Employment costs continue upward trend

Compensation costs for civilian workers increased 0.4 percent, seasonally adjusted, for the three-month period ending December 2010, the U.S. Bureau of Labor Statistics reported today. Both wages and salaries (which make up about 70 percent of compensation costs) and benefits (which make up the remaining 30 percent of compensation) increased 0.4 percent.
 
Compensation costs for civilian workers increased 2 percent for the 12-month period ending December 2010. This was higher than in December 2009, when the increase was 1.4 percent.Wages and salaries increased 1.6 percent for the current 12-month period; in December 2009 the increase was 1.5 percent. Benefit costs accelerated to 2.9 percent, up from a 1.5 percent increase for the 12-month period ending December 2009 due primarily to increases in retirement costs.

Compensation costs for private industry workers increased 2.1 percent over the year, higher than the 1.2 percent increase for the previous 12-month period. The wage and salary series increased 1.8 percent for the current 12-month period. The change for the period ending December 2009 was 1.3 percent. The cost of benefits increased 2.9 percent for the 12-month period ending December 2010, higher than the December 2009 increase of 0.9 percent.

Employer costs for health benefits rose 5 percent for the 12-month period ending December 2010. In December 2009, the 12-month percent change was 4.3 percent.

Compensation cost increases for state and local government workers decelerated to 1.8 percent for the 12-month period ending December 2010, down from 2.3 percent for the 12-month period ending December 2009.

Bernanke’s Remedy: Pump More Blood Into a Corpse

By Mike WhitneyInformation Clearing House” — Credit is everything. Without credit expansion there’s no recovery because there’s no pick-up in overall demand. But credit growth is going backwards. The banks have tightened lending standards and the pool of credit-worthy applicants has vanished. Bank lending is off 14 per cent since October 2008. Private credit is presently decreasing at a 10.5 per cent annual rate. The situation is getting worse, not better.

October 05, 2009 “

From the UK Telegraph:

“Both bank credit and the M3 money supply in the United States have been contracting at rates comparable to the onset of the Great Depression since early summer, raising fears of a double-dip recession in 2010 and a slide into debt-deflation…

“Similar concerns have been raised by David Rosenberg, chief strategist at Gluskin Sheff, who said that over the four weeks up to August 24, bank credit shrank at an ‘epic’ 9pc annual pace, the M2 money supply shrank at 12.2pc and M1 shrank at 6.5pc.

“’For the first time in the post-Second World War era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew,’he said. (Ambrose Evans-Pritchard, “US credit shrinks at Great Depression rate prompting fears of double-dip recession”, UK Telegraph)

Foreclosures, delinquencies and defaults are all up. Foreclosure activity is currently at 300,000-plus per month and rising. A huge shadow inventory is being kept off-market to maintain prices. The drip, drip, drip-effect of excess inventory dumped onto the market will keep housing in the doldrums for a decade. Homeowners are unable to borrow on underwater homes. Everything points to a long-term slump in spending.

Corporations are finding it harder to roll over their debt, bank loans are defaulting at a historic pace, and commercial real estate is imploding. Credit destruction is unprecedented, massive and ongoing. The capital hole is bigger than the Fed and bigger than the Treasury. It can’t be plugged with liquidity alone.

For now, the government can fiddle GDP with $800 billion infusion of stimulus, but what happens when the political will for more deficit spending dissipates? What happens when foreign investors demand the Fed stop writing checks on an overdrawn account?

The Fed has fixed nothing. The banks are still underwater, output is at record lows, and unemployment is climbing towards 10 per cent. Fed chair Ben Bernanke’s multi-trillion dollar rescue programs have kept a wobbly system upright, but nothing more. The economy’s underlying problems are still the same. The Fed’s quantitative easing (monetization) program has sent stocks surging, but done nothing to stimulate the economy. That’s because equities bubbles have negligible impact on aggregate demand; there’s no knock-on effect. The real economy is still flatlining while Wall Street parties on. Bernanke’s plan has been a total wash.

The government cannot deficit spend forever. Eventually, GDP will have to depend on wage growth and credit expansion. Given the political and institutional bias against labor, (and opposition to wages that rise with productivity) the only way to fuel the economy is through credit growth. And there’s the rub. Households have lost nearly $14 trillion in wealth since the crisis began and are in no position to resume borrowing at pre-crisis levels. Consumers are cutting back on spending and paying down debt. They have no other choice.

