From Carolina Journal:

RALEIGH — Since as early as January 2011, and perhaps before then, Gov. Bev Perdue’s press office has received access to confidential employment data from the U.S. Bureau of Labor Statistics hours if not days before its scheduled release, quite likely in violation of federal law. The governor’s staff used its early access to massage the monthly employment press release that reported jobs data to the public.

Documents and correspondence obtained by Carolina Journal show that the Division of Employment Security, formerly known as the Employment Security Commission, sent a draft of the press release each month to Perdue’s press office. The governor’s spokesmen typically rewrote the text and added a positive spin, even if the data did not support Perdue’s talking points.

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I warned last week that a recession and higher unemployment were about to hit the U.S. economy. On Tuesday, the Bureau of Economic Analysis cut their estimate of growth in the third quarter ending September from 2.5% to 2%. Then on Wednesday, the Federal Reserve rocked financial markets by forcing America’s 31 largest U.S. banks to “stress test” balance sheets to determine their capability to withstand an 8% drop in the economy; which would cause home prices to plunge by 21%, and unemployment rate to jump to 13%.

I illuminated in my report that U.S. Bureau of Labor Statistics has been under-counting unemployment by at least 2%. For a nation reporting 154.4 million workers; this means the 13.9 million reportedly unemployed should actually be 17 million. Given only 12.8 million were unemployed at the 1933 peak of the Great Depression, when the undercounting and the Fed’s stress test are added the total is 23.2 million unemployed; almost double the Great Depression.

Formerly bullish top bank analyst Dick Bove in an Bloomberg interview commented on the Fed:

“By taking these draconian views of what could happen in the market, if they in fact force the banks to defense themselves against the outlook that they’ve put up, they’ll cause a recession,”

Consistent with my prediction that the booming production of capital goods would fall hard next year after the expiration of the 100% “bonus depreciation” tax credit; the bad news parade picked up steam this week with reports that U.S. durable goods orders fell 0.7 percent last month and initial jobless claims came in higher than Wall Street analyst’s predictions.

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the dismal unemployment figures for August, the possibility of QE 3 and the possibility of another financial crisis.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

Economy Gains No Jobs in August, Rate Holds at 9.1%
BLS: The Employment Situation – August
Stocks Plunge 2% After Dismal Jobs Report
Ghosts of Lehman And a Budding Bank Crisis

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Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

Download Podcast | iTunes | Podcast Feed

On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the worsening job market, the stagnant economy and the effect it may have on Obama’s reelection in 2012.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

May 2011 Employment Statistics from U.S. Bureau of Labor Statistics
Paltry New Job Growth of 54,000 Sends Rate to 9.1%
‘Double-Dip’ in Housing Prices Even Worse Than Expected
US Manufacturing Growth Slowest Since Sept 2009
On the Maddeningly Inexact Relationship Between Unemployment and Re-Election
Boneheaded Stimulus Never Works

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In 2006, the last full year in which the U.S. federal minimum wage was a constant value throughout the whole year, at least before 2010, approximately 6,595,383 individuals in the United States earned $7.25 per hour or less.

For 2010, the first full year in which the U.S. federal minimum wage was a constant value through the year since 2006, the U.S. Bureau of Labor Statistics estimates that an average of just 4,361,000 individuals in the United States earned the same equivalent of the current prevailing federal minimum wage of $7.25 or less throughout the year.

In terms of jobs lost, that means that 2,234,383 of the jobs lost in the U.S. economy since 2006 have been jobs that were directly impacted by the series of minimum wage increases that were mandated by the federal government in 2007, 2008 and 2009.

Interestingly, the average number of employed members of the civilian labor force in 2006 was 144,427,000. In 2010, the average number of employed members of the civilian labor force in the U.S. was 5,363,000 less, standing at 139,064,000.

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The January employment report was a complete snow job. Abominable winter blizzards across the country caused 886,000 workers to report “not at work due to bad weather,” according to the Bureau of Labor Statistics. This is 600,000 more than the normal 300,000 not at work for the average January of the past decade.

