3/20/04 High Value Target: The Dollar
Niccolo Machiavelli: “There is nothing more difficult to take in hand, more perilous to conduct or more uncertain in its success than to take the lead in the introduction of a new order of things.”
The Mainichi Shimbun reported in its Friday editions that Japanese monetary authorities have decided to scale back intervention in world currency markets. Officials in Tokyo have decided that massive yen-selling is no longer necessary, the paper stated, attributing this to “an international monetary source” believed to be someone at the Ministry of Finance. For almost two years I have strongly recommended diverting one’s dollar holdings into the New Zealand dollar and, secondarily, into the Swiss franc. Over this time frame, the dollar has depreciated in value against 15 of the world’s leading currencies, the lone exception being the Mexican peso. I believe this depreciation could accelerate in the future. The dollar has been, and will continue to be, the world’s high value target.
According to the Labor Department and Datastream, the spread between producer and consumer inflation is near a 28-year high. Russ Koesterich, State Street’s chief North American equity strategist, noted that, since 1948, when the CPI change has been below that of the PPI, earnings growth has slowed to an average of 2% the next 12 months. By comparison, whenever the CPI is above the PPI, earnings growth averages about 8% over the next year.
Charles Hill: “The visibility on the second half of this year is horrendous.”
The Massachusetts Division of Unemployment Assistance reported yesterday that Bay State employers shed another 9,500 payroll jobs in February, the most since February 2003. At the same time, the state’s jobless rate fell to 5.3% from 5.6% in January as thousands gave up looking for jobs and therefore were not counted as unemployed. David Pace, regional economist at Global Insight, stated “we were hoping to see at least a bottoming, and maybe a move forward, but we’re still seeing a deterioration.” Payroll employment in the state has declined in 10 consecutive months. Since February 2001, Massachusetts has lost nearly 220,000 jobs, a decline of 6.5%. Andre Mayer, senior vice president of Associated Industries of Massachusetts observed “we keep seeing signs that we’re going to be creating jobs. We keep hearing from our members that they plan to be adding jobs, but it doesn’t quite happen.”
Meanwhile, the report from Pennsylvania yesterday was that nonfarm jobs in February fell by 2,000 on a seasonally adjusted basis. Since February 2003, total jobs were down 32,500. On average, it took unemployed workers in Pennsylvania longer to find work in 2003. The average number of weeks Pennsylvanians collected unemployment benefits increased by 5.6 weeks from 13.2 weeks in 2001 to 18.8 weeks in 2003.
National City is Ohio’s largest bank. By buying Provident Financial, National City will become the 10th largest bank in the U.S., based on assets. Provident’s CEO told employees in a memo that some duplicate jobs will be eliminated as a result of the merger. The final number has not been determined but sources put the number at 400 to 800 job cuts.
When you think of outsourcing, a foreign country quickly comes to mind. With Duke University it is another story. They sold its 65,000-square-foot hospital laundry to Angelica Corp. That outsourcing move will cost 40 Duke laundry workers their jobs.
A cash crunch has hit a specialty pharmaceutical company, Women First Healthcare. They will eliminate their 44-member pharmaceutical sales force.
According to Ward’s Reports, including this week’s estimates, calendar year North American vehicle output is down 4.1% from like-2003’s pace.
Natasha Humphries, a former employee at Palm Computing, told a California state Senate hearing that “offshoring has created a devastating economic climate, not just among Silicon Valley technical workers, but nationwide. Free trade is not free. The middle class is paying the price.”
The federal Trade Adjustment Assistance (TAA) program funds retraining and health insurance tax credits. It is aimed at manufacturing workers who have lost jobs because of imports or production shifting overseas. There is growing bipartisan momentum to expand the TAA to include workers from service-related fields such as computer software.
Patrick Stafford Kelley, editorial editor page of The Emporia Gazette in Kansas, stated “there are fewer flags on the streets. The first flush of patriotism has ended. People are hunkered down…and wondering when it’s going to end.”
According to the Honolulu Board of Realtors, prices for single-family homes rose 13.4% in 2003 after climbing the year before 11.7%. Single-family homes sold on Oahu last month spent an average of just 23 days on the market, the shortest time since the Board of Realtors started keeping track in 1987. Oahu condos averaged 34 days before a sale last month. On the island of Hawaii, the number of building permits were 22% higher in 2003 compared with the prior year.
Friday, March 19, 2004
3/19/04 Keeping It Real
Steve Ballmer, Microsoft CEO: “I believe we reached agreement on the issues of the case. But we were unable to agree on principles for new issues that could arise in the future.” The EU will rule that Microsoft is an illegal monopolist. How would they know? They’ve not had one in the EU. They only think they know one in Microsoft. Ballmer met a good deal of their demands. Obviously, that wasn’t good enough. I hope the EU has the patience and money for this battle. They’ll need it.
John Armbrust is a Florida consultant specializing in jet-fuel contracts for the airlines. He remarked “don’t underestimate the ability of the airlines to walk off a cliff together. Almost all of them are pretty vulnerable right now.” Southwest locked in 83% of its fuel purchases through March and hedged some purchases through 2008. The company has spent about $25 million on such hedges for this year. JetBlue probably has the second-best jet-fuel hedged position in the industry.
Yesterday Goldman Sachs economist Jan Hatzius stated “slow growth equals no jobs- perhaps it’s that simple.” Hatzius believes our government mistakenly exaggerated GDP. That’s mistakenly as in misspeak.
Meanwhile, Goldman Sachs told its clients yesterday that the firm expects national payrolls to grow by 160,000 this month. Other economists project a rise to 200,000. I don’t want to explode everyone’s bubble; however, on March 19, it is too early to know. At this time, the data is insufficient and incomplete to make an accurate analysis. There are a couple of thoughts though. In Georgia, for example, their state labor commissioner, Michael Thurmond, stated “you can’t just look at the unemployment rate and get a complete picture of the job market of the economy. While we’re encouraged by the decline in the unemployment rate, job creation remained anemic in February.” In Georgia, about 14.4% of the officially unemployed have been out of work for a half-year or more. For the nation as a whole, about 22% have been out of work for at least 27 weeks. Thurmond observed “I can envision job growth, but we don’t have any objective evidence that it has begun.”
Yesterday the Labor Department reported that U.S. initial jobless claims fell by 6,000 last week. That number was dwarfed by the increase of 47,000 in the number of people continuing to collect state jobless benefits. That number amounted to 3.064 million in the week ended March 6, and was understated by the thousands of workers being dropped weekly from the unemployment rolls due to their benefits not being extended. In addition, the Labor Department stated 33 states and territories reported an increase in new unemployment claims, while 20 reported a decrease. Again, much of the decrease is due to the unemployment benefits not being extended and not to job creation.
On Friday, March 12, Greenspan stated “employment will begin to increase more quickly before long.” On Tuesday, March 16, after the FOMC meeting, the Federal Reserve stated “new hiring was lagging.” What happened in those four days to create such a change in the tone? It’s possible they spoke to the National Federation of Independent Business. The 5.8 million small businesses in the U.S. employ about half of the U.S. workforce. The National Federation’s most recent survey indicated that only 13% of small businesses polled in February plan on hiring new workers, down from 17% in January. That is not too encouraging.
Maybe GDP growth is slowing. The Philadelphia Federal Reserve’s measure of business activity fell to 24.2 in March from 31.4 in February.
GM recalled more than 4 million pickup trucks to replace tailgate support cables that may corrode and fracture. GM remains prominently in the recall lead. With a full head of steam, I remain confident that they can retain their dominance in this category.
Beryl Sprinkel was chairman of the Council of Economic Advisors under former President Reagan. He stated Bush has “not done a good job” in restraining spending. “I’m disappointed.” Federal spending now amounts to about 20% of GDP. Federal receipts as a percent of GDP have fallen from 21% in 2000 to below 16% this year. The historical average ranges between 17 and 19 percent.
Steve Ballmer, Microsoft CEO: “I believe we reached agreement on the issues of the case. But we were unable to agree on principles for new issues that could arise in the future.” The EU will rule that Microsoft is an illegal monopolist. How would they know? They’ve not had one in the EU. They only think they know one in Microsoft. Ballmer met a good deal of their demands. Obviously, that wasn’t good enough. I hope the EU has the patience and money for this battle. They’ll need it.
John Armbrust is a Florida consultant specializing in jet-fuel contracts for the airlines. He remarked “don’t underestimate the ability of the airlines to walk off a cliff together. Almost all of them are pretty vulnerable right now.” Southwest locked in 83% of its fuel purchases through March and hedged some purchases through 2008. The company has spent about $25 million on such hedges for this year. JetBlue probably has the second-best jet-fuel hedged position in the industry.
Yesterday Goldman Sachs economist Jan Hatzius stated “slow growth equals no jobs- perhaps it’s that simple.” Hatzius believes our government mistakenly exaggerated GDP. That’s mistakenly as in misspeak.
Meanwhile, Goldman Sachs told its clients yesterday that the firm expects national payrolls to grow by 160,000 this month. Other economists project a rise to 200,000. I don’t want to explode everyone’s bubble; however, on March 19, it is too early to know. At this time, the data is insufficient and incomplete to make an accurate analysis. There are a couple of thoughts though. In Georgia, for example, their state labor commissioner, Michael Thurmond, stated “you can’t just look at the unemployment rate and get a complete picture of the job market of the economy. While we’re encouraged by the decline in the unemployment rate, job creation remained anemic in February.” In Georgia, about 14.4% of the officially unemployed have been out of work for a half-year or more. For the nation as a whole, about 22% have been out of work for at least 27 weeks. Thurmond observed “I can envision job growth, but we don’t have any objective evidence that it has begun.”
Yesterday the Labor Department reported that U.S. initial jobless claims fell by 6,000 last week. That number was dwarfed by the increase of 47,000 in the number of people continuing to collect state jobless benefits. That number amounted to 3.064 million in the week ended March 6, and was understated by the thousands of workers being dropped weekly from the unemployment rolls due to their benefits not being extended. In addition, the Labor Department stated 33 states and territories reported an increase in new unemployment claims, while 20 reported a decrease. Again, much of the decrease is due to the unemployment benefits not being extended and not to job creation.
On Friday, March 12, Greenspan stated “employment will begin to increase more quickly before long.” On Tuesday, March 16, after the FOMC meeting, the Federal Reserve stated “new hiring was lagging.” What happened in those four days to create such a change in the tone? It’s possible they spoke to the National Federation of Independent Business. The 5.8 million small businesses in the U.S. employ about half of the U.S. workforce. The National Federation’s most recent survey indicated that only 13% of small businesses polled in February plan on hiring new workers, down from 17% in January. That is not too encouraging.
Maybe GDP growth is slowing. The Philadelphia Federal Reserve’s measure of business activity fell to 24.2 in March from 31.4 in February.
GM recalled more than 4 million pickup trucks to replace tailgate support cables that may corrode and fracture. GM remains prominently in the recall lead. With a full head of steam, I remain confident that they can retain their dominance in this category.
Beryl Sprinkel was chairman of the Council of Economic Advisors under former President Reagan. He stated Bush has “not done a good job” in restraining spending. “I’m disappointed.” Federal spending now amounts to about 20% of GDP. Federal receipts as a percent of GDP have fallen from 21% in 2000 to below 16% this year. The historical average ranges between 17 and 19 percent.
Thursday, March 18, 2004
3/18/04 Budget Cuts Can Be Unwelcome
Kunji Okue, an economist at Dresdner Kleinwort Wasserstein in Tokyo: “Japan is hard at work importing the U.S. deficit. That could be dangerous, since it may be impossible to unwind.”
Alan Greenspan: “Considering the possibility of extending unemployment insurance is not a bad idea.” A friend pointed out that Bloomberg reported the rate at which unemployed U.S. workers exhausted their jobless benefits in 2002 and 2003 approached highs not seen since the program began in the 1930s as a response to the Great Depression.
A friend from Baltimore called and told me that, to balance the city’s $2.1 billion budget, it would have to eliminate 533 jobs, including police officers, firefighters, and trash collectors, as well as increasing the city’s property tax rate. The cuts are blamed on macroeconomic factors, such as, lost jobs that result in less revenue from income taxes.
Other communities are experiencing cutbacks. The Philadelphia Police Department is eliminating positions. Hospitals in Georgia, the state of Washington, and Colorado are cutting hundreds of positions. School districts and colleges in California, Florida, Kansas, Ohio, Missouri, and Kentucky have announced layoffs due to budget constraints.
According to the Kaiser Family Foundation, monthly insurance premiums for the nation’s employers rose almost 14% in 2003, the third straight year of double-digit increase. Costs for doctors’ services increased by 1.1% in February.
Mat Johnson, Quantit Economic Group’s chief economist: “The one thing that doesn’t adjust is wages and salaries. They don’t all of a sudden fall. The way to make them fall is to fire workers and try to raise productivity, and/or buy back workers at a later date at less of a cost.”
With the merger of Bank of America and Fleet Boston, 13,000 workers will lose their jobs. Bombardier, the world’s biggest maker of train equipment, will cut 6,600 jobs in its train business, or 19% of the division’s workforce, and close seven plants in Europe. It would appear that their 2001 acquisition of DaimlerChrysler AG’s Adtranz rail equipment unit was partially to blame for the cutbacks. About 990 jobs were eliminated by the closing of Thomson’s tv picture tube plant in Marion, Indiana. About 545 employees at a sister plant in Circleville, Ohio also will be cut.
A new report indicates that the percentage of prescriptions filled by generics in the U.S. has risen from 18.6% in 1984 to nearly 50% today. In 2002, filling an average generic prescription cost patients $16.85 vs. $72.20 for the average branded prescription.
Real average weekly earnings decreased by 0.1%from January to February after seasonal adjustment, according to preliminary data released yesterday by the BLS.
U.S. oil prices rose to their highest level since October 1990. There was a decline in gasoline stocks to about 200 million barrels. It is imperative that all Americans do their part and reduce their driving each week. There is little question that higher prices at the pump are a ball buster. We can’t just blame it on OPEC and higher consumption by Asian countries and/or price gauging by the big oil companies. As individuals, we must assume some responsibility for the lack of conservation.
U.S. treasury yields hit their lowest level in eight months. The yield curve is getting flatter, and this usually is a harbinger of lower economic activity. Less economic growth should be reflected in lower p/e ratios. As long as investors continue to guard against a pickup in inflation and rising treasury yields, they will see their investment accounts dwindle in size. Remaining on the wrong side of the market is a reflection of stubborn investors bearing big egos and/or sheep being led to slaughter by herding dogs and their ill-fated masters.
Kunji Okue, an economist at Dresdner Kleinwort Wasserstein in Tokyo: “Japan is hard at work importing the U.S. deficit. That could be dangerous, since it may be impossible to unwind.”
Alan Greenspan: “Considering the possibility of extending unemployment insurance is not a bad idea.” A friend pointed out that Bloomberg reported the rate at which unemployed U.S. workers exhausted their jobless benefits in 2002 and 2003 approached highs not seen since the program began in the 1930s as a response to the Great Depression.
A friend from Baltimore called and told me that, to balance the city’s $2.1 billion budget, it would have to eliminate 533 jobs, including police officers, firefighters, and trash collectors, as well as increasing the city’s property tax rate. The cuts are blamed on macroeconomic factors, such as, lost jobs that result in less revenue from income taxes.
Other communities are experiencing cutbacks. The Philadelphia Police Department is eliminating positions. Hospitals in Georgia, the state of Washington, and Colorado are cutting hundreds of positions. School districts and colleges in California, Florida, Kansas, Ohio, Missouri, and Kentucky have announced layoffs due to budget constraints.
According to the Kaiser Family Foundation, monthly insurance premiums for the nation’s employers rose almost 14% in 2003, the third straight year of double-digit increase. Costs for doctors’ services increased by 1.1% in February.
Mat Johnson, Quantit Economic Group’s chief economist: “The one thing that doesn’t adjust is wages and salaries. They don’t all of a sudden fall. The way to make them fall is to fire workers and try to raise productivity, and/or buy back workers at a later date at less of a cost.”
With the merger of Bank of America and Fleet Boston, 13,000 workers will lose their jobs. Bombardier, the world’s biggest maker of train equipment, will cut 6,600 jobs in its train business, or 19% of the division’s workforce, and close seven plants in Europe. It would appear that their 2001 acquisition of DaimlerChrysler AG’s Adtranz rail equipment unit was partially to blame for the cutbacks. About 990 jobs were eliminated by the closing of Thomson’s tv picture tube plant in Marion, Indiana. About 545 employees at a sister plant in Circleville, Ohio also will be cut.
A new report indicates that the percentage of prescriptions filled by generics in the U.S. has risen from 18.6% in 1984 to nearly 50% today. In 2002, filling an average generic prescription cost patients $16.85 vs. $72.20 for the average branded prescription.
Real average weekly earnings decreased by 0.1%from January to February after seasonal adjustment, according to preliminary data released yesterday by the BLS.
U.S. oil prices rose to their highest level since October 1990. There was a decline in gasoline stocks to about 200 million barrels. It is imperative that all Americans do their part and reduce their driving each week. There is little question that higher prices at the pump are a ball buster. We can’t just blame it on OPEC and higher consumption by Asian countries and/or price gauging by the big oil companies. As individuals, we must assume some responsibility for the lack of conservation.
U.S. treasury yields hit their lowest level in eight months. The yield curve is getting flatter, and this usually is a harbinger of lower economic activity. Less economic growth should be reflected in lower p/e ratios. As long as investors continue to guard against a pickup in inflation and rising treasury yields, they will see their investment accounts dwindle in size. Remaining on the wrong side of the market is a reflection of stubborn investors bearing big egos and/or sheep being led to slaughter by herding dogs and their ill-fated masters.
Wednesday, March 17, 2004
3/17/04 New Hiring Has Lagged
As Spring approaches, the weather should begin to turn sunnier and warmer. That means two things. One, more construction workers will be hired. Two, we are in the middle of tax season, and seasonal workers will be hired to assist in tax preparation. That’s the good news. The bad news is a bit more overwhelming. BASF will cut another 750 jobs in North America on top of the 1,000 already announced for the year. Demolition crews will tear down the 75-year old Flexsys chemical plant in Nitro, West Virginia. A total of 205 jobs will be eliminated. According to the American Chemical Council, about 100,000 chemical-related jobs, or 1 in every 10, have been cut in the past five years. As more chemical factories shut down due to rising energy costs and increased foreign competition, more workers will lose their jobs.
Did you know that the Atkins diet and mad cow disease have helped to create a slump in the french fry potato market by downsizing serving sizes at fast food outlets? JR Simplot, one of the world’s largest producers of french fries, will close its Hermiston, Oregon plant and eliminate 125 jobs by June, and another 500 by November. Lear Corp., the world’s third largest auto supplier, announced it will close one or both of its Walker, Michigan plants by May. There is a potential for 350 employees to lose their jobs. Avondale Mills will cease weaving operations at its yarn production facility in Monroe, Georgia and lay off half of its staff, or 158 people.
The House Committee on Government Reform reported yesterday that about 350,000 unemployed workers nationwide lost their benefits in January, and that an additional 2 million will do so by July 1 unless benefits are extended. When an individual loses benefits, they are no longer counted on the unemployment rolls. In other words, between December and January, 350,000 Americans were not counted as unemployed. The January unemployment number was reported in the first week of February. As such, in doing the math, it is plain to see unemployment rose in January and it did in February also for the same reason. There is not enough job creation to offset those being dropped from the rolls due to the loss of benefits. That does not take into account plant closings and other job losses from cutbacks. The Fed’s statement, “new hiring has lagged,” does not even begin to reflect the landscape on Main Street.
Let’s take a look at California. There are 59,634 who exhausted their unemployment benefits in January. As of January, there were 1.07 million unemployed workers in California.
The Walt Disney Company is exploring India as a production base for its animation and feature films. Electronic Arts will set up shop in Mumbai for some of its game creations. Gartner, the IT consultancy, predicts that up to 25% of traditional IT jobs will be outsourced by 2010 and that “global sourcing is becoming a mainstream delivery model.” They calculate the world will spend $128 billion this year for business process outsourcing contracts and more than double that amount in 2005. Do you think this might be another reason for a lag in new hiring?
Germany’s ZEW institute stated its gauge of economic expectations fell in March, for the third straight month, to its lowest level since last summer.
