Sunday, August 08, 2010

Jobs and the economy

It's obviously old news in the 24/7 media cycle but I thought I'd offer up some thoughts on the jobs report that came out on Friday. Excluding the crazy swings in census jobs, the economy created a very modest 12k jobs in July. This was below expectations and in general it was a very weak report but I saw the revision to June's number (which subtracted roughly another 100k jobs) very troubling.

Labor force participation fell again to just 64.6% and is the only thing keeping the unemployment rate from climbing. The stock market initially took this data on the chin and fell hard, but some of the computers wanted to have a good weekend living it up in the Hamptons so they flipped the 3pm switch and rallied the market back to almost unchanged.

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I won't bog you down with the details, but there is a great deal of forward looking data that seems to be indicating that the "recovery" has either stalled or we're on the verge of sinking back into recession. That idea leads directly into today's FT story indicating Fed might shift their view of the economy. It's important to remember that a big part of the stock market's recovery in 2009 was driven not by economic conditions or the bailouts, but rather the Fed's qualitative easing. They seem to be hinting in this article that the Fed is looking at further liquidity injections (Goldman said it could be up to $1 Trillion) to boost bank profi...... I mean, the economy.

"The Federal Reserve is set to downgrade its assessment of US economic prospects when it meets on Tuesday to discuss ways to reboot the flagging recovery. ...[The Fed might make] ... a decision to reinvest proceeds from maturing mortgage-backed securities held by the US central bank ... most economists believe that it would take several more months of poor data for the Fed to actually begin a new round of [large scale] asset purchases."

The Fed has long since abandoned their role as a central bank and they are now active cheerleaders of the stock market.

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In a timely article, the NY Times covers the growing use of attorneys in India by US law firms to lower costs and increase profits. This is classic mismanagement over the long run as law firms will generate increasing profits for their partners (who may chose to retire sooner) but without a new crop of young legal eagles working their way through the trenches there will be no one to run the show in 5-10 years. At some point, I expect there will be a bit of an outsourcing backlash and companies will demand to know what percentage of their work is being handled by overseas firms.

"Thanks to India’s low wages and costs and a big pool of young, English-speaking lawyers, outsourcing firms charge from one-tenth to one-third what a Western law firm bills an hour."

Do you think the law firms pass along those costs savings or keep it for themselves?

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Favorite stories of the weekend....

* The doughnut burger and "FRIED BUTTER" were the big hits at the Indiana State Fair. Fried butter?!?!? If this keeps up we might really need food police to protect people from themselves.

* OSHA fines a Boston Post Office location for violations including --- and I'm not kidding --- "workers using bar-code readers and elevator-control panels without proper training."

Hey, I'm all for worker safety but what kind of training is needed to operate a bar code reader? My kids have been handling bar code readers at self-checkout lines for 5 years without incident. What type of training is needed for an "elevator control panel"?

Step 1) Enter elevator
Step 2) Press a button
Step 3) Take a 15 minute coffee break

Cheers!

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