Major health insurance companies have been charging sharply higher premiums this year, outstripping any growth in workers’ wages and creating more uncertainty for the Obama administration and employers who are struggling to drive down an unrelenting rise in medical costs.
A study released on Tuesday by the Kaiser Family Foundation, a research group, showed that the average annual premium for family coverage through an employer reached $15,073 in 2011 — 9 percent higher than in the previous year. And even higher premiums could be on the way, particularly in New York, where some companies are asking for double-digit increases for about 1.3 million New Yorkers in individual or small-group plans, setting up a battle with state regulators.
The higher premiums are particularly unwelcome at a time when the economy is sputtering and unemployment is hovering at about 9 percent. Many businesses cite the cost of coverage as a factor in their decision not to hire, and health insurance has become increasingly unaffordable for more Americans. The cost of family coverage has about doubled since 2001, compared with a 34 percent gain in wages.
Aetna and United Health/Oxford said their requested rate increases in New York largely reflected actual hospital, physician and pharmacy costs. “Our rate requests are simply keeping pace,” said Maria Gordon Shydlo, a spokeswoman.
How much the new federal health care legislation pushed by President Obama is affecting rates remains a point of debate, with some consumer advocates and others suggesting that insurers have raised prices in anticipation of new rules that would, in 2012, require them to justify any increase of more than 10 percent. Kaiser pointed out that the increase this year could be an anomaly, after several years of 3 percent to 5 percent increases during the recession.
Kaiser estimates that one to two percentage points of the increase this year is related to provisions of the law already in effect, like coverage for children up to 26 years old and for prevention services like mammograms.
New York, along with states including California, Connecticut and North Carolina, has been exercising its regulatory muscle to try to tamp down some of the increases. The Obama administration this month funneled a total of $109 million to many states, in part to help fight against “unreasonable” increases.
The increases now under consideration in New York would affect 1.3 million of the 3 million residents in individual and small-group plans; the amounts vary considerably depending on the type of policy. The increases requested by Aetna, for example, range from 8.9 percent to 53.6 percent, while those from United Health Group/Oxford range from 13 percent to 34 percent, according to the State Insurance Department.
The state’s power to deny increases does not extend to rates for large employers; the Kaiser survey included large and small company policies, which cover about 60 percent of working-age Americans with insurance. Employers, on average, pay the bulk of premiums and absorb some of the increase each year while passing the rest onto workers.
The increase in premiums was striking because in a poor economy, many people put off going to doctors, to avoid co-payments and higher deductibles. Despite a decrease in the use of medical services, companies have defended higher premiums — and their high profits — reasoning that their costs would rebound once the economy recovered.
Insurers also say that the use and price of medical services have continued to rise in individual and small-group plans, in part because those policies tend to have a higher proportion of people with serious illnesses. If the health care law survives legal challenges and goes into full effect in 2014, increased competition will make it tougher for companies to charge those customers more, the administration says.
Aetna and United Health/Oxford said their requested rate increases in New York largely reflected actual hospital, physician and pharmacy costs. “Our rate requests are simply keeping pace,” said Maria Gordon Shydlo, a spokeswoman for United Health Group/Oxford, which secured rate increases of 18 to 24 percent last year.
Consumer advocates contend that the latest requests exceed any documented rise in costs, with some companies enjoying three years of record profits and paying millions of dollars in dividends and executive compensation.
“We’re at a watershed moment,” said Elisabeth Benjamin, who represents Health Care for All New York, a group of 100 organizations advocating affordable care. “The Cuomo administration has to decide, will the Department of Insurance stand up for the little guy, John Q. Public, or let the insurance companies get away with this nonsense?”
Since last year, the Insurance Department has posted more than 4,000 policyholder objections online. In one typical letter, a small businessman, citing six years of annual increases of more than 15 percent, raged, “There are no words to express how utterly greedy and unconscionable another double-digit increase in health care costs are to the world of small companies and those employed by them.”
Such messages are not lost on Benjamin M. Lawsky, the state’s superintendent of financial services, who oversees the department. “We get it,” he said. “These increases are often hitting people who just can’t afford it.”
“At the same time,” he added, “we have to make sure these companies stay healthy. What keeps us up at night is the need to strike a responsible balance.”
Decisions are expected in October. In the first round of reviews late last year, on premiums that took effect Jan. 1, the department approved a 10 percent increase, on the average, reduced from requests averaging 14 percent. Mr. Lawsky said the result showed the system was working.
But to Leslie Moran, senior vice president of the New York Health Plan Association, an industry group, the result confirms that under the new law, the process bows to political pressure, not actuarial reality.
“There was an effort to somewhat artificially suppress premiums to prove that the prior approval system was working,” she said, noting that New York requires at least 82 percent of premium revenue be spent on paying medical claims. (Nationwide, under the new health care law, the minimum is 80 percent.)
One company, MVP Health Care — asked about its highest rate increase requests: 40 percent, 55 percent and 56.8 percent in three plans in Rochester — said the requests had been made in error and were withdrawn last week. Gary Hughes, a company spokesman, said the plans had 805 policyholders and MVP intended to drop them at the end of the year. It was not clear what those customers would do.
Such changes can leave regulators with little recourse. Allan Evans, a musicologist who was undergoing chemotherapy for lymphoma last year, was notified that his Emblem Health premium would increase 270 percent, to $2,293 a month for his family’s $5,000-deductible policy, provided through his wife’s business, a small Italian language school in Greenwich Village. Emblem had eliminated his family’s category and offered a more expensive plan. That kind of increase is not reviewable by the state.
“We were in shock,” Mr. Evans, 55, said. What saved him, he said, was a change in his part-time contract at the New School that made him eligible for coverage.
Ilene Margolin, a spokeswoman for Emblem, said she could not comment on an individual case, but added: “We lost tens of millions on some of those products. For some people, we reviewed if they were in the right risk pool. I’m not saying this is pretty, but there were actuarially sound reasons.”
Although demand for care nationwide appears to be growing relatively slowly, insurers and benefit consultants also say prices for medical care continue to climb as drug makers and hospitals charge more. “If they’re a popular brand or anchor hospital, they’re going to negotiate a significant increase if they can,” said Edward A. Kaplan, a benefits expert with the Segal Company, which recently surveyed insurers about costs.
Some analysts and companies are already questioning the high increase found through Kaiser’s survey, saying costs are slowing down and increases in premiums would probably be more moderate in 2012.
Some small business say they expect their premiums not to rise as sharply, only because younger, healthier employees are keeping claims low. “Up until last year, we saw very hefty increases — double digits,” said Heather Gombos, an executive for R. M. Jones & Co. and affiliated businesses in New Britain, Conn., which insures about 50 of 80 employees.
Family coverage is now running $12,000 a year, Ms. Gombos said, and she is waiting to see what increases are proposed for the coming year. “What it comes down to is good luck,” she said.
Click here for original article
Thursday, September 29, 2011
As Scorn for Vote Grows, Protests Surge Around Globe
MADRID — Hundreds of thousands of disillusioned Indians cheer a rural activist on a hunger strike. Israel reels before the largest street demonstrations in its history. Enraged young people in Spain and Greece take over public squares across their countries.Their complaints range from corruption to lack of affordable housing and joblessness, common grievances the world over. But from South Asia to the heartland of Europe and now even to Wall Street, these protesters share something else: wariness, even contempt, toward traditional politicians and the democratic political process they preside over.
They are taking to the streets, in part, because they have little faith in the ballot box.
“Our parents are grateful because they’re voting,” said Marta Solanas, 27, referring to older Spaniards’ decades spent under the Franco dictatorship. “We’re the first generation to say that voting is worthless.”
Economics have been one driving force, with growing income inequality, high unemployment and recession-driven cuts in social spending breeding widespread malaise. Alienation runs especially deep in Europe, with boycotts and strikes that, in London and Athens, erupted into violence.
But even in India and Israel, where growth remains robust, protesters say they so distrust their country’s political class and its pandering to established interest groups that they feel only an assault on the system itself can bring about real change.
Young Israeli organizers repeatedly turned out gigantic crowds insisting that their political leaders, regardless of party, had been so thoroughly captured by security concerns, ultra-Orthodox groups and other special interests that they could no longer respond to the country’s middle class.
In the world’s largest democracy, Anna Hazare, an activist, starved himself publicly for 12 days until the Indian Parliament capitulated to some of his central demands on a proposed anticorruption measure to hold public officials accountable. “We elect the people’s representatives so they can solve our problems,” said Sarita Singh, 25, among the thousands who gathered each day at Ramlila Maidan, where monsoon rains turned the grounds to mud but protesters waved Indian flags and sang patriotic songs.
“But that is not actually happening. Corruption is ruling our country.”
Increasingly, citizens of all ages, but particularly the young, are rejecting conventional structures like parties and trade unions in favor of a less hierarchical, more participatory system modeled in many ways on the culture of the Web.
In that sense, the protest movements in democracies are not altogether unlike those that have rocked authoritarian governments this year, toppling longtime leaders in Tunisia, Egypt and Libya. Protesters have created their own political space online that is chilly, sometimes openly hostile, toward traditional institutions of the elite.
The critical mass of wiki and mapping tools, video and social networking sites, the communal news wire of Twitter and the ease of donations afforded by sites like PayPal makes coalitions of like-minded individuals instantly viable.
“You’re looking at a generation of 20- and 30-year-olds who are used to self-organizing,” said Yochai Benkler, a director of the Berkman Center for Internet and Society at Harvard University. “They believe life can be more participatory, more decentralized, less dependent on the traditional models of organization, either in the state or the big company. Those were the dominant ways of doing things in the industrial economy, and they aren’t anymore.”