Yesterday, oil prices hit fresh one-year highs as U.S. light crude rose to $37.80 per barrel. As temperatures rise, the demand for heating oil should begin to decline. On the other hand, nicer weather makes weekend driving more inviting.
February home construction fell 4% to the lowest annual pace since August. However, it is anticipated that 2004 will be the second-best year ever for the sale of new homes.
According to a recent report from Cutting Edge Information, today’s generic drug market has zoomed to a $40 billion industry, almost doubling in size from 1998, and is expected to reach more than $60 billion by 2007.
Panacos Pharmaceuticals has begun Phase 1 clinical trial of its small molecule HIV drug candidate PA-457, which represents the first in the new class of antiretrovirals called Maturation Inhibitors that offer the promise of new treatment options for patients with HIV.
Vinod Khosla, General Partner at Klener Perkins Caufield & Byers: “Microcredit has the power to build the next entrepreneur out of the poorest society in India.”
K. Paul Singh, Chairman, President, and CEO of Primust Telecommunications: “People don’t come to work to fail. They are smart. We need to find a good fit for the people when we hire them. It takes time for a member to find his or her fit- at least a year. “
Last year, Toyota was the number one marketer of passenger cars in the Chicago area.
As Spring approaches, the weather should begin to turn sunnier and warmer. That means two things. One, more construction workers will be hired. Two, we are in the middle of tax season, and seasonal workers will be hired to assist in tax preparation. That’s the good news. The bad news is a bit more overwhelming. BASF will cut another 750 jobs in North America on top of the 1,000 already announced for the year. Demolition crews will tear down the 75-year old Flexsys chemical plant in Nitro, West Virginia. A total of 205 jobs will be eliminated. According to the American Chemical Council, about 100,000 chemical-related jobs, or 1 in every 10, have been cut in the past five years. As more chemical factories shut down due to rising energy costs and increased foreign competition, more workers will lose their jobs.
Did you know that the Atkins diet and mad cow disease have helped to create a slump in the french fry potato market by downsizing serving sizes at fast food outlets? JR Simplot, one of the world’s largest producers of french fries, will close its Hermiston, Oregon plant and eliminate 125 jobs by June, and another 500 by November. Lear Corp., the world’s third largest auto supplier, announced it will close one or both of its Walker, Michigan plants by May. There is a potential for 350 employees to lose their jobs. Avondale Mills will cease weaving operations at its yarn production facility in Monroe, Georgia and lay off half of its staff, or 158 people.
The House Committee on Government Reform reported yesterday that about 350,000 unemployed workers nationwide lost their benefits in January, and that an additional 2 million will do so by July 1 unless benefits are extended. When an individual loses benefits, they are no longer counted on the unemployment rolls. In other words, between December and January, 350,000 Americans were not counted as unemployed. The January unemployment number was reported in the first week of February. As such, in doing the math, it is plain to see unemployment rose in January and it did in February also for the same reason. There is not enough job creation to offset those being dropped from the rolls due to the loss of benefits. That does not take into account plant closings and other job losses from cutbacks. The Fed’s statement, “new hiring has lagged,” does not even begin to reflect the landscape on Main Street.
Let’s take a look at California. There are 59,634 who exhausted their unemployment benefits in January. As of January, there were 1.07 million unemployed workers in California.
The Walt Disney Company is exploring India as a production base for its animation and feature films. Electronic Arts will set up shop in Mumbai for some of its game creations. Gartner, the IT consultancy, predicts that up to 25% of traditional IT jobs will be outsourced by 2010 and that “global sourcing is becoming a mainstream delivery model.” They calculate the world will spend $128 billion this year for business process outsourcing contracts and more than double that amount in 2005. Do you think this might be another reason for a lag in new hiring?
Germany’s ZEW institute stated its gauge of economic expectations fell in March, for the third straight month, to its lowest level since last summer.
Yesterday, oil prices hit fresh one-year highs as U.S. light crude rose to $37.80 per barrel. As temperatures rise, the demand for heating oil should begin to decline. On the other hand, nicer weather makes weekend driving more inviting.
February home construction fell 4% to the lowest annual pace since August. However, it is anticipated that 2004 will be the second-best year ever for the sale of new homes.
According to a recent report from Cutting Edge Information, today’s generic drug market has zoomed to a $40 billion industry, almost doubling in size from 1998, and is expected to reach more than $60 billion by 2007.
Panacos Pharmaceuticals has begun Phase 1 clinical trial of its small molecule HIV drug candidate PA-457, which represents the first in the new class of antiretrovirals called Maturation Inhibitors that offer the promise of new treatment options for patients with HIV.
Vinod Khosla, General Partner at Klener Perkins Caufield & Byers: “Microcredit has the power to build the next entrepreneur out of the poorest society in India.”
K. Paul Singh, Chairman, President, and CEO of Primust Telecommunications: “People don’t come to work to fail. They are smart. We need to find a good fit for the people when we hire them. It takes time for a member to find his or her fit- at least a year. “
Last year, Toyota was the number one marketer of passenger cars in the Chicago area.
Tuesday, March 16, 2004
3/16/04 Surplus Employees
The Philippines has 84 million people. With a literacy rate in excess of 90%, universities graduate 350,000 students a year, including 50,000 engineers. The average household income is less than $3,000 per year. There is a sizable middle class. The government predicts that call centers will double over the next year thanks to Dell, P&G, American Express, Citigroup, and others. Accenture, the large consulting company, employs 2,000 Filipino software developers. An average software engineer is quite pleased with a $4,000 annual salary. A very talented programmer can make $1,000 a month. Medical transcription is another field with employment on the rise. Many have degrees in nursing and physical therapy. With excellent voice and data communications, a highly educated population with many possessing English speaking skills, and long-standing economic ties to the U.S., this country has a bright outsourcing future.
Zapatero: “My most immediate priority is to fight all forms of terrorism.”
The U.S. Department of Labor announced it is increasing benefits for Boeing workers who can qualify under its Trade Adjustment Assistance program. The changes included: an additional 26 weeks of unemployment checks for workers who are going through job training, bringing the total to 104 weeks. There will be a tax credit for up to 65% of what individuals pay in premiums to maintain their Boeing health insurance under COBRA. In addition, there is an increase in one-time payment for workers’ job-search and relocation costs, from $800 to $1,250. As previously noted, Boeing has had uninterrupted monthly layoffs for over two years.
Juan Cole: “The Afghanistan GDP is $5 billion a year; $2 billion of that comes from poppy cultivation for heroin production.”
BellSouth stated yesterday that it will eliminate 778 largely technical jobs in nine states in the second quarter. The company has cut nearly a fifth of its jobs in little more than three years. BellSouth describes the targeted workers as “surplused employees.” At the end of last year, the company employed 75,743 workers. I wonder how many top managers are surplus?
The Wall Street Journal, Investors Business Daily, and other publications have commented on the most recent Manpower hiring survey of 16,000 U.S. employers. I don’t write headlines for consumption. Therefore, I have an advantage. Briefly, 28% surveyed plan to increase hiring for the second quarter. However, the increase took place essentially in the South and, for the most part, mainly in construction. Elsewhere, the picture was mixed and, unfortunately, not particularly noteworthy except that the Northeast continued to have a poor hiring outlook. The latter should not be surprising given the bleak March Empire Manufacturing Survey from the Federal Reserve Bank of New York. The index fell to 25.33 from February’s 42.05. The gauge of new orders dropped to 23.52 in March from the prior month’s 34.94. The average employee workweek declined to 11.9 from 26.5 a month earlier. The index of inventories dropped to 3.9 in March from 8.6 in February, and unfilled orders decreased to 3.3 for the month from February’s 6.5.
Wal-Mart reported yesterday that its March sales at stores open at least one year were tracking near the high end of its forecast for a 4% to 6% increase as customers cashed tax refund checks. Money orders and consumables were among the most frequently purchased items when people cashed their refund checks.
Georgia Governor Sonny Perdue, a Republican: “Our theme this year is living within our means. The federal money from last year is gone. And we need to build up our rainy day fund, rather than drawing it down.”
Even though tax collections are up 5.8% in the first seven months of California’s budget year, and even though spending is down 0.6% during this period, the state still ran a $6 billion deficit during this time.
When people think of Kentucky, horses, tobacco, and bluegrass come to mind. Rarely does one mention the textile industry. Last week, Jockey International eliminated 440 jobs at three plants in Carlisle, Mount Sterling, and Maysville. In the last 13 years, the number of employees in apparel manufacturing in Kentucky has plummeted by 70% from 32,200 to 8,900. Arlen Sanders, director of economic development for Liberty and Casey counties, stated “unfortunately, they are continuing to export our jobs. In small, rural communities where we’ve had these jobs, it hurts.” Kentucky has plenty of company. Michael Wald, an economist with the U.S. Bureau of Labor Statistics, stated U.S. apparel makers cut 556,000 jobs- 65% of the industry- in the last decade. While average compensation costs in 2002 were $21.33 an hour in the U.S., Wald stated they were $2.38 in Mexico and $2.57 in Brazil. Jockey International is the largest manufacturing employer in Carlisle. The company contributed about $80,000 annually to Carlisle and Nicholas County in payroll taxes and accounted for about a third of the purchases from the gas and water utilities.
Asked on CNN’s “Late Edition” if the war in Iraq was worthwhile given that 564 U.S. soldiers have died there, Rumsfeld stated, “Oh, my goodness, yes. There’s no question…25 million people in Iraq are free.”
Today the Fed’s Open Market Committee meets. As always, there will be the Fed’s assessment on the economy. There is an opportunity for Greenspan to invite the Bank of Japan to offer the accompanying statement. After all, the B of J has been setting interest rates on our treasuries for some time. By their purchasing hundreds of billions of treasuries, our interest rates have been maintained at an artificially low level. The Fed governors are surplus employees. It’s a good thing they don’t work for BellSouth.
The Wall Street Journal’s lead article today focuses on rising healthcare costs for retired workers, company ceilings on the amount spent per retiree, and examples of companies actually cutting retirees’ health benefits, thus creating greater income for the company itself. In my view, it is worthwhile reading for retirees and investors. For example, IBM spent 5% less on retiree health benefits last year while IBM retiree healthcare premiums rose neatly 29%.
The Philippines has 84 million people. With a literacy rate in excess of 90%, universities graduate 350,000 students a year, including 50,000 engineers. The average household income is less than $3,000 per year. There is a sizable middle class. The government predicts that call centers will double over the next year thanks to Dell, P&G, American Express, Citigroup, and others. Accenture, the large consulting company, employs 2,000 Filipino software developers. An average software engineer is quite pleased with a $4,000 annual salary. A very talented programmer can make $1,000 a month. Medical transcription is another field with employment on the rise. Many have degrees in nursing and physical therapy. With excellent voice and data communications, a highly educated population with many possessing English speaking skills, and long-standing economic ties to the U.S., this country has a bright outsourcing future.
Zapatero: “My most immediate priority is to fight all forms of terrorism.”
The U.S. Department of Labor announced it is increasing benefits for Boeing workers who can qualify under its Trade Adjustment Assistance program. The changes included: an additional 26 weeks of unemployment checks for workers who are going through job training, bringing the total to 104 weeks. There will be a tax credit for up to 65% of what individuals pay in premiums to maintain their Boeing health insurance under COBRA. In addition, there is an increase in one-time payment for workers’ job-search and relocation costs, from $800 to $1,250. As previously noted, Boeing has had uninterrupted monthly layoffs for over two years.
Juan Cole: “The Afghanistan GDP is $5 billion a year; $2 billion of that comes from poppy cultivation for heroin production.”
BellSouth stated yesterday that it will eliminate 778 largely technical jobs in nine states in the second quarter. The company has cut nearly a fifth of its jobs in little more than three years. BellSouth describes the targeted workers as “surplused employees.” At the end of last year, the company employed 75,743 workers. I wonder how many top managers are surplus?
The Wall Street Journal, Investors Business Daily, and other publications have commented on the most recent Manpower hiring survey of 16,000 U.S. employers. I don’t write headlines for consumption. Therefore, I have an advantage. Briefly, 28% surveyed plan to increase hiring for the second quarter. However, the increase took place essentially in the South and, for the most part, mainly in construction. Elsewhere, the picture was mixed and, unfortunately, not particularly noteworthy except that the Northeast continued to have a poor hiring outlook. The latter should not be surprising given the bleak March Empire Manufacturing Survey from the Federal Reserve Bank of New York. The index fell to 25.33 from February’s 42.05. The gauge of new orders dropped to 23.52 in March from the prior month’s 34.94. The average employee workweek declined to 11.9 from 26.5 a month earlier. The index of inventories dropped to 3.9 in March from 8.6 in February, and unfilled orders decreased to 3.3 for the month from February’s 6.5.
Wal-Mart reported yesterday that its March sales at stores open at least one year were tracking near the high end of its forecast for a 4% to 6% increase as customers cashed tax refund checks. Money orders and consumables were among the most frequently purchased items when people cashed their refund checks.
Georgia Governor Sonny Perdue, a Republican: “Our theme this year is living within our means. The federal money from last year is gone. And we need to build up our rainy day fund, rather than drawing it down.”
Even though tax collections are up 5.8% in the first seven months of California’s budget year, and even though spending is down 0.6% during this period, the state still ran a $6 billion deficit during this time.
When people think of Kentucky, horses, tobacco, and bluegrass come to mind. Rarely does one mention the textile industry. Last week, Jockey International eliminated 440 jobs at three plants in Carlisle, Mount Sterling, and Maysville. In the last 13 years, the number of employees in apparel manufacturing in Kentucky has plummeted by 70% from 32,200 to 8,900. Arlen Sanders, director of economic development for Liberty and Casey counties, stated “unfortunately, they are continuing to export our jobs. In small, rural communities where we’ve had these jobs, it hurts.” Kentucky has plenty of company. Michael Wald, an economist with the U.S. Bureau of Labor Statistics, stated U.S. apparel makers cut 556,000 jobs- 65% of the industry- in the last decade. While average compensation costs in 2002 were $21.33 an hour in the U.S., Wald stated they were $2.38 in Mexico and $2.57 in Brazil. Jockey International is the largest manufacturing employer in Carlisle. The company contributed about $80,000 annually to Carlisle and Nicholas County in payroll taxes and accounted for about a third of the purchases from the gas and water utilities.
Asked on CNN’s “Late Edition” if the war in Iraq was worthwhile given that 564 U.S. soldiers have died there, Rumsfeld stated, “Oh, my goodness, yes. There’s no question…25 million people in Iraq are free.”
Today the Fed’s Open Market Committee meets. As always, there will be the Fed’s assessment on the economy. There is an opportunity for Greenspan to invite the Bank of Japan to offer the accompanying statement. After all, the B of J has been setting interest rates on our treasuries for some time. By their purchasing hundreds of billions of treasuries, our interest rates have been maintained at an artificially low level. The Fed governors are surplus employees. It’s a good thing they don’t work for BellSouth.
The Wall Street Journal’s lead article today focuses on rising healthcare costs for retired workers, company ceilings on the amount spent per retiree, and examples of companies actually cutting retirees’ health benefits, thus creating greater income for the company itself. In my view, it is worthwhile reading for retirees and investors. For example, IBM spent 5% less on retiree health benefits last year while IBM retiree healthcare premiums rose neatly 29%.
Monday, March 15, 2004
3/15/04 Existing In Hostile Territory
They got Mark Everson. He could not dodge the bullet. Who is he? Everson is the IRS Commissioner. For the first time he was forced to pay the AMT. He observed that, if the process isn’t simplified, people will be less willing to pay taxes. He remarked “it’s a matter of simplifying a tax system that’s far too complex. It’s got to be addressed.” The man sounds like his nose is out of joint. Now he knows how millions of Americans got screwed this year.
As I previously noted, this year’s H-1B cap of 65,000 has already been reached. In the India Post newspaper it was reported that Bush told Paresh Shah that he was unaware about the fact that H-1B cases filed in the year 2003 were being applied to the year 2004 H-1B cap. Bush stated that he was willing to review a proposal to recapture approximately 12,000 H-1B visas into the current H-1B cap. This would allow the H-1B category to reopen in this current fiscal year until the recaptured H-1B spots are exhausted.
Craig Barrett, Intel CEO: “People in China are capable of doing any engineering job, any software job, any managerial job that people in the United States are capable of doing. As CEO of Intel, my allegiance is to the shareholders of Intel and to the success of the company. We go after the most cost-effective resources around the world, no matter where they are. However, as an American citizen, I would have to be worried about whether jobs that are created are created outside the U.S…as a citizen, I see all these resources and I think this puts my country in danger.”
Intel’s initial data-storage chip assembling took place in Shanghai in 1998. A second testing and assembly plant will open this year in Chengdu at a cost of $675 million. Intel has sales offices in 14 Chinese cities. The company has invested in 30 start-ups in China. More than 10% of Intel’s sales come from China, the largest consuming nation for mobile phones. Intel’s facility in Shanghai employs 2,000. Intel China President Wee Theng Tan stated “the quality of the work here is equivalent to any of the work we do around the world.” It had better be and it had better say in top form. Down the road is Shanghai-based SMIC, founded in 2000 with investment from Singapore, the U.S., and the Shanghai government. It is China’s leading chip company. It wants to challenge Intel’s leadership. In six years, China is expected to surpass the U.S. as the biggest buyer of personal computers. Currently, SMIC manufactures chips designed by other companies. That too will change. China has 56 wafer-fabrication plants in operation and 12 more under construction. You can bet that chip prices will drop significantly as production increases. Prices for computers will continue to decline. On Friday, SMIC priced its shares to go public. Huann Min Tang, technical director of design services for SMIC, stated we’re probably just a couple of years behind the world leaders now.” And, in my opinion, closing fast. If I know that, so does Craig Barrett.
China’s retail sales rose 10.5% from a year earlier in the first two months of this year. China’s Prime Minister is concerned with growth rates that are too high and the potential dangers of inflationary pressures. He stated “it’s a test no less than the SARS epidemic. If we fail to manage the situation well, setbacks to the economy will be inevitable.”
Daniel Cain lives in Stark County, Ohio. He is a 70 year-old retired steelworker. In 2000 he voted for Bush. Cain stated “I voted for him because I belong to the National Rifle Association. Now, I just don’t trust him because of all the shipping of jobs out of the country.” NRA supporters voted Bush into office in 2000. It won’t happen in 2004. All the ads in the world cannot regain lost trust.
They got Mark Everson. He could not dodge the bullet. Who is he? Everson is the IRS Commissioner. For the first time he was forced to pay the AMT. He observed that, if the process isn’t simplified, people will be less willing to pay taxes. He remarked “it’s a matter of simplifying a tax system that’s far too complex. It’s got to be addressed.” The man sounds like his nose is out of joint. Now he knows how millions of Americans got screwed this year.
As I previously noted, this year’s H-1B cap of 65,000 has already been reached. In the India Post newspaper it was reported that Bush told Paresh Shah that he was unaware about the fact that H-1B cases filed in the year 2003 were being applied to the year 2004 H-1B cap. Bush stated that he was willing to review a proposal to recapture approximately 12,000 H-1B visas into the current H-1B cap. This would allow the H-1B category to reopen in this current fiscal year until the recaptured H-1B spots are exhausted.
Craig Barrett, Intel CEO: “People in China are capable of doing any engineering job, any software job, any managerial job that people in the United States are capable of doing. As CEO of Intel, my allegiance is to the shareholders of Intel and to the success of the company. We go after the most cost-effective resources around the world, no matter where they are. However, as an American citizen, I would have to be worried about whether jobs that are created are created outside the U.S…as a citizen, I see all these resources and I think this puts my country in danger.”
Intel’s initial data-storage chip assembling took place in Shanghai in 1998. A second testing and assembly plant will open this year in Chengdu at a cost of $675 million. Intel has sales offices in 14 Chinese cities. The company has invested in 30 start-ups in China. More than 10% of Intel’s sales come from China, the largest consuming nation for mobile phones. Intel’s facility in Shanghai employs 2,000. Intel China President Wee Theng Tan stated “the quality of the work here is equivalent to any of the work we do around the world.” It had better be and it had better say in top form. Down the road is Shanghai-based SMIC, founded in 2000 with investment from Singapore, the U.S., and the Shanghai government. It is China’s leading chip company. It wants to challenge Intel’s leadership. In six years, China is expected to surpass the U.S. as the biggest buyer of personal computers. Currently, SMIC manufactures chips designed by other companies. That too will change. China has 56 wafer-fabrication plants in operation and 12 more under construction. You can bet that chip prices will drop significantly as production increases. Prices for computers will continue to decline. On Friday, SMIC priced its shares to go public. Huann Min Tang, technical director of design services for SMIC, stated we’re probably just a couple of years behind the world leaders now.” And, in my opinion, closing fast. If I know that, so does Craig Barrett.
