Posts Tagged ‘Department of Labor’

October Job-Creation Numbers Show Slight Uptick

Monday, November 26th, 2012

The October employment report won’t blow anyone out of the water, but showed a modest improvement that caused many to breathe a sigh of relief.  According to the Department of Labor, 171,000 jobs were added in October – the highest number since February.  Retailing (up 36,000); healthcare (up 31,000) and business services (up 51,000) showed the most significant gains.  August and September employment numbers were also revised upwards by 84,000 jobs.  The nation’s unemployment rate stood at 7.9 percent, a slight tick upwards from the 7.8 percent reported in September.

Possibly of greater significance is the fact that the workforce showed signs of growth, with the labor force participation rate rising to 63.8 percent.  More than 500,000 Americans started job hunting in October.  The current number includes 12.3 million people who have no jobs; 8.3 million who work part-time; and 2.4 million who have stopped looking for work.  Compare this with October, 2009 – at the height of the Great Recession — when the unemployment rate was 10 percent.  Prior to the recession, the unemployment rate averaged five percent or less. Even though it has declined from its peak, it is still approximately three percent less than what is considered to be full employment.

Writing in The New Yorker, John Cassidy says that “Over the past year, the total number of people employed has risen from 140.3 million to 143.4 million, according to the household survey.  After allowing for population growth, the number of people unemployed has fallen by a million, and the number working part-time or no longer actively looking for work has dropped by about half a million.  The number of people who have been out of work for more than six months – the hard-core unemployed – has fallen by more than 800,000, and it now stands at five million.”

Despite the upbeat news, Americans still are not seeing any improvement in their standard of living.  In October, the average hourly wage for workers in the non-farm sector fell one penny to $23.58.  Wages have risen a scant 1.6 percent in the last year, less than the inflation rate.

The Truth About Those Unemployment Numbers

Monday, October 29th, 2012

The nation’s unemployment rate fell to 7.8 percent in September, the lowest level reported since January of 2009.  That is a 0.4 percent decline from the 8.1 percent reported for the previous month, yet represents a slight hiring slowdown after the Department of Labor revised the July and August numbers upwards by 86,000.  A total of 114,000 jobs were added in September.

Despite the good news, the fact remains that the American work force is now down six million individuals from its 2007 levels. After adding those six million to the total, the unemployment rate rises to 11 percent.  These individuals are also known as “underutilized workers. Approximately one-third of that six million are actively looking for work; the rest have left the work force due to retirement, disability or another reason.  All told, 161.79 million American are currently employed.

Most people don’t realize that the jobs report actually collects data from two separate surveys.  In one, 140,000 employers report how many people are on their payrolls; in the second, 873,000 households report the number of members who have jobs.  While the employer-generated statistic reported in September was expected by economists, the household survey results were a surprise.  It reported the highest number of jobs filled since June of 1983.  It is not uncommon for the surveys to deviate from each other.   Here is how the household survey works is taken: an individual in the chosen household is asked if they own a business; do they work for pay; are they self-employed; do they work part time or full time.

Additionally, suggestions that the federal government had “cooked the books” are “nonsense”, according to New York Time s columnist and Nobel Price-winning economist Paul Krugman. “Job numbers are prepared by professional civil servants at an agency that currently has no political appointees,” Krugman wrote in a recent column.  “Furthermore, the methods the bureau uses are public – and anyone familiar with the data understands that they are ‘noisy,’ that especially good (or bad) months will be reported now and then as a simple consequence of statistical randomness.  And that, in turn, means that you shouldn’t put much weight on any one month’s report.”

Condoleezza Rice Breaches Augusta National’s Men Only Membership Rule

Tuesday, September 11th, 2012

As the nation celebrated the 40th anniversary of Title IX this summer, the previously all-male Augusta National Golf Club invited the first two women to join its ranks.  The invitation to former Secretary of State Condoleezza Rice — whose handicap is reported to be between 13 and 14 — and South Carolina financier Darla Moore came at a time when Augusta National was under considerable pressure to allow women members.  Augusta National’s chairman, Billy Payne, termed the decision “a significant and positive time in our Club’s history.”

