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Economix: Struggling College Graduates

June 11, 2011 by Leave a Comment

Sally Cameron has an Ivy League graduate degree, and yet found herself tending bar. Mel Rodenstein earned a master’s degree in international affairs but was working in a “mindless” clerk’s job, eating rice and beans to save money.

Then there was the young woman who attended a good public university only to spend the first year after college driving around North America, with a friend and fellow struggling graduate. “There are no jobs anyway,” the woman said.

All of these college graduates could have appeared in recent newspaper stories bemoaning the fate of college graduates. Yet they appeared in similar stories that ran years ago — 1982 in Ms. Cameron’s and Mr. Rodenstein’s case and 1993 in the case of the young women on the road trip.

So Kevin Carey, an education writer and policy analyst, did something brilliant. He tracked down the graduates to see what had become of them. He has written about his findings in The New Republic:

[Mr. Rodenstein] went on to a series of nonprofit management jobs and, by 2010, was a senior research project supervisor at the Johns Hopkins University School of Health…. Today, one of the [two road trippers] lives in Silver Spring, Maryland, and runs her own H.R. consulting firm. The other got a PhD and works 20 feet away from this author in a Washington, DC think tank.

Sally Cameron, meanwhile, isn’t tending bar anymore. She’s a senior manager at an international development consulting company that works under contract with USAID. Her recent work includes building railroads in cyclone-devastated Madagascar….

In other words, they all turned out pretty well. They were no doubt damaged by the downturn into which they graduated. But they turned out vastly better than most people of their generation who didn’t get a college degree. Today, in fact, you could probably use a couple of them to illustrate a very different trend: the growing gap in the pay between college graduates and everyone else.

Bureau of Labor Statistics

Mr. Carey again:

For going on four decades, the press has been raising alarms that college degrees may no longer be a sound investment. Two things about these stories have remained constant: They always feature an over-educated bartender, and they are always wrong.

I recommend the whole article. It’s more clever than my summary can convey. It’s also a good example of persuasive writing.

If you’re interested in more on the subject, Catherine Rampell and I have each written related posts recently.

Article source: http://feeds.nytimes.com/click.phdo?i=242635c4c6d1e81e252a67f59bbe7d8a

Filed Under: Economy News Tagged With: , ,

Bottom May Be Near for Slide in Housing

June 1, 2011 by Leave a Comment

For real estate, some economists say, an end to the seemingly endless decline in housing values might be in sight.

Not immediately. At the moment, prices are still dropping. In 20 large cities, prices fell 0.8 percent in March from the previous month, according to the Standard Poor’s Case-Shiller Home Price Index released Tuesday. That pushed the closely watched index below its level of two years ago to a new post-bubble low, and put it 33.1 percent under its July 2006 peak.

Few analysts expect housing prices to rebound anytime soon. But quite a few are predicting that the market is close to the moment when things will stop getting worse, which will be a major improvement all by itself.

“By far the bulk of the downturn of housing prices is beyond us,” said Paul Dales of Capital Economics. He expects the market to slip 5 percent further, slightly more than he was expecting a few months ago.

“There are some amazingly favorable signs. Housing is the most undervalued it’s been in 35 years,” Mr. Dales said. “At some point, it’s going to do very well.”

Peter Muoio, senior principal of Maximus Advisors, says he thinks the market has already bottomed, although he expects it to bounce around in a narrow range for a few years rather than recovering. And James F. Smith, chief economist for the investment firm Parsec Financial and a rare housing bull, is predicting a 25 percent climb from here by mid-decade.

“There’s a lot of pent-up demand for housing and someday it will be unleashed,” Mr. Smith said, adding: “Your guess is as good as mine when it will come.”

The new Case-Shiller data did not offer much room for short-term optimism. The national housing index, which is reported quarterly, fell 4.2 percent in the first quarter after a drop of 3.6 percent in the fourth quarter of 2010. This, too, is a new recession low.

Twelve of the 20 cities in the index hit a post-bubble low in March. Washington, D.C., was the only city where prices rose both in March and over the last year. In a double-digit drop that echoed the worst era of the crash, Minneapolis fell by 10 percent over the year.

