Jobs plan may create 1 million jobs

This is an interesting article that explains President Obama's new economic stimulus plan which is targeted towards the labor market. The most interesting part about it is that it targets small businesses and less towards big businesses. It includes payroll tax breaks for small businesses that is supposed to improve aggregate demand. This rise in aggregate demand is the main catalyst that should create new jobs. Figures anticipated include from 600,000 new jobs to 1 million. If this is the case, I am very grateful because I will be entering the work force soon and any help with getting a good job, is appreciated.

Unemployment Issues

In an article in the New York Times the question of whether the Obama administration’s plans to spur company hiring was in question. The administration aims to institute a payroll tax cut for individuals as well as a $4ooo tax credit for companies willing to hire the long term unemployed. From our knowledge of economics we can see how this intends to aid in relieving the current unemployment crisis. With reduction in payroll tax should create more disposable income for consumers which would encourage more spending and thus prompt companies to employ more workers, due to increased revenue. As for the proposed tax credit to companies that hire long term unemployed, it is an incentive as it reduces costs of production by some degree. The question raised in this article however is, to what degree does this benefit companies and spur them to hire more workers?

The answer that seems to be prevalent throughout this article is that the proposed plans may not help that much. Many companies are reluctant to employ unemployed workers for a few reasons. One reason for this reluctance is that a $4000 tax credit to companies may not enough to cover the cost of hiring new workers. In agreement with a chief economist at the United States Chamber of Commerce, what really would be the benefit of gaining a $4000 credit to hire a worker that is paid $80,000? In addition to this there is a “growing stigma” that is attached to those who are considered unemployed. Companies don’t want to hire new workers who were recently unemployed for long terms because of a lack of confidence in these workers’ skill. I argue that these people should not be disregarded because there are many skilled workers who are no unemployed because of job cuts.

With the way these new proposals are designed and the way in which those hiring view the unemployed what will become of the economy?

"Mr. Banker, Can You Spare a Dime?"

In this New York Times article author Joe Nocera offers up his opinion on how to help with job creation in this country by highlighting the struggles of two small businesses who are trying to find a loan. Both of the businesses seem to have good track records and be trustworthy, yet they have consistently been rejected by banks when asking for loans to expand. Why? Because banks are still recovering from the shock of the recession and have become more wary about loaning out money. This, the author says, is what has caused the trend of banks becoming more particular about who they will loan to.

The banks, the author argues, may be the key to increased job creation. Obama said in his speech Thursday that “small businesses are where most new jobs begin”, which Obama used as a defense for his plan to cut taxes to such businesses. While Nocera agrees that tax cuts will likely help small businesses he believes the government would do better to look at how to convince banks to behave more like the Sterling Savings Bank in the article. If banks would relax their stringent standards for giving out loans the money supply would increase, businesses would then be able to expand, and new jobs would be created.

Budget Deficit Vs. Job Growth

Budget Deficit vs. Job Growth
This article was published pre Obama's speech Thursday so disregard the heavily affiliated political conclusion. The author, Paul Krugman,  discussed his distaste for what has taken place (what hasn't taken place) in Washington over the last couple of years.
It is most definitely a horrifying statistic seeing the federal debt, and even more so when you combine the increasing health care costs. However, the Unemployment rate remaining idle at 9.1% must be the main focus of everyone involved in stimulating the economy. All of the scare linked to the budget deficits have acted as blinders to Congress.
It is impossible to tell if Obama's newest stimulus is going to be effective in dealing with the mass unemployment. We should all be able to agree that in order to deal with the budget deficits we must first and foremost do whatever is necessary to create new jobs. The budget deficit talks are still going to be around in a couple years, hopefully the unemployment isn't!

The Impact of 9/11 on Business, Good and Bad

With the 10th anniversary of 9/11 just days away I found myself drawn to this article. The article is a compilation of first hand accounts from different firms about how 9/11 changed the way we do business. The most interesting parts of the article for me were places where 9/11 had positive benefits to business. For instance, increased regulations for inspecting containers coming into the country made exporting goods to America more costly, and subsequently benefiting domestic production.Entrepreneurship also was affected, as the tragedy spurred more and more people on to chase their dreams, sparking innovation.

