manufacturing

Last Year’s Jobs Gains Helped Those Hit Hardest By Recession

by AP on January 6, 2012

Huffington Post…

WASHINGTON — For many people whose job prospects faded most during the recession, 2011 brought a small dose of relief. When unemployment was surging, the youngest U.S. workers, the oldest, those without college degrees and men as a whole all suffered disproportionately. Last year, those groups – whose unemployment rates still exceed the national average – had better success than others in finding jobs, according to Labor Department data released Friday. Many found low-paying jobs in technology firms and as health care technicians, machinists, autoworkers, hotel and store clerks and waiters. A big exception was African Americans, who were especially hard hit by the recession. Their unemployment rate didn’t budge in 2011. All told, about 13.1 million Americans remain unemployed. About 2.5 million have quit looking for work altogether. The proportion of American adults who have jobs has risen slightly over the past year, to 58.5 percent. But that’s down from 59.4 percent in June 2009, when the recession officially ended, and from 63.4 percent five years ago. EDUCATION: Unemployment among workers with less than a high school diploma fell from 15.1 percent to 13.8 percent. By comparison, unemployment for those with a bachelor’s degree declined by a smaller margin, from 4.8 percent to 4.1 percent. “The less-educated tend to suffer more in downturns and recover more rapidly when employment picks up,” said Lawrence Katz, a Harvard labor and economics professor. Katz cautioned that the less-educated will face difficulty in coming years as many industries demand harder-to-find technical skills from job applicants. SEX: The unemployment rate for men fell more than twice as fast as for women in 2011. Hiring was strong among male-dominated industries like manufacturing. And more men entered some fields long dominated by women, including health care and retail. The unemployment rate for men sank from 10 percent to 8.7 percent. But women remain better off. Their rate fell from 8.6 percent to 8.3 percent. “You’re seeing a shift,” Katz said. “A lot of men are dropping out of the workforce, but those that are staying are seeking more schooling, more technical certifications, and are entering fields they wouldn’t normally go into.” AGE: In 2011, employment prospects were best for workers ages 20 to 24 and those 65 and up. Some young men are being hired for entry-level positions at lower pay than in years past. And some retirees returned to the workforce last year after their retirement portfolios took a beating over the past four years. Unemployment is dropping faster for those ages 35 to 64. But part of the reason is that a disproportionate share of people in this age group have given up looking for jobs. Once people stop looking for work, they’re no longer counted as unemployed. Young adults and retirees fared slightly better than the middle-aged in 2011. Some gained lower-paying jobs in retail, manufacturing and technology firms. The percentage of workers ages 20 to 24 and those over 65 who are employed rose at a faster pace than other age groups in 2011, according to the Labor Department data. RACE: Unemployment fell most among Hispanics. Their rate declined from 12.9 percent to 11 percent. In part, that’s because a larger-than-average share of Hispanics have stopped looking for work. Immigration has also slowed. That means there are fewer foreign-born job-seekers in the United States. Since the recession ended more than two years ago, the employment gap between blacks and whites has widened. The rate for African-Americans was unchanged last year at 15.8 percent. By comparison, white unemployment fell from 8.5 percent to 7.5 percent. Unemployment among whites 25 and over with a bachelor’s degree is just 3.9 percent. For similarly educated African-Americans, the rate is more than double: 8 percent. In previous years, that gap had been roughly 1 percentage point. One reason for the much wider disparity is that college-educated African-Americans are disproportionately represented in state and local government jobs, said Algernon Austin, director of the Economic Policy Institute’s Program on Race, Ethnicity and the Economy. As those governments have increasingly slashed their payrolls to close budget gaps, many black workers have lost jobs. “The gap is becoming more noticeable after recessions end, and African-American workers are facing increasingly long odds at finding a job,” Austin said. Among the four identified racial groups, Asians have the lowest unemployment rate. It fell from 7.2 percent to 6.8 percent last year.

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Last Year’s Jobs Gains Helped Those Hit Hardest By Recession

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Harlan Green: 2012 Will Be Better

by Harlan Green on January 3, 2012

Huffington Post…

The elements seem to be in place for a better 2012 economy. Why? Banks are lending again, and it was tight bank credit after bursting of the housing bubble that basically stopped businesses from growing. Banks stopped lending because of their losses from the Great Recession, which finally ended in June 2009. So after three years of Scrooge-like underwriting following 2008′s financial crisis, banks have finally turned on the spigot, boosting lending at annual rates as high as 8.2 percent since July, according to Federal Reserve statistics. Lending had fallen from mid-2008 through this year’s second quarter, deepening what became the worst recession since the Great Depression. The data seem to allay fears that making banks keep more capital on their books as a cushion against future downturns and loan losses will take away the cash flow businesses need to keep the recovery moving. Even small businesses have seen a difference, says Bill Dunkelberg, chief economist of the National Federation of Independent Business. In a monthly NFIB survey , only 3 percent of small-business owners say lack of credit is their most important problem, trailing taxes, regulation and still-sluggish demand. Then the Conference Board’s Index of Leading Economic Indicators continues to show 3 percent plus GDP growth for the next 6 months. Graph: Wrightson ICAP The LEI is a weighted gauge of 10 indicators designed to signal business cycle peaks and troughs. Among the 10 indicators that make up the LEI, seven made positive contributions in November. The index rose a very solid 0.5 percent following October’s 0.9 percent surge. The leading positive is the rate spread which reflects the Federal Reserve’s zero interest rate policy, said its press release. The second positive is building permits which appear to be building steam in what is very good news for the construction sector. Consumer expectations are also a big positive in the month and judging from this month’s consumer sentiment report look to be a big positive for December. Another positive that’s likely to extend through this month is the November improvement in jobless claims which gave the fifth strongest contribution to the month’s 0.5 percent gain. The sharp decline in weekly initial unemployment insurance jobless claims means fewer workers are being fired. Layoffs are on a steady decline in what is good news for the jobs market and for the December employment report. Though initial claims worsened by 15K in the week of December 24, reversing roughly half of their early-December improvement, the 4-week moving average fell for the ninth consecutive week to 375K, which is still a marked improvement from the levels seen in October and November. Graph: Econoday Both the University of Michigan and Conference Board sentiment surveys continue to improve. The U. of Michigan reading implies a very strong 72.1 over the last two weeks which points to momentum for January. The bulk of the gain is centered in expectations, at 63.6 in December for a more than eight point monthly gain that points further to momentum in the New Year. The assessment of current conditions, likely held down by bad news out of Europe, rose only two points in the month to 79.6. Graph: Inside Debt The New York-based Conference Board said that its December Consumer Confidence Index rose almost 10 points to 64.5, up from 55.2 in November. The surge builds on another big increase in November, when the index rose almost 15 points from the month before. One likely positive for sentiment is improvement in the jobs market as well as the stock market which has been on the recovery, said Econoday . Another positive may be gasoline prices which, despite $100 oil, are on the decline. One-year inflation expectations eased one tenth in the month to 3.1 percent with five-year expectations unchanged at 2.7 percent. Small businesses are important because they account for 70 percent of new jobs. Though slack demand is still making entrepreneurs wary of borrowing, says NFIB chief economist William Dunkelberg: Only 12 percent think business will be better in 12 months than it is now. “Two-thirds of business owners say, “Who wants a loan?” says Dunkelberg, who is chairman of a small Pennsylvania bank. “In thirty years, I’ve never seen anything like it. The banks all have money to lend, but there’s a shortage of eligible customers coming in.” Small businesses are the key, so we know the recovery will become sustainable if they can continue to borrow. Increased bank lending is a sign of increased demand for products and services in 2012, a good sign for all businesses.

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Harlan Green: 2012 Will Be Better

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Liz Ryan: Welcome to the Antique Shop Part Three: Will Granular Work Replace the Full-time Work Week?

January 3, 2012

For ever, or at least as long as there have been Human Resources departments, employers have shipped talent (or at least manpower) into their factories and offices in one uniform container. That container is called the Forty-Hour Work Week, although it hasn’t been anywhere near as small as 40 hours a week in decades. That’s what employers love about full-time workers, of course, and the reason most of them are so reluctant to mess around with part-timers and job-sharers. They like the fact that the full-time worker container is almost infinitely elastic. You can stretch it. You can load people up with work and use the big stick to keep them in fear, and get sixty or seventy hours of work out of them every week. You can hire them as ‘permanent’ employees to pay them less than contractors, and lay them off at any moment. You don’t want to get me started on the harm this new paradigm has done, not only to individuals and their families but to the mental and physical health of working people and to the health of organizations, because that’s a topic for another column. Let’s just say that the full-time worker frame is very well established. We know how it works. You have a full-time job, and the job owns you. The threat of dismissal keeps you in fear and convinces you that your job is to please your boss at all times. If your social life, your health and your sanity suffer in the process, that’s just the breaks. At the same time that we’re groveling and panicked, we’re cynical. We can see that what HR people call the Old Social Contract lies in tatters. The corporate ladder is sawdust at our feet. We know that we’re not going to retire from wherever we’re working now, unless we’re collecting Medicare already. An HR friend of mine was leading a Monday-morning orientation session for new employees, and when she got to the point where she said “We’re going to talk about the retirement plan now” the group of newcomers burst out laughing. They thought it was hysterical. Oh please, they told her, do we really have to sit through that? If the idea of long-term employment with the same firm, or the notion that full-time employment has some connotation of stability or fixedness about it, are history — and they are — can the concept of a full-time, salaried work unit survive? I don’t see how. Employers are going to start paying for what they need, and letting the non-essential stuff go by the wayside. For every full-time job that an employer can wring sixty hours out of, there’s another full-time job somewhere in the organization where hours and hours are spent on work that has no point and no value to the employer or its clients. Now we have crowdsourcing, and employers are starting to be able to find vendors to complete critical projects without adding overhead or headcount (or office expenses or real estate taxes or carbon footprint or energy costs). We tend to think that when lots of people are available to perform work, prices must fall, but needs can be incredibly specific. I did a consulting project one time for a boutique strategy consulting firm, and it was a last-minute thing. This was in 1997, and the CEO needed me and the guru strategy guy to interview a bunch of his top execs within a few days and give him some insights back. The strategy guru told me to name my ‘inconvenience price.’ I didn’t have a number — I’d never had a project like that. I quoted him what felt like a sky-high rate: thirty-five hundred dollars a day for four days of work. He said “That’s fine.” After the project was done, I asked the guru “Did you mark up my rate the way you do for the associates?” He said “I charged the client twelve five a day for you.” He marked up my rate by nine thousand a day, and you know what? That’s fine with me. I love that he did that. He deserved that markup, because he knew he could deliver and he knew what his project was worth to the client. Welcome to the antique shop. Crowdsourcing lets companies piece out work to people who can do it on the buyer’s schedule and to the buyer’s specifications, and to learn what works for them and which providers work the way they like to work. I’m trying to see the evil in it, and I’m failing. We have a company here in Boulder that manages SEO optimization on a crowdsourced basis. The company is called Trada, and they put companies together with SEO optimizers who take on projects that make sense for them. There are something like 2000 ‘optimizers’ who work on Trada-enabled PPC and Facebook campaigns. Here’s what I see: 2000 people who are working when they want at rates and under conditions that work for them. That seems like a good thing, to me. What’s interesting too is that Trada is a company that values its employees like we used to do at U.S. Robotics — they tell them “We care about what you get done, not when you come in and when you leave.” If you were doing SEO optimization professionally, wouldn’t you want to work for a bunch of different clients, rather than being stuck with one management team (whose appetite for SEO innovation might wax and ebb over time) or one crazy boss, or one anything? Wouldn’t you want to hone your craft working on multiple projects over time? Sometimes, I talk to corporate people who say “Man, I’m glad I’m not a consultant. Too hard to drum up business all the time!” I worry about people who say that. Anybody who doesn’t know what s/he brings to the marketplace, who needs it, and what it’s worth is in trouble, if you ask me. (Welcome to the antique shop.) Any kind of work that can be done in a more granular way than the way it’s done now is ripe for crowdsourcing. That means legal work, administrative work, HR work, and tons of other things. You’re not going to crowdsource the installation of snow tires on your Jeep, but you can crowdsource almost anything that can be done in an office, and I’m sure there are folks already working on granularizing all kinds of work apart from SEO optimization. For a lot of different reasons, I like the trend, but because I acknowledge that it’s also likely to be massively disruptive to employers and to working people, I feel I should tell you why. For starters, I hate the container called full-time work; it’s not fair to employees. Companies use power and fear and guilt to get people to spend way too many hours and brain cells on jobs that don’t actually value or deserve them. I see crowdsourced work or granular work more generally as a way to re-balance the employer/employee equation. When you only get to take one full-time job and then you’re stuck with it for some period of time, you’re tying up your brand and your value with the employer’s brand, and that’s not always to your advantage. We need to manage our own brands, our own credibility and our own learning. No employer is ever going to value your career or your mojo as much as you do. I think it’s embarrassing and ridiculous that we still walk into big office boxes at eight-thirty in the morning and walk out of them at five or six or seven in the evening, believing that although we think all the time and have ideas all the time, the only time that ‘counts’ as work time is the time we spend in the box. That’s goofy. One hundred years from now, anthropologist/historians are going to look back and ask “What the heck was wrong with those people?” We know we don’t need the box. It’s fear that keeps managers keeping people in the box, and crowdsourcing has the potential to loosen that stupid, outdated leash . When I started to speak and write and consult on my own, I had to find my voice and find my value. Frankly, I couldn’t make a dime as a consultant doing the stuff I used to do as a corporate HR VP. The message to me, a decade later, is that there’s not a lot of value (to an employer or to its employees or shareholders or customers) in much, perhaps most, of what happens in corporate America on any given day. If we could separate the political posturing and wrangling and CYA garbage from the actual work and quantify it, the lost time and energy would be huge — incalculable. We know this, but we don’t acknowledge it, much less dig in to solve it. Crowdsourcing says “Work has value, and we’re going to pay what the market demands.” People who work as crowdsourced SEO optimizers don’t have to do corporate toady things because no one cares, and no one is paying them to. Now that I work for people who actually need what I can do for them, I’m closer to the need and to the market. Crowdsourcing helps you get there. The danger of being a corporate person is that you lose touch with the actual value of your work. That’s why so many of my clients are laid-off corporate people who say “I worked on several large cross-functional initiatives related to assimilating pan-divisional processes” while I scratch my head. That’s a dangerous way to live. What good does your work do? What pain does it solve? People whose work is granular always know those answers. Crowdsourcing is happening and it’s inevitable, but I think the shift to granular work deserves a higher-level perspective than “We’d better figure this out, since it’s coming whether we like it or not.” I think that getting comfortable with a mix of ‘regular’ old-fashioned staff people and crowdsourced workers builds muscles that every employer and every team needs to build. I think that losing our reliance on the phalanx of employees walking into the box at a certain hour and walking out one minute after the boss departs can only be a good thing. I think teaching people and enabling them and then ultimately requiring them to name their price can only be a good thing, for everyone.

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Bank Of America’s Won’t Deposit New Bride’s Checks

January 3, 2012

A branch of Bank of America in Albany, New York, refused to let a new bride deposit her wedding checks because she kept her maiden name, her husband Pete Iorizzo wrote in the Albany Times-Union , where he covers news and sports. In his story, “Pete vs. Bank of America,” Iorizzo explains that most of the checks he and his wife received from wedding guests were addressed to “Mr. and Mrs. Iorizzo.” Because his wife chose to not to change her surname, he endorsed the checks himself and designated them “for deposit only” so she could drop by Bank of America and deposit them in the joint account they held there. But bank tellers refused to deposit the checks due to his wife’s different last name, even though she offered to present a copy of their marriage license, Iorizzo said. What followed was a tedious series of arguments with Bank of America management over her right to deposit the checks as a member of a married couple who chose not to follow a traditional path. According to Iorizzo : “Here’s the thing I can’t understand,” I told the manager during our 10-minute phone conversation. “This must happen all the time.” After all, 10 percent of women don’t change their names – a small percentage, sure, but a figure that amounts to about 300,000 women a year. Surely many of these women receive checks as wedding gifts. And surely many do business at Bank of America – the largest bank in the country. “I’ve only seen this once in my 20 years in the business,” the manager told me. Apparently the manager was referring solely to local business, because Iorizzo faced no opposition when he drove to the Bank of America one town over, who accepted the couple’s checks without argument. It’s not the first time this year Bank of America has run into trouble over a customer’s identity. In July 2011, the Los Angeles Times reported that the bank had failed to deliver $30,000 worth of social security payments to an elderly man in Riverside, California, because they had accidentally deposited the money in another customer’s account over the previous two years. While initially claiming the error was irreversible, the bank eventually corrected the problem after the District Attorney’s office launched an investigation on the case. In another mixup case, a man in Northampton, Massachusetts, reported receiving a notice from Bank of America demanding that he pay an outstanding mortgage of $0.00 . Though he knew he wasn’t in danger of losing his home — he had never missed a mortgage payment — he was disappointed to find his credit score lowered and that he was unable to get in touch with the bank. After learning about his story on the local news, Bank of America restored his credit and issued a $150 gift card . But Bank of America has taken steps to aid its customers as well. When the bank learned that a terminally ill woman in Sacramento, California, had not been paying her mortgage because of mounting medical bills, it decided to delay eviction proceedings until after her passing .

