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Posts Tagged ‘economic predictors’
Tuesday, March 2nd, 2010
Times are tough all over. This month’s Atlantic Monthly magazine carries a thought provoking and thoroughly dispiriting article by Don Peck called, “How a New Jobless Era Will Transform America.” Peck quotes Kathryn Edin, who teaches public policy at Harvard, describing her recent research in South Philadelphia. “These white working-class communities—once strong, vibrant, proud communities, often organized around big industries—they’re just in terrible straits. The social fabric is just shredding. There’s little engagement in religious life, and the old civic organizations that people used to belong to are fading. Drugs have ravaged these communities, along with divorce, alcoholism, violence.” That’s an ugly picture, but the worst is yet to come. “I hang around these neighborhoods in South Philadelphia, and I think, ‘This is beginning to look like the black inner-city neighborhoods we’ve been studying for the past 20 years.’”
Edin’s comments unintentionally point out that many people have long-ago written off mostly-minority neighborhoods. Except, of course, the people who live in those neighborhoods. Despite the tremendous stresses of lost jobs, tumbling home values, and growing neglect from the larger community, the residents of the minority neighborhoods ShoreBank serves continue to care deeply.
The reason is that people in our communities can put down roots. Unlike in wealthy suburban areas, several generations can afford to live in the same neighborhood. There are few “For Sale” signs because homes are often passed on to the next generation, other relatives, or friends. There is a vibrancy and cohesion that ShoreBank recognized from the beginning and continues to value, and indeed, to rely on.
But, all the economic data—national, state, and local—lead inexorably to the same conclusion: the downturn has hit minorities much harder than white Americans. For blacks as a whole, this is not a recession, but a full-scale depression. As a general rule of thumb, the numbers show that, however bad things are for whites, they are twice as bad for blacks. However good things are for whites, they are half as good for blacks. The ramifications of racism live on.
Tags: community development, economic predictors, financial crisis, ShoreBank, triple bottom line, unemployment rate
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Tuesday, February 2nd, 2010
The American Recovery and Reinvestment Act may have great potential for economic boosting, but we cannot depend upon it to drive new jobs. The federal government website www.recovery.gov provides detailed information on how the $787 billion of American Recovery and Reinvestment Act funds are being distributed. As of January 22, the government has paid out $268.8 billion in the form of tax benefits ($92.8 billion), contracts, grants, and loans ($73.2 billion), and entitlements ($102.8 billion). Data on the recipients of stimulus funds is broken down by sub-units as small as zip codes.
ShoreBank’s oldest location is in the heart of the South Shore neighborhood in zip code 60649, where unemployment is more than 20% and home values have declined by more than 40% in one year. A total of just one contract and one grant have been awarded in this zip code. The contract was for $1,800 to H L Jackson Consulting Company to review grant applications. The grant was for $200,000 to an organization called Featherfist to provide services to the homeless. That $200,000 is part of a larger $34 million grant to the City of Chicago which in turn created just 60 jobs, although none at Featherfist.
Based on aggregate data from recipients, 599,108 American workers were being paid by stimulus funds in the fourth quarter of 2009. This seems like a pathetically small number, with more than 15 million Americans unemployed. But it merely underlines what should be obvious: government does not have the capacity to be the primary job creator. Government primes the pump, but the private sector does the work.
Recent reports on Gross Domestic Product growth and strengthening activity in manufacturing are the real signs of progress. GDP surged 5.7% in the fourth quarter, fueled by gains in business spending on software and equipment. Manufacturing activity in January expanded for the sixth consecutive month and manufacturing industry employment is projected to increase in the months ahead. Employment is already growing in fields as diverse as textiles, petroleum & coal products, and transportation equipment. Hopefully, it won’t be too long until job growth returns to 60649 and beyond.
