Reopening an Employment Door to the Young

In the article “Reopening an Employment Door to the Young,” by ROBERT W. GOLDFARB, he discusses the importance of  hiring young people. Most hiring managers hire workers based on their credentials and their intuition about the worker. According to GoldFarb: “more young people would be hired if they had the right qualifications, but too few have the skill and discipline needed to succeed in today’s demanding workplace.” In other words, employers judge young people without even giving them a chance. They base their decisions on the belief that  they are young and are incapable of handling responsibility and duties.

Furthermore, Goldfarb interviewed over 200 people and he found that about half of the young people had received a liberal arts degree. However, many of them regretted majoring in a discipline now viewed as unworkable or impractical like philosophy. In addition, many liberal arts graduates are eager to find an employer that is willing to train them in skills that don’t require a degree in engineering or computer science according to Goldfarb. Many just want a chance to work and master a skill for the betterment of the company.  However, most employers today hire workers who come with technical skills already. Due to this, the young people are put at a disadvantage because they are now competing against their peers and experienced worker for entry level jobs.

 

Lastly, employers need to rethink about the ways they go about hiring workers. They shouldn’t hire workers based on their credentials, instead, they should seek to hire people who are determined, energetic, and eager to learn new things. These are some of the qualities that young people inherit and are looking for employers to take a chance with them. According to Goldfarb: “ And businesses that gain a reputation for preparing young people to become productive employees are likely to have a competitive advantage as the economy recovers and older workers can afford to retire.” The clock is running out as  the baby boomer now reach their retirement age, and employers need to rethink who is going to carry on the future of the company.

http://www.nytimes.com/2014/02/02/jobs/reopening-an-employment-door-to-the-young.html?ref=economy&_r=0

"Obama wants businesses to raise pay. Here’s why they probably won’t listen."

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/29/obama-is-asking-businesses-to-raise-wages-heres-why-they-likely-wont-listen/

As the economy continues to recover, politicians, especially President Obama, look for ways to help it along.  One theory, though it seems to be misguided, is that if companies raise hourly wages, U.S. citizens will have more disposable income, which they will use to stimulate the economy and so the whole country will be better off. While this seems logical at first, it fails to take into account the importance of shareholders.  From a purely economic stand point, the satisfaction of the share holders is more important than that of the more easily replaced hourly worker.  Not to say the worker is unimportant, just less important in terms of the monetary value he or she brings to the company.  Thus, companies must prioritize the income of the shareholders, sometimes at the expense of the worker since without the shareholders, there would be no financing and eventually, no company at all.

FED Tapering Asset Purchases

http://www.forbes.com/sites/samanthasharf/2014/01/29/fed-to-further-trim-asset-purchases-to-65-billion/

Ben Bernanke, in his final meeting a chairman, announced that the Fed would continue tapering asset purchases. Bonds and treasury purchases are to be decreased due to recent economic expansion. The committee said that unemployment was higher than it would like, but household spending and business investment were accelerating.  Growth could be higher but current fiscal policy was credited with underperformance. In June, Bernanke first announced plans to taper purchases which caused a 200 point drop in the Dow and caused investors to switch to more secure investments. Many were surprised to see the FED taking this action after seeing only 74,000 jobs added in December (compared to 200,000 in October and November)

Germany's energy transition: Sunny, windy, costly, and dirty

Sigmar Gabriel is currently the leader of the Social Democratic Party of Germany (SPD), who has intentions to run for chancellor 2017. He has made a coalition deal with the current chancellor of Germany, Angela Merkel. As a part of this deal he is now considered to be a "super minister" because he is going to be combining two portfolios, energy and the economy. Under this reform, Germany will simultaneously stop using energy created from fossil fuels and nuclear power plants. Gabriel is using the marketing slogan "Energiewende" (which means turn or revolution) as promotion.

Energiewende consists of a timetable for different goals. Germany's final nuclear power plant is to be shut down by 2022. Renewable energy from the sun, wind, and biomass are set to rise to become 80% of electric power in Germany. The main goal is to reduce the emission of greenhouse gases by 70% in 2040, and 80-95% by 2050.

