Category Archives: The Great Recession

Smarter Than Our Leaders

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Back during the 2008 presidential campaign, John McCain was right about one thing, anyway; despite all of governments foul-ups the fundamentals of the American economy are basically strong.

We have ideas, and entrepreneurial energy, I don’t labor force that (2008 and 2012 elections not withstanding) we’re pretty smart and capable, and one of the worlds larger, wealthier consumer markets. Those, among other things, give the American economy’s a degree of resilience that is going to be hard to extinguish, even after 14 years of flagrant overspending and six years of crypto-socialism.

That’s the economy. Not the governments massive piling up of debt. That’s a whole ‘nother thing.

Why does it matter? Because the fact that the American private market is bigger, stronger, and smarter than its government – for now – may be the only thing that saved it from complete collapse six years ago.

Rosy

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As the media relentlessly chants about “economic recovery”, at least one article (from the AP) notes that those “new jobs” aren’t really doing much for the lower-middle-class – people who may be doing OK on the surface, but are only a missed paycheck or two away from depending on someone else.

And it’s worth noting that every previous sharp recession – like 1982 – had a correspondingly sharp rebound; within two years of the bottom of that recession, the economy was adding 500,000 jobs a month.

The 2007 recession was, along with the Great Depression, part of a tiny, exclusive club; sharp corrections that didn’t bounce back fast – as in, almost like an inverted bell curve.  And what did they have in common?

Govenment efforts to “help”.

Hunky Dory

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SCENE:  Mitch BERG is driving down the road, when he notices Avery LIBRELLE by the side of the road.  LIBRELLE is standing by the trunk of a Chevy Volt; on the trunk is perched a miniature windmill, attached by cables to a terminal under the Volt’s open hood.   LIBRELLE is blowing on the windmill. 

BERG sighs, pulls over.  He gets out of the car, notes that there is no wind – it’s a flat calm – and walks up to LIBRELLE.

BERG:  Hey, what’s…

LIBRELLE:  Hah, Merg!  The economy is doing fantastic!  You were wrong!

BERG:  Um, what now? 

LIBRELLE:  Unemployment is under 6%

BERG:  That’s that’s because so many people have left the workforce, as we see on this chart here…:

 

…which is the Bureau of Labor Statistics’ Labor Force Participation Rate, representing the percentage of the labor force – able-bodied people between 16 and 70 – that are actually working.  As you can see, since Obama’s election, that number has plummeted from the mid-sixties to under 63%.  .

And six percent of them are unemployed, which means that the actual share of the population that’s working is more like this:

That’s the labor force participation rate minus the unemployed.  Now, if there were an economic recovery going on, that number would be ticking back up. 

LIBRELLE:  Hah, Hah, Hah, Merg!  You’ve been watching too much Faux News!   (Goes back to blowing on the windmill, spinning the blades madly)

BERG: That’s pronounced “foh”, not “fowks”.

LIBRELLE:  Standard pronunciation is a microaggression of the patriarchy!  Anyway – you lie.  The labor force participation rate is dropping because Baby Boomers are retiring!  Hah!

BERG:  That’s a great theory – because statistics show that older people are working less, and that hours and productivity are ticking up among people in their prime working years.

LIBRELLE:  Hah!  Got that right! (LIBRELLE blows on the windmill some more)

BERG:  Except that both of those statements are untrue.  Neither is actually the case. 

Older workers are the only group of workers who are actually increasing their share of the workforce:

And the “inactivity rate” of men between the ages of 25 and 54 – the prime income-earning years – is double what it was during the Reagan Administration…

…and a good third above what it was under Dubya.  And since the “end” of the recession, it’s just kept climbing. 

LIBRELLE:  So you admit you lied to me?

BERG:  Huh?

LIBRELLE: By saying that the stats said one thing, and then showing that they said another!

BERG:  Uh…right.

LIBRELLE:  (Resumes blowing on windmill)

BERG:  What are you doing?

LIBRELLE:  My car ran out of battery.  I’m trying to give it a sustainable jump start. 

BERG:  With a…

LIBRELLE:  With a Personal Wind Generator. 

BERG:   Er…where…

LIBRELLE:  I got it at Sharpened Image.  It was $499. 

BERG:  Don’t you mean “Sharper Image?” 

LIBRELLE:  No. Sharpened.  It’s from Nigeria. 

BERG:  Huh.  Have a great week.

LIBRELLE continues blowing on windmill as BERG walks to his car. 

And SCENE. 

All That DFL Happy Talk About The Economy…

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…is baked wind.

 Minnesota lost 4,200 jobs in July, and is adding them at an anemic pace year-to-date:

State officials said Thursday that Minnesota employers shed a seasonally adjusted 4,200 jobs in July. Meanwhile, they also revised June’s numbers downward by 3,600 jobs.

That means that, year-to-date, Minnesota has added a meager 2,900 jobs, or about 400 per month, on an adjusted basis.

During July, the education and health services sector lost 5,300 jobs. Information shed 1,000; construction, 700; financial activities, 200; and government, 100.

The sectors that added jobs: trade, transportation, and utilities (up 1,600); manufacturing (700); leisure and hospitality (600); and other services (200). Logging and mining, and professional and business services held steady.

Look for the Alliance for a Better Minnesota’s lie machine to fabricate a lot of phony economic happytalk in the next ten weeks; as we discussed earlier, they’re off to a running start.

No – a lot.

Unexpected

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The “Obama Recovery” still isn’t. 

The U.S. economy shrank at an annual rate of 2.9 percent during the first three months of 2014, government bean counters announced this morning. That matches the worst non-recession contraction of the U.S. economy in over 40 years.

Perhaps, taking a cue from minimum wage hike laws, the Administration could issue a decree for everyone to build, spend and borrow more?
 

