Category: employment

New York State Unemployment Insurance Goes Broke

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They are now cutting checks on emergency loans from the federal government.

We will see more of this.

Note that New York state has among the most meager unemployment benefits in the region.

Additionally, the insurance rates charged, and the salary based used, are among the lowest in the region too, which means that the finances are precarious in the best of times.

With Democrats holding both houses now, this needs to change, and income taxes on higher earners should go up too.

And while we are at it, a Texas Style redistricting, since the NY state ‘Phants gerrymandered themselves into a State Senate majority for the past 30 or so years. (Seeing as how Dems hold a 26-3 lead in the House of Representatives, that can slide until the next census)

My Heart Bleeds Borscht

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It appears that no one wants to hire people whose last job was as one of Bush’s Evil Minions™:

As President-elect Barack Obama’s team transitions into the federal government tomorrow, President Bush’s political appointees will be locked out, and in these tough economic times many of them are scrambling to find new jobs. High-ranking White House loyalists have deluged Washington headhunters with pleas for jobs. Corporations and nonprofit organizations have stopped hiring. With the GOP out of power, jobs on Capitol Hill are scant and K Street lobbying firms have trimmed their golden parachutes.

So this is the new reality: Instead of boasting to friends and colleagues of new jobs in goodbye e-mails, many longtime Bush aides have offered home phone numbers and Gmail and Yahoo e-mail addresses as their new contacts.

“For Republicans, the inn is full,” lamented veteran GOP operative Ron Kaufman, a close White House adviser to former president George H.W. Bush and an executive at Dutko Worldwide. “You have lots of folks in the House and Senate on the streets and 3,000 administration appointees on the streets at a time when the job market is shrinking anyways. It’s just not a fun time.”

You know, Republicans claim to hate the federal government and DC culture. So just go home.

This has been your daily dose of Schadenfreude.

Economics Update

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Well, weekly first time jobless claims at rose to 524,000, and the 4 week moving average was down 8000 to 518,500, and continued claims fell slightly, from 4.6 to 4.5 million. (Scary graph pr0n on right)

I’m not sure how much of this is being effected by the short weeks of Christmas and new years, but it should sort out in the next few weeks.

Not unsurprisingly, the Federal Reserve’s Beige Book, a collection of anecdotal economic information reported by the various Federal Reserve banks, was really quote grim.

Unsurprising, considering that foreclosure filings rose 81% in 2008 over 2007.

Housing is not recovering in the near term, even with mortgage rates hitting another record low.

One of the reasons that there will not be a recovery is that commercial real estate is imploding right now, with the volume of loans for office space and rental properties defaulting or becoming delinquent expected to triple in 2009.

In international finance, S&P downgraded Greek sovereign debt, from A to A-, and the ECB cut its benchmark rate to 2%, an all time low.

Not surprisingly, both of these pushed the dollar up today.

The juxtaposition of economic weakness with a stronger dollar drove oil down too.

Jobless Report Update

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Unemployment numbers are in, and they are grim:

524,000 jobs were lost, and unemployment jumped from 6.8% to 7.2%, the highest number in 16 years.

Note also that the 2.6 Million job loss in 2008 is the largest since 1945.

Also note that the U6, the broadest measure of unemployment, jumped from 12.6% in November to 13.5% in December. It was 8.7% in December, 2007.

Also note that this number is worse than it looks, because the prior months have been revised down:

The change in total nonfarm employment for October was revised from -320,000 to -423,000, and the change for November was revised from -533,000 to -584,000. Monthly revisions result from additional sample reports and the monthly recalculation of seasonal factors.

The same report also notes the explosion of involuntary part timers:

In December, the number of persons who worked part time for economic reasons (some- times referred to as involuntary part-time workers) continued to increase, reaching 8.0 million. The number of such workers rose by 3.4 million over the past 12 months. This category includes persons who would like to work full time but were working part time because their hours had been cut back or because they were unable to find full- time jobs.

According this pretty picture, that number is worse than it was in the Reagan Recession of the early 1980s. (H/T Calculated Risk for the graph pr0n)

Economics Update

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Initial claims for unemployment fell unexpectedly to 467,000, but continuing claims increased to 4.6 million, the highest number since 1982.

