January 21, 2018

A Maine Racetrack Didn’t Lure Amazon. Multiply That Disappointment by 218.

“Very disappointed,” said the Bay Area Council, which had submitted a bid on behalf of San Francisco and four neighboring cities.

Amazon’s obsessive desire to please its customers has created a fearsome retail juggernaut and made its founder, Jeff Bezos, the richest man in the world. This sense of disappointment in the company, however transient it may prove, is something new.

Yet it was perhaps inevitable after the way Amazon turned its search for a second headquarters, which it announced in a blaze of publicity in September, into such a beauty contest. Even with unemployment low, the stock market booming and the economy chugging along, the prospect of landing as many as 50,000 high-paying jobs from Amazon aroused the excitement of politicians everywhere.

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Cities’ Bizarre Bids to Be Amazon’s New Home

In seeking a home for its second headquarters, Amazon winnowed a list of 238 candidates to 20 finalists, including Atlanta, Nashville and Miami.

By NEETI UPADHYE and SARAH STEIN KERR on Publish Date January 18, 2018. Photo by Elaine Thompson/Associated Press. Watch in Times Video »

“When they rolled this idea out, the narrow description they used really only defined about 30 cities,” said Mr. Phillips of Day 1, referring to how Amazon had said it was looking for a metropolitan area in North America with at least a million people, among other criteria. “Maybe they truly thought only 30 cities would apply. The fact that 238 did probably caught them off-guard.”

Scarborough, for instance, was probably not on Amazon’s radar. It is on the Northeast coast, just south of Portland, and has a population of about 20,000. The simplicity of the application process, which involved answering nine questions, providing data and touting the city, “encouraged us and several hundred others who did not have a viable chance to make the strongest possible argument why it should be us,” said Mr. Hall, the town manager. “There’s value in thinking and articulating that.”

Another factor at play: the sense that Amazon was determined to achieve dominance, so why not join up?

“This new headquarters is merely a stop on their road to global conquest,” Mr. Hall said. He noted that so many people in Scarborough received goodies from Amazon during the holidays that even now, in the third week of January, the local recycling center was overwhelmed with cardboard packaging.

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Mr. Hall said he had received “no word whatsoever” from Amazon about the fate of his application. An Amazon spokesman said, “All the cities received direct communication from Amazon, including many personal phone calls.” (Late Thursday, the Scarborough team finally received an email from the company.)

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Boxcars in Rochester. “This news is certainly disappointing,” the team that promoted Rochester and Buffalo said in a statement after Amazon passed them over. Credit Luke Sharrett/Bloomberg

Many of the other also-rans did not want to talk.

Jason Lary, the mayor of Stonecrest, Ga., who had offered to create a town named Amazon and make Mr. Bezos “the mayor, C.E.O., king, whatever they want to call it,” did not return calls. A spokeswoman for Tucson, which had also applied, said, “We are in an all-day off-site meeting,” adding that she could not be interviewed.

The letdown followed a rush of antics by cities across North America to entice the retailer with tax breaks and publicity stunts.

Business leaders in Tucson had tried to mail Amazon a 21-foot cactus, which the company declined. The mayor of Washington posted a video of herself asking her Amazon Alexa where the headquarters should go. (The answer was of course Washington.) Business school students in Philadelphia had a new homework assignment: Write to Amazon asking it to come. Mayors flew out to Seattle to wander the corporate campus.

The biggest winner in all this, of course, was Amazon. The search has led to feel-good stories in local papers around the country, a coup for Amazon’s public relations machine when many are wary of Mr. Bezos’ growing wealth and power.

For Art Rolnick, an economist at the University of Minnesota, the selection process — which will continue for months — is “reality show” theatrics and should not be celebrated, he said.

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Scarborough, Me., had proposed converting a 500-acre harness racing track to woo Amazon. It was “the longest of long shots,” the town manager, Tom Hall, said. Credit Robert F. Bukaty/Associated Press

Amazon, he said, “wants to get the highest bid and highest subsidy possible, so now the 20 finalist cities will go revise their bids.”

“From a local point of view, it looks like job creation in your community,” Mr. Rolnick added. “From a national perspective, it makes no sense.”

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Some elected officials said the reality-show spectacle was an improvement on the way business is usually done.

“It was like ‘The Apprentice,’” the show about hiring and firing that President Trump starred in, said Tulsa’s mayor, G. T. Bynum. “I loved the process. Amazon, to their credit, made it a public and transparent one. Nine out of 10 times, when we have corporate relocation interest, we have to sign so many nondisclosure agreements we don’t even know what company is interested.”

Not all the applicants felt the process was transparent. Amazon released the total number of proposals but not where they were from, which caused some latter-day confusion. Mr. Phillips of Day 1 said he had gotten a receipt from Federal Express for delivering his proposal in October and never heard from Amazon after that.

One possibility: the company did not take some applications particularly seriously. An Amazon spokesman declined to clarify this point.

However clumsy the process, Amazon might have unleashed something.

Apple, which has been criticized for doing most of its production in China, announced this week that it would open a new domestic campus. (Apple did not mention a location.) Taking advantage of the new Republican tax plan, which allows a one-time repatriation of cash, Apple signaled it would bring back most of the $252 billion in cash that it held abroad and add 20,000 new jobs in the United States.

“Second headquarters are the thing of the future — the companies are getting too big for a single market,” said Jeff Cheney, the mayor of Frisco, Tex., a city near Dallas that had a losing bid for Amazon’s second headquarters.

Beyond any sense of disappointment among the losers, then, was a feeling of expectation.

“If Amazon is not willing to swing for the fences in Oklahoma and build a city, maybe Alibaba” — the Chinese internet retailer — “is willing,” said Mr. Phillips. His efforts to build a corporate city, he said, will continue.

There is, however, the problem of the name. “Day 1” is a pet expression of Mr. Bezos, symbolizing how his company’s opportunities are always right in front of it.

“We’ll probably look for a better brand,” Mr. Phillips said, and then reconsidered. “If someone wants to take on Amazon, maybe keeping it ‘Day 1’ will offer the added ability to mess with Bezos’ head a little.”