“Home prices continue on their downward spiral with no relief in sight,” David M. Blitzer, the S. P. Index Committee chairman, said in a statement.

Housing prices are now back to where they were in mid-2002 even before taking inflation into account. Such a decline was unimaginable to the boosters and many of the analysts in the middle of the boom, who were fond of saying that house prices never fell on a national basis. But as credit dried up and the easy refinances disappeared, the foreclosures began. Prices fell sharply in late 2006, 2007 and 2008.

The market turned around in 2009, prompting hopes that the worst was over. A government tax credit proved wildly popular, but the declines resumed after its expiration a year ago.

Some economists think there are still relatively large drops to come. Dean Baker, co-director of the Center for Economic and Policy Research, expects a 6 to 8 percent fall during the rest of the year. “There are a lot of forces pushing prices downward,” he said.

One of them is the excess number of houses. Builders built too much during the boom, and the mania for second and third homes has sharply diminished. New household formation will soak up the supply, but that will take years.

The financial blog Calculated Risk estimated the excess housing supply this week using 2010 Census data, which it compared to 1990 and 2000. The blog concluded that the excess in April 2010 was about 1.8 million units, but probably several hundred thousand fewer now.

The wild card in all of this is consumer sentiment, otherwise known as confidence. The United States Conference Board reported Tuesday that its consumer confidence index unexpectedly fell to 60.8 in May from a revised 66 in April. Analysts had forecast a one-point rise, but the mood turned hesitant. The May level is the lowest since the fall.

People without confidence in the economy and their own prospects tend to put off major purchases.

“People are still scared,” Douglas C. Yearley Jr., chief executive of the high-end builder Toll Brothers, said in a recent interview. “If they look in the paper and see that Robert Shiller says prices have another 20 percent to go, it has to keep them at home.”

Mr. Shiller, one of the developers of the Case-Shiller index and a housing bear, did not respond to requests for his latest forecast, a development that no doubt made Mr. Yearley’s day.

Article source: http://www.nytimes.com/2011/06/01/business/01housing.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

China’s Economy Slows, but Inflation Still Looms

May 30, 2011 by Leave a Comment

Chinese manufacturers’ backlogs of orders are gradually shrinking in many industries. Purchasing managers have become less optimistic about their businesses’ prospects. And after surging past the United States in car sales over the last two years, the Chinese auto market unexpectedly stalled last month, as carmakers curtailed production plans.

Because China’s cooling economy is partly a result of Beijing’s efforts to contain inflation, some economists are not worried, saying a slight slowdown could be positive. And they say that after the government eases off the brakes, economic growth should quickly pick back up.

But other experts worry that inflation is already so entrenched that the government may be forced to continue braking the economy for a considerable time.

“They have to continue to tighten policy into what we expect will be a sharp growth downturn, already likely to be under way,” said Diana Choyleva, an economist in the Hong Kong office of Lombard Street Research, an economic forecasting firm based in London.

The world closely monitors the temperature of China’s economy, so crucial has it become to the health of global business and finance. This spring, as economists at Western investment banks have been reducing their growth forecasts for China, the specter of slackening Chinese demand has helped send world prices for industrial commodities like copper falling by 10 percent or more.

And the “A” share stock market in Shanghai has dropped 11.7 percent from its high on April 18, including drops of 0.13 percent on Monday and nearly 1 percent on Friday.

Despite signs of slowing Chinese growth, some international corporate executives say they remain optimistic, particularly if they look beyond the next several months.

“I don’t think it’s a hard landing,” said Martin Brudermüller, the vice chairman for BASF of Germany, the world’s largest chemical company, which sells to a wide range of industries in China. “I’m not really worried at this point.”

And even though Goldman Sachs on Tuesday cut its forecast for economic growth in China during the second quarter to 8 percent — down from 8.8 percent — it predicted that growth would recover to 9.3 percent by the fourth quarter.

The optimists note that the Chinese economy expanded robustly until this spring, even though policy makers had been stomping on the brakes since October to try to curb inflation. Seen from that bright-side perspective, policy makers can easily press the growth accelerator, after inflation starts to subside.

