February 2010___________________________________
Labor line has job news and commentary with a one stop short cut for America's job markets and job related data including the latest data from the Bureau of Labor Statistics.
American Job Market Labor News
This month's job and employment summary data are below. This month's inflation data is below.
The Establishment Job Report and Establishment Job Details for data released February 5, 2010.
This month's featured job is Accountant. Other College Job Reviews are here.
Current Job and Employment Data
Jobs
Total Non-Farm Establishment Jobs down 20,000 to 129,527,000
Total Private Jobs down 12,000 to 107,055,000
Total Government Employment down 8,000 to 22,472,000
Employment Note
Civilian Non-Institutional Population 236,832,000
Civilian Labor Force up 111,000 to 153,170,000
Employed up 541,000 to 138,333,000
Employed Men up 17,000 to 72,516,000
Employed Women up 524,000 to 65,817,000
Unemployed down 430,000 to 14,837,000
Not in the Labor Force down 202,000 to 83,663,000
Unemployment Rate down .3% to 9.7%, or 14,837/153,170
Labor Force Participation Rate up .1% to 64.7% or 153,170/236,832
Prices and inflation measured by the Consumer Price Index (CPI) for all Urban Consumers was down .4 percent for 2009.
The January CPI report for the 12 months ending with December 2009, shows the
CPI for All Items was up 2.7%
CPI for Food and Beverages was down .4%
CPI for Housing was down .3%
CPI for Apparel was up 1.9%
CPI for Transportation including gasoline was up 14.4%
CPI for Medical Care was up 3.4%
CPI for Recreation was down .4%
CPI for Education was up 4.7%
CPI for Communication was up .1%
This Month's Establishment Jobs Press Report NO CLEAR SIGNALS ON JOBS
The Bureau of Labor Statistics published its February report of jobs in January. The number of seasonally adjusted employed jumped by 541,000 and the unemployment rate dropped .3 percent to 9.7 percent. The increase in employment came from a 430,000 drop in the unemployed, which is the best news for the month. The rest of the increase in the employed came from 111,000 new entrants to the labor force who also found jobs. The increase in the employed is divided unevenly between men and women: 17,000 men and 524,000 women.
The seasonally adjusted total of jobs at establishments dropped by 20,000 for January. The loss of 20,000 jobs is a mixture of 60,000 decrease in goods production jobs, a 48,000 increase in private service providing jobs, and an 8,000 decrease in government services jobs, including education.
In goods production, construction dropped 75,000 jobs even more than last month. Mining and logging was up 4,000; manufacturing showed an increase of 11,000 jobs.
Among the nine service-providing sectors three had a decrease totaling 47,000 jobs for January. Five increased a total of 86,000 jobs with the ninth sector holding steady. The share of service employment in January equals 86.2 percent of establishment jobs. Goods production dropped slightly to 13.8 percent.
Seasonally adjusted professional and business services recovered by a net of 44,000 jobs in January. However, there was a net loss of several thousand professional and technical service jobs with legal services, architecture, engineering and management consulting showing losses. Losses were balanced gains in accounting services and computing for a net loss of 1,600 jobs in professional services.
Other parts business services for administrative and support declined, but temporary help services was up 52,000 jobs. The net gain of 44,000 jobs resulted from the gain in temporary help services.
Health care was up 17,000 jobs, a little less than normal. Seasonally adjusted trade, transportation and utilities recovered 15,000 jobs after months of losses. The gain came primarily in retail trade. Transportation was off 19,000 jobs.
Private, state and local education reversed last month's gains. All sub sectors showed losses. Finance jobs were off 16,000 jobs. Restaurant employment picked up 3,500 jobs, but the remaining parts of leisure and hospitality were down. Job losses in accommodations, arts, entertainment, and recreation came to 18,000 jobs.
The small decline for seasonally adjusted employment allows some reasonable optimism for the coming months, but no clear pattern is emerging to expect jobs to start growing.
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January Details
Non Farm Total -20
The Bureau of Labor Statistics (BLS) reported Non-Farm employment for establishments decreased in December by 20 thousand jobs for a January total of 129.527 million. (Note 1 below) It represents an annual growth rate of -.19% if monthly decreases were to average20 thousand a month for the next 12 months. The annual growth rate from a year ago beginning January 2009 was
-3.01%; the average annual growth rate from 5 years ago beginning January 2005 was
-.45%; from 15 years ago beginning January 1995 it was .72%. America needs growth around 1.5 percent a year to keep itself employed.
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Sector breakdown for 12 Sectors in 000's of jobs
1. Natural Resources +4
Natural Resources including logging and mining were up 4 thousand in December to 681 thousand jobs in January. An increase of 4 thousand each month for the next 12 months would be an annual growth rate of +7.09 percent. Natural resource jobs are down 80 thousand for the 12 months just ended. Jobs were in the 1990's were 770 thousand. Job growth here is a possibility but it will be small compared to America's job needs. This is the smallest of 12 major sectors of the economy with .53 percent of establishment jobs.
2. Construction -75
Construction jobs were down 75 thousand from December to 5.625 million in January. A decrease of 75 thousand jobs each month for the next 12 months would be an annual growth rate of -15.79 percent. They are down for the last 12 months by 926 thousand, a very large decrease relatively speaking. The growth rate for the last 5 years is -4.54%. Construction jobs rank 9th among the 12 sectors with 4.34 percent of non farm employment.
3. Manufacturing +11
Manufacturing jobs were up again by 11 thousand from December to 11.540 million in January. An increase of 11 thousand each month for the next 12 months would be an annual growth rate of +1.14 percent, a faster rate of decline than is typical for manufacturing which has been declining almost every month for more than 15 years. Jobs were down for the last 12 months by 1.003 million. In 1994, manufacturing ranked 2nd but now ranks 6th among 12 major sectors in the economy with 8.91 percent of establishment jobs.