This Is Your Obama Economy, Part MMMCCXVLIII

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A report from the center-left Brookings Institution shows that not only is busines dynamism – the pace of new business openings and old business closings – the slowest it’s been, but during the Obama “Recovery” the pace of closings has far outrun the pace of new business creation, for the first time in post-Great-Depression history:


Says Brookings:

Research has firmly established that this dynamic process is vital to productivity and sustained economic growth. Entrepreneurs play a critical role in this process, and in net job creation.But recent research shows that dynamism is slowing down. Business churning and new firm formations have been on a persistent decline during the last few decades, and the pace of net job creation has been subdued. This decline has been documented across a broad range of sectors in the U.S. economy, even in high-tech. …

While the reasons explaining this decline are still unknown, if it persists, it implies a continuation of slow growth for the indefinite future, unless for equally unknown reasons or by virtue of entrepreneurship enhancing policies (such as liberalized entry of high-skilled immigrants), these trends are reversed.

Why has America become less entrepreneurial? 

I’m going to suggest it’s two things; the constant accretion of new regulations atop old regulations, which continually make new businesses harder and harder to launch, and a culture – especially a school system – that is slowly leaching the desire independence out of the citizenry.

(Via Ed)

Deja No

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If you weren’t around – at least in a cognitive way – in 1984, then you have no frame of reference.  You’ve only been through so many downturns, and so many recoveries.

There’s been one traditional rule of thumb; the harsher the downturn, the more dramatic the recovery.

There’ve been two exceptions; the Great Depression (the recovery from which didn’t actually end until well after the Second World War; putting everyone to work on war-related production, or drafting them into the service, wasn’t a “economic recovery”, it was the mother of all temp job programs) and the current one.

How much different is the current one?

If you were in the workforce, or old enough to think about what “the workforce” was, between 1976 and 1982, you don’t need a reminder about how terribly slow the economy was; between Stagflation, the Fuel Crisis and the Carter Malaise, it was wretched time.  And when Reagan (and Fed chief Paul Volker) tightened the money supply to squeeze out inflation, things got ugly.  1981-1982 were awful times.

And yet by 1984, the economic blender had switched to puree, and Ronald Reagan coasted to the most lopsided presidential triumph in history.

If that’s what you remember – you’re right.  Job growth after the 1982 recession was a virtual mirror image of the “growth” under The Lightworker.

As John McCain said in 2008 (to Democrat derision), the fundamentals of the US economy are strong; lots of smart, hard-working people with ideas big and small to generate wealth equals an economy that, left to its own devices, can weather the cycle.

But the political system (both parties, although mostly the Democrats) have not left the economy to its own devices.

And that’s the problem.

Chanting Points Memo: “It’s The Retirees, Stupid!”

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Every month for the past couple of years, I’ve been pointing out the nearly constant decline in the Labor Force participation numbers.

With unemployment taken out of the participation numbers, the actual share of people actually working in the economy today is as low as it’s been since they’ve been tracking the numbers.

The left has a brisk retort; “People are retiring!”   Supposedly, enough baby boomers are leaving the workforce to cause the participation rate to drop.

As if that’s good news.  Someone has to be working to pay into Social Security to pay for all those aging ex-hippies, after all!  Having historically low labor force participation rates means more debt incurred to pay for statutory entitlements that we just can’t control.

So even if that were true – the slide in labor force participation is entirely due to baby boomer retirements – then that’s still bad news.

But it’s not true.

According to Mercatus, oldsters are faring much better in the workforce than younger workers.

No - much better:

Retirees aren’t retiring – and youngsters aren’t working.

At this rate, we’re going to have a nation of 50+ workers paying both for their parents and their kids.

 

The American Chilton © Manual

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It was almost 20 years ago that Newt Gingrich earned his claim to fame, engineering one of the most radical turnarounds in the history of American politics; flipping Congress to the GOP for the first time since the Great Depression. 

And he did it using one of the most radical techniques in the history of politics; telling the people what his movement stood for, and what it’d stand by. 

It worked; the 1994 elections were one of the most sweeping turnarounds in American political history.  The ’94 election did for Congress what Reagan did for the White House; put conservatism on the table. 

It didn’t stick, of course; the Gingrich Congress gave way to the Frist Congress.  The Class of 94 slowly went Beltway Native.  But noting that merely proves one of the most important points of political activism; it’s a marathon, not a sprint.  Getting people elected is only the first half of the problem; keeping them honest is just as important.

But that’s history.  I’m here to talk about the present.

A New American Repair Manual:  Of course, the name “Contract with America” had that patina of legalism that smacks of the same thing that gave us the problem in the first place.  The System.

I think conservatives need to revisit the notion of putting down a hard set of…not “campaign” promises, but lines in the sand, things that separate them from the Democrat party for all to see.  Something that everyone, from a movement conservative to a college kid looking for a job to a working, not-overly-political family with a cancelled insurance policy and a skyrocketing premium can look at, compare with “Hope and Change!”, and find some red meat to support. 

It’s not a “Contract”.  It’s a repair manual.  Sort of like a Chilton © manual for the 2014 United State of America. 

Here’s my suggestion for that repair guide:

It’s Your Money – Not Government’s!:  Return all personal, inheritance and capital gains taxes to 2004 levels, immediately.  You earned it.  You use it. 

The Government Diet:  Freeze spending at 2010 levels.  I know, that’s already too high – but Americans lack the stomach for radical change.  And economic growth will make that sustainable, eventually.  Especially if we…:

Rebuild the Economy:  Three points to this one:

  • Roll back Obama’s regulatory orgy – Especially those related to energy – because we’re gonna…
  • Drill, baby!  Drill!  – when Obama took office, gas was under $2 a gallon; with North America awash in oil, coal and natural gas, there’s no reason gas can’t be cheaper than it was.  Turning into a net energy exporter for the first time in over 40 years will be a huge boost to the economy – and start a domino effect that will, along with the regulatory rollback. 
  • Slash corporate taxes and push R&D tax credits.  The cuts will be more than repaid in revenue from new business and paying jobs. 