We also saw Monster.com’s Online Job Index Stumbles falling in December, which is another indication that we are nowhere near the bottom.

In retail, holiday sales were grim, with even Wal-Mart missing sales predictions.

This is far from surprising when you consider the fact that consumer credit fell by a record amount in November.

People are not buying, they are paying down debt.

Surveys in Europe are showing a precipitous drop in sentiment too.

We are also seeing a rather precipitous drop in port traffic in 2008, it looks to be about 8%, to the lowest level since 2004, according to the National Retail Federation (NRF)

Consumers are buying less, and domestic manufacturers are drawing down inventories, and both of these reduce the demand for imports.

As such, it is no surprise that the Bank of England cut its benchmark rate by 50 basis points (½%), the lowest since its founding…..In 1694.

Interest rates are still trending down here, with the 30-year fixed mortgage rate hitting a record low.

I’m not sure how long the low rates will last though, as Moody’s is reporting that the Federal Home Loan Banks (FHLB) are experiencing serious losses in mortgage backed bonds, and may fall below required capital minimums as a result.

While failure is not imminent, the spreads between their bonds and treasuries are rising as a result.

BTW, we are also seeing holes in one of the panglossian predictions of real estate professionalw, residential rents are dropping too, “apartment rents fell in 54 out of 79 U.S. metropolitan areas in the fourth quarter of 2008.”

We are also getting rumblings that the Chinese are losing their appetite for US debt, though Brad Setser says that this article is bogus, and he has the number to show this.

Really, the important thing here is not that people are not investing in US debt, it’s that they are talking about not investing, in the New York Times no less, which is the first step to a drying up of foreign lending.

The only foreign lending that does not seem to be decline is that of central banks to commercial banks. Case in point: the Bank of Japan decided to shovel $13 Billion to banks in the hopes of jumpstarting their lending.

In currency, the dollar fell today, largely because the 50 basis point cut of the BoE was less than had been predicted.

In energy, oil fell again, on the expectation that the recession would continue to suppress demand.

Economics Update

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Umm….Holy excrement?

The payroll firm ADP Employer Services just released its report as to job losses in December, 693,000 jobs lost…..In one month…..The ironically named Challenger, Gray & Christmas is also saying that layoffs reached a 5 year high in 2008.

The BLS will release its numbers on Friday, but I rather expect them to hew pretty closely to ADP’s numbers, particularly since ADP has been working to make its survey match the government numbers.

It’s no wonder that late loan payments are higher than at any point since 1980, there are a lot of people out of work.

In retail, we saw U.S. retail sales fell 0.8% YOY in the week following Christmas, and mall vacancies are at a 10 year high, rising from 6.6% to 7.1%, the highest quarterly jump ever recorded, and the highest vacancy rate ever recorded.

We are also seeing mortgage applications down for the first time in 4 weeks, though that could people waiting for the Federal Reserve’s purchase of mortgage backed securities to drive rates lower.

We are seeing similarly grim economic data in Europe too.

About the only bright news is that GM is saying that it does not expect to need more in the way of loans…After $13.4 billion in tax dollars to GM and $6 Billion to GMAC, I would certainly hope so.

The jobs number drove the dollar down, and traders are starting to go long on the Canadian dollar, which implies that they expect commodities, oil and timber come to mind for Canada, to start going up again.

That being said, expectations were not met today, with oil falling by 12% on reports of large inventories…..They are literally running out of tanks to store the stuff.

Retail gasoline, however has risen for the 9th straight day, and is now higher than it was a month ago…..My thinking here is that there was an overshoot on the way down, and (assuming that oil stays around $50/bbl) we will be looking at $2/gal gas.

Economics Update

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It’s the last day of the year, and we are finally getting a picture of how retail did during the holiday season, and it is not pretty.

ShopperTrak is revising its original holiday sales figures downward, from a sales increase of 0.1% and a traffic drop of 9.9%. which was already pretty grim, to a sales decrease of 2.3% with a 16% drop in traffic.

