Morning Economic News

Morning Must Reads: Budget Cuts and Layoffs

Later today, the Pennsylvania Department of Labor and Industry will release the state's September job numbers. The Philadelphia Federal Reserve is forecasting (PDF) the unemployment rate in Pennsylvania will rise a tenth of a percentage point to 8.3% in September. If that forecast holds up, the unemployment rate in Pennsylvania will have risen by nine-tenths of a percentage point since May. Based on this morning's headlines, we can expect more bad news in the months ahead.

Philadelphia-based Checkpoint Systems Inc. announced plans to expand a restructuring program to cut expenses and jobs.

The maker of anti-theft devices for retail chains said its new plans would affect 1,000 existing employees, up from the 204 in its original scheme. Checkpoint said it had 'already taken steps to eliminate three senior executive positions' and intends to 'aggressively take out layers of management.'

In addition, Checkpoint plans to close four production facilities, but did not specify where in its news release.

While job creation in the private sector remains weak, the public sector continues to make the problem worse mostly by punishing the most vulnerable in our society.   

Morning Must Reads: Yes Bridges Need Repair & Little Old Ladies Are Homeless But Ask Yourself Have We Really Done Enough for the Top 1%?

With unemployment in the construction industry at record highs, interest rates low and a deep backlog of thousands of structurally deficient bridges in need of repair, now is a great time to spend money to fix stuff do nothing!

Actually, it is not really that bad; it's worse. The Pennsylvania Legislature is spending time debating changes to the state's prevailing wage statute, even though a large body of empirical research demonstrates that changes to prevailing wage laws do not lower construction costs.  Anyway, if you find yourself in Pittsburgh, make sure your car seat also doubles as a floatation device.

Morning Must Reads: Accountability in the Private and Public Sector or Making Money the Old Fashioned Way

While cruising by Allentown on I-78 with Billy Joel's greatest hits blaring on your stereo, you may have noticed just along the highway a big sign for the camera maker Olympus. Turns out the North American headquarters for the Olympus Corporation of the Americas is located in Allentown. The Allentown Morning Call reported Friday that the CEO of the parent company has been dismissed. Businessweek is reporting this morning there is more to the story:

Fired Olympus Corp. President Michael C. Woodford said he met with the U.K.’s Serious Fraud Office to request an investigation of payments made by the Japanese company to advisers in a 2008 acquisition ...

Olympus ... paid $687 million to two advisory companies related to its purchase of Gyrus Group Plc in 2008, the PwC report said. The fees were more than a third of the $2 billion purchase price, according to the report. Merger and acquisition advisory fees usually range from 1 percent to 5 percent.

As the Allentown Morning Call reported on Friday, the company had been seeking to aggressively cut costs via an undisclosed number of layoffs in Allentown over the summer. 

Two words. 

Job creators?

Rather than lay off workers while paying fat fees to "advisers," The Philadelphia Inquirer this morning reports on an emerging approach to job creation, spending money to fix things!

Morning Must Reads: Bailouts for the Banks and Cake for the 99%

What is good for the financial sector is good for the 99% 1%.

For the financialization of America wasn’t dictated by the invisible hand of the market. What caused the financial industry to grow much faster than the rest of the economy starting around 1980 was a series of deliberate policy choices, in particular a process of deregulation that continued right up to the eve of the 2008 crisis. Not coincidentally, the era of an ever-growing financial industry was also an era of ever-growing inequality of income and wealth. Wall Street made a large direct contribution to economic polarization, because soaring incomes in finance accounted for a significant fraction of the rising share of the top 1 percent (and the top 0.1 percent, which accounts for most of the top 1 percent’s gains) in the nation’s income. More broadly, the same political forces that promoted financial deregulation fostered overall inequality in a variety of ways, undermining organized labor, doing away with the 'outrage constraint' that used to limit executive paychecks, and more.

The Pittsburgh Post-Gazette reviews employment law in Pennsylvania and notes that there are two sets of rules, the rules for the rest of us (we are employed at will and rarely get a severance) and the rules for top executives.

Morning Must Reads: Wages Under Pressure and Doing Nothing Is Not an Option

It's hard out here for a cellist!

On the cusp of the opening of the orchestra's 2011-12 season, members of the ensemble approved a contract calling for a 15 percent pay cut, reducing the size of the ensemble, and replacing the defined-benefit pension with a defined-contribution plan. The deal, also ratified by the association's board of directors, was mediated under the supervision of Stephen Raslavich, chief judge of U.S. Bankruptcy Court for the Eastern District of Pennsylvania, and is subject to bankruptcy court approval. The American Federation of Musicians and Employers' Pension Fund, the $1.7 billion national plan that would be jilted by the new deal, has pledged to fight for up to $35 million it says it will be owed if the orchestra association withdraws from the fund.

Morning Must Reads: Congress Passes Trade Deals while Families Suffer

Unemployment in most places is higher than it has been in decades, and worse still unemployment rates have started rising again as private-sector job growth has stalled and the public sector continues to shed jobs. The economy needs a boost, but Congress is making no progress towards passing a jobs bill. You might be tempted to think Congress can agree on nothing. Well, it depends on what you mean by nothing.