Yonatan Levi, 26, called the tent cities that sprang up in Israel “a beautiful anarchy.” There were leaderless discussion circles like Internet chat rooms, governed, he said, by “emoticon” hand gestures like crossed forearms to signal disagreement with the latest speaker, hands held up and wiggling in the air for agreement — the same hand signs used in public assemblies in Spain. There were free lessons and food, based on the Internet conviction that everything should be available without charge.
Someone had to step in, Mr. Levi said, because “the political system has abandoned its citizens.”
The rising disillusionment comes 20 years after what was celebrated as democratic capitalism’s final victory over communism and dictatorship.
In the wake of the Soviet Union’s collapse in 1991, a consensus emerged that liberal economics combined with democratic institutions represented the only path forward. That consensus, championed by scholars like Francis Fukuyama in his book “The End of History and the Last Man,” has been shaken if not broken by a seemingly endless succession of crises — the Asian financial collapse of 1997, the Internet bubble that burst in 2000, the subprime crisis of 2007-8 and the continuing European and American debt crisis — and the seeming inability of policy makers to deal with them or cushion their people from the shocks.
Frustrated voters are not agitating for a dictator to take over. But they say they do not know where to turn at a time when political choices of the cold war era seem hollow. “Even when capitalism fell into its worst crisis since the 1920s there was no viable alternative vision,” said the British left-wing author Owen Jones.
Protests in Britain exploded into lawlessness last month. Rampaging youths smashed store windows and set fires in London and beyond, using communication systems like BlackBerry Messenger to evade the police. They had savvy and technology, Mr. Jones said, but lacked a belief that the political system represented their interests. They also lacked hope.
“The young people who took part in the riots didn’t feel they had a future to risk,” he said.
In Spain, walloped by the developed world’s highest official rate of unemployment, at 21 percent, many have lost the confidence that politicians of any party can find a solution. Their demands are vague, but their cry for help is plaintive and determined. Known as indignados or the outraged, they block traffic, occupy squares and gather for teach-ins.
Ms. Solanas, an unemployed online journalist, was part of the core group of protesters who in May occupied the Puerta del Sol, a public square in Madrid, the capital, touching off a nationwide protest. That night she and some friends started the Twitter account @acampadasol, or “Camp Sol,” which now has nearly 70,000 followers.
While the Spanish and Israeli demonstrations were peaceful, critics have raised concerns over the urge to bypass representative institutions. In India, Mr. Hazare’s crusade to “fast unto death” unless Parliament enacted his anticorruption law struck some supporters as self-sacrifice. Many opponents viewed his tactics as undemocratic blackmail.
Hundreds of thousands of people turned out last month in New Delhi to vent a visceral outrage at the state of Indian politics. One banner read, “If your blood is not boiling now, then your blood is not blood!” The campaign by Mr. Hazare, 74, was intended to force Parliament to consider his anticorruption legislation instead of a weaker alternative put forth by the government.
Parliament unanimously passed a resolution endorsing central pieces of his proposal, and lawmakers are expected to approve an anticorruption measure in the next session. Mr. Hazare’s anticorruption campaign tapped a deep chord with the public precisely because he was not a politician. Many voters feel that Indian democracy, and in particular the major parties, the Congress Party and the Bharatiya Janata Party, have become unresponsive and captive to interest groups. For almost a year, India’s news media and government auditors have exposed tawdry government scandals involving billions of dollars in graft.
Many of the protesters following the man in the white Gandhian cap known as a topi were young and middle class, fashionably dressed and carrying the newest smartphones. Ms. Singh was born in a village and is attending a university in New Delhi. Yet she is anxious about her future and wants to know why her parents go days without power. “We don’t get electricity for 18 hours a day,” she said. “This is corruption. Electricity is our basic need. Where is the money going?”
Responding to shifts in voter needs is supposed to be democracy’s strength. These emerging movements, like many in the past, could end up being absorbed by traditional political parties, just as the Republican Party in the United States is seeking to benefit from the anti-establishment sentiment of Tea Party loyalists. Yet purists involved in many of the movements say they intend to avoid the old political channels.
The political left, which might seem the natural destination for the nascent movements now emerging around the globe, is compromised in the eyes of activists by the neoliberal centrism of Bill Clinton and Tony Blair. The old left remains wedded to trade unions even as they represent a smaller and smaller share of the work force. More recently, center-left participation in bailouts for financial institutions alienated former supporters who say the money should have gone to people instead of banks.
The entrenched political players of the post-cold-war old guard are struggling. In Japan, six prime ministers have stepped down in five years, as political paralysis deepens. The two major parties in Germany, the Christian Democrats and the Social Democrats, have seen tremendous declines in membership as the Greens have made major gains, while Chancellor Angela Merkel has watched her authority erode over unpopular bailouts.
In many European countries the disappointment is twofold: in heavily indebted federal governments pulling back from social spending and in a European Union viewed as distant and undemocratic. Europeans leaders have dictated harsh austerity measures in the name of stability for the euro, the region’s common currency, rubber-stamped by captive and corrupt national politicians, protesters say.
“The biggest crisis is a crisis of legitimacy,” Ms. Solanas said. “We don’t think they are doing anything for us.”
Unlike struggling Europe, Israel’s economy is a story of unusual success. It has grown from a sluggish state-dominated system to a market-driven high-tech powerhouse. But with wealth has come inequality. The protest organizers say the same small class of people who profited from government privatizations also dominates the major political parties. The rest of the country has bowed out of politics.
Mr. Levi, born on Degania, Israel’s first kibbutz, said the protests were not acts of anger but of reclamation, of a society hijacked by a class known in Hebrew as “hon veshilton,” meaning a nexus of money and politics. The rise of market forces produced a sense of public disengagement, he said, a feeling that the job of a citizen was limited to occasional trips to the polling places to vote.
“The political system has abandoned its citizens,” Mr. Levi said. “We have lost a sense of responsibility for one another.”
Ethan Bronner contributed reporting from Tel Aviv, and Jim Yardley from New Delhi.
Click here to read original article
Sunday, September 18, 2011
Staring into an Abyss
The latest Gallup Economic Confidence Index (ECI) numbers for Delaware are stark.
Every week Gallup conducts a nationwide survey of consumers. The ECI is based on two questions: the first asking consumers to rate their perceptions of current economic conditions as "excellent," "good," "only fair," or "poor," and the second asking them whether economic conditions in the country are "getting better" or "getting worse."
The final ECI is an average of the percentage of consumers answering positively and negatively.
After progressing from -50 in 2008 to -28 in 2010, the national ECI averaged -32 during the first half of 2011 and fell away to -53 for the last three weeks of August.
Would you like to know how Delaware compares with the nation...
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Every week Gallup conducts a nationwide survey of consumers. The ECI is based on two questions: the first asking consumers to rate their perceptions of current economic conditions as "excellent," "good," "only fair," or "poor," and the second asking them whether economic conditions in the country are "getting better" or "getting worse."
The final ECI is an average of the percentage of consumers answering positively and negatively.
After progressing from -50 in 2008 to -28 in 2010, the national ECI averaged -32 during the first half of 2011 and fell away to -53 for the last three weeks of August.
Would you like to know how Delaware compares with the nation...
I want to read entire article
Saturday, September 17, 2011
Europe's banks are staring into the abyss
Where now for European banks? Sir Howard Davies, former chairman of Britain's Financial Services Authority, said on BBC Radio's Today programme on Tuesday morning that he thought the French government was only days away from having to recapitalise the country's banking system for a second time. It's hard to disagree.
The panic seems to have been temporarily stemmed by a statement from BNP Paribas to the effect that it wasn't having the problems widely reported of finding dollar funding. There was also an emphatic denial of discussions over state intervention. But no-one is kidding themselves. Italy had to pay the highest spread since joining the euro to sell its bonds on Tuesday. There are growing fears over whether Europe's largest borrower can stay the course.
The eurozone sovereign debt crisis is meanwhile exacting a devastating toll on the European banking system as a whole, the UK included. With their high exposure to eurozone debt, the problem is particularly acute for the French banking goliaths, BNP Paribas and Societe Generale.
BNP alone has a eurozone sovereign debt exposure of some €75bn, amounting to roughly 6pc of total assets, including €14bn of Greek debt and €21bn of Italian government bonds. And that's just BNP. The other two major French banks, SocGen and Credit Agricole each have exposures of a similar order of magnitude. Collectively, French banks have €56bn of Greek sovereign bonds alone. They've so far only written down this Greek debt by around 20pc, or in line with the restructuring agreed at the time of the last bailout.
That's nowhere near mark to market. In the increasingly likely event of Germany kicking the Greeks out of the eurozone altogether, Greek debt will become close to worthless. Greece is already effectively a cash only economy. Most forms of credit has effectively dried up, the Greek banking system is finished, and capital controls to prevent what little money that remains from leaving the country are surely only a matter of time. European banking must prepare for the worst as far as Greece is concerned.
As for the remainder of the eurozone sovereign exposure, there's been no write down at all among banks on these bonds. If there's a wider problem of default, the bad debt recognition has yet to come.
How come European banks have got so much of the stuff? Well ironically, this is one lending decision gone wrong that the banks cannot be blamed for. In response to the original banking crisis, regulators ordered banks substantially to increase their liquidity buffers. Government bonds are generally viewed as the most liquid and least risky assets to hold, so that's where the money went.
That these regulatory obligations also helped governments fund their ever growing deficits is by the by. In any case, nowhere is the law of unintended consequences more in evidence than in financial regulation. By seeking to address the last crisis with greater liquidity buffers, regulators succeeded only in sowing the seeds for the next one. A banking crisis that transmogrified into a sovereign debt crisis now shows every sign of transmogrifying back into another banking crisis.