Focus On The Real Enemies:  On the one hand, stop warrantless domestic spying.  Immediately.  Completely.  The NSA and CIA exist for a reason – to protect us from foreign enemies.  Focus on them.  Put some teeth into the FISA warrant laws.  Stop the NSA, CIA, DHS and IRS from spying on, oppressing, watch-listing and persecuting Americans going about their daily business.  Reinstate the Fourth Amendment in all its prickly glory. 

And in the process, move from being the world’s policeman to the world’s ninja.  Stay out of foreign affairs that don’t affect us – and when we do get involved, do it judiciously, economically, and with an aim toward accomlishing a defined mission and getting out.  This is one area where the French have a lot to teach us.  Like the Frogs, we should become the porcupine – a porcupine with a baseball bat and a couple of rattlesnakes in the closet.  Remain magnificently above the world’s niggling jabbering squabbles, unless it’s something very important that’s utterly immutable to diplomacy.  Then hit it so hard they spend the next hundred years wondering what hit them.  Go home.  Let them pick up their pieces and reflect on the lesson they just learned.

Path To Dignity:  Focus federal welfare efforts on getting people to work.  Transition federal welfare spending to grants to state that use methods that show success at getting the poor back to work. 

Go Back To Your Own Doctor:  Repeal Obamacare.  Replace it with one of the Republican plans that leverage Medicaid while preserving the private market.  Abolish laws forbidding purchasing insurance across state lines.  We’ve invested half a trillion dollars in a failed website, and that’s only the beginning of the problems.  Cut it loose.  Abandon it.  Stop throwing good money after bad – and worse, screwing up the lives of average Americans. 

It’s not a contract.  It’s a repair manual.  Because that’s what this country needs after six years of our experiment of letting a bunch of giggly fratboys run the country; the country is like a frat house that’s going to need a summer’s worth of repairs to be ready for the fall semester.

So let’s start repairing things. 

And here, locally? :  Most of the same points apply here in Minnesota.  More on that tomorrow or early next week.

Blight of Day

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Is Detroit’s new-found cause célèbre ignoring the past to cloud the future?

George Clooney had the Sudan.  Bono has Africa.  Anthony Bourdain – and much of the American media - apparently has Detroit.

Michigan’s So Not Grand Central Station: built in 1912 and on the national registry of historic places. It was closed in 1988 and is one of Detroit’s estimated 78,000 abandoned buildings.

In recent months, the city of Detroit has witnessed two narratives arise in Phoenix-like fashion from the economic ashes of the city, often in conjecture with themselves.  One is the purported economic revitalization of the city that gave birth to Motown and the American automotive industry.  It is a narrative fostered by Quicken Loans founder (and Cleveland Cavs owners) Dan Gilbert who, among others, has put millions into Detroit to try and restore its grandeur.  The other narrative, the so-called “ruin porn” seen in picture form below, depicts Detroit as a third-world ghetto.  A Somalia on the St. Clair River.

The former delights the denizens of Detroit with hopes of a better future.  The latter rankles them.  Gilbert himself expressed outrage when 60 Minutes balance their report on the Motor City between Gilbert’s altruism and the destruction of the out-lying portions of the city, comparing it to Dresden after the Allied bombing of World War II.  Gilbert tweeted a defiant message, stating “a city’s soul that will not die was the story & they missed it.”  But even a sympathetic, blue-collar soul as Bourdain, whose CNN show Parts Unknown highlighted the city last night, saw the need to balance Detroit’s attempts to pick itself up off the ground with the stark realities of a city undone.

The Fisher Body Plant: once part of the GM empire

Both narratives ignore the Chrysler in the room – how Detroit got to where it is today.

If the “ruin porn” industry renders pity without judgement, the acts of Dan Gilbert and others, as well-intended as they obviously are, seek a future for Detroit without acknowledging its past or present.  Not once in 60 Minutes‘ coverage did the story’s telejournalism deal with the political causes for Detroit’s decay - a corrupt, one-party institution burrowed like a tick into City Hall.  Equally, if differently, ignorant are the views of Gilbert et al who believe that once their plans to remove all of Detroit’s blight (78,000 buildings), capital will come easily rushing back into the city:

Gilbert is no fan of urban farming, though. When he envisions land cleared of  blight, he sees developers rushing in to build anew…

“When that blight is gone, maybe we don’t have to be talking about shrinking cities because it will be such a rush of people who want to get into low-value housing — when all the utilities are there and the land is pretty much close to free— not exactly free, but close to it — and all the utilities are there, it becomes very cheap for a builder/developer to develop a residential unit, and they are going to develop them and develop them in mass as soon as we get the structures down and maybe we don’t have to worry about raising peas or corn or whatever it is you do in the farm.”

The Highland Park Police Station: even Detroit’s police stations no longer want anything to do with the city

And what will cause developers (yet alone individuals or businesses) to return to a city with the highest property tax rate in the country?  What will encourage retail industries when Michigan’s sales tax is 6% on top of that?  Detroit’s backers can honestly claim that the city ranks no where near the top of the tax chain (Detroit ranks 92nd nationally; Minneapolis is 52nd by comparison).  But the tax climate is far from ideal, especially the dubbed ”most dangerous city in America” with a murder rate 10-times the national average.  Throw in a 58-minute response time for police, to attract businesses back, Detroit may literally need the fictional hero RoboCop (to whom a statue is being built - seriously).

There isn’t much evidence that Detroit is about to change its ways.