4. Trade, Transportation & Utility +15
Trade, both wholesale and retail, transportation and utility employment was up by 15 thousand jobs from December to 24.642 million jobs in January. These jobs almost always increase at a slower rate than the total of non-farm jobs, but an increase of 15 thousand each month for the next 12 months would be an annual growth rate of +.73 percent. Jobs are down by 833 thousand for the last 12 months. Growth rates for the last 5 years are -.86 percent. Jobs in these sectors rank first as the biggest sectors with combined employment of 19.02% of total establishment employment.
5. Information Services +-0
Information Services employment stayed the same from December to 2.753 million jobs in January. No change in jobs each month for the next 12 months would be an annual growth rate of 0.0 percent. (Note 2 below) Jobs are down by 135 thousand for the last 12 months. Monthly employment in information services gyrates up and down and has been doing so for most of 2006 and 2007. Information jobs reached 3.7 million at the end of 2000, but started dropping and jobs have been just over 3 million since 2004. Information Services is a small sector ranking 11th of 12 with 2.13 percent of establishment jobs.
6. Financial Activities -16
Financial Activities was down 16 thousand jobs from December to 7.643 million in January. A decrease of 16 thousand each month for the next 12 months would be an annual growth rate of -2.51 percent. Jobs are down 302 thousand for the last 12 months. (Note 3 below)This sector also includes real estate as well as real estate lending. Financial Services has been growing at annual rates below the overall non-farm growth rate with a 5 year growth rate of -1.14 percent and a 15 year growth rate of .76 percent. Financial activities rank 8 of 12 with 5.90 percent of establishment jobs.
7. Business & Professional Services +44
Business and Professional Service jobs went up 44 thousand from December to 16.530 million in January. An increase of 44 thousand each month for the next 12 months would be an annual growth rate of 3.2 percent. Jobs are down 561 thousand for the last 12 months. Note 4 The annual growth rate for the last 5 years from January 2005 was -.14%. It ranks as 2nd among the 12 sectors. It was third in May 1993, when manufacturing was bigger and second rank now with 12.76 percent of establishment employment.
8. Education including public and private -18
Education jobs went down 18 thousand from December to 13.498 million in January. These include public and private education. A decrease of 18 thousand each month for the next 12 months would be an annual growth rate of -1.56 percent. Jobs are down 57 thousand for the last 12 months. (note 5) Most monthly educational employment goes up. It goes down occasionally, but the tendency is to go up, where the 15 year growth rate equals 1.82 percent, faster than the national average. Education ranks 4th among 12 sectors with 10.4 percent of establishment jobs.
9. Health Care +17
Health care jobs were up 17 thousand from December to 16.260 million in January. An increase of 17 thousand each month for the next 12 months would be an annual growth rate of 1.26 percent. Jobs are up 284 thousand for the last 12 months, the biggest increase of any sector over the last 12 months. (note 6) The current month is less than long term trends and less than growth from a year ago when the annual growth rate was 1.78 percent. Health care has been growing at 2.57 percent annual growth rate for 15 years, a rate nearly double the national rate. Health care ranks 3rd of 12 with 12.55 percent of establishment jobs.
10. Leisure and hospitality -14
Leisure and hospitality jobs went down 14 thousand from December to 12.969 million in January A decrease of 14 thousand each month for the next 12 months would be an annual growth rate of -1.29 percent. Jobs are down 240 thousand for the last 12 months. (note 7) The 5 year growth rate is .47%. More than 80 percent of leisure and hospitality are accommodations and restaurants assuring that most of the new jobs are in restaurants. Leisure and hospitality rank 4th of 12 with 10.02 percent of establishment jobs. It moved up from 7th in the 1990's to 5th in the last few years.
11. Other +3
Other Service jobs, which include repair, maintenance, personal services and non-profit organizations went up 3 thousand from December at 5.317 million in January. An increase of 3 thousand each month for the next 12 months would be an annual growth rate of +.68 percent. Jobs are down 112 thousand for the last 12 months. (note 8) Other services has -0.03 percent growth for the last 5 years. Other services are trending up over the longer term. These sectors rank 10th of 12 with 4.10% of total non-farm establishment jobs.
12. Government, excluding education +7
Government service employment went up 7 thousand from December to 12.067 million in January. An increase of 7 thousand each month for the next 12 months would be an annual growth rate of +.73 percent. Jobs are down 58 thousand for the last 12 months. (note 9) Government jobs excluding education tend to increase slowly but surely with a 15 year growth rate of .57 percent. Government, excluding education, ranks 7th of 12 with 9.32% of total non-farm establishment jobs.
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December Details
Non Farm Total -85
The Bureau of Labor Statistics (BLS) reported Non-Farm employment for establishments decreased from November by 85 thousand jobs for a December total of 130.910 million. (Note 1 below) It represents an annual growth rate of -.78% if monthly decreases were to average 85 thousand a month for the next 12 months. The annual growth rate from a year ago beginning December 2008 was
-3.08%; the average annual growth rate from 5 years ago beginning December 2004 was -.21%; from 15 years ago beginning December 1994 it was .81%. America needs growth around 1.5 percent a year to keep itself employed.
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Sector breakdown for 12 Sectors in 000's of jobs
1. Natural Resources -1
Natural Resources including logging and mining were down 1 thousand in November to 703 thousand jobs in December. A decrease of 1 thousand each month for the next 12 months would be an annual growth rate of -1.7 percent. Natural resource jobs are down 86 thousand for the 12 months just ended. Jobs were in the 1990's were 770 thousand. Job growth here is a possibility but it will be small compared to America's job needs. This is the smallest of 12 major sectors of the economy with .53 percent of establishment jobs.
