A mild depression?

I'd rather be a little bit pregnant. The nation's fourth quarter GDP shrank at a rate nearly double what economists expected -- 6.2 percent negative growth -- prompting Mark Zandi, chief economist at Moody's, to set odds for "a mild depression" at 25 percent.

In a single stroke, The New York Times attempts and fails to reassure: "Current conditions are not even as poor as during the twin recessions of the 1980s, when unemployment exceeded 10 percent, though many experts assert this downturn is on track to be significantly worse." Because the frightening truth is that no one can predict just how significantly worse things will become.

The growing consensus on things worsening significantly doesn't require a leap of logic or a Ph.D. in economics, merely an observation of what is. Yesterday, we learned from the Commerce Department that durable goods orders fell for the sixth consecutive month and from the Department of Labor that initial unemployment claims for last week reached "667,000, an increase of 36,000 from the previous week's revised figure of 631,000."

Q: Why are train wrecks so hypnotically fascinating?
A: If you are still watching the train, you haven't yet been slammed by the locomotive; you are still alive, limbs intact.

Slamming workers for having a history

Nolan Finley wrote this week about what he considers the stupidity of the Michigan public.

Finley says a recent EPIC MRA poll about public education and preparing students for the future finds that "Forty-six percent said the schools should train students for jobs they can get with a high school degree, while 41 percent said college preparation should be the mission."

Is it really so bad to wish that a publicly provided education could equip citizens for meaningful work with a living wage?

According to pollster Ed Sarpolous, Michigan residents still identify with a manufacturing culture and are not convinced that a college education is necessary to meet their employment needs. This should come as no surprise. For generations, factory work has provided a comfortable, middle-class standard of living to Michigan citizens. People with that perspective have been shaped by the experience of their parents, grand parents and great grand parents. This world view and narrative span generations not fiscal quarters. This is about people and places and history, not shareholders and quarterly profits and global capital movement.

Finley concludes that people in Michigan are stupid and lazy. He suggests a new strategy for promoting higher education among disadvantaged workers for whom he has contempt.

"Create an appetite for the jobs, and maybe job seekers will get off their backsides and get themselves some skills," writes Finley blaming the unemployed for not having work.

Here's another possibility: given the economic stresses befalling the blue-collar, Michigan middle-class maybe they are unwilling to go into debt again to get a college degree that may not allow them to pay back student loans. Maybe these folks are not ready to mortgage their future earning potential. Indeed they are still watching their nest eggs shrivel as real estate values collapse.

Finley should read the Michigan League for Human Services recent report, The Changing Face of Poverty in Michigan, which documents stagnating wages, rising costs, increasing foreclosures, and less access to health coverage.

Perhaps the EPIC MRA poll reveals skepticism about debt, pain from real economic stress and a resistance to acquiesce to globalization? Instead of blaming workers for wanting continuity of their family history and saying we need to better market higher education, Finley should examine cost barriers to higher education in an economy where poverty is increasing. If the unemployed are deciding between medicine and food, college tuition is probably not on their radar.

Bank of America to release 1500 Michigan workers

Detroit News reports:

"Bank of America Corp. will close its $21 billion deal to purchase LaSalle Bank next week, a move that will trigger the beginning of 1,500 layoffs of LaSalle workers in Michigan over the next two years."

Lawrence Di Rita, a spokesman for Bank of America, headquartered in Charlotte, N.C., also said with respect to customer experience,"There are typically hiccups along the way, but we try to minimize them. There is no reason to believe this won't be a smooth transaction."

Do you suppose the 1500 lost jobs will be experienced by the workers as mere "hiccups along the way?" Will their children who experience disruption in home life and stressed parents find the circumstance a mere inconvenience, a blip in the grand scheme of their formative years?

Well, that's not Bank of America's problem. In the last two weeks Bank of America announced it was raising ATM fees for non-Bank of American customers in order to provide better service to its own customers. How about sending a small portion of those fees to a fund for displaced Bank of America workers to assist with transition to some other knowledge-based, new economy job?

Truth is Stranger than Fiction--Economic News this Week

Looks like maybe we're not in a one-state recession anymore.
U.S. payrolls decreased by 4000 instead of increasing by the expected 110,000. It's the first drop in four years.(source)

More job cuts in the knowledge-based financial sector.
Countrywide Financial, the biggest U.S. home lender will downsize 12,000 jobs (1/5 of its workforce) over the next three months. (source)

Denial runs as deep as your credit limit.
August back to school spending was brisk. (source)

Your credit limit may be increasing if you are a particularly bad risk, through the generosity of credit card companies.
Direct mail credit card offers to subprime customers were up 41 percent in the first half of this year, compared with the first half of 2006, according to Mintel International Group.(source)

Do these things taken together make any sense?

Next Friday will bring the University of Michigan Consumer Sentiment Preliminary Number for September. It's anybody's guess.

Michigan's July Jobless Rate, Still 7.2%

According to Michigan's Department of Labor and Economic Growth, Michigan's seasonally adjusted unemployment rate remained unchanged from June at 7.2%. Is this good news?

Interesting facts from the DLEG press release:

• July's manufacturing decline was the most pronounced monthly drop in 2007.
• Construction registered its fifth consecutive monthly employment decline in July. From February to July, this sector has shown a decrease of 13,000 jobs.
• July marked the largest monthly decrease in statewide payroll jobs since January, and July's total jobs count was the lowest for thus far in 2007.
• Since July 2006, education and health services was the only major industry sector in Michigan to show significant job growth (+10,000).

The national unemployment rate remained steady up a tenth of a percent to 4.6%

Michigan Unemployment Hits 7.2% in June

Yep, we lead the nation in unemployment. We're number one again. This marks the highest rate for 2007--a full .5% higher than June 2006.

That's the bad news. But it could be worse. 208 of the state's 250 prisoner work crews (about 1500 workers) will be "laid off" by the Department of Corrections in a move to save $6 million. (source) That's right, the prisoners who cut grass, shovel snow and do other menial labor for the DNR and MDOT for next to nothing cost too much.

Actually, the prisoners don't cost too much. The Ionia Sentinel-Standard reports that the costs associated with the program include corrections officers' salaries, the leasing of vans and equipment and fuel. Agencies and municipalities only pay $15 per day per worker.

Which begs the question: who is going to do this work? And who could do this work for less?

Maybe scout troops across the state need to step up and earn some merit badges. They could even create a new one--The Other Invisible Hand Badge for literally cleaning up the messes left by the invisible hand of laissez faire capitalism, which should have been slapped a few more times along the way and is utterly incapable of picking up after itself.

At least the prisoners won't be included in the next unemployment figures--unlike workers at Pulte Homes, which announced Tuesday it is bracing for a huge second quarter loss. Tuesday's announcement didn't include news of more layoffs. The company already is in the midst of a massive restructuring announced in May cutting 16% of its workforce. Standard and Poor's has issued a strong sell recommendation on the second quarter news.

On a positive note, DeVry University will be setting up shop in Southfield as worker retooling is a booming growth industry in Michigan.