Category: U.S. Economy

Congress Votes to Slash Funding for Data Producers – Again

horvath Leave a comment

Business and government leaders in the U.S. are fortunate to have a wealth of statistical data to guide their policy decisions. For the most part, the programs that produce the data have integrity and they try to provide the best data possible.

Periodically, Congress attempts to eliminate some of the federal government statistical agencies. On May 17th, the National Association of Business Economists distributed emails to members and friends discussing the latest attempt by Congress to reduce funding for key data programs.

While government doesn’t need a blank check to collect information, the data that will allegedly be eliminated is valuable in the decision-making process. Hopefully Congress will find a fund collection and production of the data in an efficient and cost effective manner.

See the NABE communiqué below.

Dear NABE Members and Friends:

Last week, we alerted you that the U.S. House of Representatives was considering an appropriations bill for Commerce, Justice, Science, and Related Agencies (H.R. 5326) that would drastically reduce funding for the Census Bureau and make participation in the American Community Survey voluntary. Thanks to the many NABE members and other data users who contacted their representatives to try to prevent this action. Regrettably, the legislation ultimately passed the House along party lines and was much more damaging than originally proposed.  In its current form, H.R. 5326 will “devastate” the nation’s economic statistics.

Specifically, the legislation will:
•Terminate the American Community Survey;
•Cancel the 2012 Economic Census; and
•Halt development of cost-saving measures for the decennial census.

NEXT STEPS:

The Senate is expected to take up its own FY2013 Commerce, Justice, Science, and Related Agencies appropriations bill shortly. The Senate and House versions of the bill will then presumably be addressed by a conference committee comprised of members of both bodies.

HOW YOU CAN HELP:

Call or email your senators and representative today to tell them why you value the Economic Census and the American Community Survey. You can use this sample letter below:

Dear(Senator/Representative):

I am writing to express my concern over passage of H.R. 5326 by the U.S. House of Representatives, which would drastically cut funding for the U.S. Census Bureau and eliminate the Economic Census and the American Community Survey (ACS) – two of the most important tools we have for understanding the U.S. economy.

These programs are critically important to businesses, policymakers, and government agencies which use the data to make informed decisions and plan for the future. The increased uncertainty accompanying the loss of these data will most certainly result in more missed opportunities and waste for businesses and misallocation of resources by policymakers and government agencies. I urge you to ensure that the Census Bureau receives adequate funding to continue these vital programs.

How are Economic Census data used?
•By the federal government as an input to calculate elements of key economic indicators, such as economic growth (GDP), prices, and productivity;
•By retailers in evaluating whether to expand into new market geographies;
•By economic development commissions in attracting new businesses to their areas; and
•By companies to benchmark performance against industry averages

How are ACS data used?
•By corporations to examine workforce characteristics of neighborhoods to determine optimal locations for new factories or sales centers;
•By homebuilders looking to tailor new subdivisions to surrounding neighborhoods based on income, family size and existing home values; and
•By municipal governments in planning to meet the educational, safety and housing needs of their citizens.

The information we glean from the Economic Census and the ACS increases our understanding of current economic  conditions and reduce uncertainty, allowing businesses and policymakers to make well-informed, efficient decisions.

If we eliminate these programs, we are choosing to “fly blind,” an alarming proposition in these challenging economic times. Again, I urge you that you vote to ensure adequate funding for both the ACS and the Economic Census.

Sincerely,

(Your Name)

 

©Copyright 2011 by CBER.

U.S. Employment Tapers Off – Another False Start?

horvath Leave a comment

After three months of solid job growth, BLS released what seems to be a bad April Fool’s Day joke in the form of the March jobs report. After adding jobs at an average monthly rate of 246,000 for December 2011 – February 2012, total nonfarm payroll employment rose by only 120,000 in March.

In light of projections by analysts that job gains would exceed 200,000, this report begs the question, “Are we seeing another false start in job growth, as we did in the first half of 2010 and 2011, or was the March report just another bump in the seemingly endless road to full recovery?”

On Monday (April 9), the DJIA lost 130 points, or 1%. Is that a real answer to the question or just a partial answer?

On a positive note, jobs were added in the Leisure and Hospitality (39,000); Private Education and Health Care (37,000); Manufacturing (37,000); Professional and Business Services (31,000), and Financial Services (15,000) sectors.

