population

Bradley T. Borden: Budget Deals, Service Cuts, Tax Returns, and Pure Frustration

by on April 18, 2011

Huffington Post…

This year’s tax filing season coincides with the recent budget deal and President Obama’s proposal to reduce the deficit by $4 trillion. We learn about cuts to public services as we write checks to pay for them. The confluence of these events frustrates most of us. Yet, further thought deepens the level of frustration. As you prepare your tax return (or provide information to a return preparer), you probably sift through your old receipts to maximize your deductions. Perhaps you have deductible moving expenses. Maybe you can deduct a charitable contribution you made. If you own a house, you can deduct the property tax and interest you paid on your mortgage. The few thousand dollars of deductions you have saves you a few hundred dollars of taxes. You might be relieved because you save a few hundred dollars (one or two thousand if you have more children) of taxes because of the child tax credit. In the end, however, you’re still frustrated because you have to pay taxes. The real frustration comes when you realize that the tax savings you obtained through your deductions and credits are a pittance compared to what the wealthiest portion of the population saved . As a former colleague quipped, “I’m a tax attorney but I can’t afford to hire myself.” His observation suggests that a small percentage of the population — the wealthiest — reduce their taxes in ways that the middle class can’t. In fact, real tax savings come long before a person files a tax return. For example, large corporations hire tax attorneys to establish fake entities in tax havens and pretend to move their income offshore. Property owners hire tax attorneys to help them create complicated like-kind exchanges so they can pay no taxes when they sell property. Business owners sell their businesses and hire tax attorneys to help them structure the sale to be tax-free. The wealthiest save hundreds of thousands (often millions or billions) of tax dollars, compared to the hundreds of dollars those in the middle class save. Many of the tax-avoidance techniques that are available to the wealthy are legal because the wealthy promote laws that create loopholes . By supporting those laws and then paying attorneys to exploit the laws, the wealthy reduce the amount of tax they pay. If the IRS audits a wealthy person , that person can hire expensive tax attorneys to challenge the IRS’s efforts. Even wealthy tax cheats may fare better with expensive tax counsel. Middle class Americans can’t hire tax attorneys or influence legislation because they don’t have enough money. Assume a tax attorney makes $250,000 and is in the top 2% of the population (but still in the middle class). That attorney may charge tens of thousands of dollars to provide tax advice. The tax savings a tax attorney helps create must be greater than the fee the attorney charges. (For example, no one would pay an attorney $100 to save $50 of tax.) To save tens of thousands of dollars of tax, a person must have hundreds of thousands of dollars of income. And such income often comes from transactions. Even tax attorneys who make $250,000 a year generally don’t own businesses or property worth hundreds of thousands of dollars (other than a home, furniture, cars, and assets in retirement savings), so they don’t have transactions that are large enough to justify the costs of tax planning. Consequently, they get hundreds of dollars of tax savings, while they save their clients millions. This behavior of the wealthy hurts everyone. The middle class must pay more taxes or the country must forfeit services because the wealthy pay lower taxes. To illustrate, the most recent budget deal cuts spending for education, health and human services, and transportation . Those cuts affect the middle class and especially the poor; they stymie growth, hurting the future of the country. To help end the frustration most of us feel, I offer a bold proposition to both sides of the budget wrangling: do nothing else until you take goodies away from the wealthy , including corporations, and raise taxes on the wealthy. President Obama once again promised that he would not renew tax cuts for the wealthy and promised to eliminate some of the tax breaks they receive. This time he must stick with those promises, and go further (despite the efforts of those who will come to the aid of the wealthy ). Some people make millions of dollars a year. Those people should pay tax at an even higher rate than a person making $250,000. Take away the preferences for the wealthy, tax them fairly, and then worry about the other expenses. That would help reduce the frustration we feel this time of year.

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Bradley T. Borden: Budget Deals, Service Cuts, Tax Returns, and Pure Frustration

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BofA CEO: Some People Shouldn’t Think Of Their Home As An Asset

by Ryan McCarthy on April 12, 2011

Huffington Post…

CHARLOTTE, North Carolina (By Joe Rauch) – U.S. homeowners may need to look elsewhere for long-term investment returns as housing prices in some areas may not rebound long-term, Bank of America Corp Chief Executive Officer Brian Moynihan said on Tuesday. Moynihan, CEO of the largest U.S. bank, said at a state attorneys general summit that low population growth in some regions of the country indicated that prices might not rise in the wake of the worst financial crisis since the Great Depression. “It’s sobering to think, but some people shouldn’t be thinking of (their home) as an asset,” Moynihan said at the 2011 National Association of Attorneys General conference. “They should be thinking of it as a great place to live.” Moynihan said the long-term average annual rise in post-war U.S. home prices of 4 percent owed much to the explosion in domestic population and, in more recent times, the relaxation of credit standards across the mortgage industry. “The reality is that the population is not expected to grow the way it did post World War I and World War II,” he said. Moynihan noted an Ohio customers’ complaint that his 100-year-old home was valued at $50,000. The home, Moynihan said, would be valued as “some multiples of that figure” if it were located elsewhere, but stagnant population levels in the state are driving demand and home prices lower. The conference included many of the state attorneys general currently engaged in negotiations with BofA and other lenders about a broad settlement to allegations that the industry cut corners on foreclosures. Moynihan said during his prepared remarks that he had spoken with the attorneys general about industry issues, but declined to comment further about the discussions. (Reporting by Joe Rauch; Editing by Lisa Von Ahn) Copyright 2010 Thomson Reuters. Click for Restrictions .

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BofA CEO: Some People Shouldn’t Think Of Their Home As An Asset

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Michael Thornton: Unemployed 99er Population Rises Dramatically by 127,000. The "Real" Long-term Unemployment Report

April 7, 2011

The March Employment Report was again pumped as another victory in the war against unemployment. But for millions of long-term unemployed, it’s still a brutal battle to find work. That’s why it’s unfortunate that most main stream media outlets and politicos seem incapable of understanding, or chose to ignore the “real” unemployment numbers. The BLS reported that unemployment (U3) for March was 8.8%, which is a slight improvement from February’s 8.9%. 216,000 jobs were created, but that’s a relatively small monthly number of jobs for what is supposedly a strong economic recovery from the Great Recession. In comparison, during the 2004 economic recovery, 338,000 jobs were created in March. The Obama administration and media mouthpieces seem preoccupied with the U3, 8.8% measure of unemployment, but you need to dig into the numbers to reveal the “real” state of unemployment. A disconnected news media conveniently forgets to mention that the US needs to create about 125,000 jobs a month to simply keep up with new entrants to the workforce. If you subtract 125,000 from 216,000 jobs created in March, you end up with 91,000 “extra” jobs for 13.5 million unemployed. Underemployment remained quite high at 15.7%, or 8.2 million workers who want full-time work, but are forced to work part-time jobs of 34 hours a week or less. Yes, full-time work is considered 35 hours or more per week, although many “real world” workers consider jobs of less than 40 hours a week as part-time. But what was most striking about the March jobs report was the continuing increase in the number of long-term unemployed. According to the BLS, March showed 1,899,000 workers who have been out of work for 99 weeks or more, an increase of 127,000 from February. The real 99er population is growing quickly and shows no signs of abating. NELP estimates ( PDF ) that “throughout 2010, 3.9 million unemployed workers exhausted all of their unemployment benefits without finding new work.” Exhausting unemployment benefits also includes those unemployed that exhausted benefits after 60, 73, 79, or 93 weeks, so NELP’s estimate is larger than the BLS estimate for those out of work 99 weeks or more. Not only are more unemployed out of work 99 weeks or longer, but those out of work 52 and 27 weeks or more are increasing as well. Those out of work 27 weeks or more now accounts for a record 45.5% (6.14 million) of all unemployed, while for those out of work 52 weeks or more the rate is 31.5% (4.25 million) of all unemployed; again a record high. The participation rate is another employment issue rarely discussed on the national media stage. According to the BLS , “the participation rate is the share of the population 16 years and older working or seeking work.” The labor force participation rate was unchanged, 64.2%, the same as the previous two months. This is the lowest labor participation rate since March 1984. The March Employment Report showed some job gains, but not nearly enough jobs were created to put a dent in the long-term unemployment problem. Media talking heads and politicians looking for 2012 votes touted the March jobs report as a winner, but it was a loser for millions of increasingly desperate long-term unemployed who are struggling without jobs or unemployment benefits. Let’s not hang those “Mission Accomplished” banners just yet…

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David Wallechinsky: 25 Hedge Fund Managers Make as Much Money as 1,150,000 Average Americans

April 7, 2011

Here is one more example that the gap between the super-wealthy in the United States and the rest of Americans is growing wider and wider. A group of 25 hedge fund executives in 2010 managed to earn a combined $22.1 billion — an amount equivalent to 441,400 American households each making $50,000 a year (roughly the current average). Considering that the median household size is 2.6 persons, that means that these 25 took home as much as the average 1,150,000 Americans combined. That’s bigger than the population of Dallas… or Rhode Island. Ten years ago, the same 25 Wall Street barons would have taken home a total of $5 billion. Now, a single hedge fund chief, John Paulson, was able to make that much ($4.9 billion) in 2010. Paulson made billions during the worst of the financial downturn because he bet that the mortgage bubble would burst. Most of his profits in 2010 came from investing in gold, buying and selling stock in Citigroup… and collecting an estimated $1 billion in management fees. Cross-posted at AllGov.com

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Dean Baker: The Deficit Hawks Target Nurses and Firefighters

March 29, 2011

Many people might think that the country’s problems stem from the fact that too much money has been going to the very rich. Over the last three decades, the richest one percent of the population has increased its share of national income by almost 10 percentage points (Excel spreadsheet). This comes to $1.5 trillion a year, or as the deficit hawks are fond of saying, $90 trillion over the next 75 years. To put this in context, the size of this upward redistribution to the richest one percent over the last three decades is roughly large enough to double the income of all the households in the bottom half of the income distribution. The upward redistribution amounts to an average of more than 1.2 million dollars a year for each of the families in the richest one percent of the population. And this upward redistribution was brought about by deliberate policy. We pursued a trade and high dollar policy that was intended to put downward pressure on the wages of manufacturing workers. The Federal Reserve Board deliberately kept unemployment higher than necessary in order to weaken workers bargaining power. We extended patent monopolies to allow drug companies to jack up prices, raking in hundreds of billions a year. And, we gave the Wall Street banks the benefit of “too big to fail” status so they can borrow with a government subsidy. These policies and others fueled this enormous upward redistribution. But the deficit hawks don’t want us talking about any of these things. The deficit hawks insist that we have to cut Social Security and Medicare benefits now! They are busy hyperventilating over the enormous deficits, the result of the economic collapse, which was in turn the result of their economic mismanagement. (Wait, we are not supposed to talk about that.) And the deficit hawks have clear ideas on how they want to deal with the costs of Social Security and Medicare over coming decades. And, it does not involve taking money from the tiny group of wealthy people who have profited enormously at the expense of the middle class over the last three decades? Nor are the deficit hawks interested in reining in the drug companies, the insurance companies or the doctors. The bloated prices and exorbitant pay of these actors is the main reason that U.S. health care costs are so wildly out of line with health care costs in other wealthy countries. But deficit hawks don’t get paid to go after rich people or the health care industry. Deficit hawks get paid to go after the benefits of middle-income people. This is why we were treated to a Washington Post column by finance industry executive Robert Pozen telling liberals that they should support his plan for raising the retirement age and cutting Social Security benefits for higher-income earners. When Pozen talks about cutting benefits for higher-income earners he is not thinking of people like Peter Peterson or Robert Rubin. He has his gun sights on people earning $40,000 to $80,000 a year. In other words, Pozen wants to cut benefits for workers like schoolteachers, firefighters and nurses. These are workers that definitely enjoy somewhat higher pay and a higher standard of living than most of the workforce, but only in Washington deficit hawks’ circles are these people living lavish lifestyles that need to be cut back. These workers are quite explicitly the target of the Washington deficit hawk gang. The deficit hawk crew will even shed some crocodile tears for the poor who earn near the minimum wage and live near the poverty level. They would raise their benefits if not for those greedy plumbers and mechanics who insist on getting the Social Security benefits that they paid for. In the next few weeks we will be treated to an endless parade of budget experts who will be yapping about “entitlements” and insisting that middle-income workers are living too lavishly. While all these experts have really impressive credentials it is important to remember that these credentials did not prevent this highly paid crew from overlooking the largest asset bubble in the history of the world. If this group had paid a tenth as much attention to the housing bubble as they are now paying to the deficit projections, we would not be sitting around with 25 million who are unemployed, under-employed or out of the workforce altogether. The deficit hawks are very good when it comes to whining about the deficit and demanding sacrifices from middle-class workers. They just aren’t very good when it comes to understanding the economy.

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This Tiny Town Is The Population Center Of The U.S.

March 25, 2011

KANSAS CITY, Mo (By Kevin Murphy) – Village officials in Plato, Missouri are trying to figure out how to make the most of being declared by the U.S. Census Bureau as the population center of the United States. The village, which is so small that its employees are volunteers and the town board meets in the bank basement, will create a 12-inch Missouri stone marker to celebrate its census distinction. “We may put a sign up somewhere, though we are not on a main road,” Mayor Bob Biram said Friday. “Sometimes when there’s an interesting point, you stop and see it.” Each decade, the Census Bureau calculates the mean center of population, determined as the place where an imaginary, flat, weightless and rigid map of the U.S. would balance perfectly if all 308,745,538 residents were of identical weight. The center has shifted west over the centuries. In 1790, it was near Chestertown, Maryland. In 1880, it was in Covington County, Kentucky. On the edge of the Mark Twain National Forest some 35 miles from the nearest city of any size, Plato is pleased with the population distinction, said Barbara Pinkston, village clerk. “We are proud to be in the center of everything because we are stuck out here in the country,” Pinkston said. Plato has only 109 residents, according to the latest census, but it has a cafe, bank and school. Yes, Plato is named after the philosopher, Pinkston said. Plato replaces Edgar Springs, Missouri, about 25 miles to the northeast as the population center. The shift is because of the population growth of the southwest United States, according to the Census Bureau. The actual center is 2.7 miles northeast of Plato. Edgar Springs held the population center distinction since 2001, which it noted by putting up a monument, along with a flag and picnic table. People from as far away as Hong Kong visited the setting and took pictures, City Clerk Paula James said. “It was just a little something different,” James said. “We haven’t really talked about what we’ll do now.” (Writing by Kevin Murphy; Editing by Mary Wisniewski and Greg McCune) src=”http://i.huffpost.com/gen/211216/REUTERS-LOGO.jpg”> Copyright 2010 Thomson Reuters. Click for Restrictions .

