Posts Tagged ‘economy’

Want to Feel Better About the Economy? Take a Look at the Rest of the World

Monday, September 10th, 2012

There is no doubt that America needs to get its economic mojo back: in the 2nd quarter its GDP grew at an annualized rate of 1.7 percent, according to revised figures published on August 29th.  That growth number is down from two percent in the 1st quarter and 4.1 percent in late 2011. But, anyone ready to ascribe that number to mismanagement or competition from emerging economies should consider the state of much of the developed world.

Europe remains the cautionary tale with GDP shrinking by 0.2 percent (an annualized decline of 0.7 percent) in the 2nd quarter. The Greeks are on the verge of quitting the common currency and Spain is looking for a bigger bailout.  According to the Economist, the research firm Markit is predicting a further fall in GDP in the 3rd quarter.

Finland’s economy shrank by 1.1% in the second quarter. The country had been one of the euro zone’s best performers, but the crisis is now starting to take its toll on exports, which account for 40% of Finnish GDP. In July the finance minister said Finland would “not hang itself to the euro at any cost”.

The Japanese economy is feeling the European gloom with exports to the European Union falling by a steep 25 percent in the year to July.  The only reason their economy grew by 3.5 percent over the last 12 months is because of all the reconstruction work after the tsunami and earthquake.

Even the high-flier BRIC countries (Brazil, Russia, India and China) are sputtering.  Brazil’s fall from grace has been particularly marked:  Brazil’s economy grew at an annualized pace of only 1.64 percent in the April-June period. It is forecasted to grow 1.9 percent this year, less than the 2.15 percent in the U.S. and 2.5 percent expected in Japan. One bright spot – Brazil scored the rare coup of winning the bid for the 2014 World Cup and the 2016 Summer Olympics, leading to $38.1 billion in foreign direct investment this year.

Flagging imports suggest that China’s slowdown will prove to be more severe than previously expected.  The country’s exporters are also having a hard time.  In August, new export orders for manufacturers were at their weakest since March 2009, according to Markit.

So, while the campaign rhetoric heats up, with each side blaming the other, it is important to see the bigger picture. A big part of our weak job numbers was that U.S. factory activity shrank for a third straight month in August — because of factors outside our control.  Weak demand from China (our 3rd largest market) hits our farmers, IT firms and chemical companies. When Europe contracts, that makes our manufacturing free fall because they buy 20 percent of our exports.  In the end, we need to place our woes in context and recognize that the recession is indeed world-wide.

June 2012: Jobs Fizzle

Monday, July 16th, 2012

80,000 was the number. 200,000 is what we need for this to feel like a recovery. And 8.2 is the number that keeps hanging on.  The nation’s unemployment rate was unchanged at 8.2% (that’s 13 million unemployed workers) for the second consecutive month, the Labor Department said Friday.  Businesses added just 84,000 jobs, while governments cut 4,000. Monthly job growth averaged 226,000 in the first quarter but slowed dramatically to an average 75,000 a month in the second quarter.

In response, the Dow Jones industrial average fell 124.20 points to close at 12,772.47, wiping out the Dow’s gain for the week, and Treasuries rose as investors moved their money into lower-risk assets. And the Presidential campaigns took the opportunity to issue a number of extrapolations and the usual host of inaccuracies and overreaches. The Democrats claimed that the unemployment rate has been trending down since hitting 10.10% in October 2009; what they forget to point out is that that’s because of the large numbers of discouraged workers – almost 1 million — who’ve stopped looking for jobs. The Republicans, on the other hand, said that the jobs report proves that the Obama administration’s policies haven’t worked, forgetting that the US was hemorrhaging 700,000 jobs a month when Obama took office. According to Politifact, Obama’s record is 22 consecutive months of private-sector job growth, beginning in Feb. 2010, during which the number of jobs grew by almost 3.16 million, or about 143,000 per month.