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Article source: https://www.nytimes.com/2018/01/19/technology/losers-amazon-sweepstakes-disappointment.html?partner=rss&emc=rss

Tax Overhaul Is a Blow to Affordable Housing Efforts

Don Falk can see the fallout from his window. Mr. Falk is the chief executive of the Tenderloin Neighborhood Development Corporation, an affordable-housing developer in San Francisco’s impoverished Tenderloin district. Directly across the street from his office sits a new project, a rising eight-story building that will have 113 units, a third of those set aside to serve the city’s swelling homeless population.

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An affordable-housing building under construction in the Tenderloin neighborhood of San Francisco. Recent changes to the federal tax law have hurt the market for affordable-housing tax credits. Credit Jim Wilson/The New York Times

A year ago, as the market for tax credits started falling in expectation that a Republican president and a Republican Congress would steeply lower taxes, the project developed a $3 million deficit. The city stepped in to cover the shortfall, but the financing problem was an early indication of what affordable-housing groups and developers expect to be a declining pace of new building.

Kate Hartley, director of the San Francisco Mayor’s Office of Housing and Community Development — the agency that backstopped Mr. Falk’s development when it needed help — said the lower corporate tax rate had increased the cost of building affordable housing in the city by roughly $50,000 per unit. That adds up to a lot of multimillion-dollar leaks, she said, “and we have less money to build the units we want to build.”

For renters like Sandy Hernandez, who lives south of San Francisco in a two-bedroom apartment with her ex-husband and two children, this is coming at the worst possible time. Her building was recently purchased by a group of investors, and next month her $1,900 rent is scheduled to go up $850 — more than 40 percent — to $2,750. Ms. Hernandez said there is no way she can pay that much, but she’s stuck because the list for affordable housing is so long.

“It’s hard because there’s a lot of people in the same situation,” she said.

Programs to build subsidized rental housing date back to the Great Depression, and were greatly expanded during President Lyndon B. Johnson’s “war on poverty.” Support for these programs started to wane under President Richard Nixon, and they were vastly scaled back under President Ronald Reagan.

But unlike public housing programs, which tended to expand under Democratic administrations and shrink under Republican ones, tax credits proved enduring and politically popular.

Conservatives saw the approach as a tax break and a way to use private markets to solve public problems. Liberals saw it as a way to direct federal money to local communities. Since 1987, it has funded construction and rehabilitation of about 30 percent of the nation’s 10 million affordable units, which are defined as units that people making 60 percent or less of a city’s median income could afford.

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“It’s the most successful social program that nobody has heard of,” said David Erickson, director of community development at the Federal Reserve Bank of San Francisco and the author of “The Housing Policy Revolution.”

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Sandy Hernandez, who works as a house cleaner and caregiver, is facing a 40 percent increase in her $1,900 rent since her building was bought by investors. Credit Andrew Burton for The New York Times

It works like this: State governments award credits to affordable-housing developers, who transfer them to corporations in exchange for equity in rental buildings whose units are set aside for low-income tenants. Corporations use the credits as a coupon against future taxes. Low-income housing tax credits are particularly popular among banks because affordable-housing investments help satisfy their obligations under the Community Reinvestment Act.

The need is particularly great today. The number of renters has surged over the past decade, with the country adding about one million renters a year since 2010 — about twice as many as the previous rental peak in the 1970s and ’80s, according to a 2017 report by Harvard’s Joint Center for Housing Studies.

Developers have responded with an apartment building boom. But since renters tend to have higher incomes than in years past — households making more than $100,000 a year accounted for a third of the growth in renters over the past decade — many of the newer units are in the pricey glass and steel buildings that have sprouted in downtowns across the country.

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There are some indications that the rush of building is helping increase affordability, especially at the upper end of the market, where vacancies are rising and rents are falling. Still, low-income housing remains undersupplied. About half of renters pay more than 30 percent of their income on housing, and a quarter pay more than half.

In California, legislators have proposed a range of fixes, from more money for affordable housing to fewer building regulations and increased tenant protections. State Senator Scott Wiener, the author of a recently enacted law that makes it harder for cities to block housing developments, has followed up with several proposed bills that would, among other things, increase construction around train stations and other transit hubs.

At the federal level, Senators Maria Cantwell, Democrat of Washington, and Orrin Hatch, Republican of Utah, sponsored a proposal to increase the number of low-income housing tax credits by 50 percent.

For now, there is little to suggest the rental burden will get better anytime soon. Over the next decade the younger half of the millennial generation will move into their 20s and 30s, adding to the pool of renters. Over that same period, more than a million units of affordable housing financed by low-income housing tax credits and other government programs are set expire and shift to higher rents, according to the Joint Center.

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An analysis by one national accounting firm found that the new tax law would cut the growth of affordable housing by 235,000 units over a decade. Credit Jim Wilson/The New York Times

One result of the surge in higher-income renters is that units that policymakers politely refer to as “naturally occurring affordable housing” — run-down buildings where lower-income residents can afford an apartment without subsidy — are being pulled toward the higher end of the market.

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In Redwood City, on the peninsula between San Francisco and the heart of Silicon Valley, private equity firms have been snapping up buildings that house lower-income service workers and repositioning them for higher-income tech workers. The pitch to investors is straightforward: With housing scarce and demand rising, there are returns to be made buying old buildings, marketing to new tenants, and steadily increasing the rent.

That has put a squeeze on tenants like Ms. Hernandez, a 41-year-old holding down two low-wage jobs, one cleaning houses and another at an elder care facility. She has spent a decade waiting for a subsidized rental apartment to open up.

Jesshill Love, an attorney for the investors who now own Ms. Hernandez’s building, said that with demand exploding, the rents could have actually been raised even more. “The decision was made by the property management company not to raise the rent to full market value in an effort to minimize the impact upon the families,” he said.

The backlash has been fierce. Rent-control measures have popped up in cities across the Bay Area. Last week, Ms. Hernandez and other tenants in her building gathered at the offices of Redwood Landing, the building’s management company, chanting things like “Hear our cry, rent’s too high,” while holding signs that read “Stop Displacement Now.”

