Tag Archives: Unemployment

“Or We’ll Lose the Whole Middle Class”: Gallup CEO, by Wolf Richter

Regular readers of SLL know the economic recovery, such as it has been, is faltering and may be over. From Wolf Richter at wolfstreet.com:

Jim Clifton, Chairman and CEO at Gallup, who presides over endless surveys of American consumers and businesses and knows a thing or two about them, has a message for the media and the political establishment that seem to be clueless: this meme about the recovering economy – “It was even trumpeted on Page 1 of The New York Times and Financial Times last week,” he says – “I don’t think it’s true.”

In an article posted on Gallup’s website, he made his case:

The percentage of Americans who say they are in the middle or upper-middle class has fallen 10 percentage points, from a 61% average between 2000 and 2008 to 51% today.

Ten percent of 250 million adults in the U.S. is 25 million people whose economic lives have crashed.

What the media is missing is that these 25 million people are invisible in the widely reported 4.9% official U.S. unemployment rate.

Let’s say someone has a good middle-class job that pays $65,000 a year. That job goes away in a changing, disrupted world, and his new full-time job pays $14 per hour — or about $28,000 per year. That devastated American remains counted as “full-time employed” because he still has full-time work — although with drastically reduced pay and benefits. He has fallen out of the middle class and is invisible in current reporting.

And these “Invisible Americans,” as he calls them, are facing the “disastrous” emotional toll often associated with a sharp loss of household income. It hits “self-esteem and dignity,” and produces an “environment of desperation.” Even many American with good jobs and incomes are just “one degree” away from the misery of those with falling wages, or the underemployed or unemployed.

Clifton names three metrics that “need to be turned around or we’ll lose the whole middle class”:

1. According to the U.S. Bureau of Labor Statistics, the percentage of the total U.S. adult population that has a full-time job has been hovering around 48% since 2010 — this is the lowest full-time employment level since 1983.

2. The number of publicly listed companies trading on U.S. exchanges has been cut almost in half in the past 20 years — from about 7,300 to 3,700. Because firms can’t grow organically — that is, build more business from new and existing customers — they give up and pay high prices to acquire their competitors, thus drastically shrinking the number of U.S. public companies. This seriously contributes to the massive loss of U.S. middle-class jobs.

3. New business startups are at historical lows. Americans have stopped starting businesses. And the businesses that do start are growing at historically slow rates.

“Free enterprise is in free fall — but it is fixable,” he says. It all depends on small businesses. They need to thrive again. They’re “our best hope” for the economy to pick up some speed. And once they’re thriving again, they can “restore the middle class”:

Gallup finds that small businesses — startups plus “shootups,” those that grow big — are the engine of new economic energy. According to the U.S. Small Business Administration, 65% of all new jobs are created by small businesses, not large ones.

To continue reading: “Or We’ll Lose the Whole Middle Class”: Gallup CEO

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Wall Street Monkeyshines—— Look Ma, No Hands! by David Stockman

David Stockman performs his invaluable monthly service: he dopes out unemployment, using a much better indicator, and adds a critique of the economy in general. From Stockman at davidstockmanscontracorner.com:

The boys and girls on Wall Street are now riding their bikes with no hands and eyes wide shut. That’s the only way to explain Friday’s lunatic buying spree in response to another jobs report that proves exactly nothing about an allegedly resurgent economy.

When the S&P 500 first hit 2130 back in May 2015, reported LTM earnings were $99.25 per share, and that was already down 6.4% from the cyclical high of $106 per share in September 2014. Thus, stocks were being valued at a nosebleed 21.5X in the face of falling earnings.

During the four quarters since then, reported LTM earnings have slumped by a further 12.3% to $87 per share. So that brings the “cap rate” to 24.5X earnings that have shrunk by 18% over the last six quarters. Wee!

You have to use the parenthetical because the casino is not capitalizing anything rational. It’s just drifting higher in daredevil fashion until something big and nasty stops it.

That something would be global deflation and US recession. Both are racing down the pike at accelerating speed.

Needless to say, when these lethal economic forces finally hit home, the puppy pile-up on Wall Street is going to be one bloody mess. But that’s the price you pay when you have destroyed honest price discovery entirely, and have transformed the money and capital markets into robo-machine driven venues of rank speculation.

Janet Yellen and the other 100 clowns who run the world’s central banks, of course, have no clue as to the financial doomsday machine they have enabled. Indeed, they apparently think efficient pricing and allocation of capital doesn’t matter.

