Bad Economy and the rich

There are more than 22,000 homeless children in New York, the highest number since the Great Depression. This is one of their stories.

Wal-Mart is the world’s largest retailer, with 2.2 million employees, 1.3 million of whom are in the US. It reported close to $120bn in gross profit for 2012. Just six members of the Walton family, whose patriarch, Sam Walton, founded the retail giant, have amassed an estimated combined fortune of between $115bn to $144bn. These six individuals have more wealth than the combined financial assets of the poorest 40% of the US population.

…stocks and the “real economy” of jobs and production have become disconnected — and that this cannot continue indefinitely. There are practical limits to how much companies can improve profits without stronger economic growth and higher sales. If these don’t materialize, we may discover that the market is not a bubble but a blob that goes nowhere quickly.

Art collectors made news for a second straight night on Wednesday as Sotheby’s held the biggest auction in its history, led by the record-setting $105 million paid for a work by Andy Warhol.

The previous day, hedge fund managers, oil princes and oligarchs were bidding by telephone at Christie’s when the auction house sold Francis Bacon’s “Three Studies of Lucian Freud” for a record $142.4 million, in what was seen as a test of the global art market’s health.

It passed. Among the reasons, art consultants and hedge fund managers say, is the rise of a class of super-wealthy collectors, many of them from Asia, the Middle East and Russia -zones bolstered by years of booming commodities prices.,0,5131481.story

Capital gains: Spending on contracts and lobbying propels a wave of new wealth in D .C.

The winners in the new Washington are not just the former senators, party consiglieri and four-star generals who have always profited from their connections. Now they are also the former bureaucrats, accountants and staff officers for whom unimagined riches are suddenly possible. They are the entrepreneurs attracted to the capital by its aura of prosperity and its super-educated workforce. They are the lawyers, lobbyists and executives who work for companies that barely had a presence in Washington before the boom.

The signs of the new Washington are everywhere — from the Tiffany & Co. store that Fairfax County development officials boast is the most profitable in the country to the new Tesla dealership in Tysons Corner. Every morning on the Beltway, contractors, lobbyists and some of the country’s highest-paid lawyers sit in the nation’s worst traffic. Sports talk radio crackles with rants about the Redskins and the latest ads from Deltek, a firm that advises companies on “capture strategies” for winning government contracts. The radio signal doesn’t extend much beyond the Washington commute. It doesn’t have to. The ad barely makes sense to most Washingtonians, let alone those living outside the capital.

D.C. awash in contracts, lobbying wealth

For people rolling in the green, the economy is looking A-OK. (Marvin Joseph/ The Washington Post)

Rich people think the economy is doing just fine. Here’s why that matters.

The economy, most Americans agree, is pretty miserable. In a Washington Post-ABC News poll, for example, 75 percent of Americans rated the state of the economy as “negative” or “poor,” versus 24 percent who rated the state of the economy positively. The unemployment rate, at 7.2 percent is still more than two percentage points above where it was when the great recession began almost six years ago.

But there is one group who thinks things are looking pretty peachy: the wealthy.
The American Affluence Research Center surveys families in the top 10 percent of net worth twice a year, selling studies on, for example, their opinions of various luxury brands that might help marketers. Along the way, they ask how these rich families are feeling about the economy.

Pretty good, is the answer. The survey’s economic sentiment index is up to 93 this fall, rising 22 points since the spring. It’s also the highest since the fall of 2007, before the recession began, when it was at 108. The researchers, who survey 327 affluent households, consider an index above 100 as a “positive” view of the economy and the 93 level as “neutral”. Still, surveys of the rest of the masses of Americans reveal views on the state of the economy that are anything but neutral.

It shouldn’t be terribly surprising. The stock market is up 24 percent this year. Unemployment among the educated is at very low levels. It stands to reason that the economy looks to be recovering much better if you’re someone with large investment holdings and a high-level job than if you’re scraping by at a lower-wage job and not benefiting from a run-up in asset prices.