It appears that German consumers and voters like the goals that are being set under Energiewende, however they are beginning to dislike the side effects of this domestic reform. The main issue that many Germans are beginning to have with Energiewende is the rising cost of energy. It is not cheap to subsidize renewable energy sources. The average household in Germany has to pay 355 dollars a year to subsidize renewable energy sources under Energiewende. The cost of production is also rising for German companies making them less competitive. New estimates by a consulting firm, known as McKinsey, suggest that there is almost nothing that can be done to reduce the cost of subsidizing. On top of that, Germany's unemployment rate is predicted to rise due to the disband of nuclear power plants and other facilities that create energy from fossil fuels.

There are also other issues with renewable energy besides cost. The sun does not always shine, and the wind does not always blow, making these alternative sources of energy unreliable. As for now, conventional power plants have to remain online in order to assure a continuous supply of energy.

Mr. Gabriel is taking a massive risk with Energiewende. Will it be worth the reward?     


http://www.economist.com/news/europe/21594336-germanys-new-super-minister-energy-and-economy-has-his-work-cut-out-sunny-windy-costly

The Tale of a House, and an Entire Market

Link to article

The article, "The Tale of a House, and an Entire Market" published by the New York Times, seeks to explain the roller coaster economy of the housing market. The author, Shaila Dewan, begins by concentrating on one house in Maryland to represent the "American Dream"; not only a home, but also an investment to turn around and sell it for profit.

The housing market fueled the economy as the bubble grew, and was soon to blame for the downturn of the past seven years. As the economy rebuilds, the housing prices have now jumped 10-25%; concerning economists as this could create, yet, another bubble. There are still high lending standards held by banks to discourage a second bubble, but this held back 12.5 million Americans from owning homes who would have qualified prior to the crash. Even those who had been approved have different feelings toward the American Dream, the home owned is still a better investment than renting, it is still a home, "But it is no longer an A.T.M., a source of ready cash for a better lifestyle."

The article continues through owners of the house in Maryland. Including one owner who ended up defaulting on loans that banks originally pre-approved her when in reality, she could not afford. The owner bought the house for $540,000 in 2006 only to be sold to an affiliate of Greenway for $215,000 cash in 2012. Greenway renovated the house to turn it around to sell it for $381,000 in 2013. This story of the Maryland house is interesting as it represents the twists and turns of the housing market, and how the winners and losers achieve their status based on timing. The article does conclude that some believe the even through the uncertainty of finances, owning a home is a "social safety net, whether or not is profitable." Some economists still argue that homeownership is overly pushed by public policy, where the return on investment is just too optimistic.

Privatisation: The $9 Trillion Sale

http://www.economist.com/news/leaders/21593453-governments-should-launch-new-wave-privatisations-time-centred-property-9

The idea behind this privatization is that the US has many assets, such as the Yellowstone National Park, which are worth billions of dollars.  In fact, if you put all of the land, buildings and subsoil resources together, it is worth approximately $35 trillion.  The reason for noting this is because if you were in extreme debt, you would naturally want to sell some of your assets in order to pay off that debt.  The US, however, should not necessarily sell all assets, especially big ones like the Yellowstone National Park, but they should consider removing some of these "assets" since there is a large amount of debt currently.  Also, underneath some of these assets, there are oil reserves, which could profit up to $9 trillion dollars.
These leads to the question, should some of these areas, which we leave essentially off limits for private companies, be thought about in terms of how it will profit the US economy? Economists need to think about how much revenue would be lost by privatizing these assets.  It could be very profitable and a great idea, but it also could harm the US economy much more than aiding it.  It needs to be done during a time when markets are booming.
By looking at the past times of privatization, specifically during times of Thatcher and Reagan.  It may be time to consider looking into what assets the US has waiting for us with buildings, land and potential resources.