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10 States Running Out Of Smart People

February 9, 2011

By 24/7 Wall St : There are several states in the U.S. that are losing the education race to most of the others. In the past decade, these states have declining math and reading scores, lower numbers of people with bachelor’s degrees, and comparatively fewer residents who hold white collar jobs. Colorado, Michigan, and eight others are losing this competition to states who have residents that are better educated and who have done a better job obtaining higher quality jobs. These failing states have lost ground compared to the national average. The recent State of the Union address, and almost any sweeping political speech or document that writes or speaks about unemployment and future competition for jobs, impresses the point that a well educated workforce-a smart workforce-has comparative advantages. Regions with better-educated people tend to find it easier to draw and retain businesses. These regions are also likely to be more competitive in contrast to nations around the world like China, which has posted sharp increases in the level of educational attainment among its citizens. Well-educated people find it easier to obtain and keep jobs. American unemployment figures consistently show that the part of the population with high levels of eduction have lower unemployment. This makes sense: skill equals aptitude in most cases. An employer who has to pick between two potential employees is likely to choose the one who reads best, writes best, and has the highest level of educational attainment. There are exceptions to this when jobs require very specific backgrounds, but across the American workforce, which has tens of millions of workers, any employer would want to have an employee who can show his educational background is stronger than that of fellow applicants. An educated employee will not just have an advantage now, but may have more of one in the future. This is one of the reasons 24/7 Wall St. looked at trends over an entire decade. Funds of educational facilities and educators have already been eroded in many states and municipalities by budget cuts. The slow economic recovery and the move toward austerity in Washington is likely to make this trend more alarming. The portion of people who are adults with good educations may actually drop as the capital necessary to maintain a strong educational “infrastructure” is depleted. The portion of the population which is well-educated now may have reached a high-water market, at least for the foreseeable future. The problem that America has begun to lose its education edge is not national, it is local. Americans are not educated nationally. They are educated locally. The problems of a well-educated workforce end up being fought at the state and municipal level, as the 24/7 Wall St. data shows. Just as the problem with education is local, the solutions have to be. The states on the 24/7 Wall St. States Running Out Of Smart People report will almost certainly need resources that are greater than, or at least as great as, states which have better statistics. These are the resources that will allow them to be competitive nationally and internationally. 24/7 Wall St. looked at National Assessment of Educational Progress (NAEP) scores for math and reading in 2003 and 2009. We also looked at the percentage of people in each state with bachelor’s degrees, and their increases compared to the increases in the total populations in their states. We analyzed the Bureau of Labor Statistics data on the portion of each state’s population which has white collar jobs. To supplement the figures which we used in the final analysis, 24/7 also reviewed numbers for high school and graduate school education. This is the 24/7 Wall Street review of the ten states with the lowest education achievement and job levels compared to the other forty-The States Running Out Of Smart People. Which ones are the most surprising to you?

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Martin Ford: Vanishing Middle Class Jobs

November 16, 2010

There’s a very good article in The New York Post on the polarization of the job market and the disappearing middle class: From 1979-2009, there was a nearly 12% drop in the four “middle-skill” occupations: sales, office/administrative workers, production workers, operators. Meanwhile, people in the top 20% of the economy earning $100,000 or more a year, says Peter Francese, demographer at Ogilvy and Mather, “have barely been touched by this recession.” They average an unemployment rate between 3% and 4%, the lowest in the nation. The US Bureau of Labor Statistics projects a 14% increase in low-education service jobs between 2008-2018. “The only major occupational category with greater projected growth,” Autor writes, “is professional occupations, which are predicted to add 5.2 million jobs, or 17%.” These sectors include medicine, law and middle- and upper-management. Economists seem to acknowledge that middle skill jobs are vaporizing. But so far, they seem to view the situation as static. They express little concern that the “missing middle” is going to relentlessly expand and consume more jobs both at the bottom and the top. As I wrote previously, I think robots and other forms of automation will eventually become cost-effective even in low-wage occupations. At the same time, both software automation/expert systems and offshoring will be increasingly focused on the higher paying jobs. The result is going to be fewer viable consumers — and that will drive even more cyclical unemployment. Eventually, I think we will have to find ways other than job-based income to support the bulk of the population and maintain consumption. I suggest a possible scenario for this in my book The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future . In the meantime, it looks like we are going to do exactly the opposite. Millions of people will see their unemployment benefits expire in the coming year — many having used up an entire 99 weeks — and a Republican House suggests it may be impossible to even renew the existing extensions. Martin Ford is the author of The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future (available from Amazon or as a FREE PDF download ) and has a blog at econfuture.wordpress.com .

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Third Of Americans Can’t Get Mortgages As Interest Rates Hit Record Lows: Zillow

September 27, 2010

Even as a glut of unsold inventory keeps the housing market from recovering, nearly a third of Americans can’t qualify for home mortgages, according to new data from online real estate search company Zillow . Would-be homeowners with credit scores below 620 points were largely unable to take out 30-year mortgages in the first half of September, even if they offered down payments as high as 25 percent, Zillow found after analyzing more than 25,000 loan quotes and purchase requests on its website. A full 29.3 percent of Americans have a credit score that low, Zillow says, citing data from myFICO . Mortgage interest rates, meanwhile, are at a low not seen in at least 40 years. According to data compiled by the St. Louis Fed , the average interest rate on a 30-year mortgage was 4.37 percent as of September 16. The St. Louis Fed has data going back to 1971 and, in that period, before 2009, the interest rate never dipped below 5 percent. These days, according to Zillow, the lowest interest rate is 4.3 percent, available only to those with a credit score above 720 points — about 47 percent of Americans. The higher rates, ranging from 4.44 to 4.9 percent, are available to about 23.8 percent of Americans. The remaining 29.3 percent of the population can’t get loans at all. A variety of factors, including a high volume of foreclosures and weak demand, have depressed the housing market to such an extent that some experts say it won’t rebound for three years . But lenders are understandably cautious. While easily accessible mortgages might contribute to a housing recovery, lenders are still shell-shocked from the aftermath of the housing bubble. Banks have been writing off debt in record numbers — the charge-off rate this year has been higher than any year since at least 1988 , according to data from the Saint Louis Fed.

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Chief Medicare Actuary: White House Health Savings Estimates ‘Not Meaningful,’ Give Inaccurate Picture

September 13, 2010

WASHINGTON — When a government report found that President Barack Obama’s health overhaul would modestly raise the nation’s total health care tab, the White House responded with a statistic suggesting costs would go down. It turns out that may be fuzzy math. Health reform director Nancy-Ann DeParle wrote on the White House blog last week that the same government report indicates spending per insured person will be more than $1,000 lower in 2019 because of the law – some 9 percent below previous projections. ___ EDITOR’S NOTE – An occasional look at assertions by public officials and how well they adhere to the facts ___ “The act will make health care more affordable for Americans,” DeParle said. But the head of the nonpartisan economic unit at Medicare that produced the original cost report says the White House number “does not provide a meaningful or accurate indication” of the effect of the health care law. “The amounts quoted in the White House blog are not meaningful and cannot be used to calculate the change in health expenditures per insured person,” Richard Foster, Medicare’s chief actuary, told The Associated Press. The Obama administration stands by its statistic. It’s a dispute about numbers and how they’re bandied about by powerful people in Washington. But you don’t need an economics degree to follow this one. All you have to do is remember your fractions. The health care law expands coverage, reducing the number of uninsured by more than 32 million, although about 24 million will remain without coverage. Still, the share of the population with insurance will go up by nearly 10 percentage points, to about 93 percent. And that makes a difference in the numbers. If you divide total national health care spending by a bigger number of insured people, you get a smaller per-person result. It’s an interesting statistic, but it doesn’t mean the problem of rising costs is solved. “It’s not that it’s false, it’s just that it will be a little misleading,” John Allen Paulos, a mathematics professor at Temple University in Philadelphia, said of the White House number, calling it an “apples-to-oranges miscomparison.” Consider an imaginary country with just three citizens, Peter, Paul and Mary. Peter has health coverage but Paul and Mary are uninsured. Peter spends $1,000 on health care, but Paul and Mary can only afford $500 apiece because they lack coverage. Total national spending: $2,000. National spending per insured person: $2,000. Now suppose a law gets passed to expand coverage. Paul gets insurance, but Mary remains uninsured. Now Peter and Paul are spending $1,000 apiece. Paul spends more than when he was uninsured, so total national health spending goes up to $2,500. But because more people are covered, spending per insured person goes down to $1,250. It’s a simplistic comparison, but would you call that a savings? Paulos said it would make more sense to first figure out the share of total national health care spending by people with health insurance, and then divide that result by the number of insured people – before and after the health care law. The government hasn’t run that calculation. Richard Kronick, a senior Health and Human Services official, said the Obama administration disagrees that its number is misleading. “There are a number of ways to evaluate health care spending and the new law,” said Kronick. “Examining spending on each individual with health insurance is one useful data point.” National health care spending is a kitchen-sink statistic that includes personal health costs of the insured as well as the uninsured, and such categories as research and development and medical infrastructure. In 2019, when the overhaul is fully phased in, the tab will be $4.6 trillion. Foster says it’s acceptable to divide the number by the total U.S. population. In that case, per capita spending would $13,652 as a result of the law, and $13,387 without it. The difference: just $265 per person more. Paulos, the mathematician, said that sounds like a bargain to him. “It’s a relatively small cost given that 30 million more people will be covered,” he said. “You don’t really need this kind of apples to oranges miscomparison.”

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Chief Medicare Actuary: White House Health Savings Estimates ‘Not Meaningful,’ Give Inaccurate Picture

September 13, 2010

WASHINGTON — When a government report found that President Barack Obama’s health overhaul would modestly raise the nation’s total health care tab, the White House responded with a statistic suggesting costs would go down. It turns out that may be fuzzy math. Health reform director Nancy-Ann DeParle wrote on the White House blog last week that the same government report indicates spending per insured person will be more than $1,000 lower in 2019 because of the law – some 9 percent below previous projections. ___ EDITOR’S NOTE – An occasional look at assertions by public officials and how well they adhere to the facts ___ “The act will make health care more affordable for Americans,” DeParle said. But the head of the nonpartisan economic unit at Medicare that produced the original cost report says the White House number “does not provide a meaningful or accurate indication” of the effect of the health care law. “The amounts quoted in the White House blog are not meaningful and cannot be used to calculate the change in health expenditures per insured person,” Richard Foster, Medicare’s chief actuary, told The Associated Press. The Obama administration stands by its statistic. It’s a dispute about numbers and how they’re bandied about by powerful people in Washington. But you don’t need an economics degree to follow this one. All you have to do is remember your fractions. The health care law expands coverage, reducing the number of uninsured by more than 32 million, although about 24 million will remain without coverage. Still, the share of the population with insurance will go up by nearly 10 percentage points, to about 93 percent. And that makes a difference in the numbers. If you divide total national health care spending by a bigger number of insured people, you get a smaller per-person result. It’s an interesting statistic, but it doesn’t mean the problem of rising costs is solved. “It’s not that it’s false, it’s just that it will be a little misleading,” John Allen Paulos, a mathematics professor at Temple University in Philadelphia, said of the White House number, calling it an “apples-to-oranges miscomparison.” Consider an imaginary country with just three citizens, Peter, Paul and Mary. Peter has health coverage but Paul and Mary are uninsured. Peter spends $1,000 on health care, but Paul and Mary can only afford $500 apiece because they lack coverage. Total national spending: $2,000. National spending per insured person: $2,000. Now suppose a law gets passed to expand coverage. Paul gets insurance, but Mary remains uninsured. Now Peter and Paul are spending $1,000 apiece. Paul spends more than when he was uninsured, so total national health spending goes up to $2,500. But because more people are covered, spending per insured person goes down to $1,250. It’s a simplistic comparison, but would you call that a savings? Paulos said it would make more sense to first figure out the share of total national health care spending by people with health insurance, and then divide that result by the number of insured people – before and after the health care law. The government hasn’t run that calculation. Richard Kronick, a senior Health and Human Services official, said the Obama administration disagrees that its number is misleading. “There are a number of ways to evaluate health care spending and the new law,” said Kronick. “Examining spending on each individual with health insurance is one useful data point.” National health care spending is a kitchen-sink statistic that includes personal health costs of the insured as well as the uninsured, and such categories as research and development and medical infrastructure. In 2019, when the overhaul is fully phased in, the tab will be $4.6 trillion. Foster says it’s acceptable to divide the number by the total U.S. population. In that case, per capita spending would $13,652 as a result of the law, and $13,387 without it. The difference: just $265 per person more. Paulos, the mathematician, said that sounds like a bargain to him. “It’s a relatively small cost given that 30 million more people will be covered,” he said. “You don’t really need this kind of apples to oranges miscomparison.”