Much of the selling pressure on European banks has come from the US. American investors and lenders look at Europe and see a Continent apparently incapable of gripping its problems. With the debt crisis approaching some kind of self evident denouement, there's no-one in charge, only denial and blame. Policymakers seem more concerned with the irrelevancies of moral hazard than on finding solutions. If it wasn't so tragic, it would be laughable. Europe is fiddling while Rome burns.
When the banking crisis first broke, Europeans tended to regard it as wholly an Anglo-Saxon problem. There was some recapitalisation of French and German banks that went on in late 2008, early 2009, but it wasn't nearly as big as in the UK and the US, and within a year, the French banks had in any case largely repaid all their state support. Problem over, it was thought.
The same refusal to face up to underlying solvency concerns continues to dominate Contintental attitudes to the crisis. There is a collective sense of denial. BNP for one insists that it is in nothing like the same poor shape as many UK and US banks back in 2008. Profits are still buoyant, delinquency subdued, and capital more than adequate, BNP insists. Unfortunately, that's not what the markets are saying.
Record quantities of European term funding are set to mature in the first quarter of next year. It's not clear that the European Central Bank can cope with the sort of liquidity support that banks will require if markets refuse to refinance it. Europe's financial and monetary system is falling apart.
Since French banks are widely thought of as essentially arms of the French state, is there actually any point in recapitalising them? In France, the public subsidy issue which has so exercised the Vickers Commission on banking in the UK is taken for granted. Banks are understood to be underwritten by the state, and therefore require less capital and can hand the benefits of cheaper funding onto to their customers. Why not then just make this implicit support explicit?
You only need to take one look at what happened to Ireland to see why. In the early days of the crisis, the Irish government promised to stand behind all banking liabilities. By doing so, it ended up pushing the entire country into bankruptcy. No. France and Germany need to recapitalise their banks. The sooner they do so, the sooner the wider programme of debt forgiveness necessary to set the European economy back on a sustainable footing can begin.
http://blogs.telegraph.co.uk/finance/jeremywarner/100011929/europes-banks-are-starring-into-the-abyss/
The panic seems to have been temporarily stemmed by a statement from BNP Paribas to the effect that it wasn't having the problems widely reported of finding dollar funding. There was also an emphatic denial of discussions over state intervention. But no-one is kidding themselves. Italy had to pay the highest spread since joining the euro to sell its bonds on Tuesday. There are growing fears over whether Europe's largest borrower can stay the course.
The eurozone sovereign debt crisis is meanwhile exacting a devastating toll on the European banking system as a whole, the UK included. With their high exposure to eurozone debt, the problem is particularly acute for the French banking goliaths, BNP Paribas and Societe Generale.
BNP alone has a eurozone sovereign debt exposure of some €75bn, amounting to roughly 6pc of total assets, including €14bn of Greek debt and €21bn of Italian government bonds. And that's just BNP. The other two major French banks, SocGen and Credit Agricole each have exposures of a similar order of magnitude. Collectively, French banks have €56bn of Greek sovereign bonds alone. They've so far only written down this Greek debt by around 20pc, or in line with the restructuring agreed at the time of the last bailout.
That's nowhere near mark to market. In the increasingly likely event of Germany kicking the Greeks out of the eurozone altogether, Greek debt will become close to worthless. Greece is already effectively a cash only economy. Most forms of credit has effectively dried up, the Greek banking system is finished, and capital controls to prevent what little money that remains from leaving the country are surely only a matter of time. European banking must prepare for the worst as far as Greece is concerned.
As for the remainder of the eurozone sovereign exposure, there's been no write down at all among banks on these bonds. If there's a wider problem of default, the bad debt recognition has yet to come.
How come European banks have got so much of the stuff? Well ironically, this is one lending decision gone wrong that the banks cannot be blamed for. In response to the original banking crisis, regulators ordered banks substantially to increase their liquidity buffers. Government bonds are generally viewed as the most liquid and least risky assets to hold, so that's where the money went.
That these regulatory obligations also helped governments fund their ever growing deficits is by the by. In any case, nowhere is the law of unintended consequences more in evidence than in financial regulation. By seeking to address the last crisis with greater liquidity buffers, regulators succeeded only in sowing the seeds for the next one. A banking crisis that transmogrified into a sovereign debt crisis now shows every sign of transmogrifying back into another banking crisis.
Much of the selling pressure on European banks has come from the US. American investors and lenders look at Europe and see a Continent apparently incapable of gripping its problems. With the debt crisis approaching some kind of self evident denouement, there's no-one in charge, only denial and blame. Policymakers seem more concerned with the irrelevancies of moral hazard than on finding solutions. If it wasn't so tragic, it would be laughable. Europe is fiddling while Rome burns.
When the banking crisis first broke, Europeans tended to regard it as wholly an Anglo-Saxon problem. There was some recapitalisation of French and German banks that went on in late 2008, early 2009, but it wasn't nearly as big as in the UK and the US, and within a year, the French banks had in any case largely repaid all their state support. Problem over, it was thought.
The same refusal to face up to underlying solvency concerns continues to dominate Contintental attitudes to the crisis. There is a collective sense of denial. BNP for one insists that it is in nothing like the same poor shape as many UK and US banks back in 2008. Profits are still buoyant, delinquency subdued, and capital more than adequate, BNP insists. Unfortunately, that's not what the markets are saying.
Record quantities of European term funding are set to mature in the first quarter of next year. It's not clear that the European Central Bank can cope with the sort of liquidity support that banks will require if markets refuse to refinance it. Europe's financial and monetary system is falling apart.
Since French banks are widely thought of as essentially arms of the French state, is there actually any point in recapitalising them? In France, the public subsidy issue which has so exercised the Vickers Commission on banking in the UK is taken for granted. Banks are understood to be underwritten by the state, and therefore require less capital and can hand the benefits of cheaper funding onto to their customers. Why not then just make this implicit support explicit?
You only need to take one look at what happened to Ireland to see why. In the early days of the crisis, the Irish government promised to stand behind all banking liabilities. By doing so, it ended up pushing the entire country into bankruptcy. No. France and Germany need to recapitalise their banks. The sooner they do so, the sooner the wider programme of debt forgiveness necessary to set the European economy back on a sustainable footing can begin.
http://blogs.telegraph.co.uk/finance/jeremywarner/100011929/europes-banks-are-starring-into-the-abyss/
International alarm over euro zine crisis grows
BERLIN/ROME (Reuters) - International alarm over Europe's debt crisis hit new heights on Tuesday, with President Barack Obama pressing the bloc's big countries to show leadership as talk of a Greek default escalated and markets heaped pressure on Italy.
German Chancellor Angela Merkel sought to quash talk of an imminent Greek default or exit from the euro zone, but confusion over whether she would issue a joint statement on Greece with French President Sarkozy sent markets gyrating up and then down.
Confidence in the 17-nation currency area was further dented when Italy was forced to pay the highest interest rates since joining the euro in 1999 to sell 5-year bonds.
"I think there is a possibility, if the wrong steps are taken, that the system goes off the rails," Sergio Marchionne, the CEO of Italian carmaker Fiat, told reporters in Frankfurt when asked if the euro's survival was at risk.
Merkel said in a radio interview that Europe was doing everything in its power to avoid a Greek default and urged politicians in her own coalition to weigh their words carefully to avoid creating turmoil on financial markets.
Her economy minister said earlier this week that there should be no taboos in stabilizing the euro, including an orderly bankruptcy of Greece. And lawmakers from her coalition have said in recent days that Greece may have to leave the euro zone -- a move Citigroup's chief economist warned would lead to "financial and economic disaster."
"As soon as Greece has exited, we expect the markets will focus on the country or countries most likely to exit next from the euro area," Willem Buiter said in a note published on Tuesday.
Merkel, in an interview with RBB inforadio, said Europe would use all the tools at its disposal to prevent a Greek default and warned that an exit from the bloc would immediately lead to "domino effects."
In financial markets, stocks and the euro rose on Tuesday on hopes Europe's top powers will supply fresh support for Greece.
MSCI's all-country world equity index rose 0.9 percent and Wall Street rebounded. The Dow Jones industrial average closed up 44.73 points, or 0.40 percent, at 11,105.85. The Nasdaq Composite Index gained 37.06 points, or 1.49 percent, at 2,532.15.
BERLIN-PARIS CONFUSION
Merkel and French President Nicolas Sarkozy conferred by telephone on the crisis at the start of the week, and senior French sources told Reuters they would issue a joint statement on Greece, sending the euro and Greek bank stocks higher.
Less than an hour later, a spokesman for Sarkozy changed course and denied a statement was planned, sending markets into reverse.
The mixed signals reinforced the sense in the markets that European countries are unable to unite behind a common approach
President Barack Obama told Spanish journalists in a group interview published on Tuesday that euro zone leaders needed to show markets they were taking responsibility for the debt crisis. Weakness in the global economy would persist so long as it is not resolved, he said.
The Institute of International Finance, a bank lobbying group, warned in a report that prolonged inability to deal with Europe's debt issues put its banking system at severe risk.
"In a pattern echoing that of the 2007-2009 financial crisis, there is a growing risk of the real economy and financial conditions being locked into a mutually reinforcing downward spiral," the IIF warned.
In a measure of the alarm in Washington, Treasury Secretary Timothy Geithner will take the unprecedented step of attending a meeting of EU finance ministers in Poland on Friday. It will be his second trip to Europe in a week after he met his main EU counterparts at a G7 meeting last weekend.