Putting the candidates aside, the reasons for the anemic job numbers have started to sound like a bad drinking-game song being played by the pundits as they make the circuit of the talk shows: The warm weather drew construction and manufacturing activity into January and February, but dampened spring hiring; the manufacturing sector contracted for the first time in three years in June;  retail sales were weak, Corporate profits fell in the first quarter of 2012,  the first decline since 2008, according to the Commerce Department; the European Central Bank cut interest rates – a sign of nervousness about their prospects; the end-of-year fiscal cliff sent ripples through the public and private sectors with its specter of higher taxes and reduced government spending; a lame-duck Congress couldn’t pass a Jobs Bill; Republican governors made draconian cuts and instituted public-worker layoffs at the state level; and the Administration didn’t put a big enough stimulus in place which is creating an undertow. Take your pick.

So, are there any bright spots? A few.  Friday’s report showed ticks upward in average hourly earnings (to $23.50, from $23.44 in May) and the length of the typical private sector workweek (34.5 hours, from 34.4). Also, a curious fact is that the number of teens in the workforce spiked by 140,000 to 4,528,000, or 3.2% of the entire U.S. workforce:  So why are teens making out so well in this first month of summer while everyone else, well, isn’t? The Daily Kos reports from 5 May 2012:  President Obama’s Jobs program, which is lining up commitments from the private sector and from government to create summer jobs and internships for young people, has announced commitments for 90,000 paying jobs, up from the 70,000 previously announced in January.

It’s the Jobs, Stupid.

Wednesday, February 16th, 2011

President Obama recently took a short stroll from the White House and through Lafayette Park to give a speech in what might be termed enemy territory – the U.S. Chamber of Commerce. The subject was jobs and what the Chamber can do to jump start hiring by the companies that form its membership.  Noting that American companies are sitting on approximately $2 trillion in cash, the president challenged the Chamber to invest some of that money by hiring Americans who are out of work.

“Many of your own economists and salespeople are now forecasting a healthy increase in demand.  So I want to encourage you to get in the game,” Obama said, referencing the tax credits his administration negotiated to spur new investments.  “As you all know, it is investments made now that will pay off as the economy rebounds.  And as you hire, you know that more Americans working means more sales, greater demand and higher profits for your companies.  We can create a virtuous cycle.  Not every regulation is bad; not every regulation is burdensome on business,” he said.  “Moreover, the perils of too much regulation are matched by the dangers of too little.”

Relations between the president and the Chamber – one of the nation’s most powerful lobbying groups — have been chilly and the speech was an effort to find common ground.  Since the Democrats’ defeat in the November mid-term election, Obama has been trying to mend fences with big business.  One part of that strategy was to hire Bill Daley, a former Chamber board member and JP Morgan Chase executive, as his new chief of staff to replace Rahm Emanuel.  Additionally, he named General Electric CEO Jeffrey Immelt to head an economic advisory panel dedicated to job creation.  According to the president, “I will go anywhere anytime to be a booster for American business, American workers and American products, and I don’t charge a commission.”  

The Chamber gave the president a warm welcome, with the organization’s president Thomas Donohue expressing the body’s “absolute commitment” to working with the White House on turning around the economy and creating new jobs.  “Our focus is finding common ground to ensure America’s greatness in the 21st century,” he said.  “America works best when we work together.”

The president’s remarks came on a day when several Illinois firms warned that they are planning to lay off employees or close facilities. For example, Kmart is planning to close several stores in Illinois.  Gold Standard Baking, Inc., will close a commercial bakery in Chicago, slashing 73 jobs.  Another 67 employees are likely to be laid off at Itasca-based C. D. Listening Bar Inc., which sells DVDs, CDs, books and video games online at  AGI North America, LLC, a paperboard box manufacturing company in Jacksonville, is closing at the end of March, putting 70 employees out of work.  Gray Interplant Systems, Inc. – a warehousing and storage company in Peoria and Mossville – is planning to lay off 167 employees in April.

