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Archive for March 10th, 2010

Regional Employment Report: Unemployment Rate up in 30 States, Down in 9; Manufacturing States Benefit Most

In a headline trumpeting the wrong thing, Bloomberg is reporting Unemployment Decreased in Nine U.S. States in January.

The unemployment rate decreased in nine U.S. states in January and climbed in 30, signaling the thawing of the labor market is not broad-based.

The jobless rate in Michigan showed the biggest drop, falling to 14.3 percent, still the highest in the nation, from 14.5 percent in December, according to figures issued today by the Labor Department in Washington. New York and New Jersey were among eight states where unemployment decreased by a tenth of a point.

A national unemployment projected to average 9.8 percent this year signals state budgets will be strained by decreases in tax revenue and rising jobless insurance payments. The loss of 8.4 million jobs since the recession began in December 2007 means the labor market in the world’s largest economy will take years to rebound.

“This is a recovery that’s really kind of concentrated,” said Steven Cochrane, director of regional economics at Moody’s Economy.com in West Chester, Pennsylvania. “It still portends weakness in income-tax revenue and sales-tax revenue into fiscal year 2011.”

Unemployment in the Detroit area, home to General Motors Co. and Ford Motor Co., dropped to 15.3 percent from 16 percent in December, contributing to the decrease in Michigan’s jobless rate.

States showing the most improvement in coming months will probably be those with a large manufacturing base, said Moody’s Economy.com’s Cochrane. The need to rebuild inventories and growing exports is propelling a factory rebound that will help some parts of the country over others, he said.

Unemployment in California, Florida, Georgia, North and South Carolina and the District of Columbia climbed to the highest levels since records began in 1976.

Regional and State Report

With that backdrop let’s take a look at the actual data from the BLS Regional and State Employment and Unemployment Report for January 2010.

Thirty states and the District of Columbia recorded over-the-month unemployment rate increases, 9 states registered rate decreases, and 11 states had no rate change, the U.S. Bureau of Labor Statistics reported today. Over the year, jobless rates increased in all 50 states and the District of Columbia. The national unemployment rate fell from 10.0 percent in December to 9.7 percent in January, but was up from 7.7 percent a year earlier.

In January, nonfarm payroll employment increased in 31 states and the District of Columbia, decreased in 18 states, and remained unchanged in 1 state. The largest over-the-month increase in employment occurred in California (+32,500), followed by Illinois (+26,000), New York (+25,500), Washington (+18,900), and Minnesota (+15,600).

State Unemployment (Seasonally Adjusted)

Michigan again recorded the highest unemployment rate among the states, 14.3 percent in January. The states with the next highest rates were Nevada, 13.0 percent; Rhode Island, 12.7 percent; South Carolina, 12.6 percent; and California, 12.5 percent. North Dakota continued to register the lowest jobless rate, 4.2 percent in January, followed by Nebraska and South Dakota, 4.6 and 4.8 percent, respectively. The rates in California and South Carolina set new series highs, as did the rates in three other states: Florida (11.9 percent), Georgia (10.4 percent), and North Carolina (11.1 percent). The rate in the District of Columbia (12.0 percent) also set a new series high.

Six states reported statistically significant over-the-month unemployment rate increases in January. New Mexico experienced the largest of these (+0.3 percentage point), followed by California, Florida, Idaho, and Utah (+0.2 point each) and Maryland (+0.1 point). The remaining 44 states and the District of Columbia registered jobless rates that were not appreciably different from those of a month earlier, though some had changes that were at least as large numerically as the significant changes.

West Virginia and Nevada recorded the largest jobless rate increases from January 2009 (+3.5 and +3.4 percentage points, respectively). Six other states reported rate increases of 3.0 percentage points or more: Florida, Illinois, and Wyoming (+3.2 points each), Rhode Island (+3.1 points), and Alabama and Michigan (+3.0 points each). The District of Columbia also registered a large over-the-year unemployment rate increase (+3.6 percentage points). Thirty-five additional states had smaller, but also statistically significant, rate increases. The remaining seven states reported jobless rates that were not appreciably different from those of a year earlier.

Unemployment Rates By State

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Percentage Change Year Over Year

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Things are improving a bit in Michigan while climbing to new highs in California, Florida, Georgia, North and South Carolina and the District of Columbia.

Note that California was the state adding the most jobs. Employment just did not increase by enough relative to those seeking jobs.