China’s retail sales rose 10.5% from a year earlier in the first two months of this year. China’s Prime Minister is concerned with growth rates that are too high and the potential dangers of inflationary pressures. He stated “it’s a test no less than the SARS epidemic. If we fail to manage the situation well, setbacks to the economy will be inevitable.”
Daniel Cain lives in Stark County, Ohio. He is a 70 year-old retired steelworker. In 2000 he voted for Bush. Cain stated “I voted for him because I belong to the National Rifle Association. Now, I just don’t trust him because of all the shipping of jobs out of the country.” NRA supporters voted Bush into office in 2000. It won’t happen in 2004. All the ads in the world cannot regain lost trust.
Sunday, March 14, 2004
3/14/04 An Oil And Gas Field Trip
Frequently, headlines can be misleading. According to Baker Hughes, the number of rigs exploring for oil and gas in Oklahoma reached an 18-year high of 161 at the end of February. Something about the headline did not sit right with my gut instinct. That’s why we are on U.S. 75 between Tulsa and McAlester. In 2003, natural gas prices exceeded $7 per thousand cubic feet and oil prices rose above $30 per barrel. Oil and gas is the second largest industry in Oklahoma. Would you be surprised to learn that oil and gas production in Oklahoma fell in the first 11 months of 2003 versus the same period in 2002 by 3% each, according to the latest Oklahoma Corporation Commission statistics? Denise Bode, commission chairman, stated “the last time energy prices were near these levels, Oklahoma had over 800 rigs actively exploring for oil and gas.” Why has this taken place? There are many reasons. Bruce Bell, chairman of Mid-Continent Oil and Gas Association of Oklahoma, remarked “we’re kind of seeing a combination of things. We’re seeing the reduction in prospects, the increase in the price of rigs and labor, and overall loss in first year production in natural gas.” It doesn’t help to have a six-month lag between drilling permit application and oil and gas production. The commission reported that producers filed more permit applications to drill new wells in 2003, a total of 5,119, than they did since 1989. Another problem is that of fewer rigs. There are less available today than there were prior to the oil bust in the 1980s. This explains waiting on available rigs. In actuality, rig usage is up 35% over a year ago. Larry Pinkton, president and COO for Unit Corp., has 66 rigs in Oklahoma. Larry stated “we just take care of the customers that we can.” In fact, rig companies have cut back their inventories, and laid-off field hands have left the business in search of more steady employment. The ups and downs of the oil and gas business have taken a toll on the operators and their workers. There are more problems. Another commissioner, Bob Anthony, observed “environmental concerns prohibit producers from drilling in many of the most promising areas.” The commissioners also remarked that Oklahoma’s oil and gas reserves are aging. Existing wells don’t produce as much as they used to and the gas that remains is deeper and harder and more expensive to find. You might state that the cream has been skimmed off the top. Mickey Thompson, president of the Oklahoma Independent Petroleum Association, stated “that doesn’t mean there’s not plenty of oil and gas to recover here. It’s just so expensive that there are not many companies out there willing to take the risk.” Chesapeake Energy is the largest producer in the state. Its production rose by 44% in 2003. They have 41 rigs drilling wells in Oklahoma. Tom Price of Chesapeake stated “it’s going to be more expensive and the reserves are going to be smaller.” The message from Bruce Bell was not promising. He remarked “we’re drilling more holes and, in general, drilling deeper and more deeper holes just to maintain the same output of the last year. That’s not a good sign long term in whether we’ll be able to fill the natural gas needs.” I may not like this picture, but now I’m comfortable we have the skinny. Headlines are for non-thinkers.
The news from the IRS Taxpayer Advocate on the AMT is not good. In 2002, 400,000 households were hit by the AMT and it is estimated that number rose to 2.5 million in 2003 and will climb this year to 3.2 million. Then it will jump to 12.1 million in 2005 and 14.9 million in 2006. By 2010, this WMD will soar to 30 million households! The Taxpayer Advocate tells us that most of this rise can be attributed to Bush’s tax cuts. You read it right. As effective ordinary tax rates decline due to the tax cuts, taxpayers drop below the AMT’s 26% and 28% threshold rates. Because of the AMT, it is estimated that as much as 35% of the Bush tax cuts have been eliminated. In addition, because of budget problems, many tax increases have taken place at local and state government levels. Combine the latter with the nation’s under-estimated unemployment levels, higher natural gas/heating costs, the increased price of gas at the pump, and the cash flow picture for most Americans has taken a step backwards. Why won’t the AMT be repealed? The Tax Policy Center stated full AMT repeal would exceed $1 trillion. Yesterday, in his radio address, Bush stated “with the right policies in Washington, we will maintain America’s economic leadership, we will create more jobs, and we’ll help our workers achieve a better life.” And would you be interested in purchasing the Brooklyn Bridge?
New York City’s unemployment rate increased from 8% in January to 8.4% in February. It has lost 230,000 jobs in the past three years. Mayor Bloomberg stated “our future has never looked brighter.” The same person who wrote Bush’s radio address must have provided Bloomberg with that uplifting statement wrapped in 100% pure bullshit. In the past 18 months the labor participation rate has declined from 65.6% to 57%. If you make it in NYC, you can make it anywhere.
United Airlines is approaching buzz saw time. This airline has 21,000 flight attendants. They have thousands of retirees. The attendants and the retirees will picket and leaflet at Sea-Tac and Washington Dulles airports tomorrow and LAX on Wednesday to protest United’s plan to break its agreement with flight attendant retirees and change their health benefits. Based on a May 2003 agreement, it was promised that flight attendants retiring before July 1, 2003 would have access to health benefits that were less costly and more comprehensive than those that would be in place for those who retire after that date. Based on that agreement, over 2,500 flight attendants retired before the July 1 deadline. An examiner appointed by the bankruptcy court is investigating and will present his findings in bankruptcy court in Chicago on Friday.
Today, another 4 U.S. soldiers were killed in Iraq. Over the past 51 weeks, 564 U.S. armed forces personnel have died in that country.
Richard S. Foster: “Certainly, Congress did not have all the information they might have wanted, or that we had.” Senate Finance Committee Chairman Charles E. Grassley of Iowa stated “government analysts with relevant information should never be muzzled.”
Reuters has reported that, on Monday, 15 EU states may recommend sanctions against Microsoft for breaking antitrust law. A decision is set for March 24. Microsoft will be handed a deadline to comply with the sanctions. The final chapter has not been written.
L.L. Bean has been in business for 92 years. In 2003, they had record sales of $1.2 billion, a 10% increase over 2002. Their president and CEO stated “all channels outperformed even our highest expectations… 2003 was a home run.” To show their appreciation, the company’s board of directors approved a cash award of 15% of annual pay to eligible workers, and cash gifts to recognize thousands of seasonal employees who did not meet the eligibility requirements for the larger payout. The total payout of $36 million is the largest year-end bonus in the company’s history. It is quite wonderful for a board of directors and top management to acknowledge the accomplishments of all team members. The economic welfare of Bean employees is important to those overseeing the running of this fine company. The team made it possible for L.L Bean to have its best December in its 92-year history and to ship 175,000 packages on its single busiest day during the holiday sales period.
Frequently, headlines can be misleading. According to Baker Hughes, the number of rigs exploring for oil and gas in Oklahoma reached an 18-year high of 161 at the end of February. Something about the headline did not sit right with my gut instinct. That’s why we are on U.S. 75 between Tulsa and McAlester. In 2003, natural gas prices exceeded $7 per thousand cubic feet and oil prices rose above $30 per barrel. Oil and gas is the second largest industry in Oklahoma. Would you be surprised to learn that oil and gas production in Oklahoma fell in the first 11 months of 2003 versus the same period in 2002 by 3% each, according to the latest Oklahoma Corporation Commission statistics? Denise Bode, commission chairman, stated “the last time energy prices were near these levels, Oklahoma had over 800 rigs actively exploring for oil and gas.” Why has this taken place? There are many reasons. Bruce Bell, chairman of Mid-Continent Oil and Gas Association of Oklahoma, remarked “we’re kind of seeing a combination of things. We’re seeing the reduction in prospects, the increase in the price of rigs and labor, and overall loss in first year production in natural gas.” It doesn’t help to have a six-month lag between drilling permit application and oil and gas production. The commission reported that producers filed more permit applications to drill new wells in 2003, a total of 5,119, than they did since 1989. Another problem is that of fewer rigs. There are less available today than there were prior to the oil bust in the 1980s. This explains waiting on available rigs. In actuality, rig usage is up 35% over a year ago. Larry Pinkton, president and COO for Unit Corp., has 66 rigs in Oklahoma. Larry stated “we just take care of the customers that we can.” In fact, rig companies have cut back their inventories, and laid-off field hands have left the business in search of more steady employment. The ups and downs of the oil and gas business have taken a toll on the operators and their workers. There are more problems. Another commissioner, Bob Anthony, observed “environmental concerns prohibit producers from drilling in many of the most promising areas.” The commissioners also remarked that Oklahoma’s oil and gas reserves are aging. Existing wells don’t produce as much as they used to and the gas that remains is deeper and harder and more expensive to find. You might state that the cream has been skimmed off the top. Mickey Thompson, president of the Oklahoma Independent Petroleum Association, stated “that doesn’t mean there’s not plenty of oil and gas to recover here. It’s just so expensive that there are not many companies out there willing to take the risk.” Chesapeake Energy is the largest producer in the state. Its production rose by 44% in 2003. They have 41 rigs drilling wells in Oklahoma. Tom Price of Chesapeake stated “it’s going to be more expensive and the reserves are going to be smaller.” The message from Bruce Bell was not promising. He remarked “we’re drilling more holes and, in general, drilling deeper and more deeper holes just to maintain the same output of the last year. That’s not a good sign long term in whether we’ll be able to fill the natural gas needs.” I may not like this picture, but now I’m comfortable we have the skinny. Headlines are for non-thinkers.
The news from the IRS Taxpayer Advocate on the AMT is not good. In 2002, 400,000 households were hit by the AMT and it is estimated that number rose to 2.5 million in 2003 and will climb this year to 3.2 million. Then it will jump to 12.1 million in 2005 and 14.9 million in 2006. By 2010, this WMD will soar to 30 million households! The Taxpayer Advocate tells us that most of this rise can be attributed to Bush’s tax cuts. You read it right. As effective ordinary tax rates decline due to the tax cuts, taxpayers drop below the AMT’s 26% and 28% threshold rates. Because of the AMT, it is estimated that as much as 35% of the Bush tax cuts have been eliminated. In addition, because of budget problems, many tax increases have taken place at local and state government levels. Combine the latter with the nation’s under-estimated unemployment levels, higher natural gas/heating costs, the increased price of gas at the pump, and the cash flow picture for most Americans has taken a step backwards. Why won’t the AMT be repealed? The Tax Policy Center stated full AMT repeal would exceed $1 trillion. Yesterday, in his radio address, Bush stated “with the right policies in Washington, we will maintain America’s economic leadership, we will create more jobs, and we’ll help our workers achieve a better life.” And would you be interested in purchasing the Brooklyn Bridge?
New York City’s unemployment rate increased from 8% in January to 8.4% in February. It has lost 230,000 jobs in the past three years. Mayor Bloomberg stated “our future has never looked brighter.” The same person who wrote Bush’s radio address must have provided Bloomberg with that uplifting statement wrapped in 100% pure bullshit. In the past 18 months the labor participation rate has declined from 65.6% to 57%. If you make it in NYC, you can make it anywhere.
United Airlines is approaching buzz saw time. This airline has 21,000 flight attendants. They have thousands of retirees. The attendants and the retirees will picket and leaflet at Sea-Tac and Washington Dulles airports tomorrow and LAX on Wednesday to protest United’s plan to break its agreement with flight attendant retirees and change their health benefits. Based on a May 2003 agreement, it was promised that flight attendants retiring before July 1, 2003 would have access to health benefits that were less costly and more comprehensive than those that would be in place for those who retire after that date. Based on that agreement, over 2,500 flight attendants retired before the July 1 deadline. An examiner appointed by the bankruptcy court is investigating and will present his findings in bankruptcy court in Chicago on Friday.
Today, another 4 U.S. soldiers were killed in Iraq. Over the past 51 weeks, 564 U.S. armed forces personnel have died in that country.
Richard S. Foster: “Certainly, Congress did not have all the information they might have wanted, or that we had.” Senate Finance Committee Chairman Charles E. Grassley of Iowa stated “government analysts with relevant information should never be muzzled.”
Reuters has reported that, on Monday, 15 EU states may recommend sanctions against Microsoft for breaking antitrust law. A decision is set for March 24. Microsoft will be handed a deadline to comply with the sanctions. The final chapter has not been written.
L.L. Bean has been in business for 92 years. In 2003, they had record sales of $1.2 billion, a 10% increase over 2002. Their president and CEO stated “all channels outperformed even our highest expectations… 2003 was a home run.” To show their appreciation, the company’s board of directors approved a cash award of 15% of annual pay to eligible workers, and cash gifts to recognize thousands of seasonal employees who did not meet the eligibility requirements for the larger payout. The total payout of $36 million is the largest year-end bonus in the company’s history. It is quite wonderful for a board of directors and top management to acknowledge the accomplishments of all team members. The economic welfare of Bean employees is important to those overseeing the running of this fine company. The team made it possible for L.L Bean to have its best December in its 92-year history and to ship 175,000 packages on its single busiest day during the holiday sales period.
Saturday, March 13, 2004
3/13/04 Malfunctioning
As is the weekend field trip custom, today’s will cover North Carolina, Georgia, Missouri, Utah, and the Bay Area of California. Before we leave, I think we might take a moment to remember our two U.S. soldiers killed early this morning in Tikrit, two soldiers killed on Thursday by a roadside bomb at Habbaniyah, and one soldier killed and two others wounded on Wednesday.
Our first stop is in Atlanta with the management of Delta Air Lines. The company had previously predicted a first quarter loss of $300 to $350 million. Yesterday the loss estimate was boosted to $400 million. Management stated about $47 million of the increase is due to higher fuel-related costs. They also disclosed that its pension plans are underfunded by $5.7 billion, up from $4.9 billion in 2002. It’s a good thing the stock market rallied in 2003. Can you imagine the underfunding had that not taken place? Do you think Delta is the only airline facing higher fuel costs and problems with pension plan funding?
Seasonal layoffs took a toll on January’s employment in North Carolina. A visit with the state’s Employment Security Commission indicated that unemployment rates rose in 89 North Carolina counties in January. It had been hoped that the state could dodge the seasonal pattern bullet.
We’ve been invited to Brookfield, Missouri. This is a north-central Missouri town of about 4,700. Becky Cleveland, Brookfield’s economic development director, is here to greet us. She stated “we had no idea this was coming, and I hate to say that. I don’t think the employees knew this was coming…the decision was probably made at a much higher level.” Scott Ocholik is here too. He is director of finance for DURA Automotive Systems. The news is not good. Scott stated DURA would begin phasing out the work force in a couple of months. The local facility makes brake cables and employs 250 workers. The plant will close. DURA will close other facilities. Scott explained the company has acquired new plants and is operating more efficiently. DURA has 90 plants, 30 of them in North America. DURA is the second-largest employer in Brookfield.
There’s Sarah Wilhelm, a fiscal policy analyst for Utah issues. She stated “there are 200,000 poor people in Utah. That’s officially poor.” There are another 400,000 Utahns who don’t earn enough to pay their living expenses, a combination of bills that include housing, medical insurance and food, according to the Utah Issues annual report—Poverty in Utah 2003. She reported that the problem is threefold: lower average wages, high housing prices, and large family sizes. The report was released yesterday and stated “almost one-fifth of Utahns do not have sufficient net worth to survive for three months without income.” According to the report, white-collar workers earned wages at a rate of 24% less than the national average. On the housing side, growth in Utah’s housing prices increased income levels by threefold in the 1990s. Between 1990 and 2000, those housing price increases of 104% led the entire nation. During that time, Utah’s average household income grew by 24%. The report indicated that 43% cannot afford “fair-market rent” on a two-bedroom apartment.
Christopher Thornberg, an economist with the UCLA Anderson Forecast, stated “these economies in the Bay Area are inter-linked. That black hole known as the Silicon Valley is dragging the whole area down with it.” The average job total for the East Bay during the December-February period was down 5,800 jobs from the September-November period. The same comparison for the Bay Area revealed a loss of 28,000 jobs. Over the past year, state and local government jobs eroded at a much faster pace than private-sector employment in the Bay Area. Public sector woes could present problems for the private sector. As Sung Won Sohn, chief economist for Wells Fargo Bank observed, “the government is one of the largest users of private consulting services. A number of business service companies depend on work from the government at all levels.”
I don’t want you to think that the U.S. is alone in its unemployment problems. Volkswagen, Thomas Cook, and Degussa plan to cut a combined 3,200 jobs in Germany. In February, Germany’s unemployment rate rose to 10.3%. Since Schroeder became chancellor in October 1998, the number of unemployed workers has risen by 190,000.
Yesterday, the Commerce Department stated inventories rose 0.1% in January, lower than the gains expected. In my opinion, the low level of inventories reflect a loss of confidence, a lack of ability to raise prices, and the desire for inventories to meet demand on a just-in-time basis.
The U.S. trade deficit for 2003 as a whole stands at a record high of $541.1 billion, up from $480.9 billion in 2002. Of course, it’s not a problem because foreigners keep investing in dollar assets. We can smile all the way to the deficit poor house.
Richard S. Foster is not a household name. He was deputy chief actuary for the Social Security Administration for 13 years prior to becoming the chief Medicare actuary I 1995. There is a link on the Knight Ridder website about Foster. In late January, he provided the White House with calculations on the cost of the proposed Medicare legislation. The Congress had been provided numbers estimated at no more than $400 billion. Foster indicated the law would cost $534 billion. He was directed by his boss to “cease responding directly to Congress.” It sounds a bit like ‘we have a problem Houston.’
As is the weekend field trip custom, today’s will cover North Carolina, Georgia, Missouri, Utah, and the Bay Area of California. Before we leave, I think we might take a moment to remember our two U.S. soldiers killed early this morning in Tikrit, two soldiers killed on Thursday by a roadside bomb at Habbaniyah, and one soldier killed and two others wounded on Wednesday.
Our first stop is in Atlanta with the management of Delta Air Lines. The company had previously predicted a first quarter loss of $300 to $350 million. Yesterday the loss estimate was boosted to $400 million. Management stated about $47 million of the increase is due to higher fuel-related costs. They also disclosed that its pension plans are underfunded by $5.7 billion, up from $4.9 billion in 2002. It’s a good thing the stock market rallied in 2003. Can you imagine the underfunding had that not taken place? Do you think Delta is the only airline facing higher fuel costs and problems with pension plan funding?
Seasonal layoffs took a toll on January’s employment in North Carolina. A visit with the state’s Employment Security Commission indicated that unemployment rates rose in 89 North Carolina counties in January. It had been hoped that the state could dodge the seasonal pattern bullet.
We’ve been invited to Brookfield, Missouri. This is a north-central Missouri town of about 4,700. Becky Cleveland, Brookfield’s economic development director, is here to greet us. She stated “we had no idea this was coming, and I hate to say that. I don’t think the employees knew this was coming…the decision was probably made at a much higher level.” Scott Ocholik is here too. He is director of finance for DURA Automotive Systems. The news is not good. Scott stated DURA would begin phasing out the work force in a couple of months. The local facility makes brake cables and employs 250 workers. The plant will close. DURA will close other facilities. Scott explained the company has acquired new plants and is operating more efficiently. DURA has 90 plants, 30 of them in North America. DURA is the second-largest employer in Brookfield.