The Merrill Fountain at Palmer Park: has sat empty for 50 years since being moved from the Opera House. Vandals have stolen much of it.

The Merrill Fountain at Palmer Park: has sat empty for 50 years since being moved from the Opera House. Vandals have stolen much of it.

Since Governor Rick Snyder’s decision to appoint emergency manager Kevyn Orr last spring, Detroit’s journey to bankruptcy has been managed with minimal (some would say no) input from City Hall.  As the case has headed to court, where Orr has testified about Detroit’s long-term debts of $18 billion, city officials have fought the measure almost every step of the way.  The election of Mike Duggan as mayor, the former head of the Detroit Medical Center, has been advertised as the promotion of a turnaround artist.  But while Duggan had success revitalizing the city’s Medical Center, Duggan also ran on opposing Orr’s decisions and comes as a political protégé of former Wayne County Executive Edward McNamara – an official who backed the cartoonishly corrupt Kwame Kilpatrick and had FBI agents and state police raid his own office in November 2002, over alleged corruption in airport contracts and campaign fundraising.  Meet the new boss.

The American Hotel: built in 1926, the hotel is 11 stories high with over 300 rooms. It has remained vacant since the early 90′s.

Oh, there have been the requisite platitudes.  Duggan and Orr have broken bread in what was described as a “very good first meeting.”  And Duggan has said all the right things that a reformer would state, such as being “a huge believer in lean processing. If you are not excellent at making systems work, you cannot survive…”

But the inertia of the status quo has been apparent even after only one week from the election.  The Michigan House Appropriations Committee ranking Democrat Rep. Fred Durhal, Jr. is angry that Duggan hasn’t called him yet.  Metro Detroit AFL-CIO President Chris Michalakis essentially threw down a polite ultimatum that Duggan must “honor” his commitment to working families, while suggesting the labor doesn’t trust the new mayor.  Duggan claims he just wants a seat at the table as Detroit’s debts are solved, and if Synder and Orr are smart, they’ll allow it.

Wilbur Wright High School: closed in 2005, this building actually is among the few on this list that has been demolished. 10,000 buildings have been torn down in Detroit since 2010.

The decision to abrogate Detroit’s city government in the bankruptcy process may have been politically necessary (Detroit certainly hasn’t come to grips with its position despite many, many, many opportunities), but doing so has allowed Snyder and Orr to play the villain while the usual suspects who caused this economic disaster play the victim.  However, it’s also allowed Snyder to take all the credit too.  67% of Michigan voters approved the move back in March (including 41% of Detroit), and the decision has given Snyder a welcome bump in his approval rating.  That’s a short term political fix to a long-term structural problem.

Mike Duggan may be a product of the system that failed Detroit, but he’s viewed warily by both it.  Orr’s contract expires in the fall of 2014; Duggan and the City Council can vote whether or not to renew it – almost literally the only voice they have in the process.  If that’s the first time Duggan has to impact the process, he’ll have likely caved by then to labor, vote to end Orr’s tenure and – more importantly – work to undo reforms set in place.  Should Rick Snyder not return in 2015, an opportunity to address Detroit’s deeper fundamental problems will have passed and a new administration will slap a band-aid bailout on the city, and hope more journalists write about Dan Gilbert than urban hunters who live off of raccoon to supplement their meals.

Dead Skunk Plop

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Joe Doakes from Como Park emails:

Not as many people are filing for bankruptcy, only about 1 million people a year, down from an average of 1.5 million that has remained fairly steady for the past 20 years.

There are 300 million people in the whole country, 80 million of whom are children that can’t file.

If 1.5 million go broke year after year and I’m 50 years old, then 75 million people – nearly 25% of the country – has gone bankrupt in my lifetime.

Wow, how much better can The New Economy get?

Joe Doakes

Can? Much.

Will? Ugh.

Our Innumerate Overlords

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When Representative Ryan Winkler talks, people listen.

And then the smart people snicker.

He tweeted this yesterday:

Of course, he had the point of the op-ed all wrong.  Read it for yourself.

The point is that low wages aren’t the sole cause of poverty.  In the great scheme of things, they aren’t even especially important, in and of themselves.

Much more important?  When there is no opportunity to earn higher wages.

How does that happen?

To further address the point, though, I’d like to ask Rep. Winkler (or his defenders) this question:  at what minimum wage hourly rate will poverty disappear?

Put a number on it.

That’s the question I’d like to ask.  In fact, I asked it.

Hopefully we’ll see an answer.

I’m sure we will.

Continue reading →

Chart Your Own Recovery!

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How many jobs a month do we have to add to bring the level of employment back to pre-recession levels?

How long will it take to get back to pre-recession employment at current – or any – rate of job “creation?”

Check it out for yourself!

Hint – at the current rate (169,000 a month, before adjustments), we’re ten years away.  Although the calculator doesn’t distinguish between full-time and part-time jobs – although under the Obama notion of “recovery” the same number of jobs doesn’t mean the same kind of prosperity.

And They Say DFLers Don’t Get Economics

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Let’s say, hypothetically, that you live in a city.

And in that city there are 19 big companies.   They have everything that makes up a big enterprise – a CEO, executives, management, stores, labs, manufacturing plants – in your city.

And then the economy picks up.  And the 19 big companies hire more people, because a good economy means good sales, which means you gotta develop, build and sell all of those 19 sets of products!

So what’s the measure of the good economy?  ”19″?  The number of big companies in your town?

We’ll come back to that.

Then, driven by high wages and the need to be competitive, the 19 companies outsource their manufacturing to the Philippines.  All the people in your town that earned a living from building things for those 19 companies are out of work.

How’s the economy measure?  Still a “19?”

And then the price of R and D rises, and the companies relocated their R&D labs to India and Singapore and Slovenia.  All your researchers are out of work.