Growth and Unemployment

Link to the Article

The article Growth and Unemployment explains how the economy had gained back its growth with rising unemployment rate. From the chart that the author shows us, we know that when GDP growth is low, unemployment rate stays at high levels; when GDP growth is high, unemployment rate stays at low levels. Rapid GDP growth keeps unemployment rate from rising due to increasing productivity: firms have more advanced technology. That means firms can produce the same amount of products with fewer labors. That is how people feel the economy growth increasing while the unemployment rate going up. As we talked about in class, the unemployment rate is the fraction of the labor force which is unemployed, one reason the unemployment rate keeps the upward trend is that the working-age group growing rapidly. Unemployment rate does not reflect the performance of our economy 100% right.   

Economic Shift in U.S. & China Batter Markets

http://dealbook.nytimes.com/2014/01/24/a-worldwide-market-slump-gains-traction/?hpw&rref=business

The growth in developing economies over the last decade is largely dependent on two factors: growth in China, and the Fed's stimulation of the economy. With both of these slowing declining, investors pulled their money out of global markets this past week, and the effects have spilled over into other markets, causing the S&P 500 index to decline by 2.1% on Friday, which was the worst decline since June of 2012. The damage is more severe in places like Argentina and Turkey, who are suffering from political unrest already. However, many economists see this as a necessary "market pullback" that needed to happen in order for the market to correct itself after last year's tremendous gains. The American market indexes are still within a few percentage points from their record highs so there is no need for serious concern as of now. Almost all of the economic data shows that the U.S. is gaining strength on its economic recovery and it is a good time to invest.

http://www.economist.com/news/business/21594984-big-tobacco-firms-are-maintaining-their-poise-quietly-wheezing-running-out-puff

This article is about how big tobacco companies are struggling like never before due to record low sales and fewer and fewer young people smoking. The three main tobacco companies in america are Altria, Reynolds and Lollilard have been suffering of late but company experts are still confident in there current and long with standing business model. This may not be the smart move however seeing as smoking is becoming less and less popular. This issue for the tobacco industry could be more widespread than just the US; tobacco companies world wide may have to start rethinking how they market their product.

The typical worker makes no more than Dad did in 1979

When adjusted for inflation, the average American worker makes about the same at a worker in 1979 did.  According to Rex Nutting the productivity of the workers has nearly doubled since 1979.  With price increases of 1.5% and and wage increases at 1.3% the workers are struggling to continue their way of life.  I believe that massive increases in technology could have a hand in the lack of raises and increase in technology.  With machines now being able to do many of the jobs, a workers worth has decreased.  This takes away a strong bargaining chip for workers.

http://www.marketwatch.com/story/the-typical-worker-makes-no-more-than-dad-did-in-1979-2014-01-24

Japan Posts Record Annual Trade Deficit as Import Bill Soars

http://www.bloomberg.com/news/2014-01-26/japan-record-annual-trade-deficit-shows-import-drag-on-recovery.html

Over the past 18 months, Japan has seen consistent trade deficits due to nuclear plant shutdowns and importation of energy. This trend seems most likely to continue, as the value of the Yen decreases and their exportation see limited gains.  Though Japan saw their exports increase by 15% in December, their imports had also increased by 25%.  In 2013, Japan saw its highest trade deficit ever.The yearly shortfall was 11.5 trillion yen, which was almost double from what they had seen the previous year. Japanese Economist Takeshi Minami stated, "It's hard to anticipate when Japan can emerge from trade deficits at this point". The reason why Japan's exports haven't seen the growth they're expecting is due to the high cost of importing energy. This is a problem for Japan, as companies are reluctant to relocate to a "high-cost country".

Some liberals want to raise federal minimum wage from $7.25 to $10.10. Specifically they are pushing for President Obama to use his executive power to require government contractors  to pay the $10.10 minimum wage. This action could raise minimum wage for nearly 2 million workers. However, even if the President signs such an order, it would likely take a few year to be fully implemented. Minimum wage should be enough to live on if you have dependents, but whether $10.10 per hour is the right wage is still a question because who knows where prices will be in 2 or 3 years.

http://money.cnn.com/2014/01/24/news/economy/minimum-wage-executive-order/index.html?iid=SF_E_River

