Category: employment

Economics Update

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Well, it looks like 80,000 jobs were lost in March, and the unemployment rate went up to 5.1%, see here, here, and here.

There was good news, at least by the standards of the hacktacular financual press, the ISM’s report on non-manufacturing businesses rose, from 49.3 to 49.6, when it was expected to be 48.5.

Note that while the headline on the story speaks of a rebound, it’s not. Any number under 50 is a contraction, so the contraction was slower than expected, but it was still a contraction.

Given these numbers it’s no surprise that the Federal Reserve is signaling more rate cuts.

It won’t work. We need to go Nordic on this problem and nationalize the insolvent institutions, for a time at least.

Give all this information, it should come as no surprise that we are getting reports of skyrocketing vacancies in commercial space, the stuff that all the “experts” said was not going to be a problem.

This is typical. Commercial space lags residential space.

It won’t help that Oil is back above $105/bbl.

It also looks like Delphi auto parts may be going under, Appaloosa Management LP is pulling out of a deal to invest 2.55 billion in the manufacturer.

This will leave GM on the hook for a lot, and they may have no parts for their cars.

Economics Update

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First, we have a new peak in Jobless claims, 407,000, the highest level since Katrina hit New Orleans (here and here). Note, as always, that weekly jobless numbers are just a snap shot of a single week, and as such, there is a lot of noise, but this did not stop the dollar from retreating in response.

That being said, the fact that the IMF is predicting a global slowdown ain’t a good sign either.

Given that we have a consumer driven economy, the fact that people are falling behind on their debts at the highest rate in 15 years is a good indicator that we are already in a recession.

In energy, was down a buck, and gasoline hit a new record. Assuming that we are not at peak oil, there might be some moderation as the economy cools.

The markets are seeing a cooling economy too, driving Treasuries higher, because investors are looking for safe havens.

In real estate house prices fell in 21 metro areas, and foreclosures rose to record levels. Same old same old.

Finally, I’m beginning to feel like Keith Olbermann and Bill O’Reilly. I can’t make through a week without some insurer disaster intruding. In this case, it’s Triad Guaranty Inc., which is considering, “a plan to stop writing new business”, called a “run-off” in the insurance. Note that it’s business is mortgage insurance, as opposed to monoliner bond insurance.

Too many people defaulting on mortgages.

Economics Update

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Let’s see, we have Bernanke, testifying before the Congress’s Joint Economic Committee, saying that there is just the slightest possibility that the US Economy might possibly be slipping into a recession, which is Fed speak for, we are totally boned.

Not surprisingly, the US dollar tumbles, because recession=further rate cuts.

Truth be told, given the current nature of the credit markets, the Fed could lower interest rates to zero and it wouldn’t lower short term rates. They are pushing on a string, and people are unsure about the amount of risk, so rates won’t go down.

On quick numbers, we have new mortgage applications falling 29% (refi is way down too), oil prices rising, up to about $101.20/bbl, and gas prices at a record high, $3.287/gal.

On the good news side, ADP’s private report is showing an increase in private sector payrolls, though I would rever the reader to this article on underemployment, which points to growing numbers of people working part time jobs, a sign of employment weakness, for some context:

Keith Hall, the commissioner of the Bureau of Labor Statistics, which prepares the monthly jobs reports, said in Congressional testimony last month that this broader measure [underemployment report] stood at 8.9% in February, up from 8.1% a year ago.

“We’ve clearly had a broad weakening in the labor market,” Hall said.

My perspective, and I am an mechanical engineer, which means that I value tangible goods in my world view, is that the fact that factory orders are still declining, -2.5% in January, and -1.3% in February, is a better indicator, though I also consider the fact that car sales tanked last month, including Toyota, significant too.

Of course, economists, and other such folks, tend to look at consumer spending, so the fact that Discover Financial Services reported that its consumer spending confidence index is down might be a bigger deal for them.

In real estate, we have Manhattan condo and Co-op sales collapsing. It appears that the market is now crushing, “location, location, location”.

And on the more surreal side of real estate, we are finding an epidemic of copper pipe theft from abandoned homes. The hed is a real eye catcher, “ Some homes worth less than their copper pipes“.

This makes the USA sound like it’s suffering from Baghdad level looting.

Economics Update

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Jobless claims
378,000, up 22K from the previous week, and the leading economic indicators fell for the 5th straight month by 0.3%.