These numbers show how shaky the “recovery” is, especially with huge budget concerns and layoffs coming in most states.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
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The Case Against the Fed from a US Senator

If you read through this letter from US Senator Sherrod Brown (D-OH), who is also the chairman of the Senate Subcommittee on Economic Policy, you will get a grasp of how badly the Fed has mishandled its responsibilities over the past ten years at least.

I thought the Senator was far too kind and reserved in his criticism. Yes, the Fed did focus on inflation. Unfortunately the definition of inflation which they used was inappropriate, since it did not include the obvious asset bubbles which were created by the Fed’s own monetary policies.

In addition, the Fed not only neglected its role in consumer protection, it took an activist opposition to the regulation of new financial instruments such as derivatives that has created a position that even today leaves the US in a financially precarious position.

This is particularly galling when one hears of the schemes being concocted by the bank friendly Senators, Dodd, Corker and Shelby, to move more of the weak banking reforms into the Fed, which is itself a private institution owned by these very banks that it will regulate.

This is not the appropriate level of financial reform that the American people deserve. And if you notice to whom Senator Sherrod is addressing his concerns, you will understand my lack of enthusiasm or any change or improvement in this sorry state of affairs.

March 10, 2010

The Honorable Timothy Geithner
Secretary, United States Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

The Honorable Lawrence Summers
Director, National Economic Council
The White House
1600 Pennsylvania Avenue, NW
Washington, D.C. 20500

Dear Secretary Geithner and Director Summers,

I write to you today to express my concern about the vacancies at the Federal Reserve, both on the Federal Open Market Committee (FOMC) and soon in the Vice Chairman’s office. This is the financial equivalent of leaving open vacancies on the United States Supreme Court, and it is essential that we fill these positions.

As Chairman of the Senate Banking Committee’s Subcommittee on Economic Policy, with jurisdiction over the Federal Reserve System’s monetary policy functions, I am acutely aware of the importance of monetary policy at the Fed.

Both the full Banking Committee and the Economic Policy Subcommittee have examined the causes of the financial crisis and the resulting effects on lending, access to credit, and employment. The evidence presented to the Committee about the role that Fed policy decisions played in the financial crisis and the economic downturn has led me to conclude that the Fed’s monetary policy has focused almost entirely on controlling inflation rather than maximizing employment and that the Fed has too often put banks’ soundness ahead of its other responsibilities.

In light of this experience, there are several other important qualifications that I would urge you to consider in selecting the new Vice Chairman and new members of the FOMC:

1. Recognition of the causes of the financial crisis before it occurred.

Many economic experts, including some at the Federal Reserve, failed to anticipate the impending economic crisis. However, there were exceptional people who sounded alarms about the rapidly inflating housing bubble, the proliferation of subprime lending, and the packaging, selling, and investing in toxic financial products by Wall Street. Unfortunately, regulators, including the Fed, ignored or attempted to discredit many of these courageous individuals, rather than heeding their warnings. We need economic policy makers who possess the foresight to identify harmful economic trends, the courage to speak out about the necessity of addressing these practices before they inflict lasting damage to our economy, and the wisdom to listen even if their views are challenged.

2. Demonstrated dedication to protecting consumers and maximizing employment.

For years, the Federal Reserve’s monetary policy has maintained an almost single-minded focus on inflation. This has been detrimental to the Fed’s other core missions, particularly maximizing employment and protecting consumers. The results of this fixation speak for themselves. The national unemployment rate is more than double the Fed’s statutorily mandated 4 percent unemployment target. The Fed also failed to act on repeated warnings about predatory mortgage lending and credit card abuses. Consumer protection experience is particularly important if the new consumer protection entity were to be housed at the Fed. Our economy will benefit from renewed attention to all of the Fed’s priorities.

3. Commitment to releasing e-mails related to the Fed’s involvement in the AIG bailout.

A growing number of experts – including economists, academics, and former regulators – have called upon the Federal Reserve to release all e-mails, internal accounting documents, and financial models related to AIG’s collapse. The American taxpayers now hold the majority of AIG shares, and they have a right to know how their money is being spent. Providing greater detail about the AIG bailout is particularly important because that episode continues to taint the Fed’s reputation. Focusing on candidates committed to full transparency related to this particular economic event would help to restore the Fed’s stature and credibility in the eyes of many Americans.

The American public has lost a great deal of confidence in the Federal Reserve. Selecting a Vice Chair and FOMC members with the above qualifications will send the message that the Federal Reserve has learned from the financial crisis, and that the Fed’s weaknesses are being addressed with more than just cosmetic changes.