Is your city still a “19?”

And then the economy tanks.  Stores scale back and lay people off, managers get RIFFed, the work force plunges.  Your town’s unemployment lines are getting longer and longer…

…but there are still 19 CEOs and corporate boards in town.  They administer companies that do their R&D and manufacturing elsewhere, and sell to whomever can afford the products through stores that are ever dingier and more understaffed.

But those 19 CEOs are still in your town.  So the town’s economy is healthy.  Right?

If you said “what, are you kidding?”, you might be a conservative.

If you didn’t, you probably think this piece by Dave Mindeman at MnpAct makes perfect sense.

North Dakota and Wisconsin taunt our borders with new signs that say – Our State Is OPEN For Business!

Everybody seems to be overlooking the basics here.

Sure taxes have some effect on business decisions….so do a lot of other things. Let’s look how Minnesota compares.

Now, let me make sure I reiterate; Mindeman is one of that tiny minority of Twin Cities leftybloggers that don’t need to be under police surveillance.

But when he says “let’s look how Minnesota compares”, what he really means is “let’s cherry-pick some non-sequiturs as absurd as the fictional list of company CEOs in my example above”.

No, literally:

The Facts: Minnesota has 19 Fortune 500 companies. Five are in the top 100. Fourteen in the top 300. United Health ranks the highest at #22. Minnesota ranks 17th in the nation for total GDP. We rank #14 in GDP per capita. Our current unemployment rate is 5.3%. Our high school graduation rate is 91.6% (National average is 85.4%) Persons with at least a Bachelor’s Degree – 31.8% (National Average – 28.2%) Median Housing Value – $201,400 (National Average – $186,200)

Let’s leave aside for a moment the factors that have nothing to do with measuring economic health (graduation rates are nice, and might – maybe - predict the future, economically.  Or they might not.  But if 100% of your town has masters degrees, but they’re all in Women’s Studies so the unemployment rate is 100%, what’s the real (hypothetical) measurement?);

We’ve got 19 Fortune 500 companies.  Bully.

Now – are those companies creating jobs in Minnesota?   Is 3M building new plants in Minnesota?   In fact, they literally exported one plant, with hundreds of jobs that used to be on the East Side of Saint Paul, to South Carolina.  And do you remember when they used to do R&D in the Twin Cities?  Welcome to Austin!

Medtronic?  Aren’t they contracting?  Well, here they are.  In Tennessee?  Not so much.

Boston Scientific?  Well, they’re not expanding anywhere – but it’s here in MN that they’re contracting fastest.

When was the last time Ecolab built a plant in Minnesota?  (Trick question; it was the seventies).

It’s not just big Fortune 500s, of course; Red Wing Shoes is eyeing a move.  Jostens is shifting jobs from Owatonna to Texas, the first of what will likely be many moves to lower-tax states.  We talked about the iron mill that’ll be built in North Dakota rather than the Range last week.

But we have 19 headquarters here.  Right?

Well, doy.  Of course we do.  If you’re a Fortune 500 CEO, where would you rather live – around Lake Minnetonka, the Guthrie, the Ordway, with Cathedral Hill restaurants and Galleria shoppping, or up in some holler in Mississippi, sweating through your underwear? It’s a no-brainer.  And that creates jobs – for management, for MBAs and upper management, sure – and their administrators and financial planners, and bartenders and caddies and nannies and gardeners, too.

But where are you going to build the plant, and create the jobs, especially for the people who aren’t management?  Who  don’t have the MBA and the BMW and the career spent networking among the corporate elite and the decades of experience in a field?

You did see the paragraph about all the “Minnesota” companies building plants elsewhere, right?

Mindeman:

So, how do we compare with our neighbors?

Vs. North Dakota: Sure North Dakota has a very low unemployment rate. A big surplus. And most of all an oil boom. But North Dakota doesn’t have a single company in the state on the Fortune 500 list.  Not one single business.

Remember that next time you run into an unemployed Ford Plant worker; “hey, you’ve got no job, but at least we’ve got lots of headquarters here!”.

Of course Minnesota has the Fortune 500s.  Minnesota benefitted from what mattered to people, and companies, when population patterns were largely set, back in the 1800s and early 1900s;  proximity to resources, plus water, rail and eventually road communication, which led to an urban center; this center became the center the upper-midwest region, the part of the country west of Chicago and north of Omaha and Saint Louis and east of Denver.   The era when the big Fortune 500s we currently have were largely formed.  An  era that, according to some thinkers on the subject, is on its tail end, and will be over someday soon.

In total GDP, North Dakota ranks 50th out of 51 US economies – and although they do better in per capita rank (20th); of what value is a low GDP with a total population that would fit into Hennepin County?

Leaving aside that Mindeman brushes aside an amazing statistical anomaly – a state that was poor, with a low, agriculture-related GDP fifteen years ago, that is now batting thirty spaces above its weight, in league with the big, inflation-adjusted coastal economies – like it’s no big thing, he gets the real question backwards.

What could Hennepin County – whose unemployment and crime lead the state, whose schools are among the worst in the state, whose achievement gap is a state disgrace, and whose major city is rapidly fulfilling Joel Kotkin’s predictions of the obsolescence of the big central city – do if they used their resources, their inherent dynamism and their talents as wisely as North Dakota has?

North Dakota may be having an economic “boom”, [Why the scare quotes, Dave?  It's a boom.  No bones about it!] but why would any business consider a major move to a state that has a total market of about 800,000 people and a GDP that is about 1/8 of Minnesota’s? Really?

So many problems with that statement.  So many confirmations that DFLers just don’t get economics.  Where to start?

Mindeman is reliably imprecise when has asks “why would any business” move to North Dakota.

Any business?