There’s Sarah Wilhelm, a fiscal policy analyst for Utah issues. She stated “there are 200,000 poor people in Utah. That’s officially poor.” There are another 400,000 Utahns who don’t earn enough to pay their living expenses, a combination of bills that include housing, medical insurance and food, according to the Utah Issues annual report—Poverty in Utah 2003. She reported that the problem is threefold: lower average wages, high housing prices, and large family sizes. The report was released yesterday and stated “almost one-fifth of Utahns do not have sufficient net worth to survive for three months without income.” According to the report, white-collar workers earned wages at a rate of 24% less than the national average. On the housing side, growth in Utah’s housing prices increased income levels by threefold in the 1990s. Between 1990 and 2000, those housing price increases of 104% led the entire nation. During that time, Utah’s average household income grew by 24%. The report indicated that 43% cannot afford “fair-market rent” on a two-bedroom apartment.
Christopher Thornberg, an economist with the UCLA Anderson Forecast, stated “these economies in the Bay Area are inter-linked. That black hole known as the Silicon Valley is dragging the whole area down with it.” The average job total for the East Bay during the December-February period was down 5,800 jobs from the September-November period. The same comparison for the Bay Area revealed a loss of 28,000 jobs. Over the past year, state and local government jobs eroded at a much faster pace than private-sector employment in the Bay Area. Public sector woes could present problems for the private sector. As Sung Won Sohn, chief economist for Wells Fargo Bank observed, “the government is one of the largest users of private consulting services. A number of business service companies depend on work from the government at all levels.”
I don’t want you to think that the U.S. is alone in its unemployment problems. Volkswagen, Thomas Cook, and Degussa plan to cut a combined 3,200 jobs in Germany. In February, Germany’s unemployment rate rose to 10.3%. Since Schroeder became chancellor in October 1998, the number of unemployed workers has risen by 190,000.
Yesterday, the Commerce Department stated inventories rose 0.1% in January, lower than the gains expected. In my opinion, the low level of inventories reflect a loss of confidence, a lack of ability to raise prices, and the desire for inventories to meet demand on a just-in-time basis.
The U.S. trade deficit for 2003 as a whole stands at a record high of $541.1 billion, up from $480.9 billion in 2002. Of course, it’s not a problem because foreigners keep investing in dollar assets. We can smile all the way to the deficit poor house.
Richard S. Foster is not a household name. He was deputy chief actuary for the Social Security Administration for 13 years prior to becoming the chief Medicare actuary I 1995. There is a link on the Knight Ridder website about Foster. In late January, he provided the White House with calculations on the cost of the proposed Medicare legislation. The Congress had been provided numbers estimated at no more than $400 billion. Foster indicated the law would cost $534 billion. He was directed by his boss to “cease responding directly to Congress.” It sounds a bit like ‘we have a problem Houston.’
Friday, March 12, 2004
3/12/04 Trading Down
Don Evans, Secretary of Commerce: “Job trends are very encouraging.”
According to figures released yesterday by the U.S. Department of Labor, Massachusetts lost jobs faster than any other state since employment peaked in 2001. The state suffered a 6.2% decline in jobs between January 2001 and January 2004, the highest rate in the nation and more than three times the national average drop of 1.7% for that period. In the past three years, employment fell by 20% in manufacturing, by 25% in information and telecommunication, and by 15% in the professional and business sector, which includes both high-end and low-end service jobs. Employment in New England declined 3.9% during the three-year period.
The Maryland Department of Labor, Licensing, and Regulation reported that the non-seasonally adjusted unemployment rate increased to 6.3% in January from 5.4% a month earlier as a result of colder weather and customary post-holiday reductions in staffing among some businesses.
The state of Michigan survey of payroll jobs showed a decline of 14,000 positions in January. It marked the fourth month in a row that payroll jobs have declined in Michigan. David Littman, chief economist at Comerica, stated “it underscores Michigan’s inordinate reliance on manufacturing compared with the nation, and how employers are super cautious, and are able to substitute machines for labor to stay competitive, not to mention their outsourcing and off-shoring.” During January, only Oregon’s 7.7% and Alaska’s 7.3% rates were higher than Michigan’s. Littman observed “I don’t look to see any improvement relative to other states for four to six months.” There are 336,000 unemployed people in Michigan. There are presently 720,000 factory jobs in Michigan, 25,000 below that of a year ago.
Revised data for December 2003 show that Pennsylvania had 47,000 fewer jobs than previously reported, according to an analysis of new government figures by the Keystone Research Center. Stephen Herzenberg, an economist and executive director of Keystone, stated “the promises made by the Bush Administration about new jobs look more and more like fantasy.” Since February 2003, according to the Pennsylvania Department of Labor and Industry, the state has lost 31,800 manufacturing jobs. Those jobs paid $42,852 a year. Leisure and hospitality paid $14,133 yearly. Education and health services paid $33,724. In this state there has been serious trading down in pay as manufacturing jobs are eliminated.
The Sheaffer pen factory was founded in Fort Madison, Iowa in 1905. France-based Bic owns Shaeffer, one of the oldest brands of writing instruments made in the U.S. As sales have declined, the plant has cut more than 1,500 jobs over the last 25 years. About 115 workers remain. Nearly all the remaining employees have at least 30 years of seniority. Within the next two years the plant will close. Bic is also considering closing a Connecticut plant that employs about 300 people.
Greenspan: “In all likelihood, employment will begin to increase more quickly before long.” Since the latest monthly numbers indicated no rise in employment, a gain of one person on the payrolls would be a giant leap forward for mankind. Greenspan and Evans bear a strong resemblance to the wazoo bird. I like the latter better, however. The wazoo bird goes about its ever-decreasing circular path without dispensing bullshit.
Union workers at American Axle, a large GM supplier, approved a four-year contract where new hires receive a lower wage than current workers do. You can expect to read about new hires receiving this type of wage package at Delphi and Visteon within the next two or three weeks.
Zhou Xiaochuan, governor of the People’s Bank of China, stated “we have been able to choke the oversupply of the monetary base and the excessive growth of credit.” It is rumored that Zhou will replace Greenspan as Fed chairman.
Frank Nothaft, Freddie Mac chief economist: “For the year as a whole, we expect long-term rates may be even lower annually than they were in 2003.”
Say it isn’t so. Greenspan stated yesterday that tax increases probably will be needed in combination with benefit cuts to close the Social Security funding gap. Maybe we could close 50% of the government agencies before cutting benefits and/or raising taxes.
Don Evans, Secretary of Commerce: “Job trends are very encouraging.”
According to figures released yesterday by the U.S. Department of Labor, Massachusetts lost jobs faster than any other state since employment peaked in 2001. The state suffered a 6.2% decline in jobs between January 2001 and January 2004, the highest rate in the nation and more than three times the national average drop of 1.7% for that period. In the past three years, employment fell by 20% in manufacturing, by 25% in information and telecommunication, and by 15% in the professional and business sector, which includes both high-end and low-end service jobs. Employment in New England declined 3.9% during the three-year period.
The Maryland Department of Labor, Licensing, and Regulation reported that the non-seasonally adjusted unemployment rate increased to 6.3% in January from 5.4% a month earlier as a result of colder weather and customary post-holiday reductions in staffing among some businesses.
The state of Michigan survey of payroll jobs showed a decline of 14,000 positions in January. It marked the fourth month in a row that payroll jobs have declined in Michigan. David Littman, chief economist at Comerica, stated “it underscores Michigan’s inordinate reliance on manufacturing compared with the nation, and how employers are super cautious, and are able to substitute machines for labor to stay competitive, not to mention their outsourcing and off-shoring.” During January, only Oregon’s 7.7% and Alaska’s 7.3% rates were higher than Michigan’s. Littman observed “I don’t look to see any improvement relative to other states for four to six months.” There are 336,000 unemployed people in Michigan. There are presently 720,000 factory jobs in Michigan, 25,000 below that of a year ago.
Revised data for December 2003 show that Pennsylvania had 47,000 fewer jobs than previously reported, according to an analysis of new government figures by the Keystone Research Center. Stephen Herzenberg, an economist and executive director of Keystone, stated “the promises made by the Bush Administration about new jobs look more and more like fantasy.” Since February 2003, according to the Pennsylvania Department of Labor and Industry, the state has lost 31,800 manufacturing jobs. Those jobs paid $42,852 a year. Leisure and hospitality paid $14,133 yearly. Education and health services paid $33,724. In this state there has been serious trading down in pay as manufacturing jobs are eliminated.
The Sheaffer pen factory was founded in Fort Madison, Iowa in 1905. France-based Bic owns Shaeffer, one of the oldest brands of writing instruments made in the U.S. As sales have declined, the plant has cut more than 1,500 jobs over the last 25 years. About 115 workers remain. Nearly all the remaining employees have at least 30 years of seniority. Within the next two years the plant will close. Bic is also considering closing a Connecticut plant that employs about 300 people.
Greenspan: “In all likelihood, employment will begin to increase more quickly before long.” Since the latest monthly numbers indicated no rise in employment, a gain of one person on the payrolls would be a giant leap forward for mankind. Greenspan and Evans bear a strong resemblance to the wazoo bird. I like the latter better, however. The wazoo bird goes about its ever-decreasing circular path without dispensing bullshit.
Union workers at American Axle, a large GM supplier, approved a four-year contract where new hires receive a lower wage than current workers do. You can expect to read about new hires receiving this type of wage package at Delphi and Visteon within the next two or three weeks.
Zhou Xiaochuan, governor of the People’s Bank of China, stated “we have been able to choke the oversupply of the monetary base and the excessive growth of credit.” It is rumored that Zhou will replace Greenspan as Fed chairman.
Frank Nothaft, Freddie Mac chief economist: “For the year as a whole, we expect long-term rates may be even lower annually than they were in 2003.”
Say it isn’t so. Greenspan stated yesterday that tax increases probably will be needed in combination with benefit cuts to close the Social Security funding gap. Maybe we could close 50% of the government agencies before cutting benefits and/or raising taxes.
Thursday, March 11, 2004
3/11/04 Economic Insecurity
Yesterday, Bush made his fifteenth visit to Ohio. He came to the City Of Cleveland to talk about small business. He talked about offshoring. What didn’t he mention? He omitted paying the National Congress exile group headed by Ahmad Chalabi about $340,000 a month for intelligence about insurgents and other matters. He failed to mention his proposed budget plan that cut funding for the SBA by $79 million. Ohio has lost 270,000 jobs since January 2001. Of those, 160,100 are manufacturing jobs. As of December 2003, there were 350,729 unemployed Ohioans. Since Bush took office, the state jobless rate jumped from 3.9% to over 6%. In the 2000 election, Bush won Ohio by 3.5 percentage points. The state has 20 electoral votes. No president has been elected without winning Ohio. Today, Bush will name a new manufacturing czar. It’s too little and too late. Why will Bush lose Ohio and the election? Robert Reich said it right on the money. He observed “economic insecurity-insecurity about losing jobs, losing pay and losing benefits- -is widespread.” The latest Zogby poll shows 21% of probable voters are afraid of losing their jobs in the next 12 months. With those earning more than $75,000, it jumps to 25%.
Bush and his cronies want you to believe only a few states are responsible for the loss of jobs. That is pure bullshit. When all the revisions are analyzed, only Alaska has provided more jobs. Let’s look at Georgia. The revisions came in yesterday. Atlanta had been highlighted as a city creating jobs. In 2003, the fifth highest population migration took place into the state of Georgia. The main attraction was job creation. Unfortunately, Metro Atlanta ended 2003 with 84,200 fewer jobs than first thought. Instead of creating 67,900 jobs, they actually lost 16,800 jobs. Georgia started 2003 with 3,903,300 jobs and ended the year with 3,899,800. It was originally thought that Georgia had gained 63,200 jobs in 2003.
It was reported yesterday that the federal government has stuck the states with a $29 billion tab. Of that amount, almost $10 billion was for enforcing the NO Child Left Behind education law and another $10 billion in providing education for disabled students. The National Conference of State Legislatures indicated that states will have to spend 6% of their general fund revenues in 2004 on federally mandated programs and 7% in 2005.
Following its purchase of FleetBoston Financial Corp, the Bank of America might cut as many as 11,000 jobs.
China has imposed a June 1 deadline on data encryption standards. Intel stated “we have been unable to find an appropriate solution that meets Intel’s product quality standards that follows the People’s Republic of China requirements. “ This would preclude Intel from offering Centrino products in China.
First we had JC Penney biting the bullet on Eckerd Drug. Now Target is moving towards disposing of Marshall Field’s and Mervyn’s. Penney has had a difficult time finding a buyer for Eckerd. Target won’t have a picnic in its search for a buyer and/or buyers.
Yesterday, a record U.S. trade deficit of $43.1 billion was reported for January. Part of the deficit can be blamed on rising oil prices. Another contributing factor was the 40% drop in meat and poultry exports since November 1993. Mad cow and avian flu can be the kiss of death, no pun intended. One additional factor was the drop in Boeing aircraft deliveries. The latter is a recurring theme.
In January, car sales fell 6.6%, their weakest performance in 7 years. However, there has been a pickup in recalls. Yesterday, Ford chimed in and recalled 1.3 million vehicles.
U.S. companies are generating greater after-tax earnings overseas. It was reported that, at the end of 2002, earnings kept overseas grew to $639 billion from an estimated $400 billion in 1999.
It was a little over six months ago that I wrote about Skype and its new Internet voice/calling service. Their website indicates 8.5 million users globally and 1.2 million users are added monthly.
Stan Greenberg, Democratic pollster: “When we look back in November, it will be disposable income as much as jobs which will determine the outcome.” As the markets moved yesterday below their December 31, 2003 closing prices, matters came into clearer view. Bush may not get Main Street but Wall Street had better get Main Street in a hurry. Economic insecurity leads to lower levels of consumer spending and less growth in the service sector.
Yesterday, Bush made his fifteenth visit to Ohio. He came to the City Of Cleveland to talk about small business. He talked about offshoring. What didn’t he mention? He omitted paying the National Congress exile group headed by Ahmad Chalabi about $340,000 a month for intelligence about insurgents and other matters. He failed to mention his proposed budget plan that cut funding for the SBA by $79 million. Ohio has lost 270,000 jobs since January 2001. Of those, 160,100 are manufacturing jobs. As of December 2003, there were 350,729 unemployed Ohioans. Since Bush took office, the state jobless rate jumped from 3.9% to over 6%. In the 2000 election, Bush won Ohio by 3.5 percentage points. The state has 20 electoral votes. No president has been elected without winning Ohio. Today, Bush will name a new manufacturing czar. It’s too little and too late. Why will Bush lose Ohio and the election? Robert Reich said it right on the money. He observed “economic insecurity-insecurity about losing jobs, losing pay and losing benefits- -is widespread.” The latest Zogby poll shows 21% of probable voters are afraid of losing their jobs in the next 12 months. With those earning more than $75,000, it jumps to 25%.
Bush and his cronies want you to believe only a few states are responsible for the loss of jobs. That is pure bullshit. When all the revisions are analyzed, only Alaska has provided more jobs. Let’s look at Georgia. The revisions came in yesterday. Atlanta had been highlighted as a city creating jobs. In 2003, the fifth highest population migration took place into the state of Georgia. The main attraction was job creation. Unfortunately, Metro Atlanta ended 2003 with 84,200 fewer jobs than first thought. Instead of creating 67,900 jobs, they actually lost 16,800 jobs. Georgia started 2003 with 3,903,300 jobs and ended the year with 3,899,800. It was originally thought that Georgia had gained 63,200 jobs in 2003.
It was reported yesterday that the federal government has stuck the states with a $29 billion tab. Of that amount, almost $10 billion was for enforcing the NO Child Left Behind education law and another $10 billion in providing education for disabled students. The National Conference of State Legislatures indicated that states will have to spend 6% of their general fund revenues in 2004 on federally mandated programs and 7% in 2005.
Following its purchase of FleetBoston Financial Corp, the Bank of America might cut as many as 11,000 jobs.
China has imposed a June 1 deadline on data encryption standards. Intel stated “we have been unable to find an appropriate solution that meets Intel’s product quality standards that follows the People’s Republic of China requirements. “ This would preclude Intel from offering Centrino products in China.
First we had JC Penney biting the bullet on Eckerd Drug. Now Target is moving towards disposing of Marshall Field’s and Mervyn’s. Penney has had a difficult time finding a buyer for Eckerd. Target won’t have a picnic in its search for a buyer and/or buyers.
Yesterday, a record U.S. trade deficit of $43.1 billion was reported for January. Part of the deficit can be blamed on rising oil prices. Another contributing factor was the 40% drop in meat and poultry exports since November 1993. Mad cow and avian flu can be the kiss of death, no pun intended. One additional factor was the drop in Boeing aircraft deliveries. The latter is a recurring theme.
In January, car sales fell 6.6%, their weakest performance in 7 years. However, there has been a pickup in recalls. Yesterday, Ford chimed in and recalled 1.3 million vehicles.
U.S. companies are generating greater after-tax earnings overseas. It was reported that, at the end of 2002, earnings kept overseas grew to $639 billion from an estimated $400 billion in 1999.
It was a little over six months ago that I wrote about Skype and its new Internet voice/calling service. Their website indicates 8.5 million users globally and 1.2 million users are added monthly.
Stan Greenberg, Democratic pollster: “When we look back in November, it will be disposable income as much as jobs which will determine the outcome.” As the markets moved yesterday below their December 31, 2003 closing prices, matters came into clearer view. Bush may not get Main Street but Wall Street had better get Main Street in a hurry. Economic insecurity leads to lower levels of consumer spending and less growth in the service sector.
Wednesday, March 10, 2004
3/10/04 Knowing, Consulting, Synthesizing, And Initiating
Meg Whitman, eBay CEO: “We’re a different company every three months.”
Howard Schultz, Starbucks CEO since 1987, sat on eBay’s board of directors for five years. He considers this tenure “the highlight of my business career.”
One cannot ignore the sheer numbers posted by eBay. Its founder, Pierre Omidyar, is a computer programmer. He test marketed AuctionWeb in 1995. Within two years, the company was renamed eBay and it had 300,000 users and 40 employees. Meg became CEO in 1998. Today, its revenues are closing in on $3 billion and its worldwide customers are approaching 100 million in number. About 20 million items are listed daily on its auction site. This company has a lot in common with Starbucks and Wal-Mart. The heads of the three companies remain down-to-earth. They are constantly accessible to others in their organization. Each has a community of customers. The customers have a say in the business because the CEO listens to their concerns, their issues, their wishes, and synthesizes and initiates changes. As Meg Whitman observed, “You have to have a sense of what issues are hot in the community. A cardinal sin is not knowing what the community’s concerns are. Even worse, initiating something here without consulting the community. The beauty of this business…is that when you ask 10 questions, you get 4,000 answers. So we do a lot of synthesizing. We are also trying to stay focused and continue to solidify our brand.” It sounds simple. It requires dedication and discipline. It’s been proven, however, that only a handful of companies can perform like this day-in-and-day-out. At the end of the day, the customer becomes a repeat customer. As Meg stated, “the experience people have with each other helps define your brand.”
Business Process Outsourcing (BPO) is not a new fad. It’s been around for decades. More than 30 years ago, Ross Perot’s EDS performed data center facilities management. Automated Data Processing has been in the payroll business for decades. Gartner Dataquest estimates that organizations around the world will spend about $128 billion in 2004 for BPO contracts. They figure the amount will double in 2005. In sum, it’s not a new business model. Like the Atkins diet, it took some time to gain followers.
The IBD/TIPP Economic Optimism Index fell 2 points in March to 54.5. In January the index was 60.6 and then dropped 4.1 points in February. Over the past few months the six-month economic outlook dropped 9 points to 53.6. Raghavan Mayur, president of TIPP, stated “with a nearly jobless recovery and the latest economic numbers tempering last quarter’s optimism, a drop in the index is understandable.”
Debt collection is very labor intensive. Like customer service, it is in the process of being outsourced. The largest debt collector in the U.S. is NCO Group. Presently, overseas facilities account for about 5% of the company’s debt-collection activities, stated Paul Weitzel, the CEO. He estimates that, within five years, at least 25% of NCO’s debt collection will be conducted abroad. The company has 50,000 customers and Weitzel stated “as long as clients want to cut costs and we can’t fill seats in the United States, you’re going to see this trend continuing.”