Nigeria's economy to show 65% increase in size on GDP

Recent numbers coming from Nigeria's Gross Domestic product rebasing exercise are suggesting that the African country's GDP could rise to as high as 65% in the next year. This would place Nigeria's economy as the largest in Africa with GDP up as much as 432 Billion. These figures also suggest that Nigeria's economy has been vastly underestimated over the years. Sources say that this has been due to poor estimating in their nations economy. Services, a major component of GDP, is one of the leading sectors in which has been underestimated. According to the article, another major sector that has been hugely underestimated has been the entertainment part of the economy. “Our records  show that we are underestimating the entertainment sector by over 200 percent from the numbers that we are seeing so far,” he told BusinessDay. One significance of the new figures is also that the GDP per capita could increase to over $2,600 from around $1,700, taking Nigeria into the middle income class. This is really interesting because Nigeria may have the biggest economy in Africa and no one new about it.  

http://businessdayonline.com/2014/01/nigerias-economy-to-show-65-increase-in-size-on-gdp-rebasing/

UK jobless drop puts spotlight on central bank

This past Wednesday, The Office of National Statistics said that the UK's unemployment rate fell to 7.1% in the three months ended November 30. The drop was .5% and was bigger than analysts had predicted. The government has claimed the drop as evidence that its long-term economic plans are working.

This drop in the unemployment rate could lead to the Bank of England reassessing its monetary policy as Mark Carney, the Bank of England's Governor, has said. While the current interest rate is set at a record low .5%, Carney did stress that there was no immediate need to raise rates, as wage and productivity growth have been weak. Andrew Goodwin, senior economic adviser to the EY ITEM Club also weighed in on the issue of raising interest rates. “As the minutes make clear, there is no prospect of a rate rise in the near future.” He said. “Raising interest rates too soon, before real wages have begun to improve and growth has broadened out, could risk choking off the fragile consumer led recovery.” 

While the raise in interest rates is inevitable, it is vital that they are raised gradually and at a time that will not damage the recovering economy. Most economists agree that the rise should not occur until real wage growth has begun.

http://www.washingtonpost.com/business/uk-unemployment-rate-drops/2014/01/22/49492468-834b-11e3-a273-6ffd9cf9f4ba_story.html

http://www.economist.com/news/science-and-technology/21581978-sportsmen-who-take-drugs-may-be-prisoners-different-game-athletes-dilemma

          For my first post, I want to present a field that I am very interested in and am considering a graduate degree in: game theory economics. In the article above, the economist delves into the 'Athletes Dilemma' that considers the reasons why athletes take performance enhancing drugs including trust issues of each party which is a natural course of cognition for the athlete's version of "prisoner's dilemma". 

"In the athletes’ version, both players will be better off if neither takes drugs, but because     neither can trust the other, both have to take them to make sure they have a chance of winning."

Another problem lies within the fans and sponsors, specifically 'Test Skimping'. It is the main problem where the inspector, the sport, and the athlete lack accountability. However, there are flaws within the system. The reasons could be of the following: 

-cost

-disruption of the complicated athlete life

-a negative reaction of universal-cheating in athletes if the public knew the true numbers

Analysis is new and could be inapplicable situationally, but for those who do not take drugs, in a game theorist perspective they would be a fool not to take the performance enhancing drugs in this situation.

Investor Animal Spirits Spread to Companies Worldwide

This article discussed the growth in the capital expenditures that has been happening in the US recently and the set up for 2014 to be a year in which CAPEX will be increasing drastically.  There is an increase in the purchasing of high-risk high yield bonds and the average demand for a rate of return for certain international securities has decreased.  With respect to growing optimism it is apparent that companies are now willing to take on more debt in order to purchase other companies as well as invest in capital that has been used for extended periods of time due to the recession.  For manufacturing in Europe there seems to be an investment in CAPEX and there is forecasted future investment for the next 5 years.  Finally there seems to be an increase in salaries in some places around the US.  