Obama said that while Greece is the immediate concern, an even bigger problem is what may happen should markets keep attacking the larger economies of Spain and Italy.
"In the end the big countries in Europe, the leaders in Europe must meet and take a decision on how to coordinate monetary integration with more effective coordinated fiscal policy," the news agency EFE quoted him as saying.
Geithner is likely to urge euro zone finance ministers on Friday to speed up ratification of changes to their bailout fund, but a U.S. official said he would not push for an increase in the fund's size.
ITALY YIELDS SOAR
Markets have already priced in the near certainty of a Greek debt default. Credit default swap prices suggest a 90 percent probability of default in the next five years, according to CDS pricing data provider Markit.
Greece has said it only has a few weeks' cash and needs the 8 billion euro tranche in October to pay salaries and pensions.
Domenico Lombardi, president of the Oxford Institute for Economic Policy and a senior fellow at Washington's Brookings Institution, said European policymakers must act fast to ward off a full-blown market attack on Italy.
"Italy is the key to contain this crisis. It is the last window of opportunity before a serious prospect of a meltdown of the euro," Lombardi said.
Pressure on Italy mounted on Tuesday at a bond auction that showed the limits of European Central Bank efforts to hold down Rome's borrowing costs by buying government bonds in return for austerity measures to cut its budget deficit.
The five-year bond yield hit a euro lifetime high of 5.60 percent despite ECB purchases in the secondary market that led to the resignation of the central bank's German chief economist, Juergen Stark, last Friday.
"Nothing that we've had, be it at a domestic level in Italy, be it at a pan-euro zone level, or above all from Germany, indicates that anyone really is getting to grips with presenting euro zone policy with one voice," said Marc Ostwald, an analyst at Monument Securities in London.
A Financial Times report that Rome had asked China to buy "significant" quantities of its bonds in recent talks provided little support.
A Brazilian government official told Reuters that BRICS major emerging markets were in initial talks about increasing their holdings of euro-denominated bonds in an effort to help ease the euro zone crisis.
A Treasury spokesman said Italian Economy Minister Giulio Tremonti met Chinese officials last week including the head of its sovereign wealth fund. But an Italian ministerial source told Reuters the talks had centered on possible Chinese investments in Italy's industrial sector, not its bonds.
Chinese leaders have repeatedly offered verbal support to Greece, Portugal and Spain but encouraging words have not so far been matched by spectacular action.
Obama's comments suggested that Washington is trying to nudge European governments toward closer fiscal union or a bigger bailout fund to recapitalize teetering banks but European politics, especially in Germany, make that difficult.
(Additional reporting by Nigel Tutt in Milan, Giuseppe Fonte in Rome, Annika Breidthardt in Berlin, Fiona Ortiz in Madrid, Emmanuel Jarry in Paris, Jan Strupczewski in Brussels and Stella Dawson in Washington; Writing by Paul Taylor, Noah Barkin and Glenn Somerville; editing by Ken Barry)
http://mobile.reuters.com/article/idUSTRE78B24R20110913?irpc=932
German Chancellor Angela Merkel sought to quash talk of an imminent Greek default or exit from the euro zone, but confusion over whether she would issue a joint statement on Greece with French President Sarkozy sent markets gyrating up and then down.
Confidence in the 17-nation currency area was further dented when Italy was forced to pay the highest interest rates since joining the euro in 1999 to sell 5-year bonds.
"I think there is a possibility, if the wrong steps are taken, that the system goes off the rails," Sergio Marchionne, the CEO of Italian carmaker Fiat, told reporters in Frankfurt when asked if the euro's survival was at risk.
Merkel said in a radio interview that Europe was doing everything in its power to avoid a Greek default and urged politicians in her own coalition to weigh their words carefully to avoid creating turmoil on financial markets.
Her economy minister said earlier this week that there should be no taboos in stabilizing the euro, including an orderly bankruptcy of Greece. And lawmakers from her coalition have said in recent days that Greece may have to leave the euro zone -- a move Citigroup's chief economist warned would lead to "financial and economic disaster."
"As soon as Greece has exited, we expect the markets will focus on the country or countries most likely to exit next from the euro area," Willem Buiter said in a note published on Tuesday.
Merkel, in an interview with RBB inforadio, said Europe would use all the tools at its disposal to prevent a Greek default and warned that an exit from the bloc would immediately lead to "domino effects."
In financial markets, stocks and the euro rose on Tuesday on hopes Europe's top powers will supply fresh support for Greece.
MSCI's all-country world equity index rose 0.9 percent and Wall Street rebounded. The Dow Jones industrial average closed up 44.73 points, or 0.40 percent, at 11,105.85. The Nasdaq Composite Index gained 37.06 points, or 1.49 percent, at 2,532.15.
BERLIN-PARIS CONFUSION
Merkel and French President Nicolas Sarkozy conferred by telephone on the crisis at the start of the week, and senior French sources told Reuters they would issue a joint statement on Greece, sending the euro and Greek bank stocks higher.
Less than an hour later, a spokesman for Sarkozy changed course and denied a statement was planned, sending markets into reverse.
The mixed signals reinforced the sense in the markets that European countries are unable to unite behind a common approach
President Barack Obama told Spanish journalists in a group interview published on Tuesday that euro zone leaders needed to show markets they were taking responsibility for the debt crisis. Weakness in the global economy would persist so long as it is not resolved, he said.
The Institute of International Finance, a bank lobbying group, warned in a report that prolonged inability to deal with Europe's debt issues put its banking system at severe risk.
"In a pattern echoing that of the 2007-2009 financial crisis, there is a growing risk of the real economy and financial conditions being locked into a mutually reinforcing downward spiral," the IIF warned.
In a measure of the alarm in Washington, Treasury Secretary Timothy Geithner will take the unprecedented step of attending a meeting of EU finance ministers in Poland on Friday. It will be his second trip to Europe in a week after he met his main EU counterparts at a G7 meeting last weekend.
Obama said that while Greece is the immediate concern, an even bigger problem is what may happen should markets keep attacking the larger economies of Spain and Italy.
"In the end the big countries in Europe, the leaders in Europe must meet and take a decision on how to coordinate monetary integration with more effective coordinated fiscal policy," the news agency EFE quoted him as saying.
Geithner is likely to urge euro zone finance ministers on Friday to speed up ratification of changes to their bailout fund, but a U.S. official said he would not push for an increase in the fund's size.
ITALY YIELDS SOAR
Markets have already priced in the near certainty of a Greek debt default. Credit default swap prices suggest a 90 percent probability of default in the next five years, according to CDS pricing data provider Markit.
Greece has said it only has a few weeks' cash and needs the 8 billion euro tranche in October to pay salaries and pensions.
Domenico Lombardi, president of the Oxford Institute for Economic Policy and a senior fellow at Washington's Brookings Institution, said European policymakers must act fast to ward off a full-blown market attack on Italy.
"Italy is the key to contain this crisis. It is the last window of opportunity before a serious prospect of a meltdown of the euro," Lombardi said.
Pressure on Italy mounted on Tuesday at a bond auction that showed the limits of European Central Bank efforts to hold down Rome's borrowing costs by buying government bonds in return for austerity measures to cut its budget deficit.
The five-year bond yield hit a euro lifetime high of 5.60 percent despite ECB purchases in the secondary market that led to the resignation of the central bank's German chief economist, Juergen Stark, last Friday.
"Nothing that we've had, be it at a domestic level in Italy, be it at a pan-euro zone level, or above all from Germany, indicates that anyone really is getting to grips with presenting euro zone policy with one voice," said Marc Ostwald, an analyst at Monument Securities in London.
A Financial Times report that Rome had asked China to buy "significant" quantities of its bonds in recent talks provided little support.
A Brazilian government official told Reuters that BRICS major emerging markets were in initial talks about increasing their holdings of euro-denominated bonds in an effort to help ease the euro zone crisis.
A Treasury spokesman said Italian Economy Minister Giulio Tremonti met Chinese officials last week including the head of its sovereign wealth fund. But an Italian ministerial source told Reuters the talks had centered on possible Chinese investments in Italy's industrial sector, not its bonds.
Chinese leaders have repeatedly offered verbal support to Greece, Portugal and Spain but encouraging words have not so far been matched by spectacular action.
Obama's comments suggested that Washington is trying to nudge European governments toward closer fiscal union or a bigger bailout fund to recapitalize teetering banks but European politics, especially in Germany, make that difficult.
(Additional reporting by Nigel Tutt in Milan, Giuseppe Fonte in Rome, Annika Breidthardt in Berlin, Fiona Ortiz in Madrid, Emmanuel Jarry in Paris, Jan Strupczewski in Brussels and Stella Dawson in Washington; Writing by Paul Taylor, Noah Barkin and Glenn Somerville; editing by Ken Barry)
http://mobile.reuters.com/article/idUSTRE78B24R20110913?irpc=932
U.S. Income Drop Raises Stakes in Presidential Race
U.S. household income fell to its lowest level in more than a decade in 2010 and poverty rose to a 17-year high, setting the stage for the debate over jobs and the economy that will dominate the 2012 presidential race.
Median household income declined 2.3 percent, and the proportion of people living in poverty last year climbed to 15.1 percent, or almost one in six Americans, from 14.3 percent in 2009, a U.S. Census Bureau report yesterday showed.
Income and poverty issues are at the heart of the political discussion in Washington, with President Barack Obama pushing a $447 billion jobs proposal and a special congressional committee deliberating over $1.5 trillion in deficit cuts. Policy makers are wrestling with the question of whether to extend initiatives designed to address hardship stemming from the recession, the nation’s worst economic slump in seven decades.