The braking measures have included the requirement that commercial banks, to restrict their ability to lend, must park more than one-fifth of their assets at the central bank. That is starving all but the largest and most politically connected companies of capital.

And trying to slow a real estate boom that looks more and more like a dangerous bubble, the government has also put many restrictions on issuing new mortgages. The measures include requiring higher down payments, to reduce the risk that a real estate collapse would harm the banking system, as happened in the United States.

Another slowdown factor: the huge government investments in high-speed rail and other infrastructure, which played a central role in China’s swift recovery in 2009 from the global economic downturn, have begun to level off.

But Douglas Hsu, the chairman and chief executive of the Far Eastern Group, a big Taiwanese multinational with extensive investments in the cement and petrochemicals industries in mainland China, predicted that government-supported efforts to increase construction of low-income housing and move more people from rural areas to cities would offset the gradual deceleration in infrastructure spending in the months and years to come.

The big question now is how much economic growth may slow, before the authorities shift their priority from controlling inflation to revving the growth engine.

Some businesses here in Changsha, a city of 6.5 million people that is the capital of Hunan province in south-central China, say they already see weakening sales.

“Our business is down 30 to 40 percent, we’re losing money every day,” said Li Chuanlian, the manager of a store that sells stoves and water heaters.

Article source: http://feeds.nytimes.com/click.phdo?i=bcfa9d7a578e914929b3c01a34087317

Filed Under: Business News Tagged With: , ,

DealBook: Martha Stewart Living in Play

May 25, 2011 by Leave a Comment

All anyone can seem to discuss this week is Oprah. But here at DealBook on Wednesday morning, we can’t stop talking about Martha.

Shares of Martha Stewart Living Omnimedia surged more than 20 percent on Wednesday after the company announced that it had retained Blackstone Advisory Partners to explore strategic partnerships.

Blackstone will “review and respond to various parties that have expressed interest in potentially partnering with or investing in the company,” the company said in a statement.

“As the founder and largest stockholder, I fully support this initiative to take our business and iconic brand to the next level,” said Martha Stewart, who also announced that she was rejoining the board of directors.

Ms. Stewart has continued to play a significant role in the company that bears her name after serving a prison sentence in 2005 for lying to federal investigators about a stock sale. She was banned for five years from serving as an officer or director at the company.

Along with the announcement that the company is in play, Martha Stewart Living named Lisa Gersh president and chief operating officer. Ms. Gersh, a co-founder of the women-focused television network Oxygen Media, joins the company from NBC, which acquired Oxygen in 2007. Martha Stewart Living, which has struggled to fill the ranks of its executive suite in recent years, said that Ms. Gersh would assume the chief executive post within the next 12 to 20 months.

The company has struggled in recent years amid a downturn in advertising and Ms. Stewart’s legal problems.

Even with the surge on Wednesday, Martha Stewart’s market capitalization is only about $250 million.

Article source: http://feeds.nytimes.com/click.phdo?i=d42ac03435d8dd68496551959455b533

Filed Under: Business News Tagged With: , ,

Earthquake and Aftermath Push Japan Into a Recession

May 19, 2011 by Leave a Comment

The drop off was worse than economists had expected. In a survey of 23 economists, Bloomberg News had projected an average drop of 1.9 percent. It also marked Japan’s second straight quarter of economic contraction, leading the country into its second recession in less than three years.

In the aftermath of the earthquake, the country’s production lines were crippled and it faced a debilitating energy shortage, in part because of the subsequent shutdown at the Fukushima Daiichi nuclear plant. Economists project that Japan’s economy will shrink again in the current quarter, which ends in June, as production continues to falter and weigh on industrial output and exports.

Although demand from reconstruction is expected to lead to a rebound in the nation’s economy, many predict that things will get worse before they get better.