So why are American companies not hiring – or not hiring on their home turf?  According to the Chamber’s Donohue, it’s a variety of reasons, including new regulations contained in the Patient Protection and Affordable Care Act and the Dodd-Frank financial reform bill. Additionally, companies are holding onto their cash to fund future acquisitions.  Consolidation makes new regulatory burdens easier to bear.  Once companies’ regulatory costs are clear and under control, they can begin hiring, he said.  Finally, demand remains relatively low.  Once spending improves, the Chamber believes that companies will have no choice but to invest in additional personnel to meet that demand.  As consumer and business spending grows, so should jobs.

And, the jobs are going elsewhere. The Economic Policy Institute, a Washington think tank, says American companies created 1.4 million jobs abroad in 2010, compared with less than 1 million in the United States. The additional 1.4 million jobs would have cut the unemployment rate to 8.9 percent, according to Robert Scott, the institute’s senior international economist.

Half of Companies Plan to Hire New Employees in 2011

Tuesday, December 28th, 2010

Half of Companies Plan to Hire New Employees in 2011Approximately half – 47 percent – of American companies whose sales range from $25 million to $2 billion say they will hire more employees in 2011, according to a Bank of America survey of chief financial officers (CFOs).  The new number represents a significant uptick over the 28 percent who planned to hire new employees one year ago.  The news is not all good – 61 percent of companies who do not plan to hire said there is still reduced demand for their products or services.  The survey of 800 firms covered a broad range of industries throughout the United States.

The CFOs are unsure that the economic recovery will last, as well as being concerned about the impact of the healthcare reform law that Congress passed in March of 2010.  Their caution is evident in the fact that – on a scale of one to 100 – the CFOs gave the economy a rank of 47.  This represents a slight increase over the 44 level recorded last year.  An addition 64 percent expect their companies’ revenue will grow in 2011; 55 percent anticipate margin growth.

Despite the challenging economic climate, many CFOs have growing confidence that their companies have weathered the worst of the storm and are poised for expansion,” Laura Whitley, Bank of America’s global commercial products executive, said.  “Although concerns about the economy remain, the increase in CFOs who expect to hire employees could be crucial to improving the nation’s unemployment rate.  It’s exciting to see a more positive mood.”  Yet, she noted, the recovery has been slower than expected.  “When talking with businesses we hear it all the time.”

Spain Wins the World Cup

Tuesday, July 20th, 2010

Global success starts at homeSpain’s extraordinary win in the 2010 World Cup means the country now joins a rarefied group of soccer royalty – Brazil, Germany, Argentina, Italy and France – as one of the handful of countries to win the game’s highest honor.  The defining features of the Spanish team were their midfield dominance — Iniesta, Xavi, Fabregas  and Alonso– and their close passing game (that and the emergence of David Villa as a Paoli Rossi-like figure scoring goals against some of the most impenetrable defenses in recent history). Some of us older fans were even reminded of the French teams of the 1980’s that comprised Tigana, Fernandez, Girresse and the incomparable Michel Platini.  What’s curious is they actually lost their first group match to Switzerland 1-0. The Spanish coach, Vincente Del Bosque, to his credit, didn’t panic and refused to go back on his strategy of attractive, attacking football. Once the Spanish midfield took control of the midfield in a game, it was difficult for their opponents to have a look-in. The mighty Germans, for example, who easily dispatched England and Argentina with their counterattacks, came unstuck against Spain as the Spanish team denied them space and used their short passing game to press their offense.

