April 18, 2021

Economix Blog: Sequestration Hits the Long-Term Unemployed



Dollars to doughnuts.

Sunday was the five-year anniversary of the Emergency Unemployment Compensation program, a federal program signed into law by President George W. Bush that initially added 13 weeks of unemployment benefits to the standard 26 weeks states already offered eligible jobless workers. The 13 additional weeks of benefits were intended to be temporary, but as the recession worsened, Congress decided to keep the program going and even lengthened the amount of time that workers could receive benefits. For a while workers could receive as many as 99 weeks in some states, the longest duration of jobless benefits on record.

Those benefits have been pared back over the last year and a half, though, and are being cut more severely now as a result of the across-the-board spending cuts known as the sequester.

A new report from the National Employment Law Project calculates exactly how much: Of the more than $80 billion in automatic budget cuts that must occur between March 1 and Sept. 30, about $2.4 billion is being slashed from the federal emergency unemployment benefits program, says NELP, a labor-oriented research and advocacy group.

The organization estimates that upward of 3.8 million unemployed workers will ultimately be affected by the cuts. The average weekly benefit check of $289 is being cut by $43, or about 15 percent.

“It is the workers who have benefited least from the economic recovery who are bearing the largest share of the burden of the sequester,” the organization said in a statement.

Almost every state has carried out the federally mandated cuts to its unemployment benefits at this point, but many waited until recently to do so. The longer the states took to put the cuts into effect, the sharper the reduction in each remaining weekly benefit check.

For example, the 20 states that cut their benefits starting on March 31 or April 6 trimmed 10.7 percent from each weekly benefit check, whereas Maryland and New Jersey started decreasing benefits on June 30, which required slashing all future weekly checks by 22.2 percent to achieve the total required savings.

The advocacy group has put together a table showing what’s happening in each state, a portion of which is below.

Note that there is one outlier in North Carolina, which on Monday ended its participation in the federal Emergency Unemployment Compensation program altogether. That’s for reasons unrelated to the sequester; basically North Carolina reduced its state-level jobless benefits (which workers go on before qualifying for the later tier of Emergency Unemployment Compensation benefits) by so much that it is no longer legally eligible for the federal extended benefits.

The National Employment Law Project estimated that North Carolina, which has the fifth-highest unemployment rate in the country, is cutting off federal benefits for an estimated 70,000 workers.

Article source: http://economix.blogs.nytimes.com/2013/07/02/sequester-hits-the-long-term-unemployed/?partner=rss&emc=rss

Trade Deficit Widens as Demand for Imports Grows

The Commerce Department said on Tuesday that the trade gap rose 8.5 percent in April from March, to $40.3 billion.

Exports increased 1.2 percent to $187.4 billion, the second-highest level on record. Companies sold more telecommunications equipment, industrial machinery and airplane parts, while vehicles made in the United States and auto parts also rose to a high of $12.8 billion.

But imports grew an even faster 2.4 percent, to $227.7 billion. Sales of foreign cars increased to $25.5 billion. Americans also bought more consumer goods, led by a big gain in foreign-made cellphones.

A wider trade gap can restrain growth because it means American consumers and businesses are spending more on foreign goods than United States companies are gaining in overseas sales.

But Joel Naroff, chief economist at Naroff Economic Advisors, said the wider deficit did show growth in the United States remains stronger than in most other nations. And that growth has helped propel more spending by consumers on imported goods.

“The U.S. economy may not be robust, but with growth continuing, the demand for foreign goods is picking up,” Mr. Naroff said.

Most economists said trade would most likely be neutral in the April-to-June quarter after subtracting slightly from growth in the January-to-March quarter. They expect economic growth has slowed to an annual rate of about 2 percent, down from a 2.4 percent rate in the first quarter.

Still, a weaker global economy is reducing demand for American exports, and that could weigh on growth this year.

Europe’s recession continues to be a problem for American companies. The deficit with the European Union grew 25.6 percent, to $12.4 billion. American exports to the region declined 7.9 percent, while imports from the region rose slightly.

The politically delicate deficit with China surged to $24.1 billion, the highest level since January and the largest with any single nation. Imports jumped 21 percent, while exports fell 4.7 percent. The March deficit had been artificially lowered by shipping disruptions caused by the Chinese New Year holiday.