Oil dropped nearly $4.00/bbl, and the dollar is up versus the Euro.

These are both driven by what is seen as reduced demand for oil, and a rate cut from the Fed which was around 25 basis points (0.25%) less than expected.

Still, it does not appear that the banks are optimistic Citi is looking to cut 2,000 jobs in their securities division (investment banking and trading). This is in addition to the 4k announced in January.

Just to remind you, it’s not just sub-prime, as Alt-A delinquencies and foreclosures are spiking too, and are trashing the related mortgage backed securities.

Finally, the Federal Reserve continues its extended bout of anilingus with the brokerage houses, making $75 billion in treasury securities available to investment banks.

Lunch Meeting at Work.

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I got free food, but I still hate meetings with a passion.

Basically, we’ve got a lot of work, and we look to have more coming in.

Most of the discussion was on profits and bonuses, which don’t really involve me, because I am a contractor.

One interesting thing is that our division does a lot of internal work for other divisions, but doesn’t get credited for the profits derived from the plan.

I guess that one of those problems with profit sharing plans is identifying whose profit it is.

Additionally, they went over a controversy over some work involving wfrom Italy being brought here (see here, here, here, here, here, and here), but this part of the discussion was pretty low key, just a quick rundown of the bullet point arguments.

Obviously as per any industry that regulation heavy, there was some discussion of politics and the election, but it was fairly low key, mostly in terms of uncertainty in the market.

Wish that it hadn’t been Domino’s pizza. It’s OK, if you ask for ½ the normal amount of sauce, but the Domino’s owner is still a right wing turd.

Economics Update

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I’m not sure if it even qualifies as news any more, but
oil hit a new record today, topping $107/bbl. Gasoline prices are following this trend, with prices rising $0.09/gallon over the past two weeks.

When this is combined with the fact that houshold wealth fell by $533 billion, (3.6% apr), in q4 of 2007. That’s without considering inflation.

When inflation is taken into account, all of 2007 is down.

In the ever entertaining world of the monoliner insurance, MBIA, is asking Fitch to stop rating its insurance units. They think that Fitch’s model is inaccurate, because Fitch is still considering a downgrade.

MBIA is insolvent, Fitch gets it, and S&P and Moody’s don’t.

As a result of this, we are seeing more of the non-profit and state run college lenders unable to secure financing, and hence unable to make loans.

Remember, these loans cannot be discharged by bankruptcy, and they are federally guaranteed, and no one will buy the paper.

This might explain why Lehman Bros. is cutting 5% of its workforce, about 1400 jobs.

One bit of good news is that China’s trade surplus dropped 63% in February, though one wonders how much of that is currencies readjusting, how much is a slowdown in the world economy, and how much is the winter storm that shut down the country for about a week.

BTW, its official, Malaysia is a Kleptocracy. That’s the only way to explain why, following a defeat that kept the National Front in the majority, but at less than 2/3, that the Kuala Lumpur Composite Index fell so sharply that they had to shut down trading.

This wasn’t even a change in party rule, just a drop below 2/3, and everyone was scrambling to get out because their business positions were predicated on corruption.

O happy day.

For what it’s worth, things are not much better in the US, where hedge funds are seeing margin calls on US treasuries. If treasuries go bad, forget the Honda full of silver, you need ammunition and canned goods.

Economics Update

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Oil hits another record, breaking $106/bbl, and the Dollar falls again another record against the Euro, and a 3 year low against the Yen.

As I’ve noted before, these are tied together. The expectation of a falling dollar pushes up the dollar denominated cost of oil to maintain the same global purchasing power.

Closer to home, the US lost 63,000 Jobs in February, which was an unexpected 5 year high.

Not surprisingly, this is accompanied by consumer confidence at a six year low.

Luckily for us, the Fed is riding to the rescue, and printing up more money to give to the jerks who screwed this up in the first place. The March money sales have been increased from $60 billion to $100 billion.

Carlyle Capital is being to forced to liquidate securities, one would assume well below purchase price, to meet its margin calls.

That’s what 32:1 leverage gets you.

The lenders are getting skittish, and they are starting to ask for some or all of their money back from hedge funds and other speculative entities.

And why shouldn’t they as the housing crash is chewing up their balance sheets like a great white shark.

So we have money fleeing to the safe haven of US treasuries, because they are expecting another shoe to drop, like, for example, the possibility that, Fitch Ratings might downgrade $160 billion in Alt-A mortgage backed securities, which is rumored to be imminent.