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Richard Barrington: Stories That Will Shape 2012 for Deposits

January 3, 2012

Certainly, 2011 did not lack for big news stories — some of them were even big enough to draw attention away from the Kardashians and the NFL and NBA lockouts. What’s more, some of the major events of 2011 will help determine the course of the economy in 2012. Here are four examples of 2011 headlines that will have significant implications for 2012′s economy: 1. The ‘Arab Spring’ topples long-entrenched dictators First Tunisia, then Egypt and, eventually, Libya. Now Syria’s dictator is under pressure. Across the Middle East, popular revolutions brought an end to dictatorships that many of the citizens of those nations had lived with their entire lives. How will this play out in 2012? The optimistic view is that the flowering of democracy will help isolate (and therefore neutralize) Iran. The pessimistic view is that Islamists will win control over those nations, further radicalizing the region. The result could impact whether oil prices remain reasonably stable, or spike up as tensions rise. With inflation already overwhelming CD, money market and savings account rates , the last thing depositors need is higher energy prices. 2. Democrats and Republicans put politics before progress Partisan battles are nothing new, but instead of saving the acrimony for key issues, the current version of Congress seems to have made the stalemate their default position. The optimistic view is that inaction will help rein in government spending. The pessimistic view is that in an election year, both sides will favor spending over fiscal discipline, and the deficit will get further out of hand. 3. European debt woes threaten the euro The European debt crisis carries threats on two levels. One is that austerity measures will cripple the European economy, and thus stunt demand in an important/export market for the U.S. The second threat is that massive debt defaults could bring down major banks around the world. The optimistic view is that the long-developing nature of this crisis has allowed banks to ramp down their exposure to troubled debt in an orderly manner. The pessimistic view is that the promise of a bailout from the European Union has encouraged financial institutions to speculate in that debt even further. 4. U.S. unemployment drops below 9 percent This shouldn’t be anything to brag about, but with unemployment having been above 9 percent for most of the past two-and-a-half years, it was progress when unemployment dropped to 8.6 percent in November. The optimistic view is that this gives the economy some sustainable momentum. The pessimistic view is that the last time unemployment dropped below 9 percent, in early 2011, it proved to be a false start. What the stories above have in common is that while all of them made a substantial immediate impression, they will also likely have far-reaching effects that could be even more significant. And if 2011 is any indication, it would be wise to expect a steady flow of events like these in 2012 as well. The original article can be found at Money-Rates.com : ” Stories that will shape 2012 for deposits ”

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Swiss Bankers Charged With Hiding U.S. Taxpayer Accounts From The IRS

January 3, 2012

Three Swiss bankers were charged Tuesday with hiding more than $1.2 billion in U.S. taxpayer accounts from the IRS, by Preet Bharar, the Manhattan U.S. Attorney. Michael Berlinka, Urs Frei And Roger Keller allegedly conspired with some U.S. taxpayers and others to hide Swiss bank accounts and the income generated from them while working as client advisers for a Swiss bank, according to a press release from Bharar’s office. The three worked on dozens of undeclared bank accounts in 2008 and 2009 in an effort to scoop up business lost by UBS and another Swiss bank following reports that UBS was helping U.S. account holders evade taxes, according to the press release. The case has been assigned to Judge Jed Rakoff, according to the release. The three bankers allegedly helped U.S. clients open using sham corporation names in other countries as well as used code names and numbers on undeclared accounts to minimize references to the clients’ actual names, according to the press release. In addition, they allegedly made sure that any mail related to the accounts wasn’t sent to clients at their U.S. addresses and communicated using their personal email accounts to avoid detection, among other allegations, according to the release. The charges come as tensions between Switzerland and the U.S. are rising over Swiss bank secrecy — a result of a Swiss law that prevents Swiss bankers from revealing client information, according to Reuters. S wiss banks hold an estimated $2 trillion in offshore wealth and the U.S. Justice Department is investigating 11 Swiss banks suspected of helping wealthy Americans evade through Swiss accounts.

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Dave Johnson: Republicans Have Shut Down the NLRB. The President Must Act!

January 3, 2012

As of now an agency of our government, the National Labor Relations Board (NLRB), is effectively shut down, unable to do its job. This is a “nullification” by Republicans, of laws that protect workers and companies , in exchange for campaign help from the 1%. They are simply obstructing, blocking appointments in order to keep the agency from functioning . The President has a responsibility to keep the government operating and must use his power to make recess appointments to get the NLRB up and running. The NLRB The mission of the National Labor Relations Board (NLRB), by law , is “to protect the rights of employees and employers, to encourage collective bargaining, and to curtail certain private sector labor and management practices, which can harm the general welfare of workers, businesses and the U.S. economy.” Once again, the reason we have the NLRB is: “…to protect the rights of employees and employers, to encourage collective bargaining, and to curtail certain private sector labor and management practices, which can harm the general welfare of workers, businesses and the U.S. economy.” For readers who missed that, here it is in bold: “to protect the rights of employees and employers, to encourage collective bargaining, and to curtail certain private sector labor and management practices, which can harm the general welfare of workers, businesses and the U.S. economy.” It’s The Law That’s right, it is the policy of the U.S. government, and the law , to “encourage” unionization because higher wages and benefits helps Americans and our economy overall. By law. It’s the law. Influence Of The 1% Yes, it’s the law. But so what? Paying good wages and providing benefits means that the 1% and their corporations might have to wait a bit longer to stash away a few billion more, so they are furious at such government “interference.” Yes, it is better for everyone in the long run when working people do better, but it isn’t better for the 1% right now, this quarter , so they fight every effort to help the middle class. The 1% and their big corporations have a lot of influence. They dole out generous campaign contributions to those politicians who do their bidding. And they set up “outside groups” that are allowed to spend unlimited amounts to help those they favor and fight those they do not. And they hire lobbyists — and let current members of Congress and their staff know they can hire them , too, later, for extremely generous salaries, if they just play ball now. Agency Shut Down In 2010 the Republican majority on the Supreme Court ruled 5-4 that the NLRB must have a quorum of board members or it cannot decide cases. Ongoing Republican efforts to keep the Board from operating succeeded. Over 600 decided cases were thrown out. Big companies could continue to get away with firing people for trying to exercise their legal rights to organize unions so they could get better pay and benefits, regardless of what the laws said. So Republicans are doing the bidding of the 1%. Today the NLRB is effectively shut down because it does not have enough Board members to function. Republicans in the Senate have blocked appointments to the Board, to keep it from operating, to prevent it from deciding cases, so that big companies can operate with impunity and continue to shovel all the gains from our economy up to the top 1%. Nullification “Nullification” was the pre-Civil War “states rights” practice of Southern states simply ignoring federal laws. The Republicans are again engaging in nullification, on behalf of the 1%. Kevin Drum at Mother Jones, in Nullification Makes a Comeback , explains, Republicans are refusing to allow votes on President Obama’s nominee to head the new Consumer Financial Protection Bureau and on his nominees to fill vacancies on the National Labor Relations Board. In both cases, the Republican refusal is explicity aimed at shutting down these agencies. … Republicans make no bones about why they’re doing this. They opposed the CFPB from the start, and they’re now using the filibuster as a way of unilaterally preventing it from operating even though it was lawfully created by a vote of Congress and signed into law by the president. Likewise, they’re afraid the NLRB is about to make some rulings they dislike, so they’re using the filibuster as a way of shutting it down by denying it a quorum. The 1% are only 1%, and we are technically still supposed to be operating as a country where the majority rules. So when they can’t get their way the 1% engage in various schemes to get their way. We have seen an unprecedented use of filibusters to block the ability of the Congress to function. We have seen hostage-taking and shutdown attempts. In the case of the NLRB (and the new Consumer Financial Protection Agency) we are seeing another “nullification” effort — preventing the agency from operating by preventing appointments. This is not politics, this is not bipartisanship, this is intentional obstruction to keep the government from operating. Where Is Our President? The President of the United States has a lot of power — if he chooses to exercise that power. One of his powers is to make appointments himself at times when the Senate is unable to make appointments. This is in the Constitution because the Founders understood how important it is to keep the government operating. The Constitution is clear about the President’s power, and his implied responsibility to use that power to keep the government operating: Article II Section 2: The President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session. Article II Section 3: … he may, on extraordinary Occasions, convene both Houses, or either of them, and in Case of Disagreement between them, with Respect to the Time of Adjournment, he may adjourn them to such Time as he shall think proper; If the House and Senate disagree on adjournment, the President can adjourn them. And when they are adjourned he can make recess appointments. The Congress is engaging in a charade of “pro-forma” sessions to give the technical appearance of being in session when they are not in session as part of this obstruction/nullification strategy by the agents of the 1% to keep our government from functioning for the 99%. The 15-Second Option The President had the power to make recess appointments at noon today, when the Senate was officially in recess between the first and second sessions of the 58th Senate . This would have kept this important agency in operation, doing its legally mandated job of protecting workers and companies. The president didn’t. President Teddy Roosevelt used this power in 1903 to appoint 160 officials. The country survived. Adjourn And Appoint We can’t wait. We have an extraordinary situation here, where one of the parties, as a political strategy, in exchange for campaign assistance from the 1%, is obstructing for the purpose of preventing the government from operating. It is the duty of the President to keep the government operating. Mr. President, this is outrageous. Working people need you to use your power to get the NLRB up and functioning. Please, adjourn and appoint — WE CAN’T WAIT! This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture . I am a Fellow with CAF. Sign up here for the CAF daily summary .

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Romer, Shiller, Other Economists Offer Their Advice For 2012

January 2, 2012

Believe it or not, times are getting better. Some homebuilding picked up, but no fix emerged for the housing crisis. At least that’s what the dry statistics keep telling us. Industrial production, G.D.P. — the kind of figures that Washington and Wall Street sweat over — suggest that the economy is on the mend.

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Ask Rod: Should We Outsource Our Manufacturing?

December 21, 2011

Moving your company’s manufacturing overseas can be a tempting way to trim your budget. But what about the hidden costs? And attracting customers to your website is only half the battle. How do you convince them to be once they’re there? Executive Editor Rod Kurtz — along with special guest, Billy Leroy of Billy’s Antiques & Props , shares his tips on overseas manufacturing and increasing sales. Got a question about your business? We’re here to help! Just send us an e-mail at  askrod@huffingtonpost.com . Or tweet us at  @HuffPostSmBiz .

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$2.1 Million For Alternative Energy Manufacturing

November 28, 2011

Southeast Michigan is one of 20 regions from around the country picked by the federal government for economic growth grant money, Gov. Rick Snyder and an Obama administration official announced Monday. The federal Jobs and Innovation Accelerator Challenge selected Southeast Michigan from among 146 applications for its potential in alternative energy manufacturing.

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Anna Cuevas: Independent Foreclosure Review: Is It the Real Deal?

November 22, 2011

On November 1, 2011, the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency began a new initiative, requiring a review by an independent consultant to determine if errors or misrepresentations made by banks might have caused financial harm to homeowners. Is this the real deal? I’ve assisted thousands of homeowners who are facing foreclosure, and I have personally witnessed untold amounts of bank errors, misrepresentations, miscalculations, and even unfamiliarity with the foreclosure process. Each of these has, no doubt, resulted in some measure of financial injury or harm to the homeowner, whether they received a loan modification and saved their home or lost their home to foreclosure. If it’s the real deal, it’s huge. Four and a half million homeowners could be affected, as long as their mortgage was serviced by one of the 14 largest services (named below). Other criteria requires that the house was the homeowner’s primary residence and that the foreclosure took place between January 1, 2009, and December 31, 2010. The government said that they’ve already begun sending out notification letters to potentially eligible homeowners — that process is to be completed by December 31, 2011. If you receive a notification that your foreclosure fits the initial criteria for an independent review, you must complete and return a Request for Review Form, which must be postmarked no later than April 30, 2012. While I applaud the efforts to recognize that banks do err, resulting in great financial injury and the loss of a home to its customers, I also welcome these efforts with an ounce of caution. Simply put, I’ve learned that even the best intentions, coupled with stringent guidelines and government bureaucracy, can create additional problems. As I’ve said many times before, question authority. If you believe you meet the eligibility requirements and were financially injured due to a wrongful foreclosure or bank error, misrepresentation, etc., that resulted in foreclosure, it’s important that you follow the guidelines in your notification letter. But be aware of the potential for several problems: 1. You don’t receive a notification letter, even though your loan was serviced by one of the 14 servicers subject to review. (In this case, you can call 1-888-952-9105 or visit www.independentforeclosurereview.com  to find out if you should have been included.) 2. If you don’t receive a letter, question why not. The addresses provided to the government for potentially eligible homeowners are provided by none other than their lenders. Does your lender know your current address, or are they sending your notification to your last-known address… the address for the home which was foreclosed on? Again, question authority. 3. If you don’t receive a letter, what criteria and parameters are being used? Does the government have the final determination over who receives an independent foreclosure review, or does the lender? Whose figures will they use in determining error or financial loss? These questions alone prompt further investigation. 4. I should point out that the independent foreclosure reviews are not being done by the government — the government is only requiring them to be completed. So who is performing the reviews? “Independent” reviewers who are hired by your mortgage servicer will be reviewing your foreclosure to see if the bank who hired them made a mistake. This raises red flags and the potential for possible conflicts of interest and bias on the part of the reviewer. 5. As with any government incentive, too little is known about the independent foreclosure review process. There is only a smattering of examples of what and who qualifies, with very little offered to define “financial injury” or how people will be compensated for it. While some may get nothing, others may get a mere few dollars for overpayment of fees. Will those who are entitled to larger compensations be justly awarded the full amount of the loss they suffered due to bank error? After all, these are the same banks that made the mistake in the first place — the possibility for more mistakes certainly exists today. And what about those who suffered the greatest loss — the loss of their home? How will they be compensated? 6. Among the foreclosed homeowners who will receive financial compensation for their losses, how and when will they be paid? How long does the process take, and will it be fair to all involved? While I agree wholeheartedly with an independent review of foreclosures in an effort to right the wrongs that may have been committed by lenders, I also am skeptical. There are too many gray areas which can affect homeowners, and I can see room for even more error. This might be the real deal, but it might also require diligence, perseverance, and a little determination and sweat equity on your part to find out if it is. You, not the government, the bank, or an independent reviewer, will always be your own best advocate. Trust no one, do your own homework and research and question authority. *The 14 lenders subject to the independent foreclosure review regulation are (in alphabetical order): Ally’s GMAC Mortgage, Aurora Bank, Bank of America, Citibank, EverBank, HSBC, JPMorgan Chase, MetLife, OneWest, PNC, Sovereign Bank, SunTrust, U.S. Bank, and Wells Fargo.  If you believe that you are eligible for an independent review, visit the government’s website at www.independentforeclosurereview.com or call 1-888-952-9105. Make sure you receive a letter and a request for a review and follow the guidelines and timelines as stated.

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Fed: Half Of Top U.S. Banks Made Loans To Europe Banks, Heightening Risk

November 7, 2011

WASHINGTON (Reuters) – Around half of top U.S. banks surveyed by the Federal Reserve reported making loans or extending credit to European banks, which are under massive pressure from an ongoing political crisis. The findings from a quarterly lending poll suggest that the U.S. banking system faces significant risks from Europe, despite relatively small direct exposure to the troubled sovereign bonds of southern European states like Greece. “About one-half of domestic banks respondents, mostly large banks, indicated that they make loans or extend credit lines to European banks or their affiliates or subsidiaries, and about two-thirds of the foreign respondents indicated the same,” the U.S. central bank said in its Senior Loan Officer Survey, published on Monday. Of the domestic banks, about two-thirds reported having tightened standards on loans to European financial institutions in the third quarter, many considerably. Euro zone governments rushed to placate feverish bond markets on Monday as the currency bloc’s debt crisis threatened to accelerate out of control, with Italy overtaking Greece as the prime threat to stability. Italian government bond yields rose to their highest since 1997 — approaching levels regarded as unsustainable — as political turmoil in Rome threatened to drag the euro zone’s third largest economy deeper into regional debt crisis. Copyright 2011 Thomson Reuters. Click for Restrictions .

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Sony, Panasonic To Stop Making TVs?

November 7, 2011

Japanese electronics makers Sony and Panasonic are throwing in the towel when it comes to flat screen TVs. Bested by their Korean counterparts, the companies recently announced they are shrinking their money-losing operations. Analyst and investors are wondering why they didn’t do it sooner.

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Richard Barrington: Making Bank Transfer Day Work for You

November 2, 2011

Remember, remember, the 5th of November. So goes an English children’s rhyme, which commemorates Guy Fawkes Day. Guy Fawkes was a would-be rebel who plotted unsuccessfully to blow up the English Parliament in the 17th century. The 5th of November, 2011 may also be a day of revolution, albeit of a more commercial nature. That date has been dubbed “Bank Transfer Day,” an occasion for bank customers to show their dissatisfaction with bank policies by transferring their accounts to credit unions. Over 60,000 people have reportedly pledged to make this change. Is it something you should consider? Choice is power The popular dissatisfaction with banks has many sources, but it has been galvanized into action by rising bank fees. Free checking accounts are becoming more rare, and a few banks have made high-profile announcements of monthly fees for debit cards. What alternative do consumers have? The “Bank Transfer Day” movement is touting credit unions, whose non-profit nature makes a striking counterpoint against the perceived greed of banks. If you are considering dumping your bank, whether out of protest or simple economic self-interest, here are two facts to keep in mind: There are over 7,000 FDIC-insured banks. These institutions range from small, local organizations to multi-national corporations. With such a broad field, any sweeping assumption about bank policies is bound to be inaccurate. While credit unions are also plentiful, your eligibility to join a credit union is determined by your location, employment, or organizational affiliations. In other words, opting for a credit union will limit your choices. The point is, as a consumer you have the right to look for free checking accounts , not to mention the highest interest rates on CDs, savings accounts and money market accounts . But your chances of success increase with the number of choices available to you. Don’t limit your choices to credit unions. Consider both banks and credit unions as you shop for the best deal, and your choice will help demonstrate the banking polices you support. The original article can be found at Money-Rates.com : ” Making Bank Transfer Day work for you ”

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Dan Solin: The Citigroup Settlement: Legal Fiction Exposed

November 1, 2011

There are times when I have a very jaded view of the judicial system in this country. The O.J. Simpson and Casey Anthony verdicts showed that justice is not always done in criminal cases. Civil cases are much worse. The securities industry routinely victimizes its clients with impunity. A cozy mandatory arbitration system administered by FINRA, which is basically a shill for the securities industry, often serves the interest of its benefactors at the expense of its clients. If investors recover anything, it’s typically a fraction of what they deserve. Hopefully, mandatory arbitration for all consumers will be banned by Congress, but I am not optimistic. In last week’s blog , I wrote about the proposed settlement with Citigroup over its sale of $1 billion in toxic housing debt. Citigroup allegedly didn’t tell the investors who bought this debt that it exercised significant influence over the selection of $500 million of the assets in the portfolio and then took a short position against those assets. The investors lost everything. Citigroup pocketed $34 million for structuring and marketing the transaction and an additional $126 million by betting against the interest of its investors. The proposed settlement involved the payment by Citigroup of $285 million. As is customary in these cases, Citigroup did not admit to any wrongdoing. This legal fiction permits companies to defend against civil lawsuits arising out of this conduct, and forces plaintiffs in those cases to relitigate the issue of liability. Settlements of this sort are required to be submitted to the Federal Courts, where Judges routinely sign off on them without further inquiry. Not U.S. District Court Judge Jed Rakoff. Judge Rakoff is a Clinton appointee who joined the federal bench in 1996. He was previously a federal prosecutor and a defense attorney in white collar criminal cases. He has a long history of asking prickly questions about settlements with big Wall Street firms, and the Citigroup case was no exception. He wants an explanation of how Citigroup can be accused of serious securities fraud, but not be required to admit or deny wrongdoing. The response will be interesting. To the average citizen, engaging in the kind of conduct alleged in the Citigroup complaint looks like fraud. If they are guilty, why shouldn’t they admit their guilt? He would like to know if the public interest would be better served by a trial, which would determine conclusively whether the charges are true. He is right. Either Citigroup should admit its guilt or there should be a trial where all the evidence will be made public and a jury can determine guilt or innocence. He is concerned that the amount of the proposed $95 million penalty might not have deterrent effect. It won’t. It is a drop in the bucket for Citigroup, which reported third quarter 2011 revenues of $20.8 billion. Here’s his real zinger: Why is the penalty in this case to be paid in large part by Citigroup and its shareholders rather than by the “culpable individual offenders acting for the corporation.” There is no good reason why those who engage in this kind of conduct should not be personally responsible for the consequences of their actions. Finally, he asks how this alleged conduct can be characterized as mere negligence rather than fraud. It clearly is fraud. You don’t “negligently” fail to disclose this kind of conduct. Judge Rakoff should be commended for taking on a system that encourages fleecing of investors by their “trusted” advisors. Usually, the only penalty is a slap on the wrist, which actually encourages repeat behavior of this sort. Exposing the legal fiction of these settlements is a service to all investors. Dan Solin is the author of the New York Times best sellers The Smartest Investment Book You’ll Ever Read , The Smartest 401(k) Book You’ll Ever Read , and The Smartest Retirement Book You’ll Ever Read . His new book, The Smartest Portfolio You’ll Ever Own , was released in September, 2011.The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein. Furthermore, the information on this blog should not be construed as an offer of advisory services. Please note that the author does not recommend specific securities nor is he responsible for comments made by persons posting on this blog.

