Four weeks ago I discussed the quickly deteriorating macroeconomic picture, both in the U.S. and internationally. Since then the outlook has corroded more.
Especially noteworthy: Interest-rate spreads for the European PIIGS countries are widening and consequently credit-default swap spreads for major U.S. banks are on the rise.
This can further hurt struggling U.S. financial institutions that have sold credit default swaps on roughly half of the PIIGS-threatened debt. So if the PIIGS default, these U.S. banks are on the hook for 50 percent of the resulting losses.
What’s more, during the past few weeks there has been a broad-based change for the worse in nearly all forward looking U.S. economic indicators. They haven’t reached levels . . . → Read More: Oversold, but Unable to Bounce!
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The Secessionist was in Manhattan yesterday, tooting his own horn as usual.[...]
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Do you approve of the way House Minority Leader Nancy Pelosi is doing her job?
Do you approve of the way DNC Chair Debbie Wasserman Schultz is doing her job?
Right-wing media have seized on recent comments by President Obama to claim that Obama "blame[d] ATMs for high unemployment." But Obama's full comments show that he was suggesting that businesses are investing more heavily in automated machines than in hiring new employees, a view shared by economists.
Obama:"[T]here Are Some Structural Issues With Our Economy Where A Lot Of BusinessesHave Learned To Become Much More Efficient With A Lot Fewer Workers." From aJune 14 interview on NBC's Today:
ANNCURRY (host, NBC's Today): You're here encouragingprivate sector hiring. This just after The New York Times justpast -- this past Friday reported that since the recovery began, businesseshave spent just 2 percent more on hiring people, while at the same timespending 26 percent more on equipment. So why, at a time when corporate Americais enjoying record profits have you been unable to convince businesses to hiremore people, Mr. President?
OBAMA:Well, I don't think it's a matter of me being unable to convince them to hiremore people. They're making decisions based on what they think will be good fortheir companies. A couple of things have happened. Look, we went through theworst crisis since the Great Depression. We are now in a process where theeconomy is growing again, and we've created 2 million jobs over the last 15months. But it's not as fast as it needs to be to make up for all the jobs thatwere lost.
Theother thing that happened, though, and this goes to the point you were justmaking, is there are some structural issues with our economy where a lot ofbusinesses have learned to become much more efficient with a lot fewer workers.You see it when you go to a bank and you use an ATM; you don't go to a bankteller. Or you go to the airport, and you're using a kiosk instead of checkingin at the gate. So all these things have created changes in the economy, and what we have to do now -- and that's what this job council is all about -- isidentifying where the jobs for the future are going to be; how do we make surethat there's a match between what people are getting trained for and the jobsthat exist; how do we make sure that capital is flowing into those places withthe greatest opportunity. We are on the right track. The key is figuring outhow do we accelerate it. [NBC, Today, 6/14/11]
Fox Nation: "Obama Blames ATMsFor High Unemployment." A June 14 Fox Nation post embedded video of Obama's commentsunder the headline, "Obama Blames ATMs for High Unemployment." [Fox Nation, 6/14/11]
CNN's Erickson: "Barack Obama Thinks An ATMAte Your Job." Ina June 15 RedStatepost titled, "Barack Obama Thinks an ATM Ate Your Job," CNN contributorErick Erickson wrote:
Yesterday, Barack Obama gave away the game.Without actually using the words, Barack Obama admitted he is completely andutterly ignorant about job creation and economics. In an interview with theToday Show, Barack Obama declared that the unemployment rate remains so high because of ATMS.
Sadly, many people will agree with himbecause they lack the vision to see the whole picture. They see less banktellers and more ATMs -- much as Barack Obama does -- and presume this mustmean higher unemployment. This myth, and it is a myth, is older than even thegreat lament that cars put blacksmiths on the unemployment line by getting ridof the need for horse shoes.