San Francisco's Higher Minimum Wage Hasn't Hurt the Economy

http://www.businessweek.com/articles/2014-01-22/san-franciscos-higher-minimum-wage-hasnt-hurt-the-economy

San Francisco was one of the first cities to increase the minimum wage beyond the federal level and mandate better benefits for low-income workers. The wage increase went into effect in 2004, long before the notion of one percenters and the recent wave of wage protests by fast-food and retail workers. And now everyone from President Obama to Fox News star Bill O’Reilly is talking about raising the federal minimum wage. For those who need more evidence, a new book hopes to persuade them. When Mandates Work: Raising Labor Standards at the Local Level, San Francisco’s decision to increase the minimum wage and offer other benefits, such as sick leave pay, hasn’t hurt the city’s economy at all. The three editors—all labor experts—found that from 2004 to 2011 overall private employment grew 5.6 percent in San Francisco and 3 percent in Santa Clara County. Other Bay Area counties saw an overall 4.4 percent drop during that time. Among food-service workers, who are more likely to be affected by minimum-wage laws, employment grew 17.7 percent in San Francisco, faster than either of the other Bay Area counties. “We did see a small increase, 2.8 percent, in food prices compared to other counties,” Ken Jacobs, the chairman of the UC Berkeley Labor Center says. Jacobs also pointed out that companies saved money because of reduced turnover.  

The Richest of the Rich

The Guardian website has published a series of articles regarding charity Oxfam's data on the richest 85 people in the world. The data collected shows that the top 85 of Forbes annual rich list own as much wealth as the poorest 50% of the global population put together. These figures are astounding and give a whole new meaning to the debate regarding the 1 percent (particularly in light of a recent article about how a man worth $8 billion compared the war against the 1 percent to the war against the Jews during World War II: http://www.huffingtonpost.com/2014/01/25/taxes-rich-holocaust_n_4665676.html).

Of these 85 people, only 7 are women. On one hand, this displays a progressiveness that most people would not have predicted a few decades ago. But on the other hand, this displays another level of inequality, given that women represent 50 percent of the population.

These articles provide a lot of food for thought given that the World Economic Forum is currently debating about what to do about income inequality. The Guardian website also provides an interactive slider to see where these people are concentrated geographically. Definitely worth a look!



http://www.theguardian.com/business/2014/jan/20/oxfam-85-richest-people-half-of-the-world

http://www.theguardian.com/business/2014/jan/24/85-richest-people-in-the-world-men-women

In Housing, Big Is Back

http://www.nytimes.com/2014/01/26/business/in-housing-big-is-back-not-counting-the-extras.html?ref=economy

 The New York Times article “In Housing, Big Is Back” by Jim Rendon provides insight on the housing market and how it is doing in the economy. For years the housing market has been in a recession and it looks as if we are coming out of it. The market for homes, especially big ones has gone up 46.6 percent from the previous July. According to chief economist Brad Hunter, “The housing market is being driven by the move-up buyer, the luxury buyer.” People who have secure jobs and strong incomes are purchasing larger houses than ever before. The median size of new homes built has come to a new high of 2,384 square feet. This is great for the economy and as jobs continue to increase, so will the market for housing.  But for the smaller homes in the market things are not moving as fast. First time buyers are having a hard time getting money for down payments and qualifying for mortgages due to a large amount of student loans and debt. 

Does Brazil Have the Answer?

http://www.nytimes.com/2014/01/21/opinion/nocera-does-brazil-have-the-answer.html?hp&rref=opinion&_r=0

In this link Joe Nocera talks about the economy of Brazil and how in the last decade it has improve through many projects.  Over a decade ago there was a huge poverty problem that Brazil had and within the decade the "extreme poverty" was reduce by 89%, which is around 40 million people being pulled out of poverty.  This leads to a more stable economy because there more of a middle class rather just have a huge gap between the rich and poor.

Further down the article Joe goes on to compare Brazil and Americas' GDP and Unemployment rate.  He says how America's GDP and Unemployment rate is slowing getting better.  On the other hand is cutting down on food stamps and other programs helping out the poor.  While Brazil was making rapid improvements.  He explain these improvement by talking about certain projects like Bolsa Família, which is basically hands out money to mothers in poverty.  This isn't the only project that Brazil is doing for poor.  As well has kept the minimum wage high, but also making laws to make it very hard to fire a employe that are falling being others.  On top of that, the government controls the prices of gasoline so it is affordable for the people to get around.  

In the End Joe believes that Brazil will hit a wall because of the improvement can be easily reverse because the middle class will always want better "better services, higher quality schools, less corruption."