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Frank A. Weil: A Two-Track Global Economy

September 3, 2010

Terms like ‘single scoop’ and ‘double dip’ are normally heard only in ice cream shops. But at the moment, the economic and financial pages of news organizations the world over are using these types of terms to try to predict and explain what is going on “out there.” Indeed what is going on is unusual and defies conventional categorization. The underlying problem causing this confusion is that the circumstances out of which today’s conditions arose were quite different from anything that ever came before. The several important differences account for what appears to be an entirely new scenario. Historically, economies have generally risen and fallen more or less in sync — at least among given countries and often globally. For example, it was said for a long time that when the US sneezed, Europe would get pneumonia. No longer, it appears to be the case, despite the fact that information flows more completely and rapidly than ever before, creating feedback loops which normally would knit all economies more closely together. The several important differences which may account for why the economic world is behaving in a brand new way include the following: The casino effect is much larger than ever before. The casino effect is the scale and depth of financial transactions as a share of GDP. Since the credit meltdown in 2008, banks have started lending again, although not at previous levels, so that the rest of the economy, which had depended on cheap and easy money, has not been as robust as normally is the case for an economy rebounding from a recession. The big powerful companies have an enormous store of cash, in part because they slowed inventory accumulation and capital spending during the lowest points of the recession. Employment has been unusually slow to come back, probably because it had been allowed to grow too much and fast in the run up to the recession and because post recession the bigger employers found they could grow again with fewer employees and the smaller employers still could not afford to put people back on their payrolls. People who remain employed and whose savings/investments had rebounded nicely between 2008-2010 began to spend again out of proportion to the population as a whole–for example Apple sold several million iPads for several hundred dollars apiece to people who already had smart phones and computers. Go figure? The stimulus package, which was applied so relatively quickly and early [and brilliantly] in the recession, evidently had both an immediate effect and a drawn out promise, which had different effects at different times on the economy at large. That echoing process probably accounts for the broad confusion about the benefits of the stimulus not unlike the parable of the three blind men describing an elephant. Those differences appear to add up and account for what we see today, which is less a prospect for a double dip, but which really boils down to a two track economy. One track is carrying the businesses and people who were relatively unscathed by the recession. The other track is carrying the businesses and people who have yet to recover completely from the recession. It is not surprising that the two tracks run at different speeds at different moments, which may account for the appearance of the economy as a whole seeming to be slowing or speeding up. What we may need to do more of is recognize the increasing significance of the two tracks and follow them more closely. One of the other factors is that it also appears that the separate tracks seem not to much affect each other, which means that the strong track may not help the weak track recover as fast as in the past when the economy was more integrated. In all events it appears we are looking at quite a slow, long term recovery which will leave us with all the nettlesome troubles of very low employment, limited growth in personal income and spending as well as cautious capital spending. Perhaps we need a period of regrouping and re-finding our bearings after such a powerful and widespread period of growth and overspending on too much borrowed money.

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U.S. Birth Rate Sets Record, Hits Lowest Level In A Century

August 27, 2010

By Marilynn Marchione, AP Medical Writer: The U.S. birth rate has dropped for the second year in a row, and experts think the wrenching recession led many people to put off having children. The 2009 birth rate also set a record: lowest in a century. Births fell 2.7 percent last year even as the population grew, numbers released Friday by the National Center for Health Statistics show. The U.S. birth rate has dropped for the second year in a row, and experts think the wrenching recession led many people to put off having children. The 2009 birth rate also set a record: lowest in a century. “It’s a good-sized decline for one year. Every month is showing a decline from the year before,” said Stephanie Ventura, the demographer who oversaw the report. The birth rate, which takes into account changes in the population, fell to 13.5 births for every 1,000 people last year. That’s down from 14.3 in 2007 and way down from 30 in 1909, when it was common for people to have big families. “It doesn’t matter how you look at it — fertility has declined,” Ventura said. The situation is a striking turnabout from 2007, when more babies were born in the United States than any other year in the nation’s history. The recession began that fall, dragging stocks, jobs and births down. “When the economy is bad and people are uncomfortable about their financial future, they tend to postpone having children. We saw that in the Great Depression the 1930s and we’re seeing that in the Great Recession today,” said Andrew Cherlin, a sociology professor at Johns Hopkins University. “It could take a few years to turn this around,” he added, noting that the birth rate stayed low throughout the 1930s. Another possible factor in the drop: a decline in immigration to the United States. The downward trend invites worrisome comparisons to Japan and its lost decade of choked growth in the 1990s and very low birth rates. Births in Japan fell 2 percent in 2009 after a slight rise in 2008, its government has said. Not so in Britain, where the population took its biggest jump in almost half a century last year and the fertility rate is at its highest level since 1973. France’s birth rate also has been rising; Germany’s birth rate is lower but rising as well. “Our birth rate is still higher than the birth rate in many wealthy countries and we also have many immigrants entering the country. So we do not need to be worried yet about a birth dearth” that would crimp the nation’s ability to take care of its growing elderly population, Cherlin said. The new U.S. report is a rough count of births from states. It estimates there were 4,136,000 births in 2009, down from 4,251,095 in 2008 and more than 4.3 million in 2007. The report does not give details on trends in different age groups. That will come next spring and will give a clearer picture who is and is not having children, Ventura said. Last spring’s report, on births in 2008, showed an overall drop but a surprising rise in births to women over 40, who may have felt they were running out of time to have children and didn’t want to delay despite the bad economy. Women postponing having children because of careers also may find they have trouble conceiving, said Mark Mather of the Population Reference Bureau, a Washington-based demographic research group. “For some of those women, they’re going to find themselves in their mid-40s where it’s going to be hard to have the number of children they want,” he said. Heather Atherton is nearing that mark. The Sacramento, Calif., mom, who turns 36 next month, started a home-based public relations business after having a baby girl in 2003. She and her husband upgraded to a larger home in 2005 and planned on having a second child not long afterward. Then the recession hit, drying up her husband’s sales commissions and leaving them owing more on their home than it is worth. A second child seemed too risky financially. “However, we just recently decided that it’s time to stop waiting and just go for it early next year and let the chips fall where they may,” she said. “We can’t allow the recession to dictate the size of our family. We just need to move forward with our lives.”

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Howard Steven Friedman: Is China Poised for Implosion? What Would the Communist Manifesto Predict?

August 23, 2010

Deng Xiaoping probably would never have anticipated how quickly parts of China have fulfilled his words of “To be rich is glorious” yet he would be extremely concerned to see that the Chinese population policies and practices as well as the engine of capitalism appears to be creating a Marxian nightmare of bourgeois and proletariat. How can the incredible economic growth in China also lead to concerns about its political instability? In the last three decades, China has raced to become the world’s second largest economy yet questions about its political stability have arisen due to population trends and the high degree of inequality. The path to stability or instability is heavily paved with questions about China’s ability to maintain economic growth in light of wage pressures, unemployment/ underemployment of its exploding college graduate population, increasing social and health needs of its aging population and China’s projected declining support ratio. An economy that continues to grow at its current pace with minimal inflationary pressure would likely remain stable while slowdowns in economic growth or major increases in inflation would likely add gasoline to a smoldering fire of discontent. Concerning income inequality, Westerners often ask questions like “How is it possible for there to be such a high degree of inequality in China, which, until recently, fully embraced Communism?” and “Why should a country be concerned about having a high degree of inequality if the overall economy is growing?” History has answered the first question for us. Unadulterated communism, which consists of a classless society, has failed to thrive. Countries such as North Korea, which profess to be Communist while actually being authoritarian, create an upper class consisting of party leaders and party-connected individuals while ordinary citizens suffer. Now, for the second question, “Why should China be concerned about having a high degree of income inequality if its overall economy is growing?” When Deng Xiaoping famously said, “Let some people get rich first”, he probably didn’t anticipate that China would soon have the second largest economy in the world as well as the second highest income inequality of the world’s top 15 economies, behind Brazil. In fact, of China’s 10 neighboring countries where the UN estimates income inequality, China has the ninth highest level of inequality. High degrees of inequality are correlated with many issues in society and can ultimately lead to political instability as evidenced countless times in history. As Ole Schell, director of “Win in China” pointed out, “Mao’s revolution was born out of this same inequity and the Chinese government is trying to modernize the countryside in an effort to quell discontent.” While correlation does not mean causation, cross country data analysis such as that in The Spirit Level strongly suggests that unequal societies are more likely to have higher rates of murder and incarceration and lower levels of trust and social mobility. China’s wealth inequality reflects the fact that while a small percent of the population are benefitting greatly from the economic growth, that privileged population is largely confined to the educated and/or politically connected residents of major cities. Much attention has been focused recently at the fortunes made by the “princelings”, well-connected children of senior Communist Party officials who are benefiting financially from their political connections including Wen Yunsong (son of Chinese Premier Wen Jiabao) who co-founded New Horizon Capital and Jeffrey Li, the son of former Politburo standing committee member Li Ruihuan. While the princelings use their “royal” connections, a significant amount of China’s population is trapped in rural poverty or toilsome factory labor with minimal chances of social mobility. As Chinese workers clamor for greater pay and increased rights, factory owners pursue profits by seeking out areas with lower wage pressures (i.e. other parts of China, Vietnam, Bangladesh and other Asian countries). Safe and humane working standards, which laborers fought so hard for in the West, are often absent in developing countries like China, leaving workers susceptible to conditions which Western countries haven’t seen on a large scale in generations. Inequalities also exist within the workplace, where migrants often experience lower status, less job stability and lower wages than locals. This struggle between the working class and management/owners is a classic refrain of capitalist societies documented by Marx and Engels. Rural parents often see their children moving to urban areas to find factory employment where the income and opportunities usually exceed those available in their hometowns, but many question whether the quality of life is superior. Food and housing price inflation are reducing the purchasing power of factory worker’s compensation, making it more difficult to send savings to their families. In other circumstances, parents (and often grandparents) support their child’s college education only to later see that the graduate either can’t find work or the work didn’t require a college degree. From 1982 to 2005, the percent of the population with a higher education rose from 1% to 7% while the percent of white collar jobs rose from about 7% to less than 13%. Evidence of the job squeeze appears not only regularly on Chinese television but in the civil service exams where one million people recently competed for 15,000 openings. China’s income inequality and opportunity inequality will be driven to a sharp focus in the world of marriage and relationships. Due to a combination of sex selection and the natural tendency of more boys being born than girls, there are currently around 25 million more Chinese males less than 20 years old than Chinese women of the same age range. In the next few decades, this lack of female counterparts may result in more men emigrating, more women from neighboring countries immigrating to China and, will likely lead to many frustrated and angry Chinese males (where the unmatched men are more likely to be poor according to Professor Wang Feng, an expert in Chinese population demographics). For China to continue its growth rate, it will need to address inequality systematically and aggressively. The Chinese government is well aware of the upcoming financial pressures of the aging society with a declining support ratio. It is also attuned to the potentially explosive combination of having large number of men with limited social mobility and few job or family prospects. Maintaining the economic growth while addressing the population and inequality issues will be critical to whether China continues to drive a large part of the world’s economy or whether it becomes a textbook example of the destruction caused by class struggles.

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UNFPA Inks 15-Year Deal, Following Complex Negotiation

August 1, 2010

The United Nations Population Fund (UNFPA) has agreed to a 130,740-square-foot lease at 605 Third Ave. in Manhattan, following a complex negotiation involving four separate parties. The UNFPA, a humanitarian organization that works to reduce poverty…

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Howard Steven Friedman: BRIC and Beyond: How Aging Populations Strain Economic Growth

August 1, 2010

In previous articles about BRIC and N-11, the lists of countries identified by Goldman Sachs as being likely to have a major impact on the world economy by 2050, I discussed the importance of population and the limits of accuracy in long-term forecasts. There I noted that population projections are usually much more accurate than projections of GDP per capita and that, barring any changes in national borders or cataclysmic events, China and India will have at least twice the population of any other country in 2050. I also mentioned the importance of the age distribution, but want to expand on this point more. The age distribution is important because there’s an age range where the population is more likely to be employed and producing economic growth. The “support ratio,” commonly defined as the percent of a population between ages 15 to 65, is a snapshot of the age distribution of the population. Large support ratios reflect countries where a large percent of the population is available to work. A significant amount of the growth in Asian economies in the last decade is associated with the demographic bonus of having a large support ratio . If a large percent of the population is in school or retired then the support ratio will be low. The age range used for the support ratio is somewhat arbitrary. For this article I am using the age range 15 to 59, which I will call the “narrow support ratio,” as it reflects the aspirations of many of my friends to be retired before age 60. So what can we say about the age distributions in the G7, BRIC and N-11? Currently the majority of the population in all 22 of these countries is between ages 15 to 59 with Japan and Nigeria having the lowest rates (52% and 53%) while China has the highest rate (67%). That is to say, all 22 countries have “narrow support ratios” greater than 50%. Japan is an older society with more than one-third of its population 60 or older, while Nigeria is a young population with more than 40% of its population less than 15. Over the next 40 years, the declining fertility rates and lengthening life expectancies will likely result in a much older world population. Japan’s “narrow support ratio” is expected to fall below 40% by 2050 meaning there will be a huge financial burden on society. The US will see an aging population, though not as extreme as the rest of the G7. In fact, the US is the only G7 country expected to have a “narrow support ratio” greater than 50% in 2050. Of the BRIC and N-11 countries, China, Russia and South Korea are the only countries expected to have more than one third of their population 60 or older. These three countries stand out in the list of BRIC and N-11 countries as the only ones with “narrow support ratios” projected to be less than 50%. These lower “narrow support ratios” will strain the family’s and government’s ability to support those elderly needing care. Countries that are projected to have declining support ratios are well aware of the upcoming economic challenges. For example, Japan has put into place programs to promote fertility and make child-rearing both more convenient and more affordable. Besides government programs such as this, the other obvious solution is expanding the support ratio. If the typical retirement age is raised to 67 or even 70, this will abate some of the burden but expanding the support ratio needs to be more than an academic exercise. That would require meaningful, productive work to be available for people at these advanced ages. I raise this concern knowing that many unemployed people in their 40s and 50s are the victims of explicit or implicit ageism. As for the BRIC and N-11 countries, those with sharply declining support ratios will be challenged to achieve continuous major growth with China, Russia and South Korea facing more dire prospects than some of the other countries on the two lists.