Tags: American Recovery and Reinvestment Act, economic predictors, ShoreBank, triple bottom line, unemployment rate
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Tuesday, January 5th, 2010
January 1, 2010 dawned cold and clear in Chicago, the start of a new year and a new decade. Rarely has a year started with more hope that it will be better than its predecessor. One important survey indicated that Americans are more upbeat about the short-term future than they have been for two years. The economy is recovering from the worst of the recession, but there is a big difference between recovering from a cold and recovering from pneumonia – this recovery will be long and uneven. It will be many months before the fear of a serious relapse can be dismissed. This fear may also be prolonged by the opposing trends in the job and housing markets, which are key economic indicators.
In 2009, over four million jobs were lost, on top of over three million lost jobs in 2008. On average, 575,000 American workers filed for unemployment insurance every week last year. However, recent employment data is beginning to show improvement. Only 11,000 jobs were lost in November, and first-time unemployment insurance claims in December were the lowest in more than a year. Still, the economy has to generate 100,000 new jobs each month, just to absorb new entrants to the workforce.
While the employment picture is brightening, housing remains highly problematic. Mortgage delinquency climbed to 9.64% by September 30. The median sales price for an existing home dropped to $172,600, the lowest since 2003, wiping out trillions of dollars of equity. Spending on construction is also down to 2003 levels.
I actually recently sat down to discuss the economic recovery in 2010 with Lisa Leiter at Crain’s Daily Business, which you can view here.
All-in-all, the watchword for 2010 will have to be Patience.
Tags: economic predictors, ShoreBank, triple bottom line, unemployment rate
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Tuesday, December 8th, 2009
The Bureau of Labor Statistics reported that the overall unemployment situation was unchanged from October to November. The unemployment rate moved down slightly from 10.196% to 9.992%, and non-farm payrolls dipped by a mere 11,000. Job losses for September and October were revised downward, so over the last three months total net job losses were 261,000 compared to 921,000 in the three summer months. Job losses in many sectors—manufacturing and construction especially—continue unabated, but for the first time in many months there are real signs of hope.
The most heartening sign is the growth in temporary help, which has moved from a low of 1.74 million jobs in July to 1.86 million in November, including an increase of 52,000 jobs in October (see chart). As employers begin feeling the need to add workers, they often start with temporary hires before feeling confident enough to add permanent workers. Another hopeful sign is an increase in the average workweek for production and nonsupervisory workers by 0.2 hours to 33.2 hours, the highest level since February.
Few people, except those who were recently hired, should be popping champagne corks just yet. Recoveries can be just as unpredictable and long as the same economic downslide that got the economy to this point. These stats are merely signs that the worst of the economic downslide is over. The true unemployment rate, including so-called “marginally attached” or discouraged jobseekers, remains stubbornly high at 17.2%. Both the average and median length of unemployment continue climbing to 28.5 weeks and 20.1 weeks respectively. But, while the November employment picture is still not good, it is the least bad since 2007.
Tags: economic predictors, ShoreBank, triple bottom line, unemployment rate
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Tuesday, November 3rd, 2009
Most people think the Census Bureau only springs to life in years ending in zero to conduct its decennial head count. Not so. Among its numerous publications is an annual report on poverty in America. The 2008 report was published a few weeks ago.
Poverty, sadly, never seems to go away, even in the world’s richest country. Our poverty rate last year rose to 13.2%, encompassing 39.8 million people, among the highest numbers in about a dozen years. In addition, more than 17 million people had an income of less than one-half the poverty threshold, and 6.3 million children lived in such low-income households.
Stark as these figures are, they present a snapshot of a moment in time rather than an assessment of the dynamics of poverty. In contrast to many parts of the developing world, poverty in America tends not to be a long-term condition. Over the four-year period from 2003 through 2007, just 1.8% of the American population was chronically poor. On the other hand, almost a third of the population could be classified as living below the poverty level for at least two months. More than a quarter of households classified in the bottom 20% by income moved up between 2004 and 2007, while a similar percentage moved down from the top 20%.