The weakness abroad has coincided with less investment by American businesses, possibly out of concern that government spending cuts could hobble economic growth.

The deficit so far this year is running at an annual rate of $491.9 billion, down 8 percent from the revised annual deficit of $534.7 billion for 2012.

Article source: http://www.nytimes.com/2013/06/05/business/economy/trade-deficit-widens-as-demand-for-imports-grows.html?partner=rss&emc=rss

Amid Recession and Rising Joblessness, Greeks Fall Prey to Employment Swindles

A month later, he was out $2,300 and still jobless.

“They told me to wire the money to cover procedural costs and the airfare,” said Angelos, 38, a father of two who declined to give his full name for fear of jeopardizing future employment possibilities. The airline ticket never arrived in the mail, and follow-up calls went unanswered. A 300-mile road trip from Athens to the northern port of Thessaloniki, the job agency’s stated location, led nowhere. The address did not exist.

Angelos, whose wife is also unemployed and who borrowed the money for the agency fee from relatives, is by no means the only Greek to have been duped in such frauds. The authorities say criminals are busy preying on increasingly desperate Greeks facing an ever-deepening recession and an unemployment rate of 27 percent over all and more than 60 percent for those under 25.

“People come to us regularly with such stories,” said a spokesman for the Greek police’s electronic crime squad, which recorded a doubling in cases of online fraud last year but has no statistics for the job swindles, which he called “a new but growing trend”

“They reel people in with offers of promising-sounding jobs, they get their money and then they disappear,” the spokesman, who spoke on the condition of anonymity because he works undercover, said of the rackets. Sometimes the advertisements refer to jobs that do exist but are exploitive, offering a fraction of the salary promised originally.

“We have evidence, but the investigation stalls as soon as it crosses the border,” said the spokesman, adding that the authorities had lodged requests for help with specific cases in Germany, Britain and other destinations favored by austerity-weary Greeks seeking a rosier future.

Thousands of Greeks have sought to emigrate since the spring of 2010, when the government signed its first loan agreement with international creditors in exchange for an array of austerity measures that have slashed living standards. There are no government statistics confirming the size, or breakdown, of the exodus. But most appear to be heading for relatively prosperous northern European countries like Germany, as well as Australia, which has one of the largest Greek immigrant populations in the world.

German government statistics showed a 43 percent increase last year in Greek immigrants and a similarly large influx from other debt-ridden euro zone countries in southern Europe, like Spain and Portugal. Many Greek émigrés are qualified professionals, with an estimated 120,000 moving abroad over the past three years, according to a recent study by the University of Macedonia in Thessaloniki.

The move is much harder for unskilled workers, particularly those who do not speak the language of the country they move to. It is they who usually fall victim to rackets, according to the police and employment sector officials.

The chief of the association representing private job agencies in Greece, Athanassios Kottaras, said he received six or seven complaints every week (they were almost unheard-of just two years ago) from Greeks moving abroad for jobs that turn out to be nonexistent or exploitive. Mr. Kottaras has appeared several times on Greek television to raise awareness about the problem, which he attributes to hundreds of illegal job agencies.

The head of Greece’s state labor inspectorate, Michalis Kandarakis, said there were about 300 such illegal job agencies in Greece, compared with the 90 legal ones represented by Mr. Kottaras. But he said closing them down was difficult, as they often changed names, staff and premises to elude the authorities. “They even lodge charges of harassment or attempted blackmail against inspectors to slow down the process,” Mr. Kandarakis said.

Article source: http://www.nytimes.com/2013/06/01/world/europe/out-of-work-at-home-greeks-face-job-fraud-abroad.html?partner=rss&emc=rss

Euro Zone Economy Shrinks; Recession Returns in France

The latest figures, released Wednesday, marked the longest recession for the euro countries since the currency was introduced in 1999.

The 17-nation euro zone contracted by 0.2 percent in the first quarter from the last three months of 2012, Eurostat, the statistical agency of the European Union, reported from Luxembourg, less than the 0.6 percent decline recorded in the fourth quarter, but more than economists’ expectations of a 0.1 percent fall.

The economy of the overall European Union, made up of 27 nations, shrank by 0.1 percent.

Germany, with the largest economy in Europe, was almost stagnant in the first quarter, managing growth of just 0.1 percent from the prior three months, when it shrank by 0.7 percent, the Federal Statistics Office reported in Wiesbaden.