They Sold Me To Buy Dunkin Donuts, and They Have Defaulted

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Not joking. I used to work at United Defense, and the Carlyle Group sold us BAE to buy Dunkin Donuts, at DFA meetings, I’d introduce myself, and say, “I work for the Carlyle Group”, just to see the double takes.

It now appears that the
Carlyle Capital Corp. division has defaulted on about $21 billion in loans.

They invested in “high quality” mortgage backed securities from the GSEs (Fannie and Freddie), but they have not been able to sell them in order to pay some notes coming due.

Not surprising. $21.7 billion backed by $670 million in equity is a 32.3:1 leverage, which means that if things tend down about 3%, you are broke.

Our Bogus Unemployment Statistics

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David Leonhardt at the times has a very good article on unemployment statistics, and it explains how it has become less accurate over time.

Consider this: the average unemployment rate in this decade, just above 5 percent, has been lower than in any decade since the 1960s. Yet the percentage of prime-age men (those 25 to 54 years old) who are not working has been higher than in any decade since World War II. In January, almost 13 percent of prime-age men did not hold a job, up from 11 percent in 1998, 11 percent in 1988, 9 percent in 1978 and just 6 percent in 1968.

It’s a good read, and better written than I can do.

Another Gloom and Doom Article About an Aerospace Brain Drain

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They are wringing their hands because all these people will be retiring over the next few years, and there is no one in the wings to replace them.

It’s because the course of study is hard, the pay is not great, particularly once one gets past the 5 or 10 year mark, and at the slightest whiff of a downturn, you get laid off.

It doesn’t help that what once took 6 months (the P-80 shooting star), now takes 18 years or so (F-22), either.

These folks can do numbers, they know that they will be poorly paid, won’t have a secretary, and half-way through their careers, they may be asking, “Would you like fries with that”.

People don’t go into the field because it is an underpaid unattractive field.

Economics Update

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The European Commission is predicting higher inflation and slower growth for this year.

Because the European Central Bank has controlling inflation as its sole mission, as opposed to the Fed, which also has an obligation to maximize employment, I think that we will see no rate cuts from the ECB, and perhaps a rate hike, which means that the current, and any future rate cuts by the fed will increase downward pressure on the dollar.

In terms of the US economy, we have the index of leading indicators index falling for the 4th straight month, the Philadelphia Federal Reserve’s report on manufacturing activity fell sharply, to the lowest point in 6 years, and Philly Fed’s future general activity index, which looks forward about 6 months, fell to the lowest number since 1990.

On the brighter side, this has driven oil prices down, because a recession implies reduced demand for energy, to $97.31/bbl.

In real estate, we have Mark Zandi, chief economist and co-founder of Moody’s Economy.com, predicting that home prices will fall 20% from their peaks.

He’s an optomist. First, interest rates are going up, and second, you always get overshoot in a correction like this. I expect a 40%+ drop in real terms, though inflation will mask some of that.

We also have the spread between adjustable-rate and fixed-rate mortgages growing. This is an indication that lenders are expecting rates to go up in the relatively near future, and they don’t want to be locked into low return loans.

We are also seeing localities recognize that they are going to get hosed on bond issues because of the bond insurance crisis, paying higher rates on lower rated bonds.

Economics Update

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In January, employers cut 17,000 jobs, the first cut in about 4 years.

Truth be told, the private sector has not been responsible for significant employment growth in this “tide that leaves ordinary people drowning” recovery anyway. It’s pretty much all been public sector jobs.

Additionally, you have 2007 having the worst performance since 2002, with factory orders for the year being only 1.4% above 2006, though the month to month numbers for November and December were relatively healthy.

In the increasingly inevitable meltdown of the monoliner bond insurance companies, private equity firms want no part of a bailout of the insurers, so banks are trying to go it alone (here and here).

Banks trying to bail out insurers, so that the banks won’t show huge losses or insolvency as a result of losses in the market.

So, you have broke insurers being bailed out by banks that are broke too?

This will all unwind, just like the 1929 crash, only the availability of computers, and computer models, means that the level of exposure of these institutions has multiplied many times.

In any case, it appears that the credit crunch is in the process of making large private equity deals more risky for investment banks, in this case, a take over of Harrah’s Entertainment by Apollo Management and Texas Pacific Group.