The protest attracted lots of honking horns and a visit from Redwood City’s mayor. Directly across the street from the hubbub sat a recreational vehicle parked for the evening. Its two homeless residents popped their heads out to see what was going on.

Lisa Hannibal, 52, who lives in the vehicle and is unemployed, said that she was also on a list for affordable housing, but that nothing had opened up.

“We’re at the hard-suffering point,” she said. “But it can happen to anybody these days.”

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Article source: https://www.nytimes.com/2018/01/18/business/economy/tax-housing.html?partner=rss&emc=rss

Two Federal Reserve Openings Provide One Chance to Counter Trump

It is unusual for the Fed’s top three jobs to change hands at the same time. Janet L. Yellen, the Fed’s chairwoman, plans to step down at the end of her term in early February, pending the confirmation of Mr. Powell. The Senate Banking Committee, which approved his nomination last session, did so again on Wednesday, clearing the way for a final vote.

The vice chairman job has been open since Stanley Fischer stepped down in October. And William C. Dudley, the New York Fed’s outgoing president, has said that he plans to step down this summer, once a successor is in place.

The Fed’s new leaders will take the helm during a period of relative tranquillity. The economy is expanding and the Fed is in the middle of a slow-and-steady retreat from its post-crisis stimulus campaign. But there are significant long-term challenges, including a brewing debate about whether the Fed should adjust the way that it conducts monetary policy before the next downturn.

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William Dudley, president of the Federal Reserve Bank of New York. Credit Gabriela Herman for The New York Times

Krishna Guha, head of the central bank strategy team at Evercore ISI, wrote in a recent note to clients that Mr. Powell does not have a deep background in monetary policy or financial markets — and might benefit from the presence of lieutenants who do.

“For Powell to be effective, he needs the right leadership team around him,” wrote Mr. Guha, a former New York Fed official. He added, “While most decisions taken by even a Fed chairman are in the end not make-or-break, most Fed chairs face at least one profoundly consequential decision during their tenure.”

The Trump administration has discussed some vice-chairman candidates who could fit the bill, including Lawrence B. Lindsey, a former Fed governor and director of the National Economic Council under President George W. Bush, and Mohamed A. El-Erian, the chief economic adviser at Allianz, who is widely respected as both an investor and a commentator on monetary policy, according to a person who has participated in some of those conversations.

The White House has not said when it plans to announce a decision.

The New York Fed’s board of directors, which is at an earlier stage in its search, has said that it was focused on finding a technocrat who understood the bank’s work.

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But technocrats come in many flavors, and there are signs that the New York Fed would like someone in the mold of Mr. Dudley or Ms. Yellen, both of whom have emphasized the effects of monetary policy on ordinary people.

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“How monetary policy is considered seems very high-level for many people in the community, but it has a direct impact on how well they may do economically,” Denise Scott, a member of the four-person search committee, said in a video released by the New York Fed that described what it’s looking for in a candidate. Ms. Scott is executive vice president of the Local Initiatives Support Corporation, a nonprofit that backs community development projects.

The leaders of the search committee are Sara Horowitz, the executive director of a New York labor union, and Glenn Hutchins, a private equity executive who has long been a major donor to Democratic political candidates. The fourth member is David M. Cote, chairman of Honeywell International.

The committee has hired two search firms, one of which specializes in identifying a diverse field of candidates. It also made a point of meeting with a group of liberal activists, including labor unions and community development groups, in addition to the standard roster of banks and business officials.

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Mohamed El-Erian, chief economic advisor for Allianz, in October 2016. Credit Michael Nagle/Bloomberg

The divergent selection processes are an artifact of the Fed’s structure: A board of political appointees in Washington oversees the operations of 12 regional reserve banks, which are privately owned by the commercial banks in each region. The New York Fed is owned by major banks including Citigroup and JPMorgan Chase as well as smaller community banks.

Although the regional reserve banks have lost much of their original autonomy, they retain the power to select their own presidents, subject to the approval of the Federal Reserve Board in Washington.

Monetary policy is made by a committee comprising the Fed’s governors and five of the regional presidents. The president of the New York Fed holds one of those votes on a permanent basis, a reflection of New York’s longstanding role as the nation’s financial center, and serves as the committee’s vice chairman. The remaining four votes rotate among the other 11 regional banks.

While private ownership of central banks was once quite common, most developed nations have converted to fully public systems, and the list of holdouts is dwindling. Austria took ownership of all shares in the Oesterreichische Nationalbank in 2010. South Africa said in December that it would move to take full ownership of the South African Reserve Bank.

Andrew Levin, a Dartmouth economist and a former Fed official, said it’s past time to make the Fed a fully public institution, too. Mr. Levin has proposed that the federal government should take ownership of the regional reserve banks, and that the selection of regional reserve presidents should be a public process.

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“This is one of the most important public officials in the United States and that person is being chosen by a private board of directors of a private institution,” he said, referring to the New York Fed’s current search.

But some liberal activists who, under the Obama Administration, pushed for the government to take control of the reserve banks now see the New York Fed’s independence from Washington as potentially valuable.

Shawn Sebastian, director of the Fed Up campaign, a consortium of groups that lobbies the Fed to prioritize employment and wage growth when making monetary policy, said his organization is pushing for the New York Fed to make a statement with its decision.

“The next president needs to have a real and demonstrated commitment to full employment, by having worked for the public interest and low-income people in their career,” he said.

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Article source: https://www.nytimes.com/2018/01/18/us/politics/federal-reserve-trump.html?partner=rss&emc=rss

China’s Economic Growth Looks Strong. Maybe Too Strong.

But that growth has come at a high price: rising borrowing that has triggered downgrades of China’s sovereign debt rating by credit rating agencies; severe pollution of China’s air, water and soil; and persistent social problems associated with the movement of tens of millions of workers to cities who had little choice but to leave their children in their hometowns. President Xi Jinping signaled at an important Communist Party meeting in October that he wanted to address some of these chronic problems and that the country should no longer emphasize maximizing economic growth at almost any cost.

A Strange Stability

China annual economic output results have grown increasingly smooth in recent years compared with those from the United States.