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Joseph A. McCartin: Reagan’s Airport Statue: Why Some Won’t Celebrate

November 1, 2011

When the Ronald Reagan Presidential Foundation unveiled a statue of the 40th president of the United States in front of Terminal A Washington’s Reagan National Airport at 11 a.m. this morning, not everyone celebrated. Among those who withheld their applause were thousands of former air traffic controllers who walked off their jobs at that airport and across the country thirty years ago and were fired and permanently replaced by Reagan. Equally unmoved are many millions more who now protest the growing income inequality in the America Reagan helped to shape. Ronald Reagan’s stand against the strike called by the Professional Air Traffic Controllers Organization (PATCO), helped define both his presidency and a dangerous new direction in labor relations. The controllers’ walkout was clearly illegal; federal workers do not have the right to strike. But PATCO’s protest was not unprecedented. Some 39 work stoppages by federal workers were registered in the years between 1960 and 1981. Some, like the 1970 walkout by postal workers, were quite large. (The National Guard had to deliver the mail in many states when tens of thousands of postal workers walked out to protest low pay and other grievances). Within days of the postal strike, more than 3,000 members of PATCO had also struck in 1970 under the guise of a mass sickout to protest the efforts by the Federal Aviation Administration (FAA) to weaken their recently established union. In neither of those cases did mass firings result. Reagan decisively changed that pattern. Reagan’s response to the 1981 PATCO was both swift and sweeping. The controllers struck at 7 a.m. on August 3, 1981. Citing a broken pledge of support that candidate Reagan had given their union the previous October in return for their endorsement of his candidacy, the PATCO strikers pledged not to return to work until the government improved their salaries and shortened their workweek. Four hours later, Reagan strode into the Rose Garden, and warned the controllers over national television that if they did not return to work within 48 hours they would be “terminated.” Few strikers heeded his warning; the rest were fired and banned from returning to employment at the FAA. Since the rise of the industrial union movement in the 1930s, no employer had broken a major strike more decisively. Reagan’s action was both legal and politically popular — at least at first. The PATCO strikers had erred in unwisely forcing a president into a showdown, and badly timing their walkout. Air traffic controllers earned a median salary of roughly $31,000 in 1981 — above the national median. Although there was some merit in their claim that they were poorly compensated in comparison to their partners in air safety — pilots — the controllers sought significant salary increases and a shortened workweek at a time when the country was beginning to slide into recession. Even many union workers thought these demands unjustified. But it was not Reagan’s decision to fire the controllers that makes the unveiling of his airport statue today controversial. It was rather Reagan’s decision to show no mercy to the strikers once he had defeated their walkout that makes his handling of this affair a source of controversy thirty years later. It did not have to play out this way. Once it was clear that Reagan had broken PATCO weeks into the strike, public opinion called for the president to show mercy and rehire those who had struck out of loyalty to their coworkers but had not led the walkout. This view was held not only by trade unionists and liberals. Conservative columnist William Safire advised Reagan to “demonstrate that American justice is not only swift and certain but that it can be tempered by a willingness to offer a second chance.” Significantly, Reagan rejected all such entreaties. Not only did his administration refuse to hire back any who had been terminated, it went to extraordinary lengths to ensure that individual strikers would never get their jobs back through the appeals process and that no legislation would ever be enacted that would result in the rehiring of even a fraction of those fired, despite the enormous costs of replacing them. The relentlessness of Reagan’s treatment of the PATCO strikers set the real lasting precedent of 1981, laying the groundwork for the sort of economy that has emerged since then. By refusing to rehire any strikers despite appeals from fellow Republicans like Safire, Reagan broke a moral taboo that had restrained private sector employers from going all out in their own conflicts with their unions. Thus he opened the door to new era of aggressive anti-unionism, which has cut union membership rates in half in thirty years. While the surging levels of income inequality that have led to recent protest on Wall Street and elsewhere cannot be attributed solely to Reagan’s busting of PATCO, no other event of the last thirty years better symbolized the shift in power that has led to this inequality. So as Reagan’s followers cheer the unveiling of a new nine-foot statue in his honor, others rightly point to less attractive monument etched in the growing chasm between this nation’s rich and the rest — a monument whose dimensions continue to grow. Joseph A. McCartin is associate professor of history at Georgetown University and the author of Collision Course: Ronald Reagan, the Air Traffic Controllers, and the Strike that Changed America .

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China manufacturing eases for 3rd month, prices up

September 30, 2011

By Kevin Yao BEIJING (Reuters) – China’s manufacturing sector contracted for a third consecutive month in September, suggesting that the world’s second-largest economy is not immune to global headwinds, while factory inflation quickened. Growing signs of a slowdown in China have prompted concerns that the country that has been the motor of global growth in recent years will not be able to provide as much of a counterweight to faltering U.S. and European growth. The HSBC purchasing managers’ index (PMI), which previews business conditions in a range of industries before official output data, was at 49.9 in September, unchanged from August. The final PMI, released on Friday, was stronger than the flash reading published last week. “The PMI reinforces our view that the potential slowdown in China’s economy will likely be a gradual,” said Connie Tse, an economist at Forecast in Singapore. “The trade sector no doubt faces increasing risks, but recent export growth momentum is holding up decently. China is not facing a collapse in global demand yet, as witnessed in 2009.” The latest reading represents the longest period of contraction since the global financial crisis, when it came in below 50 for eight successive months from August 2008. In PMI releases around the world, the 50-point level typically demarcates expansion from contraction in factory activity. HSBC believes a PMI reading of as low as 48 in China still points to annual growth of 12-13 percent in industrial output and a 9 percent expansion in gross domestic product. “Although the lagged effects of credit tightening will continue to cool industrial activity in the months ahead, there remains little need to worry about a growth meltdown,” said Qu Hongbin, China economist at HSBC. Qu expects China’s economic growth to hold up at around 8.5-9 percent in the coming years, despite the global slowdown. But analysts at Bank of America-Merrill Lynch said in a report that China faces some systemic risks such as a property-market meltdown, bad debt and capital outflows. The warning triggered some widening China’s sovereign credit default swaps. The China Enterprise index of top mainland firms listed in Hong Kong fell 4 percent on Friday, with banks and developers sold off on fears of a property market correction. There are also concerns in some quarters that, after an investment splurge, China does not have the fiscal flexibility it possessed in 2008 and is less able to shrug off weakness elsewhere — a factor cited by consultancy Capital Economics when it last week cut its 2012 growth forecast to 8.5 percent from 9 percent. FADING DEMAND Earlier this month the IMF warned that, without action, the debt-mired economies of Europe and the United States could lapse into recession, prompting it to cut its 2011 and 2012 global growth forecast to 4 percent. Underscoring the global slowdown, a Japanese PMI survey on Friday showed September marking the first contraction in manufacturing activity in five months, as a bounce following a March earthquake in Asia’s second biggest economy faded. China, which has become a factory to the world, is especially vulnerable to fading demand from the United States and Europe, still its two biggest export markets despite its effort to diversify. Recent weakness in China’s currency against the dollar, where the offshore yuan is trading at a rare steep discount against the onshore rate, is evidence of overseas investors’ concerns about the outlook, analysts say. The HSBC survey’s new export orders sub-index remained below 50 for a fifth straight month, while the sub-index for overall new orders hovered below 50 for a second successive month. China’s exports in August pulled back from a record high and the pace of expansion slowed from the 37.7 percent rate recorded in January, government data showed. China’s annual growth tumbled to 6.6 percent in the first quarter of 2009 as exports took a hit from a slump in global trade. This time the slowdown so far has been modest and gradual, due to resilient domestic demand. Analysts believe China’s annual economic growth in the third quarter will be above 9 percent, slowing moderately from 9.5 percent in the second quarter. China’s official PMI, which is due to be published on Saturday, may have edged up in September, after a rise in the previous month from a 28-month low in July, driven by seasonal factors and domestic demand. The official PMI, which is weighted more toward big state firms, generally paints a rosier picture of Chinese factories than that of HSBC, which includes small private firms that have been hit harder by credit curbs and weaker demand. INFLATION BATTLE To the discomfort of Chinese policymakers, Friday’s data showed input costs rising rapidly, which could imply upward pressure on consumer inflation. Factory inflation in China quickened markedly in September, with the sub-index for input prices climbing to a four-month high of 59.5 in September from 55.9 in August. China’s annual inflation pulled back to 6.2 percent in August from a three-year high of 6.5 percent in July, and is widely expected to cool steadily for the rest of 2011. “The upstream price rises could trickle down to consumer prices at some point, but the impact won’t be big as global commodity prices have been falling,” said He Yifeng, economist at Hongyuan Securities in Beijing. Chinese leaders have repeatedly emphasized that fighting inflation remains the top priority despite the global malaise. The central bank is holding off further policy tightening amid jitters about a global downturn. But at the same time, it is unlikely to ease policy soon for fear of reigniting price pressures and an investment frenzy by local governments. Since last October, the central bank has raised interest rates five times and banks’ reserve requirement ratios — the percentage of cash deposits they must set aside in their vaults — nine times. (Editing by Alex Richardson and Ken Wills)

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InvestingAnswers: 10 U.S. States With the Highest Unemployment Rates

September 22, 2011

With unemployment at 9.1 percent in the United States, millions of people across the nation are still struggling to find a job. While some states have moved forward and even experienced the beginning of an economic recovery, the residents of these 10 states are still dealing with uncharacteristically high levels of unemployment. The states with the highest unemployment rates have a few things in common. For the most part, these states were hit hardest when the housing bubble burst. Also, many of these states have economies that are dependent on manufacturing. Major slowdowns in the auto and construction industries have left these states struggling. 10. Georgia — 10.1 percent (Tie) In 2007, Georgia’s economy was booming — if the state were a country, it would have been the 28th largest economy in the world. But that hasn’t kept the state from struggling during the recession. Job losses in manufacturing, construction, wholesale and retail trade, transportation, warehousing, professional and business services have hurt the state. Georgia also has a strong military presence and Fort Gillem and McPherson, which were both closed in a round of base realignment. 9. North Carolina — 10.1 percent (Tie) It’s no surprise that the downturn has hurt employment in North Carolina — 20 percent of the state’s income was tied up in manufacturing. Traditional industries such as textiles, furniture and tobacco have also taken a hit in recent years. North Carolina is one of seven “at-will employment” states that allow businesses to discharge employees for any cause at all without liability, so employers have fewer barriers from downsizing. However, the state’s low unionization rate may attract employers and help spur a future recovery. 8. Mississippi — 10.4 percent In addition to having one of the highest unemployment rates in the country, Mississippi is also the poorest state, according to the U.S. Census Bureau. The recession coupled with recent natural disasters have had a serious impact on the Magnolia State’s local economy. Like other states on this list, Mississippi is home to several manufacturing plants which have slowed production and cut jobs. In addition, a decrease in discretionary spending has hurt the state’s gambling revenues. 7. Florida — 10.7 percent Remember back in the mid-2000s when everyone and their mother was buying property in Florida? That created a flurry of economic activity that suddenly disappeared when the floor fell out of the housing market in 2008. With foreclosures on the rise and building halted, the number of construction jobs in Florida has been cut in half over the last five years. Florida’s economy is also driven in large part by small businesses. As larger corporations begin to expand, borrow money and hire, the Sunshine State, as well as its residents, is left in the cold. 6. District of Columbia — 10.8 percent (Tie) All is not well in our nation’s capital. Unemployment in Washington D.C. is the fifth worst in the country. With more than a quarter of the jobs in the district coming from government and a solid long-term housing outlook, it comes as a bit of a surprise. The unemployment rate in Ward 8, only four miles from the White House, was 25.2 percent in January 2011. D.C. has seen declines in manufacturing, education, health, construction and information technology jobs. D.C. is a particularly hard job market for teenage job seekers, where only half of the teen labor force has a job. With a federal budget crisis in full effect, the job situation may be even tougher in the near future. 5. Rhode Island — 10.8 percent (Tie) The country’s smallest state is home to one of the largest jobless rates. Declines in public sector jobs, manufacturing and the collapse of the housing market have all contributed to the high unemployment rate. In an economic downturn, it is often smaller businesses that are vulnerable. However, even larger employers with at least 1,000 employees, which account for 17 percent of the state’s private sector jobs, have also been laying off employees. 4. Michigan — 10.9 percent (Tie) Home to Ford (NYSE: F) , General Motors (NYSE: GM) and Chrysler, the implosion of the auto industry hit Michigan harder than any other state. However, with the entire manufacturing sector also struggling, Michiganders faced a double blow. Things are looking up, though; Michigan’s unemployment rate fell almost four percentage points since its rock bottom year in 2009, landing at the current rate of 10.9 percent. Many automakers are hiring once again, and while the situation isn’t rosy, it is still an improvement from the past few years. 3. South Carolina — 10.9 percent (Tie) Even with a diversified economy, unemployment remains a problem in South Carolina. Like other states, manufacturing, including automobile manufacturing, has led to extensive job cuts. While the housing bubble hasn’t impacted home prices in South Carolina as drastically as other areas, it has impacted new-home construction, with contractors hesitant to build new homes. Other industries in the area that have seen high job losses include trade, professional services, leisure and hospitality, utilities and transportation. 2. California — 12 percent Declines in manufacturing, construction and real estate have severely impacted California’s economy. A sudden halt in home building created a ripple effect that spread across the employment landscape to impact construction workers, equipment rental and leasing companies, architects and mortgage lenders. California is also dealing with a water supply shortage which has led to layoffs in the agriculture sector. Manufacturing, construction, real estate and agriculture make up 33 percent of the state’s economy. 1. Nevada — 12.9 percent After enjoying one of the fastest growing economies and lowest unemployment rates for two decades, Nevada went from first to worst in unemployment. The housing bubble decimated Nevada’s construction economy, costing the state thousands of jobs. The recession also hurt discretionary spending across the country, which translated to fewer tourists flocking to Nevada’s many casinos and attractions, including Las Vegas, Reno, Lake Tahoe and Laughlin. By Brian Reed, www.investinganswers.com

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Jerry Jasinowski: Creating Private Sector Jobs

August 31, 2011

Some years ago when I was President of the National Association of Manufacturers (NAM), I challenged a representative of one of our larger members to explain why his company was sending so many jobs overseas. “Because,” he replied with some heat, “the young people coming out of our public schools today cannot pass a reading test, a writing test or a math test.” There was more than a little exaggeration in that comment, but it reflects an attitude I encountered many times during my years with the NAM. In every survey of NAM members we conducted when I was there, a majority of respondents inevitably replied that finding qualified job applicants was one of their biggest headaches. Workers in modern manufacturing must be deft with math and science. They need to know how to read blueprints and program computers. But these skills are sorely lacking among the unemployed. There is a great debate in Washington and across the nation about the economy, and in particular what we must do to create more jobs. We will not get the economy growing again, and will not restore consumer confidence, until we put millions of the employed back to work. But how? Most of the discussion centers on general policies such as payroll taxes, regulations, infrastructure and investment – the presumption being that if we support business, business will create jobs. But business is already rolling in cash and many of the jobs business is creating are overseas. Clearly something else is needed. I suggest a cooperative program, jointly funded by government and business, to train unemployed workers for specific jobs that need filling now. There are a variety of programs out there providing training to the unemployed, and many of them are very good, but they rarely include a direct transition from training to employment. Too often, unemployed workers go through these programs only to discover there are few if any opportunities for them, even with their newly-acquired skills. I have heard many small manufacturers complain that these training programs, usually run in conjunction with community colleges, are not in synch with real world workplace needs. Give us that training money, they say, and we will train applicants to do the jobs and then put them directly to work. I think that is worth a try – at least as part of a more comprehensive job creation program. The program should be jointly funded by a foundation or government grant, plus money from participating businesses. The key ingredient should be employers with jobs that need filling who will pledge to provide employment to people who complete their training programs successfully. The employers will not be able to complain about the training because they will be the ones providing it. They will get to know the workers personally, and whether or not they are qualified to do the jobs. Based on my own experience at the NAM, I believe a program like this could bring a significant number of people into the work force in a relatively short period of time. Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute.

