Economic Revival Shown Less Robust
http://online.wsj.com/article/SB125906901646162279.html?mod=djemITP#articleTabs%3Darticle
A puzzle is how tax receipts can decline at such a greater rate than GDP? Some variance might make sense - some earned income is being replaced with unemployment benefits; yet, it appears profits are more robust than revenues (which would seem to suggest a lower GDP figure).
Another aspect of the article that was missing was an examination and consideration of the basic production equation (production = (cost of) labor + capital + raw materials).
Obviously, we know the cost of labor in the US is going up (with a direct cost and union risk factor that probably doubles it from what it is on average today). This is clearly anti-job-creation. (The estimated total cost of labor is probably running today at a factor of 3-4 times the gross pay of the worker.
As such the above production equation would suggest that the other inputs have to be adjusted - since the end product cost can't vary (much to the chagrin of the UAW and the other unions).
Also, since capital isn't captive to America, it is going to seek its highest return (beta and alpha/risk adjusted, etc.). In such a situation, we see that capital is either seeking a return commensurate with corporate profits or a risk-free return from government securities. (Government securities of course ignoring or questionably pricing in the inflation risk - except that people are apparently seeking shorter maturities and buying gold).
Based on the above and the policies of the government, the picture on the job front wouldn't appear to be particularly good for Americans looking for jobs.
Showing posts with label jobs. Show all posts
Showing posts with label jobs. Show all posts
Wednesday, November 25, 2009
Tuesday, November 24, 2009
A New Level of the Unimaginable
Government Deficits and Private Growth
http://online.wsj.com/article/SB20001424052748703932904574511243712388988.html?mod=djemITP#articleTabs%3Darticle
We really can't imagine that the US economy won't revive, but...
It's rather like loading up a camel - for a while, it works. When the camel decides enough is enough, the entire load has to be removed. To wit, the entire deficit and transfer of wealth from producers to non-producers.
It's a new level of the unimaginable. But, is it real? Everyone is making bets. Mine would be it's highly likely - but, who knows?
The Business-Labor Divide
http://online.wsj.com/article/SB10001424052748704533904574543662226907336.html#articleTabs%3Darticle
Stern's comment about unions distributing wealth is exactly the problem. It doesn't distribute wealth based on productivity or as a reward for doing one's work well; rather, it ties it to things like longevity/seniority (see teacher's unions and the UAW, etc.).
Also, the union has no ability to evaluate whether the company can stay competitive over time. It wants immediate and long term benefits and rewards.
Thus, we can't ignore what has happened with our domestic car companies and exculpate the unions. Rather, we should be looking in horror at what happened. (I'd jail the union leaders, but that might be going a bit far.)
However, the world sets a price for labor (and this price includes all of the benefits and social charges labor or the employer has to pay for). This has gotten out of hand in America as the individual worker isn't making these decisions (it's his/her union and the government - both at a state and national level).
Why one might ask are there such high salaries paid to certain people and not to others (as union leader Stern says). Well, it might be that the productivity and value of the work performed that generates the ability to pay those salaries is exactly what happens in a world of supply and demand.
Likewise, we've denied society the ability to create and employ people at more menial salaries because we think those salaries are too low, the benefits too sparse. So, either the jobs go undone or they are done by people who drop out of the productive salary-paying economy and do the jobs themselves (the labor conundrum).
The Economy and Finance
http://online.wsj.com/article/SB10001424052748704204304574543920660621900.html#articleTabs%3Darticle
What's missing from this discussion - although closest in what's said by Amex - with a lens of increasing and supporting employment as a focus of all policy decisions - is the issue of individual employee choice on the benefits they want to pay for.
In other words, too much is taken from the average employee to pay for things that government decides are important - but which, the current economic situation doesn't support.
As a result, it may cost an employer $400 for every $100 in gross employee salary; and, the employee will only net $65 or 70 (and some only $45).
With that type of allocation, the government has taken the decision-making away from the employee - with a benevolent intent and high degree of social consciousness - but with an ultimately destructive impact on employment.
Since this overreaching on the part of government was excluded from anything presented, one can't have a very positive view of the jobs picture. Instead, the government and Fed will be pushing on the job string as they have been with easy money. And, as indicated by the price of gold and commodities and the unemployment rate, it looks like investors see inflation down the road. (And, no change on the job front.)
http://online.wsj.com/article/SB20001424052748703932904574511243712388988.html?mod=djemITP#articleTabs%3Darticle
We really can't imagine that the US economy won't revive, but...