The estimates now are that 2009 is not going to be good either and that over ¼ of all retailers are at significant risk for bankruptcy (see graph pr0n above), which will hose suppliers too.

The unemployment claims numbers from last week were better than recent reports, 492,000 new applications, down 94,000 from the last week’s 586,000, and the 4 week moving average fell by about 1%.

I would note, however, that there are two things that make this news less good than it sounds, first, we are talking about the week of Christmas which means that everything was shut down on last Thursday, and, perhaps more significantly, continuing jobless claims continued to rise, hitting a 26 year high of 4.5 million.

Real estate still appears grim, with Manhattan office rents down about 25% (h/t Calculated Risk), though mortgage application activity remains at a 5 year high.

My real question though would be as to the number of mortgages granted, not the number of applications, which are likely multiple refi applications driven by even lower mortgage rates.

Additionally, the Federal reserve is to start buying mortgage backed securities, so they are going even deeper into the sh&%pile.

In currency, the dollar is up, and infact it’s up against the Euro this year, the first time 2005 that this has happened.

I guess that investors still think of the US Dollar as a safe haven, though the same cannot be said about the Ruble, which is down again.

In the stock market the VIX, the Chicago Board Options Exchange Volatility Index, fell below 40 for the first time since October 2, to 39.9, which indicates that traders are a bit less twitchy.

But that’s only a bit, because before the Lehman collapse, it was around 25, and a year and a half ago, it hung around 10-15.

In energy, oil rose about 5½ bucks/bbl, to settle at $44.60/bbl.

Economics Update

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Ouch. Initial jobless claims for last week hit 586,000, the highest number since Nov. 27, 1982. The 4 week rolling average, which is a better metric, rose as well, to 558,000, though continuing claims declined to 4.370 million.

Even if you do have a job, it’s likely that you are seeing wages and or hour cut….And that 401(k) match, fuggedaboudit.

It’s no wonder that consumer spending fell in November, though it was less than expected, and when adjusted for inflation….OK, adjusted for deflation….It was actually up.

As Calculated Risk notes even as record low mortgage rates are boosting demand, a lot of that ReFi, the spread between “conforming” and “jumbo” 30 year fixed mortgages remain at an all time high of about 2%, which means that in expensive areas, the cheap mortgages are simply not available.

CRE is tumbling too, as we can see from the fact that Manhattan office vacancies hit a two-year high.

In currency, the dollar was down again today, and the Russian central bank devalued the Ruble…again.

I still think that a run on the dollar is a possibility when traders start to realize that the Treasury and Fed are printing money and dropping it from the proverbial helicopter.

In energy, increases in inventory, drove oil to $35.35/bbl.

And Then There are the Involuntary Part Timers

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One of the ways that unemployment is understated is that in bad times, you see an explosion in the number of people who work part time.

This is one of the numbers that you rarely, if ever, see reported in the press, and it is not a pretty picture.

Graph pr0n courtesy of Calculated Risk, who to his credit notes that this is not population adjusted, it goes back to 1960, which was a recession year itself, but does note that the near vertical rise in the involuntary part-time is as bad as has been seen over those 48 years.

It’s about a 75% increase over the past 12 months.

Economics Update

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Well, most of the credit crunch indicators seem to be better today, or at least not as bad as expected.

First, we have the TED spread, the difference between the rates on interbank overnight loans and short term T-bills falling below 150 basis points (1½%) to 148 basis points, for the first time since Lehman collapsed.

Of course historically, the TED spread has been about 38 basis points.

Additionally, U.S. 2-Year T-Notes were auctioned off at a higher interest rate than predicted, 0.922%, which was better than the predictions of 0.912%, though the former is still near a record low, and still reflects a flight to safety at the expense of anything resembling returns.

You get the same picture from Calculated Risk’s Credit Crisis Indicators where things appear to be really bad, but better than they have been.

In terms of the real economy, things are still tough though with temp agency Manpower, Inc. withdrawing its forecast on weak demand, and temp employment is a bellwether, and we also are seeing the first decline in online holiday sales ever, according to a report from ComScore.