So the bad weather has distorted the numbers. The actual 36,000 increase in nonfarm payrolls and the 50,000 gain in private payrolls really don’t have a snowball’s chance at being accurate. The 1 million people in January who wanted a job but didn’t look for one because of “other” reasons hints again at the bad-weather distortion. So does the 4.9 million jump in the part-time workforce.

As for the 9 percent unemployment rate, it’s not likely to last as more people are recorded reentering the labor force in the months ahead. The household employment survey (on which the unemployment rate is based) increased 117,000 in January, following a near 300,000 gain in December.

On the plus side (if anything can be believed in these numbers), average hourly earnings increased by four-tenths of 1 percent — a much bigger gain than in recent months. Over the past year, wages are rising 1.9 percent.

But here’s a key point: Manufacturing jobs in January rose by nearly 50,000. That’s consistent with the blowout ISM manufacturing report for January published a few days ago. Manufacturing has been the biggest surprise in the recovery. Additionally, the ISM non-manufacturing services report was also gangbusters for January.

These reports are more accurate and more significant than today’s jobs calculation. And if you piece them together with record-breaking profits, which are the mother’s milk for stocks, business, and the whole economy, it’s hard not to conclude that the pace of recovery is actually picking up steam — despite the lackluster jobs performance.

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THEN (April 4, 2010):
Administration officials say growing labor force is “a great sign”

Behind the high unemployment rate, “there’s just been a tremendous increase in the labor force,” Christina Romer, chairman of the president’s Council of Economic Advisers, said on NBC’s ‘Meet the Press.’  “Over the last three months, we’ve added more than a million people to the labor force. And that’s actually, that’s a great sign,” Romer added. “That’s a sign that people that might have been discouraged dropped out because of the terrible recession, have started to have some hope again and are looking for work again.”

NOW (February 4, 2011):
What will the Administration say now that the labor force is shrinking?

Facts reveal sharp declines in the labor force since the March 2010 data Romer described above, with especially steep drops in the last two months.  According to the Bureau of Labor Statistics, the labor force has shrunk by 709,000 since March 2010.  Given this reality, will the Administration now say this trend is a “not great sign” indicating people have “lost hope again”?

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Private saving and investment are the heart and soul of the dynamic market process. Together they provide and allocate the resources used to augment the economy’s productive capacity, generate sustained long-run economic growth, and thereby make possible a rising level of living. Economic crises interrupt this process by discouraging investors and causing them to consume their resources or to employ them in relatively safe, low-yielding ways. Absent entrepreneurs willing to take the great risks that characterize investments in great technological and organizational innovations, the growth process fades into economic stagnation or even decline.

The present recession starkly displays this characteristic crisis-related abatement of the economy’s investment process. Indeed, the decline of private investment during recent years has been much greater than most observers realize. Consider the following data, taken or derived from the most recently revised National Economic Accounts prepared by the Commerce Department’s Bureau of Economic Analysis (Tables 1.1.5, 1.1.6, and 5.2.6).

In 2006, gross private domestic investment reached its most recent peak, at $2.33 trillion (in constant 2005 dollars), or 17.4 percent of GDP. After remaining almost at this level in 2007, this measure of investment fell substantially during each of the next two years, reaching $1.59 trillion, or 11.3 percent of GDP, in 2009. This decline is severe enough, but it does not give us all the information we need to gauge the extent of the investment bust.

The greater part of gross investment consists of what the statisticians call the capital consumption allowance, an estimate of the amount of money that must be spent simply to offset wear and tear and obsolescence of the existing capital stock. In a country such as the United States, with an enormous fixed capital stock built up over the centuries, a great amount of funds must be allocated simply to maintain that stock. In recent years, the private capital consumption allowance has ranged from $1.29 trillion in 2005 to $1.46 trillion (in constant 2005 dollars) in 2009. Thus, even in the boom year 2006, about 60 percent of gross private domestic investment was required merely to maintain the economy’s productive capacity, leaving just 40 percent, or $889 billion in net private domestic investment, to augment that capacity.