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Rob Carmona: New York Times Article Misses Benefits of Job Training Benefits

July 29, 2010

A recent New York Times article: “After Job Training, Still Scrambling for a Job” paints an inaccurate picture of the benefits of job training, and I’d like to illustrate why. STRIVE International , a workforce development non-profit organization, was overjoyed to place 49% of its 2009 New York trainees in jobs during one of the worst recessions in memory. Among our graduates who pursued STRIVE’s vocational skills training, 58% have secured employment and are earning an average wage that is 56% above the minimum wage. In the world of the chronically unemployed, these statistics represent a substantial victory over the cycle of failure and rejection that perpetuates poverty. Our pool of clients is drawn from the hard core unemployed: 30% have been convicted of a felony, 66% are male, and 62% are African-American. Most have no prior employment history. The majority receive some form of public assistance. When the costs to society of sustaining the unemployed are considered, a more accurate picture of the benefits of job training emerges. On average, a year of incarceration costs taxpayers roughly $50,000 per inmate in New York State. A year of TANF cash benefits for a family of 3 is approximately $6,000 – $8,000. When factoring in Medicaid, Food Stamps and housing subsidies, governmental outlays for a family of three can exceed $25,000 per year. STRIVE’s program converts these individuals into economic contributors who will earn starting salaries between $19,000 and $24,000 per year along with medical benefits. Not only will these individuals develop credentials in the workplace and become taxpayers themselves, they will cease to engage in activities that negatively impact our society, while also providing financial security to their families and modeling responsible behavior to their children. We agree that skills training must be closely aligned with available jobs. Hence, STRIVE’s Skill training regimens are drawn from the Department of Labor’s research on growth industries and close collaboration with local companies. Our program is flexible enough to quickly adapt to the requirements of the job market. These are the keys to success that those of us in the workforce development profession follow. An evaluation of job training programs must consider the specific challenges of the population served and the costs to society of not providing vocational training. Further, no program can be evaluated only one year out – STRIVE follows its graduates for a minimum of 2 years and we continue to serve them after that period when they reach out to us for help. A blanket rejection of job training ignores the many examples of success and hope provided by the Workforce Development Community.

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David Bolchover: Tony Hayward and Those CEO Myths

July 29, 2010

The exiting BP Chief Executive Tony Hayward has become rich as a time-serving employee, working his way up a huge corporation over three decades, profiting from the brand and infrastructure of a company that was created three years before he was born. Then he was made a scapegoat for an oil spill from one of the company’s several thousand wells, a well he had probably never visited and maybe never knew existed. Such is the life of a chief executive of a large corporation. The eulogies and vilifications are flip sides of the same coin, and are founded on the misconception that the chief executive of a longstanding global company with tens of thousands of employees, hundreds of senior managers and an army of expensive external consultants, has anywhere near the dramatic impact we are led to believe. The myth of CEO (chief executive) omnipotence and its twin misconception, the myth of rare executive talent, cost us dear and must be challenged vigorously and urgently. It is after all the population at large which owns large public companies through pensions, savings and other investments, and therefore has to pay for the exorbitant salaries that are a direct consequence of these myths. However, these expensive myths will continue to be stoutly defended by a number of vested interests, such as remuneration consultants, headhunters and the institutional shareholders who invest in public companies on our behalf, and whose senior executives also owe their wealth to the exact same fallacies. The principal beneficiaries of the status quo are of course the CEOs themselves, together with those corporate hopefuls who aspire to be CEOs in the future. These myths secure life-transforming and life-long wealth for them if and when they get to the top. After all, in a market where the supply of a given entity is deemed to be scarce and precious, its price (in this case, its salary) inevitably rises. Moreover, as these CEOs are in such a powerful negotiating position before they assume responsibilities, they can guarantee through contractual obligations that their sky-high compensation, in the form of golden handshakes and pension entitlements, will continue even if their term in office is deemed a failure. Thus, the heavily criticised Hayward picks up around $1.6 million on his way out, with a promised pension pot reportedly in excess of $16 million, ensuring an annual retirement windfall of around $1 million that will keep him in the lap of luxury for many years. Many years, no doubt, in which several future BP chief executives will become seriously wealthy by managing to beat thousands of equally qualified candidates to find themselves at the top of a massive company, only to then wield insignificant impact on its performance. Hayward had two full years as chief executive of BP – 2008 and 2009. In those two years, he received around $11 million in salary, cash bonus and share awards. The board defended both annual payouts on the basis that Hayward had boosted “operational performance”, despite the company performing worse than its competitors in terms of total shareholder return in 2008, and reporting a 45% profit fall in 2009. Besides, in an industry where investments traditionally take a long time to bear fruit, it is hard to accept that Hayward himself could be held personally responsible for any alleged improvements. Under his leadership, the company adopted cost-cutting measures throughout the organisation, similar to those overseen by countless chief executives, past and present. No rare talent necessary there, just bog-standard corporate administration. After the spill, he made several notorious gaffes, such as saying he wanted “his life back” after eleven people had lost theirs due to the initial accident, and thousands more lost their livelihoods as a consequence. One of the key attributes of any leader of a large organisation must be diplomacy, to say the right thing as the figurehead. Tact is a trait possessed by numerous people, for example by seasoned foreign diplomats and PR consultants earning a relative pittance. So why have all those millions come out of our pockets and been given to Tony Hayward? We need to draw broader lessons from the Tony Hayward saga. It’s not just the money that is being unjustly taken from the population as a result of the myths surrounding executives. What signal does it send to society when corporate leaders become hugely wealthy without themselves taking on any personal risk or creating anything new? What damage does that message do to innovation and entrepreneurship? Why not forget about setting up that business, and just try to become another corporate leader, exploiting and suffering from external events, and becoming rich, no matter what? David Bolchover’s latest book is “Pay Check: Are Top Earners Really Worth It?”

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Matt Fellowes: Payday Lending’s Final Payday?

July 22, 2010

While the financial reform law that was signed by President Obama yesterday signaled a renewed interest in Washington to regulate go-go bankers, it may have an even greater impact on “fringe banking” — the high-cost, dead-end alternative banking industry that includes payday lenders and check cashers. Regulators across the country and new competition from banks are squeezing their ability to survive. Every year, this $250 billion market serves about 20 million U.S. households (about one-fifth of the population), most of whom are middle- and low-income. Fringe banks charge skyscraping prices for a handful of basic services that are available at banks for much less. The average payday loan, for instance, carries an APR of about 390 percent, compared to an average credit card APR of around 14 percent. Regular check-cashing customers pay almost $1,000 a year. Considering that the average customer earns about $20,000, that’s a dire amount of money to be paying for a service that’s free at most banks. Conventional banks have traditionally stayed away from the 20 million households in the fringe bank market, fearing low revenue opportunities and high credit risks. But the financial reform bill is the latest in a series of recent market changes that have started to fundamentally change that equation. Here’s why: new regulations are choking off fringe banks’ ability to survive. From the dozens of states that have been tightening regulations in recent years to the new federal Consumer Financial Protection Agency that promises to reign in misleading consumer finance policies and practices, the high-fee model is drawing an increasing amount of criticism and pushback from regulators. Just as important, bank shareholders will demand that banks start competing with their newly hobbled fringe counterparts for those 20 million households. The fact is, banks’ current business model is forcing them to serve an ever-shrinking share of the market that has money to burn and does not pose a significant credit risk. The reform bill reinforces banks’ conservative standard through strict lending requirements and other mandates. These credit-constraining provisions have plenty of consumer finance experts predicting a windfall for the fringe bankers who are standing at the ready to serve those turned away from banks. Yes, a payday may be coming, but it won’t last. If banks want to grow in the future, they will have to adapt their business models to serve the credit-challenged population. They will also acquire start-up companies that are already striving to serve that market through models that will pass muster with watchful regulators (see, for example, Progreso Financiero ). Just last week FICO reported that, for the first time, one-third of the population has a high-risk credit rating and that share is forecasted to continue expanding over the next few years. That means one out of three Americans already looks unattractive to banks, and that millions more will be soon be joining them. A final strike against fringe banking is that one of their major competitive advantages — transparent pricing — is due to expire. I’ve found in my research that about half of fringe banking customers choose to use these services because they fear “hidden” bank fees (such as overdrafts), even though most would actually save money by using banks. When banks are forced to advertise their fee structures as clearly as a McDonald’s menu rather than burying them in fine print, the “hidden fee” deterrent will disappear. Already, the first wave of financial reform last year has forced banks to move away from “hidden” fees (like overdrafts) and toward “transparent” ones (like monthly fees). The impact of this shift will lessen as banks attempt to recoup lost revenue elsewhere, but check cashing costs an average of $1,000 each year — even if upfront (transparent) fees increase, it’s unlikely that banks will ever drain customers’ finances at the same level. Add it all up, and fringe banking appears to be headed for the exit ramp — but not before one last raid on millions of people’s wallets. Banks have traditionally been sluggish in adopting strategic rethinking related to their retail businesses, and reform will move slowly before it has a meaningful impact on the industry. Still, competition from banks for fringe banking customers will grow rapidly in the years to come, and eventually regulators will squeeze out the remaining viability of these dead-end, high-cost businesses. For the millions of fringe banking customers, that day can’t come too soon.

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Need A Job? Try Canada, Where Hiring Is Booming And Home Prices Are Rising

July 9, 2010

Stubbornly high unemployment rates got you down? Not sold on the economic recovery? Look no further than America’s polite neighbor to the north, where jobs numbers are surging and home prices have been rising steadily for nearly a year. Last month, Canada, a nation with roughly one tenth of our population, created about 10,000 more new jobs than America. Yes, Canada’s economic recovery is outpacing our own. In terms of sheer job creation, June saw Canada create jobs at a pace that was five times the rate predicted by economists, Bloomberg News reports. Canada added 93,200 jobs in June, while U.S. private employers added just 83,000. Thanks to strong hiring in the service sector, Canada’s unemployment rate fell to 7.9 from 8.1 percent, while America’s unemployment rate came in at 9.5 percent in June, falling only because of a large exodus of Americans looking for work. All told, the U.S. lost 125,000 jobs in June because of a wave of Census layoffs. Real estate prices tell a similar story. After 10 straight monthly gains, Canadian home prices rose 0.3 percent in May, reports Bloomberg News. In the States, things are somewhat bleaker. Many areas showed small home price gains in May, , but in many other areas prices remain close to their April 2009 lows , according to the latest data from the widely-watched S&P/Case-Shiller index. Canadian real estate broker Royal LePage predicts Canada’s home prices could rise an average of 6.8 percent in 2010. Meanwhile, the IMF, though remaining relatively upbeat on the U.S. housing and job markets, warned that the foreclosure crisis could lead to a double-dip in home prices .

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U.S. Payrolls May Have Climbed in May for Fifth Month

May 30, 2010

By Shobhana Chandra May 30 (Bloomberg) — Employment grew in May for a fifth consecutive month, pointing to gains in wages that will help U.S. households ride out the turmoil in financial markets, economists said before reports this week. Payrolls climbed by 508,000 workers last month, the biggest increase since 1997, according to the median estimate of 64 economists surveyed by Bloomberg News. The gain reflected a surge in government hiring of temporary help to conduct the census and a 180,000 rise in private employment, according to the survey. Other reports may show the economic rebound is broadening beyond manufacturing as service providers, including retailers and construction firms, see a pickup in demand. General Electric Co. is among companies hiring, saying the European debt crisis is unlikely to derail the recovery from the worst global recession in the post-World War II era. “The labor market is clearly improving,” said James O’Sullivan , global chief economist at MF Global Ltd. in New York. “At this point, there’s enough momentum in the economy to outweigh the drag from the turmoil in Europe.” The Labor Department’s jobs report is due June 4. The Census Bureau had said it would take on 970,000 temporary workers from April through June to conduct the population count that occurs every 10 years. The bulk of the hiring likely took place last month. Census Effect Census employment may keep distorting the payroll figures for months as the government dismisses workers when the population count is done. For that reason, economists say private payrolls, which exclude government jobs, will be a better gauge of the state of the labor market for much of 2010. The report will probably also show the unemployment rate fell to 9.8 percent last month, according to the survey median, from 9.9 percent. The rate, which reached a 26-year high of 10.1 percent in October, will take time to recede as the number of previously discouraged jobseekers returning to the labor force exceeds the number of available jobs. Factory payrolls increased in May for the fifth straight month, according to the survey. “This is a point in time when the world needs the U.S. to be a beacon of stability, a beacon of reliability,” GE Chief Executive Officer Jeffrey Immelt said in an interview on May 6. Fairfield, Connecticut-based GE, the world’s largest maker of jet engines, power-generation equipment and locomotives, this month increased the number of jobs it plans to add in Michigan to more than 1,300. Adding a Shift Chrysler Group LLC, the automaker controlled by Fiat SpA and based in Auburn Hills, Michigan, said it will add a second shift to a Detroit factory that makes Jeep Grand Cherokees and hire 1,100 workers at the plant. On June 1, the Institute for Supply Management’s manufacturing index will show factories continued to expand this month after growing in April at the fastest pace since 2004, according to economists surveyed. Manufacturing accounts for about 11 percent of the economy. Two days later, Commerce Department figures may show orders placed with factories rose in April for the eighth consecutive month, according to the survey. The manufacturing rebound has helped underpin shares. The Standard & Poor’s Supercomposite Industrial Machinery Index of 52 companies, including Caterpillar Corp. and Deere & Co., has increased 7 percent this year compared with a 2.3 percent decline in the broader S&P 500. Shares Retreat Since reaching a 19-month high on April 23, the S&P 500 Index has lost 11 percent on mounting concern efforts to trim government deficits in Europe will slow the global recovery. The gains in manufacturing are now being accompanied by a rebound among service industries, which make up about 90 percent of the economy. The Tempe, Arizona-based ISM’s index of non- manufacturing businesses, due on June 3, rose last month to the highest level in almost four years, economists surveyed projected. Housing is getting a boost from the extension of a buyer tax credit of as much as $8,000, figures may show on June 2. The National Association of Realtors’ index of signed purchase agreements, or pending home resales, rose in April for the third straight month, according to the Bloomberg survey. Construction spending, due from the Commerce Department on June 1, rose 0.1 percent in April after a gain of 0.2 percent, economists projected. A slump in commercial building is restraining in the industry. To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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Payrolls in U.S. May Have Increased for Fifth Month, Helping Boost Wages