Many of the jobs in the Manufacturing and PBS sectors are primary jobs, i.e. they bring outside wealth to the community and they create more support jobs than other sectors. It is good news when jobs are added in the Tourism sector because the industry touches most regions. Increased tourism jobs are an indicator that people have greater disposable income – and they are spending it.

Increased jobs in the Financial sector may be a sign that the woes of the industry may be behind us – with an emphasis on “may”. And then there is the Private Education and Health Care sector. Depending on our perspective this sector may be viewed as a perpetual job creation machine or nothing more than a bureaucracy builder.

The losers were Retail Trade (33,800) and Construction (7,500) sectors.

So is the latest report an April Fool’s Day joke? Employment growth is likely to continue, but not likely at the rate of 2250,000 jobs a month that is needed to significantly lower the unemployment rate.

 

©Copyright 2011 by CBER.

It is Time to Right the Ship – America’s Financial System

horvath Leave a comment

Zbigniew Brzezinski, National Security Advisor to President Carter, recently released a book entitled Strategic Vision – America and the Crisis of Global Power.

In his book, Brzezinski lays out America’s assets and liabilities, listing six of each. On the liability side, he focuses extensively on the flawed financial system.

In a footnote on page 48, the author highlights data from Roger Lowenstein’s, The End of Wall Street (2010) explaining the social and economic consequences of the “self-induced 2008-2009 financial crisis (note the use of the phrase self-induced):
• Average deficits of G-20 nations increased from 1% to 8% (p. 294).
• By 2009, American share of the national debt was $24,000-$2,500 of which was debt to China (p. 294).
• America’s total national wealth decreased from $64 trillion to $51 trillion (p. 284).
• America’s unemployment rate reached 10.2% (p. 284).
• The United States lost 8 million jobs (p. 284.)
• Mortgage foreclosures increased from 74,000 a month in 2005 to 280,000 a month in the summer of 2008, and a high of 360,000 in July 2009 (p. 147 and p. 283.)
• Banks failed at a rate of three per week in 2009 (p. 282).
• During the spring of 2009, 15 million American families owed more on their mortgages than their homes were worth (p. 282).
• There was a total GDP contraction of 3.8% – the biggest contraction since post WWII demobilization (p. 282).
• America experienced its longest recession since the 1930s ( p. 282).
• Stocks fell 57%-the biggest drop since the Great Depression (p. 281).

These data quantify how tough the times have been for Americans. Brzezinski takes it a step further by pointing out that one of America’s greatest assets is its overall economic strength and the power associated with that position. In other words there is a lot of incentive for the U.S. to right the ship and fix the problems with its financial system – immediately.

For details, check out the book. It is a must read!

 

©Copyright 2011 by CBER.

The Mismatch of Skills between Company Needs and the Unemployed

horvath Leave a comment

It is an understatement to say that there is a mismatch of skills between the unemployed and the needs of the companies looking for workers.

There are 2.1 million unemployed workers in occupations with unemployment rates below the natural rate (4.5% to 5.0%). Many of these occupations require a college degree. These occupations account for 31% of total U.S. workers.

There are 4.3 million unemployed workers in occupations with unemployment rates between the natural rate (4.5% to 5.0%) and below the U.S. average. These occupations account for 38% of total U.S. workers.

There are 6.0 million unemployed workers in occupations with unemployment rates above the U.S. average. These occupations account for 31% of total U.S. workers.


The bottom line is there are 10 million workers competing for replacement jobs in their occupations. As well, they are part of the pool who are competing for the handful of jobs in industries where they are not qualified.

It is clear why the unemployment rate has taken so long to return to the “natural rate” and it is easy to prepare the chart that illustrates the challenge.

What is the remedy?

 

©Copyright 2011 by CBER.

U.S. Employment Situation Improves

horvath Leave a comment

The Bureau of Labor Statistics recently announced that wage and salary payrolls added 200,000 workers in December. This means that about 133,000 net jobs were added on a monthly basis in 2011. There was marked improvement as the year progressed, as about 143,000 jobs were added a month for the last 6 months of the year. Sectors adding jobs were transportation and warehousing, retail trade, manufacturing, health care, and the extractive industries.