U.S. Markets Tumble as Fear Spreads

http://online.wsj.com/news/articles/SB10001424052702303448204579340480156732234?mod=WSJ_hp_LEFTWhatsNewsCollection&mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303448204579340480156732234.html%3Fmod%3DWSJ_hp_LEFTWhatsNewsCollection&fpid=2,7,121,122,201,401,641,1009

Due to weaker-than-expected economic data coming out of China and not-so-great corporate earnings, the market took a dive on Thursday and left the week with one of the biggest losses in seven months. Since the start of the new year, the market has not been doing very well. Compared to the last quarter of 2013, when the market was returning well, to now where the market is suffering, many fear losses and future poor performance. I believe the world is stunned at this lost, when in reality, the market is volatile and is going to have some losses. The fourth quarter of 2013 was a huge quarter, but one cannot expect it to remain at a high state. Also, with the holiday season now over, the market cannot be expected to perform as well.

On another note, with the emerging economies, like China, not having the high economic performance and growth that people are used to, the market will take a blow. Although growth is slowing and economic performance is not as strong right now, people must understand that growth cannot remain at such a high level forever. The emerging markets are turning into better investments because growth is steadying as the rising middle class population continues to increase. Naturally, volatility will lessen and the emerging markets will make for better investments.

How soon until the markets begin their rise again?

7 Setbacks For The Middle Class

The plans President Obama had for the middle class over his two terms seem to be falling short of his dreams. The United States may be at an all time high in economic output (15.8 trillion dollars) but this money is not benefiting the workers. Instead corporation profit is steadily increasing while worker profit is on the decline. The majority of income gains were captured by America's richest 1% of families (95%). On the opposite side of the spectrum the people of the 99% are really struggling. Unemployment is at 6.7%. This can be attributed to the 8.7 million jobs the United States has lost throughout the recession. It is estimated that 7.9 million jobs are needed in order to return to pre recession conditions. These jobs are crucial because they would help better the 46.5 million Americans currently living in poverty. This number represents 15% of US population.
The recession has hit the United States very hard and has put a hold on the things President Obama wanted to accomplish. The main thing he can do is keep pushing for new job development and the increase in the accessibility of education. I think these things will help to lower some of the high percentages.


http://money.cnn.com/2014/01/24/news/economy/middle-class-economy/

U.S. Oil Production Keeps Increasing Beyond the Forecasts

This past year the production of oil in the United States rose by over 990,000 barrels a day. Bringing the total production of oil in the U.S. to around 7.5 million barrels a day. This is great because the more oil we begin to produce on our own the more money we save from importing it from other countries. The demand for this production is also present, not only in the U.S. but in the rest of the world. the consumption in the
U.S alone raised by over 390,000 barrels, bringing total daily consumption to just under 19 million barrels a day. The world consumption of oil also increased by 1.4%.

While some may say that the increasing usage of oil is bad for the environment, etc. It can be argued that the increasing production in the United States will have many benefits, such as providing jobs and reducing costs from having to import more oil.

Is this an area that the United States should focus on to further stimulate economic growth? It seems as though we surprise ourselves with how much oil we are actually capable of producing, so why not try to maximize it and take a larger share of the market?




http://www.nytimes.com/2014/01/25/business/us-oil-production-keeps-rising-beyond-the-forecasts.html?ref=economy

A Super Bowl Estimate With a Life of Its Own

http://www.nytimes.com/2014/01/26/business/a-super-bowl-estimate-with-a-life-of-its-own.html?hpw&rref=business

The general consensus among New York and New Jersey natives is that the Superbowl will bring great economic benefits to the region, but do these benefits outweigh the costs? Several sources including N.F.L. officials project the Superbowl to generate $550 million to $600 million for the local economy. This seems like it would greatly boost the economy in the region, however, no economist seems to be able to show where this money will come from.

Skeptics of the $600 million figure believe that it leaves out some costs such as: security, transportation, and sanitation which are all direct costs as well as indirect costs like what kind of economic activity occurred during the same period not due to the Superbowl. These same skeptics criticize the government for spending so much money on an athletic event that may or may not cause an economic boom in the area.