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Obama Talks With Warren Buffett, Ford CEO In Preparation For Jobs Speech

August 23, 2011

In preparation for a major jobs address to be delivered after Labor Day, President Obama spoke on the phone with Warren Buffett, the CEO of Berkshire Hathaway, and Alan Mulally, the CEO of Ford Motor Co., on Monday, a White House spokesman has told reporters, according to The Hill . The president, currently vacationing in Martha’s Vineyard, reportedly called to discuss his new job-creation plan , the details of which he is expected to announce in a speech sometime after Labor Day , according to White House principal deputy press secretary Josh Earnest. Earnest told reporters that Obama and Buffett discussed how to “spur investment and increase economic growth,” according to The Hill . They also discuss the country’s widening federal deficit. With Mulally, Obama discussed the auto and manufacturing industries, with a particular focus on how the auto sector has dealt with supply disruptions caused by the Japanese earthquake earlier this year. Buffett, who penned a widely read op-ed for the New York Times this month that called for wealthy Americans to pay more taxes, has consulted with the president before. Last summer , Obama met with Buffett to discuss the economic slowdown and energy reform. In December, Obama met with Buffett , as well as Bill and Melinda Gates, to discuss the economy, philanthropy and national competitiveness. Obama met with Buffett and the Gateses again in July to speak more about their philanthropic efforts. In an interview with Bloomberg TV last month, Buffett expressed skepticism that the government could do much to influence the ebb and flow of the economy. “Government gets blamed too much and it may get too much credit when things do improve,” Buffett said. “Government’s a factor, but I would say by far the biggest factor in corrections of the business cycle over time is what I would call the natural regenerative powers of capitalism.” Mulally, for his part, was part of a group of business leaders who met with Obama in the summer of 2008 , during the presidential campaign. Mulally has since met with Obama in other group settings and has consulted with White House officials to discuss fuel economy standards and the outlook for the auto industry. Few details are known about the jobs plan Obama is developing. The president has already called for the establishment of an infrastructure bank, and for unemployment benefits and the payroll tax holiday to be extended. The plan is also believed to target the nation’s long-term unemployed in particular, possibly by opening new training programs for the out-of-work and creating tax incentives for employers to hire more.

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Michele Nash-Hoff: What’s Happening to U. S. Manufacturing?

August 10, 2011

After dominating the globe for over 60 years as the world’s largest, most productive, and technologically advanced in the world, America’s manufacturing sector is in a decline in nearly all industries. America’s lead in a number of industries vanished years ago, and nearly all industries are facing potentially dangerous erosion. No single indicator represents manufacturing capabilities or trends. But several key indicators, when taken together, provide strong evidence that America’s manufacturing has greatly weakened in the last decade. These are: ndustrial output (as measured by share of Gross Domestic Product), industrial capacity, employment, number of manufacturers, balance of trade in goods, and import penetration rate. The trend in employment and number of manufacturers is dramatic — 5.5 million manufacturing jobs and over 50,000 manufacturing companies gone since 2000. The balance of trade in goods has grown steadily since 1979, growing from a deficit of $25.5 billion in 1980 to $645.8 billion in 2010, which was down from a high of $835.7 billion in 2006 (Balance of Payment basis.) Manufacturing’s share of the Gross Domestic Products had taken a serious downward trend — dropping from a high of 28% in 1965 to 11% in 2010. What about capacity and important penetration? They are tied together because the capacity of American companies to manufacture products is impacted by the import penetration of the products of other countries in the U. S. market. There has been an across-the-board increase in the import penetration rate for 114 high-tech and capital-intensive manufacturing sectors — from 21.4% of domestic consumption to 34.3 percent between 1997 and 2007. Let’s take a look at a few industries. For example, if you were to go to a store to buy a set of glasses, you would have trouble finding a set made in the U. S. That’s because America’s oldest industry, glassware, is down to two companies that manufacture in the United States: Libbey Glass Inc. of Toledo, Ohio, and Anchor Hocking of Lancaster, Ohio. In 2009, nearly every major domestic competitor was either out of business, in Chapter 11, or up for sale. Corning Consumer Products and Oneida had already changed to outsourcing offshore instead of manufacturing their own product lines. Beginning in late 2003, Oneida closed five factories in the U. S., Mexico, Italy and China. Libbey Glass CEO John Meier blames “unfair trade” and the fact that the U.S. government is allowing foreign governments “to get away with subsidizing their producers and not enforcing their laws….” The U.S. glass industry has been swamped by imports. In 1996, imports from China and Turkey accounted for 12 percent of the U.S. market, but by 2006, imports were up to 53 percent of the U. S. market. According to the U.S. International Trade Commission (ITC), another U.S. industry has virtually disappeared — the industry that makes travel goods out of textiles. In 2006, the total U.S. market for travel goods with an outer surface of textile materials was estimated at approximately $3 billion wholesale. The nine remaining U. S. firms identified by the ITC in this industry reported totaled revenues of $37 million in 2006. Thus, U.S. producers commanded only a one percent share of the U.S. market. This primarily reflected a decline in shipments to commercial markets. These nine companies said that at least 70 percent of their business goes to the U.S. military and government, but this market represents less than five percent of domestic production of such goods. China has become the preferred source for offshore production, since the removal of U.S. import quotas on textile travel goods in 2002, because of its low-cost labor, fabric, and accessories. In 2006, China accounted for 80 to 90 percent of imports of textile travel goods to the United States. This same International Trade Commission report stated that the United States has completely lost the capability to make high-tech warm and water-resistant clothing for the commercial market often called performance outerwear. Skiers, hikers, mountain climbers, bikers, firemen, policemen, military personnel, and those in hazardous environments use performance outerwear. The ITC identified 13 companies making high-tech jackets and pants, but six said they produce strictly for the U.S. government and military. Only two said they produce solely for the commercial market. Conflicting estimates for the U. S industry share of the commercial market range from less than five percent to 1.3 percent of the U.S. commercial market for performance outerwear. The report noted that most companies in this industry had moved production offshore primarily to Asia, namely China and Vietnam, where the technology used to produce such garments, such as seam sealing and laser cutting, is prevalent. The air conditioning industry is facing the same challenges from China that the machine tool industry is facing. The September 28, 2008 issue of Manufacturing & Technology News reported that “the last U.S. manufacturer of air-conditioning window units is moving its production to Mexico. Frederich Air Conditioning Company has announced its intention to close its San Antonio manufacturing plant and move the work to Monterrey, Mexico… The company says that low-priced air conditioners from China are forcing it to move out of the United States.” This was only two months after Lennox International announced that it would shift production of Lennox air conditioners from two U.S. Plants (Marshalltown, Iowa and Grenada, Mississippi) to a new plant in Saltillo, Mexico. Lennox CEO Todd Bluedorn said, “We must produce quality products at lower costs to compete and grow our business.” The trend is even more serious for the manufacturing industries that supply products, components, and technologies that the Pentagon considers import to defense. University of Texas at Austin engineering professor Michael Webber evaluated the economic health of sixteen industrial sectors within the defense industrial system. Of the sixteen industries he examined, thirteen showed significant signs of erosion, especially since 2001. The American machine tool industry is facing intense competition from foreign competitors, especially China. Machine tools are used to cut and form metal, used in nearly all manufacturing involving metals, from autos to airplanes. Foreign penetration of the U. S. market rose steadily from about 30% in 1982 to 72% in 2008. The U. S. fell from the world’s third largest machine tool producer in 2000 to seventh in 2008 (behind Japan, Germany, China, Italy, Taiwan, and Korea. The U. S. loss of competitiveness in the manufacturing of five-axis machine tools exemplifies the serious erosion of this industry. Five-axis machine tools are among the most technologically advanced machine tools used in the production components in the aerospace, gas & diesel engines, automobile parts, medical, and heavy industrial equipment industries. Only six U. S. companies capable of making fix-axis machines remain, compares to at least 20 in China and 22 in Taiwan. The importance of semiconductor to today’s military is well understood. Preserving a world-class domestic semiconductor industry is vital to our national security. However, the industry lost nearly 1,200 plants of all sizes between 1998 to2000, a 17% drop. The U. S. share of global semiconductor capacity fell to 17% in 2007 and down to 14% in 2009. Of the sixteen semiconductor fabs under construction around the world in 2009, only one was being built in the United States. The U. S. led the world in closure of fab plants between 2008 to 2009 – 19 out of 42. These losses have been driven by the migration of microelectronic manufacturing to low-cost foreign locations, such as Taiwan, Singapore, China, and Korea. These are just a few examples of the erosion of U. S. industries that could be included in this article. There is hardly a day that goes by without news of some company either closing a plant, having a mass layoff, or going completely out of business. General Electric chairman and CEO, Jeffrey Immelt, commented , “Over the last five years, we have really positioned ourselves as a global company . . . the world has never been more independent from the U.S. economy . . . The U.S. economy is still important, but not like it was five, 10 or 20 years ago.” Immelt said that globalization is “profound. It’s irrefutable and it’s irreversible.” He later added that the fate of the U.S. economy “is going to be decided in the next three to five years.” The future looks dim for U.S. manufacturing if we continue on the same path. The trends discussed above show that we need to elevate revitalizing American manufacturing to a very high priority among policy makers. The fate of the U.S. economy will be decided in the next four to five years. The question is: Do we continue on the course to becoming a third-world country, importing finished goods and exporting raw materials, or will we rebuild our manufacturing base and once again become the premier industrial leader? If we descend into being a third-world country, then we will lose our position as the world’s super power and our ability to defend our nation.

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U.S. Shed Nearly Two Million Taxpayers In 2009: IRS

August 5, 2011

New tax data from the Internal Revenue service shows that in 2009, incomes fell, unemployment claims rose, and the U.S. economy shed nearly two million taxpayers. And of the 235,413 taxpayers who earned $1 million or more in 2009, 1,470 of them paid no taxes. According to the data, the average income for American taxpayers fell to $54,283 — a drop of $3,516, or about 6.1 percent, between 2008 and 2009. Not only that, but the overall number of taxpayers — that is, individuals or married couples filing with the IRS — fell by almost two million. “What you’re seeing is the devastation of the massive loss of jobs and the effects of the real recession on real Americans,” said Ed Kleinbard, a law professor at the University of Southern California. The numbers, part of a package analyzing 2009 tax returns that the IRS has just made available, reflect a grim picture of the recent past. Tax returns filed in 2009 largely speak to the state of the economy in 2008 — a time when unemployment ballooned, markets dropped precipitously and the economy languished in recession. The IRS’s data is unlikely to surprise any of the millions of Americans who were out of work in 2008 and 2009. The unemployment rate climbed from 5 percent in April ’08 to a 25-year high in February ’09 , and continued to rise for several months, topping double digits that fall with a rate of 10.2 percent. The IRS report shows that unemployment claims rose by nearly 2 million, or about 19 percent, between 2008 and 2009. The amount of unemployment benefits paid in 2009 nearly doubled from the previous year. The number of 1040EZ returns — the simplified tax form for filers who have no dependents, and whose taxable income is less than $100,000 — fell by 23 percent between 2008 and 2009. The decline in 1040EZs represents low-income taxpayers who lost their jobs and couldn’t remain a part of the workforce, Kleinbard told The Huffington Post. “What you’re seeing is people at the bottom rung of the economic ladder being taken off the economic ladder entirely,” Kleinbard said. According to the latest figures from the Department of Labor, U.S. unemployment is currently at 9.2 percent . A new monthly report will be released Friday.

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Jeanne Kelly: Understanding & Improving Your Credit FICO Score

August 4, 2011

Last week I did a Webinar for MasterCard and I wanted to share what we reviewed with the participants and some questions I was asked. I am thrilled that MasterCard is providing these webinars to help their customers with healthy credit education. Many people have commented on how they have realized that they have been doing things that have been hurting their credit without even knowing it and how, with the knowledge they had acquired, they would be making wiser credit decision. That is what I want for all of you. Do you think there is a difference between your FICO score and a credit score? The answer is YES. Many people do not know the correct answer to that question. We have to begin by understanding that most lenders look at your FICO score to decline or approve you. If you are approved then they can base your interest rate on your FICO score. This is a very important number to know and track! 5 Parts of FICO to help you get the most of your score: 35% Payment History 30% Amounts Owed 15% Length of Credit History 10% New Credit 10% Types of Credit Used Payment History is the largest percentage of your FICO score. It’s basically a log of how you’ve paid on your accounts in the past. It will report payments paid on time, late payments, collection accounts and any public records. Amounts Owed accounts for the second largest part of your score, listing how much you owe on specific accounts, how many accounts have a balance, what proportion of credit lines have been used, and what proportion of installment loan amounts are still outstanding. Length of Credit History, New Credit & Types of Credit make up the remaining percentage of your score. FICO wants to see time on your side, the number of accounts in variation, what types of new inquires and new accounts have recently hit your report, and, if you’ve had problems in the past, recent signs of healthy credit. How to make the best of your credit The best scores are made from the right mix of a payment history free of collections and late payments, low balances and newly rebuilt credit. Don’t forget to add in different types of credit and keep the relationship open for a long time. Some questions I was asked: Q: If I use my debit card will that show on my credit report? A: No, this is not a line of credit. Q: If I pay my tax lien and it gets released, does that mean it comes off my report? A: No, released shows the credit bureaus that it is paid. If you want a lien removed from your report you have to get a vacate. This would mean there was an error or dispute. A vacated lien means it will be removed from your reports. Q: If my credit cards have high balances and I pay them down to 20% will this help my score & how long will it take to update them? A: Yes, this will raise your score significantly! It can take 30 to 60 days to have the balances updated. If you need this done faster, get the creditors to send you a balance letter then send the balance letter (s) to the bureaus directly and they should update them for you within 5 business days. Please share any of your thoughts or questions with me via email at Jeanne.Kelly@TheCreditOwl.com

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Harlan Green: Why Repeat 1938?

August 4, 2011

Why does the final debt ceiling agreement look like 1938, when Republicans took over Congress after President Roosevelt ok’ed spending cuts while raising some taxes? Because Congress may have made the same mistake — a repeat of the Great Depression by cutting spending when the U.S. economy hasn’t recovered from the Great Recession. Democrats lost 71 House seats and 8 Senate seats in the 1938 election, after Roosevelt had been persuaded by his advisors cut back on New Deal programs, which precipitated the 1937-38 second depression and gave Republicans ammunition to say the New Deal hadn’t worked. Production and profits and wages had regained their 1929 levels by the spring of 1937. Unemployment remained high, but was considerably lower than the 25 percent rate seen in 1933. So in June 1937, some of Roosevelt’s advisors urged spending cuts to balance the budget. WPA rolls were drastically cut and PWA projects were slowed to a standstill, according to Wikipedia . The American economy took a sharp downturn in mid-1937, lasting for 13 months through most of 1938. Industrial production declined almost 30 per cent and production of durable goods fell even faster. Does this look terribly familiar? In other words, we might be doomed to repeat the historical mistake of listening to creditors to whom so much of the federal debt is owed by cutting spending without actually reducing debt, when we should be stimulating growth both to reduce the ratio of debt to GDP and help debtors repay their debts. The new agreement doesn’t allow any revenue increases in the first stage of some $2.1-2.4 trillion in mandated spending cuts over the next 10 years. This of course means the debt isn’t being paid down. All of the Bush tax cuts had added $3.7 billion to the $14 trillion in debt, with tax loopholes extended for energy and agribusiness, two wars and two recessions making up most of the rest. The spending cuts weren’t paid for then, and aren’t being paid for now, in other words. But, had we continued the stimulus spending of 2009-10 that included the $787 Billion in ARRA stimulus, spent more of the $11 billion set aside for the HAMP mortgage modification program, and extended the homebuyer tax credits that expired last June, we might have started both a real estate recovery and longer term economic growth. Instead, we are close to a ‘double-dip’ after just leaving the Great Recession. The first part of the Great Depression actually ended in 1934, which lulled everyone into believing that cutting spending in 1937 would do little harm. But it just made the Depression worse, until spending from government debt that topped 122 percent of GDP during World War II ended the Great Depression! So history is very clear on what it takes to stimulate jobs and economic growth — more spending on policies that produce growth. That is the only way to bring down the debt level. But one can’t borrow for the wrong things, such as tax cuts. As one pundit put it, business doesn’t care where the dollars come from — a public or private worker. Calculated Risk has kept tabs on the possibility of a double-dip recession and second quarter numbers show the economy has almost ground to a halt. GDP growth revisions show Q1 2011 rose just 0.4 percent and Q2 1.3 percent in the ‘advance estimate’. Personal Consumption Expenditures, which account for almost 70 percent of activity, have been falling for just the past 3 months for a number of reasons, including a spike in energy and food prices, and falling vehicle sales due to the Japanese Tsunami. It is why GDP growth has slowed so drastically. There are 4 indicators used by the National Bureau of Economic Research Business Dating Committee to determine a recession — employment, personal income less transfer payments, real GDP growth, and industrial production. Of the 4, industrial production and GDP growth have recovered the most. There is some hope with the July Institute of Supply Management non-manufacturing survey that showed overall service sector activity had risen 2.7 percent in 13 of its 18 industries, including transportation and Warehousing, Mining, and Real Estate (surprisingly), and which account for more than 70 percent of all economic activity. So we have not yet entered a double-dip. But without a viable job creation program, that may still happen. So history as well as basic economics tells us those who want to shrink government by slashing spending without programs that also grow the economy are wrong. What would it take to convince them otherwise? Another Great Depression, or a Great War?

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Mark Daniels: A New Look at Plastic Bags

August 4, 2011

Plastic bag recycling has caught some attention in recent months as the ongoing discussion of plastic bag legislation has become a highly debated topic. To straighten out some myths regarding plastic bags and plastic bag recycling, I wanted to respond to Lisa Kaas Boyle’s post here on Huffington Post Green to explain the real benefits of plastic bag recycling and what our company, Hilex Poly, is doing to make the process easier and more convenient for consumers across the country. After all, this is a topic that Hilex is incredibly familiar with as it is our job, and the job of more than 10,000 employees of the plastic bag manufacturing and recycling industry. Plastic Industry Tactics: Aggression and Distraction Some have called the plastic industry aggressive in its recent attempt to curb anti-plastic bag legislation. Our answer to this is, yes, we are aggressive. We believe in defending the consumer’s right to choose how they want to carry their groceries — be it plastic, paper, reusable or no bag at all — as well as educating the public about proper handling and potential dangers of reusable bags if not properly stored and cleaned . At the crux of this plastic bag debate is the principle of consumer freedom and we are open and supportive of all bag choices as we defend the American right to choose. Fact: Recycling Plastic Reduces the Use of Virgin Plastic In her recent post, Boyle shared an excerpt from an article by Stiv Wilson, in which I was misquoted. The fact is, I told Mr. Wilson we have doubled the amount of recycled material to 30 percent in the past few years. And, every day we are working to bring down the percentage of virgin material used in our bags. The more people recycle, the more recycled materials we will have to reuse in our product. Fact: Disposable Plastics are Sustainable Because they are Recycled Plastic bag recycling is something that our company does every day, so we know the process inside and out. More than 800 million pounds of plastic bags and film are recycled every year and made into new products like backyard decking, playground equipment and new plastic bags. The easier plastic bag recycling is for consumers, the higher recycling rates will climb, which is exactly the reason why legislation that supports plastic recycling is vital. Fact: Disposable Plastic is Sustainable because it can be made into Fill and Fluff and other Stuff If you don’t believe that consumers are constantly repurposing plastic bags, take a look at the facts. According to a market research study , about nine out of every ten consumers reuse these bags for everyday household purposes. With so many individuals reusing plastic bags, it is no wonder that a recent study, reported in the Scottish Parliament ERDC Committee — Economic and Rural Development Committee, revealed that sales of other, heavier gauge plastic bags soared by 400 percent in Ireland after they implemented a ban on plastic bags. Fact: Plastic Pollution Can Be Cleaned Out of the Environment Keeping plastic in the recycling stream is our top priority. The easier it is for consumers to recycle plastic bags, the less likely it is for them to be disposed of improperly. Unfortunately, plastic does end up in the ocean; however it should be noted that plastic bags are not the leading cause of animal and marine death. In fact, the National Oceanic and Atmospheric Administration stated that they are unable to find information supporting this claim. Debris, such as fishing lines, is most commonly at fault. Time for Common Sense Legislation and Consumer Choice This is a time for the country to keep plastic in the recycling stream and to preserve consumer freedom and American jobs. With the plastic bag recycling and manufacturing industry in the United States directly employing more than 10,000 employees — and effecting thousands more as the industry branches out throughout the market — recycling is a positive solution for the environment and a positive industry for this country, particular at a time when U.S. jobs are so vital to the economy . Common sense legislation that supports recycling initiatives and maintains the best interest of the American consumer is what this country needs most. Recycling laws will educate individuals on the importance of the process and will teach them how to help the environment on a day-to-day basis. If you would like to learn more about our local recycling stations and plastic bag legislation in your state, visit our interactive map available at BagtheBan.com. Mark Daniels is Vice President Of Marketing And Environmental Affairs at Hilex Poly, a plastic bag manufacturing company.