“All of that raises the stakes for the decisions that President Obama and Congress will make in coming months,” Robert Greenstein, president of the Center on Budget and Policy Priorities in Washington, said in a statement.
The census report underscored that middle-class Americans continued to struggle during the recovery. Those trends may worsen this year as the economy weakened.
“I can’t think of ways the picture could be much worse,” said Ron Haskins, a senior fellow at the Brookings Institution in Washington. “We have had more than a decade of difficult numbers. It’s not about to end.”
Lowest Since 1996
Yearly median household income reached its lowest level since 1996, slipping to $49,445 from $50,599 the year before. The 46.2 million Americans living in poverty was the highest in the 52 years since the Census Bureau began gathering that statistic and was up from 43.6 million in 2009.
“The distress the consumers are feeling now is historic in its scope,” said Mark Cole, chief operating officer at CredAbility, a provider of non-profit credit counseling.
An index that tracks the financial condition of the average household published by Atlanta-based CredAbility hit a low in the fourth quarter of 2009. Out of the 31 years CredAbility has measured consumer distress, the worst rankings have occurred in the last 13 quarters.
The number of Americans who didn’t work at least one week out of the year increased to 86 million from 83 million in 2009, said Trudi Renwick, chief of the Census Bureau’s poverty statistics branch. If unemployment insurance benefits were excluded from income, 3.2 million more Americans would have been in poverty, the Census Bureau said.
Obama’s ‘Broken Promise’
The Republican National Committee issued a statement highlighting the report as evidence of Obama’s “broken promise on poverty” and the failure of his economic policies.
The home state of Texas Governor Rick Perry, the frontrunner in the contest for the Republican presidential nomination, saw its poverty rate climb to 18.4 percent from 17.3 percent and had the sixth-highest rate among the 50 states.
Americans’ financial difficulties add urgency to the arguments in Washington and statehouses across the U.S. over budget cuts to programs designed to protect families from falling into poverty. The census figures showed the third consecutive annual increase in the U.S. poverty rate.
That trend won’t reverse itself without “concerted action” on the part of policy makers, said Melissa Boteach, who leads a campaign to reduce poverty at the Center for American Progress, a Washington-based research group with ties to the Obama administration.
Falling Income
Since 2007, the year before the recession, median household income has fallen 6.4 percent, the Census Bureau said. The number continued to decline even as the U.S. economy expanded 3 percent in 2010. Growth has slowed this year to an annual rate of less than 1 percent, sparking concern that the financial plight of families will intensify and hamper the recovery.
The data show that in 2010, a year when corporate profits were soaring and the economy was pulling out of recession, Americans saw their fortunes decline. The earnings of women who worked full time were about 77 percent of those of men, about the same gap as in 2009.
“Even in good economic times, the number of Americans who were struggling to make ends meet and had declining income was going in the wrong direction,” said Boteach. “People are right to have some frustration that the economic gains of the last decade, when they were happening, weren’t shared.”
U.S. households have little to cheer about as job creation stagnated last month and hourly wages retreated. The unemployment rate has hovered at or above 9 percent for more than two years. Consumer confidence fell to the second-lowest level this year for the week that ended Sept. 4.
Recouping Losses
Since the low point in the labor market downturn in February 2010, nonfarm payrolls have increased by 1.9 million, showing that without stronger growth, it will take years to recoup about 8.7 million jobs lost as a result of the recession that began in December 2007 and ended in June 2009.
The 2010 figures “tell us how the changing economic conditions have really impacted the American family.” said Robert Groves, director of the Census Bureau, on a conference call with reporters.
The numbers are part of an annual report on income, poverty and health insurance released by the Census Bureau. The data are based on a survey of about 100,000 addresses that’s used as the primary source of figures about the nation’s labor force.
As defined by the Office of Management and Budget and updated for inflation using the Consumer Price Index, the weighted average poverty threshold for a family of four in 2010 was $22,314.
Declines in Midwest
Among ethnic groups, median income declined for white and black households, and changes in Hispanic and Asian households weren’t statistically significant. Incomes declined in the Midwest, South and West and were little changed in the Northeast.
Adding to the woes is the number of Americans without health insurance. It increased to 49.9 million from 49 million, or about 16.3 percent of the population, though the bureau said the change wasn’t statistically significant. The overall percentage of people with insurance didn’t change.
The number of Americans with private insurance was 195.9 million, unchanged from 2009, the bureau said. The number enrolled in public programs including Medicaid and Medicare grew to 31 percent, or 95 million, from 93.2 million in 2009.
Medicaid enrolled about 48.6 million people last year, the bureau said, or 15.9 percent of the population. The figures were little changed from 2009.
http://mobile.bloomberg.com/news/2011-09-13/poverty-in-u-s-climbed-to-17-year-high-in-2010-as-household-income-fell.html
Median household income declined 2.3 percent, and the proportion of people living in poverty last year climbed to 15.1 percent, or almost one in six Americans, from 14.3 percent in 2009, a U.S. Census Bureau report yesterday showed.
Income and poverty issues are at the heart of the political discussion in Washington, with President Barack Obama pushing a $447 billion jobs proposal and a special congressional committee deliberating over $1.5 trillion in deficit cuts. Policy makers are wrestling with the question of whether to extend initiatives designed to address hardship stemming from the recession, the nation’s worst economic slump in seven decades.
“All of that raises the stakes for the decisions that President Obama and Congress will make in coming months,” Robert Greenstein, president of the Center on Budget and Policy Priorities in Washington, said in a statement.
The census report underscored that middle-class Americans continued to struggle during the recovery. Those trends may worsen this year as the economy weakened.
“I can’t think of ways the picture could be much worse,” said Ron Haskins, a senior fellow at the Brookings Institution in Washington. “We have had more than a decade of difficult numbers. It’s not about to end.”
Lowest Since 1996
Yearly median household income reached its lowest level since 1996, slipping to $49,445 from $50,599 the year before. The 46.2 million Americans living in poverty was the highest in the 52 years since the Census Bureau began gathering that statistic and was up from 43.6 million in 2009.
“The distress the consumers are feeling now is historic in its scope,” said Mark Cole, chief operating officer at CredAbility, a provider of non-profit credit counseling.
An index that tracks the financial condition of the average household published by Atlanta-based CredAbility hit a low in the fourth quarter of 2009. Out of the 31 years CredAbility has measured consumer distress, the worst rankings have occurred in the last 13 quarters.
The number of Americans who didn’t work at least one week out of the year increased to 86 million from 83 million in 2009, said Trudi Renwick, chief of the Census Bureau’s poverty statistics branch. If unemployment insurance benefits were excluded from income, 3.2 million more Americans would have been in poverty, the Census Bureau said.
Obama’s ‘Broken Promise’
The Republican National Committee issued a statement highlighting the report as evidence of Obama’s “broken promise on poverty” and the failure of his economic policies.
The home state of Texas Governor Rick Perry, the frontrunner in the contest for the Republican presidential nomination, saw its poverty rate climb to 18.4 percent from 17.3 percent and had the sixth-highest rate among the 50 states.
Americans’ financial difficulties add urgency to the arguments in Washington and statehouses across the U.S. over budget cuts to programs designed to protect families from falling into poverty. The census figures showed the third consecutive annual increase in the U.S. poverty rate.
That trend won’t reverse itself without “concerted action” on the part of policy makers, said Melissa Boteach, who leads a campaign to reduce poverty at the Center for American Progress, a Washington-based research group with ties to the Obama administration.
Falling Income
Since 2007, the year before the recession, median household income has fallen 6.4 percent, the Census Bureau said. The number continued to decline even as the U.S. economy expanded 3 percent in 2010. Growth has slowed this year to an annual rate of less than 1 percent, sparking concern that the financial plight of families will intensify and hamper the recovery.
The data show that in 2010, a year when corporate profits were soaring and the economy was pulling out of recession, Americans saw their fortunes decline. The earnings of women who worked full time were about 77 percent of those of men, about the same gap as in 2009.
“Even in good economic times, the number of Americans who were struggling to make ends meet and had declining income was going in the wrong direction,” said Boteach. “People are right to have some frustration that the economic gains of the last decade, when they were happening, weren’t shared.”
U.S. households have little to cheer about as job creation stagnated last month and hourly wages retreated. The unemployment rate has hovered at or above 9 percent for more than two years. Consumer confidence fell to the second-lowest level this year for the week that ended Sept. 4.
Recouping Losses
Since the low point in the labor market downturn in February 2010, nonfarm payrolls have increased by 1.9 million, showing that without stronger growth, it will take years to recoup about 8.7 million jobs lost as a result of the recession that began in December 2007 and ended in June 2009.
The 2010 figures “tell us how the changing economic conditions have really impacted the American family.” said Robert Groves, director of the Census Bureau, on a conference call with reporters.
The numbers are part of an annual report on income, poverty and health insurance released by the Census Bureau. The data are based on a survey of about 100,000 addresses that’s used as the primary source of figures about the nation’s labor force.
As defined by the Office of Management and Budget and updated for inflation using the Consumer Price Index, the weighted average poverty threshold for a family of four in 2010 was $22,314.
Declines in Midwest
Among ethnic groups, median income declined for white and black households, and changes in Hispanic and Asian households weren’t statistically significant. Incomes declined in the Midwest, South and West and were little changed in the Northeast.
Adding to the woes is the number of Americans without health insurance. It increased to 49.9 million from 49 million, or about 16.3 percent of the population, though the bureau said the change wasn’t statistically significant. The overall percentage of people with insurance didn’t change.