What makes us different from other nations? Mobility. The Census Bureau notes that its statistics “yield insights into…the economic mobility of US residents.” Compared to the millions trapped in generations-long poverty in the urban shantytowns and isolated rural villages of the developing world, poverty in America is relatively dynamic. If there is hope for a better future among those living in despair, it is our nation’s track record of economic mobility.
Though poverty here may not always be a life sentence, having almost 40 million people in poverty at any time remains a national disgrace. It is more than the populations of Connecticut, Mississippi, Arkansas, Iowa, Kansas, Utah, Nevada, New Mexico, West Virginia, Nebraska, Idaho, Maine, New Hampshire, Rhode Island, Montana, Delaware, South Dakota, Alaska, North Dakota, Vermont, North Dakota, Wyoming, and the District of Columbia combined. It is time to move more people to action.
Tags: community development, economic predictors, green banking, ShoreBank, triple bottom line
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Tuesday, September 1st, 2009
Last week my wife and I took a leisurely drive through Wisconsin to visit our son in Minneapolis. 
We avoided I-94, taking mostly state and US highways. We saw lots of cows and even more corn. It seemed an idyllic rural scene. But all is not well in farm country. Our hostess at a bed & breakfast in Reedsburg told of the woes of two recent guests. “We had two young women who just graduated as large-animal vets. It used to be that farm veterinarians could write their own tickets, but not anymore. They both were desperate to get jobs here. And dairy farmers are struggling too. I know one farmer who is borrowing $40,000 a month to stay afloat.”
The US Department of Agriculture confirms these on-the-ground observations. In a just-published report, the USDA projects 2009 farm profits will be 38% lower than last year. In dollar terms, income is projected to be $54 billion, compared to $87 billion in 2008.
The chart at left shows that total farm income will fall below its 10- year average. The culprit is falling prices caused by slack domestic and global demand. The recession strikes again. And, as we learned in Wisconsin, dairy has been particularly hard hit. Income from dairy products is expected to drop from $34.8 billion in 2008 to $23 billion this year. Many dairy farmers are being forced to cull their herds to reduce costs.
But the most interesting statistics I found digging through the USDA report, can be seen in the second chart: The average farm-owning family earns less than $6,000 a year from farming. According to the USDA, “In 2009, average family farm household income is forecast to be $75,895, down 5.2% from 2008, and 8% below the five-year average of 2004-08. In 2009, the average family farm is forecast to receive 7.6 percent of its household income from farm sources, with the rest from earned and unearned off-farm income.” Amazing!
Tags: community development, economic predictors, financial crisis, green banking, ShoreBank, triple bottom line
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Tuesday, July 14th, 2009
The Universal Postal Union (UPU) was established in 1874. Today it is an agency of the United Nations. According to its website, the UPU sets the rules for international mail exchanges and makes recommendations to stimulate growth in mail volumes and to improve the quality of service for customers.” Its mission is “to develop social, cultural and commercial communication between people through the efficient operation of the postal service.” One of the services provided by the UPU is the International Reply Coupon (IRC).
“When one writes to a stranger and requests a reply, it is considered polite to enclose a self-addressed stamped envelope. This works well when both persons live in the same country; however, if they are from different countries, the enclosed postage stamp will not be valid. This technical problem was solved in 1906 when the Universal Postal Union, during its Congress in Rome, introduced the International Reply Coupon service. As the service began before the days of airmail, the earliest coupons could only be redeemed for a single-rate ordinary postage stamp to a foreign country.”
What a charming description of a beneficial, useful, and entirely unexceptionable resource. Who could imagine that IRCs would be at the heart of the one of the greatest financial scandals of the 20th Century?
Charles Ponzi was an Italian who immigrated to the United States in 1903 at the age of 21. He managed to spend five of the next 14 years in prisons in Canada and the US for various white-collar crimes. Ponzi discovered IRCs in 1919 when he received one from a Spanish company asking for a catalog he was hawking at the time. The catalog company failed, so Ponzi had no use for the IRC, but he had a Great Thought. IRCs had not caught up with the huge changes in foreign exchange rates following the end of World War I. If he could buy IRCs in Spain with Spanish pesetas, he could sell them in the US for a whole lot more dollars.