“Japan’s economy is expected to remain weak for the time being,” Kaoru Yosano, Japan’s economics minister, told reporters after the figures were announced on Thursday morning. Supply constraints were easing and reconstruction demand would most likely be felt later this year, Mr. Yosano said. Still, some data suggest that the downturn may be deep but quick. Machinery orders, an indicator of future capital spending, increased unexpectedly in March, while manufacturers said recently that they hoped to return to normal production more quickly than initially forecasted.

“The economy has the strength to bounce back,” he said.

The data, released by the Cabinet Office in Japan, showed that the country’s gross domestic product shrank 0.9 percent in the first quarter compared with the previous three months. That translates to a decline, in annualized terms, of 3.7 percent.

The nuclear crisis at the Fukushima Daiichi plant has compounded the effects of the earthquake and tsunami by knocking out power capacity.

The government has ordered factories, offices and homes across Japan to reduce electricity use by 15 percent this summer.

Earlier this month, the government told another nuclear power plant to shut down until it could bolster its tsunami defenses, adding to concerns about a possible energy shortfall. A number of other nuclear reactors that ceased operating after the quake remain closed. The government is overhauling its policy on nuclear power, which supplies 30 percent of Japan’s electricity.

More than 24,000 people are dead or missing from the March 11 quake and tsunami, which destroyed swaths of Japan’s northeast coast. The government has estimated that damage from the disaster could reach as high as 25 trillion yen, or more than $300 billion.

The disaster hit an economy already weakened by years of deflation and depressed consumer spending, which made it reliant on exports for growth. Japan’s economy shrank for four straight quarters during the global financial crisis.

But Japanese exporters have been forced to cut back production in the disaster’s aftermath and race to repair their supply chains and grapple with the energy shortage. Last week, Toyota Motor, whose operations have been severely disrupted since the quake, said its first quarter profit fell 77 percent from the same period last year.

Japan’s Nikkei 225 stock average has lost more than 7 percent since March 11. Retail sales recorded their biggest drop in over a decade in March as uncertainties from the disaster caused consumers to avoid non-essential spending.

The Japanese economy contracted in the fourth quarter of 2010 as well. Though economists often define a recession as two consecutive quarters of decline in a country’s gross domestic product, Japan appoints a committee of academics to determine when recessions begin and end.

The Japanese parliament has approved a 4 trillion yen ($49 billion) extra budget for reconstruction, and Prime Minister Naoto Kan has promised more spending to help cushion the economic blow.

Japan’s central bank has also injected record amounts of cash into money markets in a bid to kick-start spending in the economy.

Article source: http://www.nytimes.com/2011/05/19/business/global/19yen.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Temp Workers in Germany Dismay Unions

April 20, 2011 by Leave a Comment

Originally from the area around Erfurt in eastern Germany, Mr. Hintermeier has spent 15 years as a temporary worker, going wherever the jobs are.

“You’re doing the same work for less pay,” said Mr. Hintermeier, who earns about 9 euros, or almost $13, an hour. That is about $2.86 an hour less than the average for eastern Germany, and $7.16 to $8.59 less than in wealthier regions of the country, where Mr. Hintermeier often works.

On top of that, “there aren’t many opportunities to develop,” he complained. And he said he often encountered resentment from co-workers who consider him low-cost competition.

Mr. Hintermeier is one of nearly a million temporary workers, almost 3 percent of the work force, who in recent years have given German companies much more flexibility than before. Temporary employment played a critical role in helping Germany weather the 2009 downturn, as employers were able to quickly respond to ebbing demand by reducing payrolls.

But an increasingly vocal group of critics say that the loosening of regulations in 2003 allowing companies to hire temporary workers has created a vast cohort of poorly paid, poorly treated employees with slim chances of obtaining permanent jobs. With the economy surging once again, unions are lobbying for legislative changes and raising the issue of temporary workers at contract talks.

“Temporary work has enabled a shadow labor market,” Berthold Huber, chairman of the IG Metall labor union, said at a news conference in Frankfurt last week. “That is intolerable.”

Temporary employment, already a boom industry in Europe, is about to get more support when the last restrictions on labor mobility among European Union countries fall away on May 1 — coincidentally the day when Europe celebrates the labor movement. Temporary-employment agencies will then be able to recruit workers in low-wage countries like Poland for jobs in Germany and elsewhere.