In the Washington DC metro area Giant Food and Safeway have begun negotiating a four-year contract with their 18,000 union workers. The two chains comprise 48% of the local market. The companies want pay cuts for new workers and fewer vacation days. The two companies pay their employees an average hourly wage of $16, including overtime pay.
Germany’s DIW economic institute cut its forecast for that country’s first quarter growth to 0.1% from 0.4%. They stated “the economy does not appear to be at the start of a noticeable recovery.” The government of Japan revised downward its fourth GDP growth to 6.4% from 7%.
According to the ICSU-UBS weekly chain store index in the U.S., the index fell 0.3% in the week ended March 6. This is the third straight week that sales have declined or remained flat.
Globally, this past year the market for Bluetooth equipped products nearly doubled. Similar growth is anticipated for 2004.
Last week, Footstar Inc. filed for Chapter 11 bankruptcy protection. Following the closing of 165 locations, the company will operate 352 stores. Prior to the closings, the company employed more than 14,000 people in 40 states.
Alan Greenspan: “The concern is not so much about Social Security. The outlook for Medicare, however, is much more difficult to assess.”
On Monday evening a five-year budget was approved by Akron school board members. About 180 jobs could be cut, including 132 teaching positions.
The Alliance@IBM has recently received information about IBM Global Services’ AMS organization’s plans to reduce professional salaries. Supposedly, the objectives of the program are to “classify employees in correct position code/band/job family”, and to “reshape the IGS organization to more of a ‘pyramid’ shape versus the existing ‘diamond’ shape.” Discussions are focusing on a 10% reduction in pay. Other forms of compensation will be affected as a result.
BB & T announced plans to cut 1,000 jobs. Volkswagen will cut 5,000 jobs.
According to the BLS, in December 2003, employer costs for employee compensation averaged $33.91 per hour worked in State and local government. Wages and salaries averaged $23.56 per hour, while benefits averaged $10.35. What benefits accrued to the taxpayers? Rising government employment represents a cancerous growth. Hopefully, outsourcing will hit the government sector, and soon.
Meg Whitman, eBay CEO: “We’re a different company every three months.”
Howard Schultz, Starbucks CEO since 1987, sat on eBay’s board of directors for five years. He considers this tenure “the highlight of my business career.”
One cannot ignore the sheer numbers posted by eBay. Its founder, Pierre Omidyar, is a computer programmer. He test marketed AuctionWeb in 1995. Within two years, the company was renamed eBay and it had 300,000 users and 40 employees. Meg became CEO in 1998. Today, its revenues are closing in on $3 billion and its worldwide customers are approaching 100 million in number. About 20 million items are listed daily on its auction site. This company has a lot in common with Starbucks and Wal-Mart. The heads of the three companies remain down-to-earth. They are constantly accessible to others in their organization. Each has a community of customers. The customers have a say in the business because the CEO listens to their concerns, their issues, their wishes, and synthesizes and initiates changes. As Meg Whitman observed, “You have to have a sense of what issues are hot in the community. A cardinal sin is not knowing what the community’s concerns are. Even worse, initiating something here without consulting the community. The beauty of this business…is that when you ask 10 questions, you get 4,000 answers. So we do a lot of synthesizing. We are also trying to stay focused and continue to solidify our brand.” It sounds simple. It requires dedication and discipline. It’s been proven, however, that only a handful of companies can perform like this day-in-and-day-out. At the end of the day, the customer becomes a repeat customer. As Meg stated, “the experience people have with each other helps define your brand.”
Business Process Outsourcing (BPO) is not a new fad. It’s been around for decades. More than 30 years ago, Ross Perot’s EDS performed data center facilities management. Automated Data Processing has been in the payroll business for decades. Gartner Dataquest estimates that organizations around the world will spend about $128 billion in 2004 for BPO contracts. They figure the amount will double in 2005. In sum, it’s not a new business model. Like the Atkins diet, it took some time to gain followers.
The IBD/TIPP Economic Optimism Index fell 2 points in March to 54.5. In January the index was 60.6 and then dropped 4.1 points in February. Over the past few months the six-month economic outlook dropped 9 points to 53.6. Raghavan Mayur, president of TIPP, stated “with a nearly jobless recovery and the latest economic numbers tempering last quarter’s optimism, a drop in the index is understandable.”
Debt collection is very labor intensive. Like customer service, it is in the process of being outsourced. The largest debt collector in the U.S. is NCO Group. Presently, overseas facilities account for about 5% of the company’s debt-collection activities, stated Paul Weitzel, the CEO. He estimates that, within five years, at least 25% of NCO’s debt collection will be conducted abroad. The company has 50,000 customers and Weitzel stated “as long as clients want to cut costs and we can’t fill seats in the United States, you’re going to see this trend continuing.”
In the Washington DC metro area Giant Food and Safeway have begun negotiating a four-year contract with their 18,000 union workers. The two chains comprise 48% of the local market. The companies want pay cuts for new workers and fewer vacation days. The two companies pay their employees an average hourly wage of $16, including overtime pay.
Germany’s DIW economic institute cut its forecast for that country’s first quarter growth to 0.1% from 0.4%. They stated “the economy does not appear to be at the start of a noticeable recovery.” The government of Japan revised downward its fourth GDP growth to 6.4% from 7%.
According to the ICSU-UBS weekly chain store index in the U.S., the index fell 0.3% in the week ended March 6. This is the third straight week that sales have declined or remained flat.
Globally, this past year the market for Bluetooth equipped products nearly doubled. Similar growth is anticipated for 2004.
Last week, Footstar Inc. filed for Chapter 11 bankruptcy protection. Following the closing of 165 locations, the company will operate 352 stores. Prior to the closings, the company employed more than 14,000 people in 40 states.
Alan Greenspan: “The concern is not so much about Social Security. The outlook for Medicare, however, is much more difficult to assess.”
On Monday evening a five-year budget was approved by Akron school board members. About 180 jobs could be cut, including 132 teaching positions.
The Alliance@IBM has recently received information about IBM Global Services’ AMS organization’s plans to reduce professional salaries. Supposedly, the objectives of the program are to “classify employees in correct position code/band/job family”, and to “reshape the IGS organization to more of a ‘pyramid’ shape versus the existing ‘diamond’ shape.” Discussions are focusing on a 10% reduction in pay. Other forms of compensation will be affected as a result.
BB & T announced plans to cut 1,000 jobs. Volkswagen will cut 5,000 jobs.
According to the BLS, in December 2003, employer costs for employee compensation averaged $33.91 per hour worked in State and local government. Wages and salaries averaged $23.56 per hour, while benefits averaged $10.35. What benefits accrued to the taxpayers? Rising government employment represents a cancerous growth. Hopefully, outsourcing will hit the government sector, and soon.
Tuesday, March 09, 2004
3/9/04 The Blue Dog Coalition And The Debt Limit
Richard Rahn, Discovery Institute senior fellow and Cato Institute adjunct scholar: “One reason for the slow employment growth has been the rapid growth in government spending. Some people think government spending creates jobs (the old Keynesian myth) but, in fact, government spending reduces more jobs in the private sector than it can create in the government sector. The reason is private sector jobs tend to be more productive than government jobs, and there is a considerable cost (ie, dead weight loss) when the government extracts monies from the private sector by taxing or borrowing to pay for the government jobs. Therefore, countries with large government sectors, like Germany and France, tend to have much higher unemployment rates than countries with smaller government sectors. Slowing the growth in government spending would speed job growth.”
The Blue Dog Coalition is a group of 36 moderate to conservative Democrats in the 108th Congress. One month ago, Charlie Stenholm of Texas, Blue Dog co-chair for Policy, stated “our nation is being threatened with an economic perfect storm consisting of record deficits largely financed by foreign investors, large and growing trade deficits, and the approaching retirement of the baby boom generation. Unfortunately, the president’s budget fails to prepare our nation to deal with these economic dangers. His budget leaves our nation with large structural deficits that will be on the rise after the 5 years budget window used by OMB, just as the cost of the baby boom retirement hits.”
Rep. Tanner (TN), co-chair of the Blue Dog Budget Task Force: “We cannot write a blank check for the Administration to raise the statutory debt limit and add to the burden on American taxpayers. The President and Congress owe it to future generations to return the government to the days of fiscal responsibility and budget stability.”
Rep. Loretta Sanchez (CA): “Raising our government’s debt limit will only further worsen our existing budgetary problems. If the average American were to continue to raise the limit on a personal credit card to accommodate overspending, we would call it ‘irresponsible.’ How can we justify the same action using the hard-earned tax dollars of those very same Americans?”
In June 2002, the debt limit was raised from $5.950 trillion to $6.4 trillion. In May 2003, the debt limit was increased to $7.3484 trillion. Last week, Brian Roseboro, U.S. Treasury assistant secretary, stated the present debt limit would be reached in June 2004. This is the first time in our nation’s history that a president will have asked the Congress to raise the debt ceiling in three consecutive years. A year ago at this time, Greenspan told the Congress they should consider doing away with the debt limit, and stated it “has never in my judgment been successful in doing what it is supposed to have been doing, namely constrain spending.” Roseboro agreed with this statement and O’Neill called the debt ceiling “an abomination.” Actually, the abomination is the administration’s strident disregard for this generation’s and future generations’ economic well being. Out-of-control government spending must stop. I recommend the debt ceiling not be raised. Bring the government to a halt. Make the Congress immediately cut back on expenditures. They can begin with salary cuts for all members of Congress and all members of the Cabinet and those working in the White House. They can reduce the size of staff members and assistants to those in Congress. The Atkins diet might be popular and it might promote animal fat and pork products as being healthy. That does not include government fat and pork. The latter will soon deliver hardening of the economic arteries for all Americans. I can hear the screams from all over the U.S. I am aware that not raising the debt ceiling risks theoretical default on what are viewed as risk-free U.S. Treasury securities. I hate to scare you, but our government is busted. It’s been the Bank of Japan that has purchased approximately $100 billion of U.S treasury bills and bonds during January and February of this year. They are funding this administration’s spending habit. They are funding our budget deficit. Our nation is in a negative cash flow position. If the U.S.A. were a common stock, no analyst would recommend it as a purchase. It would be deemed a speculative grade security. The Bank of Japan cannot be the economic savior for the U.S. every month. Here’s a warning for all believing otherwise. Japan’s machinery orders fell 12.2% in January, the biggest drop in more than 3 years.
For those who still believe in the tooth fairy, through the end of February, the IRS reported the average tax refund had only risen $94 to $2,230 from the prior year’s $2,136. The $94 should be erased quickly with $2 per gallon gasoline.
Year after year Clintwood, Va. and surrounding Dickenson County have the highest unemployment rate in the state. In 2001, Travelocity signed a six-year lease to operate a call center in Clintwood. About 275 employees were hired at $8 per hour and higher, plus benefits. Travelocity announced plans to leave Clintwood. A corporate spokesperson stated routing calls through India would save $10 million in the first year alone.
In a survey conducted by the National Federation of Independent Business trade group, only 13% of small businesses stated plans to hire, down from 17% in January. Small companies create most jobs. There are approximately 6 million small employers with about 50% of all workers. Rising health insurance costs have contributed to the damper on hiring.
Financial Times: “The U.S. has had a jobless expansion for more than two years. It will soon start to test the limits of its durability.”
Greenspan: “Overall, the household sector seems to be in good shape.” According to CardWeb.com, the average household credit card debt is $9,200. In 2003, personal bankruptcies rose 5.6% to 1.63 million. The average client seeking help from the National Foundation for Credit Counseling, the nation’s largest organization of nonprofit credit counseling agencies, has more than $15,700 in unsecured consumer debt and $30,000 in gross income.
According to the Nellie Mae National Student Loan Survey, almost 1 in 5 college and professional school graduates states career plans have changed because of student debt. In 1997, the average undergraduate came away with $11,400 in debt. In 2002, average indebtedness had risen 66% to $18,900 according to the survey. During the same time, graduate student debt increased from $21,000 to $31,700. For law and medical students the average debt is $91,700.
National Mortgage News reported yesterday that Des Moines-based Principal Financial Group is interested in selling its residential mortgage unit, Principal is the nation’s 11th-largest lender and, at the end of 2003, serviced $119 billion in loans. Early in 2003, they sold their retail mortgage operations. They have 1,500 employees.
Paula Ausick, SVP/Director of Brand Equities at Foote Cone & Belding, stated that, those who are politically opposed to Wal-Mart, are the second most frequent shoppers at their stores. She observed that “Wal-Mart isn’t considered a discount store to its customers. It’s become the definition of a regular, retail store. What’s more, Wal-Mart has established discount pricing as the retail price level. This has caused shifts in the retail landscape where ‘discount’ now means dollar stores rather than Wal-Mart.”
On 3/16/03 VP Cheney stated “we believe Saddam has, in fact, reconstituted nuclear weapons.” Jafar Dhia Jafar co-authored with Noman Saad Eddin al-Noamimi, a former director-general of Iraq’s nuclear program, a paper on the destruction of all banned weapons in Iraq. Yesterday, he stated “Saddam Hussein issued orders in July 1991 for the destruction of all banned weapons, in addition to the systems to produce them. It was carried out by the Special Republican Guard forces.” The two further stated “we can confirm with absolute certainty that Iraq no longer possessed any weapons of mass destruction after its unilateral destruction of all its components in the summer of 1991, and did not resume any such activity because it no longer had the foundations to resume such activity.”
ING economist Tim Condon stated “Thailand and India may overtake China as the region’s fastest-growing economies in 2004.”
Richard Rahn, Discovery Institute senior fellow and Cato Institute adjunct scholar: “One reason for the slow employment growth has been the rapid growth in government spending. Some people think government spending creates jobs (the old Keynesian myth) but, in fact, government spending reduces more jobs in the private sector than it can create in the government sector. The reason is private sector jobs tend to be more productive than government jobs, and there is a considerable cost (ie, dead weight loss) when the government extracts monies from the private sector by taxing or borrowing to pay for the government jobs. Therefore, countries with large government sectors, like Germany and France, tend to have much higher unemployment rates than countries with smaller government sectors. Slowing the growth in government spending would speed job growth.”
The Blue Dog Coalition is a group of 36 moderate to conservative Democrats in the 108th Congress. One month ago, Charlie Stenholm of Texas, Blue Dog co-chair for Policy, stated “our nation is being threatened with an economic perfect storm consisting of record deficits largely financed by foreign investors, large and growing trade deficits, and the approaching retirement of the baby boom generation. Unfortunately, the president’s budget fails to prepare our nation to deal with these economic dangers. His budget leaves our nation with large structural deficits that will be on the rise after the 5 years budget window used by OMB, just as the cost of the baby boom retirement hits.”
Rep. Tanner (TN), co-chair of the Blue Dog Budget Task Force: “We cannot write a blank check for the Administration to raise the statutory debt limit and add to the burden on American taxpayers. The President and Congress owe it to future generations to return the government to the days of fiscal responsibility and budget stability.”
Rep. Loretta Sanchez (CA): “Raising our government’s debt limit will only further worsen our existing budgetary problems. If the average American were to continue to raise the limit on a personal credit card to accommodate overspending, we would call it ‘irresponsible.’ How can we justify the same action using the hard-earned tax dollars of those very same Americans?”
In June 2002, the debt limit was raised from $5.950 trillion to $6.4 trillion. In May 2003, the debt limit was increased to $7.3484 trillion. Last week, Brian Roseboro, U.S. Treasury assistant secretary, stated the present debt limit would be reached in June 2004. This is the first time in our nation’s history that a president will have asked the Congress to raise the debt ceiling in three consecutive years. A year ago at this time, Greenspan told the Congress they should consider doing away with the debt limit, and stated it “has never in my judgment been successful in doing what it is supposed to have been doing, namely constrain spending.” Roseboro agreed with this statement and O’Neill called the debt ceiling “an abomination.” Actually, the abomination is the administration’s strident disregard for this generation’s and future generations’ economic well being. Out-of-control government spending must stop. I recommend the debt ceiling not be raised. Bring the government to a halt. Make the Congress immediately cut back on expenditures. They can begin with salary cuts for all members of Congress and all members of the Cabinet and those working in the White House. They can reduce the size of staff members and assistants to those in Congress. The Atkins diet might be popular and it might promote animal fat and pork products as being healthy. That does not include government fat and pork. The latter will soon deliver hardening of the economic arteries for all Americans. I can hear the screams from all over the U.S. I am aware that not raising the debt ceiling risks theoretical default on what are viewed as risk-free U.S. Treasury securities. I hate to scare you, but our government is busted. It’s been the Bank of Japan that has purchased approximately $100 billion of U.S treasury bills and bonds during January and February of this year. They are funding this administration’s spending habit. They are funding our budget deficit. Our nation is in a negative cash flow position. If the U.S.A. were a common stock, no analyst would recommend it as a purchase. It would be deemed a speculative grade security. The Bank of Japan cannot be the economic savior for the U.S. every month. Here’s a warning for all believing otherwise. Japan’s machinery orders fell 12.2% in January, the biggest drop in more than 3 years.
For those who still believe in the tooth fairy, through the end of February, the IRS reported the average tax refund had only risen $94 to $2,230 from the prior year’s $2,136. The $94 should be erased quickly with $2 per gallon gasoline.
Year after year Clintwood, Va. and surrounding Dickenson County have the highest unemployment rate in the state. In 2001, Travelocity signed a six-year lease to operate a call center in Clintwood. About 275 employees were hired at $8 per hour and higher, plus benefits. Travelocity announced plans to leave Clintwood. A corporate spokesperson stated routing calls through India would save $10 million in the first year alone.
In a survey conducted by the National Federation of Independent Business trade group, only 13% of small businesses stated plans to hire, down from 17% in January. Small companies create most jobs. There are approximately 6 million small employers with about 50% of all workers. Rising health insurance costs have contributed to the damper on hiring.
Financial Times: “The U.S. has had a jobless expansion for more than two years. It will soon start to test the limits of its durability.”
Greenspan: “Overall, the household sector seems to be in good shape.” According to CardWeb.com, the average household credit card debt is $9,200. In 2003, personal bankruptcies rose 5.6% to 1.63 million. The average client seeking help from the National Foundation for Credit Counseling, the nation’s largest organization of nonprofit credit counseling agencies, has more than $15,700 in unsecured consumer debt and $30,000 in gross income.
According to the Nellie Mae National Student Loan Survey, almost 1 in 5 college and professional school graduates states career plans have changed because of student debt. In 1997, the average undergraduate came away with $11,400 in debt. In 2002, average indebtedness had risen 66% to $18,900 according to the survey. During the same time, graduate student debt increased from $21,000 to $31,700. For law and medical students the average debt is $91,700.
National Mortgage News reported yesterday that Des Moines-based Principal Financial Group is interested in selling its residential mortgage unit, Principal is the nation’s 11th-largest lender and, at the end of 2003, serviced $119 billion in loans. Early in 2003, they sold their retail mortgage operations. They have 1,500 employees.
Paula Ausick, SVP/Director of Brand Equities at Foote Cone & Belding, stated that, those who are politically opposed to Wal-Mart, are the second most frequent shoppers at their stores. She observed that “Wal-Mart isn’t considered a discount store to its customers. It’s become the definition of a regular, retail store. What’s more, Wal-Mart has established discount pricing as the retail price level. This has caused shifts in the retail landscape where ‘discount’ now means dollar stores rather than Wal-Mart.”
On 3/16/03 VP Cheney stated “we believe Saddam has, in fact, reconstituted nuclear weapons.” Jafar Dhia Jafar co-authored with Noman Saad Eddin al-Noamimi, a former director-general of Iraq’s nuclear program, a paper on the destruction of all banned weapons in Iraq. Yesterday, he stated “Saddam Hussein issued orders in July 1991 for the destruction of all banned weapons, in addition to the systems to produce them. It was carried out by the Special Republican Guard forces.” The two further stated “we can confirm with absolute certainty that Iraq no longer possessed any weapons of mass destruction after its unilateral destruction of all its components in the summer of 1991, and did not resume any such activity because it no longer had the foundations to resume such activity.”
ING economist Tim Condon stated “Thailand and India may overtake China as the region’s fastest-growing economies in 2004.”