But there may be a second story here. In the last couple of years, any sense of urgency around getting the economy on track has almost disappeared within Congress. In last year’s fiscal cliff debate, for example, there was no strong push from either party to extend a payroll tax holiday or find another mechanism to help out low- and middle-income workers. The debate over the latest fiscal bargaining is all about how to reduce the deficit, with little discussion of interim measures to try to boost growth.

Members of Congress tend to be relatively wealthy themselves, and tend to associate with big donors and other prominent folks who would also fit in the researchers’ survey definition. And to those people, the economy is pretty much back. This helps explain why Congress has seemed less interested in finding ways to propel stronger growth than the overall surveys and economic data would suggest.

For a more detailed look at the phenomenon, check out Jim Tankersley’s piece from May.

Despite plodding economy, some profit
Cost-cutting, flat pay lift corporate world’s fortunes

By Christopher S. Rugaber and Ken Sweet | ASSOCIATED PRESS   
NOVEMBER 06, 2013

Things look different to traders on Wall Street and people on Main Street: Even though economic growth lags and the unemployment rate is high, stock have been on a tear.

WASHINGTON — Look at the US economy and you’ll notice an unusual disconnect.

It’s being slowed by a tight job market, scant pay raises, and weak business investment. Yet corporate profits and stock prices are reaching record highs. What gives?

For starters, weak job growth has held down pay. And since the recession struck six years ago, businesses have been relentless in cutting costs. They have also stockpiled cash rather than invest in new products or business lines. And they have been earning larger chunks of their profits overseas.

All of which is a recipe for solid profits but tepid economic growth. The economy grew at a meager annual rate of 1.8 percent in the first half of 2013. The unemployment rate is 7.2 percent, far above the 5 to 6 percent considered healthy.

Even so, corporate profits equaled 12.5 percent of the economy in the April-June quarter, just below a 60-year high reached two years ago. Profits of Standard & Poor’s 500 index companies have nearly doubled since June 2009.

Burger King’s sales fell last quarter as competition intensified. Yet its earnings surged because it cut expenses and enjoyed growth overseas.

‘‘Corporations have more market power than workers have and have kept wage growth to subdued levels,’’ says Dean Maki, an economist at Barclays. ‘‘That’s left more for corporate profits.’’

Those solid earnings have helped boost stock prices. So has the Federal Reserve’s drive to keep long-term interest rates near record lows: Lower bond yields have led investors to shift money out of bonds and into stocks, boosting stock prices. The Dow Jones average is up nearly 20 percent this year.

Here are factors economists cite for the gap between healthy profits and subpar growth:

Flat pay

Wages and salaries equaled 42.6 percent of the economy in the April-June quarter, near a record low set in 2011. More than 8.5 million jobs were lost in the recession and its aftermath, forcing workforces to be leaner and more productive. Corporate revenue rose as the economy recovered.

But workers haven’t benefited much. With unemployment high, they’ve had little leverage.

‘‘We’ve just had a very lopsided economic recovery,’’ says Ethan Harris, an economist at Bank of America Merrill Lynch.

Smaller paychecks have deprived Americans of money to spend. In the 30 years before the recession, consumer spending grew an average of 3.4 percent a year. Since 2010, just after the recovery began, it’s risen just 2.2 percent a year.

Stock market gains have boosted total household wealth. But they haven’t enriched most Americans. The wealthiest 10 percent of households own about 80 percent of stocks.


This week, Kellogg said it would cut 7 percent of its workforce, or 2,200 jobs, by 2017 — part of a ‘‘global efficiency and effectiveness program.’’ Though Kellogg’s sales were flat in the July-September quarter, it squeezed out 2.5 percent more net income. A key factor: It cut administrative and borrowing costs. Its shares have risen 15 percent in the past year.

FedEx is cutting jobs, too. Its quarterly revenue rose just 2 percent, but earnings grew 7 percent. The company has cut maintenance costs by replacing older aircraft. But the new planes don’t expand FedEx’s fleet. So the economy doesn’t stand to benefit as much.

Cash hoarding

Higher profits help the economy if corporations plow them back into plants, equipment, and other projects. That hasn’t happened. ‘‘Corporations have been extremely cautious in their spending in this recovery,’’ said Maki. Business spending on big-ticket items has remained about one-third below the average in previous recoveries, Harris estimates.