By The New York Times | Source: The Conference Board

China’s annual growth figures have long been quite steady. Other large countries have had somewhat steadier growth than usual in the last several years. But China’s quarterly growth figures are suspiciously smooth, unlike quarterly growth in many other countries.

Politics are a major reason. Local officials often face pressure to meet targets from the central government. At the first hint of economic weakness, they have tended to step up spending to stabilize economic output.

Increasingly, China is owning up to data shortcomings, particularly in provincial data. The region of Inner Mongolia revealed this month that two-fifths of the industrial production it reported for 2016 did not exist. A year ago, Liaoning Province in northeastern China revealed that local governments had padded their economic growth statistics from 2011 to 2014.

Tianjin, a sprawling metropolis, briefly posted on one of its official websites last week that previous data had been inflated. The post was quickly deleted.

Ning Jizhe, the director of the National Bureau of Statistics, said at a news conference on Thursday afternoon in Beijing that there had long been discrepancies between provincial and national data, but that the gap had been narrowing. “Local data will not influence the reliability of national statistics data,” he said.

It can work the other way, too: Some economists cite evidence that China also understates its growth during booms to smooth its results.

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Slower Than Stated?

The Conference Board’s estimates for China’s economy show a more pronounced slowdown in growth than the official figures.

By The New York Times | Source: The Conference Board, CEIC Data

Economists who try to estimate actual growth tend to come up with lower numbers.

The Conference Board, a business group based in New York, takes Chinese data for agriculture, construction and easily counted services, like transportation, as accurate. It then adjusts the official data for irregularities in industrial production and in less easily counted services, like health care.

The result shows Chinese growth to be somewhat lower than reported, particularly in years with weak growth. At the same time, by understating the depth of the slowdown in 2015 and 2016, the official figures also appear to understate last year’s improvement.

The Conference Board’s results suggest the current uptick is real. But the board worries that much of the growth has come from recent lending, despite China’s already huge accumulation of debt in previous years.

“We think the recovery is real,” said Yuan Gao, the senior economist in the Beijing office of the Conference Board. “We’re just concerned that a lot of it is built on bad debt.”

Parsing the Numbers

A long-running effort to adjust official Chinese figures for year-over-year quarterly G.D.P. growth suggests the economy goes through booms and busts much more than reported.

By The New York Times | Source: Enodo Economics, CEIC Data

Diana Choyleva, an economist at Enodo Economics in London, also produces growth figures that are below the official results.

Many economists, including Ms. Choyleva, believe Chinese officials understate how much prices rise in China. That tends to overstate growth.

She adjusts official figures based on price data and seasonality. She then finds that the Chinese economy tends to track Beijing’s stimulus efforts, which produce booms, and its moves to curb unsustainable lending, which produce slowdowns.

China’s statistical issues go beyond mere government meddling. The country’s economy is vast and quickly changing. Officials still struggle to catch up with years of growth and to modernize data-gathering practices.

“It’s just simplistic to say they lie or they don’t lie,” said Pauline Loong, the founder and managing director of Asia-analytica, a Hong Kong consulting firm specializing in mainland China. “They define their data differently, and they keep changing their definitions.”

Follow Keith Bradsher on Twitter: @KeithBradsher.

Ailin Tang and Carolyn Zhang contributed research from Shanghai.

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Article source: https://www.nytimes.com/2018/01/18/business/china-gdp-economy-growth.html?partner=rss&emc=rss

Apple, Capitalizing on New Tax Law, Plans to Bring Billions in Cash Back to U.S.

Apple estimated that its direct impact on the American economy would total more than $350 billion over the next five years, but how much that goes beyond what the company would have spent anyway is unclear. Apple’s current pace of spending in the United States is $55 billion for 2018, so it was already on track to spend $275 billion over the next five years. After the $38 billion tax payment is subtracted, that leaves its new investment at roughly $37 billion over the next five years.

A. M. Sacconaghi, a financial analyst for Sanford C. Bernstein, said Apple had consistently spent tens of billions of dollars on areas like staffing and capital expenditures in recent years. Bringing back the overseas cash, he said, does little to aid its expansion. But it makes the company appear to answer Mr. Trump’s call for more jobs to be created in the United States.

“This is Apple putting its best foot forward consistent with objectives of the administration,” Mr. Sacconaghi said.

Apple is one of several multinational giants that have kept a total of roughly $3 trillion in global profits off their domestic books to sidestep the previous 35 percent federal corporate tax rate. Under the new tax law, companies that make a one-time repatriation of cash will be taxed at a rate of 15.5 percent on cash holdings and 8 percent on nonliquid assets. That is lower than the new 21 percent corporate rate. And under the new tax code, Apple would also have been taxed whether it brought the money back or not.

By shifting the money under the new terms, Apple has saved $43 billion in taxes, more than any other American company, according to the Institute on Taxation and Economic Policy, a research group in Washington.

Other tech giants are set to follow suit in the coming months. Companies like Microsoft, Alphabet and Cisco also shifted their profits into offshore shell companies, avoiding billions of dollars in taxes, and are now in a better position to bring the money back.

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Although Republican supporters of the tax law argued that the influx of international profits would create jobs and increase wages, many economists disagreed that a one-time repatriation would have any substantial impact on real investment.

Apple’s announcement, couched as a major investment in the United States instead of a massive financial windfall, followed years of criticism that the company did not do enough for the American economy because it makes most of its products in China and parked its profits abroad.

During the 2016 presidential campaign, Apple was a frequent target of Mr. Trump, who pledged that as president he would force the company to start making iPhones and Macs in the United States. While that hasn’t happened and is unlikely to, Apple has since gone on a charm offensive to demonstrate its value to the American economy.

The company has highlighted the number of jobs created by the so-called app economy, an ecosystem of software and services that run on the iPhone and other Apple products. Last year, Apple also said it was creating a $1 billion fund to invest in advanced manufacturing in the United States. On Wednesday, Apple said it was increasing the size of that fund to $5 billion and noted that it was already backing projects from manufacturers in Kentucky and Texas.