This is from Bloomberg News:

“Americans plan to refrain from boosting their spending even after the biggest drop in consumption since 1980, signaling concern about the direction of the economy over the next six months.

“Only 8 per cent of U.S. adults plan to increase household spending, almost one-third will spend less, and 58 per cent expect to ‘stay the course,’ a Bloomberg News poll showed. More than 3 in 4 said they reduced spending in the past year.

“Underscoring consumers’ austere attitudes, 77 per cent of respondents said they have cut back on spending during the past year, 59 percent said they have made a bigger effort to pay off debts and 48 percent have put more money aside as savings.” (Bloomberg News)

Savings are up and spending is down. The economy is headed into a long-term funk; the “new normal”. The Fed’s sleight-of-hand programs and Obama’s stimulus elixir haven’t changed the prevailing downward trend. If anything, they have made matters worse. Consider this from Janet Tavakoli, author of “Dear Mr. Buffett” in an interview with Max Keiser:

“Regarding the outlook, my analysis is grim. I am not a doomsayer, I follow the cash, and so far, I’ve been correct, and the government has been wrong. Here’s the situation. We are at greater risk of a total meltdown due to a deflationary collapse than we were in 2007. After the greatest Ponzi scheme in the history of the capital markets, we’ve seen history’s greatest fiscal and monetary expansion, but it hasn’t worked. Debt levels of consumers and business exceed the capacity to repay.” (Janet Tavakoli On The Edge With Max Keiser)

The Fed has done nothing to restructure the financial system so the same problems which killed Lehman and thrust the global economy into a tailspin, persist today. When the stimulus runs out and the Fed ends its $1.25 trillion purchase of (Fannie and Freddie) mortgage-backed securities and $300 billion in US Treasuries, interest rates will rise, housing prices will tumble, and the economy will nosedive. Bernanke will be forced back to the printing presses, the only hope for reversing the deflationary spiral. This will trigger the next crisis, a run on the dollar.

This is from an article by Alice Schroeder of Bloomberg News:

“In all the talk of inflation because the Treasury is printing so much money versus deflation because it may not print enough, there is one type of inflation that is rarely discussed. This is the mega-inflation caused by a sudden currency devaluation. Currency is like any financial innovation, an obligation secured by assets. When the obligation is perceived to have increased far beyond the level justifiable by the assets, which in this case make up a country’s economy, a bubble has formed……Right now, the American economy is worth less than the value implied by the market value of its obligations.” (Gold Tells You U.S. Bubble Hasn’t Popped Yet: Alice Schroeder, Bloomberg)

The system crashed because it was built on the false assumption that an unregulated shadow banking system could generate an infinite amount of credit without sufficient capital. This proved to be wrong. Capitalism requires capital. The trillions of dollars in loans, complex debt-instruments, off-balance sheet operations and derivatives contracts were all stacked atop a tiny scrap of capital which eventually collapsed beneath the weight of the debt. This system (securitization) which created the mess, cannot be restored. It required a strong currency, artificially low interest rates, and credulous investors who were unaware of the inherent risks of illiquid assets. Those conditions no longer exist, nor have they for more than two years. Even so, the Fed continues to pump blood into a corpse hoping for some fleeting sign of life. This is why an even bigger crisis cannot be too far off.

Link to Article

The Recession and Pay: the Quiet Americans

Back when times were better and the newspaper industry wasn’t fighting for dear life, reporters at the Cleveland Plain Dealer would regularly grumble at the measly pay increases their union negotiated. Last month, when the union announced it had negotiated a 12% pay cut in exchange for a promise of no lay-offs, there was applause. “It took me aback,” says Harlan Spector, a medical reporter and one of the negotiators.

Like many long-standing economic relationships, “wage stickiness” is being tested by the savagery of the recession. Ordinarily, when unemployment shoots up wages do not tend to fall: they simply grow more slowly. Why the price of labor responds less to demand than that of other commodities is a bit of a puzzle. In the 1990s Truman Bewley of Yale University interviewed hundreds of employers and discovered that, faced with a slump in demand, they would rather lay some workers off than cut the pay or hours of everybody. The sackings devastated those directly affected, but broad cuts to pay and hours hurt everybody’s morale. “The main drawback of pay cuts is that they fill the air with disappointment and an impression of breach of promise, which dissolve the glue holding the organisation together,” he wrote in 1997.