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From Glenn Reynolds’ latest column in today’s Washington Examiner:

Right now, people are still borrowing heavily to pay the steadily increasing tuitions levied by higher education. But that borrowing is based on the expectation that students will earn enough to pay off their loans with a portion of the extra income their educations generate. Once people doubt that, the bubble will burst.

So my advice to students faced with choosing colleges (and graduate schools, and law schools) this coming year is simple: Don’t go to colleges or schools that will require you to borrow a lot of money to attend. There’s a good chance you’ll find yourself deep in debt to no purpose. And maybe you should rethink college entirely.

Many people with college educations are already jumping the tracks to become skilled manual laborers: plumbers, electricians, and the like. And the Bureau of Labor Statistics predicts that seven of the ten fastest-growing jobs in the next decade will be based on on-the-job training rather than higher education. (And they’ll be hands-on jobs hard to outsource to foreigners). If this is right, a bursting of the bubble is growing likelier.

What about higher education folks? What should they (er, we?) do? Well, once again, what can’t go on forever, won’t.

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The Obama Administration is putting the best face on the Bureau of Labor Statistics’ (BLS) recent March 2010 jobless numbers report, touting the steady nationwide jobless number of 9.7%.  But for minorities, the news is bad and getting worse.

The really bad news is buried in the middle of the 38 page report.  The BLS data reveals an alarming and growing divergence between the number of white and the number of minorities that are unemployed.  Worse yet, it is clear that minorities, especially African Americans, are falling further behind.  If unchecked, the long term implications of that imbalance are nightmarish for the nation.

Larry Summers and others in the Administration have not yet shown much interest in the appalling unemployment rates for minorities and, instead, exude childlike enthusiasm at the nation’s overall jobless rate that held steady for the 2^nd consecutive month.

While the unemployment for white Americans averaged 9.3%, African Americans averaged 16.6%, just a little less than double the rate of white unemployment.   Hispanic Americans reported 13.3% unemployment, while recent, young veterans are averaging 14.7%.  Black men, over 20 years old, are showing 20.2% unemployment and teenaged, African Americans, ages 16-19, of both sexes, show a mind-boggling 39.3% unemployed.  Hispanic teens also report a staggering 30.3% unemployment.  The long-term repercussions of these unemployment numbers are troubling, yet the Administration is curiously silent.

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An unlikely power figure has emerged in the Obama Administration. He’s not a great orator, nor trendy, nor well-known.  But, if the ability to influence national leaders, shape a national agenda and influence public opinion are indicators, then, Peter Orszag, the Director of the Office of Management and Budget (OMB), is, arguably, the most powerful and,  potentially, most dangerous, man in Washington, DC.

As Director of OMB, Peter Orszag is the arbiter of all financial information shared with Congress.  A series of little-known, OMB “circulars”, such as A-11, have established the rules, and repercussions if violated, by which Executive branch agencies communicate with Congress, especially regarding budgets, funding and agency priorities.

OMB, the President’s gatekeeper for budget matters, executes a complicated juggling act, balancing Obama Administration priorities and budgetary spin, against agency needs.   Frequently, to secure a critical vote, an elected member may be rewarded with a pork project for the folks back home, and, often, it’s the OMB director that has to figure out how to avoid the appearance of a bald-faced bribe, while manipulating CBO scoring on infrastructure projects.  Orszag, as the former head of CBO, understands exactly how this game is played.  Thus, most of the project and budget information that Congress reviews have been shaped by OMB’s preferences.

Peter Orszag controls much of the content and quantity of the data flow to Congress, to the President and to American citizens.  Orszag has oversight over most of the federal government’s critical data reporting structures.  Apart from the ineffective and error-prone Stimulus reporting sites (data.gov, recovery.gov),, OMB oversees federal contract opportunities and federal grants.