The number of Americans with private insurance was 195.9 million, unchanged from 2009, the bureau said. The number enrolled in public programs including Medicaid and Medicare grew to 31 percent, or 95 million, from 93.2 million in 2009.
Medicaid enrolled about 48.6 million people last year, the bureau said, or 15.9 percent of the population. The figures were little changed from 2009.
http://mobile.bloomberg.com/news/2011-09-13/poverty-in-u-s-climbed-to-17-year-high-in-2010-as-household-income-fell.html
Number of poor hit record 46 million in 2010
WASHINGTON (Reuters) - The number of Americans living below the poverty line rose to a record 46 million last year, the government said on Tuesday, underscoring the challenges facing President Barack Obama and Congress as they try to tackle high unemployment and a moribund economy.
The Census Bureau's annual report on income, poverty and health insurance coverage said the national poverty rate climbed for a third consecutive year to 15.1 percent in 2010 as the economy struggled to recover from the recession that began in December 2007 and ended in June 2009.
That marked a 0.8 percent increase from 2009, when there were 43.6 million Americans living in poverty.
The number of poor Americans in 2010 was the largest in the 52 years that the Census Bureau has been publishing poverty estimates, the report said, while the poverty rate was the highest since 1993.
The specter of economic deterioration also afflicted working Americans who saw their median income decline 2.3 percent to an annual $49,445.
About 1.5 million fewer Americans were covered by employer-sponsored health insurance plans, while the number of people covered by government health insurance increased by nearly 2 million.
All told, the number of Americans with no health insurance hovered at 49.9 million, up slightly from 49 million in 2010.
The economic deterioration depicted by the figures is likely to have continued into 2011 as economic growth diminished, unemployment remained stuck above 9 percent and fears grew of a possible double-dip recession.
The report of rising poverty coincides with Obama's push for a $450 billion job creation package, and deliberations by a congressional "super committee" tasked with cutting at least $1.2 trillion from the budget deficit over 10 years.
Faced with deteriorating job approval ratings, the president is trying to convince Republicans in Congress to support his package.
Analysts said poverty-related issues have relatively little hold on politicians in Washington but hoped the new figures would encourage the bipartisan super committee to avoid deficit cuts that would hurt the poor.
The United States has long had one of the highest poverty rates in the developed world. Among 34 countries tracked by the Paris-based Organization for Economic Cooperation and Development, only Chile, Israel and Mexico have higher rates of poverty.
http://www.reuters.com/article/2011/09/13/us-usa-economy-poverty-idUSTRE78C3YV20110913
The Census Bureau's annual report on income, poverty and health insurance coverage said the national poverty rate climbed for a third consecutive year to 15.1 percent in 2010 as the economy struggled to recover from the recession that began in December 2007 and ended in June 2009.
That marked a 0.8 percent increase from 2009, when there were 43.6 million Americans living in poverty.
The number of poor Americans in 2010 was the largest in the 52 years that the Census Bureau has been publishing poverty estimates, the report said, while the poverty rate was the highest since 1993.
The specter of economic deterioration also afflicted working Americans who saw their median income decline 2.3 percent to an annual $49,445.
About 1.5 million fewer Americans were covered by employer-sponsored health insurance plans, while the number of people covered by government health insurance increased by nearly 2 million.
All told, the number of Americans with no health insurance hovered at 49.9 million, up slightly from 49 million in 2010.
The economic deterioration depicted by the figures is likely to have continued into 2011 as economic growth diminished, unemployment remained stuck above 9 percent and fears grew of a possible double-dip recession.
The report of rising poverty coincides with Obama's push for a $450 billion job creation package, and deliberations by a congressional "super committee" tasked with cutting at least $1.2 trillion from the budget deficit over 10 years.
Faced with deteriorating job approval ratings, the president is trying to convince Republicans in Congress to support his package.
Analysts said poverty-related issues have relatively little hold on politicians in Washington but hoped the new figures would encourage the bipartisan super committee to avoid deficit cuts that would hurt the poor.
The United States has long had one of the highest poverty rates in the developed world. Among 34 countries tracked by the Paris-based Organization for Economic Cooperation and Development, only Chile, Israel and Mexico have higher rates of poverty.
http://www.reuters.com/article/2011/09/13/us-usa-economy-poverty-idUSTRE78C3YV20110913
Bills come due for loans to pay jobless
DETROIT — States that borrowed billions of dollars from Washington to cover skyrocketing unemployment payouts during the recession now are cutting benefits, adding fees and, in some cases, increasing taxes on employers to raise the cash needed to repay the loans.
“This is not good news and the timing is terrible,” says Doug Roberts, a former Michigan state treasurer who leads Michigan State University’s Institute for Public Policy and Social Research.
Michigan is one of more than two dozen cash-strapped states facing looming deadlines to pay back almost $40 billion borrowed from the federal government. California, which has the largest outstanding balance, must repay some $8.4 billion.
To pay back the loans, some states are cutting benefits.
According to a new report from the Washington-based National Employment Law Project, six states have reduced the amount of the average unemployment check and the number of weeks someone can draw assistance in order to address insolvent trust funds.
In Florida, a new state law ties benefits to the health of the economy. As unemployment drops, the number of weeks a person can draw an unemployment check drops. Under the new rules, benefits could be cut to as few as 12 weeks — less than half the 26 weeks available in most states.
The change will save Florida an expected $100 million or more a year, helping the state make payments on its own $1.5 billion federal loan.
Some states have tightened eligibility requirements and enacted surcharges on employer tax bills — putting more pressure on businesses at just the moment the Obama administration is urging the private sector to create jobs.
Michigan, which has the nation’s third-highest jobless rate and owes the federal government $3.1 billion in unemployment loans, has a new “solvency tax” on employers.
“The most important thing the federal government and states can do is adopting policies that get people employed, decreasing the need for people to pull on the unemployment insurance,” Mr. Roberts said.
Businesses, Mr. Roberts said, are still trying to recover from the December 2007 to June 2009 “Great Recession.”
“Now we’re telling employers who are trying to hire people we are going to hit you with a higher tax because you have a history of laying people off. It’s discouraging people who want to come into states. A company looks at a state and says that’s a big problem here, and it might spread to me,” he said.
Michigan plans to make its $106 million to $108 million payment due Sept. 30 by drawing up to $41 million from the state’s general fund. The rest will come from the solvency tax on Michigan employers that is expected to generate $47 million. Another $20 million will come from an unemployment penalty and interest account, according to Steve Arwood, director of the Michigan Unemployment Insurance Agency.
An estimated 20 percent of Michigan employers will be affected by the solvency tax, which is triggered when a business pays less into the unemployment compensation trust fund than the Unemployment Insurance Agency has paid out to its laid-off workers.
Billion-dollar-plus federal bills also are coming due in New York, $2.8 billion; Ohio, $2.6 billion; Illinois and Indiana, $1.8 billion each.
In Indiana, businesses have paid nearly 45 percent more in employer taxes this year, according to the Associated Press, under that state’s plan to fix the bankrupt unemployment insurance fund.
Mark Everson, commissioner of the Indiana Department of Workforce Development, said his state plans to make its $60 million federal loan payment on time.
“It’s true that employers are skittish about hiring at this stage, but I don’t think it’s because of the adjustment in the employment insurance premiums,” Mr. Everson said.
“When I talk to employers, they are more focused on the leadership out of Washington, frankly, not the unemployment insurance piece.”
Indiana, he says, is on track and holding the line, not asking for relief from Washington.
But he acknowledged this emerging debt burden is a mounting problem across the country as states struggle to keep themselves afloat economically in a stubborn jobs climate.
“Some states have had to plug huge budget gaps, and I imagine it’s a tough issue for those who have failed to step up and do a good job of addressing these challenges,” Mr. Everson said. “We think we have done the right thing. Nobody is happy about it, but it’s been accepted as necessary.”
http://m.washingtontimes.com/news/2011/sep/11/bills-come-due-for-loans-to-pay-jobless/?page=2
“This is not good news and the timing is terrible,” says Doug Roberts, a former Michigan state treasurer who leads Michigan State University’s Institute for Public Policy and Social Research.
Michigan is one of more than two dozen cash-strapped states facing looming deadlines to pay back almost $40 billion borrowed from the federal government. California, which has the largest outstanding balance, must repay some $8.4 billion.
To pay back the loans, some states are cutting benefits.
According to a new report from the Washington-based National Employment Law Project, six states have reduced the amount of the average unemployment check and the number of weeks someone can draw assistance in order to address insolvent trust funds.
In Florida, a new state law ties benefits to the health of the economy. As unemployment drops, the number of weeks a person can draw an unemployment check drops. Under the new rules, benefits could be cut to as few as 12 weeks — less than half the 26 weeks available in most states.
The change will save Florida an expected $100 million or more a year, helping the state make payments on its own $1.5 billion federal loan.
Some states have tightened eligibility requirements and enacted surcharges on employer tax bills — putting more pressure on businesses at just the moment the Obama administration is urging the private sector to create jobs.
Michigan, which has the nation’s third-highest jobless rate and owes the federal government $3.1 billion in unemployment loans, has a new “solvency tax” on employers.
“The most important thing the federal government and states can do is adopting policies that get people employed, decreasing the need for people to pull on the unemployment insurance,” Mr. Roberts said.
Businesses, Mr. Roberts said, are still trying to recover from the December 2007 to June 2009 “Great Recession.”
“Now we’re telling employers who are trying to hire people we are going to hit you with a higher tax because you have a history of laying people off. It’s discouraging people who want to come into states. A company looks at a state and says that’s a big problem here, and it might spread to me,” he said.