Phillip Porter, an economic professor at the University of South Florida, believes that the economic benefits of the event are "zero" because the people that attend the Superbowl are not consuming local products, instead they are consuming products from a few large groups of interest. Any economic gains will go to only a select few beneficiaries such as hotels and the N.F.L.

Some economist believe that the government should not spend such a large amount of money on one athletic event because it is essentially a transfer of money from taxpayers to those few corporations that reap the majority of the benefit. Those that support the government spending believe that athletic events like the Superbowl not only create economic benefits, but also create intangible benefits that are not seen in consumer spending. These non-financial benefits boost moral and overall happiness in the community.

Either way the question still remains, should the government be spending such a large amount of money on an athletic event that may or may not produce economic benefits and is transferring money from the typical citizen to large corporations?

States Cutting Weeks of Aid to the Jobless

States Cutting Weeks of Aid to the Jobless by Annie Lowrey

Annie Lowrey’s New York Times Article, States Cutting Weeks of Aid to the Jobless, discusses the government’s decision to no longer support long-term unemployment. Most extended benefits have come halt since the end of 2013. Lowrey states, “the country’s safety net for jobless workers has undergone a sudden transformation.” The time between losing your job and finding a new one has shortened. Many people are forced to take jobs they never expected to have, just to earn some type of income. They are taking much lower wages than what they earn at their previous jobs. Many people, who are laid off from work, look for unemployment benefits to help support them and their families while they are unemployed. These families are struggling and living on very little.

In North Carolina, without the extended unemployment insurance, the unemployment rate has dropped from 8.8% to 7.4%. This is not because people are suddenly finding work. The main reason for this drop is, the workers that have become discouraged. Since they cannot find work before their insurance is cut off, they simply give up looking for work. In North Carolina, you can see the reduction in unemployment insurance is positively correlated to the decline in the labor force.

There is also a divide among the political parties about this change in policy. One side believes it is a necessary change because people are too dependent on unemployment insurance. They believe it encourages people to take their time to find a job when they could do better. The other side disagrees and believes that many families need unemployment insurance to help them through these tough economic times.

Walmart Fund to Support U.S. Manufacturing

Walmart plans to provide 10 million dollars in grants to endorse American manufacturing. This money will be spread out in five years. Another company

Kent International has decided to move production from overseas into the U.S. specifically into South Carolina.

            With all of this talk about creating more jobs in the U.S. it is creating some dispute over minimum wage. There has been talk about increasing the minimum wage from $7.25 to $10.10 an hour. The problem with all of these changes occurring at the same time is that with a higher minimum wage, companies would have to have fewer employees. However, because the U.S. companies are planning to move manufacturing practices to the U.S. to create more jobs that is not a viable option. The other viable options the companies have is to increase the prices of their products.

http://www.nytimes.com/2014/01/24/business/walmart-creates-10-million-fund-to-stimulate-american-manufacturing.html?ref=economy

7 Setbacks for the Middle Class

http://money.cnn.com/2014/01/24/news/economy/middle-class-economy/

When President Obama was elected president, he made a promise to fix the economy to help the middle class. However, this article claims that only the 'super rich' and corporations have benefited. One reason the article gives states that while US income sits around $15.8 trillion a year, and while this is one of the largest on record, the profits of large corporations have grown. Another reason given is that income inequality in the United States has grown tremendously. The richest 1% (earning more than $394,000 a year) of the United States have captured about 95% of the income gains.

The article continues saying that about 15% of the US population is living in poverty and that a record number of Americans are receiving food stamps. Currently about 48 million Americans are receiving food stamps, the largest number of recipients since 1968. During the State of the Union speech, President Obama put a goal of doubling US Exports by 2014. Currently they sit at about $1.4 trillion and would need to grow 57% to meet his goal.

There are many reason why the middle class has not been doing too well. Although they can get by, many of the middle class and especially those living in poverty, are pushing for more equality across the classes. However, this is not a free economy works. Unfortunately, they might be pushing for something that will never happen.