This left-wing populist thinking does notcreate jobs and often leads to dangerous policies that stifle the innovationthat create the jobs that spring forth from the ATM's replacing the banktellers. Barack Obama sees less tellers at the banks because of ATM's. But hedoes not see new IT workers at the bank to manage the ATM -- higher paid thanthe tellers. He does not see the computer programmers. He does not see themanufacturers of the machines and their component parts. [RedState, 6/15/11]
Malkin: "Obamanomics: DamnThose ATMs And Airport Kiosks!" In a June 15 blog posttitled, "Obamanomics: Damn those ATMs and airport kiosks!" Michelle Malkinwrote:
Canhe possibly be more out of touch?
Thesepeople have no clue about the natureof American ingenuity and smallbusiness creation/preservation.
Obamanomicsperpetuates a Luddite view -- a stupidly static,anti-technology view -- of the economy that betrays hostility not only to realinnovators in America, but to all of the individual consumers and employees whobenefit from their advances.
ATMsand ticket kiosks are not the enemies of economic success. These are:
Limbaugh: Obama "Cited ATMMachines As A Reason For High Unemployment." During his June 14radio program, Rush Limbaugh said:
There's a new reason forhigh unemployment as told by Obama. He had that interview with Ann Curry at theToday Show, and basically there's too much automation out there. He cited ATMmachines as a reason for high unemployment. No, no. I kid you not. That's right!Obama explained to NBC News the reason that companies are not hiring is notbecause of his policies, it's because the economy is so automated. He said,"There are some structural issues with our economy where a lot ofbusinesses have learned to become much more efficient with a lot fewer workers.You see it when you go to a bank and you use an ATM; you don't go to a bankteller -- or you go to the airport and you're using a kiosk instead of checkingin at the gate."
He actually said this.
We've lost two millionjobs since the stimulus, and now today or yesterday we learned it's because of"automation." That's what he told AnnCurry. [Premiere Radio Networks, The Rush LimbaughShow, 6/14/11]
NFIBEconomist: Shift To Automated Production "Displaces A Lot Of Workers At Once." In a June 9 NewYork Times article, National Federation of Independent Business (NFIB)chief economist William Dunkelberg cited the mechanization of farming as anexample of mass worker displacement by automated production. From the Times:
Of course the shift to more automated production predates theGreat Recession. And in the long run, better technology lowers prices, raisesliving standards and helps workers move into higher-paying jobs. This was thecase with the mechanization of farming, which a century ago employed 41 percent of the Americanwork force.
"We don't have 11 million unemployed farmers today because overtime farmers and their children transitioned into different sectors," saysWilliam C. Dunkelberg, chief economist at the National Federation of IndependentBusiness. "We don't usually have this kind of shock, though, that displaces alot of workers at once."
Better technologies may eventually offer better job opportunities,but only if people can upgrade their skills quickly enough to qualify. That ishard to do in the short run, especially when so many displaced workers need tobe retrained at once. [The New York Times, 6/9/11]
Harvard Economist: "If You're Doing SomethingThat Can Be Written Down In A Programmatic, Algorithmic Manner, You're Going ToBe Substituted For Quickly." The Times further reported:
Usually economistscheer on capital spending, and have supported Congress's tax breaks for capitalinvestment, like bonus depreciation, which lets companies expense the full costof purchases immediately instead of waiting several years. That is becausecapital and labor can be complementary: a business that buys a new truck oftenhires a new driver, too.
But with the risingcosts of hiring, companies like Vista are finding ways to use capital toreplace workers whose jobs are relatively routine.
"Ifyou're doing something that can be written down in a programmatic, algorithmicmanner, you're going to be substituted for quickly," said Claudia Goldin, aneconomist at Harvard. [The New York Times, 6/9/11]
Barclays Economist: "Firms Are JustResponding To Incentives. ... And Capital Has Gotten Much Cheaper Relative ToLabor." TheTimes further reported that chief United States economist at BarclaysCapital Dean Maki stated, "Firms are just responding to incentives. ... Andcapital has gotten much cheaper relative to labor." From the Times:
Two years into therecovery, hiring is still painfully slow. The economy is producing as much asit was before the downturn, but with seven million fewer jobs. Since therecovery began, businesses' spending on employees has grown 2 percent asequipment and software spending has swelled 26 percent, according to theCommerce Department. A capital rebound that sharp and a labor rebound that slowhave been recorded only once before -- after the 1982 recession.