Apple, which is based in Cupertino, Calif., also took a page out of Amazon’s public relations strategy on Wednesday by saying it will open a new domestic campus in a location where it currently has no operations. Amazon garnered good will throughout the country last year when it announced plans to open a second corporate headquarters outside its home base of Seattle.

Apple currently has about 84,000 employees in the United States, so 20,000 new jobs would be a 24 percent increase. The company added that it would invest more than $30 billion in capital expenditures, or spending on parts and the equipment required to produce them, over the next five years in the United States.

For a comparison, Apple spent $14.9 billion in capital expenditures in the last fiscal year, though it did not specify how much it spends in the United States alone.

For Apple, repatriating the cash creates opportunities that could include acquisitions and higher dividends for shareholders. The company had previously chosen to borrow money to fund its stock buybacks and dividends, instead of bringing its cash back from abroad. Over the last five years, Apple has returned $233 billion in cash to shareholders through buybacks and dividends.

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Paying $38 billion in taxes now is unlikely to strain Apple’s checkbook because the company had already earmarked $36.4 billion in anticipation that it would eventually have to pay taxes on its foreign earnings.

“From a financial statement perspective, it’s going to be a nonevent,” said J. Richard Harvey, a Villanova University law professor and former Internal Revenue Service official. Other companies are not as prepared, he said, and would likely have to take a significant loss should they make a one-time cash repatriation.

Apple employees will see benefits as well. Mr. Cook said in an email to staff on Wednesday that Apple was increasing investment in its employees by rewarding them with bonuses of $2,500 in restricted stock units, according to people familiar with the matter, who asked not to be identified because the plans were not public. Apple joins other companies, such as ATT, that have issued employee bonuses since the tax law was signed.

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Article source: https://www.nytimes.com/2018/01/17/technology/apple-tax-bill-repatriate-cash.html?partner=rss&emc=rss

Carillion Collapse Could Lead to Thousands of Job Losses in U.K.

“We ensured that all but one of those contracts was a joint venture,” she added, meaning that “there is another company available to step in and take over the contract.”

The Insolvency Service, a government agency, said on Wednesday that it had halted bonus and severance payments to former Carillion executives.

The Financial Times reported on Wednesday that the government was closely monitoring Interserve, another big construction and services company that has struggled financially, prompting a sharp drop in its share price. But Interserve, business analysts and the government all said that concerns about the company were overstated; in a statement, the Cabinet Office said, “We do not believe that any of our strategic suppliers are in a comparable position to Carillion.”

Carillion, with about 20,000 employees in Britain, touched myriad sectors of British life, as well as operating overseas. It not only managed or co-managed major, unfinished construction projects for the government, like a high-speed rail link among English cities; a hospital near Birmingham; another hospital, in Liverpool; and a highway near Aberdeen, Scotland. Carillion also helped operate an array of government services, including running prisons, delivering school lunches, and maintaining schools and courthouses.

The government has vowed that all public-sector work by Carillion will continue and that the company’s workers on those contracts will be paid, adding that other contractors were being sought to take over those jobs. But the government has said that it could not ensure that thousands of the company’s employees working on private-sector projects would be paid past Wednesday.

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“That’s a scandal,” Tim Roache, the leader of GMB, a major trade union, told BBC Radio. He said that the government should ensure a longer period of pay for those workers, while other companies explored taking on Carillion contracts and Carillion employees.

The company had about $1.7 billion in debt and an $800 million pension deficit. By Monday, it had cash reserves of less than $40 million.

Carillion’s subcontractors, who complained that the company was behind on its bills, face being paid only a small fraction of what they were owed before the collapse.

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Flora-tec, a landscaping company, said it would lay off 10 workers because it could never recoup most of the $1.3 million it was owed by Carillion.

PwC, the firm handling the liquidation, has told the subcontractors, who employ tens of thousands in Britain, to continue working for now, pledging that “you will get paid for goods and services you supply” after Monday’s liquidation filing, but that those contracts could be terminated.

“Over the coming days, we will review supplier contracts and we’ll contact you concerning these soon,” it said.

But some subcontractors are leery of even the short-term assurances. Shaun Weeks, who runs a cleaning company, told the BBC that it had stopped sending one of its workers to a prison, under a contract with Carillion, until it knew more.

At the construction site of the new Royal Liverpool University Hospital — where activity slowed sharply on Monday and some workers reported finding the site locked — work resumed on Tuesday, but some subcontractors said they expected delays as Carillion’s obligations were reviewed.

Follow Richard Pérez-Peña on Twitter: @perezpena.

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Article source: https://www.nytimes.com/2018/01/17/world/europe/carillion-collapse-uk.html?partner=rss&emc=rss

Poll Finds Upturn in Sentiment on Tax Overhaul and Economy

Mr. Moran said that he had initially been concerned that the president’s shoot-from-the-hip style could be bad for financial markets and the economy. A year into his term, Mr. Moran still isn’t a fan, but he said he was “pleasantly surprised” by Mr. Trump’s stewardship of the economy. The corporate tax system was overdue for an overhaul, Mr. Moran said, and he applauded efforts to reduce regulations on businesses.

“I won’t say that Trump deserves all the credit for that, but it is true that the economy just really picked up,” said Mr. Moran, who described himself as a political moderate who leans Republican but voted for neither Mr. Trump nor his opponent Hillary Clinton in 2016.

Over all, 42 percent of Americans believe the national economy is better than it was a year ago, according to the Times survey, which polled 10,509 adults in the first week of January. Only 23 percent believe the economy has gotten worse. And a broader measure of consumer confidence, which combines five questions on economic and financial conditions into a single index, rose significantly in January after remaining flat for most of 2017.

A Rosier Outlook

SurveyMonkey’s consumer confidence index, which combines five questions on Americans’ financial and economic outlook, rose in January after staying flat for most of 2017.

Note: Partisan categories include people who lean toward a particular party. | Source: SurveyMonkey

Ordinarily, such figures would bode well for Republicans heading into the midterm elections this fall. Most Americans, however, said Mr. Trump’s policies had either hurt the economy or had little effect on it; only 38 percent said his policies had made it better.

“The overall story remains that the president is not getting credit for an economy that has been continuing on an upward trajectory,” said Jon Cohen, vice president for survey research at SurveyMonkey.