After all, their entire modus operandi is to peg the price of money, bonds and the yield curve sharply below market-clearing levels—–so that households and business will borrow and spend more than otherwise.

Likewise, they aim to goose stock prices to ever higher levels. That’s so the top 10% and the top 1%, who own the preponderant share of equities, will feel the wealth(effects) and then spend-up and invest-up a storm.

But the economic gods created market-based price discovery for a reason. It was to insure that in the great arena of financial market supply and demand, the forces of fear and greed would contend on a level playing field. Short-sellers and contrarians heading south were to intercept the lemmings of greed heading north before they reached the edge of the cliff.

Now there is nothing but cliff. Central bankers have euthanized the short-sellers and empowered the lemmings of greed with free money to fund every manner of speculation while gifting them with cheap downside hedging insurance.

There is an awful price to be paid for one-way markets, however. The latter never correct; they crash.

And the suddenness, unexpectedness, and violence of these episodic crashes slam the main street economy with gale force. That confidence shock, in turn, cancels out the gains that the resilient forces of capitalism have eked out since the previous crash, thereby causing trend rates of gain in real output and wealth to fade toward the flat-line and even below.

In short, by enabling the casino to fly blind monetary central planning functions as the enemy of capitalist prosperity. The gambling ethos it implants in the financial markets degrades analysis and dumbs-down incoming economic and financial information to the point of uselessness.

To continue reading: Wall Street Monkeyshines—— Look Ma, No Hands!

 

Job Cuts Pile up, by Wolf Richter

From Wolf Richter at wolfstreet.com:

And it’s reaching far beyond energy.

Turning points in the vast US labor market rarely come with a big drumroll that no one can miss. Instead, they wedge themselves into the rosy scenario bit by bit, here and there, posing contradictions where none are expected. And today, we got one of those contradictions: unemployment claims v. job-cut announcements.

The number of people who applied for unemployment insurance during the week of March 20 to 26 rose by 11,000 to 276,000, the Labor Department reported today. While up, these initial claims are still near the low of 253,000 established on March 5, which had been the lowest level since the late 1960s!

So even at 276,000, initial unemployment claims are still very low by historical standards. Red flags go up when claims jump well above 300,000. Serious fretting begins when claims hit 400,000. That’s a sign that laid-off people can’t find new jobs and are filing for unemployment insurance to tide them over. It’s a sign that layoffs by one company can no longer be absorbed by other companies.

Companies have already started laying off people. The announcements and rumors bubble up on a daily basis. And today, the Challenger Job Cut Report confirms it in a chilling way.

In March, job cuts announced by the largest US-based companies soared 31.7% year-over-year to 48,207. The fourth month in a row of year-over-year increases. Up 40% from March 2014.

Job-cut announcements in the first quarter jumped to 184,920, up 32% from 2015, and up 52% from 2014.

These are not minor increases. And they only include the largest US-based companies that announce layoffs to the media. They do not include smaller companies that might be trimming their payrolls quietly.

In Q1, about 50,000 job-cut announcements, or 27% of the total, were “attributed to falling oil prices,” as the report put it. That includes companies such as manufacturers that supply the oil sector. Last year in Q1, “oil-related” job cuts had reached 47,610, or 34% of the total.

This shows that the oil sector is still shedding jobs manically, but other sectors have now jumped into the fray in significant numbers. As the report put it: This “upward trend outside of the energy sector is somewhat worrisome.”

To continue reading: Job Cuts Pile up

Mineworkers’ protests shake Chinese leaders, by Dikang

Political and social upheaval go hand-in-hand with economic contraction. Things are heating up in China. From Dikang at chinaworker.info:

Thousands of coal miners in the far northeast of China have been on strike for six days, demanding that China’s rulers – the so-called Communist Party dictatorship (CCP) – “give us back our money!”

The protests, captured in dramatic video footage that is banned inside China, have shaken the Chinese regime during the very week when its ceremonial National People’s Congress (NPC) has been meeting in Beijing. A key discussion at the NPC has been about how the regime will cut the workforce in state-owned industries, with widely cited reports of 5-6 million redundancies, equivalent to one in six state sector jobs. The striking mineworkers of Heilongjiang province, a region already devastated by closures and layoffs, have given a courageous and resounding answer to these plans.