2. Construction -53
Construction jobs were down 53 thousand from November to 5.907 million in December. A decrease of 53 thousand jobs each month for the next 12 months would be an annual growth rate of -10.67 percent. They are down for the last 12 months by 934 thousand, a very large decrease relatively speaking. The growth rate for the last 5 years is -3.66%. Construction jobs rank 9th among the 12 sectors with 4.56 percent of non farm employment.
3. Manufacturing -27
Manufacturing jobs were down again by 27 thousand from November to 11.630 million in December. A decrease of 27 thousand each month for the next 12 months would be an annual growth rate of -2.78 percent, a faster rate of decline than is typical for manufacturing which has been declining almost every month for more than 15 years. Jobs were down for the last 12 months by 1.272 million. In 1994, manufacturing ranked 2nd but now ranks 6th among 12 major sectors in the economy with 8.92 percent of establishment jobs.
4. Trade, Transportation & Utility -37
Trade, both wholesale and retail, transportation and utility employment was down by 37 thousand jobs from November to 24.962 million jobs in December. These jobs almost always increase at a slower rate than the total of non-farm jobs, but a decrease of 37 thousand each month for the next 12 months would be an annual growth rate of -1.78 percent. Jobs are down by 881 thousand for the last 12 months. Growth rates for the last 5 years are -.57 percent. Jobs in these sectors rank first as the biggest sectors with combined employment of 19.12% of total establishment employment.
5. Information Services -6
Information Services employment was down by 6 thousand jobs from November to 2.806 million jobs in December. A decrease of 6 thousand jobs each month for the next 12 months would be an annual growth rate of -2.56 percent. (Note 2 below) Jobs are down by 134 thousand for the last 12 months. Monthly employment in information services gyrates up and down and has been doing so for most of 2006 and 2007. Information jobs reached 3.7 million at the end of 2000, but started dropping and jobs have been just over 3 million since 2004. Information Services is a small sector ranking 11th of 12 with 2.16 percent of establishment jobs.
6. Financial Activities +4
Financial Activities was up 4 thousand jobs from November to 7.695 million in December. An increase of 4 thousand each month for the next 12 months would be an annual growth rate of .62 percent. Jobs are down 315 thousand for the last 12 months. (Note 3 below)This sector also includes real estate as well as real estate lending. Financial Services has been growing at annual rates below the overall non-farm growth rate with a 5 year growth rate of -.98 percent and a 15 year growth rate of .8 percent. Financial activities rank 8 of 12 with 5.88 percent of establishment jobs.
7. Business & Professional Services +50
Business and Professional Service jobs went up 50 thousand from November to 16.814 million in December. An increase of 50 thousand each month for the next 12 months would be an annual growth rate of 3.58 percent. Jobs are down 542 thousand for the last 12 months. Note 4 The annual growth rate for the last 5 years from December 2004 was .26%. It ranks as 2nd among the 12 sectors. It was third in May 1993, when manufacturing was bigger and second rank now with 12.72 percent of establishment employment.
8. Education including public and private +8
Education jobs went up 8 thousand from November to 13.533 million in December. These include public and private education. An increase of 8 thousand each month for the next 12 months would be an annual growth rate of .68 percent. Jobs are up 28 thousand for the last 12 months. (note 5) Most monthly educational employment goes up. It goes down occasionally, but the tendency is to go up, where the 15 year growth rate equals 1.86 percent, faster than the national average. Education ranks 4th among 12 sectors with 10.3 percent of establishment jobs.
9. Health Care +25
Health care jobs were up 25 thousand from November to 16.350 million in December. An increase of 25 thousand each month for the next 12 months would be an annual growth rate of 1.82 percent. Jobs are up 333 thousand for the last 12 months, the biggest increase of any sector over the last 12 months. (note 6) The current month is less than long term trends and less than growth from a year ago when the annual growth rate was 2.08 percent. Health care has been growing at 2.62 percent annual growth rate for 15 years, a rate nearly double the national rate. Health care ranks 3rd of 12 with 12.46 percent of establishment jobs.
10. Leisure and hospitality -25
Leisure and hospitality jobs went down 25 thousand from November to 13.096 million in December. A decrease of 25 thousand each month for the next 12 months would be an annual growth rate of -2.29 percent. Jobs are down 208 thousand for the last 12 months. (note 7) The 5 year growth rate is .73%. More than 80 percent of leisure and hospitality are accommodations and restaurants assuring that most of the new jobs are in restaurants. Leisure and hospitality ranks 4th of 12 with 10.03 percent of establishment jobs. It moved up from 7th in the 1990's to 5th in the last few years.
11. Other -4
Other Service jobs, which include repair, maintenance, personal services and non-profit organizations went down 4 thousand from November at 5.374 million in December. A decrease of 4 thousand each month for the next 12 months would be an annual growth rate of -.89 percent. Jobs are down 103 thousand for the last 12 months. (note 8) Other services has -0.08 percent growth for the last 5 years. Other services are trending up over the longer term. This sector ranks 10th of 12 with 4.11% of total non-farm establishment jobs.
12. Government, excluding education -19
Government service employment went down 19 thousand from November to 12.039 million in December. A decrease of 19 thousand each month for the next 12 months would be an annual growth rate of -1.86 percent. Jobs are down 52 thousand for the last 12 months. (note 9) Government jobs excluding education tend to increase slowly but surely with a 15 year growth rate of .55 percent. Government, excluding education ranks 7th of 12 with 9.23% of total non-farm establishment jobs.