Monday, March 08, 2004
3/8/04 “Strong Economies Create Jobs”
John Challenger of Challenger, Gray & Christmas: “The fact is, we are going to have to get used to slow job creation in this country. While the politicians war over the number of jobs they expect to be created in the economy by the end of the year, the reality is that we will probably not see a true job market boom until the next economic cycle around 2008.”
Peter McTeague of RBS Greenwich Capital Markets was the top-ranked U.S. government debt strategist last year in Institutional Investor magazine’s poll. With job creation falling below the level anticipated by economists for the fourth consecutive month, coupled with the prices of consumer goods and services excluding food and energy only rising at a 0.7% rate in the fourth quarter, McTeague stated “this should drive home to people that the Fed’s not going to raise rates, certainly not at the pace or magnitude people expect.”
Sanjay Verma, head of government bond trading at Morgan Stanley, stated “the Fed is going to be on hold for longer than anyone expected.”
Warren Buffett: “Prevailing exchange rates will not lead to a material let-up in our trade deficit.”
After Brazil and Turkey, Argentina is the IMF’s third largest debtor, and the country accounts for 15.2% of the Fund’s outstanding credit.
Lee Kwang-ho of Hyundai Heavy Industries remarked “we have 180 ships on our order book. That’s enough to keep the yard busy for three years.”
Guo Shuqing, head of China’s State Administration of Foreign Exchange: “Our study shows that the impact of the exchange rate on the economy and employment has been over-exaggerated. China’s managed floating exchange rate system conforms to the realities of China and it will continue for a long time to come. Betting on an RMB appreciation is likely to (end up paying in) an enormous price.”
According to the Bureau of Labor Statistics, since 1999, Michigan has lost 195,000 manufacturing jobs.
Boeing creates 1.7 jobs per employee. Microsoft adds 2 jobs per worker. AT&T Wireless creates 1.5 jobs for each person on the payroll. Wireless workers on average received $73,400 in compensation in 2003. How many of the 5,700 AT&T Wireless employees in the state of Washington will be cut after their acquisition by Cingular? What will be the multiplier effect?
TeleTech Holdings recently told 790 employees in Topeka, Kansas that they’ll lose their jobs because of a contract that came to an end. A few days later they announced its call-center was closing. The company is not doing well. The Topeka call-center and customer service facility opened in 1999. The state of Kansas provided a $2 million training grant. TeleTech employs 28,000 worldwide. Topeka mayor James McClinton stated “in a town of 125,000, when 790 of them lose their jobs, that’s pretty tough.” These jobs in Topeka will end April 2.
According to an Ernst & Young study, Indian telecom operators could see a jump in revenues from $9 billion in 2002 to $25 billion in 2007. This would easily make India the second biggest telecom market in the world, stated Sanjay Mehta, Ernst & Young director. With weak land-line infrastructure, and often a 5 year wait for a land-line, the 1 billion plus population in India is an inviting market for the cell phone industry.
Yesterday, more than 300,000 chickens on Maryland’s Eastern Shore were destroyed in an effort to stem a fresh outbreak of avian flu. The poultry sector represents about a third of Maryland’s $1.4 billion-a-year agriculture industry. Sales of live poultry have been stopped at the state’s only two live-auction operations.
In a recent Herald/St. Petersburg Times Florida survey, a majority of voters believe the United States is “moving in the wrong direction” under Bush. More than half of Florida voters disapprove of his handling of the economy, and only 46% approve of his leadership in Iraq. Kerry holds a 49 to 43 percent lead in the poll. Diane Chisholm, 60, a Naples retiree and registered Republican stated “I know he (Bush) can’t create jobs, but he can create an atmosphere that creates jobs, and that hasn’t happened. He’s given us tons of promises, but he hasn’t delivered.” Fifty seven percent of the independents, as well as the same percentage of women, expressed they would vote for Kerry.
Alan Blinder, a Princeton University economist and a former Fed governor: “From an historical perspective, the lack of job growth is stunning, given what is happening to GDP.” He stated the risk of a consumer spending slowdown is “the biggest hazard to this expansion. Every month we go with labor income stagnating raises the hazard level.”
John Challenger of Challenger, Gray & Christmas: “The fact is, we are going to have to get used to slow job creation in this country. While the politicians war over the number of jobs they expect to be created in the economy by the end of the year, the reality is that we will probably not see a true job market boom until the next economic cycle around 2008.”
Peter McTeague of RBS Greenwich Capital Markets was the top-ranked U.S. government debt strategist last year in Institutional Investor magazine’s poll. With job creation falling below the level anticipated by economists for the fourth consecutive month, coupled with the prices of consumer goods and services excluding food and energy only rising at a 0.7% rate in the fourth quarter, McTeague stated “this should drive home to people that the Fed’s not going to raise rates, certainly not at the pace or magnitude people expect.”
Sanjay Verma, head of government bond trading at Morgan Stanley, stated “the Fed is going to be on hold for longer than anyone expected.”
Warren Buffett: “Prevailing exchange rates will not lead to a material let-up in our trade deficit.”
After Brazil and Turkey, Argentina is the IMF’s third largest debtor, and the country accounts for 15.2% of the Fund’s outstanding credit.
Lee Kwang-ho of Hyundai Heavy Industries remarked “we have 180 ships on our order book. That’s enough to keep the yard busy for three years.”
Guo Shuqing, head of China’s State Administration of Foreign Exchange: “Our study shows that the impact of the exchange rate on the economy and employment has been over-exaggerated. China’s managed floating exchange rate system conforms to the realities of China and it will continue for a long time to come. Betting on an RMB appreciation is likely to (end up paying in) an enormous price.”
According to the Bureau of Labor Statistics, since 1999, Michigan has lost 195,000 manufacturing jobs.
Boeing creates 1.7 jobs per employee. Microsoft adds 2 jobs per worker. AT&T Wireless creates 1.5 jobs for each person on the payroll. Wireless workers on average received $73,400 in compensation in 2003. How many of the 5,700 AT&T Wireless employees in the state of Washington will be cut after their acquisition by Cingular? What will be the multiplier effect?
TeleTech Holdings recently told 790 employees in Topeka, Kansas that they’ll lose their jobs because of a contract that came to an end. A few days later they announced its call-center was closing. The company is not doing well. The Topeka call-center and customer service facility opened in 1999. The state of Kansas provided a $2 million training grant. TeleTech employs 28,000 worldwide. Topeka mayor James McClinton stated “in a town of 125,000, when 790 of them lose their jobs, that’s pretty tough.” These jobs in Topeka will end April 2.
According to an Ernst & Young study, Indian telecom operators could see a jump in revenues from $9 billion in 2002 to $25 billion in 2007. This would easily make India the second biggest telecom market in the world, stated Sanjay Mehta, Ernst & Young director. With weak land-line infrastructure, and often a 5 year wait for a land-line, the 1 billion plus population in India is an inviting market for the cell phone industry.
Yesterday, more than 300,000 chickens on Maryland’s Eastern Shore were destroyed in an effort to stem a fresh outbreak of avian flu. The poultry sector represents about a third of Maryland’s $1.4 billion-a-year agriculture industry. Sales of live poultry have been stopped at the state’s only two live-auction operations.
In a recent Herald/St. Petersburg Times Florida survey, a majority of voters believe the United States is “moving in the wrong direction” under Bush. More than half of Florida voters disapprove of his handling of the economy, and only 46% approve of his leadership in Iraq. Kerry holds a 49 to 43 percent lead in the poll. Diane Chisholm, 60, a Naples retiree and registered Republican stated “I know he (Bush) can’t create jobs, but he can create an atmosphere that creates jobs, and that hasn’t happened. He’s given us tons of promises, but he hasn’t delivered.” Fifty seven percent of the independents, as well as the same percentage of women, expressed they would vote for Kerry.
Alan Blinder, a Princeton University economist and a former Fed governor: “From an historical perspective, the lack of job growth is stunning, given what is happening to GDP.” He stated the risk of a consumer spending slowdown is “the biggest hazard to this expansion. Every month we go with labor income stagnating raises the hazard level.”
Sunday, March 07, 2004
3/7/04 The Float
The float reflects the temporary cash reserves available for alternative use. As of the close of business on Friday, March 5, the Federal Reserve Bank headed by Alan Greenspan had a temporary float of $15 billion. Berkshire Hathaway, run by Warren Buffett and Charles Munger, had a float of $36 billion. Microsoft Corp., headed by Bill Gates, had a float of $56 billion. What does this all mean? I guess it has different significance depending on one’s frame of reference. For me, the float represents great importance. It signifies the daily lifeblood of an organization.
Bush: “The economy is getting stronger. We’ve overcome a lot.” Not your administration, yet. In this week’s poll conducted by the Chicago Sun-Times sister newspaper, 50% of those polled stated they are not better off today, and 39% believed the nation was in a recession. Kerry leads Bush in the Illinois poll by a margin of 52% to 39%.
Berkshire Hathaway will pay $3.3 billion in federal tax on its 2003 income, about 2.5% of the total paid by all U.S. corporations, wrote Warren Buffett. He stated “if only 540 taxpayers paid the amount Berkshire will pay, no other individual or corporation would have to pay anything to Uncle Sam.”
March 31 is the fiscal year-end for Japanese companies. The Bank of Japan will do all that is necessary to keep a lid on the upward valuation of the yen versus the U.S. dollar. They want to make year-end profits appear as strong as possible. Taking advantage of this concentrated month of March pro-dollar purchasing has produced some very satisfying currency profits over the years. It is highly predictable behavior during times of yen strength.
According to researchers at UC Berkeley’s Fisher Center for Real Estate and Urban Economics, 1 in 6 jobs in the Silicon Valley are at risk of being sent abroad. These economists estimate that 1 in 7 San Francisco jobs could be exported. They identified the following characteristics that put a job at risk of being outsourced: no face-to-face customer service requirement; the product created is mainly information; work is done via telephone and Internet; low barriers to setting up new facilities; little social networking required; and large differences in wages between locations. The researchers found 37 job categories ripe for being moved overseas. They include computer workers, insurance claim processors, radiology technicians, paralegals, customer service, and processing tax returns.
Carol Bartz, CEO and chairman of Autodesk: “When you can get great talent at 20% of the costs, it isn’t about waving the American flag. It’s about doing what’s right to have a good company.” Last fall, Autodesk announced it would cut as many as 650 employees. At the same time, the company was hiring at its new Shanghai development center. PeopleSoft recently stated an intention to hire 1,000 additional workers in India. Hewlett-Packard has increased staffing in India to 8,000. Oracle has hired more workers in India, and now employs 4,200 in that location.
Nanotechnology is viewed as one of the next great avenues for future innovation and hiring growth. Ron Hira, public policy professor at the Rochester Institute of Technology stated China is right behind the U.S. in terms of technical papers published on nanotech. He observed that, China’s cost advantages and knowledge, position it well to compete for nanotech jobs.
Zimmer Holdings is closing its Austin, Texas manufacturing plant. About 550 employees will lose their jobs when the hip and knee plant production is transferred to Zimmer’s plants in Indiana, Switzerland, and Puerto Rico. The company chose to close the Austin plant in an effort to streamline manufacturing costs.
Perdue Farms hopes to save money by closing a chicken processing facility in Defuniak Springs, Florida. The company wants to shift production to Georgia where its operations are more efficient. The closure will mean a loss of 392 jobs.
Vought Aircraft Industries is planning to close its Nashville facility, cutting 1,000 workers. The company has been consolidating operations at its Dallas headquarters.
Tampa, Florida-based Sykes Corp. has been opening new call centers overseas. They are closing their Pikeville, Kentucky call center and eliminating 341 jobs.
Northwest Airlines will close its remaining 25 U.S. ticket offices in late March. They are located in 16 cities in 16 states. The company has determined the city ticket offices are no longer cost-effective. Northwest did not state how many employees would lose their jobs.
Corporate cost cutting is here to stay. Closing operations, adding workers overseas, and increased innovation and competition from companies in other countries are all here to stay. Regulatory developments, partnerships, acquisition objectives, and defensive pricing strategies will affect the future competitive landscape and the ability to execute effectively and with excellence.
The float reflects the temporary cash reserves available for alternative use. As of the close of business on Friday, March 5, the Federal Reserve Bank headed by Alan Greenspan had a temporary float of $15 billion. Berkshire Hathaway, run by Warren Buffett and Charles Munger, had a float of $36 billion. Microsoft Corp., headed by Bill Gates, had a float of $56 billion. What does this all mean? I guess it has different significance depending on one’s frame of reference. For me, the float represents great importance. It signifies the daily lifeblood of an organization.
Bush: “The economy is getting stronger. We’ve overcome a lot.” Not your administration, yet. In this week’s poll conducted by the Chicago Sun-Times sister newspaper, 50% of those polled stated they are not better off today, and 39% believed the nation was in a recession. Kerry leads Bush in the Illinois poll by a margin of 52% to 39%.
Berkshire Hathaway will pay $3.3 billion in federal tax on its 2003 income, about 2.5% of the total paid by all U.S. corporations, wrote Warren Buffett. He stated “if only 540 taxpayers paid the amount Berkshire will pay, no other individual or corporation would have to pay anything to Uncle Sam.”
March 31 is the fiscal year-end for Japanese companies. The Bank of Japan will do all that is necessary to keep a lid on the upward valuation of the yen versus the U.S. dollar. They want to make year-end profits appear as strong as possible. Taking advantage of this concentrated month of March pro-dollar purchasing has produced some very satisfying currency profits over the years. It is highly predictable behavior during times of yen strength.
According to researchers at UC Berkeley’s Fisher Center for Real Estate and Urban Economics, 1 in 6 jobs in the Silicon Valley are at risk of being sent abroad. These economists estimate that 1 in 7 San Francisco jobs could be exported. They identified the following characteristics that put a job at risk of being outsourced: no face-to-face customer service requirement; the product created is mainly information; work is done via telephone and Internet; low barriers to setting up new facilities; little social networking required; and large differences in wages between locations. The researchers found 37 job categories ripe for being moved overseas. They include computer workers, insurance claim processors, radiology technicians, paralegals, customer service, and processing tax returns.
Carol Bartz, CEO and chairman of Autodesk: “When you can get great talent at 20% of the costs, it isn’t about waving the American flag. It’s about doing what’s right to have a good company.” Last fall, Autodesk announced it would cut as many as 650 employees. At the same time, the company was hiring at its new Shanghai development center. PeopleSoft recently stated an intention to hire 1,000 additional workers in India. Hewlett-Packard has increased staffing in India to 8,000. Oracle has hired more workers in India, and now employs 4,200 in that location.
Nanotechnology is viewed as one of the next great avenues for future innovation and hiring growth. Ron Hira, public policy professor at the Rochester Institute of Technology stated China is right behind the U.S. in terms of technical papers published on nanotech. He observed that, China’s cost advantages and knowledge, position it well to compete for nanotech jobs.
Zimmer Holdings is closing its Austin, Texas manufacturing plant. About 550 employees will lose their jobs when the hip and knee plant production is transferred to Zimmer’s plants in Indiana, Switzerland, and Puerto Rico. The company chose to close the Austin plant in an effort to streamline manufacturing costs.
Perdue Farms hopes to save money by closing a chicken processing facility in Defuniak Springs, Florida. The company wants to shift production to Georgia where its operations are more efficient. The closure will mean a loss of 392 jobs.
Vought Aircraft Industries is planning to close its Nashville facility, cutting 1,000 workers. The company has been consolidating operations at its Dallas headquarters.
Tampa, Florida-based Sykes Corp. has been opening new call centers overseas. They are closing their Pikeville, Kentucky call center and eliminating 341 jobs.
Northwest Airlines will close its remaining 25 U.S. ticket offices in late March. They are located in 16 cities in 16 states. The company has determined the city ticket offices are no longer cost-effective. Northwest did not state how many employees would lose their jobs.
Corporate cost cutting is here to stay. Closing operations, adding workers overseas, and increased innovation and competition from companies in other countries are all here to stay. Regulatory developments, partnerships, acquisition objectives, and defensive pricing strategies will affect the future competitive landscape and the ability to execute effectively and with excellence.
Saturday, March 06, 2004
3/6/04 Gasping And Spinning
In December 2001, Martha Stewart sold 3,928 shares of ImClone. Yesterday A New York City jury found her guilty on four counts. Chappell Hartridge, a 47 year-old juror in the case, stated “maybe it’s a victory for the little guy who loses money in the markets because of these types of transactions, the people who lose money in 401(K) plans.” Chappell, I hope you are not suggesting that ImClone stock is suitable for such an investment plan. I have a problem with a juror reading about this case during the trial. He stated “you see it on the front pages. You see it on the subway.” I am not condoning insider trading; however, unless I missed it, the government did not file criminal charges against Stewart for insider trading. She faces civil insider-trading charges brought by the SEC. After the verdict was announced, there were gasps, and not just in the courthouse. On the floor of the New York Stock Exchange, those who had speculated on a positive verdict got crushed financially. Beware of the “beyond a reasonable doubt” standard. It may have a different meaning for many people.
John Snow: “The administration is not satisfied with today’s job creation numbers.” John, there weren’t any jobs created without the 20,000 state government workers added to payrolls. I have often wondered how one can add a worker when their state has a budget deficit.
Elaine Chao; “As the president has said many times, we’re not going to rest until every American who wants a job can find one.” Chao gloated that the unemployment rate had not risen. She stated “the unemployment rate of 5.6% continues to be below the averages of the 1970s, 1980s, and 1990s.” Chao, the reason might be that the labor participation rate fell below 66% for the first time in 16 years. When Bush came into office, the labor participation rate was 67.1%. Had the rate been the same 67.1% yesterday, the unemployment rate would be 7.3%. Martha Stewart may go to jail for lying about a stock tip. How many Americans have you harmed by your misleading unemployment statements in our country? Chao, you should be held accountable. A total of 392,000 workers left the labor force in February.
Yesterday, when the February employment numbers were released, many gasps were heard. What do you think it’s like for the 484,000 discouraged workers who dropped out of the labor force? That number increased by 52,000 from the prior month. January’s employment estimate was revised downward by 23,000 jobs. The December numbers were reduced from 112,000 to 97,000 and November’s from 16,000 to 8,000. Are you aware that 22.1% of all the unemployed were idle for 6 months or more in 2003? According to the Economic Policy Institute, this is the worst annual rate in 20 years. We should not forget that Congress allowed the federal extension of state unemployment benefits to expire on December 21. Since that time, approximately 800,000 people have lost their benefits. The EPI study shows that college graduates make up a disproportionate share of the long-term unemployed. While college grads contributed 15.3% of the unemployed, they represented 19.1% of the long-term unemployed. The study stated that, in 48 out of the 50 states, jobs in higher-paying industries are shrinking. From the end of 2001 to the end of 2003, the industries losing jobs paid wages of $16.92 on average, while the industries gaining jobs paid an average of $14.65. The average working week has been reduced to 33.8 hours. According to the Labor Department’s Current Population Survey, Hispanics garnered 64% of the new jobs created in 2003. A Pew Hispanic Center study stated new Hispanic immigrants worked on many home building sites. These jobs put downward pressure on their wages. It should be noted that employment in construction dropped by 24,000 in February.
February marked the 43rd consecutive decline in factory employment. Even the service sector was weak with only a net gain of 46,000 workers. Overall, total employment in February declined to 138.3 million. O. If you read that employment increased in February or over the past six months, write down their name, address, and phone number. We’ll hold them accountable along with Chao and other members of the administration. Please do not forget that 1.7 million people were not counted as unemployed. They had not actively searched for the four weeks preceding yesterday’s report. This number is about the same as the one reported a year earlier. Just as a reminder, a year earlier was a few weeks before we invaded Iraq. Business stunk the house out and businesses were not hiring. We need to remember history. Mark Zandi of Economy.com adds history states that the jobs will appear “but history has not been a very reliable guide through this period.”
House Democrat Whip Deny Hoyer: “George W. Bush ought to be pleased that he doesn’t have to face the American people in Donald Trump’s board room today to defend this anemic employment report because the two words he surely would hear are – ‘You’re fired.’”
Congressman Chaka Fattah (D-PA): “Job growth is the definition of a good economy. Congressional leaders are called to repair the breach since the president has proven himself unwilling or unable… a job summit by congressional leaders would provide confidence that the president’s failure to create jobs is not the final word on real help for real people.” Representing Pennsylvania, Fattah has reason for concern. February was the ninth consecutive monthly decline for nonfarm jobs in his state.