France, the second-largest economy in Europe, contracted for a second consecutive quarter, meeting the common definition of a recession. The economy shrank by 0.2 percent, the same decline as in the fourth quarter of 2012.

Britain, the third-largest E.U. economy, but not a member of the euro, last month posted 0.3 percent first-quarter growth.

Among the “peripheral” euro nations, Spain’s economy shrank by 0.5 percent, the same as Italy’s. Portugal shrank by 0.3 percent, and Cyprus’s economy, the victim of a financial sector meltdown and bailout, shrank 1.3 percent. Data on Greece were not immediately available.

More than five years after the meltdown of the U.S. housing market set off the global financial crisis, the 27-nation European Union remains in turmoil, buffeted by a lack of confidence in member states’ public finances and demands for budgetary rigor to address those concerns. Unemployment in the euro zone reached a record 12.1 percent in March, and economists do not expect the labor market to turn around before next year, at the earliest.

Despite its troubles, the E.U. market remains the world’s largest, and its weakness is doubly worrying at a time when the rest of the world is not growing strongly enough to take up the slack. Moody’s Investors Service warned Wednesday that the weakness in the euro zone, combined with the mandatory “sequestration” budget cuts in the United States, would weigh on the world economy, with growth in the Group of 20 nations this year of just 1.2 percent, picking up to 1.9 percent in 2014.

In annualized terms, the euro zone economy contracted by about 0.8 percent in the first quarter, lagging far behind the 2.5 percent growth in the United States.

Japan, which reports its first-quarter G.D.P. figure on Thursday, is expected to post an annualized figure of about 2.8 percent. China in April reported 7.7 percent first-quarter growth.

That Germany grew at all was a result of increased household consumption, Germany’s statistics agency said, as exports and investment declined. Jörg Krämer, chief economist at Commerzbank in Frankfurt, estimated in a research note that the unusually cold weather had subtracted as much as 0.2 percentage point from German growth.

Even though Germany eked out a positive figure, it was “really in contractionary territory” in the quarter, Philippe d’Arvisenet, global head of economic research at BNP Paribas, said. He said more recent data showed clear evidence of a German rebound in the second quarter.

Mr. d’Arvisenet estimated that the euro zone economy would shrink this year by about 0.5 percent, following a 0.6 percent contraction in 2012. Growth is likely to return in 2014, he said, “but probably below 1.0 percent.”

Article source: http://www.nytimes.com/2013/05/16/business/global/germany-france-economic-data.html?partner=rss&emc=rss

Off the Charts: Recovery in Germany Is Faster Than Elsewhere

But not in Germany.

In Germany, alone among the 27 members of the European Union, unemployment rates for both older and younger workers are now lower than they were when the United States slipped into a recession at the end of 2007.

In the rest of the euro zone, the unemployment rate for workers ages 25 to 74 has more than doubled over that period, to 12.8 percent. The rate for younger workers is more than 30 percent, on average — and above 50 percent in Spain and Greece. In Germany, it is less than 8 percent.

The accompanying charts show how unemployment rates for both groups of workers have changed in each of the 17 countries in the euro zone, as well as for Britain and the United States.

In terms of adult unemployment rates, the most recent figures for the United States (6.1 percent) and Britain (5.7 percent) are not that far from Germany’s figure of 5.1 percent. The major difference is in youth unemployment, which is above 16 percent in the United States and above 20 percent in Britain.

What accounts for that difference? Some of the credit goes to Germany’s education and employment system for young workers, and to German policies that encourage employers facing downturns to reduce working hours rather than fire workers. In Germany, students are separated into different career tracks, with many put into a system that leads to apprenticeships rather than to college degrees.

But that is not the entire story. The euro zone’s troubles have helped Germany’s export-oriented economy. The weak euro has made Germany’s exports more competitive against those of countries with which it competes, most notably the United States and Japan. Since the end of 2007, the euro is down about 10 percent against the dollar and about 20 percent against the yen.

Were the euro zone to break up, there is little question that the value of a new German mark would rise sharply, while the currencies of many other members of the zone would fall relative both to the mark and other international currencies. That would depress German exports.