The mineworkers’ protests began on Wednesday 9 March in the city of Shuangyashan. Longmay Group, the largest state-owned coal producer in northeastern China, operates 10 mines in Shuangyashan and over 40 across the province as a whole. Last September, Longmay announced 100,000 job cuts – 40 percent of its entire workforce. According to some reports 22,500 redundancies have already been implemented. The company also owes a total of 800 million yuan (US$123 million) in unpaid wages dating from 2014. There have been earlier protests to demand payment of wage arrears by Longmay workers around Heilongjiang, including in the city of Hegang one year ago. The strike in Shuangyashan did not materialise from nowhere in other words, but is akin to a match being dropped into a large pool of gasoline.

“What the Shuangyashan incident has exposed is just a tip of the iceberg. It has been pretty endemic (workers not getting paid),” a rights activist from Heilongjiang told the Voice of America website.

In China, workers do not have their own trade unions. The only legal union organisation is the government-controlled ACFTU, which invariably sides with management against the workers. In the case of Longmay, the ACFTU has been invisible and played no role in supporting the workers’ protests.

To continue reading: Mineworkers’ protests shake Chinese leaders

Minimum Wages Surged In 6 Cities Last Year; Then This Happened, by Jed Graham

From Jed Graham at investors.com:

Hiring at restaurants, hotels and other leisure and hospitality sector venues slowed markedly last year in metro areas that saw big minimum-wage hikes, new Labor Department data show.

Wherever cities implemented big minimum-wage hikes to $10 an hour or more last year, the latest data through December show that job creation downshifted to the slowest pace in at least five years.

Liberals fighting for a dramatic increase in the minimum wage have insisted that there would be a negligible impact on job creation. Though the data are preliminary and overly broad, Washington D.C., Oakland, Los Angeles, San Francisco, Seattle and Chicago seem to be finding out that the reality isn’t so benign.

A slowdown in job growth can fly below the radar, at least for those who aren’t seeking low-wage work. But the risk of raising the minimum wage too high became fairly obvious last month, when Wal-Mart (WMT) bolted from Oakland and Los Angeles and scrapped plans for two stores in low-income areas of D.C.

The big shortcoming in the available data for 5 of the 6 cities is that they cover broad metro areas, far beyond the city limits where wage hikes took effect. Still, the uniform result of much slower job growth in the low-wage leisure and hospitality sector, even as the pace of job gains held steady in surrounding areas, sends a pretty powerful signal.

To continue reading: Minimum Wages Surged In 6 Cities Last Year; Then This Happened

 

WalMart Store Closures Leave Elderly Villagers With No Grocery Stores, Pharmacies, by Tyler Durden

Sometimes good intentions have unintended, and negative consequences. The people who fight WalMart openings are generally not the same people (employees and customers) who feel the pain when WalMart closes. From Tyler Durden at zerohedge.com:

Last week, WalMart doubled down on the wage hike debacle when the world’s largest retailer decided to give everyone a raise in February.

The all-in cost will be around $2.7 billion. While some were surprised at the move, it was easy to see coming. Indeed, we’ve long said that the company’s decision to hike wages for its lowest-paid employees would eventually necessitate similar raises for workers higher up the corporate ladder.

“The wage hierarchy has been distorted and that distortion had nothing to do with merit,” we wrote, back in August. “Higher paid employees don’t understand why everyone under them in the corporate structure suddenly makes more money and if people who are higher up on the corporate ladder don’t receive raises that keep the wage hierarchy proportional, they may simply quit which means that, for Wal-Mart, raising the minimum for the lowest paid workers to just $9/hour will end up costing the company around $1.5 billion if you include the additional raises the company will have to give to higher paid employees in order to retain their ‘talents’ and avoid a mid-level management mutiny.”

Sure enough, that’s exactly what happened – only the cost is far higher than even we anticipated.

The problem is that when your business model revolves around “everyday low prices,” each and every additional penny you give to your employees is a penny that’s not passed on to customers as savings. That’s a problem, given how competitive the discount retail space has become. On top of that, margins are already razor thin and pinching them further has a dramatic impact on profitability as evidenced by the shocking guidance cut WalMart delivered in October.

Initially, the company sought to make up for the money “lost” to the wage hike by squeezing the supply chain. When efforts to extract more savings from vendors weren’t sufficient, WalMart simply fired some folks, first at the home office in Bentonville and then at 269 stores where 16,000 employees learned this month that they no longer have a job.