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Progress Reversed: Economy Tips Toward Recession With Little Relief In Sight

August 3, 2011

NEW YORK — Three years after the worst economic downturn in generations, the American economy increasingly appears vulnerable to another recession. Months of slow growth and external shocks have wounded the economy to a critical extent, economists say. After Washington lawmakers agreed to raise the nation’s debt ceiling in exchange for hundreds of billions in federal spending cuts over the next decade, investors breathed only momentary relief. They quickly changed focus to the increasingly ugly fundamentals: Gross domestic product is barely growing, the unemployment rate is high, home prices are falling and the manufacturing sector is suffering, with little relief in sight. A stream of data in recent days vividly portrays a sick economy. One more obstacle, experts say, might put an end to growth. “The economy has so little momentum that if something were to happen — if there were some exogenous shock — that might tip us into recession,” said Mark Vitner, a senior economist at Wells Fargo. Many economists say it is too early to write off the fragile recovery, arguing that in such an enormous economy, growth is an almost organic process. Disappointing manufacturing numbers, for instance, do not on their own signal a broader economic slowdown, Ian Shepherdson, chief U.S. economist at High Frequency Economics, said in a recent note. But even the optimistic experts suggest that a prolonged period of slow growth is a likely outcome, even if the United States manages to avoid a second recession. The economic situation may be worse than the headline numbers make it seem. Economic output grew at an annual rate of just 0.85 percent in the first half of the year, the government announced Friday. Growth in the first three months clocked in at a meager 0.4 percent. Officially, at least, the economy is not in a recession. But dig below those numbers, and the outlook is more grim: Seen in relation to population growth, gross domestic product has hardly expanded at all this year, Wells Fargo economists said in a research note Tuesday. By this measure — known as real gross domestic product — growth actually shrank in the first quarter, at an annual rate of 0.4 percent, Wells Fargo said. It then grew at an annual rate of 0.6 percent in the second quarter. Small wonder, then, that the current slowdown feels like an outright recession to many Americans. “If you’re one of the unlucky people who have lost their job and are struggling to find another one, I’m pretty sure that to your mind there’s been no recovery at all,” said Paul Dales, senior U.S. economist at Capital Economics. The unemployment rate has ticked steadily upward for three straight months, reaching 9.2 percent in June. And with more companies planning to lay off workers, economists expect July’s reading to be similarly gloomy. When fewer members of the workforce have jobs, less money circulates through the economy, and general economic progress slows. A job loss can cause a person to default on their mortgage, which can lead to a foreclosure. That in turn can further depress home prices, again weakening the broader economy. In a widely circulated research note this week, Goldman Sachs economist Andrew Tilton described a formula for predicting recession. If the unemployment rate rises to 9.3 percent in July and stays that high in August, that means the economy has either already entered recession, or will do so within six months, Tilton said. Experts see an economy vulnerable to shocks. Bill Gross, who manages the world’s biggest bond fund at PIMCO, said the economy had stalled, in a Tuesday interview on Bloomberg TV . He stopped short of predicting a return to recession, but called the current situation a “tipping point.” Larry Summers, former Treasury Secretary and recently head of the White House’s National Economic Council, said in a Reuters column Tuesday there’s a one-in-three chance the economy will revert to recession, “if nothing new is done to raise demand and spur growth.” Government stimulus programs, such as the payroll tax cut and unemployment benefits, are set to expire at the end of the year. The deficit-reduction deal passed this week doesn’t renew them, instead enacting a decade of cuts. “The economy’s problem remains a lack of aggregate demand,” author Bruce Bartlett, who was a senior policy analyst under President Ronald Reagan, said in an email. “The unwinding of the 2009 stimulus has already had a depressing effect on growth, and any further fiscal contraction from the budget deal will make matters worse.” Economic growth this year will likely average less than 2 percent, said John Richards, head of strategy at Royal Bank of Scotland in the Americas. “Empirically, growth at that level is not a stable long-run point,” Richards said. “You move off it rapidly, in one direction or another.” Financial markets reflect the dismal mood. Stocks have taken a relentless beating in the past couple weeks, with investors eying the fight in Washington over raising the government’s debt ceiling. After days of selling, the Standard & Poor’s 500 Index at Tuesday’s close had erased all of the gains it had made so far this year. If stocks hadn’t risen Wednesday, the Dow Jones Industrial Average would have logged its longest losing streak since 1978, Bloomberg News reported . Perhaps a more telling indicator is the interest rate on Treasury debt, which plunged this week to fresh lows. Yields on the 10-year note fell to the level of early November, when the Federal Reserve was beginning a massive stimulus program, Bloomberg data show . Falling Treasury yields are typically a sign that investors foresee a weak economy, as they clamber for a safe-haven investment. Fears that the Treasury might default, which were hardly reflected in the data to begin with, are now wholly irrelevant, as the darkening economic picture pushes rates down, economists say. Indeed, there’s been little cause for hope in the stream of data released in the last few days. Consumer spending , a key driver of growth, fell in June, the government said Tuesday. It was the first decline in nearly two years. On Monday, the Institute for Supply Management announced that activity in the manufacturing sector hardly increased at all in July. New orders in manufacturing actually shrank, for the first time since June 2009, the ISM said. Manufacturing, used as a gauge for the health of the economy, had been showing strength earlier in the year. But now, that seems to have changed. At Vista Metals, a manufacturer outside Pittsburgh, orders shrank by about 15 percent in June, according to Mark Shelleby, the company’s treasurer. “This may be more of a fundamental decline in demand than just summer doldrums,” Shelleby said. Others in his field see the slowdown as seasonal, he said. But Shelleby insists it’s based on the weakening economy. “I hope I’m wrong,” he said.

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Mark J. Perry and Robert Dell: Reset Equity-Risk Formula for Banks

August 2, 2011

Originally published in The Atlanta Journal-Constitution on July 29, 2011. By Robert Dell What the AJC ‘s recent investigation into the failure of 65 Georgia banks showed is that both bank executives and their regulators lacked incentives for maintaining equity capital commensurate with the risk of making aggressive bets on real estate in the latter stages of the real estate boom. Instead, regulated banks accentuated both the boom and the bust. For banks with assets under $1 billion, which comprise 90 percent of U.S. banks, 74 percent of their loans and securities are real estate risk-related, according to banking scholar Alex Pollock. On the surface, the banking business looks much like the real estate investment trust (“REIT”) business these days. REITs derive revenue from the leasing and sale of properties they own. Banks get revenue from interest on loans, interest which is paid from the leasing and sale of properties securing those loans. Whereas banks are more exposed to risk in residential for-sale properties versus REITs, which are more affected by risk in rental properties, these two major real estate categories experienced a comparable boom and bust in recent years. So why weren’t REITs hit with large waves of failures the way banks were? REITs are lightly regulated and compete for credit partially by offering creditors more safety. As a result, REITs are typically capitalized with tangible equity exceeding 30 percent of assets. There is evidence to suggest REITs were a moderating influence on the real estate boom and bust. Banks are heavily regulated and bank creditors are, to a great extent, insured by government deposit insurance and other safety net policies. Consequently, bank depositors don’t discipline bank risk-taking and banks typically hold tangible equity of less than 6 percent of assets. This was not always the case. A century or more ago, banks were capitalized more like REITs are today, holding equity of at least 30 percent of assets. University of Georgia banking economist George Selgin, an advocate of free banking , explains: In a world without insurance … [a bank can] only attract deposits by putting its owners’ capital at stake. Other things equal, the more capital a bank has, the more likely it will succeed in attracting risk-averse depositors … [B]anks can also attract such depositors by holding low-risk assets … In the past, banks used both sorts of strategies to gain market share, often taking out advertisements in newspapers in which they supplied pertinent balance-sheet details. Historical perspective is warranted. If we define “banking crisis” to mean bank failures and system losses exceeding 1 percent of a country’s GDP, we find that in the period 1875-1913, the “golden era” of laissez-faire, there were only four banking crises worldwide. By contrast, in the period 1978-2009, about 140 banking crises occurred worldwide. The major difference between the two periods has been the expansion of taxpayer-backed deposit insurance. Federal deposit insurance began in 1933, but it was initially opposed by Franklin Roosevelt, his treasury secretary, the Federal Reserve, major bank executives, virtually all economists and Sen. Carter Glass (of Glass-Steagall). The reason was that in the two prior decades experimentation with state deposit insurance resulted in banking collapses in all eight states that had tried it. It was widely acknowledged to have been a failure. At his first presidential press conference, Roosevelt offered his own assessment: I can tell you as to guaranteeing bank deposits my own views … The general underlying thought behind the use of the word ‘guarantee’ with respect to bank deposits is that you guarantee bad banks as well as good banks. The minute the government starts to do that the government runs into a probable loss. Deposit insurance was widely recognized as special interest legislation. Sen. Henry Steagall of Alabama, the primary sponsor, represented a state where single-location unit banks were politically influential. Deposit insurance helped protect these banks from competition from larger, more-diversified multi-branch banks, since depositor risk was reduced in the competition for their deposits. Financial economist Charles Calomiris finds that empirical studies of banking in the modern era — an era of unprecedented frequency and severity of bank losses — have “concluded uniformly that deposit insurance and other policies that protect banks from market discipline, intended as a cure for instability, have instead become the single greatest source of banking instability.” The cure for banks is more equity and less government entanglement. Then banks would perform more like REITs — with a healthy focus on the long-term.

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Auto Union Wants Bigger Cut Of Detroit Success

July 25, 2011

AUBURN HILLS, Mich. (AP) — To help American carmakers stay in business, autoworkers grudgingly gave up pay raises and some benefits four years ago. Now that General Motors, Ford and Chrysler are making money again, workers want compensation for their sacrifice. Just how much they get is the central question hanging over contract talks that start this week between Detroit and one of the nation’s largest and most powerful unions. The negotiations, the first since Chrysler and GM took government aid and emerged from bankruptcy, will set wages and benefits for 111,000 members of the United Auto Workers, including those at Ford, which avoided bankruptcy by taking out massive private loans. The UAW’s four-year contracts with the Detroit Three expire on Sept. 14. There’s more at stake than pay. After the industry’s brush with financial ruin in 2008 and 2009, both sides know how quickly Detroit’s sales and profitability could vanish. Sales are on pace to reach nearly 13 million cars and trucks this year, better than the 10 million in 2009, but still below the 17 million peak in 2005. Americans are worried about buying cars when wages and the job market are weak. The workers and Detroit companies can’t leave themselves vulnerable to rivals. “Management’s not the enemy at this point,” says Jim Graham, a longtime local union president in Lordstown, Ohio, where workers make the Chevrolet Cruze car. “The enemy is the competition.” Even so, the talks won’t be easy. Chrysler, which is run by Italian automaker Fiat, wants to hold the line on wages and benefits, while GM and Ford want to cut labor costs even more. There’s friction inside the union, too. Many workers are eager to get a share of company profits and restore pay raises and some benefits given up during the financial crisis. “You want to get something back,” says Hans Smith, a worker at GM’s pickup plant in Flint, Mich., who knows they won’t get back all the concessions. That could create problems for the UAW’s new leader, Bob King, who preaches cooperation over confrontation. King wants to “make sure our members get their fair share of the upside” but also keep the companies competitive. Wall Street is watching, too. Stock prices at Ford and GM and a potential Chrysler public offering could be hurt if companies end up with higher costs. The talks started Monday at Chrysler’s Auburn Hills, Mich., headquarters with a series of friendly handshakes. Both sides wore matching maroon jackets to signal unity. Here are the key issues in the talks: — Reward for Risk: Workers want a bigger cut of the profits now that Detroit’s automakers are making money again. They got profit-sharing checks in January, but they’ll want bigger ones this year to offset the risk that they could nothing if the economy slows more and auto sales tank. They also resent the size of executive pay packages, particularly at Ford, where workers fume that Ford CEO Alan Mulally got $26.5 million for 2010. Some assembly-line workers are already mad about giving up guaranteed raises. They could resist profit-sharing. “Most workers say `No, that’s not good enough,’” says Gary Walkowicz, a Ford worker who ran unsuccessfully against King last year. “It’s like pie in the sky as opposed to real increases in wages to help us keep up with increasing prices.” The UAW’s ultimate weapon, a strike, is banned at GM and Chrysler under terms of the government bailout. The union could still strike at Ford. — Matching Rivals’ Costs: Even with big reductions in labor costs since 2007, GM and Ford still pay more in wages and benefits than Toyota, Honda and Hyundai, which don’t have unionized workers. Ford’s cost is the highest in Detroit at around $58 per hour, while Toyota’s is $55, according to the Center for Automotive Research. GM and Ford will try to cut costs further in talks this summer, while Chrysler, which has the lowest costs in Detroit, doesn’t want an increase. Still, factory wages and benefits cost the Detroit Three around $20 less an hour per worker than they did four years ago. In the last contract talks, companies got the union to form trust funds to manage the cost of their retirees’ health care. That took a huge cost off Detroit’s books once the companies gave money to the trusts. The union also agreed to lower wages for newly-hired workers, about half the $29 per hour that longtime union workers make. King says Detroit’s costs will fall as more new workers are hired. He says that the union won’t make any more financial concessions, but will look at other ways to cut costs, including health care changes, as long as members aren’t hurt. Al Iacobelli, Chrysler’s chief negotiator, says the company won’t go back to the old formula of pay raises. — Keeping U.S. Jobs: The UAW is eager to boost its ranks with more new hires. Its membership has fallen to 376,612, about a quarter of the 1.5 million it had at its peak in 1979. The companies, though, are reluctant to hire with auto sales and the economy still sputtering. King concedes that reopening plants would have to be justified by increased sales. In past years the spirit of cooperation at the start of talks quickly has turned to nastiness as both sides staked out their positions. But UAW Vice President General Holiefield says this year will be different. “We’ve come through hell and look where we’re at today,” he says. “I don’t see anything as an obstacle.”

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Week Ahead: Lots of Data Ahead of July 4th Holiday

June 24, 2011

Most investors next week will undoubtedly be looking forward to the long July Fourth holiday weekend. Everyone could use a breather after weeks of bad economic news and stock market losses. Nevertheless, a good bit of economic data will be released. The ISM Manufacturing Index for June is due Friday and it may be the most significant report all week. The ISM index is the most widely watched factory report and it follows closely in the wake of disappointing regional manufacturing data. Economists expect the index to fall to 51.8 in June from 53.5 in May. For months manufacturing had been a lone bright spot on an otherwise grim economic landscape. But that may be changing; the regional data was impacted by bad weather across many regions of the U.S. — notably tornadoes and flooding in the Midwest — which disrupted supply chains. Three Federal Reserve District Bank surveys of manufacturing are due ahead of the ISM report and they should give a preview of what’s to come on a national scale. The Dallas Fed’s Texas Manufacturing Outlook is due Monday and it may offer the most optimistic view. The Richmond Fed’s Survey of Manufacturing is due Tuesday and the Kansas City Fed Manufacturing Survey is due Thursday. The Chicago Purchasing Managers index, used to gauge demand for goods made in factories, is due on Thursday. Consumer spending and personal income data for May are due on Monday. Meanwhile, more bad news is expected from the housing sector. The S&P/Case-Shiller Home Price Index for April is due Tuesday and the numbers are expected to show a continued decline in home values. Pending home sale data for May is due Wednesday. The U.S. housing sector has been just as stubborn as the labor market in its refusal to participate in a recovery. Consumer confidence has been rocked as homeowners see the value of their homes decline and with it the equity that provided a cushion against financial emergencies. Speaking of consumer confidence, the Conference Board’s Consumer Confidence Index will be released Tuesday and the final take on the Reuters/University of Michigan Consumer Sentiment Index is due Friday. The only hope for an increase in these indexes stems from a slight drop in gas prices as oil prices have dipped in recent weeks to around $90 a barrel from over $110 a barrel in the spring. Car makers on Friday will release figures on June sales of North America-produced motor vehicles.