Not surprisingly, opinion on the invitations differs.  Writing in Time, Sean Gregory says that “”If you want to give Augusta some leeway (in terms of Title IX), is it maybe 30 years too late?  Back then, Title IX had been on the books for ten years, Billie Jean King had beaten Bobby Riggs, and women were making progress on both ball fields and at the workplace.  Yes, it’s late, but at least it has happened.  Augusta National finally has female members.”  Curiously, all the discrimination hasn’t stopped women from golfing.  There are more than 26,000,000 golfers in the United States; nearly 25 percent are women.  To this day, 24 golf courses in the United States don’t allow women members; of those; four are located in metropolitan Chicago.

Lauren Stiller Rilkeen, writing in the Harvard Business Review, says  that  “The controversy surrounding the club’s long-standing refusal to admit women wasn’t about golf in general or Augusta in particular.  It was about access.  Significant business decisions are more often made by men, and the proof is in the data — which has barely moved in years.  Approximately 16 percent of corporate board seats and 15 percent of the highest-ranking executives are female, and women continue to earn less than their male peers.  People (of either gender) tend to give jobs, deals and promotions to those they know and trust — and that trust is built through connections made in clubs, at dinners, and during other social events.  When women are denied admittance to places where powerful men gather, they are therefore also denied networking opportunities.”

Some believe that threatened financial pressure caused Augusta National to invite Rice and Moore to join because some sponsors reportedly threatened to withdraw their support.  As long ago as 2003, women’s rights activist Martha Burk tried to talk corporate leaders into withdrawing their financial support for Augusta National and the Masters.  “My first reaction was, we won — and we did,” Burk said regarding Rice’s and Moore’s invitations.  “By we, I mean the women’s movement and women in the United States, particularly those in business.”

And what about women being allowed into athletics in general?  Despite the significant increase, the record of Title IX is still mixed.  On the plus side, in the four decades since Title IX was enacted, more than six times as many women compete in college sports as did in 1972.    In 1972, for example, approximately 32,000 women competed in collegiate athletics.   Just two percent of university budgets funded women’s sports; athletic scholarships for women were virtually non-existent.   Today, nearly 200,000 women participate in college sports; 48 percent have scholarships at NCAA Division I schools.  The bad news is that those numbers don’t correlate with the fact that nearly 60 percent of college students are women.  Unfortunately, access to competitive women’s sports is still unequal.  Women athletes have fewer opportunities to participate or benefit from athletic scholarships than men.  Low-income, minority and immigrant women are less likely to play sports than middle-income white women.

Bernanke Defends Fed Policy on Job Growth, Inflation

Wednesday, February 22nd, 2012

Although the economy has improved in the past year, Federal Reserve Chairman Ben Bernanke told lawmakers that they still must cut the growing budget deficit.  “We still have a long way to go before the labor market can be said to be operating normally,” Bernanke said in testimony to the Senate Budget Committee.  “Particularly troubling is the unusually high level of long-term unemployment.”

According to Bernanke, the 8.3 percent unemployment rate understates the weakness of the labor market.  He reminded the committee that it is necessary to also consider other measures of the labor market, including underemployment.  Although the jobless rate has fallen five months in a row, it is still higher than the 5.2 to six percent that the Fed believes is consistent with maximum employment.  The percentage of the unemployed who have been jobless for 27 weeks or longer rose to 42.9 percent in January, compared with 42.5 percent in December, according to the Department of Labor.

“Over the past two and a half years, the U.S. economy has been gradually recovering from the recent deep recession,” Bernanke said.  “While conditions have certainly improved over this period, the pace of the recovery has been frustratingly slow, particularly from the perspective of the millions of workers who remain unemployed or underemployed.”