Best Buy?  3M?  Starkey Hearing?  They’re not going to move to North Dakota.  What’d be the point?

You want to start a trucking company?  You’ll be making money hand over fist.  A machine shop in Minot?  You’ll be working three shifts seven days a week the moment you open your doors.  A house-cleaning service?  Accounting firm?  Security company?  Contract law firm?  Gas station?  Hotel?  You’ll have more business than you can handle.

Mindeman runs through all the neighboring states – focusing especially on the relative dearth of Fortune 500s in Iowa and the Dakotas – and asks:

Again, is that the type of market that can attract major business?

Why the obsession with “major” businesses?

The “Fortune 500″ is an arbitrary set of companies (or was – it hasn’t actually been published in ten years), set by the editorial staff of a magazine.  It focuses, by definition, on the 500 biggest companies, in terms of sales, profits, assets, market value, and employees.

Not growth.  Not innovation.  Just sheer size.

Are these companies the major sources of American economic dynamism?  Of innovation, strength, or even new hiring?  No.  They are not.  Small business is.

Sure there are plenty of people moving out of Minnesota and heading south, but that has been a weather trend that has been going on for decades. Our population is holding better than any of the states that border us.

Another factoid that Mindeman sails past like a mile marker on 94 headed west for good.

Why have people been leaving for decades?  Why is Minnesota on the cusp of losing a Congressional seat?

If you think it’s the weather – the Dakotas are growing.

Let’s put the question this way; if you’re a financial researcher with an MBA, your best shot at a job is in one of the big metro areas, with a big company.  Ditto if you work in political non-profits – you go where the politics are.  Big cities.

But if you’re a person with a high school education, maybe with a child to support and some bills to pay, which state would you rather be in right now – North Dakota or Minnesota?

Republican talking points are only so much hot air.

Minnesota’s quality of life is thriving and we are the Midwest model for business.

That’s what the facts say.

And maybe in a future post Mindeman will explain exactly why, in terms other than “CEOs per acre”.

Maybe.

Bleeding Slower

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Joe Doakes from Como Park emails:

Fewer people are applying for unemployment.  So there must more jobs, right?  Yes, the article says: “The job market has also improved over the past six months. Net job gains have averaged of 208,000 a month from November through April. That’s up from only 138,000 a month in the previous six months.” No wonder I keep seeing so many Help Wanted signs.

But then the writer follows up with this:  “Still, much of the job growth has come from fewer layoffs—not increased hiring.”

 

Screeech.  Hold on, what’s that?  How can Growth come from Layoffs instead of Hiring?  You didn’t get laid off, so that’s the same as being hired?

 

Turns out employers are still laying off people and aren’t hiring full time because of Obamacare and tax increases, but they are hiring part-time workers who don’t get Obamacare.  Those McJobs are the heros of this story.  People taking McJobs don’t apply for unemployment.  That’s your hopeful sign?

And the article doesn’t even mention discouraged workers.  Instead it says: “Applications are a proxy for layoffs. Weekly applications have fallen about 9 percent since November and are now at a level consistent with a healthy economy.”  Okay, I can buy that applications are a proxy for layoffs.  When you get laid off, you go apply for unemployment.  Makes sense.  And I can believe there aren’t many layoffs coming anymore, most of the fat was wrung out of the system years ago.  So yes, very few layoffs after five years of lean is the same rate as very few layoffs when times are booming.  All that adds up to “we’re bottoming out” not “prosperity is right around the corner.”

And then, this howler:  “Wages rose 3.6 percent in April.  That’s comfortably ahead of the 1.5% inflation rate.”  My wages sure as Hell didn’t go up, but my grocery bill did and gas is back up to $3.77 today.

 

I’m actually impressed the Associated Press has managed to stuff so many ridiculous claims into one article and pass it off as good news.

 

Joe doakes

The U6 number – counting the percentage of unemployed and underemployed – is up, even as the number of unemployed dropped a bit. The average amount of time worked in a week dropped. That means the job creation is all part-time.

This isn’t a recovery. This is blood clotting and an infection forming.

Canaries In Coal Mines And All That

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Joe Doakes from Como Park emails:

There are companies that buy, sell and trade gold (major banks and investment firms, generally). The actual gold bars are stored by Comex, which stands for Commodity Exchange, and is part of the New York Stock Exchange. Remember the Bruce Willis movie where the bad guys faked bombs in schools to divert cops while the bad guys stole the gold bricks from Wall Street? That’s what we’re talking about – huge supplies of actual gold bricks being stored in vaults for their owners.

Owner who are now pulling the gold out in record amounts. Giant withdrawals. Trillions of dollars worth.

Did they have unexpected expenses to pay? Losses to cover? Fine, that’s what it’s there for.

Or are they grabbing their gold before the economy collapses because they know something we don’t? Not fine, that’s what we’re all afraid of.

I’d stock up on bullets and whiskey but there are no bullets for sale. Which means more money for whiskey, I guess. So that’s not all bad!

Joe Doakes

Como Park

Look!  Guns and abortion!

This Is Your Obama Economy, April Edition

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The topline number has all the mainstream media bobbleheads a-tingling; unemployment is “down to 7.6%”.

It’s wind in sails, of course; the labor participation rate has dropped to 63.3%, the lowest it’s been in ten years of measuring, and the lowest it’s been so far in this recession.

Which means the actual share of the work force above the age of 16 actually working is 58.49%.

That number is…:

  • Almost 2.5% lower than the day Barack Obama took office (60.58%)
  • Statistically the same as October, 2010 (58.5%), when unemployment peaked at 10%.
  • Marginally up from December of 2010 (58.2%), when the recession bottomed out (and which looks like a statistical fluke, coming between two months in the 58.5% range)
  • Marginally better than the low-points in this calculation (58.18, in November 2010 and July 2011, when the unemployment rates were 9.8% and 9.1%, respectively).