Bush is spending the weekend in Texas, his home state. If I were Bush, I’d be plenty concerned. Yesterday, the Texas Workforce Commission revised unemployment data. In Houston, for example, Houston lost 16,2000 jobs last year instead of the 8,700 job loss originally reported. It gets worse. It gets a lot worse. Between December 2002 and December 2003, the commission had reported a net gain of 45,611 jobs. I guess the adding machine was out of whack. In fact, Texas actually lost 38,889 jobs, a swing of 84,500 jobs. How many other states have made similar mistakes? You know Texas has plenty of company. We are talking about government workers who specialize in data revisions. When all the data has been revised, you can bet there will have been net job losses throughout the U.S. over the past six months. Paul Murphy is CEO of Southwest Bank of Texas. He stated “I think Houston is already doing better than most.” Paul, that statement gives me comfort. Houston has racked up 24 consecutive months of year-over-year monthly job losses.
Under Secretary of the Treasury Roseboro stated the nation’s debt limit may be reached by June. It could have been worse. It might have been May. We should be thankful for little things. George W. gets an A+ for spending. He does it up Texas big time. Kathleen Bostjanic, a senior economist at Merrill Lynch, stated “until the job market improves, spending is at risk.” Kathleen, that’s not the case for George W. He is spending your money.
According to the Consumer Credit Index, over four out of ten Americans are making just minimum payments or no payments on their credit card balances.
According to the Yale School of Management’s opinion poll, currently 95% of individuals and close to 92% of financial institutions believe that the U.S. stock market will rise over the next 12 months. Didn’t George W. go to Yale?
Jack Guynn, president and CEO of the Federal Reserve Bank of Atlanta: “But just as a doctor shouldn’t overmedicate the patient, one should always be sensitive to the potential unintended side effects of maintaining an accommodative policy for too long. Put differently, if my forecast for robust economic growth materializes, then, at some point, a fed funds rate of 1 percent will no longer be the best policy…my own view is that job growth will pick up in coming months, and the unemployment rate will continue to drop.” I agree it will continue to drop as more Americans leave the labor force. Guynn stated “there’s evidence that businesses are feeling more pressure to expand payrolls.” Hospitals are not feeling the pressure. Hospitals lost 5,000 jobs in February.
In December 2001, Martha Stewart sold 3,928 shares of ImClone. Yesterday A New York City jury found her guilty on four counts. Chappell Hartridge, a 47 year-old juror in the case, stated “maybe it’s a victory for the little guy who loses money in the markets because of these types of transactions, the people who lose money in 401(K) plans.” Chappell, I hope you are not suggesting that ImClone stock is suitable for such an investment plan. I have a problem with a juror reading about this case during the trial. He stated “you see it on the front pages. You see it on the subway.” I am not condoning insider trading; however, unless I missed it, the government did not file criminal charges against Stewart for insider trading. She faces civil insider-trading charges brought by the SEC. After the verdict was announced, there were gasps, and not just in the courthouse. On the floor of the New York Stock Exchange, those who had speculated on a positive verdict got crushed financially. Beware of the “beyond a reasonable doubt” standard. It may have a different meaning for many people.
John Snow: “The administration is not satisfied with today’s job creation numbers.” John, there weren’t any jobs created without the 20,000 state government workers added to payrolls. I have often wondered how one can add a worker when their state has a budget deficit.
Elaine Chao; “As the president has said many times, we’re not going to rest until every American who wants a job can find one.” Chao gloated that the unemployment rate had not risen. She stated “the unemployment rate of 5.6% continues to be below the averages of the 1970s, 1980s, and 1990s.” Chao, the reason might be that the labor participation rate fell below 66% for the first time in 16 years. When Bush came into office, the labor participation rate was 67.1%. Had the rate been the same 67.1% yesterday, the unemployment rate would be 7.3%. Martha Stewart may go to jail for lying about a stock tip. How many Americans have you harmed by your misleading unemployment statements in our country? Chao, you should be held accountable. A total of 392,000 workers left the labor force in February.
Yesterday, when the February employment numbers were released, many gasps were heard. What do you think it’s like for the 484,000 discouraged workers who dropped out of the labor force? That number increased by 52,000 from the prior month. January’s employment estimate was revised downward by 23,000 jobs. The December numbers were reduced from 112,000 to 97,000 and November’s from 16,000 to 8,000. Are you aware that 22.1% of all the unemployed were idle for 6 months or more in 2003? According to the Economic Policy Institute, this is the worst annual rate in 20 years. We should not forget that Congress allowed the federal extension of state unemployment benefits to expire on December 21. Since that time, approximately 800,000 people have lost their benefits. The EPI study shows that college graduates make up a disproportionate share of the long-term unemployed. While college grads contributed 15.3% of the unemployed, they represented 19.1% of the long-term unemployed. The study stated that, in 48 out of the 50 states, jobs in higher-paying industries are shrinking. From the end of 2001 to the end of 2003, the industries losing jobs paid wages of $16.92 on average, while the industries gaining jobs paid an average of $14.65. The average working week has been reduced to 33.8 hours. According to the Labor Department’s Current Population Survey, Hispanics garnered 64% of the new jobs created in 2003. A Pew Hispanic Center study stated new Hispanic immigrants worked on many home building sites. These jobs put downward pressure on their wages. It should be noted that employment in construction dropped by 24,000 in February.
February marked the 43rd consecutive decline in factory employment. Even the service sector was weak with only a net gain of 46,000 workers. Overall, total employment in February declined to 138.3 million. O. If you read that employment increased in February or over the past six months, write down their name, address, and phone number. We’ll hold them accountable along with Chao and other members of the administration. Please do not forget that 1.7 million people were not counted as unemployed. They had not actively searched for the four weeks preceding yesterday’s report. This number is about the same as the one reported a year earlier. Just as a reminder, a year earlier was a few weeks before we invaded Iraq. Business stunk the house out and businesses were not hiring. We need to remember history. Mark Zandi of Economy.com adds history states that the jobs will appear “but history has not been a very reliable guide through this period.”
House Democrat Whip Deny Hoyer: “George W. Bush ought to be pleased that he doesn’t have to face the American people in Donald Trump’s board room today to defend this anemic employment report because the two words he surely would hear are – ‘You’re fired.’”
Congressman Chaka Fattah (D-PA): “Job growth is the definition of a good economy. Congressional leaders are called to repair the breach since the president has proven himself unwilling or unable… a job summit by congressional leaders would provide confidence that the president’s failure to create jobs is not the final word on real help for real people.” Representing Pennsylvania, Fattah has reason for concern. February was the ninth consecutive monthly decline for nonfarm jobs in his state.
Bush is spending the weekend in Texas, his home state. If I were Bush, I’d be plenty concerned. Yesterday, the Texas Workforce Commission revised unemployment data. In Houston, for example, Houston lost 16,2000 jobs last year instead of the 8,700 job loss originally reported. It gets worse. It gets a lot worse. Between December 2002 and December 2003, the commission had reported a net gain of 45,611 jobs. I guess the adding machine was out of whack. In fact, Texas actually lost 38,889 jobs, a swing of 84,500 jobs. How many other states have made similar mistakes? You know Texas has plenty of company. We are talking about government workers who specialize in data revisions. When all the data has been revised, you can bet there will have been net job losses throughout the U.S. over the past six months. Paul Murphy is CEO of Southwest Bank of Texas. He stated “I think Houston is already doing better than most.” Paul, that statement gives me comfort. Houston has racked up 24 consecutive months of year-over-year monthly job losses.
Under Secretary of the Treasury Roseboro stated the nation’s debt limit may be reached by June. It could have been worse. It might have been May. We should be thankful for little things. George W. gets an A+ for spending. He does it up Texas big time. Kathleen Bostjanic, a senior economist at Merrill Lynch, stated “until the job market improves, spending is at risk.” Kathleen, that’s not the case for George W. He is spending your money.
According to the Consumer Credit Index, over four out of ten Americans are making just minimum payments or no payments on their credit card balances.
According to the Yale School of Management’s opinion poll, currently 95% of individuals and close to 92% of financial institutions believe that the U.S. stock market will rise over the next 12 months. Didn’t George W. go to Yale?
Jack Guynn, president and CEO of the Federal Reserve Bank of Atlanta: “But just as a doctor shouldn’t overmedicate the patient, one should always be sensitive to the potential unintended side effects of maintaining an accommodative policy for too long. Put differently, if my forecast for robust economic growth materializes, then, at some point, a fed funds rate of 1 percent will no longer be the best policy…my own view is that job growth will pick up in coming months, and the unemployment rate will continue to drop.” I agree it will continue to drop as more Americans leave the labor force. Guynn stated “there’s evidence that businesses are feeling more pressure to expand payrolls.” Hospitals are not feeling the pressure. Hospitals lost 5,000 jobs in February.
Friday, March 05, 2004
3/5/04 Consuming And Borrowing
It has been proven that peak spending occurs between the ages of 35 and 54. As our population ages, and it is, the level of spending should begin to lessen. That would be good news. Consumer spending as a percentage of GDP currently stands at 70%+. Only the UK is close at 68%. Italy and Spain are at 60% with Japan and France at 55%.
Yesterday, the Federal Reserve reported that households expanded their debt by 10.4% in 2003 to $9.5 trillion. Not to be outdone, the Federal government borrowing expanded by 10.9% to $4.1 trillion, the fastest pace in 21 years. You might check to see whether your boxers or panties have been mortgaged. Of course, there is no reason to be concerned. Bush and Kerry are both fiscal conservatives. The nation’s debt now stands close to $23 trillion. The pundits on Wall Street are hanging on the February jobs report. Most don’t even have an awareness of the individual state employment problems. They are willing to rely on government figures to dictate the direction of their investment dollars. Schmucks could never be barred from Wall Street. Broad and Wall would become a ghost town.
Talking about the employment report, let’s say that 140,000 net new jobs were created in February. They weren’t, but let’s say they were. If the nation’s workforce expands by 140,000+ per month, then creating 140,000 jobs does not produce a change in the workforce. In fact, if those discouraged workers smell that hiring has picked up, they could come out of the woodwork and begin to apply for jobs, thus making the unemployment rate shoot up. Therefore, Bush is in a bad spot. If hiring does not improve, he’s in duck soup. If it does pick up, so will the unemployment rate. All the money in his re-election coffers won’t change that problem.
David Kay had an interview with the Guardian and stated it was time for Bush “to come clean with the American people” about WMD. He observed “when you don’t say you got it wrong, it leads to the general belief that you manipulated the intelligence and so you did it for some other purpose.” Kay stated he now believes any weapons Iraq did possess were destroyed by 1998. In addition, Resolution 1441 was the UN resolution used by the U.S. and the UK to justify the war in Iraq. Attorney General Lord Goldsmith’s advice conceded 1441 did not automatically authorize war.
Vincente Fox will visit President Bush’s Crawford ranch this weekend. They will announce Mexicans with visas will be allowed briefly to visit border areas without the checks that are part of a new border security program. Mexicans with routine border crossing cards would use them for visits that last no longer than 72 hours and require travel of no more than 25 miles into the U.S. In return, Mexico has lifted its ban on U.S. deboned meat from cows under 30 months of age into that country. Next to Japan, Mexico is our largest export market for beef. It’s almost as good a deal as getting a second round draft choice for Terrell Owens.
Antioch is one of the fastest growing areas in California’s Contra Costa County. The Antioch school district is sending notices to 13 elementary school vice principals, 13 computer teachers, 9 music teachers, and 14 physical education instructors that they may be laid off prior to the 2004-2005 school year. Without across-the-board pay cuts and other employee concessions, the Antioch school district will become financially insolvent by the end of next school year. They have a $7 million budget deficit. This year, the district’s general fund budget is about $132 million.
Chinese Premier Wen Jiabao gave his annual state of the nation address today. He took a cue from Bush and intends to cut taxes and also increase subsidies in rural areas. He stated “solving the problems of agriculture, villages and farmers is one of the most crucial parts of our entire work.” In 2003 China’s GDP grew by 9.1% and he intends to reduce this year’s growth rate to 7%. What impact will that have on Intel and GM? China is presently the world’s sixth largest economy. Wen grasps the significance of the wealth gap between rich and poor and observed “rural incomes have grown too slowly; the task of increasing employment and social security is arduous; development in different regions of the country is not balanced; the income gap is too wide among some members of society; and pressure on resources and the environment is mounting.”
For the first time since the start of the Iraq war, New York crude oil rose above $37 a barrel. In the next few days, record gasoline prices will be found at our nation’s gas stations. Venezuela is one of our four biggest crude oil suppliers. With growing unrest in Venezuela, it is hoped their crude shipments to our shores will not be interrupted.
According to Cutting Edge Information, in the past five years the generic drug industry has grown from $21 billion to $40 billion.
On Sunday, SK Williams plans to permanently close its metal finishing and plating plant in Wauwatosa, Wisconsin and eliminate 38 jobs. This may not qualify for a mass layoff, but it will impact this community and the workers losing their jobs.
Revisiting today’s job report, we should not overlook the revision to January’s increase to 112,000. That number was fictitious, and the revision will simply compound the lunacy. It’s another WMD. They haven’t existed for years.
GM announced a few years back that 2004 would be the last model year for Oldsmobiles. They have already stopped making the Intrigue, Aurora, and Bravada SUV. That only leaves the Alero passenger car and the Silhouette minivan.
Justice Brandeis on privacy: “The right to be left alone. The most comprehensive of rights and the right most valued by civilian men.” Without credible evidence, it would be irrational to play the terror card with every American’s right to privacy.
Intel and GM have one thing in common-- an inventory buildup.
It has been proven that peak spending occurs between the ages of 35 and 54. As our population ages, and it is, the level of spending should begin to lessen. That would be good news. Consumer spending as a percentage of GDP currently stands at 70%+. Only the UK is close at 68%. Italy and Spain are at 60% with Japan and France at 55%.
Yesterday, the Federal Reserve reported that households expanded their debt by 10.4% in 2003 to $9.5 trillion. Not to be outdone, the Federal government borrowing expanded by 10.9% to $4.1 trillion, the fastest pace in 21 years. You might check to see whether your boxers or panties have been mortgaged. Of course, there is no reason to be concerned. Bush and Kerry are both fiscal conservatives. The nation’s debt now stands close to $23 trillion. The pundits on Wall Street are hanging on the February jobs report. Most don’t even have an awareness of the individual state employment problems. They are willing to rely on government figures to dictate the direction of their investment dollars. Schmucks could never be barred from Wall Street. Broad and Wall would become a ghost town.
Talking about the employment report, let’s say that 140,000 net new jobs were created in February. They weren’t, but let’s say they were. If the nation’s workforce expands by 140,000+ per month, then creating 140,000 jobs does not produce a change in the workforce. In fact, if those discouraged workers smell that hiring has picked up, they could come out of the woodwork and begin to apply for jobs, thus making the unemployment rate shoot up. Therefore, Bush is in a bad spot. If hiring does not improve, he’s in duck soup. If it does pick up, so will the unemployment rate. All the money in his re-election coffers won’t change that problem.
David Kay had an interview with the Guardian and stated it was time for Bush “to come clean with the American people” about WMD. He observed “when you don’t say you got it wrong, it leads to the general belief that you manipulated the intelligence and so you did it for some other purpose.” Kay stated he now believes any weapons Iraq did possess were destroyed by 1998. In addition, Resolution 1441 was the UN resolution used by the U.S. and the UK to justify the war in Iraq. Attorney General Lord Goldsmith’s advice conceded 1441 did not automatically authorize war.
Vincente Fox will visit President Bush’s Crawford ranch this weekend. They will announce Mexicans with visas will be allowed briefly to visit border areas without the checks that are part of a new border security program. Mexicans with routine border crossing cards would use them for visits that last no longer than 72 hours and require travel of no more than 25 miles into the U.S. In return, Mexico has lifted its ban on U.S. deboned meat from cows under 30 months of age into that country. Next to Japan, Mexico is our largest export market for beef. It’s almost as good a deal as getting a second round draft choice for Terrell Owens.
Antioch is one of the fastest growing areas in California’s Contra Costa County. The Antioch school district is sending notices to 13 elementary school vice principals, 13 computer teachers, 9 music teachers, and 14 physical education instructors that they may be laid off prior to the 2004-2005 school year. Without across-the-board pay cuts and other employee concessions, the Antioch school district will become financially insolvent by the end of next school year. They have a $7 million budget deficit. This year, the district’s general fund budget is about $132 million.
Chinese Premier Wen Jiabao gave his annual state of the nation address today. He took a cue from Bush and intends to cut taxes and also increase subsidies in rural areas. He stated “solving the problems of agriculture, villages and farmers is one of the most crucial parts of our entire work.” In 2003 China’s GDP grew by 9.1% and he intends to reduce this year’s growth rate to 7%. What impact will that have on Intel and GM? China is presently the world’s sixth largest economy. Wen grasps the significance of the wealth gap between rich and poor and observed “rural incomes have grown too slowly; the task of increasing employment and social security is arduous; development in different regions of the country is not balanced; the income gap is too wide among some members of society; and pressure on resources and the environment is mounting.”
For the first time since the start of the Iraq war, New York crude oil rose above $37 a barrel. In the next few days, record gasoline prices will be found at our nation’s gas stations. Venezuela is one of our four biggest crude oil suppliers. With growing unrest in Venezuela, it is hoped their crude shipments to our shores will not be interrupted.
According to Cutting Edge Information, in the past five years the generic drug industry has grown from $21 billion to $40 billion.
On Sunday, SK Williams plans to permanently close its metal finishing and plating plant in Wauwatosa, Wisconsin and eliminate 38 jobs. This may not qualify for a mass layoff, but it will impact this community and the workers losing their jobs.
Revisiting today’s job report, we should not overlook the revision to January’s increase to 112,000. That number was fictitious, and the revision will simply compound the lunacy. It’s another WMD. They haven’t existed for years.
GM announced a few years back that 2004 would be the last model year for Oldsmobiles. They have already stopped making the Intrigue, Aurora, and Bravada SUV. That only leaves the Alero passenger car and the Silhouette minivan.
Justice Brandeis on privacy: “The right to be left alone. The most comprehensive of rights and the right most valued by civilian men.” Without credible evidence, it would be irrational to play the terror card with every American’s right to privacy.
Intel and GM have one thing in common-- an inventory buildup.
Thursday, March 04, 2004
3/4/04 Nanotubes
President Bush: “We’ve achieved great things over the past three years…a positive vision for creating jobs and promoting opportunity.”
Federal Reserve Beige Book: “Employment has been growing slowly in most Federal Reserve districts.”
New York City’s January unemployment rate rose to 8.4% from December’s 8.1%. Trump must have fired many workers.
The ISM February employment index slipped to 52.7 from 53.4 in January. The index of new orders for non-manufacturing companies fell to 60.3 in February from 64.9 in January. Order backlogs fell to 53 from 53.5. The inventory index fell to 49 from the prior month’s 49.5. The index of prices paid fell to 57.3 from January’s 59.7. It should be noted that the ISM index surveys U.S. service industries and this sector comprises approximately 85% of our GDP.
Costco will open 18 more stores in this fiscal year, down from a previous target of 25 stores.
Chick-fil-A, the Atlanta-based food chain, has begun the most aggressive expansion in company history. They plan on building more than 70 free-standing restaurants in 2004. Currently, the chain operates more than 1,130 restaurants in 37 states and Washington, DC. The company reported 2003 system-wide sales of more than $1.53 billion, an 11.8% rise over its 2002 figures.
The Georgia Department of Labor reported that, in January, the state experienced a loss of 62,800 jobs. Much of the rise in unemployment was due to cutbacks in the retail trade and other service-related industries. As we go from state to state, it is hard to see how the BLS reported an increase of 117,000 jobs in the U.S. in January. Adding up the numbers, I come out with a net loss of jobs. Then again, I count the actual numbers. I’ve made my rounds for February. I’ve gone from state to state. There are about 60 economists projecting an employment gain of 150,000+ jobs for our nation in February. If they count the jobs added by U.S. companies in China, then maybe the number can be reached. The last time I checked China had not merged with the U.S. Only their currency is pegged to ours.