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My late father had a phrase to describe the arrogant intellectuals unacquainted with real life who foist their insane ideas on the “unenlightened” rest of us: The phrase was “educated idiots.”

Sadly, today his words ring ever truer. To witless:

(In what is rarely a good sign) a New York Times blog reports the Harvard-based Belfer Center for Science and International Affairs has determined fuel prices must rise significantly to reduce carbon dioxide emissions.  Thus, in the name of discredited Leftist psuedo-science, your gas prices could reach $7 a gallon.

In this tepid spat of Think Tanks vs. Gas Tanks, we glean two things: these researchers have recession-proof jobs; and they are unconcerned you don’t.

How else to explain these researchers’ cavalier demand that your shrinking family budget must get smaller and your job must become more tenuous all so Goddess Gaia can keep her cool?

In our real world, the United States Bureau of Labor Statistics’ 2009 annual summary reports that unemployment rates rose last year in all regions, divisions, and states.  And nowhere is the pain of this recessed economy deeper than in my Michigan, which had the largest increase in unemployment percentage from last year (5.3%); and has held the nation’s highest unemployment rate since this recession began (at times exceeding 15%).

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Based on this data , I am thinking that the good life starts the day one gets a job as an employee of your local Labor Union and in fact those overpaid financial sector people might want to change jobs!

This table, based on data from the Bureau of Labor Statistics, shows  the changes in the wages in three sectors: the private sector, the Labor Union industry and the financial industry. According to the BLS, the Labor Union industry “comprises establishments primarily engaged in promoting the interests of organized labor and union employees.” That’s basically all the guys who work in a Union.  The financial industry is “The Finance and Insurance sector comprises establishments primarily engaged in financial transactions (transactions involving the creation, liquidation, or change in ownership of financial assets) and/or in facilitating financial transactions.” So the Goldman Sacks, AIG and others.

As one can see clearly here since the beginning of the recession, private sector employees have seen their wages grown by 3.3 percent (roughly the rate of inflation.) The financial sector employees have been slightly better off with wages growing at a 4.1 percent rate.

Meanwhile, wages in the labor unions have continued to increase. And not by 5 percent or 7 percent but by over 24.9 percent!!!

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Okay, I will admit that I am obsessed with this one particular truth:  The stimulus bill and all the stops that the federal government pulled to save the economy and create jobs didn’t not help the private sector employees. On the other hand, it did show support for its own employees.

Encouraged by Reason Magazine’s founder Manny Klausner, I made this chart this morning based on Bureau of Labor Statistics data that shows the change in employment in the private and the public sectors during the last two years.

Warning: the number of public employees is on the right hand-side of the chart and the private employees are on the left.

Warning 2: This chart is not claiming that public employment was ever higher than private employment.

However, it is showing without a doubt that during the last two year the number of public employees has increased from 22.3 million in January 2008 to 22.4 million in January 2010, after peaking at 22.6 million in July 2009.  Not that impressive you will say. Well, excuse me but it certainly beats being a private employee during that same period of time. The number of private jobs decreased from 115.5 million in January 2008 to 107 million. That’s a lose of 8.7 million jobs in the private sector while the public sector gained almost 100,000 jobs.

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Last week, the Huffington Post (here) was all over this  new study showing that low-income workers got hit more severely during the recession than high-income workers (low-income workers suffer an over 30 percent unemployment rate, workers making about $138,000, only a 3.2 percent.)

The data in this study, which turned out to be quite misleading, certainly makes for nice populist headlines. But it is hiding the true debate that we should be having. And that’s not that low-skill workers are vulnerable to recession (duh) but that public-sector employees still have jobs and private employees don’t.