But the employees at the shuttered stores aren’t the only ones affected by the decision to close hundreds of locations. Also out in the cold are local customers who in some cases will now be forced to effectively commute to the grocery store and pharmacy as the family-owned businesses which used to serve small communities were put out of business when WalMart came to town.

“Though mom-and-pop stores have steadily disappeared across the American landscape over the past three decades as the mega chain methodically expanded, there was at least always a Wal-Mart left behind to replace them,” Bloomberg writes. “Now the Wal-Marts are disappearing, too.”

Bloomberg tells the story of The Town’n Country grocery in Oriental, North Carolina which was “a local fixture” for nearly half a century – until WalMart showed up.

The Town’n Country closed last October after sales collapsed by a third. “They ruined our lives,” Renee Ireland Smith, who ran Town’n Country said. “They came in here with their experiment and ruined us,” she laments, referencing WalMart’s foray into smaller stores called “WalMart Express.” Here’s more:

“I was devastated when I found out. We had a pharmacy and a perfectly satisfactory grocery store. Maybe Wal-Mart sold apples for a nickel less,” said Barb Venturi, mayor pro tem for Oriental, with a population of about 900. “If you take into account what no longer having a grocery store does to property values here, it is a significant impact for us.”

Oriental is hardly alone. Wal-Mart Stores Inc. said on Jan. 15 it would be closing all 102 of its smaller Express stores, many in isolated towns, to focus on its supercenters and mid-sized Neighborhood Markets.

That’s a big problem for small towns, often with proportionately large elderly populations. For the older folks of Oriental — a retirement and summer vacation town along the inter-coastal waterway — the next-nearest grocery and pharmacy is a 50-minute round-trip drive.

Towns like Clearwater, Kansas, and Merkel, Texas, are among those hit by Wal-Mart closures. In Godley, Texas, with a population of roughly 1,000, Wal-Mart opened a small store just a year ago. Within months, the only other grocery store in town — Brookshire Brothers, part of an employee-owned regional chain — shut its doors. Now with Wal-Mart gone, the closest full-service grocery store is about a 20-minute drive away.

This is just one more example of why improving the quality of life for poorly paid hourly employees isn’t as simple as implementing across-the-board wage hikes.

To continue reading: WalMart Store Closures Leave Elderly Villagers with No Grocery Stores, Pharmacies

 

 

Hollande’s Socialist Wonderland, by Pater Tenebrarum

From Pater Tenebrarum at acting-man.com:

Everything’s an Emergency

If memory serves, France remains in a state of emergency on account of the terror attack in Paris in last November. As terrible as terror attacks are, they are a statistically insignificant cause of death and injury in developed nations. It is also worth noting that the countries that seem most prone to suffering terror attacks are the ones that are most active in intervening militarily in foreign countries. This is probably no coincidence. Just saying.

We also imagine that a state of emergency is a costly exercise (France’s government immediately exempted itself from meeting the Maastricht deficit target in the wake of the attack, so we can conclude this by inference). Moreover, the recurrence of such attacks shows that ubiquitous snooping on everybody’s digital communications is a wasted effort, if the goal is indeed to keep such attacks from happening (which is doubtful, but that is a topic for another day).

France is in fact one of the world’s top snoopers, but appears to have ignored information and warnings from Turkey’s secret service – information which reportedly was obtained by traditional investigative means and turned out to be correct.

Now there is another emergency, this time an economic one. Mr. Hollande (a.k.a. “the welfare state incarnate”, h/t Gaspard Koenig) has just declared that his government will pull out all stops in terms of labor market intervention, so as finally stop the inexorable rise in French unemployment. His main motive seems to be saving his own job, as Mish notes.

Apparently Hollande made a vague promise that he would step down if unemployment failed to decline this year. Given the persistence of the trend and the inability and/or unwillingness of France’s government to institute meaningful reform, it seemed a slam dunk that it would keep failing to do so.

France’s unemployment rate. If this were a stock, we’d be inclined to buy it on technical grounds

Back when Mr. Hollande’s approval rating fell to the reciprocal of Mr. Putin’s (namely 13%), we briefly gave him the benefit of the doubt, on account of the fact that he evidently had nothing to lose (see “Mission Impossible?”). Nothing much has happened since then – what has happened, was essentially of the too little too late variety.

To continue reading: Hollande’s Socialist Wonderland