Instead, companies have stockpiled a record $1.8 trillion in cash, according to the Federal Reserve, up nearly 10 percent since the recession ended. And thanks to the Fed’s drive to keep rates low, companies have been able to borrow cheaply and replace higher-cost debt. All that has bolstered corporate finances and helped lift stock prices.

Improved finances are ‘‘great for the company and its stock price, but from the point of view of the broader economy, you’d prefer they use the money to hire more workers and invest in more projects,’’ Harris says.

Economists say chronic budget fights in Washington and Europe’s financial crisis have left executives uncertain about the economy and reluctant to commit to big projects. So have the uncertain consequences of the Obama health care law, said Mark Vitner, an economist at Wells Fargo Securities.


International competition has lowered wages as a share of the economy in most developed countries, according to the Organization of Economic Cooperation and Development. About one-tenth of the decline is due to competition from lower-wage countries, it says.

And big US companies earn a larger share of profits overseas than in previous decades. That means their profits and stock prices can grow even when US growth is weak.

Nearly half of sales recorded by companies in the S&P 500 index are from abroad. In 2003, the figure was 41.8 percent.

Aswath Damodaran, a professor of finance at New York University, says the trend is a global one. Many Indian companies have fared well even as India’s economy has slowed. The French luxury goods company LVMH did only a tenth of its sales in France in 2013.

‘‘It used to be that US companies lived off the US economy and French stocks lived off the French economy,’’ Damodaran said. ‘‘Now, stock markets are more reflections of the global economy.’’

For retailers, low wages aren’t working out


Technology didn’t kill middle class jobs, public policy did
The story is that innovation rapidly reduced the need for factory workers and other skilled labor. The data just doesn’t support it

Unionisation has shrunk in the US from over 20% in the 1970s to less than 7% today. Photograph: Christopher Furlong/Getty Images

A widely held view in elite circles is that the rapid rise in inequality in the United States over the last three decades is an unfortunate side-effect of technological progress. In this story, technology has had the effect of eliminating tens of millions of middle wage jobs for factory workers, bookkeepers, and similar occupations.

These were jobs where people with limited education used to be able to raise a family with a middle class standard of living. However computers, robots and other technological innovations are rapidly reducing the need for such work. As a result, the remaining jobs in these sectors are likely to pay less and many people who would have otherwise worked at middle wage jobs must instead crowd into the lower paying sectors of the labor market.

This story is comforting to elites, because it means that inequality is something that happened, not something they did. They won out because they had the skills and intelligence to succeed in a dynamic economy, whereas the huge mass of workers that are falling behind did not. In this story, the best we can do for those left behind is empathy and education. We can increase opportunities to upgrade their skills in the hope that more of them may be able to join the winners.

That’s a nice story, but the evidence doesn’t support it. My colleagues Larry Mishel, John Schmitt, and Heidi Sheirholz, just published a paper showing that the pattern of job growth in the data doesn’t fit this picture at all. This paper touches on a wide variety of issues related to technology and wage inequality, but first and foremost, it shows that the story of the hollowing out of the middle does not fit the data for the 2000s at all.

Since 2000, the increase in employment has occurred almost entirely in low-wage occupations. There has been a decline in relative employment for both workers in middle wage and high wage occupations. If this “occupational shift story” explained trends in wages we should expect to see sharply rising wages for retail clerks, custodians and other workers employed in low-paying occupations.

Of course, we see the opposite. Workers in these occupations continued to lose ground in the 2000s as they did in the prior two decades. Their wages barely kept pace with inflation over the last three decades.

The paper makes an impressive case that technology is not the main explanation for the rise in inequality that we have been seeing. In fact, even MIT economics professor David Autor, the leading proponent of the occupational shift story concedes this point. He was quoted in a New York Times column saying of the view that technology explains inequality:

It can suck all the air out of the conversation … All economists should be pushing back against this simplistic view.

Given the evidence compiled by Mishel et al, it would be difficult to maintain that technology has been the main culprit in the upward redistribution of income that we have seen.