It takes a lot of lipstick to make this look like anything but a pig.

EMT for the 313

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Speramus Meliora; Resurget Cineribus

“We Hope For Better Things; It Shall Rise From the Ashes.” – City of Detroit’s motto.

Those words were written in 1805 to memorialize a Detroit school burned to the ground.  208 years later, Detroit still hopes for divine intervention, this time from the Michigan capitol.

Michigan Gov. Rick Snyder’s proclamation of a “financial emergency” in Detroit was the culmination of a decades-long municipal car wreck.  Between 2000 and 2010, the city lost 237,500 inhabitants — an estimated 1/4th of the population.  One in 20 homes were foreclosed upon during the height of the recession.  The city remains $327 million in the red with $14.9 billion in unfunded city pension plans.  By comparison, the entire state of Michigan’s biennial budget is $49 billion.

While Detroit has been slowly crashing into a wall of economic reality, a busload of corrupt and incompetent city officials have rubber-necked their way past the myriad of issues confronting the city.  In the last decade, Detroit saw 131 convictions of government officials, a number defined by the reign of ousted Mayor Kwame Kilpatrick.  Even the federal government last year withheld millions in grants from Detroit over concerns of corruption.  The city’s reaction?  We’re not as bad as Chicago when it comes to corruption, so what’s the big deal?

The Roosevelt Warehouse or Detroit School Book Depository. A fire in 1987 did some damage to the building but was abandoned despite most of the inventory being usable. No effort to recover science and sports equipment, scissors, crayons, and books was ever made and now all sit on the floor in ruin

Synder’s appointment of an “emergency manager” to oversee the Detroit budget and pension plans has elicited howls of protests from the usual suspects:

“[Emergency managers] can unilaterally tear up union contracts, take over pension funds, make and repeal laws, sell public assets, the list goes on,” he said in an earlier interview with The Huffington Post. “Imposition of the EM must be understood in the context of the many other methods conservatives are using today to suppress democracy –- especially among people of color and people in poverty.”

But the decision to go the EM route has also gained critics on the Right, with one National Review writer declaring Snyder’s decision, in hyperbolic form, a “uniquely American way to dictatorship.”

The Emergency Manager legislation has gone through a number of iterations over the years, including one version, Public Act 4, that was opposed by the unions and defeated on the ballot last November.  PA 4 would have allowed EMs to effectively run cities, with their authority superseding that of city officials.  Instead, with PA 4 defeated, Snyder is falling back on the format of an older PA – one that while still not allowing EMs to be fired by the city, doesn’t grant them the power to abrogate collective bargaining or dissolve local governments.

The United Artists Theater. The theater is actually part of an 18-story high rise built in 1928. The historic building was such an embarrassment that the exterior was refurbished before the Super Bowl in 2006. The interior remains as seen.

Despite the fact that no one will be declared dictator, or even Pontifex Maximus, Snyder’s decision has prompted Detroit’s City Council to fight tooth-and-nail against any EM, filing an appeal against the state.  One official who isn’t planning on fighting Lansing is surprisingly Detroit’s Mayor Dave Bing.  Like the rest of the city government, Bing isn’t happy about Snyder’s power play, but unlike the rest, Bing is willing to work with any EM.  Speaking at a City Hall press conference, Bing stated that “we need to stop BSing ourselves,” a quote perhaps applicable to more than just an acknowledgment that an emergency manager would be imposed on Detroit whether they liked it or not.

An emergency manager invites micro concerns – with 83 cents of every Detroit police and fire payroll dollar being spent on pensions by 2017, what use is an EM without the ability to unilateral restructure pension and/or contracts?  But the macro concerns of the decision are far more troubling.  How do you save a city that won’t save itself?

The Lee Plaza Hotel lobby. The Lee Plaza is on the United States National Register of Historic Places.

H.L. Menchken famously declared that “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”  Detroit has certainly being getting it “good and hard” for decades, and like an S&M enthusiast whose forgotten their safe-word, doesn’t know how to stop.  Bankruptcy may be an option, but it doesn’t address the billions in underfunded liabilities.  And considering all bankruptcy would do is force Detroit and its creditors to negotiate, there’s not much more that an EM would do for the situation except provide a political scapegoat for the necessary hard choices to come.  It should be little wonder that Mayor Dave Bing isn’t fighting Snyder’s executive decision – he’s probably relieved someone else will being taking the slings and arrows (in Detroit; statewide, the move is very popular).

Yet what happens after the dust settles?  Even if Snyder’s EM hacks Detroit’s budget into the black, will the political machinery or populace live with the decisions?  Or, having avoided any connection to the policies implemented to take Detroit on the long road to fiscal solvency, will the business of City Hall simply revert to usual?

Snyder’s technocrat lean may be well-intended, but in the case of Detroit, is only delaying the city and its voters coming to terms with their decisions.  Although on the plus side, Snyder’s move is the first job created in Detroit in years.

Liberté, égalité, vacances

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France’s continued Hollande from reality gets a rude wake-up call from America.

With an unemployment rate that’s been hovering around 10% for nearly four years, unemployment benefits that somehow manage to be the most generous in Europe and yet exclude thousands of eligible non-workers, and an attempted tax bracket of 75% on top earners, France clearly isn’t economically serious about domestic jobs.  That hasn’t stopped them from being seriously upset at the lack of foreign capital coming to their rescue.  Or when that same foreign capital criticizes the famous French non-work ethic.