At the same time, Bernanke cautioned the Senators against holding back short-term economic growth by cutting the budget too much in the name of controlling the deficit.

The upbeat jobs data – the private sector added 243,000 jobs in January, sending the unemployment rate down to 8.3 percent – caused some Senators to ask about the Fed’s monetary policy as the economy shows more signs of life.  The Federal Open Markets Committee (FOMC) recently said that it expected to keep interest rates at historically low levels through late 2014.  Bernanke said the strategy is a reaction to concerns that low interest rates might set off inflation by noting that prices did not rise significantly during 2011.

Rather, Bernanke said that the Fed is consciously taking a “balanced approach” to spur economic growth with low inflation.  Previously, Bernanke told the House Budget Committee that the Fed would not sacrifice its two percent inflation goal to jump start employment.  ‘Over a period of time we want to move inflation always back toward 2 percent,” Bernanke told Representative Paul Ryan (R-WI), the committee’s chairman.  “We’re always trying to bring inflation back to the target.”

Bernanke offered a strong defense of the Fed’s inflation goal after Ryan suggested it should tolerate higher inflation to assure maximum employment.  “In looking at the two sides of the mandate, the rate of speed, the aggressiveness, may depend to some extent on the balance between the two objectives,” Bernanke said.  “We are always trying to return both objectives back to their mandate.”  Ryan, who has backed legislation to require the Fed focus exclusively on stable prices, said that he is “greatly concerned to hear the Fed recently announce that it would be willing to accept higher-than-desired inflation in order to focus on the other side of its dual mandate.”

Also during his testimony, Bernanke reiterated a promise to prevent Europe’s financial crisis from harming the American economy. “We are in frequent contact with European authorities, and we will continue to monitor the situation closely and take every available step to protect the U.S. financial system and the economy,” Bernanke told the Senate Budget Committee.

Job Creation Strengthens, But Unemployment Increases?

Wednesday, January 11th, 2012

American companies added 244,000 jobs to the economy in April, the fastest pace in five years.  In an ironic twist, however, the unemployment rate climbed to nine percent, according to the Department of Labor.  The unemployment rate fell to 8.8 percent in March after dropping continuously since November’s rate of 9.8 percent rate. Economists had predicted that just 186,000 jobs would be added, so the numbers show that the economy is gaining strength.  “What we’re seeing is a sustained pick-up in hiring and it suggests that businesses have gained enough confidence to look past short-term fluctuations in demand,” said Aaron Smith, a senior economist at Moody’s Analytics.

“Headwinds remain, but not enough to derail the recovery or set us back momentarily,” said Diane Swonk, chief economist at Mesirow Financial in Chicago, although she remains cautious about the outlook.  According to Swonk, the increase in new unemployment claims were reported in the weeks after the April jobs surveys.  Job losses in the public sector could intensify, with more teachers getting laid off as the school year ends and local governments deal with budget shortfalls.

The number of officially unemployed Americans totaled 13.75 million in April, an increase over the 205,000 reported in March, according to the Labor Department.  “At this point, coming out of a recession this deep, we should be getting unambiguously huge growth, of 300,000 to 400,000 (new jobs) a month,” said Heidi Shierholz, a labor economist at the Economic Policy Institute.  “And it’s just nowhere near that.  We’re still in a rocky place.”

April’s job growth was in multiple sectors.  For example, the retail industry added 57,100, approximately half at general merchandise stores.  Manufacturing added 29,000 more workers in April.  Since December 2009, factory payrolls have risen by 250,000, according to the Labor Department.  Business and professional services, whose wages tend to be higher than average, grew by 51,000, with consulting businesses, computer services and architectural firms experiencing growth.  Educational and health services, and the leisure industry, each also added nearly as many jobs.  Even the construction industry saw a small gain in April.  Government was the sole employment group that declined; its payrolls contracted by 24,000, primarily due to cuts at state and public agencies.