The timing of this anniversary is quite unique. America is still recovering from a recession, and political divisiveness has severely impeded recovery. President Obama's speech Thursday night to congress stressed the need for unity among politicians now more than ever as he unveiled his new Jobs Act. The speech has put pressure on Congress to get something done, and with the added drama of 9/11, it will be interesting to see where this Jobs Act goes.

Mortgage Rates Plumb Lows, With the 30-Year at 4.12%

This article is from the Wall Street Journal and talks about the ever low mortgage rates.

Mortgage rates are historically low at 4.12% compared to almost 6% in 2008. One reason for this is the increased exposure of the US banks to the euro zone crisis. As investors are skeptical of the performance of the financial markets, they are turning to safe heavens such as investments in the treasury bonds. As demand for these bonds increase, their prices rise hence the interest rates they offer decreases. As the fixed mortgage rates are related to the yields on these bonds, they also go down.
This problem is exacerbated by the fact that the US unemployment rate is still high at almost 9.1% as the economy fails to add more jobs. This means that although the mortgage payments are very low, people just don't have the money to buy houses, hence depressing the level of fixed residential investments which ultimately slows the pace of recovery.
One interesting thing to note here is that although S&P recently downgraded the US credit rating, investors are still content on buying the treasury bonds rather then investing in the housing market which indicates how worse the housing market situation is even after all the attempts by the government.
If this situation continues who knows what is to follow? Will the US economy need another round of quantitative easing to spur growth or will the markets jump back themselves?

US falls to 5th in global competitiveness, survey shows

I thought it was very interesting to see how the United States economy has compared to others within these past few years where we have experienced many difficulties in our nation's economy. The U.S., which until recently held the title for the most competitive economy, has seen their ranking drop in the latest announcement through the World Economic Forum. Such factors that are used in determining the rankings include the innovation of companies, education, and population belief in the government. It was only in 2008 that United States was at the top of the board, however, in three months have fallen to fifth in the world. Meanwhile, Switzerland for the third year in a row has come in first while the leading economy in Europe, Germany, sits behind the United States at sixth.

Throughout my time in college I knew that our nation's economy has struggled but I did not realize it was falling drastically on a global scale. According to the forum, the U.S. received praise for their, "productivity, highly sophisticated and innovative companies, excellent universities and flexible labor market." But, they also noted that the United States had "a number of escalating weaknesses" which included a rise in the government debt and also "declining public faith in political faith in political leaders and business ethics." I was very shocked to see that many are in a sense, giving up on our government and lacking confidence for the leaders of this country. Hopefully Obama will be able to implement new programs to reduce government spending and find new ways to address the unemployment issues that have dampened a large number of citizens hopes of finding a job in the work force.

Greek banks: Dance of the dead

This article details a merger between the second and third largest banks in Greece, Eurobank EFG and Alphabank, which will create the largest bank in the country. This merger is said to be beneficial for two reasons. The first is the lowering of administrative costs, potentially increasing profitability. Second, the merger would allow the banks to merge their capital and secure more investments, including an already promised investment from Qatar. With more large-scale investment, the hope would be that personal saving would increase, encouraging a greater of quantity of loanable funds to be demanded by businesses, improving economic growth.

Unfortunately, these hopes are overly optimistic, and it appears that the merger will have little effect in reversing the falling economy. With increased numbers of bad loans from Greek banks, deposits have been leaving the country. As the economic downturn affects households, marginal propensity to consume in order to make ends meet, while savings has dwindled. The risk of default is a very real concern for Greece, and this bank merger will do little to avoid this outcome.

If you have the answers, tell me

This article by Gregory Mankiw, Professor of Economics at Harvard University, was recently published in the New York Times. Dr. Mankiw talks about three hot questions in the world of Economics today: How long will the economy take to heal, how long will inflation be controlled or "anchored" and how long will the bond market trust the United States?