May 29, 2010

By Shobhana Chandra May 30 (Bloomberg) — Employment probably grew in May for a fifth consecutive month, pointing to gains in wages that will help U.S. households ride out the turmoil in financial markets, economists said before reports this week. Payrolls may have climbed by 508,000 workers last month, the biggest increase since 1997, according to the median estimate of 64 economists surveyed by Bloomberg News. The gain reflected a surge in government hiring of temporary help to conduct the census and a 180,000 rise in private employment, according to the survey. Other reports may show the economic rebound is broadening beyond manufacturing as service providers, including retailers and construction firms, see a pickup in demand. General Electric Co. is among companies hiring, saying the European debt crisis is unlikely to derail the recovery from the worst global recession in the post-World War II era. “The labor market is clearly improving,” said James O’Sullivan , global chief economist at MF Global Ltd. in New York. “At this point, there’s enough momentum in the economy to outweigh the drag from the turmoil in Europe.” The Labor Department’s jobs report is due June 4. The Census Bureau had said it would take on 970,000 temporary workers from April through June to conduct the population count that occurs every 10 years. The bulk of the hiring probably took place last month. Census Effect Census employment may keep distorting the payroll figures for months as the government dismisses workers when the population count is done. For that reason, economists say private payrolls, which exclude government jobs, will be a better gauge of the state of the labor market for much of 2010. The report will probably also show the unemployment rate fell to 9.8 percent last month, according to the survey median, from 9.9 percent. The rate, which reached a 26-year high of 10.1 percent in October, will take time to recede as the number of previously discouraged jobseekers returning to the labor force exceeds the number of available jobs. Factory payrolls probably increased in May for the fifth consecutive month, according to the survey. “This is a point in time when the world needs the U.S. to be a beacon of stability, a beacon of reliability,” GE Chief Executive Officer Jeffrey Immelt said in an interview on May 6. Fairfield, Connecticut-based GE, the world’s largest maker of jet engines, power-generation equipment and locomotives, this month increased the number of jobs it plans to add in Michigan to more than 1,300. Adding a Shift Chrysler Group LLC, the automaker controlled by Fiat SpA and based in Auburn Hills, Michigan, said it will add a second shift to a Detroit factory that makes Jeep Grand Cherokees and hire 1,100 workers at the plant. On June 1, the Institute for Supply Management’s manufacturing index may show factories continued to expand this month after growing in April at the fastest pace since 2004, according to economists surveyed. Manufacturing accounts for about 11 percent of the economy. Two days later, Commerce Department figures may show orders placed with factories rose in April for the eighth consecutive month, according to the survey. The manufacturing rebound has helped underpin shares. The Standard & Poor’s Supercomposite Industrial Machinery Index of 52 companies, including Caterpillar Corp. and Deere & Co., has increased 7 percent this year compared with a 2.3 percent decline in the broader S&P 500. Shares Retreat Since reaching a 19-month high on April 23, the S&P 500 Index has lost 11 percent on mounting concern efforts to trim government deficits in Europe will slow the global recovery. The gains in manufacturing are now being accompanied by a rebound among service industries, which make up about 90 percent of the economy. The Tempe, Arizona-based ISM’s index of non- manufacturing businesses, due on June 3, probably rose last month to the highest level in almost four years, economists surveyed projected. Housing is getting a boost from the extension of a buyer tax credit of as much as $8,000, figures may show on June 2. The National Association of Realtors’ index of signed purchase agreements, or pending home resales, rose in April for the third straight month, according to the Bloomberg survey. Construction spending, due from the Commerce Department on June 1, rose 0.1 percent in April after a gain of 0.2 percent, economists projected. A slump in commercial building is restraining in the industry. To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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College Graduates to Make Global Economy More Productive: Chart of the Day

May 18, 2010

By David Wilson May 18 (Bloomberg) — This year’s college graduates are likely to make the global economy more productive because of their education, judging by the results of a study from the National Bureau of Economic Research. The CHART OF THE DAY shows the average years of schooling worldwide for people at least 15 years old, according to data that economists Robert J. Barro of Harvard University and Jong- Wha Lee of the Asian Development Bank compiled for their study. They tracked education levels in 146 countries since 1950. During the past decade, the average rose by 0.78 year, in line with the 0.76-year average for the second half of the 20th century. People with college degrees increased to 6.7 percent of the population this year from 5.9 percent in 2000. “Human capital, particularly attained through education, is crucial to economic progress,” Barro and Lee wrote today in a posting on the Centre for Economic Policy Research’s Vox Web site that summarized their findings. Global economic output climbs by about 2 percent for each additional year spent in school, according to the study. Rates of return on undergraduate and graduate studies are as high as 18 percent for every year. Developing countries were primarily responsible for the past decade’s increase in education levels, based on the study data . In 24 “advanced” economies, the average amount of time in the classroom rose just 0.38 year. College graduates dropped to 14.5 percent of the population from 15.4 percent a decade ago. (To save a copy of the chart, click here.) To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

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Papandreou Faces Bond Rout as Budget Outlook Worsens

April 22, 2010

By Maria Petrakis April 22 (Bloomberg) — Greek bond yields surged to the highest since 1998 as the country’s worsening budget outlook put pressure on the government to accept a European Union bailout and ignore street protests against its austerity measures. Greece’s benchmark 10-year bond yield rose 84 basis points to 9 percent today, almost triple the rate on bunds. As a civil servant strike closed hospitals and shut the 2,500-year-old Parthenon temple, the EU said today that Greece’s deficit in 2009 was worse than its previously forecast and Moody’s Investors Service cut its rating on Greek debt one notch to A3. Prime Minister George Papandreou is under fire from voters who say his budget cuts have gone too far and from investors who argue that further action is needed to reduce a deficit that is four times bigger than European Union rules allow. As Greek lawmakers meet EU and International Monetary Fund officials to negotiate loan conditions, the premium investors demand to hold Greek debt over German bonds reached 522 basis points. “Papandreou is caught between a rock and a hard place,” said Jacques Cailloux , chief European Economist at Royal Bank of Scotland Group Plc. “The market has zero confidence in what the Greeks are saying, and any further austerity measures pushed for by the IMF could be the ones that break the camel’s back if they are deemed unfair by the population. He doesn’t have any option though.” Markets Suffer The EU today lifted its estimate to 13.6 percent of gross domestic product from 12.7 percent. The Greek government said it still plans to cut the deficit by 4 percentage points this year. Greek stocks declined for a second day today with the benchmark ASE Index falling 3.9 percent to 1,860.76, leaving it down 15 percent on the year. At 10 percent, Greece’s two-year bonds now yield more than the 10-year debt, indicating investors don’t believe the EU bailout plan will be enough to sustain Greece. Credit-default swaps to insure against a default in the coming year leaped 104 basis points to a record 744.7. Moody’s, which still has the highest assessment of Greek debt among the major rating companies, said after today’s downgrade that it still has a negative outlook on the debt. “There is a significant risk that debt may only stabilize at a higher and more costly level than previously estimated,” the statement said. Greek Music In Athens, more than 500,000 workers were called on to strike today, according to the unions organizing the walkout. With Greek folk music blaring over Constitution Square in Athens, the PAME Hellas union set up a stage for speakers across from the parliament with a banner demanding “no more sacrifices” from the Greek people. Members of PAME Hellas, which is affiliated with the Greek Communist Party, blockaded entry to the port of Piraeus yesterday, preventing ferries from sailing. Others picketed luxury hotels in the city center, including at least one where IMF negotiators are staying. “We must dare, otherwise we will be led like lambs to the slaughter,” said Aleka Papariga, head of the Communist Party of Greece, the third-largest parliamentary party. “Working people aren’t about to be used to allow passage of policies that will bring the worst barbarity we’ve seen in the past 35 years.” Greek officials yesterday began talks on activating a 45 billion-euro ($60 billion) emergency aid package, with 9 out of 10 people surveyed in an opinion poll in Eleftheros Typos expecting the IMF to insist on more belt-tightening measures. Embracing IMF The main opposition party, the center-right New Democracy, said Papandreou is responsible for driving the country into the IMF’s arms. Dimitris Papadimoulis, a lawmaker for the Syriza left coalition group, said in parliament yesterday the IMF’s involvement hangs “like a cloud of volcanic ash over Greeks.” “They feel that for years now the prime minister will be Dominique Strauss-Kahn ,” he said, referring to the IMF’s managing director. Speaking in Washington today, Strauss-Kahn said “it’s going to take some days” for IMF officials to draw initial conclusions from their Greek talks. “There’s no silver bullet to solve it in an easy manner,” he said. The IMF is likely to try to impose tougher conditions than the deficit-reduction measures devised by the Papandreou government. Serious resistance to IMF demands could endanger future loans, said Erik F. Nielsen , chief European economist at Goldman Sachs in London. Debt Restructuring “If this becomes a major issue, then I suspect that the IMF might settle for a smaller and shorter program to help them through the May payments, but for investors this ought to be a major concern,” he wrote in an e-mail to investors. Nielsen said the government might even be forced to offer a voluntary debt-restructuring arrangement sometime over the next few months in combination with the aid package. Some European officials say that national strikes highlight the challenge facing the Greek government in coming years. In a briefing to German lawmakers on April 19, Bundesbank President Axel Weber cited television footage of Greek demonstrators as showing how sections of the population fail to appreciate the situation their debt-laden country is in. His comments were cited by two lawmakers who were present. Papandreou’s government still needs to raise about 8.5 billion euros before the end of May. While Finance Minister George Papaconstantinou says he’s “not influenced” by the surge in bond yields, investors are skeptical he can maintain momentum to cut the budget shortfall to less than 3 percent in 2012. Swap Uncertainty The EU today said the 2009 deficit could be revised as much as 0.5 percentage point higher because of “uncertainties on the surplus of social security funds for 2009, on the classification of some public entities and on the recording of off-market swaps.” The yield on Greece’s 10-year government bond has surged more than 200 basis points since April 12, the first day of trading after the EU said it was prepared to offer Greece loans for three years at 5 percent. The spread on German bunds is the highest since the euro was started in 1999. “Greek policymakers are steering an extremely perilous course between investors asking for a quick and tough IMF program, and public opinion opposed to further adjustment,” said Marco Annunziata , chief economist at UniCredit Group in London. “It’s an almost impossible task, especially with time quickly running out.” To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

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Papandreou Faces Bond Rout as Budget Deficit Worsens, Greek Workers Strike

April 22, 2010

By Maria Petrakis April 22 (Bloomberg) — Greek bond yields surged to the highest since 1998 as the country’s worsening budget outlook put pressure on the government to accept a European Union bailout and ignore street protests against its austerity measures. Greece’s benchmark 10-year bond yield rose to 8.564 percent, the highest since 1998 and more than twice the rate on bunds. As a civil servant strike closed hospitals and shut the 2,500-year-old Parthenon temple, the EU said today that Greece’s deficit in 2009 was worse than previously forecast. EU officials lifted their estimate to 13.6 percent of gross domestic product from 12.7 percent and said it could top 14 percent. Prime Minister George Papandreou is under fire from voters who say his budget cuts have gone too far and from investors who argue that further action is needed to reduce a deficit that is four times bigger than European Union rules allow. As Greek lawmakers meet EU and International Monetary Fund officials to negotiate loan conditions, the premium investors demand to hold Greek debt over German bonds reached 522 basis points. “Papandreou is caught between a rock and a hard place,” said Jacques Cailloux , chief European Economist at Royal Bank of Scotland Group Plc. “The market has zero confidence in what the Greeks are saying, and any further austerity measures pushed for by the IMF could be the ones that break the camel’s back if they are deemed unfair by the population. He doesn’t have any option though.” Markets Suffer The Greek government said it still plans to cut the deficit by 4 percentage points this year, though it backed away from a forecast that the shortfall would fall to 8.7 percent. An EU official said the bloc has always aimed for a 4 percentage point cut in the budget gap this year. Greek stocks declined for a second day today with the benchmark ASE Index falling 2.4 percent to 1,890.21, leaving it down 14 percent on the year. Greece’s two-year bonds now yield more than the 10-year debt, indicating investors don’t believe the EU bailout plan will be enough to sustain Greece. Credit- default swaps to insure against a default in the coming year leaped 104 basis points to a record 744.7. More than 500,000 workers were called on to strike, according to the unions organizing the walkout. Today’s strike isn’t expected to affect public transport or plane travel, after air-traffic controllers postponed a planned walkout to clear a backlog of flights caused by the spread of volcanic ash from Iceland across Europe. Embracing IMF Greek officials yesterday began talks on activating a 45 billion-euro ($60 billion) emergency aid package, with 9 out of 10 people surveyed in an opinion poll in Eleftheros Typos expecting the IMF to insist on more belt-tightening measures. The main opposition party, the center-right New Democracy, said Papandreou is responsible for driving the country into the IMF’s arms. Dimitris Papadimoulis, a lawmaker for the Syriza left coalition group, said in parliament yesterday the IMF’s involvement hangs “like a cloud of volcanic ash over Greeks.” “They feel that for years now the prime minister will be Dominique Strauss-Kahn ,” he said, referring to the IMF’s managing director. The IMF is likely to try to impose tougher conditions than the deficit-reduction measures devised by the Papandreou government. Serious resistance to IMF demands could endanger future loans, said Erik F. Nielsen , chief European economist at Goldman Sachs in London. Debt Restructuring “If this becomes a major issue, then I suspect that the IMF might settle for a smaller and shorter program to help them through the May payments, but for investors this ought to be a major concern,” he wrote in an e-mail to investors. Nielsen said the government might even be forced to offer a voluntary debt-restructuring arrangement sometime over the next few months in combination with the aid package. Some European officials say that national strikes highlight the challenge facing the Greek government in coming years. In a briefing to German lawmakers on April 19, Bundesbank President Axel Weber cited television footage of Greek demonstrators as showing how sections of the population fail to appreciate the situation their debt-laden country is in. His comments were cited by two lawmakers who were present. PAME Hellas, a union affiliated with the Greek Communist Party, called its own labor action. Its members blockaded entry to the port of Piraeus yesterday, preventing ferries from sailing. Others picketed luxury hotels in the city center, including at least one where IMF negotiators are staying. Slaughter “We must dare, otherwise we will be led like lambs to the slaughter,” said Aleka Papariga, head of the Communist Party of Greece, the third-largest parliamentary party. “Working people aren’t about to be used to allow passage of policies that will bring the worst barbarity we’ve seen in the past 35 years.” Papandreou’s government still needs to raise about 8.5 billion euros before the end of May. While Finance Minister George Papaconstantinou says he’s “not influenced” by the surge in bond yields, investors are skeptical he can maintain momentum to cut the budget shortfall to less than 3 percent in 2012. The EU today said the 2009 deficit could be revised as much as 0.5 percentage point higher because of “uncertainties on the surplus of social security funds for 2009, on the classification of some public entities and on the recording of off-market swaps.” The yield on Greece’s 10-year government bond has surged more than 100 basis points since April 12, the first day of trading after the EU said it was prepared to offer Greece loans for three years at 5 percent. The spread on German bunds is the highest since the euro was started in 1999. “Greek policymakers are steering an extremely perilous course between investors asking for a quick and tough IMF program, and public opinion opposed to further adjustment,” said Marco Annunziata , chief economist at UniCredit Group in London. “It’s an almost impossible task, especially with time quickly running out.” To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