According to Austan Goolsbee, Chairman of the White House Council of Economic Advisers, “The last three months we’ve added more than a quarter million jobs, on average, every month.  That’s very heartening and the fact that it was, really, across a whole lot of industries.”

According to Heather Boushey, an economist at the Center for American Progress, a non-profit think tank in Washington, D.C., “We need to see job growth break above 300,000 a month and stay at that level for many months before the unemployment rate will begin to come back down.  Today’s report provides a number of data points that point toward caution in interpreting the data positively in anticipation of that level of jobs growth returning anytime soon.  The average hours worked for production and nonsupervisory employees was 33.6 hours per week in April, the same as in March.  This remains below the 2000s recovery peak of 33.9 hours per week, and far below the late 1990s peak of 34.6 hours per week.  At the same time, employers shed 2,300 temporary workers, which either means they are hiring permanent employees or they are no longer seeing an increase in demand.

July Jobs Numbers Disappoint

Monday, October 3rd, 2011

ADP, a leading payroll services company, is reporting that private companies added 114,000 jobs in July.  Many analysts had projected an increase in hiring from June, but it is not likely that the unemployment rate will decline even if job growth rose sharply.  ADP’s forecasts are frequently used to measure how the labor economy is performing, but the firm has had its share of missteps, with some estimates on target and others varying sharply from actual government-issued data.  In June, ADP projected that more than 140,000 jobs were added.  The official government report showed that the labor economy had experienced anemic growth during the month, with a net total of only 18,000 jobs created.  Many economists and industry believe that private employers likely added more jobs than previously projected during July.

Not all the news was good, however. Employers announced 66,414 planned layoffs in July, an increase of 60.3 percent over the 41,432 announced in June, according to a report from consultants Challenger, Gray & Christmas, Inc.

Any gain or loss in jobs above 100,000 is considered statistically noteworthy by economists.  Expectations were rather low, however, given the recent bad news about GDP, consumer spending and manufacturing recently.  “We still expect that actual payrolls may have risen by around 50,000 in July,” according to Capital Economics.  “That would be better than the previous two months, but hardly reason for cheer.”  “This pace of job creation usually implies a steady unemployment rate,” according to ADP’s employment report.  Capital Economics said that the latest job gains would not reduce the unemployment rate.  “We are in a process of discovery over whether the slowdown we have seen since March in the U.S. is over and we are entering a new phase of faster growth or that we are in a slump,” said Francisco Torralba, economist at Morningstar Investment Management.

Recently released Institute of Supply Management (ISM) numbers indicate an economy that continues to move barely at a snail’s pace.  The non-manufacturing ISM report showed expanding business activity, new orders and employment, but at a slowing pace.  Planned layoffs reached a 16-month high while the private sector added 114,000 jobs in June, most of them in the small business and the services sector.  “Today’s report shows modest job creation for the month of July at a rate of half what is needed for meaningful employment and economic recovery,” said Gary C. Butler, Chief Executive Officer of ADP. Approximately half of June’s private sector job additions came from small business, which added 58,000 employees, and medium businesses (+47,000).  These statistics mesh with the Challenger, Gray & Christmas job-cuts report, which showed planned layoffs hitting a 16-month high on a “sudden and unexpected burst” in downsizing by large companies.  Merck, Borders, Cisco, Lockheed Martin, and Boston Scientific announced plans to cut 38,000 jobs in July, 58 percent of the 66,414 announced.   According to Dave Rosenberg, who is viewed by many as a perma-bear, it will be really hard for a self-sustaining recovery to pick up.  “The overhang of excessive debt burdens is still with us today and the problem with the government stimulus programs that were put into place is that they were not designed properly; the multiplier impacts never did kick in,” said Rosenberg. “So we can’t ‘grow’ our way out.  Now government sectors in nearly every jurisdiction are tightening their fiscal belts.  Companies and banks retain their extreme stash of cash, if we dare suggest, because they see the economic environment that we do and want to survive the next downturn.”

