Summary of Reading…

2011 November 6
by SJ Leeds

Here are a few things I learned this week…


Mediocre employment report.  The jobs report showed 80K more jobs in October.  September’s jobs were revised upward to 158K.  August was also revised up.  The unemployment rate dropped slightly – to 9%.  In December 2007, it was 4.6%.  Overall, the report was okay news.  But remember, we’re going to have to start producing 300K jobs / month if we want to start to see a meaningful change in the unemployment rate.  We have 14 million unemployed people.

The average length of time that people have been unemployed is 39.4 weeks.  The all-time high was in September (40.5 weeks).


Fed becoming more pessimistic.  The Fed said that they expect unemployment to end 2012 around 8.6%.  It was just June when they were predicting that unemployment would be around 8% at the end of 2012.

The Fed also lowered their growth forecasts.  They now expect growth of 2.5% to 2.9% in 2012.  In June, they had been predicting 3.3% to 3.7%.


Large companies matter.  According to 2006 census data, 61% of companies have fewer than four workers.  But, more than 2/3 of the American work force is employed by companies with more than 100 workers.  Half of American workers are employed by companies with more than 500 people.  These large companies pay 57% of total payroll.  Small businesses (with income between $10K and $10 million) account for 99% of all businesses, but only account for 17% of income and only 23% of them pay any wages at all.  (Source: Op-ed by Jared Bernstein, published in NY Times)


Italy’s problems.  As I mentioned last week, Italy’s cost of debt is increasing.  Their cost of debt is higher than any time since they’ve been a member of the EU.  Their ten-year debt is above 6%.  One analyst suggested that when Greece, Ireland and Portugal saw their cost of debt go above 7%, it never came back below that level.  (The recovery rate on Greek debt may end up below that level…) (Source: NY Times)

Italy has agreed to allow the IMF to scrutinize their books every three months to ensure that they are carrying out their $75 billion austerity package.  (Source: NY Times)


The Debt Commission.  Everyone’s attention is going to turn to the debt commission soon.  They’re supposed to have a proposal by November 23rd.  We’re hearing all different things.  Many stories have argued that there has been no progress.  But, late Friday, Bloomberg published an article arguing that a $4 trillion deal was possible.  Remember that the Simpson-Bowles plan cut $3.9 trillion.  (This was $2.2 trillion in spending cuts, $673 billion in reduced interest payments and $1 trillion in tax increases.)  (Source: Bloomberg)

A group of 40 House Republicans and 60 Democrats signed a letter encouraging the debt committee to explore new revenue as part of the deal and saying that they should also consider entitlement cuts.  Several of the Republican Congressmen had previously signed a pledge saying that they would not support a net tax increase.  Several of the Democrats had previously opposed any cuts to entitlements.  While it’s nice to see the some bipartisan behavior, it’s unclear what it means.  Several of the Republican signers said that they were not endorsing a tax increase, but rather they want to see the tax code rewritten to close loopholes and lower rates.  (Source: Washington Post)


The whole world is getting old.  The fertility rate in Germany, Italy, Spain, Greece and many other nations is less than 1.5 children per woman.  This is significantly lower than the replacement rate of 2.1 children (some children don’t make it to adulthood).  Japan has a 1.4 rate and is the oldest country in the history of the world.  South Korea is not far behind at 1.2.  China is at 1.5.  The US is aging, but our fertility rate is near the replacement rate.  People will have to work longer and we may start competing for immigrants.  (source: Washington Post)


The poorest of the poor.  Approximately 20.5 million Americans (6.7% of the population) make up the poorest poor – defined as those at 50% or less of the official poverty level.   In 2010, this meant that the poorest poor had income of $5,570 or less (for an individual) or $11,157 for a family of four.  This group comprises approximately 44% of those in poverty.  The 6.7% share is the highest in the 35 years that the Census Bureau has maintained these records.  (Source: CBS News)


A chip off the old block.  By the number of emails in my inbox on Friday morning, I was shocked at the number of LSU subscribers to my blog.  It left me wondering, “who reads this to them?”  Okay, that was just a plain ugly comment from a bitter Alabama fan.  Saturday night hurt.  A lot.

My nine-year-old is a huge Tide fan (he also likes Texas).  Saturday is our college football day.  On Saturday nights, he and I actually sleep in our tv room, falling asleep to the late games.  He stayed up for the entire Alabama game…until we didn’t score in OT.  It was clear that we were going to lose.  He simply said, “good night” and he got off the couch and into his sleeping bag.

It was hilarious to see how angry he was.  The great thing was that he forgot his pillow.  So, his face was flat on the carpet.  It couldn’t have been comfortable.  “John, don’t you want your pillow?”  All I got was a stern, “no.”  You could tell what he was thinking – we lost and I don’t want to be comfortable.  Ah, the pride in seeing that your son is just as bad of a sport as you are.  (I did get his pillow and I stuck it under his angry little head.)


Have a great week.

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