The charts reflecting Germany’s unemployment rates, if they were the only evidence available on world economic trends, would seem to indicate there was a mild downturn in 2009 that soon ended, with the economy recovering the next year. The United States charts would indicate a more severe downturn, followed by a recovery that began in 2010 and may now be gathering strength. In Britain, there has been much less progress since unemployment peaked in 2011.

In the 16 other euro zone countries as a group, the chart indicates a deep recession that leveled off in 2010 and 2011 but has since gotten much worse — particularly for young workers. “We will have to speed up in fighting youth unemployment,” the German finance minister, Wolfgang Schäuble, said at a conference this week, “because otherwise we will lose the support, in a democratic way, in some populations of the European Union.”

If that is to happen, it may require a change of course for Europe, where it appears the rich will continue to get richer. The European Commission’s latest economic forecast, released last week, predicted declining unemployment in Germany this year and next, but said joblessness was likely to continue to climb in France, Italy and Spain.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2013/05/11/business/economy/a-faster-recovery-in-germany-than-elsewhere.html?partner=rss&emc=rss

Economix Blog: Stock Markets Rise, but Half of Americans Don’t Benefit



Dollars to doughnuts.

The stock market has been doing well, reaching new nominal highs in recent weeks. Economists have been arguing that such equity gains make people feel richer, which might encourage consumers to pick up their spending despite their stagnant wages and recent tax increases.

One possible problem with this hopeful story: the share of Americans who actually have money invested in stocks has been falling in recent years.

Source: Gallup. Selected trends are from surveys conducted closest to April each year. Most recent results are based on telephone interviews conducted April 4-14, 2013, with a random sample of 2,017 adults. The margin of sampling error is plus or minus 3 percentage points. Source: Gallup. Selected trends are from surveys conducted closest to April each year. Most recent results are based on telephone interviews conducted April 4-14, 2013, with a random sample of 2,017 adults. The margin of sampling error is plus or minus 3 percentage points.

In its annual Economy and Finance survey, conducted April 4-14, Gallup found that 52 percent of Americans said they (personally or jointly with a spouse) owned stock outright or as part of a mutual fund or self-directed retirement account. That’s not statistically different from the share last year (53 percent), but is down substantially from pre-recession levels. It’s also the lowest recorded share since Gallup started asking this question in 1998.

Lydia Saad of Gallup suggests that Americans’ withdrawal from the stock market may be “more a function of their ability to buy it, than of whether its value is soaring,” and notes that high unemployment seems to correlate with low stock ownership rates.

I wonder also whether the experience of the financial crisis may frighten Americans away from riskier assets like equities for a while, long after the unemployment rate has returned to more normal levels. Research from Ulrike Malmendier and Stefan Nagel about the so-called “Depression babies” found that people who had experienced low stock market returns throughout their lives are less willing to take on financial risk, are less likely to take part in the stock market and invest a lower fraction of their liquid assets in stocks if they do take part.

There are signs that the appetite for risk is returning among more sophisticated investors and institutions, but that may not extend to the median American, who did not not recover as quickly or as fully (if at all) as the finance industry did.

Gallup also found, by the way, that recent declines in equity ownership had been largest among 30- to-49-year-olds and among middle-income Americans. The employed also had sharper declines than those who were not employed, although the latter started from a much lower base.

Source: Gallup. Most recent results are based on telephone interviews conducted April 4-14, 2013, with a random sample of 2,017 adults. The margin of sampling error for the national sample is plus or minus 3 percentage points, and will be larger for subgroups. Source: Gallup. Most recent results are based on telephone interviews conducted April 4-14, 2013, with a random sample of 2,017 adults. The margin of sampling error for the national sample is plus or minus 3 percentage points, and will be larger for subgroups.

Article source: http://economix.blogs.nytimes.com/2013/05/08/stock-markets-rise-but-half-of-americans-dont-benefit/?partner=rss&emc=rss

Economix Blog: Keeping Up, Not Getting Ahead

The American economy continues to add jobs in proportion to population growth. Nothing less, nothing more.

The Jobs Report

Behind the April numbers.

The share of American adults with jobs has barely changed since 2010, hovering between 58.2 percent and 58.7 percent. This employment-to-population ratio stood at 58.6 percent in April. That is about four percentage points lower than the employment rate before the recession, a difference of roughly 10 million jobs. In other words, the United States economy is not getting any closer to recreating the jobs lost during the recession.