The most interesting argument that Dr. Mankiw makes is of Milton Friedman's theory that inflation is driven by people's expectations for the most part. I find this fascinating because we crib about inflation all the time and ironically, it is probably caused by us! When people feel that prices in the economy might rise, they ask for better wages which results in prices actually going up (due to rising costs of production)! If this is the cause of inflation, I would wonder if it is really possible to ever control it because people speculate all the time. People can make predictions based on political observations, personal experience or merely forecasts based on events in the economy! Assuming this is true, to curb inflation in the economy, the foremost aim of the Fed should be to try and manipulate the expectations of people -- which is probably the most difficult and least result-yielding strategy!

I also like how Dr. Mankiw is skeptic of economists who answer the above questions without a hint of doubt. I agree with his critical perspective that it is impossible to be sure about how the economy will look in the future because the nature of macroeconomics is such that a prediction can never convincingly take into account all the factors that influence the state of an economy at any point in time.

College Degree and Financial Security

I found this article interesting as it is in a way related to each of us.

This article talks about a college degree and job opportunities. The article argues that in the past, a college graduate could earn much more over a lifetime than a person with a high-school degree, but now, "old patters are about to change."

It argues that in the past, there was a lesser number of college-graduates, and just that very exclusivity is what promised financial security. In today's age though, the supply of college-graduates has and is rapidly increasing, not only in the United States but also in the rest of the world. Competition for jobs is increasing, as the pool of talent is increasing. "The best and the brightest of the rich world must increasingly compete with the best and the brightest from poorer countries who are willing to work harder for less money." Then it continues to argue that the demand for educated labour is being reshaped by technology, just like the demand for agricultural labour was reshaped in the 19th century and that for factory labour in the 20th. Faster, more efficient computers and Technology is (and already has if you look at the past) taken over jobs usually held by humans, decreasing a demand for them.

It concludes by hinting that the future is now far less unpredictable for the university graduate as compared to the past. as it concludes with the statement "....But the reconfiguration of brain-work will also make life far less cosy and predictable for the next generation of graduates."

Is Higher Education a Bubble?

In today's economy, is it really worth it to pay top dollar to go on to a private institution or go straight into the workforce? It use to be a universal truth that those who went on to college are guaranteed to add more value to their paychecks, but with today's unemployment rate sitting at 9.1% and the increasing number of college grads having to decide to continue on with education (grad school) or take a job that a few years ago, would have been unheard of for them to take.
This article reflects the opinion that there is no education bubble and that students who go on to college will get the return on there education.
In my opinion, education expenses are too high for what they are promising. I know many recent graduates that have taken service jobs or jobs that they wouldn't have necessarily have pegged as their "dream" job, in order to start making a dent on their student loan or because there has been no other offers.
I am hoping by the time I graduate, I will have some different options, but knowing that the unemployment rate has been staying at a steady 9% isn't giving me much hope.

For Obama, a Familiar Labor Day Theme

This article tells a recent unemployment related news. On this Monday, the Labor Day, president Obama, while speaking to an estimated crowd of 13,000 in Detroit, Michigan, said he would propose “a new way forward on jobs” in his speech on this Thursday, promising job-creation measures to reduce a 9 percent unemployment rate.

Even though he did not offer any details, Mr. Obama said that "millions of unemployed construction workers would be able 'to get dirty' building roads, bridges and other public works under his infrastructure proposals. " Except for infrastructure proposals, he will also call for "extending and expanding temporary tax cuts for businesses and individuals."

President Obama has been faced serious skepticism because of the persistently high unemployment rate. "Recent polls give him his lowest ratings to date for job approval and his handling of the economy, though the ratings of Congress, and especially Republicans, are even more negative."

As the 2012 election is coming soon, every policy relates to unemployment rate Obama makes now could be somehow decisive. Let's wait for his hopefully magical new measure to reduce unemployment rate on Thursday.