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Obama To Announce A New High-Tech Manufacturing Effort

June 24, 2011

PITTSBURGH — Imagining advances from lighter cars to smarter robots, President Barack Obama is announcing a $500 million project to spur high-technology manufacturing, a sector of U.S. industry that presidential advisers say has lost ground to such competitors as Germany and Japan. On Friday in Pittsburgh, Obama is to call for a joint effort by industry, universities and the federal government to help reposition the United States as a leader in cutting-edge manufacturing, including biotechnology, robotics and nanotechnology – the development of new materials at the molecular level. The initiative represents yet another effort by Obama to promote job-creation in the midst of an economic slowdown that has reduced hiring and weakened his job approval standing with the public. The president has tried to elevate his profile on the economy with weekly job-related trips to states that are key to his re-election. In 2008, Obama beat John McCain, his Republican opponent, by a 55-45 percent margin in Pennsylvania. But presidential elections are usually competitive there, making the state a 2012 battleground. He is to launch his new high-tech plan at Carnegie Mellon University, one of six universities in what the administration is calling the Advanced Manufacturing Partnership. The plan also features 11 manufacturing companies, including Ford Motor Co., Caterpillar Inc., Procter & Gamble Co. and Northrop Grumman Corp. Leading the effort will be Andrew Liveris, chairman, president and CEO of the Dow Chemical Co., and Susan Hockfield, president of the Massachusetts Institute of Technology. “The idea here is that we’re bringing together all of the key players in a collaborative partnership to help identify these promising technologies, to invest in these promising technologies and to use them to drive a revitalization of American manufacturing,” said Ron Bloom, assistant to the president for manufacturing policy. Obama will be touring the Carnegie Mellon Robotics Institute, which is building machines that can help with bomb disposal, brain surgery, lawn mowing and paint scraping. Ultimately, some scientists at the institute are trying to figure out whether robots and humans can “treat each other as equal partners or teammates.” The administration’s plan includes $70 million for a robotics initiative. It also is aiming $300 million toward national security industries and $100 million for research and training to more quickly develop advanced materials at lower costs. Some of the $500 million would come from existing allocations to government agencies, but other money is only reflected in Obama’s 2012 budget request and would require approval by Congress. Bloom envisioned nanotechnology that could create stronger but lighter materials. “And what that means is, if we can be the leader in creating these kinds of materials, then we’re going to have cars that are lighter, but yet as strong; we’re going to have airplanes that are light and consume less energy in order to power them,” he said. The initiative is the brainchild of the President’s Council of Advisors on Science and Technology. In a report issued Friday, the council warned that U.S. leadership in manufacturing is at risk. It said the United States has been losing research and development associated with manufacturing to other countries. Most importantly, the council noted, the United States is losing the manufacturing competition for products that were invented in the U.S., including laptop computers, flat panel displays and lithium ion batteries. In a teleconference with reporters, Bloom rejected a suggestion that the effort could be criticized because it could single out beneficiaries at the expense of others “We’re not trying to pick a winner,” Bloom said. “We just want to give entrepreneurs and innovators tools to work with.” ___ Associated Press writer Kevin Begos contributed to this report.

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Deutsche Fired Top Trader After Complaints Of ‘Substantial’ Anomalies

June 24, 2011

NEW YORK (Matthew Goldstein) – In the fall of 2009, Deutsche Bank quietly fired one of its top derivative traders in London after a colleague in New York complained about finding “substantial trading anomalies” in a multibillion dollar portfolio of high-risk credit default swaps managed by the German-based bank, Reuters has learned. The bank dismissed Alex Bernand after a quick internal investigation prompted by the employee’s complaint led to the discovery of improper trading in one of Bernand’s personal brokerage accounts, according to documents seen by Reuters and interviews with people familiar with the situation. The documents, part of a Sarbanes-Oxley whistleblower action filed against Deutsche in May 2010 by the employee in New York, also reveal that the Securities and Exchange Commission opened an inquiry last year into a related allegation that some of the assets in the derivatives portfolio overseen by Bernand may have been improperly valued in order to hide trading losses. Deutsche bank spokeswoman Renee Calabro declined to comment on Bernand’s dismissal. But she said the allegation that some assets in the bank’s derivatives book had been improperly valued was investigated by the bank and is “wholly unfounded.” The SEC investigation and Bernand’s October 2009 firing, neither of which has been previously reported, come as Deutsche is aggressively winding down the portion of its derivatives trading business that Bernand had overseen. Earlier this month, the bank reported in an investor presentation that its plan to unwind its “high-risk” credit correlation portfolio “is well ahead” of schedule. The bank first announced a plan to begin “de-risking” some of its derivatives trading desks in late 2008. In January, Deutsche settled the whistleblower case by agreeing to pay $900,000 to trader Matthew Simpson and promoting him to managing director shortly before he voluntarily agreed to leave the bank in April. It was the largest Sarbanes-Oxley whistleblower settlement for a complaint filed in 2010. Simpson, who now works for Rochdale Securities in Stamford, Connecticut, did not return a phone call seeking comment. UNFOUNDED ALLEGATION “This complaint, which is over a year old, has been the subject of a thorough investigation, and we believe that any allegations about financial misreporting are wholly unfounded,” said Calabro, who declined to comment on the terms of the settlement with Simpson. “The bank is cooperating with the SEC on its review of the matter.” An SEC spokesman declined to comment. Bernand, who lives in France, also declined to comment. On his LinkedIn profile, Bernand describes himself as an “independent philanthropy professional.” Simpson’s and Bernand’s names were redacted from the whistleblower documents seen by Reuters, but their identities were confirmed by two people familiar with the situation. In its settlement agreement with Simpson, Deutsche also denied “any wrongdoing in connection with the matter.” In light of the settlement, the U.S. Department of Labor in February closed its investigation into Simpson’s claim that he had been retaliated against by some of his superiors for bringing the allegations of improper trading to the attention of the bank’s compliance department. The firing of Bernand, a one-time rising star in the derivatives world, is something of an embarrassment for Deutsche. In 2006, the bank issued a press release to trumpet his hiring from Bank of America as its global head of credit correlation. At BofA, Bernand had pretty much built the Charlotte, North Carolina-based bank’s structured credit trading business from scratch. Inside Deutsche, the portfolio that Bernand oversaw from London was called the “exotics book,” because many of the derivatives in the portfolio were tied to complex securities. At its peak, the portfolio was one of the largest on Wall Street with the assets underlying the trades valued in the tens of billions of dollars. ILLUSORY PROFITS The bank’s credit correlation desk specialized in using credit default swaps to make proprietary trades that were aimed at hedging some of the bank’s exposure to potentially risky corporate bonds, leveraged loans, currencies, indexes and commercial paper. Many of the trades put on by correlation traders involve synthetic collateralized debt obligations (CDOs), financial instruments that use credit default swaps to get exposure to various bonds and other assets. Some have blamed credit default swaps — a type of derivative that is supposed to provide a level of insurance against an underlying asset going bad — with exacerbating the global financial crisis because they increase the level of risk on balance sheets of the world’s major banks. However, the synthetic CDOs traded by the correlation desk were not like the more popular variant of CDOs which were stuffed with subprime mortgage securities. Janet Tavakoli, a Chicago-based derivatives consultant who has written several books on credit derivatives and structured products, said many bank managements did not fully appreciate the illusory nature of the trading profits being generated from derivatives correlation desks before the financial crisis. She said those profits often disappeared and turned into losses when the underlying assets turned south. “The thing about correlation desks is that it will appear you are making a lot money from trades, but it is all money at risk,” said Tavakoli. “I call this kind of trading an invisible hedge fund.” In an early 2010 regulatory filing, Deutsche attributed some of the rise in the bank’s value-at-risk, or VAR, at the end of 2009 to a “recalibration of parameters in the Group’s credit correlation business.” On Wall Street, VAR is one metric used by a bank to estimate how much money it could conceivably lose in a day if all of its trading bets and hedges went awry. It’s an imperfect measurement, but one followed by most industry analysts. A person familiar with Deutsche said the bank is winding down the credit correlation desk to both reduce its risk profile and better comply with the so-called Volcker Rule’s ban on proprietary trading in the United States. The bank’s internal investigation into Simpson’s allegations was overseen by the big New York law firm Fried Frank. The revelation that the SEC is investigating the valuations used for some of Deutsche’s derivatives portfolio comes at an awkward time. Over the past few months, the bank has taken some high-profile lumps for its role in contributing to the financial mess. A Senate report released in April faulted Deutsche for continuing to churn out collateralized debt obligations and other securities backed by subprime mortgages even as the housing market in the United States was starting to crumble. The report from the Senate’s Permanent Subcommittee on Investigations said Deutsche aggressively marketed CDOs to its client, “despite the negative views of its most senior CDO trader” about the failing health of the housing market. Just last month, federal prosecutors in New York filed a civil suit against Deutsche, claiming its MortgageIT subsidiary repeatedly lied about the quality of the mortgages it was issuing to obtain federal guarantees on those iffy home loans. The government seeks to recoup some $1 billion in losses it incurred from insuring the mortgages. Deutsche contends most of the problem loans were issued before the bank acquired MortgageIT in 2007. Before filing his whistleblower complaint last May, Simpson had built a long track record at Deutsche. Over the dozen years he worked for the bank in New York, he held positions in finance, risk management and then trading. He joined the firm’s correlation trading group in 2008 and was responsible for trading derivatives tied to bonds and currencies. In his whistleblower complaint, Simpson said when he reported his concerns about trading improprieties to Deutsche’s compliance department he “expressed concerns for future retaliations.” Among the acts of retaliation that Simpson alleged were being passed over for a promotion in February 2010 and later “stripped” of all his trading and management responsibilities. Calabro said the bank denies Simpson’s claim of retaliation. (Reported by Matthew Goldstein; Editing by Michael Williams and Claudia Parsons Copyright 2011 Thomson Reuters. Click for Restrictions .

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Department Of Energy Makes $150M Bet On Solar Tech

June 17, 2011

On Friday, Secretary of Energy Stephen Chu announced a ” game changing ” development in solar energy. A company called 1366 Technologies , headquartered in Lexington, Mass., has developed a silicon solar wafer that would cut the cost of solar cell manufacturing by an estimated 50 percent. The wafer technology was developed with the support of a pilot innovation investment program housed under the Department of Energy, known as the Advanced Research Projects Agency – Energy (ARPA-E). According to director Arun Majumdar, “ARPA-E is looking for high risk ideas that, if successful, can be high impact. Those that don’t exist today.” Unlike traditional wafers–which are sliced from a large block, resulting in considerable losses of material (up to 50 percent )–these new wafers are individually cast to specific measurements, a more efficient model of production. In 2009, ARPA-E made an initial $4 million dollar investment in 1366 Technologies, and on Friday, announced it would make an additional $150 million dollar loan guarantee to take the company’s research and development to the next level. If projections regarding cost savings are accurate, solar may be on its way to becoming competitive with traditional fossil-fuels — though some in the industry remain concerned about barriers still in place. “There are two main areas of concern: price and value,” said Brian Keane, president of Smart Power , a green energy marketing group. Keane explained that the primary “value” of solar “is that it’s good for the environment. But quite frankly, no American actually thinks that’s good value.” Keane says that U.S. consumers need to be convinced that solar is a viable proposition. “The perception is that solar is an idea from the 1970s that just didn’t work. They think it’s not strong enough to power their lives, compared with oil, coal and nuclear power.” Still, Keane added, “If we can cut the price [of manufacturing] in half, that really helps us with the value proposition to the American people.” Others point to concerns around the marketplace itself. Lew Milford, president of the Clean Energy Group , a non-profit advocacy group focused on energy and climate concerns, said that many new and innovative technologies fail because they never reach commercialization. Milford called this the “valley of death” that innovative tech companies must cross after their initial rounds of funding, and the hurdle that oftentimes prevents them from becoming scalable and reaching market potential. Milford suggested that the problem of access to capital might be solved with something like the President’s suggested–” Clean Energy Bank “–to finance clean energy initiatives, but acknowledged that the highly political climate surrounding budget negotiations would complicate its creation. With ARPA-E in particular, Milford thought that a better and more robust relationship with state governments was essential for the success of the agency’s investments. “In the end, I think states are a really critical backstop for all of this,” he said. “State policy is increasingly going to create these markets.” While many state governors remain skeptical of climate change policy and energy reform on the whole, Milford contended that many of the same governors were nonetheless supportive of clean energy technology, given its potential to create jobs and strengthen state economies. By way of an example, Milford pointed to New Jersey governor Chris Christie, who is critical of climate change concerns but remains “a strong supporter of offshore wind farms in the state.” “ARPA-E just doesn’t have the states as customers,” said Milford, and it still needs to figure out “how to you commercialize the products that it is funding.” ARPA-E director Majumder insisted that the agency already has a close relationship to the states. As evidence, he pointed a program, Sunshot , that specifically addresses the question of cost competitiveness and solar technology. “We have a very close relationship with the states,” he said. Majumder said that one of his primary concerns around solar energy had to do with manufacturing: “In the mid-90s, the U.S. had 40 percent of the manufacturing of photovoltaic cells,” he explained. “Now we have less than 5%. We have to regain that technology lead back — and that will be based on innovation in the U.S.”

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ISM Manufacturing Disappoints- Dollar Heavy

June 1, 2011

ISM Manufacturing Disappoints- Dollar Heavy

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Ian Fletcher: Why Johnny Can’t Innovate: The American Economy’s Most Surprising Deficit

May 28, 2011

I argued in a previous article why, despite America’s current obsession with government budget issues, the real key to bringing back our economy lies in a) fixing our trade deficit and b) restoring our capacity for innovation. Although the former problem has now grabbed significant public attention, most Americans seem to think that our national capacity for innovation is healthy and without problems. After all, we’re the home of Silicon Valley. So things must be going great, right? Unfortunately, no, and for the same reason that, as I explained elsewhere, our manufacturing sector isn’t healthy. While it’s true that there’s an enormous amount of innovation (and manufacturing) going on in this country, “enormous” is not, in and of itself, an adequate quantity. To figure out how much innovation (or manufacturing) is enough for America, the quantity must be measured against how much we need to maintain our living standard . And we are, in reality, falling short in both areas. As long as our manufacturing output is so small that we must run a trade deficit with foreign nations in order to satisfy our consumption desires, we aren’t manufacturing enough . As long as our innovation output is so small that American industry can’t keep pace with its foreign rivals and continues to inexorably surrender market share and technological superiority to them, we aren’t innovating enough. Yes, it’s nice that we have iPhones and other innovative American products. But for our economy to be truly healthy, we would have to be exhibiting that level of innovation in products across the board . Our cars would have to be as innovative as our iPhones. And our consumer electronics. And all the other by-no-means-low-tech products that increasingly aren’t even made in this country. Having a few superstar sectors in our economy simply isn’t enough to deliver the living standard that Americans want. To deliver this, we need an economy in which dozens of major metropolitan areas have the same sheen of prosperity, productivity, innovation and all-round economic sophistication that the San Francisco Bay Area has. That’s the vision to keep in your mind. Detroit as San Francisco. People forget how small Silicon Valley really is. According to the Labor Department, it only employs 225,000 people — in a U.S. economy with a labor force of 238 million . Unfortunately, the media in this country give so much excess attention to it — and the other fancy sectors of our economy, like Hollywood and Wall Street — that people mistakenly think it, and industries like it dominate the U.S. economy. Nice work if you can get it, but they don’t. What would it take to restore innovation to those sectors of the American economy that are deficient in it? The best analysis of this problem I know is by Gregory Tassey, the chief economist of the National Institute of Standards and Technologies, America’s only serious civilian industrial policy agency. In his book The Technology Imperative , and also in his essay , “Rationales and Mechanisms For Revitalizing U.S. Manufacturing R&D Strategies,” he argues that the key problem for U.S. innovation is what he calls the “valley of death” between pure science and commercialization. America remains strong (though in relative decline, compared to other nations) in pure science. We remain good at commercializing discoveries and inventions that can be sold for a profit. But we are weak at the vast area of research that falls between these two extremes. Before a new scientific discovery can reach fruition in actual products sold to customers, it must pass through many stages of research. And, crucially, much of this research cannot itself be turned to profit. But profiting from new discoveries is impossible unless this research is done. Because it is unprofitable, companies won’t, as a rule, engage in enough of this intermediate research. Therefore an economy that relies wholly upon private profit to finance innovation will fall short. This research isn’t academic science either, so don’t expect the professors to fill in. One way to look at this research is to call it useful but unpatentable ideas. Anybody who has ever talked to creative engineers, or patent lawyers, knows that a great many important ideas cannot be patented. Some are more discoveries than inventions. Others are too generic, or too easy to copy. Others consist simply in the painful process of trying and ruling out a hundred ways to implement some new fundamental principle in order to find the one or two ways that have a future. Other ideas are not the sort of things for which patents would be even relevant. In their case, one would ideally capture their value by means of proprietary technologies, first-mover advantage, or other commercial methods. But, for any of a dozen different reasons, one cannot. So if you do this research, somebody else can harvest the profits as easily as you can. The problem is a kind of “tragedy of the commons” applied to ideas. Historically, the only companies that engaged in this sort of research were very large companies with monopoly or quasi-monopoly power over their ultimate product markets: companies like the old AT&T with its Bell Labs, the old IBM with its Watson Laboratory, the old RCA with its Sarnoff Research Center, or the old Xerox with its Palo Alto Research Center. Because of their oligopolistic power, they were assured of a) capturing the value of whatever they discover, rather than having it swiped by a competitor, and b) bringing in enough money, over a long-enough time frame, to pay for expensive laboratories that may take years to produce results. There are still a few companies like this around, but not nearly enough to bridge the valley of death to the extent we need. So government has a legitimate role. This fact, of course, drives laissez-faire ideologues crazy. But it was recognized as far back as founding father Alexander Hamilton, whose Report on Manufactures , submitted to Congress in 1791, was partly about this very topic. (What constitutes high technology changes over time, but technological innovation has been the key to economic growth since the dawn of the industrial revolution.) During the Cold War, hundreds of billions of dollars, from the jet plane to the Internet, went into this sort of research. But because it was justified in terms of national security, not industrial innovation per se , we never really reached a solid understanding of what we was doing. So we never properly institutionalized it as a policy with an economic purpose. As a result, our efforts today in this area are pathetically small. For example, the Federal government’s Manufacturing Extension Partnership maintains a network of centers in every state designed to help American manufacturers adopt innovative technologies. One evaluation found that it generated $1.3 billion a year in cost savings for manufacturers and $6.25 billion in increased or retained sales — all for an annual federal outlay of only $89 million. A single Boeing 747 costs four times that. Another good but underfunded program is the Technology Innovation Program . An audit by the respected National Academy of Sciences vindicated its claim to generate economic benefits far exceeding its cost. One single $5.5 million grant, for example, seeded development of the small disk drive industry, which enabled creation of the iPod, the iPhone, TiVo and the Xbox. TIP’s 2012 projected budget? $75 million. Our rivals are far ahead of us in this game. Germany, where factory wages are now higher, and unemployment lower, than here, spends roughly two billion dollars a year on its Fraunhofer Gesellschaft . They even have a substantial presence in this country, to harvest useful American ideas for commercialization in Germany! To get our economy back on track, we need to stop dreaming that innovation is purely a self-financing private-sector game and start paying for the innovation we need. Either that, or we’re not going to get the economy we want.

