(WASHINGTON) — The number of Americans seeking unemployment benefits fell 11,000 last week to a seasonally adjusted 346,000, a level consistent with steady job growth. The Labor Department said Thursday that applications dropped from 357,000 the previous week, which was revised up from an initially reported 354,000. The less volatile four-week average rose 4,500 to 352,500. Weekly applications are a proxy for layoffs. They have fallen 7 percent in the past six months and hit a five-year low of 338,000 in early May. Still, layoffs are only half of an improving jobs picture. The other is hiring, and companies have been reluctant to rapidly create many more jobs. (MORE: April Jobs Report: No Spring Slump for Unemployment) On Friday, the government reports on May employment. Economists expect it will show that employers added 170,000 jobs last month. The unemployment rate is expected to remain a four-year low of 7.5 percent. Economists were encouraged by the figures, which come after several tepid economic reports earlier this week. “While there is a fair bit of worry in some quarters about an economic slowdown, the stability seen in the weekly jobless claims data is quite reassuring,” Dan Greenhaus, chief economic strategist at BTIG LLC, an institutional brokerage, said in a note to clients. More than 4.6 million Americans received unemployment benefits in the week ended May 18, the latest data available. That’s about 68,000 more than the previous week. The number of people receiving benefits briefly topped 11 million in 2010, the highest on record. Job gains accelerated over the winter but have since softened, along with the broader economy. Factory activity shrank in May for the first time since November, according to a survey by the Institute for Supply Management, a trade group of purchasing executives. (MORE: Survey: U.S. Private Employers Add 135K Jobs in May) A separate ISM survey of service firms found that they grew at a faster pace last month. But a measure of employment in the report fell sharply. That suggests that service companies added fewer jobs. Service
Tag Archives: Economy & Policy
Survey: U.S. Private Employers Add 135K Jobs in May
(WASHINGTON) — A private survey shows U.S. businesses added just 135,000 jobs in May, the second straight month of weak gains. Payroll provider ADP said Wednesday that May’s gain was above April’s revised total of 113,000. But it’s much lower than the gains ADP reported over the winter, which averaged more than 200,000 a month from November through February. Mark Zandi, chief economist at Moody’s Analytics, blamed the slowdown on higher taxes and steep government spending cuts enacted this year. (MORE: Survey: Private Employers Add Just 119,000 Jobs in April) The ADP survey is derived from payroll data and tracks private employment. It has diverged at times from the government’s more comprehensive monthly jobs report, which will be released Friday. In April, the government said private employers added 176,000 jobs, much higher than the ADP’s estimate. Economists say the gap between the ADP’s survey and the government figures has narrowed since Moody’s Analytics began compiling the numbers eight months ago. Still, it has differed from the Labor Department’s report by about 40,000 a month since then. “The ADP survey has never been the most reliable indicator,” Paul Ashworth, an economist at Capital Economics, said in a note to clients. Economists forecast that the government’s report will show employers added 170,000 jobs in May, according to a survey by FactSet. The unemployment rate is expected to stay at a four-year low of 7.5 percent. Most economists said the ADP report wouldn’t prompt them to change their forecasts. Zandi acknowledged that the ADP has undershot the government’s figure in recent months. The ADP report found that manufacturing companies cut 6,000 jobs last month. Construction firms added only 5,000, below the previous month’s 15,000 gain. Retail hiring has also been weak, Zandi said, a sign that consumers could be spending less because of the increase in Social Security taxes. (MORE: Survey: Private Employers Add 158K Jobs in March) If the government report Friday shows slower job growth, too, the Federal Reserve would be less inclined to scale back its pace of bond buying,
Report: U.S. Hasn’t Seen Expected ‘Great Recovery’
(LOS ANGELES) — An economic forecast says the country’s expected “Great Recovery” hasn’t materialized and the economy’s fallen short of even normal growth. The Los Angeles Times reports the gloomy picture appears in the quarterly UCLA Anderson Forecast released Wednesday. It says that real gross domestic product growth — the inflation-adjusted value of goods and services produced — is well below the 3-percent growth trend of past recoveries. The forecast says the country isn’t creating enough good jobs. However, the forecast also says a housing market recovery should boost the GDP over the next two years and bring down unemployment, falling to 6.9 percent next year. California, meanwhile, outperformed the nation in job growth during a 12-month period that ended in April. One reason is demand for California goods, such as computers.