Other recent surveys show public confidence in the economy is rising, but less movement on the tax bill. A Quinnipiac University poll released last week found that two-thirds of Americans viewed the economy as excellent or good, up 3 percentage points from December. A Gallup poll published last week found that approval for the law had risen to 33 percent in January from 29 percent in December, an increase that was not statistically significant.

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Supporters of the tax law dismissed its poor poll numbers in the fall, saying Americans would like it more once they began to see its benefits in their take-home pay. “The results are going to be what sells this bill,” House Speaker Paul D. Ryan, Republican of Wisconsin, told reporters in mid-December.

Many Americans won’t start to see more money in their paychecks until February, because the Internal Revenue Service issued new tax withholding guidance only last week. But a series of high-profile announcements, from companies such as Walmart and Wells Fargo, have cited the tax bill in decisions to raise wages or give employees one-time bonuses.

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Many analysts, however, say the pay increases were more a result of the strong labor market than the tax law. A Morgan Stanley survey of Wall Street analysts released on Tuesday found that only 22 percent expected the companies they follow to direct at least some of their tax savings to employee compensation. By contrast, 83 percent of analysts said companies would increase share buybacks, dividends or merger activity. (Analysts could select multiple responses.)

Still, the law, which cut taxes for businesses and individuals while eliminating many deductions and credits, isn’t particularly popular. Forty-nine percent of Americans in the Times survey said they disapproved of it, and far more people said they were strongly opposed to it than strongly in favor. And deep political divisions are evident: 86 percent of Republicans approve of the law, but just 13 percent of Democrats do.

Most Americans still don’t think they will see their taxes go down under the new law. According to the survey, 41 percent of Americans expect a tax cut this year, up from 33 percent in December. Most independent analyses estimate that three-quarters or more of households will receive a tax cut in 2018, although those cuts are set to expire after 2025.

Doug Leichliter, a retiree in western Pennsylvania, questioned the wisdom of a big tax cut at a time when unemployment is already low, saying he worried that it could lead to inflation. And he said he doubted that middle-class Americans would see much benefit in any case.

“I think everybody’s going to see a little bump, but the vast majority of the money is going to go to the 1 percent,” Mr. Leichliter said. “I don’t necessarily think the money’s going to trickle down.”

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Article source: https://www.nytimes.com/2018/01/16/business/economy/tax-economy-survey.html?partner=rss&emc=rss

Economic Scene: Making Medicaid a Tool for Moral Education May Let Some Die

Mr. Bevin might care to glance south over the border. In 2005, Tennessee removed 170,000 people — almost one in 10 Medicaid beneficiaries in the state, mainly working-age adults without children — from its Medicaid program to save money. They didn’t do well.

The cuts didn’t just eat into poor Tennesseans’ finances. One study found that childless adults in Tennessee — especially the least educated — started delaying or forgoing visits to the doctor. They reported suffering more days in bad health and incapacitated. And they recorded more visits to hospital emergency rooms, which are required by law to care for all comers, regardless of their ability to pay.

Delayed care can kill. Breast cancer is the second-leading cause of cancer death among women. One of eight American women will get it. Detecting it early is critical. Specifically, the five-year relative survival rate for localized breast cancer is 98.5 percent when detected early, but only 25 percent when detected at a distant stage. Waiting for 60 days or longer to get treatment raises the risk of dying of breast cancer over five years by 85 percent.

Another study from Tennessee found that losing access to Medicaid led to delays in diagnosis, so more breast cancers were caught at a later stage. Women who lived in low-income ZIP codes were 3.3 percentage points more likely to receive a diagnosis of late-stage cancer than women living in high-income ZIP codes.

Photo
Gov. Matt Bevin of Kentucky announcing federal approval of the plan last week to require many Medicaid recipients to work to receive coverage. Credit Alex Slitz/Lexington Herald-Leader, via Associated Press

“We are ready to show America how this can and will be done,” Mr. Bevin said at a news conference in Frankfort. And yet Kentucky’s approach to Medicaid draws from a well-worn playbook, one from which both Republicans and Democrats have drawn to trim the social safety net over the years.

Kentucky was an eager participant in the last big so-called entitlement reform, visited upon the nation’s poor just over two decades ago. Under that 1996 program directed at welfare benefits, the entitlement to federal assistance was replaced by a hodgepodge of programs managed by the states and financed by a fixed dollop of federal cash. Work requirements became the norm. And people got less help.

The number of families in poverty in Kentucky has budged little since then, declining to 116,000 from 132,000. But the number of families getting cash assistance has fallen by two-thirds. Today, the Temporary Assistance for Needy Families program covers only one of five poor families in the state. For a single mother with two children, it provides $262 a month — a third less than it did two decades ago, adjusted for inflation.

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And Kentucky is hardly the stingiest state. In 15 states, antipoverty cash benefits reach fewer than 10 percent of the families with children in poverty. In all of them, the change was sold as a way to encourage poor Americans to get off their backsides, get a job and prosper on their own — free of the clutches of the welfare state. Yet though it pushed many poor families into employment, it failed at mitigating their distress: Rarely do such families’ breadwinners earn enough to move out of poverty.

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The problem with the latest twist in Republicans’ effort to pare the social safety net is that removing the poor’s health insurance may not just make their life more difficult.

It might kill them.

It is well known by now that health insurance saves lives. A review of recent research in the Annals of Internal Medicine concluded that the odds of dying for non-elderly adults are between 3 and 41 percent higher for the uninsured than for the insured.

Work by Katherine Baicker, now at the University of Chicago, with Benjamin Sommers and Arnold Epstein at Harvard found that Medicaid expansions in the past significantly reduced mortality. Their research, they concluded, “suggests that 176 additional adults would need to be covered by Medicaid in order to prevent one death per year.”

It doesn’t take a leap of imagination to figure out what might happen if 100,000 people were to lose their coverage.

As Lawrence H. Summers, once President Barack Obama’s top economic adviser, noted about the Republican tax cut passed in December, thousands would die if the tax bill were to cut the health insurance of 13 million people, as the nonpartisan Congressional Budget Office has estimated.