Online stores think local to grow global

http://www.cnbc.com/id/101363758

    For  any business to be successful, it is necessary that it understands the mentality of its consumers.
The  e-commerce  has also realized this and thus to be successful in every country, it offers payment options that best suit the preference of that country.

For example in Brazil, customers prefer paying in installments whereas in India they prefer paying after the good is received. This definitely does create hassle for businesses but data reveals that all this trouble is worth it as eCommerce has been growing rapidly in emerging markets.

  Changing the payment option for every country is a great deal of work which requires writing new contracts, changing contracts with dealers and financial services, calculating the new interest rate and testing out if the software woks fine.
For example, a hotel booking website allows its Brazilian customers to pay in installments, so the website had to join with a Brazilian financial service that would bear the credit risk but with a fee.

The credit card usage in Brazil has increased by 63% since 2007 but the high interest rates on credit cards makes it unaffordable to many ; which leads to using the installment payment method. But this inconvenience will lead to high payoffs: Brazil eCommerce market is set to increase by $8 billion in the next four years.

Lord Alli, a former chairman of British fashion group states," Our job as retailers is to serve our customers. My job isn't to tell them how they want to pay. Our job is to be at their service."

Incurring the extra expense on the payment method is part of  their business. As a change in the payment method leads to a drastic increase the number of sales. The business knows that if they lose their margin here(through added expense on payment method) they can  earn it through somewhere else.

A Morgan Stanley survey found out that 58% of Russians prefer to pay cash for an online order. It is expensive and inconvenient for companies to provide this option  but Qiwi ( a NASDAQ listed payment group) has set up ATM machines that instead of giving cash, take cash.  Groupon, Apple and Hotels.com are some of the companies that are signing up for this service.

Nick Robertson, chief executive of Asos states,"If your going to operate globally, you have to operate the best payment methods."

Every country doesn't like using credit and debit cards. Only 10% of German consumers prefer using cards whereas 70% of British consumers prefer using cards.

Despite all this hassle, the companies are optimistic of the future as most of the youth worldwide prefer using plastic.

To end on this note, Lord Alli thinks,"Never punish the consumer for the way they pay. It's irrelevant how they pay; I want them to buy."

Era of Cheap Apparel May Be Ending for U.S.

http://www.nytimes.com/2014/01/18/business/era-of-cheap-apparel-may-be-ending-for-us.html

As we mentioned in class, the inflation rate measured by CPI and GDP deflator is usually different because of several factors, one of which is the price of imported consumer goods. It is included in CPI, but excluded from GDP deflator. We used oil as an example in class, but apparel is also another typical example since most of the United States clothing today is imported from China, India, Vietnam, Bangladesh, etc. As the prices of these goods increases, the CPI will then be greater than GDP deflator (probably not that noticeable because clothing consumption only takes up a small percentage).

In this article, it is reported that 2013 “was the third consecutive year [since 2011] that apparel prices increased”, which is 0.6 percent. In fact, for a long period, the United States apparel industries suffered from the inexpensive imports from the world’s largest exporter, China, which results in cheaper clothing prices, allowing consumers to spend more money on other purchases.

However, due to competition from other Asian countries, such as India and Vietnam, and rising wages, the price of this imported goods has increased rapidly. Moreover, because of the extreme weather condition, cotton production has suffered, which led to higher imported cost of cotton for clothes production and higher price of apparel. All these changes will consequently raise the CPI.

http://www.nytimes.com/2014/01/26/business/asking-banks-to-reveal-where-their-high-rollers-are.html?ref=business

Thomas P. DiNapoli, the state comptroller of New York, has been working to increase transparency and regulation in the financial sector. His plan is to require a 'company’s board to prepare a report disclosing whether Wells Fargo has identified employees who, by virtue of the size and riskiness of their portfolios, could expose the bank to material losses. It also asks the bank to disclose the number of such risk-takers, broken down by division. If it has decided not to enumerate these employees, the proposal asks the board to explain why.'  While many members of the S.E.C and the government are in favor of requiring more information Wells Fargo (the only bank approached thus far) has already made an argument against it. As the U.S economy continues to recover from the recession it will be interesting to see if we enter a more regulatory or deregulatory period.