The banks are, “Having trouble selling on the leveraged buy-out debt to third parties. With the bulk of the debt remaining on their books, the banks are sitting on a sizeable loss.” No one wants to buy the funny paper no more.

For the UK, there is some good news, asthere are now competing bids for the Northern Rock bank, with Richard Branson and the board of Northern Rock competing, which implies that the UK taxpayers won’t take too bad a hit.

In a sign of the new world order, CitiGroup is no longer number one in the world in market capitalization, that honor now goes to the Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and Bank of China Ltd. (ICBC).

In fact, it’s number 7 on the list, after ICBC, Bank of America, HSBC Holdings, China Construction, Bank of China, and JPMorgan Chase.

And we now have indications that perhaps that trader was not so “rogue”, with Societe Generale in court defending itself against money laundering. It appears that they were laundering stolen checks through Israeli banks.

Economics Update

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It appears that the the markets are expecting another 75 basis point rate cut by the Fed at their regular meeting next week. The futures market on the Fed rate cut puts the chance at 81%.

I have no clue what sh$# they are smoking, but I wants some. It’s gotta be some seriously good stuff.

Could someone please explain to me how this is not making book over the telephone and internet, and hence illegal?

Then we have George Soros warning that he is seeing a possibility of “systemic failure” in the markets. He expects that at the end of the US Dollar as the sole world reserve currency, which has been obvious for years, and that the era of “superleverage” is over, and that, “”I question how far the Fed can go, given the reluctance of people to hold dollars”, and, “We need a new sheriff, not Washington consensus.”

Basically, he’s saying that we are in 1930, and we need the restoration of FDR market regulations. I agree, but, of course, I didn’t break the Bank of England because I understood world currency markets better than the English Ministry of the Exchequer, and he has, so his opinion carries more weight.

In real estate, we have Credit Suisse predicting losses of $16 billion for Fannie Mae and Freddie Mac, and we have a year over year price drop of 6% in the US, and that median sale prices in 2007 was 1.3% lower than 2006, the first yearly drop ever.

And in employment and automotive, Ford is reported to be offering buyouts to all of its 54,000 hourly employees.

Every salesman, every buyer, every secretary, every engineer, etc.

OK, It’s Official, I am a Purveyor of Weapons of Mass Destruction

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Many years ago, around the turn of the millennium, I worked at Loral Vought Systems…..Lockheed Martin Vought Systems…..Lockheed Martin Missiles and Fire Control* in Grand Prairie, TX.

One of the items that I worked on was the Medium Extended Air Defense System, or MEADS.
I’ve also worked on the Armies ongoing but truly misbegotten Future Combat System† (FCS), it’s largest procurement program.

So now, I’m beginning to see just how tied into the Military Industrial Complex I am.

Maybe I should ditch engineering and become a Klezmer‡.

Yes, I worked on this, and that little flare behind the head is for additional volume for the motor to increase range. The original PAC-3 had straight sides.

It looks like they are still using ProEngineer™ as the CAD package. After a while, you can kind of get a sense of which cad packate it is from how it renders.

Yep, worked on this too, looking at a more flexible launch cannister than the PAC-3 launch cannister.

Worked on most of these too.

Worst place I ever worked. It was so bad that people who never worked at Stewart & Stevenson, Tactical Vehicle Systems would hang up when they heard Sealy, TX.

Made Dilbert™ and his workplace look like “Nerdvana”.

They ended up screwing up in reverse. Their final drawing package was bad enough that no one else wants to bid on FMTV contracts, because they can’t make heads or tails of the drawings.

*It was all the same place, it just went through one merger, and two name changes.
†Note to self, need to finish article about FCS for my blog. It’s been sitting in my draft folder for months.
‡An itinerant Jewish musician, more specifically, one who plays music typical of Eastern European Jews.

Diner Diving

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My job shop took me out to lunch and gave some schwag, a pencil cosy, pen, and sticky pad.

They also took me out to lunch at the Silver Diner.

I like diners, I find them to be a bit of an adventure, as opposed to chains, though this is a local chain with 20 restaurants in Maryland and Virginia.

I had a burger, and it was pretty good. The shoe string fries were very nice, maybe next time I’ll do onion rigs, and the coffee was good, in a “this is a diner, not a latte house” way, which is my preference.

Both the restaurant, and my job shop are recommended, and for the latter, I’d say that even if they hadn’t just fed me.