Considering the fact that online sales are still growing as a proportion of overall sales, the rest of retail is doing worse.

In energy, oil is down again, largely on reports of diminished Chinese demands.

In currency, the Dollar is up on the expectation that central banks will act to support it.

Economics Update

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December 2008 Business Outlook Survey – Philadelphia Fed.
Calculated Risk gives us the following graph pr0n on the relation beteween the Philly Fed index and recessions

30-year mortgage lowest in 37 years of Freddie Mac survey – MarketWatch

Also note the Institute for Supply Management’s manufacturing index, which, as Bondad Notes, has fallen off a cliff over the past two months.

If you go to the ISM’s report, you will see that the pretty much everything is down, and down significantly:

The two industries reporting growth in November — listed in order — are: Apparel, Leather & Allied Products; and Paper Products. The industries reporting contraction in November are: Nonmetallic Mineral Products; Fabricated Metal Products; Textile Mills; Printing & Related Support Activities; Machinery; Electrical Equipment, Appliances & Components; Primary Metals; Transportation Equipment; Furniture & Related Products; Plastics & Rubber Products; Computer & Electronic Products; Chemical Products; Petroleum & Coal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Wood Products.

With industrial production cratering, it is no surprise that first time job claims are still at a high level, though they have retreated from last week’s catestrophic numbers, and the 4 week rolling average is up, though continuing claims are down, though I can’t tell if that’s from claim exhaustion, people giving up, or people going back to work, though my money would be on one, or both, of the first two.

Over on the other side of the pond, corporate sentiment is falling in Germany, and the ECB is taking rate cut like steps, even if they are not technically rate cuts, to boost the economy.

In the intersection of real estate and banking, the rate for a 30 year fixed mortgage hit the lowest number ever recorded, and records go back 37 years, though Calculated Risk (again) notes what the rate is for Jumbo loans, which not handled by Fannie and Freddie, who now have an explicit guarantee from the government, the numbers are very different:

As an example Wells Fargo is offering a 30 year fixed at 4.75% (up to $417K), but their rates are 7.375% for loans above that limit.

That’s a 7.375% is 55% more than 4.75%. That’s a lot of flight to safety.

In currency, the dollar is up a bit, which is not surprising. It’s enough time for the shock from the Fed’s rate cut to have worn off.

I still think that hte trend for the dollar is weaker.

In oil, even though OPEC announced large production cuts, fell below $36/bbl.

It could be that oil traders do not believe that the cuts will be followed, or that they think that the economy is so bad that it does not matter, or that there are still people who need cash and are selling oil contracts to get it.

My vote would be for all three.

Economics Update

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Woah, new claims for jobless benefits just jumped by 58,000, to 573,000, a 26 year high.

Continuing claims, which is a far less noisy metric, also jumped to a 26 year high, 4.43 million, up from 4.09 million.

In real estate, the average rate for a 30-year fixed mortgage hit 5.47%, a 4½ year low, and forclosures fell in November, but this appears to be as a result of new state laws requiring more time for the process and/or temporary moratoriums, so there will likely be a significant spike in the next few months.

In the more general economy, we have a first, or at least a first since the Federal Reserve began collecting the data in 1951, the level of consumer debt held in the US has fallen, by 0.8%.

Of course, consumer net worth fell by 4.7%, so it’s a net loss.

In international finance, the Swiss Central Bank cut its interest rate by 50 basis point, and China’s exports fell 2.2% year over year, the steepest drop in nearly a decade.

In currency, the dollar weakened significantly, by about 4¢.

My guess is that it was some combination of extremely low interest rates in the US, or the demonstration of batsh%$ insanity by the Republican senators on the auto bailout vote.

In energy, oil is back above $45/bbl on strong calls by OPEC for production cuts, and retail gasoline prices continued their slide.

Update on the Sitdown Strike

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It appears that the owner may have been planning to shut down the plant and skip town for some time. It appears that, “company managed by the wife of Republic Windows and Doors owner Richard Gillman recently purchased an Iowa plant that manufactures similar products.”