After EU Financials Tanks, The BofA Death Watch Heats Up

Not only the banks in Europe are facing difficulties by falling 8.4% on Friday. Bank of America is facing difficulties as well. It goes hands in hands the European financial market especially in German DAX index fell from 5.28% to 5.246%. Royal bank of Scotland fell 12% and Deutsche Bank fell around 6%.

In order to help with the situation, Bank of America is trying to reduce 3,500 jobs and to layoff 10,000 employees in the near future.

If this condition get worse the FED offers many options one of them is to issue separate class of shares tied with Merrill Lynch securities unit which managements at the bank already took that offer. Since they bought Merrill Lynch in 2009 and are now their most profit category. Also Bank of America sold half of their stocks at $3.3 billions to a bank in China. They are trying to do as many things they can in order to survive.

Even though Warren Buffet bought Bank of America stock at $5 billion this didn’t help with Bank of America financial situations since the stocks haven’t been paid off yet.

Bank of America have losses three out of six quarters since 2010 with $8.8 billions lose during Quarter 2 of this year. If Bank of America fail this will cause many consequences around the world.

Amazon Tax Battle With Cali

So here’s the situation, online sales giant, Amazon, refuses to pay sales taxes in the state of California, even though a law on the matter had been drawn up 2 years ago. Political figures in California have accused Amazon of not caring about the people of California as the taxes would be used to help better the state, where it is needed. The argument is that e-commerce companies are making it hard for businesses like neighborhood bookstores to prosper so this proposed taxing is a sort of divine retribution if you will, to let Amazon share in the tax payout that other struggling companies already have to pay. Amazon however, is trying its best to resist this tax as it would then have to succumb to other taxes across the country if it loses its footing in California. To appease the calls to tax, Amazon states that it would open two warehouses in the state of California which would then generate 7000 jobs. This is obviously a tempting offer considering the state of California’s 12% rate of unemployment and the nation’s rather high 9.1%. On the other hand, this whole issue affects many small time online retailers who are affiliates of Amazon in California, which it has decided to cut ties with to avoid taxes.

This tax law, if it falls through, is proposed to provide approximately $300 million in revenues for the state. And if what Amazon fears also comes true, it could also provide millions in revenues for other states. However, with other online stores not wanting to comply with this tax as an online store owner states in the article, is the Government looking for money they can’t attain? With that said, it is my opinion that the government take up Amazon’s offer of creating jobs in this time of high unemployment, if this effort is all for naught.

The Bear

I really really liked this article. I like how the writer compared our economy to a bear charging at you and how to react to it. The writer tells people to quit running and freaking out. The best way to fight back is stand your ground. If you can stand your ground and remain level headed in, a bear attack or, our economy then everything will be okay. There will be less fluctuation in everyones stocks. Now the writer also says that if you can remain level headed in an economy and take yourself out of the moment everything will also be okay. What some economists and stockbrokers need to do is to stop getting caught up in the sudden peaks and valleys because they are just creating more headaches to themselves. Along with creating more headaches they create more uncertainty with their clients. The writer also talks about what you should do if you do take a step back and you are still continuing to lose money. He says in that situation then go about stopping it by making little changes nothing drastic. People just need to relax and be confident in our economy because the more confident people are the better things will be in the long run.

http://www.forbes.com/sites/rickferri/2011/08/04/how-to-escape-from-a-bear/

Fed Divisions Led to a Compromise on Interest Rates

At the Federal Reserves’ meeting this month, a broad of disagreements occurred on the interest rate. In the end, the Federal Open Market committee took a middle ground and decided to keep interest around zero till mid-2013. Since the divisions, the Federal members decided to hold a meeting again during September to have more time to discuss this issue. This meeting also assessed the disappointing economic performance for the past summer and the downgrading economic growth in the next few months. The interest rate has been keeping this low for the past two years and it is not good to the economic because this policy cannot stimulate economy anymore. Under the Depression, the prolonged low interest rate is just going to make the economic worse.