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Payrolls in U.S. Rise by 162,000, Most in Three Years; Rate Holds at 9.7%

April 2, 2010

By Timothy R. Homan April 2 (Bloomberg) — Employment in the U.S. increased in March by the most in three years and the unemployment rate held at 9.7 percent as companies gained confidence the economic recovery will be sustained. Payrolls rose by 162,000 last month, less than anticipated, after a revised 14,000 decrease in February that was smaller than initially estimated, figures from the Labor Department in Washington showed today. The March increase included 48,000 temporary workers hired by the government to help conduct the 2010 census. Average hourly earnings fell and hours worked rose. Caterpillar Inc. is among companies adding staff, indicating the recovery that began in the second half of 2009 is starting to foster the job gains needed to lift consumer spending and sustain the economic expansion. Nonetheless, unemployment may be slow to recede as formerly discouraged employees enter the labor force looking for work, signaling the Federal Reserve will keep interest rates low in coming months. “Labor markets have shifted to expansion mode,” said Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “Some of the increase was payback for weather but more encouraging is that the recovery in hiring is spreading quickly across industries. This was broad-based.” Stock-index futures reversed losses and Treasury securities declined after the report. Futures on the Standard & Poor’s 500 Index expiring in June rose 0.2 percent to 1,176.4 at 8:55 a.m. in New York. The 10-year Treasury note fell, pushing up the yield to 3.92 percent from 3.87 percent late yesterday. Private payrolls increased by 123,000 in March. Economists’ Forecast Overall payrolls were forecast to increase by 184,000, according to the median estimate of 83 economists surveyed by Bloomberg News. Estimates ranged from a decline of 40,000 to a gain of 360,000. The jobless rate was projected to hold at 9.7 percent. Forecasts ranged from 9.5 percent to 9.9 percent. The unemployment rate was unchanged even as more people entered the workforce. Average hourly earnings fell 0.1 percent in March, the first drop since comparable records began in 2006. Part of the payroll gain last month likely reflected a rebound from the February blizzards that set seasonal snowfall records in cities including Washington and Philadelphia, shuttering some businesses during the week of the government survey. Any hiring that would have taken place that week is figured into the March job count instead. Census Hiring Hiring at the Census Bureau for the population count may have the biggest impact on payroll figures in April through June, when the bulk of the additions will take place. The program will then subtract from the job count the following months as employees are dismissed after the work is done. The agency said it will take on 1.15 million temporary workers in the first half of the year to conduct the population count that occurs every 10 years. For that reason, economists will be excluding workers on public payrolls for much of the rest of the year in gauging the state of the labor market. Today’s report from the Labor Department showed that government payrolls increased by 39,000 in March. State and local governments reduced employment by 9,000 during the month, while the federal government added 48,000. The average work week for all workers rose to 34 hours in March from 33.9 hours the prior month, when winter storms temporarily closed some businesses. Underemployment Rises The so-called underemployment rate — which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking — increased to 16.9 percent from 16.8 percent. The report also showed an increased in long-term unemployed Americans. The number of people unemployed for 27 weeks or more rose as a percentage of all jobless, to a record 44.1 percent. Factory payrolls increased 17,000 in March after rising 6,000 in the prior month. The median forecast by economists in the Bloomberg survey called for a gain of 15,000. Payrolls at builders rose 15,000 last month, the biggest gain since March 2007, after declining 59,000. Financial firms reduced payrolls by 21,000, after a 15,000 drop the prior month. Service industries, which include banks, insurance companies, restaurants and retailers, added 121,000 workers after an increase of 33,000 in February. Private service providers added 82,000 workers to payrolls in March. The number of temporary workers increased 40,000 in March. Payrolls at temporary-help agencies often turn up before total employment because companies prefer to see a steady increase in demand before taking on permanent staff. Data ‘More Positive’ “Recent economic data have really turned more positive, of course with the exception of housing and commercial construction markets,” Ellen Hughes-Cromwick, Ford Motor Co.’s chief economist, said yesterday on a analysts’ conference call from Dearborn, Michigan. The Institute for Supply Management’s factory index , which rose in March to the highest level in more than five years, points to “a very broad-based recovery in that sector,” she said. Initial jobless claims “continue to fall in line with what we would consider to be likely job growth in coming months.” One company adding to payrolls is Leggett & Platt Inc., the 127-year-old manufacturer. The Carthage, Missouri-based company has hired a few hundred employees this year to meet rising demand for its car-seat parts and home-furniture components, according to Chief Executive Officer David Haffner. “Things are better,” Haffner, 57, said in a March 16 interview. “We are reluctant to get too optimistic too quickly, but things are relatively better.” The economy grew at a 5.6 percent annual rate in the fourth quarter, the biggest gain in six years, according to data from the Commerce Department released last week. Economists surveyed by Bloomberg last month projected the jobless rate will end the year at 9.5 percent as the economy expands 3 percent in 2010. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Joel Shatzky: Educating for Democracy: School Closings and National Priorities

March 25, 2010

In recent weeks a number of cities and states have announced school closings and teacher layoffs due to several factors including population shifts, budgetary problems and, as in the case of New York City, low scores on standardized tests. Although these factors indicate a complicated picture, my concern is that the notion of closing schools in itself for reasons that have little to do with student safety is a sign of a profound change in attitudes in this country toward equal opportunity for all young learners. In Detroit, because of population shifts — “white flight” — the school population has precipitously declined in the past decade. Forty-four city schools will be closed and a recent cut in per pupil allocation will be offset from public employee pensions. In California 10,000 educators will be fired and in NYC 8500 will be laid off in addition to 19 schools scheduled for closing due to low test scores. In Kansas City — with a similar situation as Detroit — 29 schools will be closed and 1000 educators are being laid off in Chicago. These measures will certainly have an effect on reducing the quality of the education of young learners in these cities and states but there is no doubt that schools in more privileged areas and private schools will suffer little negative impact. I am afraid that this trend will become more commonplace just as homelessness, which would have been regarded as a national disgrace and unacceptable condition in such a rich country as the United States forty years ago, is now considered by most Americans as not much more than a public nuisance. The more “tolerant’ we as a nation become to signs of economic, social and ethical decay, the closer we will be to becoming a country in which democratic values will be regarded as too much of a “luxury” to be sustained or even fought for. School closings and budget cuts are, in my opinion, not only a sign of a shrinking economy whose impact is disproportionately felt by the majority, but of a decline in our standing as a nation. I am convinced that there is more than enough wealth in America to address many of these problems far more adequately than they are now, but that would require a serious redistribution of wealth, through a fairer tax system, so that at least revenues for the public good would be more available. In the past forty years there has been a massive redistribution of wealth to the top 10% of the economic pyramid which is completely losing its shape. In 1970 the top 1% income bracket was taxed at a rate of 47%; it has now been reduced to 30%. At the same time, not surprisingly, their income rose from 8.4% to almost 20% while 1/3 of all the wealth: cash, investments, possessions, is now owned by that 1%. Today the bottom half of our population pays only 3.3% of Federal Income Taxes and owns 2.8% of the wealth. This looks more like the economic profile of what used to be called a “Banana Republic” than a Western democracy. And since this half of the population doesn’t make enough money even to pay much taxes, the “tax cuts” constantly recommended by conservatives as the solution to any economic problem we face has no tangible effect on the poorest half of the population, that group whose children depend most on good public schools as their only path out of poverty. If the tax structure of forty years ago had remained as it was, I don’t think we would be faced with making such draconian decisions when it comes to our educational system. If there were also a serious reform in the way in which property taxes are computed, so that they would be tied to income rather than property values, and more evenly distributed nation-wide instead of district-wide, the vast inequalities in public school funding would be effectively addressed. If these sound like radical proposals, I would suggest that signs of the alternative are clearly before us: the decline of the United States by the middle of the century into a country which we would not wish to bequeath as our legacy to future generations.

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Afghan, U.S. Forces Drive to Oust Taliban From Helmand Province Stronghold

February 13, 2010

By Viola Gienger and Eltaf Najafizada Feb. 13 (Bloomberg) — U.S. Marines joined by British and Afghan soldiers assaulted a Taliban stronghold in southern Afghanistan early today in what may be the biggest offensive of the war that began in 2001. About 15,000 troops participated, the NATO-led coalition said in an e-mailed statement. Troops were ferried to the plain of Marjah in Helmand province by helicopter beginning at about 2 a.m. local time. “Key objectives were secured with minimal interference,” U.K. Major General Gordon Messenger told reporters in London. He declined to discuss allied casualties and said there was a “low number” of insurgents killed. The offensive is the first major combat test for some of the 50,000 reinforcements President Barack Obama has authorized for Afghanistan since taking office. Their aim is to reverse Taliban territorial gains, protect civilians and train Afghan forces to start taking over parts of the country in July 2011. Coalition forces led by the North Atlantic Treaty Organization have talked openly for weeks about the offensive in an effort to persuade Taliban militants to give up and warn the population so residents can flee. Marjah, an area centered about 28 kilometers (18 miles) southwest of the provincial capital, Lashkar Gah, is one of the biggest opium-production areas. Messenger said over the next 24 hours “the theme will be one of consolidation.” Daud Ahmadi , a spokesman for the province’s governor, said more than 450 families from Marjah have fled to Lashkar Gah, where authorities are providing food, blankets and other supplies. U.S. Goal The offensive is the allied forces’ effort to consolidate their biggest previous attempt, in July 2009, to establish government control in Helmand , where opium and smuggling trails to adjacent Pakistan have provided the guerrillas with revenue and supply routes. The capture of Marjah would connect areas seized by U.S. and British forces last year, according to U.S. Army General Stanley McChrystal , the top U.S. and NATO commander in Afghanistan. The Marines are driving into farmland cut by irrigation canals, built by a U.S. aid program in the 1950s, that are too deep to drive through. Authorities in Lashkar Gah cited fleeing Marjah residents as saying Taliban have laced the dirt roads and the mud walls of farm fields and residential compounds with remote-controlled bombs. The Taliban have “probably no better ground in Helmand on which to fight a defensive battle,” said a Feb. 4 report by Stratfor , an Austin, Texas-based strategic analysis company. Three Deaths Three U.S. troops were killed by an improvised bomb in the area, NATO said today. If the Marines capture Marjah, the greater challenge, as elsewhere in Helmand, may be for international donors to restart the farming economy to build support for the government and marginalize the Taliban, according to Richard B. Scott , a retired U.S. development specialist who has worked in the province since the 1970s. The U.S. presence in Helmand has improved security and the economy since July, said Abdul Ahad Helmandwal, a tribal elder near Marjah, in a phone interview. Still, the accompanying aid effort — which provided millions of dollars worth of seed and fertilizer to encourage farmers to grow wheat instead of opium – - has been undercut by a corruption scandal in which several top provincial officials have been arrested. A Taliban commander in Afghanistan, Akhtar Mohammad, said such operations had been attempted before and failed. Taliban Claim “The Taliban have never been defeated,” Mohammad said. The offensive began a few hours after Afghan President Hamid Karzai agreed to the attack following discussions with McChrystal and U.S. Ambassador Karl Eikenberry , the Washington Post reported, citing unidentified U.S. officials. Dubbed Operation Moshtarak, which means “Together” in the Dari language, the offensive will be the largest joint operation to date between Afghan and coalition forces, according to a Feb. 11 report by Jeffrey Dressler, an analyst at the Institute for the Study of War in Washington. Marjah, whose population is probably less than 50,000, became “a major command and control” hub for the Taliban and narcotics traders “after U.S. Marines drove insurgents out of their previous sanctuary” to the south in Garmser in May 2008, Dressler wrote. A three-day operation last May against one of two main bazaars that host the insurgency netted the largest drug cache in Afghanistan to date and resulted in the deaths of 47 militants, according to Dressler, who recently briefed a Marine Battalion at Camp Lejeune, North Carolina, prior to deployment. Coalition and Afghan commanders have been meeting with local leaders to plan the operation and find ways of protecting the population. McChrystal said the planning for the offensive has been led by Helmand’s governor, Mohammad Gulab Mangal. To contact the reporters on this story: Viola Gienger in Washington at vgienger@bloomberg.net ; Eltaf Najafizada in Mazar-i-Sharif, Afghanistan at enajafizada1@bloomberg.net