With equipment pricesdropping, and tax incentives to subsidize capital investments, these trendsseem likely to continue.
"Firms are justresponding to incentives," said Dean Maki, chief United States economist atBarclays Capital. "And capital has gotten much cheaper relative to labor." [The New York Times, 6/9/11]
NYTimes:MIT Economics Professor Said That "Jobs In The Middle Are Being Lost ToAutomation And Outsourcing, And Now Job Growth At The Top Is Slowing Because OfAutomation."From a March 4 Times article:
David H. Autor, aneconomics professor at the Massachusetts Institute of Technology, says theUnited States economy is being "hollowed out." New jobs, he says, are coming atthe bottom of the economic pyramid, jobs in the middle are being lost toautomation and outsourcing, and now job growth at the top is slowing because ofautomation.
"There is no reasonto think that technology creates unemployment," Professor Autor said. "Over thelong run we find things for people to do. The harder question is, does changingtechnology always lead to better jobs? The answer is no."
Automation of higher-leveljobs is accelerating because of progress in computer science and linguistics.Only recently have researchers been able to test and refine algorithms on vastdata samples, including a huge trove of e-mail from the Enron Corporation. [TheNew York Times, 3/4/11]
Vista Technologies Managing Director: "YouDon't Have To Train Machines." The June 9 Times article furtherquoted Dan Mishek, managing director of Vista Technologies, as saying thathiring employees "has some hidden costs, as well as the expenses of salary andbenefits" and that "you don't have to train machines." From the Times:
Hiring has somehidden costs, as well as the expenses of salary and benefits, Mr. Mishek added.
"I dread the processwe have to go through when we want to bring somebody on," he said. "When wehave a job posting these days, we get a flurry of résumés from people whoaren't qualified at all: people with misspellings on their résumés, who havenever been in the industry and want a career move from real estate orsomething. It's a huge distraction to sort through all those."
Culling the résuméstakes three days. Then he must make time to interview applicants, and spend$150 for each drug test.
Once a worker ishired, that person must complete a federally mandated safety program, whichVista pays an outside contractor a flat fee of $7,000 annually to handle.Finally, Vista's best employees spend several months training the new hire,reducing their own productivity.
"You don't have totrain machines," Mr. Mishek observes. [The NewYork Times, 6/9/11]
Seems Democratic Rep. Carl Anderson is upset about the redistricting taking place with Republicans at the helm.
?He (Kevin Ryan) really wants Kensington,? Anderson said, adding he has tried to get Ryan to meet with him in the ?map room? to discuss the district lines but Ryan never accepted the invitation.
(Anderson) said he does not expect the newly drawn lines to make it past the review of the U.S. Justice Department. ?They will say it?s not right,? Anderson said. ?But we should not have to go to court. We should take care of making this right ourselves.?
The Larry Summerses of the world agree with the DFH's on identifying the problems, but as Robert Kuttner says, they are too chickenshit or too stubborn to actually agree with us when we call out the right things to do.
If you want to understand why the Obama administration?s heart is in the right place but it suffers from a chronic lack of political nerve, you need look no further than former chief economic advisor Larry Summers. On Sunday, Summers published a piece in the Financial Times warning that the recovery was at risk of sputtering out. His analysis was spot-on. But his proposed solutions were feeble, bordering on pathetic.
Summers declared boldly:
The problem in a period of high unemployment, as now, is a lack of business demand for employees? After bubbles burst, there is no pent-up desire to invest. Instead, there is a glut of capital caused by the over-investment during the period of overconfidence - vacant houses, malls without tenants, factories without customers.
Exactly so. And Summers went on to debunk such usual remedies as training programs, tax cuts, and deficit reduction for its own sake. Increasing the supply of qualified workers, he added, may even make things worse:
Training programs or measures to increase work incentives for those with high and low incomes may affect who gets the jobs, but in a demand-constrained economy will not affect the total number of jobs. Measures that increase productivity and efficiency, if they do not also translate into increased demand, may actually reduce the number of people working as the level of total output remains demand-constrained.