It's rather like loading up a camel - for a while, it works. When the camel decides enough is enough, the entire load has to be removed. To wit, the entire deficit and transfer of wealth from producers to non-producers.
It's a new level of the unimaginable. But, is it real? Everyone is making bets. Mine would be it's highly likely - but, who knows?
The Business-Labor Divide
http://online.wsj.com/article/SB10001424052748704533904574543662226907336.html#articleTabs%3Darticle
Stern's comment about unions distributing wealth is exactly the problem. It doesn't distribute wealth based on productivity or as a reward for doing one's work well; rather, it ties it to things like longevity/seniority (see teacher's unions and the UAW, etc.).
Also, the union has no ability to evaluate whether the company can stay competitive over time. It wants immediate and long term benefits and rewards.
Thus, we can't ignore what has happened with our domestic car companies and exculpate the unions. Rather, we should be looking in horror at what happened. (I'd jail the union leaders, but that might be going a bit far.)
However, the world sets a price for labor (and this price includes all of the benefits and social charges labor or the employer has to pay for). This has gotten out of hand in America as the individual worker isn't making these decisions (it's his/her union and the government - both at a state and national level).
Why one might ask are there such high salaries paid to certain people and not to others (as union leader Stern says). Well, it might be that the productivity and value of the work performed that generates the ability to pay those salaries is exactly what happens in a world of supply and demand.
Likewise, we've denied society the ability to create and employ people at more menial salaries because we think those salaries are too low, the benefits too sparse. So, either the jobs go undone or they are done by people who drop out of the productive salary-paying economy and do the jobs themselves (the labor conundrum).
The Economy and Finance
http://online.wsj.com/article/SB10001424052748704204304574543920660621900.html#articleTabs%3Darticle
What's missing from this discussion - although closest in what's said by Amex - with a lens of increasing and supporting employment as a focus of all policy decisions - is the issue of individual employee choice on the benefits they want to pay for.
In other words, too much is taken from the average employee to pay for things that government decides are important - but which, the current economic situation doesn't support.
As a result, it may cost an employer $400 for every $100 in gross employee salary; and, the employee will only net $65 or 70 (and some only $45).
With that type of allocation, the government has taken the decision-making away from the employee - with a benevolent intent and high degree of social consciousness - but with an ultimately destructive impact on employment.
Since this overreaching on the part of government was excluded from anything presented, one can't have a very positive view of the jobs picture. Instead, the government and Fed will be pushing on the job string as they have been with easy money. And, as indicated by the price of gold and commodities and the unemployment rate, it looks like investors see inflation down the road. (And, no change on the job front.)
Friday, November 6, 2009
Useless Canards and the Jobless Recovery
Facing Facts on the 'Jobless' Recovery
http://online.wsj.com/article/SB125746080945231961.html?mod=djemITP#articleTabs%3Darticle
• Some say that Jobless recoveries are the residue of the expansion of globalization. That each recovery is worse than the last one. That endless mergers and labor arbitrage will leave the US with a few big transnational corporations owned largely by foreign investors.
But why does this appear to be happening? Are we really looking in the right places?
Almost everyone receiving them likes government services that come at what appears to be little or no cost. No one really contemplates where this generosity is coming from.
Americans need to realize that there is NO FREE LUNCH.
Retirement at age 50 costs something. Almost free and limitless healthcare costs something.
The bottom line is all this generosity (which is tax or borrowing supported) is costing the US economic vitality and jobs.
We are hurting ourselves and refuse to see it.
• Some people even go so far as to cough up the old canard that no more wealth can be created so dividing up what exists is all that can be done.
One look at the wealth being created in China should dispel this canard for good. So should one look at companies like Google – or, even turning on the internet or getting in your car.
Yes, certain things aren’t around anymore; but, in the aggregate, the total amount of wealth and the better quality of life produced by the creative destruction of capitalism is growing and can grow – unless, that is, capital and the ability of capital to create wealth is compromised.
And, this compromising of capital’s ability to create wealth is exactly what has been happening in America – and, the seat of this destruction sits in Congress and the White House, with unions and with government.
http://online.wsj.com/article/SB125746080945231961.html?mod=djemITP#articleTabs%3Darticle
• Some say that Jobless recoveries are the residue of the expansion of globalization. That each recovery is worse than the last one. That endless mergers and labor arbitrage will leave the US with a few big transnational corporations owned largely by foreign investors.