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Afghan, U.S. Forces Swoop Down on Taliban Stronghold in Southern Offensive

February 12, 2010

By Viola Gienger Feb. 13 (Bloomberg) — U.S. Marines joined by British and Afghan soldiers began an assault on a Taliban stronghold in southern Afghanistan early today in what may be one of the biggest offensives of the war. A U.S. military official who asked not to be identified confirmed the operation was under way against insurgents in the town of Marjah in Helmand province. Coalition forces led by the North Atlantic Treaty Organization have talked openly for weeks about the impending action in an effort to persuade Taliban militants to give up and warn the population so residents can flee. The town, located about 25 miles (40 kilometers) southwest of the provincial capital Lashkar Gah, is considered one of the country’s biggest opium-production centers. U.S. Army General Stanley McChrystal , the top U.S. and NATO commander in Afghanistan, said the offensive’s goal is to connect other areas of Helmand that the Marines and British, Danish and Estonian troops recaptured in the past year. “We’re expanding that, increasing the areas that will be under government of Afghanistan control,” McChrystal told reporters on the sidelines of a NATO defense ministers meeting in Istanbul on Feb. 4. The offensive is the first major combat test for some of the 50,000 reinforcements President Barack Obama has authorized for Afghanistan since taking office. Their aim is to reverse Taliban territorial gains, protect civilians and train Afghan forces to start taking over parts of the country in July 2011. “This is the next example of the evolution and, I guess, the maturation of the capacity” of coalition and Afghan forces,” McChrystal said. Karzai Meeting The offensive began a few hours after Afghan President Hamid Karzai agreed to the attack following discussions with McChrystal and U.S. Ambassador Karl Eikenberry , the Washington Post reported, citing unidentified U.S. officials. The Associated Press reported earlier from the Marjah area on the beginning of the offensive, saying troops were ferried into the town by helicopter before dawn. Dubbed Operation Moshtarak, which means “Together” in the Dari language, the offensive will be the largest joint operation to date between Afghan and coalition forces, according to a Feb. 11 report by Jeffrey Dressler, an analyst at the Institute for the Study of War in Washington. The campaign may include as many as 15,000 coalition and Afghan troops, wrote Dressler, who recently briefed a Marine Battalion at Camp Lejeune, North Carolina, prior to deployment. British Major General Gordon Messenger said Feb. 7 that the offensive probably will involve heavy fighting with insurgents. Taliban Hub Marjah became “a major command and control” hub for the Taliban and narcotics traders “after U.S. Marines drove insurgents out of their previous sanctuary” to the south in Germser in April 2008, Dressler said. Marjah’s population probably is less than 50,000, he said. A three-day operation last May against one of two main bazaars that host the insurgency netted the largest drug cache in Afghanistan to date and resulted in the deaths of 47 militants, according to Dressler. Coalition and Afghan commanders have been meeting with local leaders to plan the operation and find ways of protecting the population. McChrystal said the planning for the offensive has been led by the governor of Helmand Province and supported by the relevant government ministries. To contact the reporter on this story: Viola Gienger in Washington at vgienger@bloomberg.net .

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Yahoo Said to Be Targeted by China Cyber Attack Similar to Google Incident

January 14, 2010

By Brian Womack and Ari Levy Jan. 14 (Bloomberg) — Yahoo! Inc. , owner of the No. 2 search engine in the U.S., was targeted by a Chinese attack similar to the one that affected Google Inc. , according to a person familiar with the matter. Google said this week that at least 20 other companies were targeted in a series of “highly sophisticated” attacks in December. Yahoo was one of those companies, said the person, who declined to be identified because the information isn’t public. Google said this week that it’s notifying the other companies, which spanned such industries as finance, technology, media and chemicals. Google declined to identify them. The Chinese attacks also included hackers going after human-rights activists via their Gmail e-mail accounts, Google said. The popularity of Yahoo’s e-mail service could have made it a target, said Danny Sullivan , editor-in-chief of the Search Engine Land site in Redding, Connecticut. “People are looking for places to communicate, and communicate without the Chinese authorities restricting them.” Yahoo, which said it “stands aligned” with Google in condemning the attacks, doesn’t disclose attacks on its computer systems. Yahoo sold its Chinese business in 2005, though it has a stake in the country’s Alibaba Group. “ Yahoo does not generally disclose that type of information, but we take security very seriously and we take appropriate action in the event of any kind of breach,” the company said in a statement. Adobe Attacked After Google’s announcement, Adobe Systems Inc. said its network systems also were attacked, in a “sophisticated, coordinated” effort. San Jose, California-based Adobe, the world’s biggest maker of graphic-design programs, didn’t say where the attack originated. Google , the most popular search engine, said this week it would end self-censorship of its product in China. Depending on how the government reacts, the Mountain View, California-based company said it may have to close its site and shut down offices in the country. The Chinese government said global Internet companies are welcome in the country provided they obey laws that restrict their content. “The Chinese government administers the Internet according to law and we have explicit stipulations over what content can be spread on the Internet,” Jiang Yu , a Foreign Ministry spokeswoman, said at a regular briefing in Beijing today. A separate Chinese government official today defended the nation’s right to censor the Internet. ‘Protecting Security’ “Effective guidance of public opinion on the Internet is an important way of protecting the security of online information,” Wang Chen, director of the State Council Information Office, said in a question-and-answer session with reporters, a transcript of which was posted on the office’s Web site today. Wang’s remarks suggest China will not grant Google’s request to allow unfiltered Internet searches, said Duncan Clark , the Beijing-based chairman of BDA China, a telecommunications and Internet consulting company. “Google.cn is toast,” Clark said in an interview. “Just keep pressing refresh on your browser and see what happens.” An exit would leave Google on the sidelines of an Internet market that’s larger than the U.S. population. The number of Chinese Internet users should grow to 840 million, or 61 percent of the population, by 2013, according to EMarketer Inc. in New York. That’s up from 396 million, or 30 percent of the population, last year. Google and Yahoo were criticized by U.S. lawmakers in 2006 for complying with the Chinese government’s restrictions on the Internet. Yahoo co-founder Jerry Yang said in 2005 that a court order obliged the Sunnyvale, California-based company to hand over user records. That move led to the conviction of a Chinese journalist. Yahoo fell 3 cents to $16.87 at 9:35 a.m. New York time on the Nasdaq Stock Market. Google dropped 28 cents to $586.81. To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net Ari Levy in San Francisco at alevy5@bloomberg.net

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Yahoo Said to Be a Target of China Hacker Attacks

January 14, 2010

By Brian Womack and Ari Levy Jan. 14 (Bloomberg) — Yahoo! Inc. , owner of the No. 2 search engine in the U.S., was targeted by a Chinese attack similar to the one that affected Google Inc. , according to a person familiar with the matter. Google said this week that at least 20 other companies were targeted in a series of “highly sophisticated” attacks in December. Yahoo was one of those companies, said the person, who declined to be identified because the information isn’t public. Google said this week that it’s notifying the other companies, which spanned such industries as finance, technology, media and chemicals. Google declined to identify them. The Chinese attacks also included hackers going after human-rights activists via their Gmail e-mail accounts, Google said. The popularity of Yahoo’s e-mail service could have made it a target, said Danny Sullivan , editor-in-chief of the Search Engine Land site in Redding, Connecticut. “People are looking for places to communicate, and communicate without the Chinese authorities restricting them.” Yahoo, which said it “stands aligned” with Google in condemning the attacks, doesn’t disclose attacks on its computer systems. Yahoo sold its Chinese business in 2005, though it has a stake in the country’s Alibaba Group. “ Yahoo does not generally disclose that type of information, but we take security very seriously and we take appropriate action in the event of any kind of breach,” the company said in a statement. Adobe Attacked After Google’s announcement, Adobe Systems Inc. said its network systems also were attacked, in a “sophisticated, coordinated” effort. San Jose, California-based Adobe, the world’s biggest maker of graphic-design programs, didn’t say where the attack originated. Google , the most popular search engine, said this week it would end self-censorship of its product in China. Depending on how the government reacts, the Mountain View, California-based company said it may have to close its site and shut down offices in the country. The Chinese government said global Internet companies are welcome in the country provided they obey laws that restrict their content. “The Chinese government administers the Internet according to law and we have explicit stipulations over what content can be spread on the Internet,” Jiang Yu , a Foreign Ministry spokeswoman, said at a regular briefing in Beijing today. A separate Chinese government official today defended the nation’s right to censor the Internet. ‘Protecting Security’ “Effective guidance of public opinion on the Internet is an important way of protecting the security of online information,” Wang Chen, director of the State Council Information Office, said in a question-and-answer session with reporters, a transcript of which was posted on the office’s Web site today. Wang’s remarks suggest China will not grant Google’s request to allow unfiltered Internet searches, said Duncan Clark , the Beijing-based chairman of BDA China, a telecommunications and Internet consulting company. “Google.cn is toast,” Clark said in an interview. “Just keep pressing refresh on your browser and see what happens.” An exit would leave Google on the sidelines of an Internet market that’s larger than the U.S. population. The number of Chinese Internet users should grow to 840 million, or 61 percent of the population, by 2013, according to EMarketer Inc. in New York. That’s up from 396 million, or 30 percent of the population, last year. Google and Yahoo were criticized by U.S. lawmakers in 2006 for complying with the Chinese government’s restrictions on the Internet. Yahoo co-founder Jerry Yang said in 2005 that a court order obliged the Sunnyvale, California-based company to hand over user records. That move led to the conviction of a Chinese journalist. Yahoo rose 22 cents to $16.90 on the Nasdaq Stock Market. Google fell $3.39 to $587.09. To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net Ari Levy in San Francisco at alevy5@bloomberg.net

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Linda Franklin: Don’t Mess With A Woman Over 40 with Credit Cards

January 13, 2010

The world’s population is becoming predominantly female. This year, women between the ages of 40 and 64 will be the largest demographic in the United States and we are just starting to find out what that really means for us. Today we influence 80 percent of the $2.1 trillion purchased on consumer goods each year. We are the largest segment of the population reports www.brandchannel.com , a website on global branding. The implications here are profound. Corporations all over the world are focused on just one thing and that’s their bottom line. One by one as they realize we are the largest part of that bottom line they will start listening to what we have to say. We have an important message that they better listen to. That message is don’t mess with a woman over 40 with credit cards. Women are very clear on what they don’t want. One of those don’t wants is looking at other 40 somethings posing naked on magazine covers. Haven’t you noticed that you can’t pick up any publication without seeing one or more women in their birthday suits? In my opinion, that does nothing to enhance our credibility. Haven’t we worked too hard, accomplished too much to be recognized only for our sexuality. In my humble opinion, our buying power is much more seductive. Who said we have to strip down to prove we still have what it takes to get noticed.? Just last week I had this discussion with the T he New York Post. Let’s face it society is still struggling to give women their rightful place as leaders. It’s really difficult to let go of old stereotypes and accept the fact that we are smart, financially independent and making a big difference in anything we choose to do. I am christening 2010 “The Year Woman Soar Like Never Before”. I know our buying power will be the wind beneath our wings. No longer will we have to follow – it’s our turn to lead.

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Shrinking Labor Force Keeps U.S. Unemployment Rate From Rising Above 10%

January 8, 2010

By Bob Willis and Courtney Schlisserman Jan. 8 (Bloomberg) — An exodus of discouraged workers from the job market kept the U.S. unemployment rate from climbing above 10 percent in December, economists said. Had the labor force not decreased by 661,000 last month, the jobless rate would have been 10.4 percent, say economists including David Rosenberg at Gluskin Sheff & Associates in Toronto and Harm Bandholz at UniCredit Research in New York. “The actual unemployment rate is higher than shown by the official numbers,” Bandholz said. About 1.7 million Americans opted out of the workforce from July through December, representing a 1.1 percent drop that marks the biggest six-month decrease since 1961, figures from the Labor Department showed today in Washington. The share of the population in the labor force last month fell to the lowest level in 24 years. December’s 10 percent unemployment rate was unchanged from the previous month, matching the median forecast of economists surveyed by Bloomberg News. It was shy of the 26-year high of 10.1 percent reached two months earlier. The so-called underemployment rate — which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking — rose to 17.3 percent in December from 17.2 percent, today’s report showed. The number of discouraged workers, those not looking for work because they believe none is available, climbed to 929,000 last month, the most since records began in 1994. Length of Unemployment The backdrop to the disillusionment is that it’s taking longer and longer to find work, economists said. Workers were unemployed for 29.1 weeks on average last month, the most since records began in 1948. “Longer-term unemployment is one of the biggest problems,” said Bandholz. “Payroll declines will come to a halt in the next couple of months, but the people who are unemployed are having problems getting a job and it’s getting tougher by the month.” The U.S. unexpectedly lost another 85,000 jobs in December after revised figures showed payrolls climbed by 4,000 the month before, today’s report from the Labor Department showed. The November gain was the first since the economic slump began in December 2007. “Workers seem to be particularly discouraged by this recession,” said Chris Rupkey , chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. Participation Rate The participation rate , or the share of the population in the labor force, fell to 64.6 percent in December, the lowest level since 1985, from 64.9 percent. The labor force will probably grow this year as the economy continues to expand and Americans believe jobs will be easier to get. That will mean the unemployment rate will head higher because there won’t be enough jobs available to satisfy the demand for work. “The exodus from the labor force can’t contain the unemployment rate indefinitely,” said Ryan Sweet , a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “We expect unemployment to resume rising over the next few months, peaking near 10.5 percent in the third quarter.” Federal Reserve policy makers, while noting stabilization in the labor market, have expressed concern about unemployment and poor job prospects. That’s one reason policy makers will keep the benchmark interest rate near zero longer than most anticipate, said John Ryding . Fed ‘On Hold’ “We continue to believe that the Fed will leave monetary policy on hold throughout 2010 in light of the high level of un- and under-utilized labor resources,” Ryding, chief economist at RDQ Economics in New York, said in a note to clients. The median forecast of economists surveyed by Bloomberg News last month projected the first rate increase would come in the third quarter of this year. Treasury two-year notes today gained the most in three weeks following the worse-than-expected payroll numbers. The notes’ yields dropped below 1 percent. President Barack Obama on Dec. 8 proposed additional spending on the nation’s transportation system, tax credits to spur hiring by small businesses and incentives to make homes more energy efficient in a second round of efforts to cut the jobless rate. “We’re going to have to work harder to create jobs.” U.S. Labor Secretary Hilda Solis said in an interview today on Bloomberg Television. “This is a very stubborn recession.” To contact the reporters on this story: Bob Willis in Washington bwillis@bloomberg.net ; Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