Source: Bureau of Labor Statistics

This lack of progress has been obscured by the steady decline of the high-profile unemployment rate, which continued in April. But the unemployment rate is easily misunderstood. The government counts as unemployed only those who are actively looking for new jobs. As people have given up, the unemployment rate has declined – not because more people are working, but because more people have stopped looking for work.

The share of adults looking for work peaked at 6.4 percent of the population in 2010. It fell to 4.7 percent in April. But recall that over the same period, the share of adults with jobs did not change. What grew instead is the share of adults no longer counted as part of the labor force.

(The unemployment rate also uses a different denominator than the employment rate: Workers plus searchers, rather than the entire population. For the sake of consistency and clarity, the figures in the previous paragraph show “unemployment” as a share of the entire population.)

And the decline of labor force participation – the technical term for the share of adults working or searching – is primarily the result of a bad economy.

Baby boomers are aging into retirement. Even before the recession, the government projected in 2007 that participation would decline to 65.5 percent by 2016, from 66 percent. But the April rate of 63.3 percent means the labor force has lost roughly five million additional workers.

Furthermore, the projections were wrong. Participation has actually risen among people older than 55. The decline is entirely driven by younger dropouts.

The federal government counts 11.7 million Americans as unemployed. The real number, it follows, is more like 17 million.

There is always some unemployment. Millions of Americans are out of work at any given moment even in the best of times. But the economy is still roughly 10 million jobs short of returning to normal levels of unemployment and labor force participation. That’s a lot of missing jobs.

Some of those losses may be permanent. The number of Americans receiving disability benefits has increased by 1.8 million since the recession began, and people on disability rarely return to the work force, even if they would have preferred to keep working in the first place.

And as the economy improves, it is likely that labor force participation among older workers will finally begin to decline.

But the evidence suggests that the majority of the 10 million are just waiting for a decent chance.

Article source: http://economix.blogs.nytimes.com/2013/05/03/keeping-up-not-getting-ahead/?partner=rss&emc=rss

Central Bank Takes Step as Europe’s Downturn Drags On

The central bank, meeting in Bratislava, cut its benchmark interest rate to 0.5 percent from 0.75 percent, which was already a record low. It was the first change in interest rates since July 2012 and the bank’s fourth cut since Mario Draghi took over as its president in November 2011.

The central bank will continue providing unlimited loans to banks at the benchmark interest rate “as long as needed” and at least until mid-2014, Mr. Draghi said at a news conference after the announcement.

Even at its new low of 0.5 percent, the European Central Bank’s benchmark rate remains higher than the 0.25 percent rate the Federal Reserve has had in place since late 2008. On Wednesday, the Fed said it would maintain its stimulus campaign, buying $85 billion a month in Treasury and mortgage-backed securities. The Fed added that it would consider adjusting its efforts to spur growth and reduce unemployment in the United States.

A cut by the European Central Bank was widely expected after a series of economic indicators in recent weeks foreshadowing an extended downturn in the euro zone, with recession even threatening the seemingly unstoppable German economy. On Thursday, two stalwarts of corporate Germany, BMW and Siemens, warned of lower profits for 2013 because of the downturn in European markets.

Many economists argued that the central bank was practically obliged to cut rates. Inflation in the euro zone was just 1.2 percent in April, well below the E.C.B. target of about 2 percent. The central bank is mandated to maintain price stability above all else, which includes heading off deflation — a downward spiral in prices that can be even more destructive than inflation.

But there is widespread skepticism about the likelihood that the rate cut will do much to restore the flow of credit in countries like Italy and Spain, which are in the midst of long-term slumps. The cut could have negative effects in Germany, where low interest rates have fueled steep rises in home prices in some cities.

“A rate cut will only have a small impact on the economy but it will signal an easier monetary policy stance,” Marie Diron, an economist who advises the consulting firm Ernst Young, wrote in an e-mail ahead of the decision.

Investor reaction to the rate cut was muted. European markets initially rose after the announcement, but then slumped lower.

Many banks in Europe, whose shyness to lend the E.C.B. is trying to address, may regard the cut with mixed feelings. While the new rate will lower the cost of raising money, the cut may also reduce the profit margin on mortgages or other forms of lending. Many banks in Europe are barely profitable and can ill afford any more problems.