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Sector Notes___________________________
(1) The total cited above is non-farm establishment employment that counts jobs and not people. If one person has two jobs then two jobs are counted. It excludes agricultural employment and the self employed. Out of a total of people employed agricultural employment typically has about 1.5 percent, the self employed about 6.8 percent, the rest make up wage and salary employment. Jobs and people employed are close to the same, but not identical numbers because jobs are not the same as people employed: some hold two jobs. Remember all these totals are jobs. back
(2) Information Services is part of the new North American Industry Classification System(NAICS). It includes firms or establishments in publishing, motion picture & sound recording, broadcasting, Internet publishing and broadcasting, telecommunications, ISPs, web search portals, data processing, libraries, archives and a few others.back
(3) Financial Activities includes deposit and non-deposit credit firms, most of which are still known as banks, savings and loan and credit unions, but also real estate firms and general and commercial rental and leasing.back
(4) Business and Professional services includes the professional areas such as legal services, architecture, engineering, computing, advertising and supporting services including office services, facilities support, services to buildings, security services, employment agencies and so on.back
(5) Education includes private and public education. Therefore education job totals include public schools and colleges as well as private schools and colleges. back
(6) Health care includes ambulatory care, private hospitals, nursing and residential care, and social services including child care. back
(7) Leisure and hospitality has establishment with arts, entertainment and recreation which has performing arts, spectator sports, gambling, fitness centers and others, which are the leisure part. The hospitality part has accommodations, motels, hotels, RV parks, and full service and fast food restaurants. back
(8) Other is a smorgasbord of repair and maintenance services, especially car repair, personal services and non-profit services of organizations like foundations, social advocacy and civic groups, and business, professional, labor unions, political groups and political parties. back
(9) Government job totals include federal, state, and local government administrative work but without education jobs. back
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Notes
Jobs are not the same as employment because jobs are counted once but one person could have two jobs adding one to employment but two to jobs. Also the employment numbers include agricultural workers, the self employed, unpaid family workers, household workers and those on unpaid leave. Jobs are establishment jobs and non-other. back
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Friday, December 31, 2010
Tuesday, February 2, 2010
Public Debt and Private Debt
The United States Treasury will lose borrowing authority when the national debt reaches the legislated ceiling passed by Congress. Treasury Secretary Geithner will have to ask for an increase, which the Congress will grant, but he is bracing for the usual politics. Many in Congress use the opportunity to make government debt their number one worry in order to attach conditions eliminating programs they don’t support.
It is common for them to make comparisons between Government debt and personal debt. “My constituents pay their debts and keep their house in order and it’s time for the government to do the same.” That one is a favorite, but most of the announcements from members of Congress play on constituent anxiety and bias about their personal debts.
When people think of their private debts they worry they won’t be able to pay, but that is not the problem with public debt. The public debt must be managed as part of every administration’s duty to manage the economy. Federal Reserve Bank monetary and interest rate policy gets lots of attention, but without mention that it is also debt management.
When the Federal Reserve wants to lower interest rates to expand the economy, it begins buying outstanding Federal Bills, Notes and Bonds. Payments are by check and when the checks are deposited into bank accounts or converted to cash they become part of America’s money supply.
Buying Federal Bills, Notes and Bonds converts outstanding Federal debt to money and the government and Federal Reserve Bank can do that at anytime and in any amount.
Because the government and Federal Reserve Bank have money in any amount officials could retire the entire federal debt at anytime. They don’t do that because the increase in the money supply would generate inflation and retiring the debt is not a goal of economic policy.
The Federal Government also owns assets and has taxing authority and Federal officials could double or triple taxes and begin selling off its land and other assets to pay off the federal debt. They don’t do that either because it would depress the economy and cause deflation and retiring the debt is not a goal of economic policy.
The British government has done some of its borrowing using a bond called the British Consol, which has no maturity, but is sold in perpetuity. The owner gets periodic interest and can sell their Consol to someone else, but the government has no obligation to pay the principal, ever.
America does not have any equivalent to the British Consol. That’s because Americans think of debt as a symbol of excess that should be retired and they want a date when that will occur. They regard public debt as the equivalent of private debt.
Truth is America’s debt will never be retired, but will go up and down as meets the needs of economic policy. The politicians know this and they will raise the debt ceiling, but in the meantime we will have to listen to their excess.
It is common for them to make comparisons between Government debt and personal debt. “My constituents pay their debts and keep their house in order and it’s time for the government to do the same.” That one is a favorite, but most of the announcements from members of Congress play on constituent anxiety and bias about their personal debts.
When people think of their private debts they worry they won’t be able to pay, but that is not the problem with public debt. The public debt must be managed as part of every administration’s duty to manage the economy. Federal Reserve Bank monetary and interest rate policy gets lots of attention, but without mention that it is also debt management.
When the Federal Reserve wants to lower interest rates to expand the economy, it begins buying outstanding Federal Bills, Notes and Bonds. Payments are by check and when the checks are deposited into bank accounts or converted to cash they become part of America’s money supply.
Buying Federal Bills, Notes and Bonds converts outstanding Federal debt to money and the government and Federal Reserve Bank can do that at anytime and in any amount.
Because the government and Federal Reserve Bank have money in any amount officials could retire the entire federal debt at anytime. They don’t do that because the increase in the money supply would generate inflation and retiring the debt is not a goal of economic policy.
The Federal Government also owns assets and has taxing authority and Federal officials could double or triple taxes and begin selling off its land and other assets to pay off the federal debt. They don’t do that either because it would depress the economy and cause deflation and retiring the debt is not a goal of economic policy.