Michigan plans to make its $106 million to $108 million payment due Sept. 30 by drawing up to $41 million from the state’s general fund. The rest will come from the solvency tax on Michigan employers that is expected to generate $47 million. Another $20 million will come from an unemployment penalty and interest account, according to Steve Arwood, director of the Michigan Unemployment Insurance Agency.
An estimated 20 percent of Michigan employers will be affected by the solvency tax, which is triggered when a business pays less into the unemployment compensation trust fund than the Unemployment Insurance Agency has paid out to its laid-off workers.
Billion-dollar-plus federal bills also are coming due in New York, $2.8 billion; Ohio, $2.6 billion; Illinois and Indiana, $1.8 billion each.
In Indiana, businesses have paid nearly 45 percent more in employer taxes this year, according to the Associated Press, under that state’s plan to fix the bankrupt unemployment insurance fund.
Mark Everson, commissioner of the Indiana Department of Workforce Development, said his state plans to make its $60 million federal loan payment on time.
“It’s true that employers are skittish about hiring at this stage, but I don’t think it’s because of the adjustment in the employment insurance premiums,” Mr. Everson said.
“When I talk to employers, they are more focused on the leadership out of Washington, frankly, not the unemployment insurance piece.”
Indiana, he says, is on track and holding the line, not asking for relief from Washington.
But he acknowledged this emerging debt burden is a mounting problem across the country as states struggle to keep themselves afloat economically in a stubborn jobs climate.
“Some states have had to plug huge budget gaps, and I imagine it’s a tough issue for those who have failed to step up and do a good job of addressing these challenges,” Mr. Everson said. “We think we have done the right thing. Nobody is happy about it, but it’s been accepted as necessary.”
http://m.washingtontimes.com/news/2011/sep/11/bills-come-due-for-loans-to-pay-jobless/?page=2
Monday, September 12, 2011
Rising tax burden driving wealthy from Delaware
The most recent data from the Tax Foundation shows that Delaware is driving out wealthy residents by raising its state and local tax burden.
Every year the Tax Foundation calculates each state-local tax burden as a percentage of the state's per capita income.
Since 2001 Delaware's tax burden has risen from 8.1% (40th lowest among the states) to 9.6% in 2009 (23rd among the states).
Since the research literature shows that over time households vote with their feet, a rising tax burden is a good incentive to leave a state...
I want to read entire article.
Every year the Tax Foundation calculates each state-local tax burden as a percentage of the state's per capita income.
Since 2001 Delaware's tax burden has risen from 8.1% (40th lowest among the states) to 9.6% in 2009 (23rd among the states).
Since the research literature shows that over time households vote with their feet, a rising tax burden is a good incentive to leave a state...
I want to read entire article.
Thursday, September 8, 2011
Working-age poor population highest since '60s
WASHINGTON — Working-age America is the new face of poverty.
Counting adults 18-64 who were laid off in the recent recession as well as single twenty-somethings still looking for jobs, the new working-age poor represent nearly 3 out of 5 poor people — a switch from the early 1970s when children made up the main impoverished group.
While much of the shift in poverty is due to demographic changes — Americans are having fewer children than before — the now-weakened economy and limited government safety net for workers are heightening the effect.
Currently, the ranks of the working-age poor are at the highest level since the 1960s when the war on poverty was launched. When new census figures for 2010 are released next week, analysts expect a continued increase in the overall poverty rate due to persistently high unemployment last year.
If that holds true, it will mark the fourth year in a row of increases in the U.S. poverty rate, which now stands at 14.3 percent, or 43.6 million people.
"There is a lot of discussion about what the aging of the baby boom should mean for spending on Social Security and Medicare. But there is not much discussion about how the wages of workers, especially those with no more than a high school degree, are not rising," said Sheldon Danziger, a University of Michigan public policy professor who specializes in poverty.
"The reality is there are going to be a lot of working poor for the foreseeable future," he said, citing high unemployment and congressional resistance to raising the minimum wage.
The newest poor include Richard Bowden, 53, of southeast Washington, who has been on food stamps off and on the last few years. A maintenance worker, Bowden says he was unable to save much money before losing his job months ago. He no longer works due to hip and back problems and now gets by on about $1,000 a month in disability and other aid.
"At my work, we hadn't gotten a raise in two years, even while the prices of food and clothing kept going up, so I had little left over," Bowden said. "Now, after rent, the utility bill, transportation and other costs, my money is pretty much down to nothing."
"I pray and hope that things get better, but you just don't know," he said.
The poverty figures come at a politically sensitive time for President Barack Obama, after a Labor Department report last Friday showed zero job growth in August. The White House now acknowledges that the unemployment rate, currently at 9.1 percent, will likely average 9 percent through 2012.
Obama is preparing to outline a new plan for creating jobs and stimulating the economy in a prime-time address to Congress on Thursday. The Republican-controlled House has been adamant about requiring spending cuts in return for an increase in the federal debt limit. Suggested cuts have included proposals to raise the eligibility age for future Medicare recipients or to reduce other domestic programs in a way that would disproportionately affect the poor.
According to the latest census data, the share of poor who are ages 18-64 now stands at 56.7 percent, compared to 35.5 percent who are children and 7.9 percent who are 65 and older. The working-age share surpasses a previous high of 55.5 percent first reached in 2004.
Lower-skilled adults ages 18 to 34, in particular, have had the largest jumps in poverty as employers keep or hire older workers for the dwindling jobs available. The declining economic fortunes have caused many unemployed young Americans to double up in housing with parents, friends and loved ones.
In 1966, when the Census Bureau first began tracking the age distribution of the poor, children made up the biggest share of those in poverty, at 43.5 percent. Working-age adults comprised a 38.6 percent share, and Americans 65 and older represented nearly 18 percent.
Douglas Besharov, a University of Maryland public policy professor and former scholar at the conservative American Enterprise Institute, says that expansions of the federal safety net including Social Security retirement and disability payments have been important in reducing poverty.
In 2009, for instance, the Census Bureau estimated that new unemployment benefits — which gave workers up to 99 weeks of payments after a layoff — helped keep 3.3 million people out of poverty. For 2010, Besharov said demographers on average expect an increase in poverty of roughly half a percentage point to nearly 15 percent, depending partly on the impact of unemployment insurance, which did not run out for many people until this year.
The current poverty level was set at $10,956 for one person and $21,954 for a family of four, based on an official government calculation that includes only cash income, before taxes. It excludes capital gains or accumulated wealth, such as home ownership, as well as noncash aid such as food stamps.
Taking noncash aid into account shifts the poverty numbers notably. Next month, the government will release new supplemental poverty numbers for the first time that will factor in food stamps and tax credits — which often benefit out-of-work families with children — but also everyday costs such as commuting that tend to have a bigger impact on working Americans.
Preliminary census estimates released this summer show a decline in child poverty based on the new measure and a jump in the shares of poor who are working age — from 56.7 percent to nearly 60 percent. In all, the child poverty rate decreases from 20.7 percent under the official poverty measure to 17.9 percent, according to estimates. But the senior poverty rate jumps from 8.9 percent to 15.6 percent after including out-of-pocket medical costs, and working-age adults see an increase in poverty from 12.9 percent to 14.9 percent.
Food banks say they see a shift to a new working poor.
"Americans from all walks of life are now finding themselves in need of help for the first time in their lives," said Vicki Escarra, president of Feeding America, a national network of food banks that is based in Chicago. She noted that demand has increased by 46 percent since the recession began in late 2007, with more than 1 in 3 families who get their assistance having one or more adults working.
"The reality is we all know someone who has lost a job or a crisis that has caused financial concern. In fact, some people who used to be donors to our Feeding America food banks are themselves now turning to us for help," she said.
Demographers expect next week's poverty report to show:
A rise in working families who are low income, to nearly 1 in 3. "Low income" is defined as those making less than 200 percent of the poverty threshold, or about $43,000 for a family of four.
Larger numbers of people who are uninsured, due to slightly higher rates of unemployment on average in 2010. Most provisions of the new health care law, which in part expands Medicaid to pick up millions more low-income people, don't take effect until 2014.
Blacks and Hispanics disproportionately hit, based on their higher rates of unemployment.
A possible widening of the income gap between rich and poor, at least by some measures, due partly to last year's stock market rebound while the job market languished.
Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in income inequality, called the outlook for younger adults in the U.S. especially troubling. He pointed to youth discontent in other parts of the world, such as England, where he says high unemployment and widening inequality contributed to recent rioting.
"We risk a new underclass who are not able to support their children, form stable families, buy houses and reach the middle class," Smeeding said.
http://www.msnbc.msn.com/id/44413750/ns/business-us_business/#.Tma4yY4rdac
Counting adults 18-64 who were laid off in the recent recession as well as single twenty-somethings still looking for jobs, the new working-age poor represent nearly 3 out of 5 poor people — a switch from the early 1970s when children made up the main impoverished group.
While much of the shift in poverty is due to demographic changes — Americans are having fewer children than before — the now-weakened economy and limited government safety net for workers are heightening the effect.
Currently, the ranks of the working-age poor are at the highest level since the 1960s when the war on poverty was launched. When new census figures for 2010 are released next week, analysts expect a continued increase in the overall poverty rate due to persistently high unemployment last year.
If that holds true, it will mark the fourth year in a row of increases in the U.S. poverty rate, which now stands at 14.3 percent, or 43.6 million people.
"There is a lot of discussion about what the aging of the baby boom should mean for spending on Social Security and Medicare. But there is not much discussion about how the wages of workers, especially those with no more than a high school degree, are not rising," said Sheldon Danziger, a University of Michigan public policy professor who specializes in poverty.
"The reality is there are going to be a lot of working poor for the foreseeable future," he said, citing high unemployment and congressional resistance to raising the minimum wage.