Some economists argue that there is little the central bank can do to force-feed credit to small businesses in countries like Greece and Portugal that are suffering prolonged downturns. Banks’ reluctance to grant loans reflects the sad fact that many businesses and consumers are poor credit risks, Richard Barwell, an economist at Royal Bank of Scotland, wrote in a note to clients.

Mr. Barwell referred to a recent European Central Bank survey that found that the biggest problem for businesses in countries like Italy is finding customers, not credit. The central bank cannot help businesses with that problem, he wrote. Still, he said, “the E.C.B. has reached the point where it has to do something.”

A cut may, however, help some exporters by helping to reduce the value of the euro compared to the dollar and other major currencies. A lower official interest rate tends to make it less attractive to hold euros, and drive down the exchange rate, making European products cheaper in foreign markets.

A rate cut “would be a sign that policy makers understand it is time to find a way to compete,” Marco Tronchetti Provera, chief executive of the Italian tire maker Pirelli, said during an interview last week.

The central bank also cut the higher rate it charges for overnight loans, the so-called marginal lending facility, to 1 percent from 1.5 percent. The benchmark rate of 0.5 percent, known as the main refinancing rate, is what banks pay to borrow for a week or more and is the rate that normally has the most powerful effect on the economy.

The European Central Bank left the rate it charges banks to park money at the bank, the deposit rate, at zero. There has been speculation in the past that the E.C.B. would cut the deposit rate below zero, charging banks to park their money, in order to discourage lenders from hoarding cash rather than issuing loans. But there was fear that move could have unintended consequences.

And in another step to ease the credit crunch in southern Europe, Mr. Draghi said the central bank would also consult with European Union institutions on how to revive the market for asset-backed securities, in which outstanding loans are bundled and sold to investors. A more lively market for asset-backed securities could also help lending, although Mr. Draghi did not immediately explain what steps he had in mind.

Article source: http://www.nytimes.com/2013/05/03/business/global/03iht-euro03.html?partner=rss&emc=rss

Case Study: Reconciling Retail Sales With a Wholesale Business

Although Mr. Shvartsman ships to hotels and resorts beyond his home state, he does the bulk of his business in South Florida, where he strives to deliver exceptional customer service, more in keeping with a small retail shop than a wholesaler.

THE CHALLENGE Having established five channels of distribution, Mr. Shvartsman found himself worrying that he might have to forgo his most profitable channel — a direct-to-consumers approach that was starting to offend his wholesale clients.

THE BACKGROUND A Toronto native, Mr. Shvartsman learned his first sales lessons at the age of 7, helping his parents sell jewelry at a Sunday flea market. He was smart, but he struggled in school because of an undiagnosed attention deficit disorder.

Passing on college, he went into business with his older brother in a 36,000-square-foot nightclub with 150 employees. Next, the brothers sold mall advertising on food court tabletops and ran a company that erected walls bearing “Coming Soon” announcements for obscure mall shops under renovation.

On the lookout for opportunities, Mr. Shvartsman had an aha! moment when he went to buy deck furniture for the patio of his family’s Miami condo.

“A sectional to seat four or five? Fifteen thousand dollars,” he recalled. “Chaise longues? One thousand dollars apiece. I was flabbergasted. I looked in store after store, but I couldn’t afford to buy what I like.”

Knowing nothing about the furniture industry, Mr. Shvartsman assumed he could jump in at a lower price and win buyers.

“My mother raised me to think there was no such thing as barriers to entry for me,” he said.

He disregarded the rumblings of the looming recession, as well as the industry’s old-school way of selling to retail stores through representatives. When his first four containers of outdoor furniture arrived from China, Mr. Shvartsman became a one-man sales force. He personally called and visited every furniture retailer in a 60-mile radius.

“I started attacking them,” he said. “In a short time, all had some of my furniture in their store or were selling off my catalog, which at the time was terrible.”

Then he opened several other South Florida distribution channels. He struck deals with local decorators and designers, and also with condos that needed half a dozen sectionals and dozens of chairs for each ground-level pool. Starting with one enterprising online furniture seller, Mr. Shvartsman also began fulfilling orders taken over the Internet by other businesses. Retail stores and online sellers paid him 60 percent off full price. Decorators, designers and condos got his goods for 50 percent off.