Uh-Oh: We Already Started Spending Like It’s 2005
The two-faced recovery soldiers on. One day, indicators like the Case-Shiller housing index give us hope that the economic recovery is finally gaining steam, and the next day the ISM Manufacturing Index shows the sector actually contracted in May. Amidst the confusion, however, some commentators see a fate much worse than a tepid recovery. News organizations from Bloomberg to Yahoo, have been wondering whether the recent gains in the housing market are setting the stage for another real estate bubble. The reasons for this concern: Home values are increasing far faster than wages, while retail sales and GDP growth seem to be accelerating faster than the fundamentals would allow. And if retail spending, home prices, and economic activity are growing faster than worker paychecks, it means we’re taking on more debt — and at some point that will become an unsustainable situation. It’s the same unsustainable situation, in fact, that characterized the run up to the housing crisis. In the early 1990s, the average American’s debt load was 83% of his income, but by 2007 that number reached a staggering 130%. Americans compensated for stagnant wage growth by “using their homes as ATMs,” as the catch phrase has it, taking out more and more mortgage-backed debt with the belief that home prices would always continue to rise. And a reckless banking system was only too happy to oblige. The Great Recession was supposed to have changed all of that. In the wake of the financial crisis we read story after story of chastened Americans socking away more money in their retirement accounts, paying down debt, and saving for their children’s educations. The national savings rate, which had averaged just 2.84% between 2000 and 2007, climbed above 6% in 2008. But it would seem that this post-recession parsimony has ended. One of the main reasons why tax increases and sequestration-related spending cuts haven’t slowed consumer spending or GDP growth is because Americans have given up on the whole savings thing once again. According to William Emmons, an economist at the St. Louis Federal Reserve, “the rise in
How to Fix the Post Office: Keep the ‘Last Mile,’ Outsource the Rest
A proposal to create a “hybrid” United States Postal Service would keep postal workers on their routes while allowing private companies to compete for mail collection, transportation, and processing. Now all it needs is a divided Congress and a reluctant postmaster general to sign off on it. A new study released today by a non-partisan Washington think tank recommends a radical departure for the struggling United States Postal Service: a public-private partnership that would open up much of the service’s back-end logistics to outside competition. (MORE: The ‘World’s Longest Labor Strike’ Ends in a Whimper) The idea to partly privatize the Postal Service has been floating around for at least a decade, and it’s been the subject of other recent studies too, including a white paper written in part by former postal employees and released by the National Academy of Public Administration; and an analysis of that paper funded by Pitney Bowes, a shipping and packaging company that would almost certainly benefit from the post office’s privatization. But the study released today by The Information Technology & Innovation Foundation adds a bit more to the discussion. This public-private hybrid proposal centers around private companies competing to accept, transport, and process much of America’s first-class mail. The USPS’s mail carriers would keep their “letterbox monopoly” on existing delivery routes, and the Postal Service would determine a national average for delivery costs that it would charge those private carriers. The author of the paper, ITIF President Robert Atkinson, likens it to the break-up of AT&T in the 1980s, which allowed competition among long-distance carriers for the first time. “If you want to go to a post office in the future, you might go to CVS or a Safeway or your local bank branch,” says Atkinson. “And then they might contract with FedEx to move that mail, which would all end up at a local USPS processing facility.” From there, mail would essentially be delivered like it has been since the development of the postal service two centuries ago — but, in Atkinson’s view,
Guess Who’s Bullish on Europe? China’s New Investment Play
Another day in Europe, another Chinese acquisition: Over the first June weekend it was the turn of three prestigious Bordeaux wine châteaux, Bon Pasteur, Rolland-Mallet and Bertineau Saint-Vincent, to be acquired by the Hong Kong-based Goldin group for an undisclosed amount. A new wave of Chinese investment is rolling across the world, and Europe is where much of it’s washing up. Over the past couple of years, Chinese groups have been snapping up an assortment of manufacturing companies and consumer brands, from forklift makers to wineries, in Germany, France, the UK, Scandinavia and elsewhere at a steadily increasing pace. Last year Chinese investments into Europe totaled $12.6 billion, up 21% over 2011, according to A Capital, a private-equity fund based in Beijing, Brussels, and Shanghai that was involved in the biggest recent European deal, a friendly $700 million buyout of France’s Club Med by shareholders including China’s Fosun International. Chinese