It is not difficult to identify other potential culprits – trade would certainly rank high on the list. A trade policy that quite deliberately puts factory workers in direct competition with low-paid workers in the developing world, while protecting doctors and other highly paid professionals, would be expected to redistribute income from the former to the latter.
The weakening of unions is likely also an important factor. The private sector unionization rate in the United States has shrunk from over 20% in the 1970s to less than 7% at present. In the same vein, the deregulation of major industries like airlines, telecommunications, and trucking has been another factor putting downward pressure on wages. The higher unemployment rates we have seen, not just in the last five years but in the last 35 years, compared with the early post-war decades, has also weakened the bargaining power of workers at the middle and bottom of the pay ladder.

We have also seen big changes that contributed to growth of income at the top. The highlights in this category would be deregulation in the financial sector and the changes in corporate governance that pretty much allow top management to write their own pay checks.

The big difference between the items listed above and the occupational shift story is that this is a list of items that involve policy changes. If this list (which could be extended) explains the growth in inequality over the last three decades then, it means that inequality was a result of policy. It was not something that just happened; it was something that we did or was done to us.

That presents a very different policy agenda for addressing inequality. No one would quarrel with the idea that our children should get a better education, but if a lack of skills was not the cause of inequality, more skills will not be the solution. Rather, we might look at an agenda that would rein in finance and CEO pay, restore the strength of labor unions, and include a more balanced trade policy.

This agenda wouldn’t just mean empathy from those on top, but also lead to them losing some of their gains from the last three decades. Therefore we are likely to keep hearing stories about technology destroying middle wage jobs for some time, even if the evidence doesn’t back up the stories.

Great Recession has new wrinkles for older workers

Tracy Blakeley, who was laid off in early 2009, thought she would quickly find another job but it didn’t work out that way. She went to school to learn massage therapy and ran her own business for a while but closed the business last year. Blakeley has strung together a series of temporary jobs but still hopes to land a permanent one. (Genaro Molina/Los Angeles Times/MCT)

POSTED: Saturday, November 16, 2013, 6:00 AM

When potential employers ask Tracy Blakeley about her personal life, she assumes they’re not making idle chit-chat.

They’re trying to figure out how old she is.

“They ask if I have kids or grandkids,” Blakeley, 53, said. “They won’t ask you your birth date, but they’ll ask when you graduated from high school.”

Blakeley has a rock-solid work ethic, good computer skills and an upbeat personality. What she doesn’t have is a permanent job, despite trying her hardest to find one.

It’s a common story for people in their 50s, 60s and even 70s. Nearly 2 million people ages 55 and older are looking for a job these days, twice as many as before the Great Recession.

The chronically sluggish U.S. economy has taken a toll on workers of all ages, but it has weighed particularly heavily on the baby boom generation.

The unemployment rate for older workers is below that of the general population. It’s 5.4 percent for those ages 55 and older, versus 7.3 percent for the entire labor force, according to the federal Bureau of Labor Statistics.

But boomers who suffer layoffs endure far longer bouts of unemployment than the rest of the labor force. And when they do land new positions, boomers typically have to take substantially larger pay cuts than their younger brethren.

“Older workers who have been able to hang onto their jobs have done pretty well,” said Sara Rix, senior strategic policy advisor with the AARP Public Policy Institute. “It’s once they lose their jobs that they’re just not getting new ones.”

In a sign of the need for help among older workers, the AARP held a recent job-skills conference in Long Beach, Calif. The organization expected 600 attendees. Nearly 1,000 people showed up.

Beyond the financial implications, the long job hunts exact an emotional price.

“Sitting at home trying to figure out what you’re going to do next is very taxing on your brain,” said Darryl Whetstone, a 55-year-old Norwalk, Calif., man who was laid off 17 months ago. “There are a lot of people over the age of 50 that can really be of use, and they’re not utilized.”

Their plight is important in part because a growing number of people fall into that age group. And given the nation’s poor rate of retirement savings, more people are searching for jobs than just a few years ago.

Four in 10 job seekers ages 50 and older say they need the money, according to a survey last month by the Associated Press-NORC Center for Public Affairs Research.