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Leo Hindery, Jr.: Note to Boeing’s Jim McNerney: All We Are Saying Is Give the Truth — and Your Union — a Chance

May 24, 2011

Back in 1969, John Lennon famously wrote, ” All we are saying is give peace a chance .” Well, here in May 2011, while labor peace is not always at hand, maybe we can at least give labor truth a chance. Unfortunately, telling the truth seems to be increasingly difficult for the CEOs of our multinational corporations when talking about “Making It In America” and saving and creating American jobs. And Exhibit A right now is Jim McNerney, who is the Chairman, President and CEO of the Boeing Company. The reason I am picking on Mr. McNerney is that he is defending Boeing’s decision to retaliate against its union workforce in Everett, Washington, by moving thousands of jobs to a non-union location in South Carolina, with statements that are among the most misleading and disingenuous by a major American CEO ever. And I’ve been around long enough to have heard a lot of statements by a lot of big company CEOs. Compounding my dismay with Mr. McNerney is that he also happens to currently hold a very senior economic advisory position in the Obama administration as head of the President’s “Export Council.” He holds this position of crucial influence despite the fact that for years he’s been exporting thousands of his American manufacturing jobs to Mexico and China. The facts of this dispute are pretty simple. As reported by Hal Weitzman and Jeremy Lemer in the Financial Times , ” nineteen [Republican] Senators are threatening to block President Barack Obama’s two appointments to the National Labor Relations Board…after the organisation filed a complaint last month against Boeing that seeks to force the manufacturer to transfer 787 production from the non-union factory in South Carolina to its unionised facilities in the Seattle region .” The NLRB believes that Boeing selected South Carolina — a right-to-work state — purely in retaliation for a strike in 2008 at the Everett facility. To attack the NLRB’s conclusion, Mr. McNerney, in a preferentially placed op-ed in the Wall Street Journal , said the following (the underscoring is mine): ” We viewed Everett as an attractive option and engaged voluntarily in talks with union officials to see if we could make the business case work. Among the considerations we sought were a long-term ‘no-strike clause’. “Despite months of effort…union leaders couldn’t meet expectations on our key issues. “We hold no animus toward union members, and we have never sought to threaten or punish them for exercising their rights, as the NLRB claims. About 40% of our 155,000 U.S. employees are represented by unions – a ratio unchanged since 2003 .” Now, for the truth: The most important right any union has is the right to strike. Without this right, what real opportunity does it have to ensure fair and balanced treatment for workers? Thus it is at once irresponsible for McNerney to make this unreasonable demand and disingenuous for him to then say that union leaders couldn’t meet his ” expectations on key issues .” As Christopher Corson, General Counsel of the International Association of Machinists and Aerospace Workers, wrote on May 9, “In every state in our nation, the law provides important protections for individual workers when they act together to improve their work lives for themselves and their families…If retaliation were permitted, there would be no protection.” McNerney says that ” Boeing never sought to threaten or punish [workers] for exercising their rights.” Yet the NLRB based its finding on the very specific comment by Boeing executives that ” avoiding strikes was a central reason for the decision .” Yes, ” 40% of Boeing’s [overall] U.S. employees ” today may be ” represented by unions “, and yes, this ratio may be “unchanged since 2003.” However, in the late ’60s when I was in college in Seattle and working nights as a Sheetmetal Workers journeyman, the number of Machinists and other union members working for Boeing in the greater Seattle-Everett area was around 22,000, and by the year 2000 it was around 50,000. Now just a decade later, with McNerney as CEO for the last five years, the number of union members at Boeing in the Pacific Northwest has shrunk to around 35,000, with at least 20,000 of these jobs having moved to China. In just 15 years or so, using an initiative benignly called “systems integration mode of production” which entails providing foreign suppliers and overseas subsidiaries with massive amounts of business knowledge, management practices, training and other intangible exports, Boeing has gone from producing nearly 100% of its commercial aircraft and parts in America to today producing only a small fraction of that work here. The workhorse 727 airframe, launched in 1963, had just a 2% foreign content; the 777 airframe, launched in 1995, has about 30% foreign content; the new 787 Dreamliner, officially launching this year, will have nearly 70% of its manufacturing content coming from foreign sources, with workers in Everett accounting for only about 4% of each aircraft’s value. This massive transfer by Boeing, and by almost every other American corporation committed to offshoring, of intellectual property that took decades to develop with internal investment and support from government-funded research laboratories will, with its massive ripple effects throughout our economy, ultimately be an even bigger ‘drain’ on America than even the direct offshoring of millions of American jobs over the last 15 years. Jim McNerney’s very public and cynical efforts, however, are just another egregious example of the broad opportunism that many American multinational corporation CEOs have embraced in their continuing efforts to offshore American jobs, cut the wages and benefits of the American workers whose jobs are not being shipped overseas, and, whenever they can, BUST UNIONS. As reported by David Wessel ( Wall Street Journal , 4-19-11), ” U.S. multinational corporations, the big brand-name companies that employ a fifth of all American workers, have been hiring abroad while cutting back at home, sharpening the debate over globalization’s effect on the U.S. economy. ” According to the Commerce Department, these companies cut their work forces in the U.S. by 2.9 million during the last decade while increasing employment overseas by 2.4 million, which is a big shift from the ’90s when they added 4.4 million jobs in the U.S. and 2.7 million abroad. In just the year 2009, they cut 1.2 million, or 5.3%, of their workers in the U.S. but only 100,000, or 1.5%, of their workers abroad. Three highlights: Between 2005 and 2010, General Electric, the nation’s largest industrial conglomerate and #6 on the Fortune 500 list, cut 28,000 workers in the U.S. but only 1,000 workers overseas. This notwithstanding that GE’s Chairman and CEO, Jeffrey Immelt, now heads President Obama’s “Council on Jobs and Competitiveness”, which is supposed to help create jobs in the United States and not ship them overseas. Cisco Systems Inc., the Fortune #62 company that makes networking gear, has also been creating jobs much more rapidly overseas. Over the past five years, it has added 21,350 employees overseas, but only 10,900 in the U.S. At the beginning of the last decade, 26% of Cisco’s work force was overseas; today, around 46% is. Oracle, the Fortune #96 company that makes business hardware and software, added twice as many workers overseas over the past five years as in the U.S. At the beginning of the last decade, it, like Cisco, had many more workers at home than abroad; today, however, around 63% of its employees are located overseas. McNerney and his fellow CEOs tout many global ‘differentials’ as the reasons why they’ve been economically ‘downgrading’ some jobs (with moves to South Carolina and other right-to-work states) and offshoring others (to China and elsewhere). Wessel further wrote that American multinationals repeatedly say in justification that it is the ” combination of the U.S. tax code, the declining state of U.S. infrastructure, the quality of the country’s education system, and barriers to the immigration of skilled workers [that is] making the U.S. less attractive to multinationals. ” Yet it is these very multinationals which every day support and maintain these differentials by: Fighting to preserve the corporate tax practices that favor overseas earnings and employees (read ” The Tax Man Cometh – Just Not For Everybody “); Resisting efforts to couple government infrastructure investments with ‘Made in America’ requirements that are no more demanding than every other member of the G-20 has for its own infrastructure investing; Fighting the adoption of our own Manufacturing & Industrial Policy, which we need in order to compete with the mercantilist practices of our major trading partners, often by blaming the relatively poor state of American public school education, which, while of grave concern, has absolutely no correlation; and Manipulating our immigration practices so that these companies can continue to hire employees from India, Taiwan and China at the expense of qualified American job seekers. At the end of the day, as I noted earlier, what’s really going on here is a massive, nation-wide attempt to bust unions in order to further enrich our nation’s multinational corporations. Yet this is happening at precisely the point in time when the United States needs millions more, not millions fewer, union jobs in order to stabilize our middle class. For our country to be ascendant again, American workers everywhere — at Boeing and hundreds of other major corporations — must be treated as the highly skilled, enormously productive and wealth-producing ‘assets’ they are. We need more union-made quality goods to sell abroad and many more union paychecks producing fair incomes here at home if we are to grow ourselves out of the dismal ongoing jobless recovery we are experiencing. Expanding union membership will be one of the surest signposts on the road back to a vibrant, consuming middle class, more income equality, and fairness in employment. And when we have all of this again, along with fairer trade practices, our nation will prosper as it did for the half century before unfair globalization and union-busting practices began to run amok twenty or so years ago. In all of our manufacturing industries — not just in aircraft manufacturing — we must ensure that American workers compete on level-playing fields. Right now, however, our workers are forced to compete against foreign workers, many of whom work for American multinational corporations, who are the indirect beneficiaries of illegal subsidies, massive currency manipulation and shameful environmental practices that swamp any measure of true country ‘comparative advantage’. All the while here at home, with very limited mobility in general but especially in this distressed economy, workers must confront the enormous power that multinational corporations’ almost unlimited geographic, capital and technology mobility gives them. The members of America’s unions are skilled, resilient and tenacious. They did not win the 40-hour work week, benefits and safer working conditions in one fell swoop. These integral pathways and others to the middle class lifestyle — a lifestyle that is now being challenged in so many of our cities and towns — were hammered out over years of negotiations with very powerful corporations. And sometimes these women and men had to strike to ensure fair dealing. But in exchange for their skills, hard work and productivity, these unionized workers produce real wealth that’s been shared for generations across our entire economy and society. I can’t envision a day when unions don’t represent the best path to fair and balanced dealing between companies and workers, for without union voices workers have little or no say in their future. And no worker anywhere should have to work without organizing protections, which is why Jim McNerney’s and Boeing’s demand that Boeing workers now agree to ” a long-term no-strike clause ” is so obviously unfair. Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.

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Sony Paid Big Money To Mitigate PlayStation Network Hack

May 23, 2011

TOKYO — Sony Corp. is expecting an annual loss of $3.2 billion, reversing its earlier projection of a return to profit, as the electronics giant struggles with production disruptions from Japan’s tsunami and a hacker attack on its online gaming service. The Japanese maker of PlayStation 3 video game machines and Bravia flat-panel TVs said Monday that the projection of a 260 billion yen ($3.2 billion) net loss for the fiscal year ended March 2011 was largely due to writing off 360 billion yen ($4.4 billion) related to a tax credit booked in a previous quarter. Sony announced the loss ahead of its official earnings announcement Thursday under Tokyo Stock Exchange guidelines. The company had earlier projected a 70 billion yen ($860 million) profit. Like many other Japanese manufacturers, Sony has been hampered by the production disruptions set off by the March 11 earthquake and tsunami that killed more than 25,000 people, destroyed many factories and sent the nation’s economic recovery into reverse. The company kept its operating profit forecast unchanged at 200 billion yen ($2.46 billion). It expects to report sales of 7.18 trillion yen ($88.2 billion), slightly down from an earlier projection of 7.2 trillion yen ($88.5 billion). Masaru Kato, Sony’s chief financial officer, said parts shortages in the aftermath of the disaster have eased but a full recovery hasn’t yet been realized. “In the first quarter, we saw quite a major impact on our manufacturing activities,” he said. After the quake, “negative factors have grown bigger” and offset earlier improvement in the previously loss-making games division, dashing hopes for a profit. Tokyo-based Sony also faced a new challenge to its reputation following a massive security breach affecting more than 100 million online accounts. After temporarily closing down its online gaming services last month, Sony began restoring its PalyStation Network services in the U.S. and Europe on May 15 mainly for online gaming, chat and music streaming services. Sony spent 14 billion yen ($170 million) to cover costs that included identity theft insurance for customers, improvements to network security, free access to content, customer support and an investigation into the hacking. Sony has seen plunging sales of flat-panel TVs and other gadgets, and was likely to remain in the red in its TV business for the seventh year straight. Sony has also taken a beating in music players and other portable devices to Apple’s iPod, iPhone and iPad. The company booked a 40.8 billion yen ($439 million) loss for the fiscal year ended March 2010 after a 98.9 billion yen loss the year before_ Sony’s first annual red ink in 14 years. ___ Associated Press writer Tomoko A. Hosaka contributed to this report.

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Europe Ahead: PMI Manufacturing & Services kickoff a busy European week

May 22, 2011

Europe Ahead: PMI Manufacturing & Services kickoff a busy European week

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Labor, Manufacturing and housing data highlight today’s U.S economic agenda…

May 19, 2011

Labor, Manufacturing and housing data highlight today’s U.S economic agenda…

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Empire Manufacturing Index Eases in May

May 16, 2011

Empire Manufacturing Index Eases in May

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U.S. stocks fell by opening, on May’s New York Manufacturing Slowdown…

May 16, 2011

U.S. stocks fell by opening, on

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Empire Manufacturing Data Underperforms Expectations, Fails to Move Dollar

May 16, 2011

Empire Manufacturing Data Underperforms Expectations, Fails to Move Dollar

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Dave Johnson: U.S.-China Summit: If Trade Were Trade…

May 9, 2011

Today the U.S.-China Strategic and Economic Dialogue begins in Washington. This is the third such meeting, and it’s time for the Obama administration to get it right. China has not been engaging in “trade” with us, they have been engaging in something else entirely. The Washington Post sets the stage, with an editorial, The U.S. must push back against China’s investment controls : … It is still holding the renminbi at about 25 or 30 percent below its probable market value. … Beijing has increasingly used government procurement rules, technical standards and tax laws to force foreign companies to transfer their technology to state-owned Chinese firms in return for access to the Chinese market. … Beijing’s objective is the mercantilist one of building up state-owned “national champion” firms that can then capture global markets from Japanese, European and U.S. competitors. No matter that the state-owned sector already receives massive official support, direct and indirect — while more efficient private-sector job- creators must scramble for resources. Last week’s Let Trade Be Trade , explains: Since China’s admission into the World Trade Organization we have been packing up our factories and sending them over there. We have been buying so many things made in China, but they have not been buying very many things made here, and the resulting “trade deficit” has gotten worse year after year. Everyone is afraid of what China might do with all those trillion$ in U.S. Bonds they have accumulated. … There is a better way to solve the problem: let trade BE trade. Time To Buy From Us There is a simple solution: tell them to start actually trading with us, When the meeting begins Secretaries Clinton (State) and Geithner (Treasury) and Locke (Commerce) should slide a big stack of order forms across the table and say, “Your turn. Let us take your orders now, please.” China has been selling but not buying and it’s time for them to to start buying. That way we might be able use the word “trade” without wincing. It would also help fix our economy, our budget deficit, our unemployment rate and many other pressing problems. China Holds $1.5 Trillion Of Our Debt Trade by definition is a two-way street, buying from and selling to others. But China has accumulated $1.5 trillion by selling to us and not buying from us. This one-sided “trade” relationship has hurt or killed industries, companies, factories and jobs here in the United States, while forcing wages and living standards to drop. It has also placed China in an unhealthy position of power over us. It is understandable that some American interests have benefited from this arrangement, becoming fabulously wealthy while at the same time strengthening their whip-hand by pitting China’s low-wage rights-suppressed workers against American employees who have enjoyed all the protections and benefits of democracy. But it is not clear why our own government has gone along. It is obvious now to all that the one-way arrangement with China has hurt us, closed our factories, devastated our “rust-belt” communities, created vast income disparities and created terrible imbalances in the world’s economy. Placing Orders Here Fixes Both Economies If China were to place orders tomorrow for $1.5 trillion in American-made goods, the effect on our economy, unemployment level, manufacturing base, budget deficit, state budget shortfalls, public-employee pensions, and a host of other problems would be immediate and dramatic. And with our economy and wages restored, our own orders of goods from China would increase, boosting their economy, too. Their trade manipulations are costing them. Workers, facing labor-rights suppression and import restrictions from joining the world’s economy, are increasingly restless. They face inflation and a pending financial crisis. And that huge cash reserve is increasingly at risk from the worldwide imbalances it causes. If China repositioned its policies from mercantilism to trade it would fix so many problems. So why don’t they? If Not Trade, What? If China were using trade to build their economy they would use that $1.5 trillion dollar reserve to place orders here for American-made goods, boosting our economy, and boosting our ability to trade further with them. But they are not. They are sacrificing their own economic position to instead build their power position. China is cleverly using the greed and power of our Chamber of Commerce, huge multinationals, Wall Street, etc, to manipulate our government into letting them to sell China the rope to hang us with. The more China continues these manipulations even at its own expense, the more we should perhaps be understanding these imbalances as a national security problem instead of a trade problem. China isn’t trading , it is seizing the means of production. It is using manipulations of trade to gather wealth and power to itself at the expense of the rest of the world. It is vitally important for U.S. opinion leaders and policymakers to address this. We have been hypnotized by the word “trade” and the result is we are ignoring our national security. We are not minding our business. It is time to tell them to start trading fair or we’ll start minding our business with a big, fat tariff on imports so we can start paying down our deficits and rebuilding our manufacturing and jobs base. This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture . I am a Fellow with CAF. Sign up here for the CAF daily summary .

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Jerry Jasinowski: The Next Generation of Cost Savings

May 6, 2011

In these times of anemic economic growth, businesses must continue to increase profits by reducing costs. Procurement officers have become experts at extracting savings and innovations from suppliers, negotiating raw-materials contracts and managing complex global supply chains. But large amounts of goods and services are purchased too casually. Market researcher Gartner Inc., estimates that a typical company spends 30 to 60 percent of revenue on indirect goods and services. That’s not surprising in enterprises like law firms and ad-agencies where, except for salaries, almost all spending is “indirect.” But even manufacturers spend a lot of money on purchases related to sales and administration, rather than the production of goods. At packaged good companies, about 20 percent of non-core spending is logistics, encompassing everything from ocean-freight to short-haul trucking. Another 17 percent is in marketing services. About 9 percent is information technology and telecom. Corporate CFO’s are aware that indirect spending is significant, but do not appreciate the aggregate size, and find it difficult to control. Internal procurement managers are often stretched thin and focused on ensuring supply and optimizing pricing for core commodities. Even companies that have addressed indirect spending may still be leaving a considerable amount of money on the table. Although they have dedicated people and tools to improve the purchasing process, they do not have the full infrastructure to effectively managed indirect spending. With hundreds of supply markets to address and thousands of purchases to control, companies lack the market intelligence, specialized category expertise, structured processes and technology to maximize cost savings. Knowledge of the market, commodity experts and better buying processes can cut total indirect costs by 15 percent or more. One company I know had just negotiated 6 percent savings on linerboard, a dramatically fluctuating commodity. What they didn’t know was that the market had deflated further while they were negotiating. Using this outside intelligence they secured a total of 13.5 percent savings. Savings like this require a whole different level of discipline and resources. Some manufacturers such as Whirlpool, Kimberly Clark and Goodyear are using outside providers, leveraging the provider’s investments in dedicated category teams, market intelligence, and technologies to manage buying and enforce purchasing policies. But many are not. In one study by ICG Commerce, average companies were able to affect about half of indirect spending, while world-class companies were able to affect 93 percent. World-class companies have established business processes to make certain that everyone who buys anything used preferred suppliers to maximize savings. With $2 billion in indirect spending, an average company received a bottom line benefit of $54 million. A world-class company would save $272 million over the same time, and could increase that by 3 percent a year through continuous improvement. In today’s competitive environment, few companies can afford to overlook the opportunity to achieve this next generation of cost savings, which could amount to as much at 1 percent or more of a firm’s profit margin. Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements.