The total value of all the IRCs in existence in 1919 was less than $1 million, and, of course, they were all in very small denominations. But Ponzi thought it was worth a shot. He placed a few magazine ads claiming his postal coupon idea would double people’s money in a few months. Forty thousand suckers took the bait.
Between February and May 1920 Ponzi received more than enough money to set himself up for life back in Italy. “Investors” mailed in $420,000 in May alone, which is more than $4.5 million in today’s money. The original plan became untenable; Ponzi had $3.5 million more than the size of the IRC market. Needless to say, Ponzi did not buy any IRCs. Why bother with markets and real investing when so many people sent money merely because you placed na ad? Instead he simply paid early investors with funds received from later investors. It couldn’t last and it didn’t. By July, the newspapers were on his trail. Instead of making a break for it, Ponzi foolishly fought back. Maybe he believed his own hype. At any rate, the end came on August 12, 1920, when Ponzi was indicted for mail fraud. The whole thing lasted barely six months, but it was long enough for many foolish people to lose their homes, their life savings, and their innocence.
Charles Ponzi should have been no more than a footnote to the financial mania of the Roaring Twenties. He wasn’t the first swindler to fleece the unwary in a pyramid scheme—they had been around since 1720. And he certainly wasn’t the last. Not even Bernie Madoff’s 150-year sentence is enough to guarantee that. But for some reason—maybe because his rise and fall was so meteoric, or maybe just because his unusual name caught peoples’ fancy—pyramid investment scams have been known as Ponzi schemes ever since.
There is a moral to Charles Ponzi’s sad story. (And it is sad. He died penniless and blind in a Buenos Aires charity hospital in 1949 after several more prison stints.) The moral is, “If it sounds too good to be true, it is.” Now that sounds simple and obvious, but too many people translate this maxim as, “If it sounds too good to be true, it usually is,” or “it probably is,” or “it is, except in just this one special case.” Here’s the real translation: “If it sounds too good to be true, it is, absolutely is and always is and especially is this time.”
Tags: community development, economic predictors, green banking, Ponzi Scheme, ShoreBank, triple bottom line
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Tuesday, June 9th, 2009
As an ordinary American, wondering if you can keep your job or make your mortgage payment, you may be surprised to learn that the recession is almost over. But, this is what the economists are telling us. All the indicators, they say, now point to recovery. One on the key data series showing better days ahead is Personal Income and Outlays, released monthly by the Bureau of Economic Analysis. Earlier this week, the BEA reported that American’s disposable personal income rose 1.1% in April to $10.91 trillion on an annualized basis. That’s a big jump, but let’s look at the details to see if it really is a harbinger of spring.
Collectively, personal income has five components, shown below as percentages for April:
As you can see, the biggest contributor by far is employee’s compensation, but that’s not the source of April’s increase. Rather it can all be found in higher government transfer payments and lower taxes.
According to the BEA, “Provisions of the Federal Additional Compensation Program of the American Recovery and Reinvestment Act of 2009 boosted the level of personal current transfer receipts by $11.8 billion at an annual rate in April.” What a mouthful, but, hey, $11.8 billion is a lot of money! Except what it actually translates to is an extra $25 a week if you are collecting unemployment insurance.
Much bigger contributions came from tax reductions. The Making Work Pay Credit provision of the Act reduced personal current taxes by $49.8 billion at an annual rate in May. This provision allows a refundable tax credit of up to $400 for individuals and $800 for working couples. Reductions in payroll taxes added $63.6 billion (again, annualized) to May income.
What did we do with this bounty? Answer: We saved it; that is, we didn’t spend it. The BEA calculates the savings rate by subtracting personal outlays from disposable personal income. Putting $100 in the bank counts as saving, but so does paying off your credit card bill. Using this definition, the rate of US savings as a percentage of disposable income rose to 5.7%, the highest since 1995. Spending actually decreased 0.1% from March, and spending, not saving, drives the economy. Also, a little suspicion about the permanence of tax reductions might be warranted, with the Federal budget deficit spiraling into the trillions and only a handful of states able to balance their budgets.
