job gains continued in ambulatory health
care services (+25,000) and hospitals (+6,000). Over the past year, employment in
health care has risen by 296,000.

Retail trade added 36,000 jobs in October, with gains in motor vehicles and parts dealers
(+7,000), and in furniture and home furnishings stores (+4,000). Retail trade has added
82,000 jobs over the past 3 months, with most of the gain occurring in motor vehicles
and parts dealers, clothing and accessories stores, and miscellaneous store retailers.

Employment in leisure and hospitality continued to trend up (+28,000) over the month.
This industry has added 811,000 jobs since a recent low point in January 2010, with
most of the gain occurring in food services.

Employment in construction edged up in October. The gain was concentrated in specialty
trade contractors (+17,000).

Manufacturing employment changed little in October. On net, manufacturing employment
has shown little change since April.

Mining lost 9,000 jobs in October, with most of the decline occurring in support
activities for mining. Since May of this year, employment in mining has decreased
by 17,000.

Employment in other major industries, including wholesale trade, transportation and
warehousing, information, financial activities, and government, showed little change
over the month.

In October, the average workweek for all employees on private nonfarm payrolls was
34.4 hours for the fourth consecutive month. The manufacturing workweek edged down by
0.1 hour to 40.5 hours, and factory overtime was unchanged at 3.2 hours. The average
workweek for production and nonsupervisory employees on private nonfarm payrolls edged
down by 0.1 hour to 33.6 hours. (See tables B-2 and B-7.)

In October, average hourly earnings for all employees on private nonfarm payrolls edged
down by 1 cent to $23.58. Over the past 12 months, average hourly earnings have risen
by 1.6 percent. In October, average hourly earnings of private-sector production and
nonsupervisory employees edged down by 1 cent to $19.79. (See tables B-3 and B-8.)

The change in total nonfarm payroll employment for August was revised from +142,000 to
+192,000, and the change for September was revised from +114,000 to +148,000.

Tuesday, October 30, 2012

Un-intended consequence of "Obamacare"---If you work over 30 hours per week but less than 40 on average, look out for cutbacks to get you below 30 hours. Reality Bites....

One of the consequences of passing a large piece of legislation, that may be scant on implementation details, is the agency in charge of carrying out the provision(s) has to interpret the legislation and issue rules and guidelines.

The IRS has issued such rules on how businesses with over 50 employees must comply with "ObamaCare".   Beware of un-intended consequences!!

The IRS has clarified what determines a Full-Time Employee and a Part-time employee.

 The IRS has established 30 hours per week as the mark to distinguish part-time from full-time work.  Work over 30 hours per week and the business must treat you as a full-time worker eligible for full-time benefits.

This is important because if you work an average of over 30 hours per week the business must provide you insurance coverage under the provisions of the Affordable Care Act.  An average estimate is this will cost a business roughly $5,000 (maybe less, maybe more) per employee OVER the 30 hour mark.  If the business does not provide this benefit they will be subjected to a fine.  Either way, an employee will become more costly to the business.

The un-intended consequence of the rule/regulation is that many businesses may decide to pull down the average hours worked per employee to get below the 30 hour requirement.  This potentially can effect those workers incomes.

If you are one of those "marginal" workers whose hours are perilously close to that cut-off,  look out for cutbacks in your hours in the coming months. Now you know why. 

Also, if you are looking for an example of how government rules and regulations are costly to a business, go to the ACTUAL IRS ruling on this.  Imagine you are a Human Resources person and you have to figure out how to apply this to EVERY worker employed by the business.  Multiply this by 1,000's from various government agencies and you begin to see the scope of the problem.

HT: Washington Post for the idea behind this posting.


Monday, October 29, 2012

"There is no profit in destruction"---This storm is beginning to affect economic reasoning as well...

An example of Frederic Bastiats "Broken Window Fallacy".  The BWF decries the "bad economist" and his view that there is a positive side to destruction. 

There are visible benefits to rebuilding, or fixing a broken window, but seldom is considered the unseen costs of what might have been purchased had the window not been broken.  What you add you must subtract as well.  This

This is one of the criticisms of calculating GDP----it only counts the stuff purchased to fix things. It does not subtract the value of things already in place and productive that were destroyed.

Yes, broken windows happen and need to be fixed, but it should not be considered a net positive for the economy by politicians and pundits.  It is neutral, at best.

From Forbes

Is Hurricane Sandy To Provide A Stimulus For The US Economy? 
The sharp divergence between macroeconomic and microeconomic data can certainly be attributed to hurricane Sandy that is about to hit Eastern US—a highly populated region—prompting consumers to stack-up to all kinds of things, from batteries and candles, to bottled water, to snacks, and all-sorts of dry food. Is this rush of consumers to spend a very-much needed stimulus of the US economy?
Definitely not, as Sandy is one time event, and as the boost in demand for certain items this week will turn into bust for the same items in the weeks to follow. A boost in the demand for water bottles this week, for instance, will turn into bust next week, as consumers over-stack the product. But, what about the impact of cleaning and reconstruction that is expected to follow the hurricane? Wouldn’t it give a boost to the economy? 
It depends on the extent of the damages and magnitude of the reconstruction to be done. Some experts talk of damages in the order of $10, $20, even $100 billion—seeing a “Sandy stimulus package.” But even if we go with the highest estimate, $100 billion, it is a too small number given the size of the US economy. Besides, whatever stimulus comes from cleaning and reconstruction will be mitigated by other factors like declines in the tourist sector, and losses in economic activity, due to disruptions in transportation and communication. And don’t expect any significant boost from policy makers.

The bottom line: We do hope and pray that the damages from Sandy will be minimal. A stimulus from a storm is something we don’t need.
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