Look at the data:

In this chart, I compare seasonally adjusted unemployment rates across segments of the economy, dividing these segments using the super-categories designated by the Bureau of Labor Statistics. The chart compares the unemployment rates in January of 2009 (blue) with the unemployment rates in these same sectors a year later (yellow). (FYI, the difference would be even more dramatic if I had used not seasonally adjusted data)

In both years, the unemployment rate within the government has been small relative to the level of unemployment within the entire economy, and particularly so relative to the private sector.   In the course of a year, government employment has decreased by 296,000 jobs to 4.3% unemployment; during the same period, employment in the private, non-agricultural, sector has decreased by 2.3 million jobs to 11.1%. (And if you look at not seasonally adjusted unemployment data, the lose of private jobs reached 3.1 million and the lose of public jobs is roughly 70,000. That’s quite a gap.)

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Both the House and Senate versions of the healthcare reform bill would require employers above a certain size to provide health insurance for their workers or face some sort of penalty. The House bill that passed last month would require employers to pay an 8% additional payroll tax for not insuring their workers. The Senate bill now under consideration is much less punitive, requiring employers who do not provide insurance to pay a $750 annual fee per full-time worker, but only if one or more of their employees receive a government subsidy in the insurance exchange.

Quite a difference between the two bills. By way of example, take an employee earning $50,000 per year. Under the House bill, an employer who did not provide insurance would be required to pay an additional tax of $4,000 to the federal government. Compared to only $750 under the Senate bill – a difference of more than 500%.

Now consider whether it would make more sense financially for the employer to provide insurance or pay the penalty. In our example above, under the House bill it would probably be close to a break-even if the employer is providing coverage only for the employee. According to the most recent data from the Bureau of Labor Statistics (BLS), the average monthly insurance premium for private industry employers across all worker categories was $317.63. Or just over $3800 annualized (compared to the $4,000 penalty). However, it would be quite a bit more expensive if the employer was providing family coverage (BLS data: $737.68/mo – $8850/yr).

Obviously under the Senate bill it would be far less expensive for the employer to just pay the $750 penalty rather than provide the insurance.

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Federal Communications Commission (FCC) Chairman Julius Genachowski is facing fresh opposition in his push for controversial “net neutrality” rules, it emerged Monday.

The Songwriters Guild of America (SGA) announced that its President, Rick Carnes, and well-known songwriters Phil Galdston and Gordon Chambers, had recently testified before the New York City Council in opposition to a resolution expressing support for net neutrality.  The trio, each prominent figures within the arts community, are concerned that net neutrality rules would do little combat online music piracy.

According to an SGA release, “Net Neutrality rules… would restrain Internet service providers from fighting illegal file sharing on their networks.”  Furthermore, according to the release, “70% of the volume of traffic on broadband networks is Peer to Peer (P2P) file sharing, generated by 5% of network users. An astonishing 90% of such traffic represents stealing of copyrighted works.”  The SGA blames such file sharing for noteworthy declines in the songwriting industry, citing Bureau of Labor Statistics data as well as anecdotal evidence obtained by Carnes himself.  According to Carnes, “Every major music publisher tells me they have laid off at least half, and sometimes all, of their songwriters.”

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We should be happy. The Bureau of Labor Statistics announced a 3.5 percent growth in this year 3rd quarter. Yet, most of us aren’t. At least I know I am not. Why? Because I have no faith in the numbers.

First, the Gross Domestic Product (GDP) numbers include government spending. So, when the government pumps thousands of billions of dollars into the economy it will look as if GDP is growing.

What’s more, the way the GDP accounts for government spending is totally biased: It assumes that if the government is spending $200,000 on a contractor to repave a road in the middle of nowhere that it will create $200,000 of genuine economic value.  By contrast, GDP measures are tougher on private-sector spending. As my George Mason university colleague Garett Jones explained to me recently “So if Exxon Mobil pays an engineer $200,000 per year, that only shows up in GDP if the engineer finds an extra $200,000 of oil to sell, or builds a new machine that sells for $200,000, something like that.  So our GDP measures of “government spending” are awful–and when the government is in a race to spend money as quickly as possible, these measures are going to be even worse than usual.”

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