So, what?s solution? A big infrastructure program, or Stimulus II, right? Surely, that logically follows. Well, no.
Atrios continues: All Wind-Up And No Pitch
It's basically the same with Klain, who spent time arguing with the imaginary hippies who were obsessed with the stimulus involving Big Projects. Now as a certified dirty hippie, I think there was a blown opportunity to make the case for big projects, though I don't think that's the same thing as thinking big projects should have been central to the stimulus. And thinking that some big projects would be a good thing isn't just Hoover Dam nostalgia, it's thinking that...there are some big projects that we should be doing!
Klain then goes on to make the case that we should be repairing things instead of focusing on big new projects. Well, this dirty hippie mostly agrees! Or, at least, agrees that while there shouldn't necessarily be a tradeoff, there are basically limitless fast opportunities to spend money repairing water systems.
Looks like you don't have to worry
about that $275K, friend
"The grunt work in corporate litigation is being farmed out to contract attorneys. More and more law school graduates, steeped in student-loan debt, are settling for this unsteady, monotonous work for surprisingly low pay. WSJ's Vanessa O'Connell and Jason Bellini report."
-- blurb for the WSJ article
"Lawyers Settle . . . for Temp Jobs"
A colleague smuggled this out from behind the WSJ paywall, and I'm still shaking my head over it.
I know, I know, we all have automatic responses to bad news for lawyers. (All of us who aren't lawyers, I mean.) "Serves 'em right!" "Nobody held a gun to their heads and forced them to become lawyers!" Still, I can't help thinking there's something wrong here, maybe something deeply wrong.
Lawyers Settle... for Temp Jobs
As clients seek to cut costs, the field of 'contract' attorneys expands
By VANESSA O'CONNELL
When he decided to become a lawyer, Jose Aponte followed a familiar path: He took the LSAT, spent more than $100,000 on law school, took a grueling bar exam and paid for continuing education.
But the work the 37-year-old New York lawyer, a graduate of American University's Washington College of Law, is getting is a far cry from the stable, lucrative type he originally envisioned.
Mr. Aponte is part of a growing field of itinerant "contract" attorneys who move from job to job, getting paid by the hour, largely to review documents for law firms and corporate clients. These short-term jobs, which can pay as little as $15 an hour, have increasingly become a fixture in the $100 billion global corporate legal industry as law firms and clients seek to lower their costs.
This new "third tier" of the legal world illustrates the commoditization of the legal profession, which once offered most new entrants access to prestige and power, as well as a professional lifestyle. It also shows how post-recession belt-tightening is permanently altering some professions.
For 10 to 12 hours a day?and sometimes during graveyard shifts?contract attorneys such as Mr. Aponte sit silently in a big room, at rows of computer monitors. Each lawyer reads thousands of documents online and must quickly "code" every one according to its relevance in litigation or an investigation.
Supervisors discourage talking and breaks are limited. The computer systems count each lawyer's speed. Some law firms use their own contract attorneys, while others hire them through third-party agencies.
The increasing reliance on temporary workers comes as the industry continues to struggle from a downturn that has produced a glut of unemployed U.S. lawyers, including crops of indebted recent law school graduates. About 10% of all private practice jobs accepted by last year's law school graduates were reported as temporary, a steady increase from 5.4% in 2007, according to the National Association for Law Placement.Responses to a June survey of top legal officers, conducted for The Wall Street Journal by the Association of Corporate Counsel, a bar association for in-house counsel:To make a living, Mr. Aponte, who works for a variety of agencies, must scramble for the next gig. He has worked for as little as $33 an hour and has endured up to seven months' unemployment. The duration of a job is unpredictable. "A case can settle at any time. One night they'll call you, and the next day the project ends," he says.
Approximately 34% of 876 respondents said their companies had used non-staff "contract" attorneys in the previous fiscal year.