Spain’s euphoria over its World Cup win is a signal of the profound impact that soccer (and by extension sports) can have on a national psyche.  Hundreds of thousands jammed Madrid’s avenues as an open air bus conveyed the national team past a sea of red and yellow, the colors of the Spanish flag. The celebration in Madrid, where national unity is at its strongest, was expected. But there was support from other places: The Catalonia region, which has long sought greater autonomy, and the separatist Basque region, where anything pro-Spain is often anathema. For a country that emerged from 40 years of brutal fascist rule under Franco and that now struggles with 20% unemployment, the victory couldn’t have come at a better time.  Spanish Finance and Economy Minister Elena Salgado told reporters Monday that winning the World Cup “generates confidence in our country, here and abroad, and that will also be good for GDP,” she added. An ABN Amro Bank study into the macro-economic effects of the tournament suggested a World Cup provided a GDP gain of 0.7 percentage points, a figure that some economists dispute. There is no question: Spain deserves the World Cup.  Let us hope it helps to boost the country’s fortunes, from its  anemic growth of 0.1 percent of GDP over the first quarter of this year and its projected 0.3 percent contraction over 2010.

Rodrigo Silva is AlterNow’s soccer correspondent.  Based in Malaysia, he teaches business and marketing at the MBA level at Segi College in Kuala Lumpur.

Employees Are Saying “I Quit” Again

Monday, June 28th, 2010

Workers say “I quit”; a sign that the economy is improving.  Two short words are being heard in offices that have been absent for some time.  The words are:  “I quit.”   In the last three months, more Americans have quit their jobs than were laid off, a sharp contrast with the last few years that points to a gradually thawing jobs market. Although some of the quitters have accepted new jobs when they resign, others have no firm offers except for a new-found confidence that they will be able to find employment quickly.  “There is a century’s worth of evidence that bears out this view that quits rise and layoffs fall as the job market improves,” said Steven Davis, a University of Chicago economist.

Long-term trends point to a job market that can only improve.  Already this year, the economy has created a net 982,000 jobs following a recession that wiped out more than eight million jobs.  According to the federal government, the number of people who quit their jobs in April rose to nearly two million, the most in more than a year and a 12 percent increase over January.  Workers were afraid to quit during the darkest months of the recession, and with good reason.  Jobs were in short supply; others feared facing layoff because of the “last hired, first fired” principle.

Fear kept many people in their jobs, according to David Adams, vice president of training at Adecco, a national staffing firm, who says that his firm had trouble recruiting people for open jobs during the recession.  Now, Adams is seeing more people who have jobs looking to interview versus laid-off workers searching for employment.  “The hangover is over.  It’s really starting to move toward a market where the employee can have a lot more confidence making a move.”

Green Buildings Weathering a Tough Economy

Monday, May 3rd, 2010

Building owners, users find green elements save money.Despite the troubled economy, commercial building owners retain their commitment to making their properties more environmentally friendly.  Going green saves building owners and users money and makes sound business sense.

“The fact of the matter is this is just good business – making buildings perform better,” said Dan Probst, an energy and sustainable development expert with Jones Lang LaSalle.  “It’s all about making existing buildings perform better.”  Probst was speaking at a seminar sponsored by the Urban Land Institute, the North Texas Commercial Association of Realtors and the Real Estate Council.  “Their shareholders, customers and employees care about it.”

“Today people simply expect it,” said Michael Buckley, a real estate professor at the University of Texas at Arlington, noting a shift in attitudes towards eco-friendly commercial real estate.  “Cost savings is going to drive things.”  Developers recognize that buildings with environmental and energy design built in have a four percent higher average occupancy and offer significant savings on utilities.  Additionally, corporate America has embraced the concept.

Ernst & Young (E&Y), one of the nation’s largest office tenants, is focusing on locating its offices in green buildings.  More than half of the 6,100,000 SF that E&Y occupies in the United States has energy savings ratings, according to Judy Barth Bowles, the accounting giant’s director of real estate services.  “We’ve looked at everything to maximize the dollars we spend,” according to Bowles.  “We are very cognizant of the energy consumption.  Landlords are very interested, and we give them the push.”

Federal Mortgage Modification Program Hits Target

Thursday, October 29th, 2009

Federal Mortgage Modification Program Hits TargetThe federal government’s program to help homeowners facing foreclosure has reached its target of 500,000 mortgage modifications by November 1.  “There is a lot of work left to do,” said Shaun Donovan, Secretary of Housing and Urban Development.  “Today’s announcement is a good step forward, but we are nowhere near the finish line.”  The long-term goal is to help 3,000,000 to 4,000,000 homeowners over the next three years.