But why does this appear to be happening? Are we really looking in the right places?
Almost everyone receiving them likes government services that come at what appears to be little or no cost. No one really contemplates where this generosity is coming from.
Americans need to realize that there is NO FREE LUNCH.
Retirement at age 50 costs something. Almost free and limitless healthcare costs something.
The bottom line is all this generosity (which is tax or borrowing supported) is costing the US economic vitality and jobs.
We are hurting ourselves and refuse to see it.
• Some people even go so far as to cough up the old canard that no more wealth can be created so dividing up what exists is all that can be done.
One look at the wealth being created in China should dispel this canard for good. So should one look at companies like Google – or, even turning on the internet or getting in your car.
Yes, certain things aren’t around anymore; but, in the aggregate, the total amount of wealth and the better quality of life produced by the creative destruction of capitalism is growing and can grow – unless, that is, capital and the ability of capital to create wealth is compromised.
And, this compromising of capital’s ability to create wealth is exactly what has been happening in America – and, the seat of this destruction sits in Congress and the White House, with unions and with government.
Tuesday, November 3, 2009
The Inverse of the Rule of 72 - Obama Style
Heard of the Rule of 72 for savers? It also works in reverse and applies to what is happening to the US economy.
It has consequences which are being ignored.
Sadly, along with all this government spending and entitlement is a shrinking of the real economy - and, in particular, the very jobs the economy wants to retain for the less skilled and less educated.
As the society adds costs to any employment (and we've seen and are seeing this in spades), the less valuable or affordable jobs are dropped. But, somehow the administration is oblivious.
If they spent some time in Europe, they'd get the picture very quickly. The flip side is lots of very low paid jobs and jobs with very little purchasing power.
Thus, it pays to watch the percent of GDP the government plans to take and is taking.
And like the inverse of the rule of 72 with investing, the less principal you leave each year, the lower the growth rate can be - no matter what the intrinsic rate of return.
Thus, take two economies growing at the same rate (say 6%). If one third of the growth is siphoned off into consumption in Economy 1, then Economy 1 will have only 2/3rd of the growth left for reinvestment (say 4%). With the rule of 72, this would 18 years to double. If the other economy left all 6% to reinvest, it would double in 12 years.
Now, take a situation where it's not just the growth in the economy that is taxed away but the equity built up (read: unionization, etc.), then the real growth will be even less.
So, as the US is heading hell-bent-for-leather down the road of expanded entitlements, it is also eating into the meat of the economy and it is hard to believe this won't have the same impact on the economy that exactly the same types of policies had on GM, where the UAW took the meat out of the company year-in, year-out.
It has consequences which are being ignored.
Sadly, along with all this government spending and entitlement is a shrinking of the real economy - and, in particular, the very jobs the economy wants to retain for the less skilled and less educated.
As the society adds costs to any employment (and we've seen and are seeing this in spades), the less valuable or affordable jobs are dropped. But, somehow the administration is oblivious.
If they spent some time in Europe, they'd get the picture very quickly. The flip side is lots of very low paid jobs and jobs with very little purchasing power.
Thus, it pays to watch the percent of GDP the government plans to take and is taking.
And like the inverse of the rule of 72 with investing, the less principal you leave each year, the lower the growth rate can be - no matter what the intrinsic rate of return.
Thus, take two economies growing at the same rate (say 6%). If one third of the growth is siphoned off into consumption in Economy 1, then Economy 1 will have only 2/3rd of the growth left for reinvestment (say 4%). With the rule of 72, this would 18 years to double. If the other economy left all 6% to reinvest, it would double in 12 years.
Now, take a situation where it's not just the growth in the economy that is taxed away but the equity built up (read: unionization, etc.), then the real growth will be even less.
So, as the US is heading hell-bent-for-leather down the road of expanded entitlements, it is also eating into the meat of the economy and it is hard to believe this won't have the same impact on the economy that exactly the same types of policies had on GM, where the UAW took the meat out of the company year-in, year-out.
Monday, November 2, 2009
Obama's German Union Quandry
Obama starts out the month of November wondering why the Germans can have both an export economy and be heavily unionized.
Does anyone need to wonder both the direction and the non-fate of America? As written about before, Obama has a view of an American nirvanaland that has U-6 unemployment at 17% and no reason to see it shrink. Sadly, just the opposite.