The British government has done some of its borrowing using a bond called the British Consol, which has no maturity, but is sold in perpetuity. The owner gets periodic interest and can sell their Consol to someone else, but the government has no obligation to pay the principal, ever.
America does not have any equivalent to the British Consol. That’s because Americans think of debt as a symbol of excess that should be retired and they want a date when that will occur. They regard public debt as the equivalent of private debt.
Truth is America’s debt will never be retired, but will go up and down as meets the needs of economic policy. The politicians know this and they will raise the debt ceiling, but in the meantime we will have to listen to their excess.
Saturday, January 16, 2010
Transportation and Free Enterprise
Shortly after taking office President Obama announced plans for government spending that calls for “billions of dollars to rebuild roads and bridges, modernize public schools, and construct wind farms and other alternative sources of energy.”
He didn’t say much about railroads but it is common to ignore the differences between America’s highways and railroads. With highways everyone has equal access. Anyone can start a trucking company and be ready to haul freight and pay fuel taxes by using Federal highways and the interstate highway system. The trucking companies are private enterprise, but the roads are public enterprise so truck transportation becomes a joint partnership of business and government.
Railroads are private companies that build and maintain their right of way and they own their locomotives and rolling stock. America’s rail routes go back to the 19th century when the Federal government provided land grants to investors who built the lines.
Suppose for the last 50 or 100 years that anyone who invested in a locomotive and freight cars had the right to use the entire rail network as long as they paid fuel taxes just like truckers do for the highways. That way new shippers and new investors could decide trucks or rail without the need to spend billions building and maintaining their own railroads.
Think of a big shipper like United Parcel Service that started way back in 1907. Now they operate their own airplanes and their own trucks, but using the rails means an additional set of transactions with railroads. Shipping rates must cover the cost of fuel, locomotives and freight cars, but also the cost of capital and profit for the railroads.
When it’s time to decide rail or truck, the decision depends on different financial considerations rather than the best way to move freight. Since rail is not available with just the expense of locomotives, freight cars, fuel and fuel tax like it is for trucks, decisions favor trucks.
A whole highway, street and bridge construction industry has grown up from America’s system of interest free and pay as we go fuel tax finance for highways but not railroads. Railroads have to resort to risky private funding and fluctuating interest rates.
We can only speculate how much more rail transportation America would have if the rails and roads had equal access to financing, but even more important, if shippers could use the rails like they use the highways.
During the presidential campaign the Republicans pulled out their favorite bogeyman and called Mr. Obama a Socialist. The terms capitalism and socialism have special definitions in American politics. Socialists are bad guys in political campaigns, but socialist projects like the Interstate Highway System get funded anyway. We can also see that capitalism and socialism are not really the issue; it’s the rules and the finance that make the difference.
He didn’t say much about railroads but it is common to ignore the differences between America’s highways and railroads. With highways everyone has equal access. Anyone can start a trucking company and be ready to haul freight and pay fuel taxes by using Federal highways and the interstate highway system. The trucking companies are private enterprise, but the roads are public enterprise so truck transportation becomes a joint partnership of business and government.
Railroads are private companies that build and maintain their right of way and they own their locomotives and rolling stock. America’s rail routes go back to the 19th century when the Federal government provided land grants to investors who built the lines.
Suppose for the last 50 or 100 years that anyone who invested in a locomotive and freight cars had the right to use the entire rail network as long as they paid fuel taxes just like truckers do for the highways. That way new shippers and new investors could decide trucks or rail without the need to spend billions building and maintaining their own railroads.
Think of a big shipper like United Parcel Service that started way back in 1907. Now they operate their own airplanes and their own trucks, but using the rails means an additional set of transactions with railroads. Shipping rates must cover the cost of fuel, locomotives and freight cars, but also the cost of capital and profit for the railroads.
When it’s time to decide rail or truck, the decision depends on different financial considerations rather than the best way to move freight. Since rail is not available with just the expense of locomotives, freight cars, fuel and fuel tax like it is for trucks, decisions favor trucks.
A whole highway, street and bridge construction industry has grown up from America’s system of interest free and pay as we go fuel tax finance for highways but not railroads. Railroads have to resort to risky private funding and fluctuating interest rates.
We can only speculate how much more rail transportation America would have if the rails and roads had equal access to financing, but even more important, if shippers could use the rails like they use the highways.
During the presidential campaign the Republicans pulled out their favorite bogeyman and called Mr. Obama a Socialist. The terms capitalism and socialism have special definitions in American politics. Socialists are bad guys in political campaigns, but socialist projects like the Interstate Highway System get funded anyway. We can also see that capitalism and socialism are not really the issue; it’s the rules and the finance that make the difference.
Wednesday, January 6, 2010
Retail Costs and Manufacturing
The decline of the American Textile industry is well documented. In 1990 there were 928 thousand working in just the apparel industry; by 2008 it was down to 198 thousand. The decline is more than double the jobs lost in the automobile industry.
Most of us see our clothes marked "Made in China" or some far eastern country. In the debate over free trade economists have offered excuses for the made in China label. They said textiles and the cut and sew clothing industry are labor intensive and American labor is too expensive to compete with the Chinese.
News coverage on the global clothing industry often includes a picture of Asian women lined up in long rows at sewing machines suggesting another excuse: low cost needs large scale.
Large firms are common in manufacturing because manufacturing industries typically starts out with many companies that gradually consolidate into a few large scale producers. The automobile industry started out with hundreds of firms at the beginning of the last century. Gradually they combined into fewer, but bigger producers, until only three American companies survive in a small group of global auto companies.
The cut and sew clothing industry was never like the automobile industry, but large firms produced clothing to be sold and shipped to other firms in the wholesale and retail parts of the marketing chain.