These would be mostly lower-income Americans. Maybe they would be people from Kentucky — the state with the most cancer deaths and the most preventable hospitalizations, 45th out of 50 in the incidence of diabetes and 47th in terms of heart disease.

Would their deaths cause America to be greater?

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Article source: https://www.nytimes.com/2018/01/16/business/economy/work-medicaid.html?partner=rss&emc=rss

Workplace Raids Signal Shifting Tactics in Immigration Fight

“It’s causing a lot of panic,” said Oscar Renteria, the owner of Renteria Vineyard Management, which employs about 180 farmworkers who are now pruning grapevines in the Napa Valley.

When word of the raids spread, he received a frenzy of emails from his supervisors asking him what to do if immigration officers showed up at the fields. One sent a notice to farmhands warning them to stay away from 7-Eleven stores in the area.

“Our work force frequently visits 7-Elevens,” said Mr. Renteria. “They’re very nervous. It’s another form of reminding them that they’re not welcome.”

The Obama administration largely took a lower-profile approach to enforcement, auditing employers’ compliance in documenting their workers’ status without conducting many on-site investigations. A handful of employers faced prominent criminal cases in recent years, but most companies employing workers illegally avoid serious charges, because it is often impossible to prove that they knew someone had handed in fake documents.

“The consequences are not that harsh, and the effect of the enforcement is less than it should be,” said Jessica M. Vaughan, the director of policy studies for the Center for Immigration Studies, which advocates tighter restrictions on immigration.

The law requires employers only to ensure that documents appear to be valid, and federal law prohibits them from requiring specific types of identification from workers.

Photo
Workers in Sanger, Calif., picking grapes that will be used as raisins. More than half of California’s agriculture workers lack documents, according to a federal survey. Credit Max Whittaker for The New York Times

Employers negotiate reduced administrative fines and sometimes put political pressure on local officials when they become targets, making the punishment for companies “weaker than it should be,” Ms. Vaughan said. “There are employers for whom the penalties are just the cost of doing business.”

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The more lasting effect of raids is to spread fear among undocumented workers, who often end up bearing the brunt of enforcement action at the workplace.

“Having some semblance of a fear of workers’ being arrested will have a behavioral shift,” said William Riley, who spent 20 years as an ICE special agent, under both Bush presidencies and the Clinton and Obama administrations, and is now a consultant at Guidepost Solutions, working on corporate compliance. Mr. Riley said that under the last administration, people were more lax about working illegally, assuming they wouldn’t be arrested.

“There was slightly more complacency when it was pretty well known that there wasn’t a fear of being arrested in your workplace,” Mr. Riley said, nor much of a deterrent to “using fake documents to get a job.”

Mr. Renteria said he expected raids on farms soon, because the industry is a big employer of “people with complicated immigration status.” More than half of California’s agriculture workers lack documents, according to a federal survey. Mr. Renteria worries that if agents home in on the Napa area, no one will stay to harvest the grapes.

“They will start calling their cousins, aunts and uncles and finding the safest place where the work is,” he said.

The last flurry of public, on-site investigations happened under President George W. Bush, who sent immigration agents to several meatpacking plants and other workplaces. Those raids led to hundreds of arrests of workers and prompted many other employees to stop reporting to work, according to local news reports. But they also enraged advocates for immigrants and drew complaints from business owners.

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The Obama administration changed tack and pursued employers mainly by inspecting their paperwork. Such audits doubled from fiscal years 2009 to 2013, reaching 3,127, then declined sharply.

Law enforcement may welcome a more aggressive approach under the new administration. But sending armed agents to the doorsteps of American companies could prove politically uncomfortable for Mr. Trump, who has portrayed himself as an ally to business.

Doris Meissner learned how quickly local politicians can spring into action when their hometown industries feel threatened. As head of the agency that preceded ICE, the Immigration and Naturalization Service, from 1993 to 2000, Ms. Meissner tried to focus on holding employers accountable.

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She approved the start of Operation Vanguard in the 1990s, in which the agency asked for employee records in several Nebraska meatpacking plants. When it came time to pursue charges against some employers, Ms. Meissner said, she started receiving frantic calls from Nebraskans on Capitol Hill.

“The politics gets hot and heavy,” Ms. Meissner said. “These are communities that are heavily reliant on these industries. This is the major employer. These are the major consumers at the stores and the bowling alleys.”

Inspecting Employers

Audits of employers were favored early in the Obama administration as an immigration enforcement tool, but their use then declined.

By The New York Times | Source: Immigration and Customs Enforcement

Ms. Meissner says work-site raids don’t work in the long term because they fail to address the real magnet drawing people into the country: a need for laborers.

Cracking down on employers who violate the law is crucial, she said, and it isn’t right to employ people who are here illegally. But without a visa system allowing unmet labor needs to be addressed with foreigners, she said, ICE shouldn’t expect patchwork enforcement stings to persuade farms, hotels or meatpackers to stop employing unauthorized workers.

“When your laws don’t align with the market, then the market is always going to win,” Ms. Meissner said.

Advocates for immigrant workers said the raids were just the most recent source of a quiet terror reverberating across factory floors since Mr. Trump took office.

“When you have such a public thing happening close to home, folks feel the presence of ICE constantly,” said Mariela Martinez, the organizing director of the Garment Worker Center in Los Angeles. But her clients have families and children here, Ms. Martinez said, so they can’t just pack their bags and go.

“It’s not motivating people to self-deport,” she said. “It’s motivating people to not use their labor rights. It’s causing people to distrust government agencies.”

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Ms. Martinez helps people in the garment industry file claims for back pay with the state when their employers pay them less than they’re owed. She said far fewer workers asked for restitution last year compared with 2016, partly because of concern that their bosses would call ICE if they spoke up.

That was the punishment one manufacturer meted out to Pablo, a 36-year-old sewing worker in Los Angeles who would not give his last name because he lacks papers and fears being identified by ICE. When he received a check for $92 after working three 11-hour days at a garment factory last month, Pablo insisted that he deserved more.

His boss responded by offering to pay him what he was owed, but only if Pablo offered up his home address. After signing another check, Pablo said, the factory owner said that he would call immigration officials and direct them to Pablo’s door.