This rate of growth has been sufficient to gradually reduce the unemployment rate, which reached 8.5% in December. It is necessary to add about 225,000 jobs a month on a sustained basis to lower unemployment significantly.

There are about 13.1 million unemployed workers. Most likely that number understates the severity of the situation as it does not include discouraged workers or those who did not want to deal with the hassles of seeking unemployment.

It is important to note that 5.6 million have been without work for 27 months. (Keep in mind the total number of unemployed people in January of 2001 was 6.0 million people).

The jobless rates for men (8.0%) and women (7.9%) are similar, while teenagers come in at 23.1%. The Asian population has the lowest unemployment rate at 6.8%, followed closely by whites at 7.5%. Hispanics have a jobless rate of 11.0% and blacks register 15.8%.

The Q4 preliminary Real GDP report is scheduled to be released in the latter part of January and is expected to be in the 2.5% to 3.0% range, a marked increase from the first part of the year. The combination of improved output and the increase in the number of jobs added bodes well (but not great) for 2012.

 

©Copyright 2011 by CBER.

ISM Manufacturing Index Points to Continued Growth

horvath Leave a comment

The Institute of Supply Management produces the Purchasing Managers Index (PMI), a measure of sentiment among manufacturing purchasing managers. The November PMI registered 52.7, an increase from 50.8 in October. November marks the 28th consecutive month of expansion for the PMI and the manufacturing sector.

Generally speaking, a reading above 50 indicates that the manufacturing economy is expanding while a reading below 50 points to a general contraction in manufacturing. A reading above 42.5 points to expansion in the overall economy. (November is the 30th month the PMI has been above 42.5).

Looking back over the past decade, manufacturing was hit hard during the 2001 recession and did not show sustained expansion until mid-2003. Sentiment remained strong for about a year then gradually tapered off with a severe decline in mid-2008. Despite 28 months of expansion, the PMI approached 50 in October.

Manufacturing is important because it is a source of primary jobs. In Colorado it is a particularly important part of the Boulder, Larimer, and Weld Counties. Each of the three areas has different manufacturing strengths.

©Copyright 2011 by CBER.

Chance of Recession Recedes – The Conference Board

horvath Leave a comment

There are signs the economy is improving. The unemployment rate is trending downward, retail sales are trending upward, and manufacturing has added jobs in 2012. For the 220,000+ unemployed Coloradans and those who aren’t captured in the UI numbers, it feels like the Great Recession never ended.

In recent months, The Conference Board (TChad demonstrated an ability to more accurately assess the economy than other groups. As a result, people took notice when they pushed the odds of another downturn up to 52% in October. A short-term historical look at TCB’s chance of recession statistics follows:
• July   17%
• August   33%
• September  45%
• October  52%
• November 32%
• December     9%

It is good news that the November and December percentages dropped off significantly. If a recession had occurred, it would have been short and shallow – barring a major shock. The economy has performed at a subpar level for so long and the recovery has been so weak that there would be little room for further deterioration in the event of another downturn.

Within the past month there has been reason to be more upbeat. Patience will continue to be a virtue as Coloradans weather the recovery.

 

©Copyright 2011 by CBER.

Conference Board and Moody’s Foretell Weak Growth in 2012

horvath Leave a comment

On Halloween, Moody’s released a frightfully optimistic forecast for 2012. It calls for no recession, Real GDP growth of 2.8%, an unemployment rate of 8.8% and the creation of 1.4 million jobs.

About 10 days later, The Conference Board (TCB countered with its latest take on where the U.S. economy is headed. In the spirit of the season, that update states that the economy is a real turkey.

TCB’s outlook follows:

Real GDP
2011  1.7%, up from 1.6% last month
2012 1.1%, down from 1.8% last month
2013 1.9%
TCB projects 0.7% growth in Q4 2011, while Moody’s foretells expansion in the range of 2.5%. TCB sees Q1 2012 growth of 0.5% followed by expansion of 1.2% in Q2 2012.

Consumer Spending
2011 2.1%, down from 2.2% last month
2012 1.9%, up from 1.5% last month
2013 1.6%
Consumers will remain cautious.

Capital Spending
2011 8.8%, up from 6.9% last month
2012 5.8%, up from 5.5% last month
2013 5.1%
The private sector will be less than robust in the months ahead.