Link to article:

http://www.cfo.com/article.cfm/13933928

REVENUE BREAKDOWN – Obama’s Spending Spree

REVENUE BREAKDOWN – Obama’s Spending Spree

By Stephen Wellman
June 5, 2009

 

This will cover spending and tax revenues for the week starting June 1, 2009. It was a busy week for the US TREASURY and one of the highlights was Tim Geithner’s meeting in China. Laughing students aside, he had a tough act to sell! Yet he kept to the same script the US FED and US TREASURY have been saying for decades now their mantra of STRONG DOLLAR … STRONG DOLLAR. Its their mantra but not their practice.

BLS WAGES

BLS data for wages that was released on June 4th to NO FANFARE … The FANFARE that moved the DOW that day was for the small dip in unemployment claims. Meanwhile if you read the hidden details, like I do, you see that there has been some massive hour cuts for American workers for the Q1 2009. That reflects perfectly with my collapse scenario for the US PAYROLL WITHHOLDING TAX REVENUES. If workers work less hours then there will be less tax revenues. Even here in Hawaii Governor Lingle is making State employees take mandatory three day furloughs(no pay) every month in order to cut costs.

What stuck out was this report on the MANUFACTURING SECTOR:

Manufacturing

Productivity decreased at a 2.7 percent annual rate in the manufacturing sector during the first quarter of 2009, reflecting a 21.7 percent decrease in output and a 19.5 percent decrease in hours (tables A and 3). These were the largest-ever declines in the output and hours series, which begin with data for the second quarter of 1987. Over the last four quarters, manufacturing productivity fell 3.2 percent, the largest four-quarter decline in the series (tables A and 3). This contrasts with the 3.7 percent average annual increase from 2000 to 2007. In the durable goods manufacturing subsector, output declined 31.0 percent and hours fell 23.0 percent, yielding a productivity decline of 10.4 percent. In nondurable goods industries, productivity rose 1.9 percent as the decline in output of 11.6 percent was less than the 13.2 percent decline in hours.

Hourly compensation in manufacturing grew 13.4 percent during the first quarter of 2009, reflecting a 15.8 percent rise in durable goods industries and a 10.1 percent rise in the nondurable goods industries (seasonally-adjusted annual rates). Real hourly compensation, which takes into account changes in consumer prices, increased 16.1 percent for all manufacturing workers. Unit labor costs rose 16.6 percent in manufacturing during the first quarter of 2009, after increasing 17.1 percent in the fourth quarter of 2008. Over the last four quarters total manufacturing unit labor costs increased 12.0 percent, the largest increase in the series.

These moves represent the BIGGEST moves since 1987. So things are falling off a cliff for America’s manufacturing base. I have also reviewed this same info for the State Of California and it is confirmed. The biggest drops in payroll for California are Construction and Manufacturing. The reports don’t really say why, but I imagine it is due to closing doors or moving out! Interesting the two sectors which show the least decline in employment are mining and healthcare. Healthcare in California is stable.

So productivity decreases while wage costs increase. Hummmmm??? NEXT!

US TREASURY DAIIY STATEMENT

Well on June 3rd, 2009, the US TREASURY spent $22.332BIL USD on Social Security benefits in 24 hours. That put our SPEND RATE up to 6.00. The US TREASURY only took in $7.559BIL USD in tax revenues on June 3rd and out of that $7.449BIL was from US PAYROLL TAX REVENUES. How much tax did the US corporations pay? $52mil. Those rich people with their Estate taxes only paid in $3mil USD that day.

Here is the LINK to the US TREASURY DAILY STATEMENT for June 3, 2009.

So how much have we spent on Social Security for FY 2009 so far? Around $385.7BIL USD and how much on TARP? Around $321.4BIL USD … not much difference. But on UNCLASSIFIED we have spent way over what we spend on Social Security at $413.6BIL USD. Between OTHER and UNCLASSIFED we have spent a combined total of $1.777TRIL USD and the media is dead silent. There’s so much money in the system on a daily basis the US TREASURY can’t even line item it!

TRUST FUND IOUS IN LAYMAN’S TERMS

There has been much talk about how the US TREASURY “borrows” from the Social Security Trust Fund. If only that were the only Trust Fund they hand IOUs to!