Still, there are powerful signs that a recovery has begun. The Dow Jones Industrial Average has gained more than 2100 points or 33% since hitting its low early in March. Globally, commodity prices are soaring as is industrial production in China. In the US, long-term interest rates are rising because bond traders have started worrying about inflation, which can accompany strong economic growth. As result, the average rate for new 30-year mortgages jumped to 5.29% last week, from a low of 4.78% a month ago. I’m feeling better already. Aren’t you?
Tags: community development, economic predictors, financial crisis, green banking, ShoreBank, triple bottom line
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Tuesday, May 5th, 2009
Memorial Day, 1937. Chicago. Several thousand striking steelworkers and their families gather in a field near the Republic Steel plant to obtain recognition for their union. Singing “Solidarity forever! The union makes us strong!” and carrying banners, they approach the plant. But between the men, their families, and Republic Steel stand 500 Chicago policemen. The police move forward, first swinging their nightsticks and then firing tear gas grenades and guns shouting “you got no rights.” Within a few minutes seven workers are dead and more than one hundred seriously hurt. The event has come down through Labor history as the Memorial Day Massacre.
May 1, 2009, a day celebrated in many countries as International Workers’ Day in honor of the achievements of Organized Labor. New York City. The United Automobile Workers, representing Chrysler’s unionized workers, agrees to a bankruptcy that would effectively give it a 55% ownership stake in the company. The UAW’s contract is preserved through the bankruptcy, meaning it will not have to renegotiate its lucrative salaries and benefits with Fiat, the Italian automobile manufacturer that will operate the new Chrysler.
Of course, the deal will be worth nothing if Chrysler goes down, a very real possibility. New, Fiat-designed Chryslers will not be roll off the assembly lines for two years or more, and Fiat, in the past, has had no success in cracking the American market. Not that Chrysler has had much success lately. Its U.S. deliveries in April dropped to 76,682 units, down 48% from a year ago and 60% less than in April 2007. Chrysler isn’t alone; total U.S. auto sales fell in April, for the 18th consecutive month to just 819,540 units. But, at 9.4% of U.S. sales, Chrysler is behind GM, Ford, Toyota, and Honda.
Organized labor, still oppressed in 1937, reached its zenith in the 1950s and 60s, when America’s industrial might was unchallenged. The notion that one of the Big Three automakers could fail would have been preposterous. Labor flexed its muscles, wringing ever-greater concessions from Capital. But the world turned, and now, at least at Chrysler, Labor is Capital.
Tags: community development, economic predictors, green banking, ShoreBank, triple bottom line
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Tuesday, March 17th, 2009
“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” – Winston Churchill, November 10, 1942, describing the Allied victory at El Alamein in North Africa.
The Census Bureau reported this morning that retail sales in the United States, excluding autos and gasoline, rose sharply for the second consecutive month. The percentage increases were 1.4% in January and 0.5% in February. Sales of electronic equipment, clothing, sporting goods, books, and general merchandise have all risen this year. Gasoline sales are up as well, though mostly because of rising prices following the steep fall late last year. Automobile sales remain in the doldrums. Total vehicle sale in the US fell to an annualized rate of 6.4 million units, the lowest since 1981. 
Separately, the Labor Department announced that first-time applications for unemployment insurance remained above 600,000 for the sixth consecutive week. Initial claims of 654,000 brought the total number of Americans collecting unemployment compensation to an all-time high of 5,317,000.
The two-month rebound in retail sales marks one of the first hopeful economic signs in many months. Retail sales are the main driver of our economy and shopping is our national pastime. But, until initial unemployment claims begin to slow down, we won’t know if today’s report foreshadows a real or a false dawn.
Tags: community development, economic predictors, financial crisis, green banking, ShoreBank, triple bottom line, unemployment rate
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