In the meantime, 400,000 Americans filed for first time unemployment claims in the last week of July, according to the Department of Labor.  Coupled with a revision of initial claims in the previous week to 401,000, the latest update means claims have yet to dip below the 400,000 mark for 17 weeks.

Writing for The Hill, Vicki Needham says that “Economists say these figures are in line with the economy’s slowing expansion and are expecting growth to accelerate through the second half of the year as temporary factors such as high gas prices fade.  While companies aren’t hiring, consumers are being cautious with their money, spending less for the first time in 20 months.  Consumer spending rose only 0.1 percent in the 2nd quarter and households tucked away more savings.”

Stagflation Rears Its Ugly Head

Wednesday, September 21st, 2011

The Consumer Price Index (CPI) climbed by 0.5 percent in July, according to a Labor Department report.  That came after a decrease of 0.2 percent the previous month.  Rising inflation cuts consumers’ buying power.  Average pay, when adjusted for inflation, fell in July and has declined by 1.3 percent in the last year.  Over the last 12 months, prices have gone up 3.6 percent.  Core prices over the last year have risen 1.8 percent — the largest increase since December of 2009. 

“Once again, the consumer was pushed to the wall by rising retail costs,” said Joel Naroff, chief economist at Naroff Economic Advisors.  “It’s bad enough that workers are not getting any pay increases but the surge in retail prices is cutting into spendable income.”  Although many economists and the Federal Reserve expect that higher food and energy prices will prove short lived, that offers little good news to Americans who must find the money to pay for food and gas.  “This is not welcome news for Fed officials who are trying to justify QE3,” First Trust analysts said.

The news also raises the specter of stagflation, a circumstance when the inflation rate is high and the economic growth rate is slow.  Writing for CBS Money Watch, Dan Burrows says that “Prices are growing rapidly but the economy is not.  Sound familiar?  It’s called stagflation — something we haven’t had in three decades — and markets are getting more jittery about its possibility with each passing data point.  A stagnant economy plus inflation equals stagflation, and it could actually be worse for American households this time around, should it come to pass.  Yes, inflation rates of three percent to four percent are nothing compared to the double-digit inflation Americans lived with in the 1970s and early 1980s.  But then households were in much better shape back then because they carried much less debt, be it through mortgages, home equity loans, credit cards or student loans.”

The Hill’s Vicki Needham writes that “The energy index has risen 19 percent over the past year.  Overall, food prices increased 0.4 percent in July, with larger increases in dairy and fruit prices.  The cost of meat, coffee and vegetables all increased.  The core index, excluding volatile food and energy, was up 0.2 percent, slightly below the 0.3 percent increase in each of the previous two months.  Prices are up 3.6 percent from a year ago, the same amount as in May and June.  Core prices are 1.8 percent higher than they were a year earlier, the largest increase in two years, with rent and the rising cost of hotels pushing up housing prices by the most in three years.  Although prices are up, the index of core prices, used by the Federal Reserve to gauge inflation, is within the target range of 1.5 and two percent.  Core consumer inflation is expected to remain between 1.5 and 1.8 percent this year, the Fed has said.  The cost of apparel increased sharply last month, as clothing prices were up 1.2 percent, the third consecutive month of increases.  Clothing costs have increased 3.1 percent during the past 12 months, the largest yearly increase since July 1992.”

With an economy sluggish, and many calling a recession inevitable, the latest CPI number fits with recently released Producer Price Indexes (PPI) which showed prices rising throughout different levels of production.  While recessions are usually deflationary, rising measures of inflation have sparked fears of stagflation.