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Dave Johnson: Royal Wedding of Austerity and Trade Deficits Is Killing Our Economy

April 29, 2011

Sometimes you can just see glimmers of something through the DC brain fog, other times it becomes so clear that you can’t ignore it. The current DC brain-fog motto is, “if it doesn’t work, do it more.” Today’s GDP-growth report shows that austerity isn’t working, so the geniuses in DC want to do it more. And they say, “government just gets in the way of business” so we send our businesses out on their own to compete with governments, and the resulting trade deficits eat our jobs. Cutbacks Cut Growth How long ago was it that DC was all about cutting taxes for the rich even more? And how many minutes after that was DC all about cutting budgets — “austerity” — because of the resulting budget deficits? So instead of the jobs that will fix the deficits the government gives us cutbacks — cutbacks in taxes on the rich, cutbacks in construction projects, cutbacks in teachers and police and other government functions, cutbacks in the things We, the People do for each other. We watch as England, Greece, Ireland and other countries try cutbacks — austerity — to get out of slow growth and their growth gets slower as a result. The U.S. tries it, too, and our growth gets slower, too. The first quarter growth figures are out: 1.8% for the first three months of the year : Total output grew at an annual pace of 1.8 percent from January through March, the Commerce Department said Thursday, after having expanded at an annual rate of 3.1 percent in the fourth quarter of 2010. But the DC fog machine blames the weather, not austerity. Higher commodity prices and winter blizzards that shuttered businesses and delayed construction were among the main causes of the slowdown. Our growth slows because of austerity. So they blame the weather and insist on more austerity. Because austerity “gets government out of the way” of the wealthy few and their accumulation of the rest . Trade Deficit As the economy recovered a bit and people started to buy a few more things , the things came from elsewhere, and the money and jobs just left the economy . Without government policies to deal with it, our trade deficit will continue to get even worse, costing us even more jobs and growth and draining even more money out of the country. Germany runs a trade surplus, so German unemployment is at its lowest level in 19 years. Headline: German Unemployment Declines to 19-Year Low as Export Boom Drives Demand : German companies are hiring as they increase production to meet booming export orders, fueling domestic demand. … German factory orders and industrial production rose more than economists predicted in February. … More than a third of Germany’s medium-sized companies plan to take on staff in the second quarter… Germany also pays workers more than we do, gives them lots and lots of vacation time, health care, pensions, rights on the job — all the things that our leaders say hurt our businesses. Our leadership is making every effort to return to the old economy that caused the crisis. This is because those who benefited from that economy are still in control of the system, still using their great wealth to get what they want , damn the consequences for the rest of us. (Hint, the first link is to a post titled, Nine Pictures Of The Extreme Income/Wealth Gap , and the second is a post titled, Corporate Propaganda Response To Town Hall Medicare Anger .) Contractionary Policies Cause Contraction Conservatives say so many silly things that are proven wrong by the simplest fact-checking — cutting taxes increases revenue, taxes take money out of the economy, tax cuts grow the economy — and the silly thing they say that is hitting us now: cutting back causes expansion. Huh? Here is what really happens in the real world. Following are a few charts showing the effect of the “stimulus” and what has happened since the stimulus ran out. First, manufacturing. See the plunge through 2008? That’s the collapse. See the sharp change to an upward direction through 2009? That’s the stimulus. See the leveling off since? That’s the end of the stimulus. Now look at the following chart of job growth. See the downward slope, when we were losing more and more jobs every month? That’s the collapse. See the upward slope, when we were losing fewer jobs every month, up to where we were actually gaining a bit? That’s the stimulus. See the leveling off, standing still through 2010, going into 2011. That’s the end of the stimulus. You can see in front of your face what works and what doesn’t. We should be doing what works, not what doesn’t. Why did I even have to write that sentence? Solutions As I wrote the other day , we have to invest in rebuilding our infrastructure if we want to continue to be competitive in the world, so right there are millions of jobs that need doing. And the payoff from doing that pays for doing that. We need to retrofit our economy to be energy efficient , so right there are millions of jobs that need doing. And the payoff from doing that pays for doing that. We need more teachers, more police, more firefighters, more judges, more scientists, more social workers, more park rangers, more noise abatement and met and safety and environmental and other kinds of inspectors and so many other things that We, the People do for each other — so right there are millions of jobs that need doing. And the payoff from doing that pays for doing that. So right there are millions of jobs that need doing. And the payoff from doing that pays for doing that. But wait, there’s more: National Manufacturing Strategy The idea of a manufacturing strategy or industrial policy is hardly a radical concept. Alexander Hamilton constructed America’s first industrial policy in 1791. Setbacks during the War of 1812 due to a lack of domestic capacity to build naval vessels and military equipment cemented the determination of the federal government to grow manufacturing, a policy that continued until the end of World War II. To solve the trade deficit and create millions of good-paying jobs (like in Germany) we need a national manufacturing strategy — a government-sanctioned plan to ensure that U.S. manufacturers remain competitive in the global marketplace. Click this link for a few examples of countries that have national manufacturing strategies. Following is the Alliance for American Manufacturing’s plan : Expand American Production, Hiring, and Capital Expenditures Establish a manufacturing investment facility to leverage private capital for domestic manufacturing Expand and make permanent clean energy manufacturing tax credits and industrial energy efficiency grants to allow America to lead on green job creation Link federal loan guarantees for new energy infrastructure projects, including nuclear, wind, solar, other renewable energy sources, as well as the smart grid, with expanding domestic supply chains Adopt immediate, up-front expensing rules for plant and equipment to spur capital expenditures Enforce our trade-legal Buy America and other domestic procurement requirements to prevent leakage of tax dollars overseas Invest in America’s Infrastructure Create a National Infrastructure Bank to finance high-value, long-term infrastructure projects, such as roads, bridges, high-speed rail, and other needs Enact a robust, multi-year surface transportation infrastructure program of at least $500 billion financed exclusively by fuel taxes Enhance Our Workforce Refocus on technical and vocational education, providing a seamless program that bridges high school and post-secondary education to produce the next generation of highly skilled manufacturing workers Reward companies that are investing in effective skills and training programs for their workers Make Trade Work for America Keep America’s trade laws strong and strictly enforced to provide a level playing field for our workers and businesses Penalize and deter mercantilist nations such as China that manipulate their exchange rates and implement non-tariff barriers to gain an unfair trade advantage As the Administration works to double exports, expand the goal to include balancing our trade account so that gains in exports are not overwhelmed by increased imports Rebuild America’s Innovation Base Make permanent the research and development tax credit and enhance it to incentivize commercialization and production in America Focus federal investments in new technology and workforce training on promoting regional clusters of innovation, learning and production And finally, It Never Hurts To Quote The Boss Press release WASHINGTON’S FIXATION WITH AUSTERITY IS HURTING THE ECONOMY Campaign for America’s Future Urges Lawmakers to Put Job Creation First Washington, DC – Campaign for America’s Future’s co-director Robert Borosage commented on today’s economic indicators. Borosage said: “The first quarter growth figures — 1.8% for the first three months of the year — are an ominous reminder of the reality that Washington has forgotten. “This economy is in trouble. For most Americans, the recession has not ended. Growth is painfully slow. Unemployment remains high. Home values are dropping; gas prices are rising; wages are not keeping up. “Despite this — and despite the warnings of economists — Washington, driven by the new House Republican majority, has turned prematurely to austerity. Contractionary policies cause contraction. They will impede any recovery, and slow an economy that is barely moving. “Washington offers no answer because it is fixated on the wrong question. The question is how do we get the economy going and put people back to work — not simply how do we balance our books? Every deficit reduction plan — from the President’s to the House Republican’s to the Congressional Budget Office projections — assumes faster growth than we saw in the first quarter. “The most powerful deficit reduction measure is to put people to work, turning them into consumers and taxpayers. If growth and unemployment stay at this level, deficits will rise, not fall. The White House and the Congress should turn to measures to put people to work, to stave off debilitating layoffs of teachers and police at the state and local level, instead of ignoring the reality that Americans are struggling with every day.” Sobotka, from The Wire : This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture . I am a Fellow with CAF. Sign up here for the CAF daily summary .

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Jerry Jasinowski: The S&P Wakeup Call

April 22, 2011

Standard & Poor’s decision to change the nation’s long-term credit outlook from stable to negative should be seen as a wakeup call to Congress and the White House that we simply must find a credible solution to the fiscal crisis, and soon. This is not strictly a domestic issue. Our government’s credit worthiness underpins the world economy. Foreign governments invest trillions in U.S. debt instruments because they believe our credit is good. The mere possibility that Congress will not extend the debt limit is enough to send shivers throughout the world financial system. The prospect of losing our credit worthiness in the not too distant future is even more disconcerting. Our ability to borrow vast sums of money at reasonable rates — and the acceptance of the U.S. dollar as the world currency of choice — confers upon us innumerable advantages. If we let these advantages slip away, the cost of credit will be higher, economic growth will be slower and our standard of living will be reduced. The reason for S&P’s change in outlook is not hard to understand. Our government is spending much more money than it takes in. Roughly 40 cents of every dollar that Uncle Sam spends is borrowed. We have had back-to-back deficits of $1.5 trillion and have almost reached our self-imposed debt limit. In the absence of a credible debt reduction plan, Congress may not be able to summon enough votes to raise the debt limit. If that happens, no one will need S&P to question our credit worthiness. It will be gone with the wind. The budget plan offered by Rep. Paul Ryan (R-WI), Chairman of the House Budget Committee, was politically bold in that it proposed real reductions in entitlement spending. There is no question that is where the real problem is. Spending as a percentage of GDP has grown from 19 percent in 2000 to 25 percent of GDP in 2010, and almost all of that was due to the growth of Social Security, Medicare, Medicaid and Defense. Any viable solution will of course include increased revenues, but there is not enough money in the world to plug that hole. Spending is the central problem that must be dealt with. Two bi-partisan deficit commissions, including the one created by President Obama, also made serious recommendations to reduce the deficit. One can quibble about specifics, but they did put everything on the table. Instead of criticizing Ryan, President Obama should focus on the recommendations of his own deficit commission. We need leadership to define the tough decisions that must be made and bring us all together to do what must be done. We urge the President to provide the leadership the country so urgently needs. Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. You can quote from this with attribution. Let me know if you want to talk to Jerry.

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Consumer Prices Probably Increased, while Manufacturing Activities are Expected to Ease

April 15, 2011

Consumer Prices Probably Increased, while Manufacturing Activities are Expected to Ease

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CPI Confirms Price Pressures are Mounting on Rising Energy Prices, while Manufacturing Activities Continue to Expand

April 15, 2011

CPI Confirms Price Pressures are Mounting on Rising Energy Prices, while Manufacturing Activities Continue to Expand

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Robert E. Scott: Putting U.S.-China Trade in its Proper Perspective

April 11, 2011

An April 7 column in the New York Times Economix blog highlighted the rapid growth of U.S. exports to China, which look impressive in isolation. But this is a biased and one-sided view — exports have been overwhelmed by the growth of U.S. imports from China and the bilateral trade deficit, as shown in the graph below. When trying to assess the costs and benefits of the U.S./China trade relationship, counting only exports is like judging a baseball game by only counting runs scored by the home team. It might make you feel good, but tells you nothing about who is winning or losing the game. Properly measured, U.S. imports from China were $364 billion in 2010, vs. domestic exports of only $85.8 billion (excluding transshipments of goods from other countries), for a trade deficit of $278.3. Even when goods made in other countries are included with U.S. exports, the deficit in 2010 was $273.1 billion, substantially more than estimates reported by the Times (“$180 to $250 billion”). A sizable share of U.S. exports to China is raw materials used to produce goods that are re-exported back to the United States. Four of the top six industries producing exports are waste and scrap products, semiconductors, resins and synthetic rubber and fibers, and basic chemicals. Sectors such as cash grains (the top export commodity) and waste and scrap support very few U.S. jobs. Such trade may be good for U.S. multinational companies (MNCs), but provides few benefits for the domestic economy. Overall, the large and growing trade deficit with China has displaced millions of U.S. jobs , most in the manufacturing sector which has lost 5.5 million jobs since 2000. The Economix report relies on data published by the U.S. China Business Council, a trade association representing MNCs doing business in China. These firms have profited enormously by outsourcing production to China. China has subsidized these firms through massive currency manipulation, which reduces the costs of their exports by 25 to 40%, and by pouring tens of billions of dollars into subsides of products like steel , glass and paper products . U.S. MNCs should not be allowed to dictate U.S. trade policy. The U.S. needs to get tough and demand that China and other currency manipulators revalue their currencies and end other unfair trade practices. Nibbling around the edges with a WTO case for one sector and import surge protection for another will not get the job done. The U.S. should start by threatening to impose large tariffs on all U.S. imports from currency manipulators.

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Toyota Will Begin Suspending North American Production Next Week

April 9, 2011

LOUISVILLE, Ky. — Toyota Motor Corp. said Friday that it will suspend production at its North American plants in a series of one-day shutdowns this month as a result of parts shortages caused by the earthquake that hit Japan. The temporary shutdowns will affect 25,000 workers, but there will be no layoffs, the world’s No. 1 automaker said. A March 11 earthquake and tsunami damaged auto parts plants in northeastern Japan, causing shortages. All 13 of its North American plants will have down time, though the duration may vary at a few plants, Toyota spokesman Mike Goss said. For most plants, the one-day shutdowns will begin April 15 and end April 25, the company said. Toyota said future production plans will be determined later. “We’re just monitoring supplier progress on a daily basis, and we’ll make decisions as we go along,” Goss said. The North American plants have been using parts in their inventory or relying on those that were shipped before the earthquake. “We are slowing down to conserve parts yet maintain production as much as possible,” said Steve St. Angelo, executive vice president of Toyota Motor Engineering and Manufacturing North America. Toyota gets only about 15 percent of its parts from Japan for cars and trucks built in North America. Those parts include electronic and rubber components, and a paint additive, Goss said. The production shutdowns will total five days – April 15, 18, 21, 22 and 25 – at its North American vehicle plants, except at Georgetown, Ky., where production will be halted four days. The Kentucky plant makes the popular Camry, along with the Avalon and Venza vehicles. Most of the company’s North American engine and component plants will follow the same schedule, the company said. The schedule might vary for just a few of those plants, Goss said. The incremental stoppage in production is meant to “keep as much production going on a weekly basis as we possibly can so we keep vehicles flowing to our dealerships,” Goss said. Shortages of parts from Japan are also affecting manufacturers outside the country. Ford Motor Co. and Nissan Motor Co. recently said that several North American plants would be closed for part of this month. Chrysler Group LLC is cutting overtime at plants in Canada and Mexico to conserve parts from Japan. Toyota said its North American plant workers will focus on training and reviewing operations when production is halted so that they can still earn a paycheck. However, they can also take vacation or unpaid time off. Meanwhile, Toyota announced Friday it will resume car production at all its plants in Japan at half capacity from April 18 to 27. The March earthquake and tsunami had forced the company to halt manufacturing due to shortages of parts and power. The company said production at the plants will then halt from April 28 to May 9, which includes a holiday period when factories would normally close.

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Ian Fletcher: Economists Shocked, Shocked: We Really Are Losing Jobs to China!

April 9, 2011

There’s a nice new academic paper just out by an MIT economist and his friends that gives some hard data to back up everyone’s suspicion that the U.S. is losing jobs to China. It’s entitled “The China Syndrome: Local Labor Market Effects of Import Competition in the United States,” by David Autor, and you can download it here if you’re curious. The bottom line here probably won’t be all that surprising to most ordinary Americans, though it will annoy the living daylights out of most academic economists and our political establishment. In the authors’ own words, Our study suggests that the rapid increase in U.S. imports of Chinese goods during the past two decades has had a substantial impact on employment and household incomes, benefits program enrollments, and transfer payments in local labor markets exposed to increased import competition. These effects extend far outside the manufacturing sector, and they imply substantial changes in worker and household welfare. In ordinary language, we’re getting scr*wed, folks. “Welfare,” in this context, doesn’t mean welfare checks; it is the economists’ term for, roughly, “economic well-being.” And the “substantial changes” mentioned are not for the better. One key discovery of this study is hard data to back up the idea, which I have personally argued for years, that free trade is not a small-government policy. In reality, free trade tends to expand government, by increasing the demand for social services and transfer payments (unemployment, welfare etc.) needed to mitigate its social costs. As the authors put it: Growing import exposure spurs a substantial increase in transfer payments to individuals and households in the form of unemployment insurance benefits, disability benefits, income support payments, and in-kind medical benefits. Quite . But don’t think the butcher’s bill is paid for by all this welfare-state generosity. The authors conclude that all this government assistance doesn’t cover the harm done by free trade: Nevertheless, transfers fall far short of offsetting the large decline in average household incomes found in local labor markets that are most heavily exposed to China trade. Now here’s the real kicker: the authors calculate that the economic efficiency lost due to increased transfer payments is quite likely big enough to cancel out all the supposed gains in economic efficiency due to trade with China! Our estimates imply that the losses in economic efficiency from trade-induced increases in the usage of public benefits are, in the medium run, of the same order of magnitude as U.S. consumer gains from trade with China. In other words, the blithe assumption of conventional economics that “Sure, free trade has its costs, but the benefits are infinitely larger” doesn’t hold up. We’re either not winning out, or winning only peanuts. Finally, for any readers who have been smugly assuming that because they don’t personally work in manufacturing, none of this affects them, bad news. The authors report that, Our analysis finds that exposure to Chinese import competition affects local labor markets along numerous margins beyond its impact on manufacturing employment. In particular, while growing exposure to Chinese imports reduces manufacturing employment in a local labor market, it also triggers a decline in wages that is primarily observed outside of the manufacturing sector. Reductions in both employment and wage levels lead to a steep drop in the average earnings of households. (Emphasis added.) So don’t think there’s anywhere to hide from the China threat. Make no mistake, people: the case for free trade is inexorably crumbling .

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