Echo Windows and Doors was created two weeks ago and lists Sharon Gillman as its manager, according copies of records obtained by the Daily News from the Iowa Secretary of the State. According to Cook County property tax records, Sharon Gillman is Richard Gillman’s wife.

The couple purchased a $2.6 million Oak Street condo together in 2007, according to property records.

The Gillimans could not be reached for comment today. But this afternoon, Richard Gillman released a statement confirming the creation of the new company.

Also, Amy Zimmerman, who has served as Republic’s marketing director, is now listed as the contact on the newly registered echowindows.com domain name. She refused comment today.

As much as it pains me to say this, it may very well be that Bank of America is blameless in all this. The Gillimans may have set up a second company to find cheap non-union plant in Iowa, and then screwed up their credit line with BoA on purpose, so they could get out from under things like COBRA, owed vacation time, and other benefits.

In the mean time it appears that Chase, which had a 40% stake in Republic, is actually doing the right thing: it has pledged $400,000 to the employees there.

Still, this is getting weird, and if this is a scam by the Gillimans, and it looks increasingly so, there may very well be a criminal fraud case against them.

A Better Employment Metric

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Of course, it is also a very scary metric.

But I agree with Paul Krugman, workforce participation is one of the better metrics that we have to describe the unemployment situation.

However, I do have a problem with the graph, which is that the delta is magnified, by focusing on a range, in this case 61%-65%, as opposed to showing the full range from 1-100%.

I think that these sort of “broken range” graphs serve to overemphasize deltas….though that is a really scary picture, even if it’s done on a full 1-100 scale.

It shows that employment never recovered from the 2001 downturn, and that it’s headed down fast now.

Economics Update

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I’ve never been entirely sure why, but Fridays tend to be OMFG kinds of days, and this one is a doozy.

We have the jobs report out, and it is unbelievably grim, with 533,000 job losses, and the unemployment rate going from 6.5% to 6.7%.

By way of perspective, the so-called experts has predicted job losses of “only” 335,000.

It’s the worst monthly job losses since 1974.

The numbers are actually worse, since this does not count the 422,000 people who just stopped looking for work.

BTW, the unemployment number quoted, the U3 is considered, by me at least, to be over restrictive and understate unemployment. The broader U6, it hits 12.5%:

The U-6 rate only has comparable history back to 1994, but November’s rate is by far the highest since then and the swift rise to that elevated level also far surpasses similar moves during the recessions in 2001 and 1990-91. Previously, the Labor Dept. kept a similar gauge with history back to 1970, showing a high of 14% unemployment during the deep recession in 1982.

The U-6 rate rose sharply in November, from 11.8% in October, and is markedly higher now than the 8.4% recorded in November 2007.

It sucks north of the border too, where Canada Lost 70,600 jobs, which is more on a per capita basis…but Steven Harper wants to try Hoovernomics for a few months to see if it will fix things, which is why the hereditary enemies Liberal, NDP, and BQ parties are trying to desperately form a coalition government to kick his ass to the curb.

Given these numbers, it’s no surprise that a record number of Americans are on food stamps.

Meanwhile, in real estate, delinquencies and foreclosures hit record highs, loans in foreclosure are now at 2.97%, and delinquencies rose to 6.99%.

Meanwhile, it’s clear that the central banks are pushing on a string, and the Bank of England is looking at finding new ways to give away money, because rate cuts are not working:

The Bank of England is working on radical plans to inject cash directly into the British economy as a last resort to reverse a slide into recession, a newspaper reported on Friday.

…

The Daily Telegraph said the Bank was “working on radical plans to inject cash directly into the economy — the nuclear option to be used only when interest rates approach zero.” The report said the Bank was considering engaging in “quantitative easing” — printing more money to reflate the economy.

“Measures under consideration include direct purchases of assets, such as government debt or commercial investments, by the Bank or the Treasury, as well as expanding the Bank’s balance sheet, a means of pumping extra cash into the banking sector,” the newspaper said.

This is end of days economics…..They are literally considering throwing money out the window.