Lately though creative retailers are finding small scale clothing production can be cost competitive when it is combined with their own retail operations. Retailers that produce on site in their own space capture the entire marketing margin; that is the sales price above their manufacturing costs.
Producing on site eliminates the wholesaler and has the potential to cut inventory and transportation costs. Clothing sales have seasonal fluctuations with peak sales in late summer and again in December. Staff doing cut and sew in off peak periods can be moved to retail selling in peak sales periods making more intensive use of staff and raising labor productivity and lowering costs.
Shipping charges from the Far East are eliminated with local production. Freight charges from China to Long Beach are only part of the expense to import clothing. There are Long Beach handling charges, warehouse in and out fees, forklift fees, customs entry fees, and customs duties, but the clothing shipment is still in Long Beach. Add the shipping fee from Long Beach to wherever, and when it is all added up shipping charges are not insignificant in the costs for importing clothing.
It is unusual for an industry to transform itself from a few dominate firms to many small firms in competition. It can happen though. For many years IBM dominated the computer industry. Then the microprocessor chip transformed the industry allowing hundreds of new firms to enter the hardware and software industry. The PC revolution created many jobs with firms only a fraction of IBM.
In the combined textile and apparel industries more than a million jobs are gone, but that should not mean it was inevitable as economist’s like to say. What looks inevitable may not be. America needs jobs and new ideas; maybe a smaller scale, fully integrated clothing industry is one place to look.
Most of us see our clothes marked "Made in China" or some far eastern country. In the debate over free trade economists have offered excuses for the made in China label. They said textiles and the cut and sew clothing industry are labor intensive and American labor is too expensive to compete with the Chinese.
News coverage on the global clothing industry often includes a picture of Asian women lined up in long rows at sewing machines suggesting another excuse: low cost needs large scale.
Large firms are common in manufacturing because manufacturing industries typically starts out with many companies that gradually consolidate into a few large scale producers. The automobile industry started out with hundreds of firms at the beginning of the last century. Gradually they combined into fewer, but bigger producers, until only three American companies survive in a small group of global auto companies.
The cut and sew clothing industry was never like the automobile industry, but large firms produced clothing to be sold and shipped to other firms in the wholesale and retail parts of the marketing chain.
Lately though creative retailers are finding small scale clothing production can be cost competitive when it is combined with their own retail operations. Retailers that produce on site in their own space capture the entire marketing margin; that is the sales price above their manufacturing costs.
Producing on site eliminates the wholesaler and has the potential to cut inventory and transportation costs. Clothing sales have seasonal fluctuations with peak sales in late summer and again in December. Staff doing cut and sew in off peak periods can be moved to retail selling in peak sales periods making more intensive use of staff and raising labor productivity and lowering costs.
Shipping charges from the Far East are eliminated with local production. Freight charges from China to Long Beach are only part of the expense to import clothing. There are Long Beach handling charges, warehouse in and out fees, forklift fees, customs entry fees, and customs duties, but the clothing shipment is still in Long Beach. Add the shipping fee from Long Beach to wherever, and when it is all added up shipping charges are not insignificant in the costs for importing clothing.
It is unusual for an industry to transform itself from a few dominate firms to many small firms in competition. It can happen though. For many years IBM dominated the computer industry. Then the microprocessor chip transformed the industry allowing hundreds of new firms to enter the hardware and software industry. The PC revolution created many jobs with firms only a fraction of IBM.
In the combined textile and apparel industries more than a million jobs are gone, but that should not mean it was inevitable as economist’s like to say. What looks inevitable may not be. America needs jobs and new ideas; maybe a smaller scale, fully integrated clothing industry is one place to look.
Tuesday, December 22, 2009
Health Care and Inequality
The debate over health care reform drags on with charges and counter charges. When the groups opposed to change want to throw down the gauntlet they will describe the Democrat’s proposals as a “complete takeover of the health care industry.”
Using the words “complete takeover” makes it sound like the private insurance industry once served people who now get health care provided through the government, or have no health care at all.
Opposition groups define the duty to provide health care as their right in private markets. They want health care to be an option that goes with a job. Otherwise the saga of America’s health care is a government takeover of groups ignored, and groups abandoned by the fee for service private sector.
Health care provided through employment leaves retirees out of health care, which is why those over 66, the Social Security retirement age, have Medicare health coverage. Notice that Medicare maintains the fee for service principles favored by the private sector. That’s because Medicare is financed with a 1.45 percent tax on wages, which fee for service advocates contend is just like an insurance premium.
Medicare is just one of the partial and patchwork solutions to health insurance. Since health care for those younger than 66 assumes employment, the unemployed are left out. Congress responded to the unemployed with legislation known as COBRA that allows the unemployed to buy their group health insurance at group rates, but only for 18 months. The time limit assumes the unemployed will find more work with health insurance.
Since jobs that pay low wages, or jobs that use low skills, do not always include health care the working poor are left out. Congress responded with Medicaid, but with strict limits on income and assets. The limits are so low that many families above the Medicaid limit are without health insurance. Congress responded with legislation known as SCHIP (State children’s health Insurance Program) as a Medicaid supplement to cover children, but not their parents.
Workmen’s compensation, which is really health insurance for injuries on the job, duplicates some of the coverage for private insurance policies but ignores the unemployed since it too requires a job.
If a job does not include health care insurance individual and family policies get mysteriously expensive and unaffordable for millions with wages too low to pay fees and premiums charged.
The patchwork of government health care reflects the limitations imposed by private sector advocates with the political strength to maintain fee for service principles.
To have health insurance for the uninsured it will be necessary to address the inequality of wages and income outside a fee for service system. The wealthy will have to pay higher income taxes to support health care subsidies to have health care reform. Most of the public debate tries to disguise this requirement, but reform that insures the uninsured must have subsidies to make up for low income.