Unions, like Obama, think there is an endless money train they can tap for benefits. But, what is the reality?
Let's see: GM and Chrysler are easy - the companies had to be refunded by taxpayers; investors got wiped out; large parts of the company (and jobs) were lost; young workers are getting screwed to protect and provide additional benefits to older workers.
In terms of public employees - the State of CA is broke; and, in Philadelphia, last week it was reported on Bloomberg that the police/fire unions wanted 12% wage increases for each of the next two years. Meanwhile their neighbors don't have jobs.
The unions don't get it. There is a world outside the borders of the US. Other people are actually struggling for jobs and they are educated and seeking more education; taxes are lower and benefits are lower.
If the GM - UAW experience is the model that Obama and the unions seek, then it's no wonder that companies are holding onto as much cash as they can. They clearly don't want to create jobs in America where the price of labor (particularly its benefits) and taxes will make it uncompetitive to produce (exactly as with GM, where 5 car brands are now down to 2 - if that).
As the unions get the last blood out of the economy, they think they are winning. However, with the 17% U-6 unemployment rate and no one even suggesting that there will be a strong rebound in jobs, it would seem reasonable to consider maybe something is wrong? And, I'd suggest the unions are high on the list.
It may appear as though business got greedy by wanting to have products that could compete on price and quality - and maybe that's unfair.
After all, GM couldn't compete that way and so it closed Oldsmobile, Pontiac, most of Buick, etc. They were forced to try to compete and continue with 1930's unions and union labor practices. What did it get them? A wipeout of their investors and a loss of jobs and capital plant and equipment. I'd blame that failure directly on the UAW.
And, the added benefits the government is going to be mandating all sound nice, but with higher taxes it means that for every 300 dollars business could have paid a worker, they'll only have maybe 75 dollars left after allowing for all the extra costs (recall that up and down the business pipeline, money that could go to labor and labor productivity and jobs is being siphoned off for government benefits to those not working).
Does anyone need to wonder both the direction and the non-fate of America? As written about before, Obama has a view of an American nirvanaland that has U-6 unemployment at 17% and no reason to see it shrink. Sadly, just the opposite.
Unions, like Obama, think there is an endless money train they can tap for benefits. But, what is the reality?
Let's see: GM and Chrysler are easy - the companies had to be refunded by taxpayers; investors got wiped out; large parts of the company (and jobs) were lost; young workers are getting screwed to protect and provide additional benefits to older workers.
In terms of public employees - the State of CA is broke; and, in Philadelphia, last week it was reported on Bloomberg that the police/fire unions wanted 12% wage increases for each of the next two years. Meanwhile their neighbors don't have jobs.
The unions don't get it. There is a world outside the borders of the US. Other people are actually struggling for jobs and they are educated and seeking more education; taxes are lower and benefits are lower.
If the GM - UAW experience is the model that Obama and the unions seek, then it's no wonder that companies are holding onto as much cash as they can. They clearly don't want to create jobs in America where the price of labor (particularly its benefits) and taxes will make it uncompetitive to produce (exactly as with GM, where 5 car brands are now down to 2 - if that).
As the unions get the last blood out of the economy, they think they are winning. However, with the 17% U-6 unemployment rate and no one even suggesting that there will be a strong rebound in jobs, it would seem reasonable to consider maybe something is wrong? And, I'd suggest the unions are high on the list.
It may appear as though business got greedy by wanting to have products that could compete on price and quality - and maybe that's unfair.
After all, GM couldn't compete that way and so it closed Oldsmobile, Pontiac, most of Buick, etc. They were forced to try to compete and continue with 1930's unions and union labor practices. What did it get them? A wipeout of their investors and a loss of jobs and capital plant and equipment. I'd blame that failure directly on the UAW.
And, the added benefits the government is going to be mandating all sound nice, but with higher taxes it means that for every 300 dollars business could have paid a worker, they'll only have maybe 75 dollars left after allowing for all the extra costs (recall that up and down the business pipeline, money that could go to labor and labor productivity and jobs is being siphoned off for government benefits to those not working).
Pelosi, the Cheshire Cat
The Worst Bill Ever
Epic new spending and taxes, pricier insurance, rationed care, dishonest accounting: The Pelosi health bill has it all.
http://online.wsj.com/article/SB10001424052748703399204574505423751140690.html#articleTabs%3Dcomments
Pelosiland is like the world of the Cheshire Cat - a world of make believe - except of course for unemployment.