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The Increasing Demands of Distressed Debt Investments

December 25, 2009

Everyday, the population of distressed debt investment keeps on increasing, and in near future will double its number. Being an investor and looking for foreclosure properties are hard because of the competition with other investor who …

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Chip Conley: JdV > GDP? Sarkozy Stimulates Sarcasm

September 29, 2009

As the world’s leaders descended on the burg of Pitts, that rascal Sarkozy handed out a French-made pair of 3-D glasses. Upon the one-year anniversary of the financial meltdown, the French president suggested that we’ve been evaluating the financial world with one eye closed and have been distracted by the “cult of statistics” that traditional economists feed us. Now that his Nobel-winning duet of economists (Joseph Stiglitz and Amartya Sen) have delivered their report that suggests France adopt a “Joie de Vivre” index, this conservative president has started sounding like a leftist or at least someone who spends a little too much time reading Sartre in Left Bank cafes. And, of course, the conventionally wise around the world chortled about how naïve this diminutive president could be since happiness and joie de vivre aren’t really measurable. In fact, for most economists, if you can’t measure something accurately, it ain’t real. Maybe that’s why economists are such a glum bunch. What is the recipe for success for a country? We’ve been worshiping at the altar of Gross Domestic Product for nearly a half-century, yet one observer recently suggested, “If we all put bars on our windows and buy face masks to deal with pollution, guess what? GDP goes up. That doesn’t mean we are better off.” In 1968, Robert Kennedy suggested that GDP “counts napalm and nuclear warheads” and, yet, here we are forty years later, just starting to ask the blasphemous question of “what is real?” Economist Joseph Stiglitz suggests, “What we measure affects what we do. If we have the wrong measures, we will strive for the wrong things.” There was a time when having a chicken in every pot and two cars in every garage was our real measurement of success in this country, but maybe it’s become our measure of excess in the past few decades. First, Bhutan…now, France. Are we on the verge of a great revolution in which political leaders redefine what’s real and what’s measurable? Forty national governments are studying or adapting Bhutan’s Gross National Happiness Index to imagine how they could create the conditions for their people to have greater well-being. As Sarkozy says, “If leisure has no accounting value because it’s essentially full of non-market activities like sport or culture, we put productivity above human fulfillment.” Take it from a Frenchman, they know their leisure! Well, I know something about Joie de Vivre, myself, as it’s the impractical name I chose for my company twenty-three years ago. Our mission statement (“creating opportunities to celebrate the joy of life”) sounds straight out of the French socialist playbook, yet this mantra has allowed us to grow into the country’s second largest boutique hotel company. Miraculously, making employees and customers happy creates beaucoup bucks for our hotel investors (although less so in times like these). And, we measure all kinds of things that our traditional hotelier counterparts don’t typically fathom: our employees’ sense of meaning and connection in the workplace, the number of employees who take sabbaticals (all our salaried employees get a one-month paid sabbatical every three years), our customers’ sense of feeling they are in their perfect habitat in our hotels, and the amount of money we raise for grassroots community organizations. If you were president, what key metrics would you try to evaluate to determine whether you were leading a successful country? Here’s some of my suggestions, but I look forward to reading yours: • % of High School Grads who go to College • % of the Population that volunteer their time or donate financially to non-profits • Commute time (obviously, with higher rankings for shorter commutes) • Legal immigration demand (this has historically been an important measure of America’s greatness) • Capacity for innovation (either through measuring patents or the like) • Of Hours Worked/GDP (our productivity is at the expense of our leisure) Chip Conley is the Founder and CEO of Joie de Vivre Hospitality and the author of PEAK: How Great Companies Get Their Mojo From Maslow.

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Smoking, Fatty Diet Cuts 10 Years Off Men’s Lives After Age 50, Study Says

September 19, 2009

By Marthe Fourcade Sept. 18 (Bloomberg) — Men who smoke and let fat clog their arteries die a decade earlier than those who don’t. Scientists looking for a connection between life expectancy and cardiovascular risk factors combed through the Whitehall study , a survey of 19,019 male civil servants that started in London in the late 1960s. They found that those who had high blood pressure, high cholesterol and smoked in middle age died about 10 years earlier than the others after reaching age 50. The findings are published in the latest edition of the British Medical Journal . The reduction in life expectancy was even greater when the researchers factored in body mass index and diabetes. “Our results provide support for the public health policies aimed at achieving modest changes in major risk factors throughout the population to achieve improvements in life expectancy,” wrote the authors, led by Robert Clarke of the University of Oxford. In the study, the researchers found smoking shortened life by about six years and married men tended to live about two years longer. To contact the reporter on this story: Marthe Fourcade at mfourcade@bloomberg.net

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Scailex to Buy Hutchison’s Partner Communications Stake for $1.4 Billion

August 12, 2009

By Tal Barak Harif and Mark Lee Aug. 12 (Bloomberg) — Scailex Corp. said it agreed to pay 5.29 billion shekels ($1.4 billion) to buy the 51 percent stake in Partner Communications Ltd. held by billionaire Li Ka- shing ’s Hutchison Telecommunications International Ltd. Scailex, the Israeli investment company owned by Ilan Ben Dov , will pay 67 shekels per share, the company said in a statement. Partner, Israel’s second-biggest provider of mobile- phone services, fell 1.5 percent to close at 67 shekels in Tel Aviv trading yesterday. The sale will allow Li, 81, to increase investments in faster-growing phone markets in Southeast Asia and exit a country where wireless subscriptions exceed the population. Hutchison Telecom shares have outperformed Hong Kong’s benchmark amid speculation shareholders will get a payout from proceeds of the possible Israel sale. “After Israel goes, their focus will shift towards Indonesia, Vietnam and Sri Lanka,” Lisa Soh , who rates Hutchison Telecom shares “underperform” at Macquarie Group Ltd. in Hong Kong, said before the announcement. “Assuming a transaction is concluded, expectations would be for the company to pay a special dividend.” Hutchison Telecom, whose shares were suspended today, fell 1.5 percent to close at HK$1.98 in Hong Kong trading yesterday, trimming the stock’s gain this year to 69 percent. The benchmark Hang Seng Index has advanced 46 percent. Partner, which offers mobile-phone services under the Orange brand in Israel, accounted for 56 percent of Hutchison Telecom’s sales of HK$23.73 billion ($3.2 billion) last year, according to the parent’s earnings announcement in March. For Related News and Information: To contact the reporters on this story: Tal Barak Harif at tbarak@bloomberg.net Mark Lee in Hong Kong at wlee37@bloomberg.net

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Russian Economy Contracted by Record 10.9% Last Quarter as Slump Deepened

August 11, 2009

By Paul Abelsky Aug. 11 (Bloomberg) — Russia’s economy contracted the most on record last quarter as rising unemployment sapped consumer demand, bank lending stalled and the government was slow to respond with support measures. Gross domestic product contracted an annual 10.9 percent in the second quarter, the Federal Statistics Service said in an e- mailed statement today, citing preliminary data. The median estimate in a Bloomberg survey of seven economists was for output to shrink 10.2 percent. GDP expanded 7.5 percent from the previous quarter. The service’s data go as far back as 1995. Russia’s economic decline is worsening after output contracted 9.8 percent in the first quarter, ending 10 years of expansion that averaged close to 7 percent. The worst global financial crisis since the Great Depression undermined demand for Russia’s oil, natural gas and metals. The country’s industrial production plunged as companies depleted stocks and struggled to raise funds during the credit crunch. “We can’t develop like this any longer,” President Dmitry Medvedev said yesterday during a meeting with political party leaders in the Black Sea resort of Sochi. “It’s a dead end. And the crisis has placed us in a situation where we will have to make decisions on changing the structure of the economy.” Russia “crumbled” after commodity prices collapsed, Medvedev said. Energy, including oil and natural gas, accounted for 68.8 percent of exports to the Baltic states and countries outside the former Soviet Union in the first six months of the year, Russia’s Federal Customs Service said last week. Urals crude oil, Russia’s chief export earner, averaged $61.03 a barrel during the last quarter after reaching a record $142.5 in July 2008. Stocks, Oil Russian stock market moves are showing record correlations with oil futures traded in New York, based on daily changes over the past 90 days, according to data compiled by Bloomberg. The 30-stock Micex index , which is mostly made up of energy companies, slipped into a bear market in June after falling more than 20 percent from its high on June 1, on concern a prolonged recession will cut demand for fuel. It gained 8.4 percent in July and is up 79 percent this year. The world’s biggest energy exporter may run a budget deficit as wide as 9.4 percent of GDP this year, the country’s first shortfall in a decade, as plummeting demand for commodities threatens to cut revenue by a third, according to the Finance Ministry. Russia has earmarked 2.51 trillion rubles ($79 billion) in spending to battle the slump, including funding designated for carmakers, agriculture and construction. The “anti-crisis” program was signed into law by Putin on June 19. ‘Might Fail’ “The planned fiscal relaxation might fail to stimulate private consumption in the face of significant uncertainty about future income,” the International Monetary Fund said in a report published on Aug. 7. “Absent a more determined policy intervention, there is a risk that banks will continue to struggle to adjust balance sheets, stifling credit expansion and impeding a recovery.” Declining inventories accounted for 80 percent of the drop in GDP during the first three months, according to the Economy Ministry, which predicts output may shrink as much as 8.5 percent this year. Russia’s inflation rate rose in July for the first time in four months, advancing to 12 percent from 11.9 percent in June. The trade surplus widened in June to $9.03 billion from $8.8 billion in the previous month. The economy may start to show signs of recovery in the third quarter this year, Deputy Economy Minister Andrei Klepach said on July 23. Central Bank Russia’s economy will need between four years and five years to match last year’s pace of growth, Finance Minister Alexei Kudrin said yesterday. GDP in 2008 grew at the slowest pace since 2002, expanding 5.6 percent compared with 8.1 percent a year earlier. The IMF forecasts a 6.5 percent economic contraction for Russia this year, followed by growth of 1.5 percent in 2010. The central bank’s five interest-rate cuts since April 24 have failed to spur lending as banks hold back on concern borrowers can’t repay loans. Lending to consumers dropped 1.1 percent in June for the fifth consecutive monthly decline and banks shrank their corporate loan books by 1.2 percent, according to central bank data. By the end of 2009, 17.4 percent of the population, or 24.6 million people, will be living beneath the subsistence level of $185 per month, almost 5 percent more than before the crisis, the World Bank said in a report released in June. Unemployment may exceed 13 percent by the end of the year, compared with 8.3 percent in June, according to the World Bank. Rising numbers of jobless and falling wages will cut the country’s nascent middle class by 10 percent, or 6.2 million people, to about 51.2 percent of the population, the Washington- based lender said. Household consumption, “the main source of growth in recent years,” is “collapsing,” it added. To contact the reporter on this story: Paul Abelsky in St. Petersburg at pabelsky@bloomberg.net .

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Man Dies of Plague in China, Town Placed Under Quarantine as 11 Infected

August 2, 2009

By Bloomberg News Aug. 2 (Bloomberg) — A Chinese town and its surrounding areas were quarantined after a man died of pneumonic plague and 11 others were infected, the local health authority said

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Man Dies of Plague in China, Town Placed Under Quarantine as 11 Infected

August 2, 2009

By Bloomberg News Aug. 2 (Bloomberg) — A Chinese town and its surrounding areas were quarantined after a man died of pneumonic plague and 11 others were infected, the local health authority said. A 32-year-old herdsman died in Ziketan in Qinghai province, the provincial health department said in a statement dated yesterday. The other 11 infected people are mostly relatives of the deceased and they are in “stable condition” in a designated hospital, it said.

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Doctors Should Tailor Swine Flu Treatment to Death Rates by Age Group

July 27, 2009

By Carey Sargent July 27 (Bloomberg) — Governments without sufficient stockpiles of antiviral drugs should prioritize treatment for swine flu based on age-specific fatality rates , a study said. Giving antivirals to the elderly should be a priority if the current outbreak follows the patterns of the 1969-1970 flu pandemic in Italy, where deaths occurred primarily among those older than 65, research published in the BioMed Central Infectious Diseases medical journal found. Treatment of younger adults should be the focus if the flu is more like the 1918-1919 pandemic in Copenhagen, the study said.

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Max Keiser: Should Goldman Sachs be Prosecuted for Human Rights Abuses? (VIDEO)

July 25, 2009

On my show this week ON THE EDGE I ask the question, should Goldman Sachs be prosecuted for human rights violations? I have been in touch with famed human rights attorney Geoffrey Robertson who has agreed to discuss this hypothetical case on my show. My initial thought is that Goldman Sachs was guided in their human rights abuses just like Augusto Pinochet was during the time he was conducting deadly neo-liberal experiments on the population in Chile.

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