“That will certainly raise the pressure,” said Sandra Siebenhüter, who has studied temporary work for the Otto Brenner Foundation, a research organization in Frankfurt that is financially supported by IG Metall.

While there are plenty of anecdotes about temporary workers who are receiving worse deals than permanent employees, the loosening of Germany’s traditionally rigid labor market has been crucial in preventing at least some companies from shipping production abroad.

“Our global competitiveness would deteriorate if we were unable to use the instrument of temporary employment,” Bayerische Motoren Werke, the maker of BMW vehicles, said in a statement, noting that 75 percent of its work force was in Germany, while 80 percent of its car and motorcycle sales were abroad.

At the heart of the debate is the question of whether a temporary, lower-wage job is better than no job at all.

The rise of temporary labor has contributed to a plunge in German joblessness. The unemployment rate has fallen to just above 7 percent, or 3.2 million people, from nearly 12 percent in 2005, or almost 5 million people.

Temporary employment agencies have soaked up a large proportion of those jobless people, many of whom lack training. The industry draws two-thirds of its new employees from the ranks of the unemployed, according to a study by the German Federal Employment Agency.

Randstad Holding, a global temporary-employment agency based outside Amsterdam, has created 50,000 jobs in Germany over the last two years, said Ben Noteboom, Randstad’s chief executive. Most of the people hired had been jobless, he said.

“In the past, staffing was difficult legally,” Mr. Noteboom said. “The moment it changed, the market started to boom.”

He said that he was baffled by efforts to tighten restrictions on temporary hiring. Abuses by a few companies had turned public opinion against the industry, he said. “In Germany, we do see that there is more aggressive talk against our business,” Mr. Noteboom said. “I don’t know how many difficulties you want to create for your companies to stay in the country.”

In fact, Mr. Noteboom said, Germany still has some of the tightest protections anywhere for temporary workers. He said that he considered “temporary worker” a misnomer in the first place. In Germany, Randstad’s workers have the status of regular employees with full health and pension benefits. They are simply lent to other employers.

Article source: http://feeds.nytimes.com/click.phdo?i=3a62e983397857445cb7938fe7b0f675

Filed Under: Business News Tagged With: , ,

Economix: Comparing Recoveries: Job Changes

April 1, 2011 by Leave a Comment

DESCRIPTIONSource: Bureau of Labor Statistics. Chart by Amanda Cox. Horizontal axis shows months. Vertical axis shows the ratio of that month’s nonfarm payrolls to the nonfarm payrolls at the start of recession. Note: Because employment is a lagging indicator, the dates for these employment trends are not exactly synchronized with National Bureau of Economic Research’s official business cycle dates.

The United States added 216,000 jobs on net in March, the Labor Department reported today, slightly faster growth than the February gain, which was revised slightly to 194,000. March also represented the 13th straight month of net job gains in the private sector.

Job gains were relatively widespread — nearly ever major sector added employees, or at least kept payrolls flat — but the industries with the biggest gains were professional and business services, health care, leisure and hospitality, and mining. The biggest loser was local government, which has lost 416,000 jobs since its payrolls peaked in September 2008.

Even most of the winners, though, have a long way to go before returning to their prerecession levels, if they ever do.

The chart above shows economywide job changes in this last recession and recovery compared with other recent ones, with the black line representing the current downturn. Since the downturn began in December 2007, the economy has shed, on net, about 5.3 percent of its nonfarm payroll jobs. And that doesn’t even account for the fact that the working-age population has continued to grow, meaning that if the economy were healthy we should have more jobs today than we had before the recession.

The unemployment rate (measured by a different government survey, and based on how many people are without jobs but are actively looking for work) ticked downward to 8.8 percent in February, from 8.9 percent in February. That means joblessness is at its lowest rate in two years. The number may go up again, though, as more discouraged workers return to actively searching for jobs when they hear employers are hiring again.

Article source: http://feeds.nytimes.com/click.phdo?i=1bebacc621f0555d7e0a81cefb93b18a

Filed Under: Economy News Tagged With: , ,
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