The most common reason for their use was given as "project cost management," by 29% of those respondents using contract attorneys. About 26% said they were looking "to satisfy the need for a specific skillset." Another 20% said their use was the result of "cost management" by a law firm.
About 35% of 319 respondents said their companies typically paid more than $80 an hour for document review work by contract attorneys; 18% said they paid less than $40 an hour.
Source: Association of Corporate Counsel/WSJ Contract Attorney Use Survey
A typical contract lawyer with an average flow of work can make $40,000 to $50,000 annually, according to Veronica Maldonado, a contract attorney in Chicago who recently started a website for contract lawyers. That compares with an average starting salary of $160,000 for associates?who may also get bonuses of $10,000 or more annually? at some of the big corporate law firms in New York.
Temporary legal staffing in the U.S. is projected to increase by 25% cumulatively over the next two years, according to Staffing Industry Analysts, a temp-industry tracking group. The hourly rates that temp agencies charge for contract attorneys are just a fraction of what a first-year associate at a big law firm typically bills per hour.
Large firms are billing $325 to $550 for an hour's work this year by freshman associates, while smaller firms bill them as low as $100, according to research firm Valeo Partners. Temp staffing agencies, in contrast, might bill around $50 an hour or less for document review work by contract attorneys.
There is no count of the total number of lawyers working as contract lawyers. The Posse List, an online clearinghouse for contract-lawyer job postings, has more than 14,000 registered U.S. users seeking work as temp attorneys.
More than a third of top legal officials at 876 companies said they used contract attorneys in the previous fiscal year, according to a June survey for The Wall Street Journal by the Association of Corporate Counsel, a bar association for in-house lawyers.
Dozens of corporate law firms including Wachtell, Lipton, Rosen & Katz, Cravath, Swaine & Moore LLP, and Davis Polk & Wardwell LLP, are turning to staffing agencies such as De Novo Legal and Hudson Highland Group Inc., for document review, sometimes at the behest of cost-conscious corporate clients. Spokesmen for Wachtell and Davis Polk said they couldn't immediately comment. Cravath declined to comment.
At De Novo Legal, founded 11 years ago, document review work, by hours, was up more than 40% so far this year, said CEO Robert Singer. It has document review centers in Washington, D.C., New York, Dallas and Houston.
The Posse List said it saw a 66% increase in document review job postings this year. AT&T Inc.'s proposed acquisition of T-Mobile USA alone has resulted in the use of 200 contract lawyers, it said. Both companies declined to comment.
Many lawyers turned to temporary work after losing full -time jobs. Deania Marie Jackson, 52, was laid off as general counsel of a small company in 2007, but figures she may be able to make $65,000 to $80,000 from document review projects this year.
"The pool of candidates willing to work as contract attorneys is bigger this year than it ever has been," says Mark Yacano, executive vice president at Hudson Legal, which has 10 project facilities around the country, including St. Louis, where lawyers are willing to work on a temp basis for hourly pay in the low $20s. Hudson Legal is a part of Hudson Highland.
For the lawyers themselves, the short-term jobs can sometimes come with medical coverage or retirement accounts but they offer little chance of advancement. Some document reviewers also believe they become stigmatized.
Chevita Phifer, 26, has worked in Charlotte, Moyock, N.C., New York and Los Angeles at regular rates of $20 to $40 an hour. Ms. Phifer, a 2009 graduate of Southern University Law Center, recently overheard another attorney refer to her as a "coder." A term, she says, she doesn't like.
The only circumstances in which I think I’d get behind a boycott of the Huffington Post is if the company had explicitly broken contracts it made with freelancers, and was denying them compensation they’d promised. In a sense, I feel sort of the same way about Huffington Post contributors that I feel about some of Roseanne Barr’s troubles during the first season of her shows?if you agree to something rotten that you later regret, that’s deeply unfortunate, and you can be upset when you’re treated badly, but you have to, at some level, accept that you made the bargain. The one part of it that I think Erik Loomis gets right, and that I sympathize with, is this bit of it:
The blogosphere was all about timing. Yglesias was right on that, much like Klein, Marcotte, Valenti, Kos, and many others. This site, in a lesser way, benefited from the same good timing. Nothing wrong with that. So that?s absolutely not meant as an attack. But a 22 year old today wanting to write about politics simply can?t become what Yglesias became. I don?t see the problem in just admitting that.