The economic benefits are projected to be small [blogger's note: even according to people whose models capture gains from trade but not the downside]. A federal agency estimated in 2007 that the impact on employment would be 'negligible' and that the deals would increase gross domestic product by about $14.4 billion, or roughly 0.1 percent.

This 112th Congress is building a solid record of having a negligible effect on employment. Meanwhile, back in the real world, a story that just breaks your heart.

Morning Must Reads: The Senate Chooses to Do Nothing About the Economy and You Should Root for GE

The economic news this morning makes you feel like you are watching Major Kong (from the movie Dr. Strangelove — the picture on the left) ride the bomb like a mechanical bull to our mutual total economic destruction. But our economic situation is more similar to that of Otto (played by Kevin Kline in A Fish Called Wanda — on the right).  At first we are amused with the idea of being run down by a steamroller moving 2 miles per hour. But then we realize that we have stepped in wet cement and are thus destined to be run down by the U.S. Senate a one-eyed man with ketchup stains round his nostrils.

In short, our problem is a lack of aggregate demand and the solution is well within our grasp, but our politics are paralyzed and millions are destined to be run down by years of needless misery.

Morning Must Reads: Hard Times In Pennsylvania and Debates About Higher Education

The Mercyhurst College Center for Applied Politics has released to The Philadelphia Inquirer the results of a poll asking Pennsylvanians about the impact of the economy on their lives.

The poll found that one in four Pennsylvania residents has had someone living in his or her household lose a job or be laid off in the last 12 months — and two out of three had close friends or family members who were put out of work in that time. More than three out of every four Pennsylvanians said they knew individuals or families who struggle every month to afford basic needs such as rent, utilities, health care, clothes, or food. 'The poverty question was startling,' said Joseph Morris, a professor and director of the college's Center for Applied Politics, which conducted the poll, 'as was the fact that a strong majority of Pennsylvanians have had to make lifestyle changes because of the economy.'

The Mercyhurst College Center findings mirror those of the State of Working Pennsylvania 2011:

Over one in four Pennsylvania workers — and nearly one in three U.S. workers — have had less paid work than they want during the last 12 months. ... National poll results reveal that, between 2009 and 2011, 43% of likely voters had been unemployed or someone in their family has been unemployed. Since likely voters are a significantly more educated, higher-income group than typical voters, the share of all workers that have been unemployed or had a family member unemployed almost certainly exceeds 50%.

Morning Must Reads: Unemployment Up, Incomes Down

The New York Times this morning leads with a story based on a report by a private consulting firm called Sentier Research LLC. In the chart that follows, the quote below the plummeting red line is a measurement of income for the typical household and the skyrocketing black line is the unemployment rate. If you come across anyone arguing that we should do nothing to spur job growth, it is probably because profits measured as a share of national income reached their highest share since World War II, even while incomes have been decimated by high unemployment.

Between June 2009, when the recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7 percent, to $49,909, according to a study by two former Census Bureau officials. During the recession — from December 2007 to June 2009 — household income fell 3.2 percent.

Morning Must Reads: Three Act Plays About Zombie Banksters, Smokestack Chasing and the Convoy

Paul Krugman describes our economic woes as a three-act play; now you Occupy Wall Street kids turn it into zombie banker street theater!

So, in case you’ve forgotten, it was a play in three acts. In the first act, bankers took advantage of deregulation to run wild (and pay themselves princely sums), inflating huge bubbles through reckless lending. In the second act, the bubbles burst — but bankers were bailed out by taxpayers, with remarkably few strings attached, even as ordinary workers continued to suffer the consequences of the bankers’ sins. And, in the third act, bankers showed their gratitude by turning on the people who had saved them, throwing their support — and the wealth they still possessed thanks to the bailouts — behind politicians who promised to keep their taxes low and dismantle the mild regulations erected in the aftermath of the crisis. Given this history, how can you not applaud the protesters for finally taking a stand?

A story in The Philadelphia Inquirer suggests Occupy Wall Street - Philadelphia is off to good start and includes more than just unshowered hippie kids. My twitter feed this morning even included a rumor that the Mayor was going to approve a brief moment of electricity so the protestors can watch the Phillies in Game 5 of the National League division series against the St. Louis Cardinals. As the saying goes, we want bread AND roses Phillies.

In the course of the morning, infrastructure — the kind meant to sustain the protest — started falling into place. After an organizer hopped up on a stone wall and called out that tables were needed for first aid and other stations, a rabbi from a nearby temple offered four tables, as did a community group called Fight for Philly. District 1199C of the National Union of Hospital and Health Care Employees donated office space for Occupy Philadelphia's legal team. Philadelphia Jobs with Justice, a coalition of labor unions and student, community, and religious groups, agreed to allow financial donations for the protest to be funneled through it, to ensure compliance with tax laws. The stagehands union said it would have a professional sound system in place for Friday, eliminating the need for the 'people's mike' — a system of echoing by the crowd, so all could hear.

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