The Business Roundtable’s March 2004 CEO Economic Outlook Survey shows that, on average, CEOs expect real GDP growth to be 3.7% in 2004. A total of 33% of CEOs are projecting their companies will add jobs this year. Forty five percent anticipate no change and twenty two percent foresee a decrease. In other words, a net ten percent are looking to hire more employees in 2004. That doesn’t bode well for those expecting big gains in employment.
The unemployment rate in the euro nations remained at 8.8% in January, the highest since January 2000.
Houston-based Carbon Nanotechnologies Inc. built its first pilot plant three years ago. The plant could produce one pound of nanotubes a year. Six pilot plants later, they are close to making 20 pounds a day. Later this year they will complete a unit capable of continuous operation, making 100 pounds a day. In late 2005, they hope to begin manufacturing at least 1,000 or more pounds per day. The company’s President and CEO stated “this isn’t going to be a $1 million-a-year business. It’s going to be a giant business.” Yesterday, they announced a patent license with NEC and signed a deal with Sumitomo to market its nanotubes in Japan. A carbon nanotube is 100 times stronger than steel, at a fraction of the weight, and has high heat resistance. Near-term applications would be for fuel cells and flat-panel displays. Longer-term applications include ultra-high-speed computing and high-performance materials. I am looking forward to a nanotube powering my laptop and my cell phone continuously for weeks at a time. Many challenges remain. Many scientists believe major advances in this field are at least five years away. I do not share that view. I would be more than pleased to step up to the plate and risk my capital by investing in Carbon Nanotechnologies Inc. The quality and quantity of nanotubes will change the polymer world. That’s good enough for me.
The Consumers Union auto testing center bought approximately 50 new vehicles for testing last year. They reported most of the vehicles were recalled.
President Bush: “We’ve achieved great things over the past three years…a positive vision for creating jobs and promoting opportunity.”
Federal Reserve Beige Book: “Employment has been growing slowly in most Federal Reserve districts.”
New York City’s January unemployment rate rose to 8.4% from December’s 8.1%. Trump must have fired many workers.
The ISM February employment index slipped to 52.7 from 53.4 in January. The index of new orders for non-manufacturing companies fell to 60.3 in February from 64.9 in January. Order backlogs fell to 53 from 53.5. The inventory index fell to 49 from the prior month’s 49.5. The index of prices paid fell to 57.3 from January’s 59.7. It should be noted that the ISM index surveys U.S. service industries and this sector comprises approximately 85% of our GDP.
Costco will open 18 more stores in this fiscal year, down from a previous target of 25 stores.
Chick-fil-A, the Atlanta-based food chain, has begun the most aggressive expansion in company history. They plan on building more than 70 free-standing restaurants in 2004. Currently, the chain operates more than 1,130 restaurants in 37 states and Washington, DC. The company reported 2003 system-wide sales of more than $1.53 billion, an 11.8% rise over its 2002 figures.
The Georgia Department of Labor reported that, in January, the state experienced a loss of 62,800 jobs. Much of the rise in unemployment was due to cutbacks in the retail trade and other service-related industries. As we go from state to state, it is hard to see how the BLS reported an increase of 117,000 jobs in the U.S. in January. Adding up the numbers, I come out with a net loss of jobs. Then again, I count the actual numbers. I’ve made my rounds for February. I’ve gone from state to state. There are about 60 economists projecting an employment gain of 150,000+ jobs for our nation in February. If they count the jobs added by U.S. companies in China, then maybe the number can be reached. The last time I checked China had not merged with the U.S. Only their currency is pegged to ours.
The Business Roundtable’s March 2004 CEO Economic Outlook Survey shows that, on average, CEOs expect real GDP growth to be 3.7% in 2004. A total of 33% of CEOs are projecting their companies will add jobs this year. Forty five percent anticipate no change and twenty two percent foresee a decrease. In other words, a net ten percent are looking to hire more employees in 2004. That doesn’t bode well for those expecting big gains in employment.
The unemployment rate in the euro nations remained at 8.8% in January, the highest since January 2000.
Houston-based Carbon Nanotechnologies Inc. built its first pilot plant three years ago. The plant could produce one pound of nanotubes a year. Six pilot plants later, they are close to making 20 pounds a day. Later this year they will complete a unit capable of continuous operation, making 100 pounds a day. In late 2005, they hope to begin manufacturing at least 1,000 or more pounds per day. The company’s President and CEO stated “this isn’t going to be a $1 million-a-year business. It’s going to be a giant business.” Yesterday, they announced a patent license with NEC and signed a deal with Sumitomo to market its nanotubes in Japan. A carbon nanotube is 100 times stronger than steel, at a fraction of the weight, and has high heat resistance. Near-term applications would be for fuel cells and flat-panel displays. Longer-term applications include ultra-high-speed computing and high-performance materials. I am looking forward to a nanotube powering my laptop and my cell phone continuously for weeks at a time. Many challenges remain. Many scientists believe major advances in this field are at least five years away. I do not share that view. I would be more than pleased to step up to the plate and risk my capital by investing in Carbon Nanotechnologies Inc. The quality and quantity of nanotubes will change the polymer world. That’s good enough for me.
The Consumers Union auto testing center bought approximately 50 new vehicles for testing last year. They reported most of the vehicles were recalled.
Wednesday, March 03, 2004
3/3/04 The Winner Is. The Loser Is.
Toyoto is the landslide victor. They had the best-ever U.S. February sales of 146,783 vehicles, an increase of 17.7% over the year ago month. Their executive vice president and COO issued a word of caution, and stated “rising fuel prices may begin to impact the market if they continue their climb.” Their Lexus division also had record results for the month of February, and recorded sales up 34.1%. Meanwhile, inventories of unsold vehicles for GM, Ford, and Chrysler continue to mount. It should be noted that, according to Edmunds.com, the average difference between MSRP and net price for vehicles sold in January 2004 was $624 less than in July 2003. Incentives for GM, Ford, and Chrysler range from $4,200 to $4,400 per vehicle. The difference in management abilities between Toyota and the U.S. big three is wide, and getting larger all the time.
Warner Music Group announced it will lay off 20% of its workforce or 1,000 jobs. Unifi announced facility closures and downsizing, and reductions of salaried workforce at its headquarters in Greensboro, North Carolina. The company faces excess capacity in the U.S. textile market, rising material costs, and continued pressure from imports, stated its President and CEO. They plan on cutting the company workforce from 4,100 to 3,700. Included will be the closing of the Latamahaw, North Carolina location, which produces air-jet textured polyester products. There is some good news on the hiring front. Applied Materials intends to add 500 workers in 2004.
Bunge North America announced it will temporarily idle production at its soybean processing facility in Destrehan, La., in the early part of March. Its President and CEO stated “unfortunately, the smaller than anticipated U.S. soybean crop in 2003 coupled with rapid U.S. soybean exports have significantly decreased our margins at Destrehan.”
A study by Global Insight found that equipment investment expanded by $229 billion throughout the economy, creating 3-5 million jobs, and producing as much as $300 billion additional GDP annually between 1997 and 2002.
Since the discovery of mad cow disease in Washington in late December, 65 countries have shut their borders to our meat export sales. Gary Smith, a meat scientist from Colorado State University, reports that the USDA’s lead veterinarian compared testing every animal slaughtered to testing every man, woman, and child in the United States for prostate cancer. You can’t expect greater intelligence from a government worker. Most are walking around with a severe case of mental castration.
Speaking in New York yesterday, Greenspan tried to calm the currency markets about the dangers of a broad dollar decline. Someone might have mentioned to him that the euro has recently dropped to an 11-week low and that the yen is trading at a four-month low versus the dollar. When the head of the Fed is so far behind the curve, it gives the impression that he is a mental midget or saying it more gently, a loser. He didn’t help his cause by keeping rates at 1% for so long because, he argued, “this is a very special case that we are dealing with…clearly, we have kept the federal funds rate where it is because we have good reasons.” The markets were concerned with his remark that the 1% rates will eventually have to rise. Any idiot could arrive at that conclusion. Their real concern should be with the words “with good reasons.” The Fed is scared stiff. They have tried everything to stimulate the economy so that employment would rise. In 2002, there were 1,466,823 job-cut announcements. In 2003, the number declined 16% to 1,236,426. However, in December 2003, the number of job-cut announcements slightly exceeded those in the prior year period. Even though the number declined to 77,250 in February 2004, the monthly average remains above 100,000 over the last six months. Something is wrong with the economy when workers are left behind month after month. For those in manufacturing, it's four months away from four years. John Challenger pointed out yesterday that “we’ll see an occasional month here and there with strong jobs growth, but consistent job creation is unlikely.” Ford’s senior economist, Jarlath Costello, stated “the sluggish labor market undermined (consumer) sentiment somewhat in February.” It is well to remember that, the percentage of people in the Conference Board’s monthly consumer confidence survey who state jobs are “hard to get”, has remained near the highest level in a decade. The average monthly growth of our nation’s labor force is about 140,000. It’s no wonder that it is taking longer to find a job, any job.
Toyoto is the landslide victor. They had the best-ever U.S. February sales of 146,783 vehicles, an increase of 17.7% over the year ago month. Their executive vice president and COO issued a word of caution, and stated “rising fuel prices may begin to impact the market if they continue their climb.” Their Lexus division also had record results for the month of February, and recorded sales up 34.1%. Meanwhile, inventories of unsold vehicles for GM, Ford, and Chrysler continue to mount. It should be noted that, according to Edmunds.com, the average difference between MSRP and net price for vehicles sold in January 2004 was $624 less than in July 2003. Incentives for GM, Ford, and Chrysler range from $4,200 to $4,400 per vehicle. The difference in management abilities between Toyota and the U.S. big three is wide, and getting larger all the time.
Warner Music Group announced it will lay off 20% of its workforce or 1,000 jobs. Unifi announced facility closures and downsizing, and reductions of salaried workforce at its headquarters in Greensboro, North Carolina. The company faces excess capacity in the U.S. textile market, rising material costs, and continued pressure from imports, stated its President and CEO. They plan on cutting the company workforce from 4,100 to 3,700. Included will be the closing of the Latamahaw, North Carolina location, which produces air-jet textured polyester products. There is some good news on the hiring front. Applied Materials intends to add 500 workers in 2004.
Bunge North America announced it will temporarily idle production at its soybean processing facility in Destrehan, La., in the early part of March. Its President and CEO stated “unfortunately, the smaller than anticipated U.S. soybean crop in 2003 coupled with rapid U.S. soybean exports have significantly decreased our margins at Destrehan.”
A study by Global Insight found that equipment investment expanded by $229 billion throughout the economy, creating 3-5 million jobs, and producing as much as $300 billion additional GDP annually between 1997 and 2002.
Since the discovery of mad cow disease in Washington in late December, 65 countries have shut their borders to our meat export sales. Gary Smith, a meat scientist from Colorado State University, reports that the USDA’s lead veterinarian compared testing every animal slaughtered to testing every man, woman, and child in the United States for prostate cancer. You can’t expect greater intelligence from a government worker. Most are walking around with a severe case of mental castration.
Speaking in New York yesterday, Greenspan tried to calm the currency markets about the dangers of a broad dollar decline. Someone might have mentioned to him that the euro has recently dropped to an 11-week low and that the yen is trading at a four-month low versus the dollar. When the head of the Fed is so far behind the curve, it gives the impression that he is a mental midget or saying it more gently, a loser. He didn’t help his cause by keeping rates at 1% for so long because, he argued, “this is a very special case that we are dealing with…clearly, we have kept the federal funds rate where it is because we have good reasons.” The markets were concerned with his remark that the 1% rates will eventually have to rise. Any idiot could arrive at that conclusion. Their real concern should be with the words “with good reasons.” The Fed is scared stiff. They have tried everything to stimulate the economy so that employment would rise. In 2002, there were 1,466,823 job-cut announcements. In 2003, the number declined 16% to 1,236,426. However, in December 2003, the number of job-cut announcements slightly exceeded those in the prior year period. Even though the number declined to 77,250 in February 2004, the monthly average remains above 100,000 over the last six months. Something is wrong with the economy when workers are left behind month after month. For those in manufacturing, it's four months away from four years. John Challenger pointed out yesterday that “we’ll see an occasional month here and there with strong jobs growth, but consistent job creation is unlikely.” Ford’s senior economist, Jarlath Costello, stated “the sluggish labor market undermined (consumer) sentiment somewhat in February.” It is well to remember that, the percentage of people in the Conference Board’s monthly consumer confidence survey who state jobs are “hard to get”, has remained near the highest level in a decade. The average monthly growth of our nation’s labor force is about 140,000. It’s no wonder that it is taking longer to find a job, any job.
Tuesday, March 02, 2004
3/2/04 There Are Still Troubled Times In Ohio
State officials recently released January’s unemployment rate for Ohio. It was the same 6.2% rate as in December. For three months before that, the jobless rate had dipped below the 6% mark. The Ohio Department of Job & Family Services indicated some Ohioans dropped out of the job market. Individuals who aren’t looking for work aren’t factored into the government’s unemployment calculations. As James Newton, chief economist advisor for the Commerce National Bank in Columbus, pointed out, “the discouraged worker effect can make the jobless rate look better than it is. It makes you feel kind of warm and fuzzy for about half a second, then you notice things aren’t that great.” In Ohio, the unemployment rate increased in December largely because there were more holiday job seekers than available jobs, stated Tom Hayes, director of Job & Family Services I Ohio. Some economists in Ohio suggest that, in 2004, businesses will buy equipment with an eye toward efficiency, allowing them to get more work from the same number of workers. Continuing productivity gains can offset the need to hire more workers.
President Bush: “All the signs in our economy…are very strong. And that’s positive for somebody who might be wondering about whether he or she is going to find a job.” Yesterday, Gateway Computer stated it will reduce its workforce to “mid-5,000” from the present 7,400.
North Carolina’s annual unemployment rate was 6.5%, down from 6.7% in 2002, according to the BLS. Only nine states and the District of Columbia had higher unemployment rates. It has been suggested that North Carolina has many discouraged workers.
U.S. manufacturers have experienced 44 straight months of layoffs. The sector has shed almost 3 million jobs since mid-2000. Job cuts are not confined to manufacturing. Guardian Life Insurance, for example, began outsourcing IT to India in March 2001, and now sees annual savings of $12.5 million. According to E-Business Strategies, in general, a company can save at least 50% in operational expenses by moving call-center functions to countries where wages and turnover are lower. Even start-up and venture-capital backed companies are looking at offshore alternatives. John Challenger believes “the cost savings and efficiency gains achieved through outsourcing will in fact free up resources that can be used for innovation and to expand other areas of business, thus creating new opportunities and jobs in America.”
Bush administration officials have projected that the economy would produce 2.6 million jobs this year. The Philadelphia Fed’s survey indicated that private sector economists have a more modest prediction of about 1.1 million new payroll jobs this year. More to the point, however, might be a breakdown of what those new jobs are like. Are they minimum wage, are they full-time, are they hourly, and what will the average income level be from these new jobs? I study investment in capacity expansion and not just investment in new equipment to boost productivity. With capacity utilization remaining around 76%, there is little need to expand or build new plants. When Wal-Mart opens a new store, they hire more people. They open more stores than any other company in the U.S., and that’s why they are the largest private sector employer by a wide margin. When plants are built in China, employees are hired overseas. I don’t see new plants being constructed in Ohio.
The ISM’s latest new orders index declined to 66.4 from 71.1 in January. The production index fell to 63.9 from 71.1. The prices paid index jumped to 81.5 from the prior month’s 75.5.
In the San Francisco Bay Area unleaded gasoline is $2.26 per gallon at the local stations. Do you think that price will cut into consumer spending in other areas, such as, dining out? After adjusting for inflation, the rise in the nation’s consumer spending was 0.1% in January.
Yesterday, Houston’s Mayor White stated his city’s pension funding shortfall may be closer to $1.5 billion over 18 years and not $1 billion as earlier estimated. The city of Houston may have to issue bonds just to cover the rapidly escalating pension costs.
Government subsidized health insurance for the poor covered 42.4 million people in 2003. Medicaid enrollment rose by 1.6 million people or 3.9% last year, according to the Centers for Medicare and Medicaid Services. States pay 39% of Medicaid costs and the federal government 61%.
The savings rate increased to 1.8% in January from the prior month’s 1.4%. This gain is modest and the present savings rate is modest by historical standards; however, one cannot expect the trend of consumption to turn to savings on a dime. It takes time for a trend change. The same is true for hiring. After 44 months of job losses, it’s unrealistic to assume significant improvement would occur in a matter of a few months.
State officials recently released January’s unemployment rate for Ohio. It was the same 6.2% rate as in December. For three months before that, the jobless rate had dipped below the 6% mark. The Ohio Department of Job & Family Services indicated some Ohioans dropped out of the job market. Individuals who aren’t looking for work aren’t factored into the government’s unemployment calculations. As James Newton, chief economist advisor for the Commerce National Bank in Columbus, pointed out, “the discouraged worker effect can make the jobless rate look better than it is. It makes you feel kind of warm and fuzzy for about half a second, then you notice things aren’t that great.” In Ohio, the unemployment rate increased in December largely because there were more holiday job seekers than available jobs, stated Tom Hayes, director of Job & Family Services I Ohio. Some economists in Ohio suggest that, in 2004, businesses will buy equipment with an eye toward efficiency, allowing them to get more work from the same number of workers. Continuing productivity gains can offset the need to hire more workers.
President Bush: “All the signs in our economy…are very strong. And that’s positive for somebody who might be wondering about whether he or she is going to find a job.” Yesterday, Gateway Computer stated it will reduce its workforce to “mid-5,000” from the present 7,400.
North Carolina’s annual unemployment rate was 6.5%, down from 6.7% in 2002, according to the BLS. Only nine states and the District of Columbia had higher unemployment rates. It has been suggested that North Carolina has many discouraged workers.
U.S. manufacturers have experienced 44 straight months of layoffs. The sector has shed almost 3 million jobs since mid-2000. Job cuts are not confined to manufacturing. Guardian Life Insurance, for example, began outsourcing IT to India in March 2001, and now sees annual savings of $12.5 million. According to E-Business Strategies, in general, a company can save at least 50% in operational expenses by moving call-center functions to countries where wages and turnover are lower. Even start-up and venture-capital backed companies are looking at offshore alternatives. John Challenger believes “the cost savings and efficiency gains achieved through outsourcing will in fact free up resources that can be used for innovation and to expand other areas of business, thus creating new opportunities and jobs in America.”
Bush administration officials have projected that the economy would produce 2.6 million jobs this year. The Philadelphia Fed’s survey indicated that private sector economists have a more modest prediction of about 1.1 million new payroll jobs this year. More to the point, however, might be a breakdown of what those new jobs are like. Are they minimum wage, are they full-time, are they hourly, and what will the average income level be from these new jobs? I study investment in capacity expansion and not just investment in new equipment to boost productivity. With capacity utilization remaining around 76%, there is little need to expand or build new plants. When Wal-Mart opens a new store, they hire more people. They open more stores than any other company in the U.S., and that’s why they are the largest private sector employer by a wide margin. When plants are built in China, employees are hired overseas. I don’t see new plants being constructed in Ohio.
The ISM’s latest new orders index declined to 66.4 from 71.1 in January. The production index fell to 63.9 from 71.1. The prices paid index jumped to 81.5 from the prior month’s 75.5.
In the San Francisco Bay Area unleaded gasoline is $2.26 per gallon at the local stations. Do you think that price will cut into consumer spending in other areas, such as, dining out? After adjusting for inflation, the rise in the nation’s consumer spending was 0.1% in January.
Yesterday, Houston’s Mayor White stated his city’s pension funding shortfall may be closer to $1.5 billion over 18 years and not $1 billion as earlier estimated. The city of Houston may have to issue bonds just to cover the rapidly escalating pension costs.
Government subsidized health insurance for the poor covered 42.4 million people in 2003. Medicaid enrollment rose by 1.6 million people or 3.9% last year, according to the Centers for Medicare and Medicaid Services. States pay 39% of Medicaid costs and the federal government 61%.
The savings rate increased to 1.8% in January from the prior month’s 1.4%. This gain is modest and the present savings rate is modest by historical standards; however, one cannot expect the trend of consumption to turn to savings on a dime. It takes time for a trend change. The same is true for hiring. After 44 months of job losses, it’s unrealistic to assume significant improvement would occur in a matter of a few months.
Subscribe to:
Posts (Atom)