Random Thoughts On the Working Experience

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My boss looks like Patrick Stewart. Thank the Flying Spaghetti Monster doesn’t use the phrase “Make it so”.

On a telecom with the UK, I realized that I love how Scotsmen say “Schedule” (shed-yule), “Buffer” (sort of boofferr), and does (dooze).

The worst part about meetings is that they are like Sominex® to me. How do you stay awake, particularly after lunch. What I do to stay awake is to take two sets of notes one for the meeting, and one for the pretty much anything that pops into my head. It keeps me engaged enough to keep the old eyes open.

I showed up for work early one morning, and a guy out here for a week from the west coast was already here…..Talk about an early bird…..It’s 3 hours earlier for his circadian rhythm.

Every Thursday, a bunch of get chicken and potato wedges from the Amish Market…Yum.

D’oh!!!!

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(Forward dated a bit, so that people will see it for a while)

Well, I just finished up at my previous job. I don’t blog about my job generally, because it is just begging to be fired.

I was working on a medical device for Becton Dickenson Diagnostic Systems, in Sparks, MD. Unfortunately, the project was canceled*, and as a contractor (temp) so was I (they had planned to keep me on for a few years).

They were very humane about it. They give me 4 weeks notice, which is pretty much unheard of.

It was a great place to work. Seriously. If you need to blow a goat to get in there, break out the Chap Stick.

Jobwise, things have worked out OK. Because of the notice, I finished on the Wednesday before Thanksgiving, and started my new job on the Wednesday following Thanksgiving.

I would have started on Monday, but I had a medical and dental appointment on Monday, and jury duty on Tuesday.

So, I am now working about 20 miles south of Baltimore (no more detail on the blog) for a company involved in the nuclear fuel cycle. I’m involved in decommissioning and waste encapsulation.

So, I’m fat, and I’m bald (that picture is 28 years old and none of your #$@!ing business pounds ago), and I work in nuclear power.

I’m Homer Simpson.

I’ve started to grow a beard to cover up this fact.

*No details on the project…..Not sure if anything would be proprietary.

Free Trade: The Best Weapon Against the “Free Traders”

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Dean Baker makes the point that the free trade evangelists would not be so supportive of free trade if their necks were on the line. (I should note that I made a similar point about press outsourcing to India in Pasadena California).

I am already a member of a profession abused by immigration policies (H1B and L1 visas), so Baker’s point that protected professions should be opened up to competition makes sense to me:

The big winners in this story are the workers who manage to keep themselves protected from international competition. As a result of recent trade and immigration policy, these highly paid professionals can buy low cost furniture, cars, and clothes. They can also have their homes renovated and their gardens maintained at low prices. They can even get cheap nannies for their kids.

But the key to the success of these highly paid workers is maintaining their own protection from international competition. There are long list of professional and immigration barriers that protect doctors, lawyers, and even economists and journalists from the same sort of international competition faced by textile workers and dishwashers.

In addition to the professional and licensing barriers that impose obstacles to foreign professionals working in the United States, there are also immigration barriers. These barriers prohibit a Wal-Mart Hospital or Wal-Mart University from hiring the lowest cost qualified foreign professionals from anywhere in the world, in the same way that Wal-Mart buys the cheapest clothes and toys from any country in the world.

The way to fix this problem is simple: we create transparent licensing requirements for the licensed professions that can be met by students training anywhere in the world. (Let them have test sites in their own country—administered by U.S. certified testers, of course.) We then remove any comparable pay requirements for these professions. The rule is free trade, just like with steel and clothes. If a Chinese doctor is willing to work in the U.S. for $50,000 a year or an Indian journalist is willing to work for $30,000, then they can be hired at these wages as easily as Wal-Mart buys cheap toys from China.

Word Up! Particularly the journalists and economists.

The Employment Numbers are Weaker than They Appear

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Nouriel Roubini’s observations are as follows:

  • The August revision (+93k) was almost entirely government jobs.
  • Private sector employment gains have averaged (+73K), which is very weal.
  • 80% of job created in September were either in government or in health/education services.
  • Housing job losses are under-reported, since illegal aliens are not counted in this figure.
  • The 2007 benchmark for employment figures turns out to be 297k less than predicted.
  • Year over year job growth has been falling for at least a year.

We are in a recession folks (me, not Mr. Roubini speaking).