“You feel terrible. You feel uncomfortable,” Pablo said. “I was so scared.” He called Ms. Martinez and they returned together the next day to tell the employer that the threat constituted illegal retaliation under California law. The employer backed down.

The 7-Eleven raids will give garment bosses even more control over their workers, Pablo said.

“Now they know the president is on their side,” he said, “so they feel like they can intimidate people and treat them badly and they will never talk.”

Still, Pablo has been here since he was 17, and has no plans to leave yet. He has bills to pay.

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Article source: https://www.nytimes.com/2018/01/15/business/economy/immigration-raids.html?partner=rss&emc=rss

As Labor Pool Shrinks, Prison Time Is Less of a Hiring Hurdle

Meghen Yeadon, a recruiter for Stoughton, found part of the solution: a Wisconsin Department of Corrections work-release program for minimum-security inmates.

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Work-release programs have often been criticized for exploiting inmates by forcing them to work grueling jobs for pay that is often well below minimum wage. But the Wisconsin program is voluntary, and inmates are paid market wages. State officials say the program gives inmates a chance to build up some savings, learn vocational skills and prepare for life after prison.

Ms. Yeadon initially encountered skepticism from supervisors. But as the local labor pool kept shrinking, it became harder to rule out a group of potential — albeit unconventional — workers.

Less Education, but Still Gaining

In the past five years, employment rates have grown the most among those who have not earned a high school diploma.

+4.0

pct. points

Less than

high school

Change in

employment

rates

+3.5

Some college or

associate’s degree

+3.0

Ages

25-54

+2.5

High school

diploma or G.E.D.

+2.0

Bachelor’s

degree or higher

+1.5

+1.0

+0.5

’12

’13

’14

’15

’16

’17

Note: Data shows monthly percentage-point changes in the 12-month moving averages of employment rates. | Source: Census Bureau, via IPUMS

“Our company is looking for new ways to find pools of people just because of our hiring needs being so high,” Ms. Yeadon said. “It just took them to hear the right sales pitch.”

Other companies are making similar choices. Officials in Wisconsin and other states with similar inmate programs say demand for their workers has risen sharply in the past year. And while most companies may not be ready to turn to inmate labor, there are signs they are increasingly willing to consider candidates with criminal records, who have long faced trouble finding jobs.

The government doesn’t regularly collect data on employment for people with criminal records. But private-sector sources suggest that companies have become more willing to consider hiring them. Data from Burning Glass showed that 7.9 percent of online job postings indicated that a criminal-background check was required, down from 8.9 percent in 2014.

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Mike Wynne has seen the change in employer mind-set firsthand. Mr. Wynne runs Emerge Community Development, a Minneapolis nonprofit that helps people with criminal records or other difficulties find jobs. In the past, Mr. Wynne said, companies saw working with Emerge mostly as a form of public relations. But with the unemployment rate in the Minneapolis area at 2.1 percent, companies have increasingly turned to Emerge as a source of labor.

“We see employers really knocking on the door of our organization in a way that we haven’t seen in probably 20 years,” Mr. Wynne said.

As employers dip deeper into the pool of available labor, workers are coming off the economy’s sidelines. The participation rate for what economists call prime-age workers — those ages 25 to 54 — hit a seven-year high in December. Employment gains have been especially strong for groups that often face discrimination — unemployment for African-Americans fell to 6.8 percent in November, the lowest rate on record.

Amy Glaser, a senior vice president for Adecco, a staffing firm, said that especially during the recent holiday season, there was a surge in demand for warehouse workers, creating opportunities for people who might have struggled to find work earlier in the economic recovery. Two years ago, Ms. Glaser said, companies required warehouse workers to have high school diplomas and experience with the scanners used to track merchandise. Now, increasingly, they require neither, she said.

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“We’ve seen an extreme escalation in the past 12 months,” Ms. Glaser said. “If someone applies for a job and you don’t get to them within 24 hours, that person will already have taken another job.”

Even during the strong economy that accompanied the housing boom of the mid-2000s, the unemployment rate never dropped below 4.4 percent, and the United States has never reached the point at which everyone who wanted a job could get one. Perhaps as a result, incomes were stagnant for many middle-class families, and many groups that have historically faced discrimination or other disadvantages in the labor market never experienced the full benefits of the strong economy.

Many economists say the recovery still has a ways to go before rivaling that of the late 1990s and early 2000s. The unemployment rate has fallen nearly as far as it did in 2000, when it hit 3.8 percent. But millions of Americans still have part-time or temporary jobs, or are out of the labor force entirely. And parts of the country still bear the scars of the recession that officially ended nearly a decade ago.

“I think of the late ’90s as having been a very healthy labor market,” said Narayana Kocherlakota, the former president of the Federal Reserve Bank of Minneapolis. “When I look at the United States today, I think it has some room to grow in terms of achieving that kind of health.”

Still, household incomes have risen rapidly in the past two years, with the strongest gains coming for those in the poorest families. And there are signs that the tightening labor market is at last beginning to shift bargaining power from companies to workers. Ahu Yildirmaz, an economist who helps lead the research arm of the payroll-processing company ADP, said her firm’s data showed more people switching jobs, and getting bigger bumps in pay for doing so.

For Mr. Forseth, the job at Stoughton Trailers was an opportunity to save money and prove his value. He even earned the Employee of the Month award — although, because he was still incarcerated, he couldn’t take advantage of the parking spot that came with it.

Now, however, he is thinking bigger. Other jobs in the area pay higher wages, and his freedom has opened up more options. He has been talking to another local company, which is interested in training him to become an estimator — a salaried job that would pay more and offer room for advancement.

“They’re saying they’re willing to teach someone that wants to learn,” Mr. Forseth said. “That’d be an actual career.”

Photo
A recruiter for Stoughton Trailers found that supervisors were skeptical when she proposed hiring inmates. They became more receptive as the local labor pool continued to tighten. Credit Narayan Mahon for The New York Times

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Article source: https://www.nytimes.com/2018/01/13/business/economy/labor-market-inmates.html?partner=rss&emc=rss