investment into Europe tripled between 2006 and 2009, and then tripled again from 2009 to 2011. At a time when Europe, and especially the 17 nations in the core euro-zone are struggling with no growth, rising unemployment, and an increasingly restless populace, this Chinese investment is a vote of confidence, just as some U.S. companies have become increasingly downbeat about the Continent’s prospects. (MORE: The Importance of Pork in China) The Chinese are also interested in the U.S., of course, as shown by the $4.7 billion agreed acquisition by Shanghui International for Smithfield Foods. If that deal receives regulatory approval, it would almost equal in dollar terms the total amount of Chinese investment in U.S. companies during the whole of 2012. But it’s on the other side of the Atlantic where much of the deal flow is taking place. A Capital says one third of all Chinese mergers and acquisition volume is coming from Europe, more than double than the U.S., where Chinese investments last year totaled $5.4 billion. China watchers detect an important strategic shift in all this activity: Chinese companies are now hungry to acquire both Western consumer brands and
The ‘World’s Longest Labor Strike’ Ends in a Whimper
On Fathers Day 2003, all of the 130 workers at the Congress Hotel in Chicago walked out on the job, protesting management’s decision to cut wages and bring in minimum-wage, subcontracted workers. Ten years later, the union — United Here’s Local 1 — is giving up its fight, and not because management gave in to any of the union’s demands. It simply decided that the fight had gone on long enough, and that its resources and attention would be better spent elsewhere. “The decision to end the Congress strike was a hard one, but it is the right time for the Union and the strikers to move on,” said Local 1 President Henry Tamarin. “The boycott has effectively dramatically reduced the hotel’s business. The hotel treats their workers and customers equally poor and the community knows it. There is no more to do there.” Of course, the point of a strike isn’t just to hurt the employer’s business, it’s to improve pay and working conditions for employees. And after a staggeringly long strike, which United Here claims is the “worlds longest,” they came up empty handed. The significance of this particular loss for labor is probably not all that great in the grand scheme of things. These are just 130 workers, and sometimes management will resist demands even if strikers are able to hurt business significantly. But the United Here’s loss in this battle is symbolic of more than just one unsuccessful strike. During the 2008 primary, when organized labor split its support between Hilary Clinton and Barack Obama, United Here was the first union to back Obama. As a Senator in 2007, Obama even picketed with Strike First outside the Congress Hotel, in solidarity with striking workers. And when President Obama was first elected in 2008, the labor movement was optimistic that it would finally have the support it needed in Washington to reverse decades of decline in the power of private sector unions. According to Randy Shaw, an attorney and labor activist, President Obama’s background as a community organizer
Applications for U.S. Unemployment Aid Rise to 354K
(WASHINGTON) — The number of Americans seeking unemployment aid rose 10,000 last week to a seasonally adjusted 354,000, a sign layoffs have increased. Still, the level of applications is consistent with steady hiring. The Labor Department says the four-week average, a less volatile measure, increased 6,750 to 347,250, the third straight gain. The average had fallen to a five-year low of 338,000 earlier this month. Weekly applications are a proxy for layoffs. They have been at about 350,000 or below for most of this year. At the same time, hiring has been solid. In the past six months, employers have added an average of 208,000 jobs per month. That’s up from an average of only 138,000 in the previous six months. (MORE: US Unemployment Aid Applications Fall to 340K) The unemployment rate has fallen to a four-year low of 7.5 percent, down from 10 percent in October 2009. Some of the decrease is because many people have given up looking for work. The government counts people as unemployed only if they are actively searching for a job. Two reports this week suggested that the economy is still expanding modestly, despite an increase in Social Security taxes at the beginning of the year and federal government spending cuts that kicked in March 1. Home prices are surging and consumers are more confident. Both trends could encourage more spending in the coming months, providing crucial support for growth. Consumer confidence jumped in May to the highest level in five years, the Conference Board said Tuesday. Soaring stock prices and Americans’ brighter outlook on the job market helped drive the gain. Home prices jumped nearly 11 percent in March from a year earlier, according to the Standard & Poor’s/Case-Shiller home price index, also released Tuesday. That is the biggest gain in seven years. Higher prices increase homeowners’ net worth, which makes them more likely to spend. They can also sustain the housing recovery, by encouraging more would-be buyers to purchase homes before prices rise further. More buyers are bidding on a tight supply