On every US TREASURY DAILY STATEMENT is a term called GOVERNMENT ACCOUNT SERIES. First TABLE III-B refers you back to TABLE III-A where there is a breakdown of both “marketable”(bills, notes and bonds) and “nonmarketable”(intergovernment debt). As anyone with eyes can plainly see the vast majority of “debt” is in the “Government Account Series” line item in the “non-marketable” section of both TABLES III-A and III-B. Just think of that BIG number as the UNFUNDED LIABILITY number for US CONgress to borrow from the Social Security and Medicare Trust Funds and many other trust funds you probably have never heard of. This is the magic hocus-pocus of IOUs that are suppose to be repaid in our lifetime.

So this stuff is “ON-BUDGET” and “OFF-BUDGET”. The “OFF-BUDGET” debt did not start until 1937 during the Great Depression, under FDR, but it has steadily grown since then just like everything that BIG GOVERNMENT does. Once again both DEMS and REPS have been guilty of growing the gross DEBT; both are experts at fiscal irresponsibility.

Back to the Government Account Series. These are non-marketable securities, implicit debt, guaranteed by the US government. They are mainly TRUST FUNDS. This chart of TRUST FUNDS is from the Financial Management Service, a bureau of the US TREASURY. I think it is important to get a perspective on just how widespread this addiction to SPEND has become. It has infested all manners of solvent entities and turned them into IOU ridden wards of the state.

The following TABLE FD-3 is only reported monthly, so March 2009 is the last data point.

Here is the LINK to the website that publishes these tables. Click on “Federal Debt”.

You can see that the US government owes these Trust Funds a total of trillions.

I found this statement from the FMS … “Government account series (FD-2)—Certain trust fund statutes require the Secretary of the Treasury to apply monies held by these funds toward the issuance of nonmarketable special securities. These securities are sold directly by Treasury to a specific Government agency, trust fund, or account. Their rate is based on an average of market yields on outstanding Treasury obligations, and they may be redeemed at the option of the holder. Roughly 80 percent of these are issued to five holders: the Federal Old-Age and Survivors Insurance Trust Fund; the civil service retirement and disability fund; the Federal Hospital Insurance Trust Fund; the military retirement fund; and the Unemployment Trust Fund.”

The BIG FIVE!!

I’ll bet they are “special”! I just hope we never find out just how “special” they really are!

There are also “marketable bonds” as per Table III-B of the US TREASURY DAILY STATEMENT. Every BOND issued by companies or governments has a “Redemption Value” upon maturity whereby the company, or in this case the government, pays to redeem it.

So in the end should the US TREASURY count these securities or “IOUs” when they borrow from a multitude of Trust Funds? The idea is that these “IOUs” will be made good when they are due or “mature”. So in theory as these IOUs mature the government must print money to pay them if there are no tax revenues to cover them. I personally am not counting on getting any checks from Social Security by time I retire. I also doubt I am going to have Medicare, but instead some Third World version of UNIVERSAL HEALTHCARE that is tantamount to a Medicare default.

Just because all this is listed on the US TREASURY DAILY STATEMENT don’t get the idea that all these numbers add up and make sense … THEY DON’T! Try to add up the OTHER total with the breakdown that is listed for OTHER, it never adds up.

This is the stuff that the GAO has been complaining about for decades now and is the main reason that David Walker(former GAO Chief)quit.

So next time when you hear someone compare the US government to ENRON, you’ll know why. More to the point you’ll know where ENRON got all their ideas from! Yet the S&P gives out their AAA rating … AAA is virtually worthless in my opinion, but then again I am not CHINA or the millions of people out there sitting in cash on the sidelines using Treasuries or FDIC accounts. By the way the US government even borrows from a trust fund entitled “Deposit Insurance Fund”. Hummmmmm??? I wonder if that is related to the FDIC.

All this info is available to the public so feel free to do your own research. When was the last time any of this was discussed in the SITUATION ROOM or on SQUAWK BOX or on OPRAH? Nobody wants to know the real truth and even after going on 60 MINUTES, David Walker walked away completely convinced that the US CONgress is just that … a CON!

None of this data supports a STRONG DOLLAR POLICY. Strangely enough it all comes from the same entity that Tim Geithner heads, the US TREASURY.

Gold is the only durable hedge against this enormous monetary fraud of the irredeemable currency Ponzi scheme.

GOVERNMENT IS ONLY AS HONEST AS ITS MONEY …