Currently, 63 servicers are participating in the program, an increase over the 47 reported at the end of August, according to Treasury Department data.  JP Morgan Chase has started the most modifications, with 117,000 underway, representing 27 percent of their eligible delinquencies.  Bank of America increased its modifications by 62 percent during September, with nearly 95,000 trial modifications covering 11 percent of eligible loans underway.

Mortgage Bankers Association statistics note that, as of August, one in 7.6 mortgages was late with payments or in foreclosure.  The poor economy and declining real estate prices are the primary reason for these foreclosures.  Additionally, 25 percent of homeowners owe more on their house than it is currently worth.

A September report on loan servicer performance found that 19 percent of eligible homeowners had been offered loan modifications, though problems persist.  For example, Bank of America – the servicer with the most eligible loans – had started modifications on just seven percent of its mortgages during September.

Listen to our podcast on solving the foreclosure crisis.

New Economic Reality Impacts Everyday Life

Tuesday, September 29th, 2009

The long recession has dramatically impacted the lives of all Americans, according to demographic data released by the U.S. Census Bureau.  Commutes are lengthier; people are not moving; immigration is down; and couples are delaying marriage.  The annual American Community Survey report, based on information gleaned from three million households, highlights how deeply the recession impacted all Americans.car_pool_only_lane

The number of people who drive solo to work fell last year to 75.5 percent, the lowest in a decade.  Yet, the average commute time rose to 25.5 minutes, as people left home earlier in the morning to pick up car-pooling co-workers.  Mobility is at a 60-year low, which will impact congressional district reapportionment based on 2010 census data.  The number of foreign-born individuals living in the United States fell to less than 38 million, after reaching an all-time high in 2007.

Of Americans over the age of 15, 31.2 percent reported that they had never been married, the highest percentage in a decade.  According to the survey, the number of unmarried Americans started climbing when the housing market downturn started in 2006.  Sociologists believe that young people are taking more time to achieve economic independence because they are having trouble landing well-paying jobs or are studying for advanced degrees.

“The recession has affected everybody in one way or another as families use lots of different strategies to cope with a new economic reality,” according to Mark Mather, associate vice president of the not-for-profit Population Reference Bureau.  “Job loss – or the potential for job loss – also leads to feelings of economic insecurity and can create social tension.”  With unemployment still rising, Mather notes that “It’s just the tip of the iceberg.”

One Year After Financial Meltdown, Obama Counsels Caution

Monday, September 21st, 2009

On the first anniversary of the collapse of Lehman Brothers and the onset of the global financial crisis,  President Barack Obama used a Wall Street speech to call for stringent new regulation of United States markets.  After Lehman’s collapse, the American government infused billions of dollars into the financial system and took major stakes in Wall Street’s most famous names.  Although this action stabilized the system, it could not forestall a shrinking economy or the highest unemployment rate in 26 years.lehmanbros

“We can be confident that the storms of the past two years are beginning to break,” he said.  As the economy begins a “return to normalcy,” Obama said, “normalcy cannot lead to complacency.”

Lobbyists, lawmakers and even regulators so far have opposed proposals to more closely monitor the financial system. The five biggest banks – Goldman Sachs, JP Morgan, Wells Fargo, Citigroup and Bank of America – posted second-quarter 2009 profits totaling $13 billion.  That is more than twice their profits in the second quarter of 2008 and nearly two-thirds as much as the $20.7 billion they earned in the same timeframe two years ago – a time when the economy was considered strong.

Connecticut Senator Christopher Dodd, chairman of the Senate Banking Committee, is the point man for formulating new rules.  President Obama wants stricter capital requirements for banks to prevent them from purchasing exotic financial products without keeping adequate cash on hand.  It was precisely this type of behavior that caused last year’s financial crisis.