Surprisingly, the Chicago area was relatively immune to July’s inflationary numbers.  Consumer prices in metropolitan Chicago declined 0.4 percent in July from June as energy prices fell, according to the Labor Department.  With the exception of food and energy, prices were also down 0.4 percent.  Compared with last year, prices rose 3.2 percent and there was a 17.8 percent spike in energy costs.  When food and energy are taken out of the equation, prices rose 1.6 percent compared with last year.  Food prices remained the same as June, but rose 3.5 percent from July 2010.  Energy prices declined one percent from June as gasoline prices dropped 4.2 percent.  Gas prices were 37.3 percent higher than in 2010.  The biggest price declines were in education and communication, down 3.8 percent; clothing was down 2.6 percent; and transportation was down 1.7 percent.  Housing costs rose 0.5 percent.

There’s A Whole Lot of Shaking Going On

Tuesday, September 6th, 2011

A big shake-up occurred recently in Washington, D.C.,  although it was not of the variety that some would prefer.  The nation’s capital was taken by surprise when it was hit by a 5.9-intensity earthquake that rocked the East Coast and was felt as far away as Boston, North Carolina and even Michigan.  Although early reports said that the Washington Monument was tilting slightly, it was later determined that the stately obelisk only had damage to some of the stone in the pyramid that tops the monument.  Approximately 45 minutes after the 1:51 p.m. quake, Fox News started reporting that it had received reports that the Washington Monument was leaning.  Atlanticwire noted that Twitter “immediately seized on it” and quoted Twitterer Patrick Tansey, as tweeting that “I just walked past the Washington Monument, it’s not tilted at all.” 

The Associated Press reported that “The National Park Service (NPS) says all memorials and monuments on the National Mall were evacuated and closed after an earthquake struck near the nation’s capital.  No damage was reported.”  Park Service spokesman Jeffrey Olson said there was “absolutely no damage” to the Lincoln Memorial or other memorials along the Mall.  According to the NPS, a preliminary inspection shows the Washington Monument to be structurally sound.  But it “is evaluating the structures to ensure that they are structurally sound and safe for all visitors.  The Washington Monument, because of its structural complexities, will remain closed until further notice.  It is possible that the Lincoln Memorial and Jefferson Memorial could open as early as this evening after preliminary inspection.  The Old Post Office Tower will open on Wednesday morning.” 

One Washington landmark was damaged in the quake.  Washington National Cathedral, an impressive Gothic structure favored by tourists, suffered what is being termed as “significant” damage.  “The building will retain structural integrity,  but the damage to the central tower is quite significant,” Cathedral spokesman Richard Weinberg said, noting that engineers and stonemasons are assessing the full extent of the damage, how costly the repairs will be and when the cathedral might reopen. 

The quake was shallow, occurring three miles below the earth’s surface.  Washington Metro and commuter rail services ran normally the next morning, but authorities closed several government buildings pending damage inspections.  These include the Departments of Agriculture, Homeland Security and Interior.  The Labor Department and Health and Human Services buildings were closed at first but later reopened.  D.C. public schools were closed, in addition to schools in several districts in Virginia and Maryland.

Not surprisingly, there were some initial fears that terrorists had struck the region as office workers were evacuated from their buildings.  “In Washington, 10 years later, every day is September 12,” Marc Fisher.  “When the office ceiling shifts to and fro, and the pens and cups fall off the desk, it’s scary enough. But in a terror-scarred city, thoughts go immediately to evil attack rather than natural disaster.”  Or, as the Los Angeles Times says, “when a building shakes in Washington, ‘earthquake’ does not spring to mind.  Instead, as the magnitude 5.9 earthquake shook the capital on Tuesday, it sparked immediate fears of a terrorist attack for congressional staff members accustomed to repeated warnings about man-made threats.” 

“At first we weren’t sure exactly what it was, but as we heard the Capitol Police officers and other staff shouting evacuation orders, we knew it was serious,” said congressional staffer Rachel Semmel, who fled without her keys or wallet.  “For a brief moment during evacuation, it was very scary.” 

Senate Sergeant at Arms Terrance Gainer said that some buildings in the Capitol complex sustained structural damage and “a couple minor twisted ankles.  Aside from people being a little bit anxious and nervous,” most Capitol complex employees are fine, Gainer said. 