Older workers long have battled negative perceptions, such as that they’re not as productive as younger colleagues or that their health care costs are higher. They’re at an added disadvantage in today’s rapidly shifting digital world, some experts say.

Employers fear they lack skills in crucial areas such as social media. And older workers often aren’t adept at modern-day job-search techniques, such as using LinkedIn or video interviews.

“It’s extremely difficult for those who lose a job,” said Carl Van Horn, director of the John J. Heldrich Center for Workforce Development at Rutgers University. “Employers would rather not hire older workers. They have in their heads certain assumptions about them, which may or may not be correct.”

In historical terms, the challenges for this age group are a fairly new phenomenon.

Older workers fared reasonably well in past economic downturns, according to the Center for Retirement Research at Boston College.

The jobless rate for people 55 and older peaked at 5 percent in the early-1990s recession. It topped out at 4.3 percent in the downturn in the early 2000s. By contrast, the rate hit a record high 7.4 percent in August 2010.

Older job seekers face significant head winds.

It takes the average older worker 55 weeks to find a job, compared with 35 weeks for those ages 25 to 34, according to Bureau of Labor Statistics data. And workers aged 55-64 take an average 18 percent pay cut in a new job, compared with 6.2 percent for people ages 35 to 44, according to the data.

It’s hard to prove, but many boomers – even those with jobs _ say they’ve been discriminated against.

One in five people ages 50 or older report suffering age discrimination, including being passed over for promotions or training to update their skills, the AP-NORC survey found.

Older workers say they emphasize to employers the benefits of their maturity and experience. Beyond quantifiable skills, that includes nuances such as knowing how to work in a team or get along with moody co-workers.

“I’m very happy to pass my knowledge on to a 35-year-old who wants to attain (a promotion), not take the position away from him,” said Roy Satz, a 63-year-old financial executive.

Still, older workers worry that their age is being held against them.

Blakeley was laid off in early 2009 from her job as a recruiter at an employment agency.

She thought she would quickly find another job, as she always had in the past. The Gardena, Calif., woman went to school to learn massage therapy and ran her own business for a while but closed it last year.

Since then, she has strung together a series of temporary jobs, including a current stint as a home health care aide, but hasn’t landed a permanent position.

Like many older workers, Blakeley can’t tell whether potential employers are holding her age against her. But sometimes she suspects they are.

Earlier this year, an employment agency called her for an administrative position. Blakeley had a half-hour phone chat with a recruiter at the agency, which led her to believe that she was a serious candidate.

The recruiter asked Blakeley to come in a few days later to meet her manager and interview with the company that was hiring.

But the tone changed when she got to the temp office and, Blakeley believes, the recruiter realized Blakeley was older than expected.

“I walked into her office, and it was a total different persona,” Blakeley said. “I was supposed to meet the manager, and the manager all of a sudden wasn’t available. I was supposed to go out on an interview, and all of a sudden the interview wasn’t going to happen.”

Despite that, Blakeley remains optimistic.

“I believe there are still great options out there for me,” she said. “I just have to find the right one.”

Colorado parolees: Without job, family or home, recently released inmate struggles to find way

STANFORD, Calif. — On Stanford University’s sprawling campus, where a long palm-lined drive leads to manicured quads, humanities professors produce highly regarded scholarship on Renaissance French literature and the philosophy of language.

They have generous compensation, stunning surroundings and access to the latest technology and techniques of scholarship. The only thing they lack is students: Some 45 percent of the faculty members in Stanford’s main undergraduate division are clustered in the humanities — but only 15 percent of the students.

The Outsiders Who Saw Our Economic Future

In both America’s energy transformation and the financial crisis, it took a group of amateurs to see what was coming

At the source of the shutdown, the economy falters — and anger at Barack Obama runs high–and-anger-at-obama-runs-high/2013/10/28/67d51c90-3fe2-11e3-a751-f032898f2dbc_story.html

About Jerry Frey

Born 1953. Vietnam Veteran. Graduated Ohio State 1980. Have 5 published books. In the Woods Before Dawn; Grandpa's Gone; Longstreet's Assault; Pioneer of Salvation; Three Quarter Cadillac
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