The debate goes on, but the wealthy are resisting. Health care reform remains doubtful, but we will see.
Using the words “complete takeover” makes it sound like the private insurance industry once served people who now get health care provided through the government, or have no health care at all.
Opposition groups define the duty to provide health care as their right in private markets. They want health care to be an option that goes with a job. Otherwise the saga of America’s health care is a government takeover of groups ignored, and groups abandoned by the fee for service private sector.
Health care provided through employment leaves retirees out of health care, which is why those over 66, the Social Security retirement age, have Medicare health coverage. Notice that Medicare maintains the fee for service principles favored by the private sector. That’s because Medicare is financed with a 1.45 percent tax on wages, which fee for service advocates contend is just like an insurance premium.
Medicare is just one of the partial and patchwork solutions to health insurance. Since health care for those younger than 66 assumes employment, the unemployed are left out. Congress responded to the unemployed with legislation known as COBRA that allows the unemployed to buy their group health insurance at group rates, but only for 18 months. The time limit assumes the unemployed will find more work with health insurance.
Since jobs that pay low wages, or jobs that use low skills, do not always include health care the working poor are left out. Congress responded with Medicaid, but with strict limits on income and assets. The limits are so low that many families above the Medicaid limit are without health insurance. Congress responded with legislation known as SCHIP (State children’s health Insurance Program) as a Medicaid supplement to cover children, but not their parents.
Workmen’s compensation, which is really health insurance for injuries on the job, duplicates some of the coverage for private insurance policies but ignores the unemployed since it too requires a job.
If a job does not include health care insurance individual and family policies get mysteriously expensive and unaffordable for millions with wages too low to pay fees and premiums charged.
The patchwork of government health care reflects the limitations imposed by private sector advocates with the political strength to maintain fee for service principles.
To have health insurance for the uninsured it will be necessary to address the inequality of wages and income outside a fee for service system. The wealthy will have to pay higher income taxes to support health care subsidies to have health care reform. Most of the public debate tries to disguise this requirement, but reform that insures the uninsured must have subsidies to make up for low income.
The debate goes on, but the wealthy are resisting. Health care reform remains doubtful, but we will see.
Monday, December 14, 2009
Gambling and Taxes
House democrats announced a plan to raise personal income tax rates up to 5.4 percent on incomes over $350,000. The Obama Administration is supporting a similar plan. The additional tax revenue will be used to pay for health care proposals that extend coverage to 37 million people who are currently without coverage.
In a recent article about the proposal in the Washington Post [Health-Care Plan Would Add Surtax On Wealthy, July 15] there were several objections quoted. One objection caught my eye. It was from Senator Ben Nelson of Nebraska.
He said, "Tax is a four-letter word" with voters. Even families not ranking in the top 1 percent of earners hope they're going to be there someday. So they don't necessarily think it's fair."
He used percent to define the rich, which is significant because America is a democracy. Remember in a democracy 50 percent plus one win elections. Therefore, if Senator Nelson is right then the other 99 percent of American voters, not ranking in the top 1 percent, accept having low taxes for the wealthy because it gives them hope they might become wealthy. The 99 percent would include voters from the 37 million without health care; unless someone thinks the richest 1 percent go without health care.
Notice the word “hope” in his statement. Hope is a word often associated with gambling rather than tax policy, or fairness, or anything else. Americans and politicians talk about what is fair and what is unfair, but when it’s time to vote no one has to consider what is fair. They can vote for any reason they want including the hope they will win a state lottery and pay low taxes on their winnings.
There was a time when the wealthy paid 90 percent of their incremental income as income tax. That was back nearly 50 years ago, but it was also a time when state lotteries and gambling was mostly illegal.
For the millions who lived on a wage 50 years ago, there was little hope of becoming wealthy without years of saving, if saving was possible. Gambling mostly took place in black markets and went untaxed.
For the millions who live on a wage today, there is little hope of becoming wealthy without years of saving, if saving is possible, but the gradual rise of gambling overlaps the decline of the top income tax rate, which dropped to 35 percent back in 2003.
I read the media stories about lobbyists and the influence of money in politics, but the vote has not been abolished in the United States. The richest one percent of Americans cannot have low taxes in a democracy without the acceptance or support of millions.
Senator Nelson’s statement adds anecdotal confirmation to what I have long suspected: gambling has more influence on America’s tax policy than any of us want to admit. Gambling gives hope to the many, but low taxes to the rich. Just ask Senator Nelson.
In a recent article about the proposal in the Washington Post [Health-Care Plan Would Add Surtax On Wealthy, July 15] there were several objections quoted. One objection caught my eye. It was from Senator Ben Nelson of Nebraska.
He said, "Tax is a four-letter word" with voters. Even families not ranking in the top 1 percent of earners hope they're going to be there someday. So they don't necessarily think it's fair."
He used percent to define the rich, which is significant because America is a democracy. Remember in a democracy 50 percent plus one win elections. Therefore, if Senator Nelson is right then the other 99 percent of American voters, not ranking in the top 1 percent, accept having low taxes for the wealthy because it gives them hope they might become wealthy. The 99 percent would include voters from the 37 million without health care; unless someone thinks the richest 1 percent go without health care.
Notice the word “hope” in his statement. Hope is a word often associated with gambling rather than tax policy, or fairness, or anything else. Americans and politicians talk about what is fair and what is unfair, but when it’s time to vote no one has to consider what is fair. They can vote for any reason they want including the hope they will win a state lottery and pay low taxes on their winnings.