To watch the White House shake during the earthquake, click here.

Where’s Our Recovery? Job Growth and Productivity Falter

Monday, June 13th, 2011

Sluggish job growth in May could be a sign that the economic recovery is losing momentum.According to the ADP May Employment Report, a mere 38,000 jobs were added in the private sector on a seasonally adjusted basis.  That was well below consensus estimates of 170,000 new jobs.  The report also revised downwards the estimated change from March to April from 179,000 to 177,000. “A deceleration in employment, while disappointing, is not entirely surprising,” the report said.  “In the 1st quarter, GDP grew at only a 1.8 percent rate and only about 2¼ percent over the last four quarters.  This is below most economists’ estimate of the economy’s potential growth rate and normally would be associated with very weak growth of employment.”

Patrick O’Keefe, director of economic research at J.H. Cohn, said that although some seasonal factors may have been at work in the recent claims data and in the ADP estimates, the report still disappointed.  “We can put away our balloons and party hats today,” he said.  “We expected a pull back in the rate of acceleration, instead we got deceleration.  It appears that the general expansion has lost a bit of momentum and employment numbers, which were already lethargic, are slowing further.”

“This only adds fuel to the argument that the slowdown story is here in the U.S.,” said Tom Porcelli, chief economist at RBC Capital Markets.  “I am fairly confident that people are going to be scaling back their estimates for nonfarm payrolls.  While it is a good thing that small and medium-sized companies are adding payrolls, there is no doubt that the pace has slowed.  This is exactly what we do not want when other significant data shows things are slowing down as well.  Having said that, I still do not believe the Fed will initiate QE3.”

Writing in the National Journal, Jim Tankersley takes a more optimistic viewpoint. According to Tankersley, “Reality is a little more positive and a lot more complicated than that.  Wall Street analysts are fairly united in their view that the recovery has entered a “soft patch,” just like it did last year, and that sooner or later, growth and job-creation are on track to pick up again.  Several analysts and columnists have been reminding Americans that recoveries from financial crises can often feel like stop-and-go traffic on the freeway.  For now, the economic brakes seem to be pumping.  The 2010 slowdown flowed from worries over Europe’s sovereign debt crisis.  This one is likely a combination of several factors.  The spike in oil and food prices has spooked confidence — though consumers are still spending apace, dipping into their savings to keep up — and may be driving businesses to scale back hiring.”

On the MarketWatch website, Rex Nutting says that “If you recall that government employment is declining by almost that much every month, the ADP report implies only a very small increase in total employment.  This is no way to get the unemployment rate down from nine percent.  The economy has been buffeted by both natural and man-made forces.  Extremely bad weather earlier in the year depressed activity, as did the surge in commodity prices, especially for energy and food.  Then the Japanese earthquake and tsunami knocked out vital supply chains.  Global economic growth, which had given a big boost to U.S. exporters, is slowing. Europe is dead in the water, so is Japan.  The fast-growing developing nations such as China, India and Brazil are downshifting to avoid overheating.  The strongest sector of the U.S. economy — manufacturing — is still growing, but the momentum is fading.  The Institute for Supply Management’s closely watched diffusion index (Defined by Investopedia as “A measure of the breadth of a move in any of the Conference Boards Business Cycle Indicators (BCI), showing how many of an indicators components are moving together with the overall indicator index) plunged by 6.9 points to 53.5 percent in May, the largest one-month decline since 1984.

Companies may need to start hiring again as a new report from the Department of Labor is showing that the productivity of American workers slowed in the 1st quarter and labor costs rose as companies boosted employment to meet rising demand.  The measure of employee output per hour increased at a 1.8 percent annual rate after a 2.9 percent gain in the prior three months, revised figures from the Labor Department showed today in Washington, D.C.  Employee expenses climbed at a 0.7 percent rate after dropping 2.8 percent the prior quarter.