When Goodyear Tire & Rubber Co’s Amiens Nord plant faced being closed,  threatening 1,250 jobs, Paris attempted to mediate a sale to Illinois-based Titan International.  Unable to get the French unions to move on any of their conditions, Titan’s owner, Maurice Taylor (last seen running for the Republican presidential nomination in 1996), fired off his answer on any potential purchase:

“The French workforce gets paid high wages but works only three hours. They get one hour for breaks and lunch, talk for three and work for three,” Taylor wrote on February 8 in the letter in English addressed to the minister, Arnaud Montebourg.

“I told this to the French union workers to their faces. They told me that’s the French way!” Taylor added in the letter, which was posted by business daily Les Echos on its website on Wednesday and which the ministry confirmed was genuine.

“How stupid do you think we are?” he asked at one point.

“Titan is going to buy a Chinese tire company or an Indian one, pay less than one Euro per hour wage and ship all the tires France needs,” he said. “You can keep the so-called workers.”

Taylor’s jab on going to China or India has to chafe Arnaud Montebourg, France’s Minister of Industrial Renewal, whose industrial policy has thus far been to scapegoat low-wage competitors.  Montebourg even blocked Indian steelmaker ArcelorMittal from buying a French plant in 2012, apparently proving that beggers can be chosers.

Who needs employers?

Taylor’s brusque reply may dominate the headlines (who are we kidding with ‘may’?), but the real story is France slowly coming to terms with, well, their unemployment terms.

Despite the reputation of being exceptionally generous, which they are, France’s unemployment benefits are reaching fewer and fewer unemployed.  Even as unemployment has increased, the percentage of beneficiaries has decreased – 44.8% of those eligible receive benefits, down from 48.5% in 2009.  Many eligible are being turned away, a situation brought to greater public awareness when an eligible beneficiary set himself on fire in protest for being declined.

Why are even eligible beneficiaries being told ‘non’?  Because as the French government auditor, the Cour des comptes (think of it as the French CBO), recently stated, the system of benefits is “unsustainable”:

The current funding system is expected to reach a deficit of 5 billion in 2013. According to the Cour, the French system is largely to blame for the deficit, as it is much more generous than similar benefits programs in neighboring countries. For example, the current allocation is between 63 and 93 percent of the previous incomes of the unemployed. In addition, the minimum compensation length for unemployment benefits in France is two years, compared to one year in Germany.

Such debts helped France’s credit rating fall to AA1, despite President Hollande’s pledge to reduce the deficit by the end of 2013.  With familiar rhetoric coming from another left-leaning politician, it’s little wonder what Maurice Taylor chose to acknowledge in his letter:

Socialist President Francois Hollande may take some comfort in the view Taylor expressed of Washington: “The U.S. government is not much better than the French,” he wrote…

Just Keep Repeating To Yourself…

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…that raising taxes in a recession isn’t face-palmingly stupid:

“In case you haven’t seen a sales report these days, February (month-to-date) sales are a total disaster,” wrote Murray in a February 12 email to executives. “The worst start to a month I have seen in my (about) 7 years with the company.”

The recent hike in payroll taxes is dragging down sales for discount retailers like Wal-Mart. With less disposable cash in their wallets, lower-income shoppers have less to spend.

The bad news comes on the heels of a lackluster January for the major retailer.

“Have you ever had one of those weeks where your best-prepared plans weren’t good enough to accomplish everything you set out to do?” wrote Walmart Vice President for U.S. Replenishment Cameron Geiger in a February 1 email to Walmart executives. “Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where’s their money?”

If we – the “middle class” – have 5% less money between payroll taxes and Obamacare, then that’s 5% less to spend at Walmart.  Or Patagonia, or MPR’s pledge drive, or what have you.

Most of us know this.

Democrats in DC and Saint Paul, it seems, do not.

Prudence

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Joe Doakes from Como Park writes:

I like this analogy, from Instapundit

***

Don’t think that zero is as low as interest rates can go: money as a store of value is also threatened.

Primitive man often faced an interest rate of -%50 per hour, if he caught some meat for instance, and was trying to get it into the bellies of his family it spoiled or was snatched by competitors. Now you can store your income and wealth in financial instruments and only buy meat when you want to eat it, or keep it in the fridge or freezer for even greater convenience. We take all this for granted, but as near-zero nominal interest rates come to be paired with rising inflation–an outcome that is pretty much guaranteed under QE3–even coin and currency will no longer keep stored value from wasting away. We are heading into difficulties that should be a thing of the past, and its not just bedbugs and resistant disease. Government is squandering EVERYTHING.

***

So we need to invest in stuff that won’t spoil, that people will be willing to trade for after the economy collapses. Honestly, gold bullion doesn’t strike me as useful for everyday living. More useful, durable stuff would be:

Whiskey

Bullets

Toilet paper

I’m pretty much good to go.

Joe Doakes

Como Park

Americans at large – other than Mormons – have never really taken the possibility of complete collapse seriously.

It’s looking smarter and smarter.

I bet I just got onto a DHS watchlist, didn’t I?

The Democrats’ Big Lie

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You see it in Presidential statements, in Bill Clinton’s pro-Obama ad, and all over the place:

“Deregulation and tax cuts are what got us into this mess in the first place”.

It’s a Big Lie, and they’re repeating it over and over and over, in hopes that they can lop off not only the low-information voters, but maybe a few “moderates” and “Independents” who don’t pay much attention beyond the sound bites.

The melt-down in the financial industry was caused by the socialization of risk and privatization of reward – by the government.

The melt-down had nothing to do with tax cuts.  Democrats say that the deficit was exacerbated by the Bush tax cuts – which is true, if you believe that spending is inviolate and must be paid for rather than cut.

“But non-discretionary spending is, well, non-discretionary”.  Only if you don’t have the guts to change the laws.

Long story short:  the Democrats are lying to you, in hopes that enough of you are uninformed or incurious enough to buy their BS.

There’s really no more artful way to put it.  And I’m getting tired of trying to be artful about it.