Net Exports (billions)
2011-416.0, increased from -$398.3
2012 -430.8, increased from -$370.6
2013 -418.3.
There are many factors that could cause the trade deficit to increase such as higher prices for a barrel of oil and reduced demand for American goods and services in Europe.

Two things are certain. First, there is agreement that the outlook for 2012 is not robust! Second, “not robust” covers a wide range of economic conditions.

©Copyright 2011 by CBER.

Is a Recession on the Horizon?

horvath Leave a comment

The Wall Street Journal recently reported that The Conference Board has put the chance of a recession at 45% within the next 12 months. This is higher than other polls, which are more in the neighborhood of 1-in-3. TCB Chief Economist Bart van Ark’s projection is up from 1-in-3 in August and 1-in-6 in July. The WSJ noted, “For the last 23 years, a downturn has followed every time The Conference Board’s estimate topped 40 %.”

This news is significant because for the past year The Conference Board has unfortunately has more accurately projected the performance of the U.S. economy than such groups as Kiplinger’s, Moody’s, and the National Association of Business Economists. In some cases, these groups provided projections that pointed to a recovery.

The Conference Board’s outlook for the remainder of 2011 and 2012 is:

Real GDP
2011 1.6%
2012 1.8%
A slight improvement is on tap for the second half of 2012.

Consumer Spending
2011 2.1%
2012 1.9%
The consumer will not jumpstart the economy

Capital Spending
2011 6.9%
2012 5.5%
The private sector will be less than robust over the next 18 months.

Net Exports (billions)
2011 -$398.3
2012 -$370.6
Slight improvement in the trade deficit.

This is not a pretty picture!

 

©Copyright 2011 by CBER.

10 Years After 9/11 – Summary of Impacts on Colorado

horvath Leave a comment

This is the final post summarizing the way the economy has performed in the 10 years after 9/11. The series of posts began in early August and has included a review of tourism; construction, housing, and financial activities; retail sales and personal services; high tech and the military.

Tourism

• From an employment perspective, tourism (accommodations and food services) has expanded in Colorado since 2001. Competitiveness within the industry has increased, as evidenced by the flat growth in output.

• In Colorado, the airline industry was “restructured” after 9/11.

• The impact of 9/11 was short term. These declines may have been offset by gains in emerging industries,
such as teleconferencing and other means of communications.

Construction, Housing, and Financial Activities

• Construction, housing (prices and foreclosures), and finance are all interrelated. A portion of today’s
problems can be tied to 9/11 and the 2001 recession. There was a mindset that the country could “spend” its way back to prosperity. That mindset created problems when overextended consumers lost their jobs or saw declines in the values of their houses.

• Construction output peaked in 2000 and has dropped-off since. From an employment standpoint, there was a slight decline during the 2001 recession. A much more severe drop-off began in 2008.

• Creative financing allowed financial employment to grow throughout the 2001 recession. Some of the
products that spurred that growth were problematic in the second half of the decade. In turn, layoffs in the
financial sector began in 2007 and have continued since. These declines are a function of lack of activity,
consolidation, automation, bank failures.

• Year-end equity market values are about the same in 2010 and 2000.

Retail Sales and Personal Services

• Sales of retail goods and personal services has become more competitive during the past decade, yet
employment has remained relatively flat. Increased savings in recent years may be an indicator that consumers learned from the 2001 and 2008 recessions that they have limited resources that can be allocated to the consumption of goods and services.

High Tech (Manufacturing; Information; and Professional Technical Services)

• Employment has dropped significantly as a result of increased efficiencies, outsourcing, and offshoring. At
the same time output has risen dramatically. MIPTS is the driver of the state economy. 9/11 played a role in the adoption of high technology goods and services (surveillance, security, teleconferencing, etc.)

Military
• The U.S. military has increased their dependence on Fort Carson since 9/11.The movement of troops in and out of the base have had a noticeable impact on the El Paso County economy.

The “Lost Decade” was a turning point in the structure of the U.S. and Colorado economies. While 9/11 did not cause this transformation, it played a role in accelerating the change that occurred in some industries.

For additional information, see The Colorado Economy Ten Years After September 11, 2001 at cber.co in the Special Reports section.

©Copyright 2011 by CBER.