Meanwhile, the markets behaved in ways that make no sense to me, once again indicating that anything beyond simple index funds is not a good investment option for me:

because….Honestly, I have no clue as to why.
In the meantime, oil fell to $40.81/bbl, the lowest since December 10, 2004, and Gasoline?: $1.773/gallon retail.

Economics Update

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First, Calculated Risk’s Credit Crisis Indicators are either flat or down, and the 3 month treasure note is still at 0.005%, which means that people basically put their cash in a mattress, so that is how freaked investors are, and how much they look for a safe haven.

Of course, what with the Bank of England cutting its rate by 100 basis points to 2%, it’s not like there is a whole bunch out there that is going to generate decent return anyway.

The weekly jobless claims posted a surprise drop, but continuing claims rose to a 26 year high.

Additionally, we have factory orders falling by the most in 8 years, which is completely unsurprising, as factories do not order much if consumers are not buying, and we are seeing double digit drops in buying this holiday season.

Considering that demand for commodities is falling with the economy, it’s not a surprise that oil has fallen to less than $44/bbl, and retail gasoline price has falls below $1.80/gallon.

Economics Update

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Well, some employment numbers are out, and they suck wet farts from dead pigeons. Job cuts in November were up 148% from last year, 181,671 according to Challenger Gray & Christmas said and 250,000 according to ADP.

Other metrics are bad too, with the Fed’s Beige Book showing economic slowdown in every one of the Federal reserve districts, and the Institute for Supply Management’s Non-Manufacturing Index dropped off a cliff, falling to 37.3 from 44.4 in October.

Service activity in Europe is falling, with the Euro Zone service activity falling to a 10 year record.

In retail, we have Retail Tracker more than tripling its estimate as to the decline in this years holiday shopping season.

There is some bright news, with mortgage applications rising 112% in last week, though I tend to believe this analysis, that this is not new demand, but people scrambling to lock in the rate.

It’s one of those things that makes week to week stats noisy.

What isn’t noisy is the fact that Manhattan empty office space has doubled, and if there is a glut of office space there, there’s a glut of office space everywhere.

In international finance, we have, VEB, a Russian State Bank asking for a $34 billion cash injection, and the Kiwis% and the Thais central banks slashing their rates by 150 and 100 basis points (1% and 1.5%) respectively.

This makes it no surprise that the dollar gained against the euro and pound.

In energy, despite OPEC’s announcement of its intent to cut wasdown again today, and retail gas prices fell for the 77th straight day.

Shoot Me, I Agree with a WSJ OP/Ed

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Like me, they ask the question, “Why are Robert Rubin and other directors still employed?“

It’s a good question.

Truth be told, my guess is that the Wall Street Journal hates Bob Rubin because he worked for Clinton, and they have CDS.*

It may be further exacerbated by the fact that his policies were so completely slanted toward the financial services industry, so the cognitive dissonance makes their heads hurt.

For me, it’s because he has been consistently anti-worker, pro-Wall Street, and now we know that he’s just an incompetent with a good line of crap to feed people.

*Clinton Derangement Syndrome

George W. Bush Broke Our Army

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That’s, or at the least the conclusion that the US Army is broken, is the conclusion of well respected army analyst Andrew Krepinevich in a Center for Strategic and Budgetary Assessments report.

His basic points:

  • The quality of enlisted men and officers is decreasing despite significant pay hikes.
  • Physical, educational, and “moral” (i.e. criminal conviction) standards have been lowered for recruits.
  • NCO quality is suffering, because enlisted men ill suited to leadership are being promoted to NCO status.
  • Falling reenlistment numbers.
  • Increased use of stop loss to maintain staffing levels.
  • The Army is attempting to create units that are simultaneously configured for both conventional and counterinsurgency warfare, and thus under performing at both.

He does not explicitly finger Bush, but Iraq is clearly mentioned as a part of the problem.

His recommendations:

  • Make 15 Army BCTs dediucated to counter-insurgency/peacekeeping.
  • Delay expanding the army until personnel quality issues are resolved.
  • Cancel the FCS, which has dubious utility in a counter-insurgency scenario, and is sucking up too much budget.

It is likely that the ill effects of Iraq will weigh on the army for more than a decade.