Productivity measures the amount of output per hour of work.  A slowdown in growth is bad for the economy if it persists.  But it can be good in the short term when unemployment is high because it can mean that companies are reaching the limits on how much extra output they can get from their existing work forces.  Output grew 3.9 percent in 2010, the biggest increase since 2002.  But many economists believe it will slow to 50 percent of that rate this year.  The expectation is that companies will hire new workers to further boost output.

With Inflation on the Rise, Is the Era of Cheap Food Over?

Tuesday, April 19th, 2011

The long-feared specter of inflation is finally rearing its ugly head, as consumer prices rose by 0.5 percent in February, according to a report from the Department of Labor.  Take away food and gas prices and the increase was jut 0.2 percent.  “All signs indicate that, against the backdrop of a strengthening economy, inflation is beginning to heat up as well,” said Jim Baird, chief investment strategist of Plante Moran Financial Advisors.  The Department of Agriculture says that food prices could climb three or four percent in 2011.

Although core consumer prices have risen at the slow pace of 1.1 percent over the past year, they’ve also started rising more quickly in the past five months.  The Federal Reserve pays closer attention to the core rate when it determines interest rates and examining whether inflation is under control.  The central bank believes recent price increases are likely to prove temporary.  Critics of the Fed argue its looser-money policies have contributed to the price spikes.  “If core inflation continues to rise, while job growth remains slow and the U.S. expansion is threatened by developments in the Middle East and Japan, then the Fed will be in a very tight spot,” said Ellen Beeson Zentner, senior U.S. macroeconomist at Bank of Tokyo-Mitsubishi.

The lion’s share of the blame for renewed inflation is sharply rising energy prices, which soared 3.4 percent in February alone and represent an 9.8 percent increase over the last three months.  A gallon of gas has risen 50 cents in the first months of 2011, primarily a result of political unrest in countries such as Egypt, Tunisia, Libya and Bahrain.  The cost of food rose 0.6 percent in February and 2.8 percent in the last year, driven largely by global demand.  Prices for corn and wheat have soared to a two-year high; sugar prices have climbed to their highest level in 30 years.  Large-scale crop failures around the world have contributed to the spike.  Because these farm staples are used to feed livestock or are included in many packaged goods, the prices of many grocery items — ranging from chicken to cereal — have risen accordingly.  Housing prices, which constitute approximately 40 percent of the core Consumer Price Index, rose for the fifth consecutive month, by 0.1 percent.

For Americans, the return of inflation could signal the end of the era of inexpensive food. Typically, Americans have spent just 10 percent of their paychecks on food, compared with as much as 70 percent in some countries, particularly in sub-Saharan Africa.  Some economists are wondering if the nation’s cornucopia of affordable food is a thing of the past.  “Food prices have been rising a lot faster, because underlying costs have really shot up. You’re seeing some ingredients up 40 percent, 50 percent, 60 percent over last year,” said Ephraim Leibtag, a U.S. Department of Agriculture economist.  “When you see wheat prices close to 80 percent up, that’s going to ripple out to the public.”

Fierce weather patterns, which some scientists blame on climate change, are making the problem worse.  Unprecedented floods in Australia destroyed much of the wheat crop, while a drought threatened China’s.  “We’re not sure if these extremes in weather are the new normal,” said Clive James, founder of the not-for-profit International Service for the Acquisition of Agri-Biotech Applications.  “But the patterns we’ve seen in the past few years show that this may become more the rule than the exception.”

In nations where people spend 30 to 70 percent or more of their income on food, starvation is on the rise.  The World Bank has reported that as many as 44 million people have been forced into hunger because of rising food prices.  That has helped fuel the conflict in Libya and ousted leaders in Tunisia and Egypt.  “The situation is volatile and we’re at a point of transition,” said Abdolreza Abbassian, a grain economist with the United Nations’ Food and Agriculture Organization.