There’s no problem admitting it. What I do think Huffington Post promised, and what it generally seems to have delivered, was a blogging platform that unlike its competitors, offered some possibility of cross-promotion. Instead of promising a better wysiwyg editor or a smarter information architecture, HuffPo promised a marginally better chance of turning your hobby into a job, if that is what you were doing it for (I think this is a point that’s worth interrogating. I’d love to know a breakdown of what HuffPo contributors might have helped get out of the site.) That might have been enough to have launched some writers’ careers if, paradoxically, the site hadn’t been so good at attracting users. The chances of rising to the top were fairly small, and they became less meaningful as blogging became less an astonishingly rare talent that more a standard tool in the journalistic kit.
In that sense, deciding to blog on the Huffington Post is less like accepting a job that doesn’t pay in the hope that the person who employs you will have a change of heart, and more like making the early choices in setting up a small business. If you pick a bad corner and your business goes under because you didn’t get enough foot traffic, that’s too bad, but it’s one of the risks of starting a business! I can see why people would have given Huffington Post’s business proposal a shot, just as they might have decided to go with a certain advertising firm if they were starting a business. But it also seemed fairly clear fairly quickly that blogging for Huffington Post wasn’t leading many, if any, people to paid gigs either at HuffPo or elsewhere. At some point, if people were concerned about using it as a stepping stone to blogging or journalism jobs, it might have been a good bet to look elsewhere, just as you’d fire an ad firm that brought in no business.
I think it’s fantastic that so many people want to be in journalism, and want to write. Huffington Post, as it turns out, may have been a good way to validate that desire, but not to help people actualize it by getting them real jobs. I don’t think boycotting reading the publication is going to make it a good engine for creating hugely more journalism jobs?the barriers to that are baked into its business model. But part of wanting to make writing a career is treating it like a business. If Huffington Post is Cleveland, it’s time for its contributors to take their talents to South Beach.
Lawmakers in Florida are touring the Sunshine State promoting a new law that, if approved by the federal government, would require “most of the state’s 3 million Medicaid enrollees to join private health plans after July 1, 2012.” The proposal ?gives managed care companies more control over the program that?s paid for with federal and state money,? a shift the state GOP claims will ?hold down spiraling costs in the $20 billion program.?
During yesterday’s town hall meeting in West Palm Beach, Florida lawyers argued that the initiative would encourage private nursing homes to dump granny:
A little-known incentive buried in Florida’s new Medicaid reform law will reward health plans for cutting numbers of seniors in nursing homes, several speakers said during a highly charged hearing on the law Tuesday.
Calling it the “granny dumping bonus,” elder law attorney Ellen Morris warned that the law could result in eviction of seniors from nursing home care after 2012. ….
“Florida is poised to put thousands of long term care patients out into the cold without services,” she predicted. “There is no verifiable system to ensure that vulnerable elders are not evicted inappropriately.” [...]
Morris said the new law does away with longstanding, effective rules on who has recovered enough to be discharged from a nursing home, and replaces them with vague terms insurance companies will ultimately decide.
“Managed care companies will be paid bonuses for evicting seniors from nursing homes,” she predicted.
Florida Gov. Rick Scott (R) has also come under criticism since signing the law after it was revealed that one of the private managed-care companies that stand to gain from the measure is Solantic, ?a chain of urgent-care clinics aimed at providing emergency services to walk-in customers. Solantic was founded in 2001 ? by none other than Rick Scott.
Before being elected to the governorship, Scott was fired as head of Columbia/HCA just as the for-profit hospital chain pled guilty to a massive array of fraud charges ? which resulted in a fraud settlement of $1.7 billion dollars, the largest in U.S history.