Clearly Congress was oblivious to the housing bubble because they fought so hard to turn a blind eye to Fannie and Freddie's role in all of it, etc.
And, from the reports on companies listing (or, one should say "not" listing) on American stock exchanges, and of course the well-noted planned high taxes on business owners, it just perplexes one where the Democrats expect jobs to come from?
Maybe they are confident the US will be happy with the French model of overstaffed government-owned enterprises? And, maybe their actions with respect to GM and Chrysler give a clear indication of this - although Obama foreswears the opposite? Are these really puzzles?
It sure feels good to have low or no cost healthcare! Just like retirement at age 50, etc.
I know lots of people who retired in the last ten years who are beginning to have concerns about the next 20 to 40.
Even though consumer sentiment is weak, my guess would be that most people are like members of the UAW - they are in for the immediate grabbing of benefits with apparent total ignorance of the long-term impact of such taking.
Maybe money can be endlessly bestowed on the US economy by the Federal Reserve and foreign central banks trying to preserve the relative value of their currency, but nothing goes on forever.
There was a rude wakeup call to housing prices not having only one direction. But that was only part of the economy. Now, we're dealing with the dollar itself. Can we say - let's hope not Zimbabwe.
Epic new spending and taxes, pricier insurance, rationed care, dishonest accounting: The Pelosi health bill has it all.
http://online.wsj.com/article/SB10001424052748703399204574505423751140690.html#articleTabs%3Dcomments
Pelosiland is like the world of the Cheshire Cat - a world of make believe - except of course for unemployment.
Clearly Congress was oblivious to the housing bubble because they fought so hard to turn a blind eye to Fannie and Freddie's role in all of it, etc.
And, from the reports on companies listing (or, one should say "not" listing) on American stock exchanges, and of course the well-noted planned high taxes on business owners, it just perplexes one where the Democrats expect jobs to come from?
Maybe they are confident the US will be happy with the French model of overstaffed government-owned enterprises? And, maybe their actions with respect to GM and Chrysler give a clear indication of this - although Obama foreswears the opposite? Are these really puzzles?
It sure feels good to have low or no cost healthcare! Just like retirement at age 50, etc.
I know lots of people who retired in the last ten years who are beginning to have concerns about the next 20 to 40.
Even though consumer sentiment is weak, my guess would be that most people are like members of the UAW - they are in for the immediate grabbing of benefits with apparent total ignorance of the long-term impact of such taking.
Maybe money can be endlessly bestowed on the US economy by the Federal Reserve and foreign central banks trying to preserve the relative value of their currency, but nothing goes on forever.
There was a rude wakeup call to housing prices not having only one direction. But that was only part of the economy. Now, we're dealing with the dollar itself. Can we say - let's hope not Zimbabwe.
A Tale of Two Families
* NOVEMBER 2, 2009
Jittery Companies Stash Cash
After Crisis, Big Businesses Hoard Most Bucks in 40 Years; Google's $22 Billion Cache
http://online.wsj.com/article/SB125712303877521763.html?mod=djemITP#articleTabs%3Dcomments
With respect to companies not investing right now, they are not the culprit you portend, it is government and government policies that are a clear cause of these problems (along with unions).
Think of two families with similar incomes and similar job prospects.
When the economy turns down, one cuts back and builds resources (read: companies).
The other family not only continues its previous level of spending on anything and everything, but ups its consumption of non-essentials and takes on debt (read: business).
Now, which of these families do you think has a better future?
Sadly, the second spendthrift family has the right to tax the savings of the first family. So, one can only image that the first family is thinking of moving out of their grasp.
Jittery Companies Stash Cash
After Crisis, Big Businesses Hoard Most Bucks in 40 Years; Google's $22 Billion Cache
http://online.wsj.com/article/SB125712303877521763.html?mod=djemITP#articleTabs%3Dcomments
With respect to companies not investing right now, they are not the culprit you portend, it is government and government policies that are a clear cause of these problems (along with unions).
Think of two families with similar incomes and similar job prospects.
When the economy turns down, one cuts back and builds resources (read: companies).
The other family not only continues its previous level of spending on anything and everything, but ups its consumption of non-essentials and takes on debt (read: business).
Now, which of these families do you think has a better future?
Sadly, the second spendthrift family has the right to tax the savings of the first family. So, one can only image that the first family is thinking of moving out of their grasp.
Subscribe to:
Posts (Atom)