I would be happy to discuss specific candidates with you at your convenience. Thank you for considering my views, and I look forward to working with you to address these vacancies at the Fed.

Sincerely,
Sherrod Brown
United States Senator

A Modest Amendment Proposal To The “Move Your Money” Campaign: Increase Your Withholding Exemptions

Submitted by Tyler Durden

Over the past few months, Arianna Huffington has initiated a grass roots campaign called “Move your money” whose purpose is to forcefully shift an allocation of the deposit base from the TBTFs which have captured the government via the Wall Street-D.C. lobby complex. While we hope this campaign succeeds, we are somewhat skeptical that it will achieve its goal. First, the logistics of transferring one’s account are non-trivial and can be daunting to most people. Second, the overarching problem lies not so much with the banks themselves, as with the one supreme enabler of not just artificial “profitability engineering” but of the broad range of market interventions, which will ultimately result in the collapse of America. Just today we demonstrated that the US monthly budget deficit hit an all time record, which, paradoxically, and completely counter-intuitively was accompanied by a record drop in the interest rate paid on public marketable debt. This is an artificial and perverted relationship which will soon breaks, and when it does the suffering will truly begin. Yet therein lies the rub: as the Administration, with the full complicity of the Treasury, borrows deeper into the red and consigns America’s future to a 3rd world fate, can now only be stopped by precipitating a full systematic reset of a Treasury-Fed duopoly set on testing whether or not America can default. Unfortunately, the guinea pigs in this experiment are some 300+ million Americans. We suggest a simpler solution to facilitate this the much needed reset: increase your tax withholding exemptions (a far simpler process to moving one’s deposit account), thereby forcing the treasury to tip its hand on just how much debt it will need, as it pretends to have some semblance of authority over an out of control budgetary situation.

This is a perfectly legal practice: here is the IRS itself providing a useful primer on how taxpayers can bump up their withholding exemptions all the way up to 10, in this way forcing the Treasury to delay receipt of tax funds via paycheck withholdings well into the post April 15^th future. We are confident that the capital reallocation that the banks will experience as a result of “Move your money”, coupled with the need to run a much more balanced budget (which we now realize is impossible, and the only alternative is eventual sovereign default or complete dollar devaluation) once tax withholdings dwindle, will finally force this administration and the banking cartel to listen to the silent majority of 95%+ Americans which are not on the list of burgeoning millionaires, and who couldn’t care less if the market shot up 100% today on some algo gone wild, yet which is somehow supposed to indicate that the economy is getting better. Just look at today’s record budget deficit number to make your own determination just how much “better” the economy is getting.

Bank Of America To Stop Charging 31,200% Interest

Posted by Karl Denninger

No, that’s not a misprint.

Let’s say you went to Starbucks and bought a $5 Latte.  You swiped your debit card and didn’t have the $5 in your account.

Bank of America would charge you a roughly $30 overdraft fee, amounting to 600% of your purchase for a loan of that $5 for as little as one day.  That’s bad enough.

Let’s assume you paid that overdraft fee (and the $5) in one week.  There are 52 weeks in a year and the bad news is that when computing the annual percentage rate you must divide the interest charged by the percentage of a year you held the money to get the APR.  Thus, 31,200% interest on an “annualized” basis, assuming you pay it in one week (it’s 218,400% if you pay it off the next morning!)

The bank will soon stop doing this, and in fact is mandated to do so without getting permission first for each transaction, as of June 1st.

The question that should be asked is why we should have to wait until June 19th for new accounts, or August 1st for existing accounts, never mind why this sort of outrageous behavior has been permitted in the first place.

Guido on the corner typically will charge you something obscene like 500% interest over the course of a year.

The banksters put Guido to shame.

How much do the banksters make off this?  Some $1.77 billion annually, at last count.  None of which, I might add, will be refunded to their customers.

The banking industry has claimed that changes like this will “restrict credit” to lower-income customers, who allegedly “need” that credit. 

I will simply observe that nobody “needs” a 31,200% interest rate loan except the bank that has been given license to rob the public blind – literally.

If you were wondering who the Congress and Fed work for, it clearly is not you.

The open question, and one that I cannot seem to find a reasonable answer to, is why we, the people, continue to allow both a Congress and Federal Reserve to sit in control of our government and financial system when they permit and endorse actions that constitute financial rape of such an egregious nature that absolutely everyone can understand it.