There was a time when the wealthy paid 90 percent of their incremental income as income tax. That was back nearly 50 years ago, but it was also a time when state lotteries and gambling was mostly illegal.
For the millions who lived on a wage 50 years ago, there was little hope of becoming wealthy without years of saving, if saving was possible. Gambling mostly took place in black markets and went untaxed.
For the millions who live on a wage today, there is little hope of becoming wealthy without years of saving, if saving is possible, but the gradual rise of gambling overlaps the decline of the top income tax rate, which dropped to 35 percent back in 2003.
I read the media stories about lobbyists and the influence of money in politics, but the vote has not been abolished in the United States. The richest one percent of Americans cannot have low taxes in a democracy without the acceptance or support of millions.
Senator Nelson’s statement adds anecdotal confirmation to what I have long suspected: gambling has more influence on America’s tax policy than any of us want to admit. Gambling gives hope to the many, but low taxes to the rich. Just ask Senator Nelson.
Thursday, December 3, 2009
Telecommuting and Green Jobs
President Obama announced plans to create “green jobs” as part of the Reinvestment and Recovery Act passed earlier this spring. He was quoted as saying "A green, renewable-energy economy isn't some pie-in-the-sky, far-off future. It is now. It is creating jobs now."
The new law provides money and development programs for adopting environmental technologies and helping to expand green projects. Green projects that reduce the use of fossil fuels and expand renewable energy, retrofit buildings, expand mass transit, or longer term initiatives like solar power, wind mill farms and bio-fuels will increase jobs and employment.
Telecommuting could save fossil fuels and reduce green house emissions, which makes it a green initiative but unlike the green projects mentioned above it conflicts with work and jobs. Telecommuting and outsourcing are possible because digital technologies applied in computing and communications let people work anywhere and anytime.
Outsourcing usually has more attention than telecommuting in the popular media, but they are nearly the same and have the same potential to reduce employment. For example, take the customer service representative, which holds 8th place among America’s occupations with 2.1 million total jobs in nearly every sector of the economy, but especially when we need assistance in finance and insurance.
Customer Service Representative gets media attention because America’s corporations outsource some of this work to India and other countries. Many regard outsourcing as the action of ruthless corporate tycoons ripping the heart out of America, but allow me to suggest outsourcing is very much a telecommuting issue.
Over 80 percent of Customer Service Representative jobs are reported for the country’s metropolitan areas, where millions commute by car and donate thousands of hours of their time using up gasoline and wearing out their cars so that others might work. Unlike production workers who must work at factories, Customer Service Representatives work can be anywhere with a computer and a telephone, as the companies themselves have so definitely proved.
Doing computer work from home as telecommuters not only reduces jobs in the automobile industry, car repairs, gasoline, cement, and highway construction, but also for jobs in real estate, office rental, building maintenance, building repair and local government. Quarter-time telecommuting potentially reduces office demand by 25 percent.
The Obama energy initiatives attempt to develop new supplies of energy that will cut down on fossil fuels and green house emissions and create jobs. Politically it should be much easier to do because it avoids sacrifice. Telecommuting confronts America with conflicts and trade offs. Telecommuting can save resources and reduce green house emissions, it will also eliminate jobs.
Business has similar incentives to expand telecommuting as it does outsourcing to other countries. Government has begun to experiment with limited telecommuting. If America gets serious about green house gases it should expect to confront the conflict between energy and jobs. The Obama plan does the easy things first, but it may not be enough. More green initiatives will require us to change the way we think about work and jobs.
The new law provides money and development programs for adopting environmental technologies and helping to expand green projects. Green projects that reduce the use of fossil fuels and expand renewable energy, retrofit buildings, expand mass transit, or longer term initiatives like solar power, wind mill farms and bio-fuels will increase jobs and employment.
Telecommuting could save fossil fuels and reduce green house emissions, which makes it a green initiative but unlike the green projects mentioned above it conflicts with work and jobs. Telecommuting and outsourcing are possible because digital technologies applied in computing and communications let people work anywhere and anytime.
Outsourcing usually has more attention than telecommuting in the popular media, but they are nearly the same and have the same potential to reduce employment. For example, take the customer service representative, which holds 8th place among America’s occupations with 2.1 million total jobs in nearly every sector of the economy, but especially when we need assistance in finance and insurance.
Customer Service Representative gets media attention because America’s corporations outsource some of this work to India and other countries. Many regard outsourcing as the action of ruthless corporate tycoons ripping the heart out of America, but allow me to suggest outsourcing is very much a telecommuting issue.
Over 80 percent of Customer Service Representative jobs are reported for the country’s metropolitan areas, where millions commute by car and donate thousands of hours of their time using up gasoline and wearing out their cars so that others might work. Unlike production workers who must work at factories, Customer Service Representatives work can be anywhere with a computer and a telephone, as the companies themselves have so definitely proved.
Doing computer work from home as telecommuters not only reduces jobs in the automobile industry, car repairs, gasoline, cement, and highway construction, but also for jobs in real estate, office rental, building maintenance, building repair and local government. Quarter-time telecommuting potentially reduces office demand by 25 percent.
The Obama energy initiatives attempt to develop new supplies of energy that will cut down on fossil fuels and green house emissions and create jobs. Politically it should be much easier to do because it avoids sacrifice. Telecommuting confronts America with conflicts and trade offs. Telecommuting can save resources and reduce green house emissions, it will also eliminate jobs.
Business has similar incentives to expand telecommuting as it does outsourcing to other countries. Government has begun to experiment with limited telecommuting. If America gets serious about green house gases it should expect to confront the conflict between energy and jobs. The Obama plan does the easy things first, but it may not be enough. More green initiatives will require us to change the way we think about work and jobs.
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