But Mr. Shvartsman also sold his furniture another way. As many as six or seven times a year he would fill a truck and unload it at a big Florida home show, selling directly to the public.

Most of these sales were at full price, with margins greater than 300 percent over his own costs — the equivalent of grand slams versus the singles of selling to furniture retailers and the doubles of selling to decorators and condo associations.

Even the home-show items he discounted were generally slow-selling pieces that had been clogging his warehouse and that he was only too happy to move, especially at margins around 100 percent.

But one day in 2010, his third year in business, Mr. Shvartsman answered the phone and found his second-best retail customer on the line with a beef.

“Gerald,” said the Fort Lauderdale furniture store owner. “I understand you’re doing home shows. I know that’s important to you, but we’re your customer. It’s not fair to us. You might be taking our sales.”

Mr. Shvartsman feared such a call might come, and he had already been weighing the pros and cons.

Article source: http://www.nytimes.com/2013/04/25/business/smallbusiness/reconciling-retail-success-in-wholesale-business.html?partner=rss&emc=rss

Economix Blog: The Incredible Shrinking Budget Deficit

For four years, during and in the wake of the recession, the federal budget deficit ballooned to more than $1 trillion. But because of belt-tightening in Washington and a strengthening economy, it has started shrinking — and fast.

The number crunchers at Goldman Sachs have lowered their estimates of the deficit both this year and next, on the back of higher-than-expected revenues and lower-than-projected spending. Analysts started the year projecting that the deficit in the current fiscal year would be about $900 billion. Earlier this year, they lowered the estimate to $850 billion. Now they have lowered it again, to $775 billion, or about 4.8 percent of economic output.

“Spending in the fiscal year to date is lower than a year ago and the nominal growth rate is lower than it has been in decades,” the Goldman economists wrote in a note to clients. “Revenues have also exceeded expectations, with a 12 percent gain fiscal year to date. What is more notable is that the strength in revenues preceded the payroll tax hike at the start of the year, and the spending decline does not seem to reflect sequestration, which has just started to take effect.” To translate: the deficit could come in even smaller than currently anticipated because of spending cuts and higher tax rates.

On the face of it, this sounds like something to applaud: The growing economy is bolstering tax revenue and reducing the need for spending on programs like unemployment insurance. Washington has gotten its act together. The budget is finally coming back into balance. Indeed, Goldman now expects the budget deficit to fall to just 2.7 percent of economic output by the 2015 fiscal year. Many economists consider budget deficits that small to be sustainable — particularly if the federal government is investing in public goods like schools and roads — with the accrued debt paid off by later years’ economic growth.

But a number of budget experts are booing rather than applauding, including the fiscal hawks at the International Monetary Fund. Last week, the fund nudged down its estimates for United States growth in 2013 and 2014. It said it saw many bright spots in the American economy, including the strength of the private sector, but it criticized Washington for imposing too much austerity, too soon, and thus sapping strength from the recovery and preventing the unemployment rate from coming down faster.

“The growth figure for the United States for 2013 may not seem very high, and indeed it is insufficient to make a large dent in the still-high unemployment rate,” the fund said. “But it will be achieved in the face of a very strong, indeed overly strong, fiscal consolidation of about 1.8 percent of G.D.P. Underlying private demand is actually strong, spurred in part by the anticipation of low policy rates under the Federal Reserve’s ‘forward guidance’ and by pent-up demand for housing and durables.”

The fund’s economists specifically dinged “sequestration,” the $85 billion in mandatory budget cuts that Congress promised to undo, but failed to undo, earlier this year. “While the sequester has decreased worries about debt sustainability, it is the wrong way to proceed,” the fund said. “There should be both less and better fiscal consolidation now and a commitment to more fiscal consolidation in the future.”

In its note, Goldman Sachs did specify a few trends that could widen the deficit this year, like a “negative economic surprise.” The investment bank did not elaborate much on what that economic surprise could be, but troubles in the emerging economies that are driving global growth, higher gas prices and an intensification of the financial troubles in Europe seem like plausible candidates, as do natural disasters like hurricanes and droughts.

Article source: http://economix.blogs.nytimes.com/2013/04/22/the-incredible-shrinking-budget-deficit/?partner=rss&emc=rss