The newest poor include Richard Bowden, 53, of southeast Washington, who has been on food stamps off and on the last few years. A maintenance worker, Bowden says he was unable to save much money before losing his job months ago. He no longer works due to hip and back problems and now gets by on about $1,000 a month in disability and other aid.
"At my work, we hadn't gotten a raise in two years, even while the prices of food and clothing kept going up, so I had little left over," Bowden said. "Now, after rent, the utility bill, transportation and other costs, my money is pretty much down to nothing."
"I pray and hope that things get better, but you just don't know," he said.
The poverty figures come at a politically sensitive time for President Barack Obama, after a Labor Department report last Friday showed zero job growth in August. The White House now acknowledges that the unemployment rate, currently at 9.1 percent, will likely average 9 percent through 2012.
Obama is preparing to outline a new plan for creating jobs and stimulating the economy in a prime-time address to Congress on Thursday. The Republican-controlled House has been adamant about requiring spending cuts in return for an increase in the federal debt limit. Suggested cuts have included proposals to raise the eligibility age for future Medicare recipients or to reduce other domestic programs in a way that would disproportionately affect the poor.
According to the latest census data, the share of poor who are ages 18-64 now stands at 56.7 percent, compared to 35.5 percent who are children and 7.9 percent who are 65 and older. The working-age share surpasses a previous high of 55.5 percent first reached in 2004.
Lower-skilled adults ages 18 to 34, in particular, have had the largest jumps in poverty as employers keep or hire older workers for the dwindling jobs available. The declining economic fortunes have caused many unemployed young Americans to double up in housing with parents, friends and loved ones.
In 1966, when the Census Bureau first began tracking the age distribution of the poor, children made up the biggest share of those in poverty, at 43.5 percent. Working-age adults comprised a 38.6 percent share, and Americans 65 and older represented nearly 18 percent.
Douglas Besharov, a University of Maryland public policy professor and former scholar at the conservative American Enterprise Institute, says that expansions of the federal safety net including Social Security retirement and disability payments have been important in reducing poverty.
In 2009, for instance, the Census Bureau estimated that new unemployment benefits — which gave workers up to 99 weeks of payments after a layoff — helped keep 3.3 million people out of poverty. For 2010, Besharov said demographers on average expect an increase in poverty of roughly half a percentage point to nearly 15 percent, depending partly on the impact of unemployment insurance, which did not run out for many people until this year.
The current poverty level was set at $10,956 for one person and $21,954 for a family of four, based on an official government calculation that includes only cash income, before taxes. It excludes capital gains or accumulated wealth, such as home ownership, as well as noncash aid such as food stamps.
Taking noncash aid into account shifts the poverty numbers notably. Next month, the government will release new supplemental poverty numbers for the first time that will factor in food stamps and tax credits — which often benefit out-of-work families with children — but also everyday costs such as commuting that tend to have a bigger impact on working Americans.
Preliminary census estimates released this summer show a decline in child poverty based on the new measure and a jump in the shares of poor who are working age — from 56.7 percent to nearly 60 percent. In all, the child poverty rate decreases from 20.7 percent under the official poverty measure to 17.9 percent, according to estimates. But the senior poverty rate jumps from 8.9 percent to 15.6 percent after including out-of-pocket medical costs, and working-age adults see an increase in poverty from 12.9 percent to 14.9 percent.
Food banks say they see a shift to a new working poor.
"Americans from all walks of life are now finding themselves in need of help for the first time in their lives," said Vicki Escarra, president of Feeding America, a national network of food banks that is based in Chicago. She noted that demand has increased by 46 percent since the recession began in late 2007, with more than 1 in 3 families who get their assistance having one or more adults working.
"The reality is we all know someone who has lost a job or a crisis that has caused financial concern. In fact, some people who used to be donors to our Feeding America food banks are themselves now turning to us for help," she said.
Demographers expect next week's poverty report to show:
A rise in working families who are low income, to nearly 1 in 3. "Low income" is defined as those making less than 200 percent of the poverty threshold, or about $43,000 for a family of four.
Larger numbers of people who are uninsured, due to slightly higher rates of unemployment on average in 2010. Most provisions of the new health care law, which in part expands Medicaid to pick up millions more low-income people, don't take effect until 2014.
Blacks and Hispanics disproportionately hit, based on their higher rates of unemployment.
A possible widening of the income gap between rich and poor, at least by some measures, due partly to last year's stock market rebound while the job market languished.
Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in income inequality, called the outlook for younger adults in the U.S. especially troubling. He pointed to youth discontent in other parts of the world, such as England, where he says high unemployment and widening inequality contributed to recent rioting.
"We risk a new underclass who are not able to support their children, form stable families, buy houses and reach the middle class," Smeeding said.
http://www.msnbc.msn.com/id/44413750/ns/business-us_business/#.Tma4yY4rdac
Delaware: A State in Denial
The latest data on state to state migration confirms that folks vote rationally with their feet and that Delaware legislators are in denial about this fact.
Census data shows that two-thirds of the net migrants into Delaware from 2007-09 came from just four states: New Jersey, New York, Pennsylvania and Massachusetts. Not surprisingly, these states have among the highest tax burdens, strong unions, and sluggish economies.
Two-thirds of the net out-migrants from Delaware went to five states: North Carolina, Florida, South Carolina, Kentucky and Tennessee. All the states have comparatively low tax burdens, four are right to work, and these four have higher growth economies...
I want to read the entire article
Dr John E. Stapleford, Director
Center for Economic Policy and Analysis
Caesar Rodney Institute
Census data shows that two-thirds of the net migrants into Delaware from 2007-09 came from just four states: New Jersey, New York, Pennsylvania and Massachusetts. Not surprisingly, these states have among the highest tax burdens, strong unions, and sluggish economies.
Two-thirds of the net out-migrants from Delaware went to five states: North Carolina, Florida, South Carolina, Kentucky and Tennessee. All the states have comparatively low tax burdens, four are right to work, and these four have higher growth economies...
I want to read the entire article
Dr John E. Stapleford, Director
Center for Economic Policy and Analysis
Caesar Rodney Institute
Hiring standstill points to growing recession risk
WASHINGTON (AP) -- Employers added no jobs in August -- an alarming setback for the economy that renewed fears of another recession and raised pressure on Washington to end the hiring standstill.
Worries flared Friday after the release of the worst jobs report since September 2010. Total payrolls were unchanged, the first time since 1945 that the government reported a net job change of zero. The unemployment rate stayed at 9.1 percent.
The dismal news two day before Labor Day sent stocks plunging. The Dow Jones industrial average fell 253 points, or more than 2 percent.
Analysts say the economy cannot continue to expand unless hiring picks up. In the first six months of 2011, growth was measured at an annual rate of 0.7 percent.
Companies are mostly keeping their payrolls intact. They're not laying off many workers. But they're not hiring, either. Without more jobs to fuel consumer spending, economists say another recession would be inevitable. Consumer spending accounts for about 70 percent of economic growth.
Like a wobbling bicycle, "you either reaccelerate or you fall over, said James O'Sullivan, chief economist at MF Global. "Something has to give."
When growth is slow and unemployment high, companies feel little pressure to increase pay and benefits. In August, for instance, hourly wages fell.
And when unemployment is chronically high, even many people who have jobs worry about losing them. So they're less likely to spend.
Eventually, as consumers cut back, corporate sales decline. Companies scale back hiring even more. Weak spending and hiring can feed on each other and edge the economy closer to recession.
When the economy is barely growing, it's also vulnerable to shocks like natural disasters and political upheavals. An economy growing 5 percent a year can absorb more punishment than one growing at 1 percent before it would slip into recession.
Consumer and business confidence was shaken this summer by the political standoff over the federal debt limit, a downgrade of long-term U.S. debt and the financial crisis in Europe. Tumbling stock prices escalated the worries.
Even before it stalled last month, job growth had been sputtering. The economy added 166,000 jobs a month in the January-March quarter, 97,000 a month in the April-June quarter and just 43,000 a month so far in the July-September period.
"Underlying job growth needs to improve immediately in order to avoid a recession," said HSBC economist Ryan Wang.
The dispiriting job numbers for August will heighten the pressure on the Federal Reserve, President Barack Obama and Congress to find ways to stimulate the economy.
So far, the Fed has been reluctant to launch another round of Treasury bond purchases. Its previous bond-buying programs were intended to force down long-term interest rates, encourage borrowing and boost stock prices.
On Thursday, Obama will give a televised speech to a joint session of Congress to introduce a plan for creating jobs and spurring economic growth.
"The importance of job growth cannot be overstated," said Joshua Shapiro, chief U.S. economist at MFR Inc.
The economy needs to add at least 250,000 jobs a month to rapidly bring down the unemployment rate. The rate has been above 9 percent in all but two months since May 2009.
Roughly 14 million Americans are unemployed. An additional 11.4 million are either working part time but want full-time jobs or have given up looking for work and aren't counted as unemployed.
The weakness was underscored by revisions to the jobs data for June and July. Collectively, those figures were lowered to show 58,000 fewer jobs added than previously thought. The downward revisions were all in government jobs.
The average workweek declined in August. Cutbacks by federal, state and local governments have erased 290,000 government jobs this year, including 17,000 in August.
"There is no silver lining in this one," said Steve Blitz, senior economist at ITG Investment Research. "It is difficult to walk away from these numbers without the conclusion that the economy is simply grinding to a halt."
The unemployment rate for black men jumped a full percentage point in August to 18 percent. That's the highest level for that group since March 2010. And unemployment for black people as a whole surged from 15.9 percent to 16.7 percent even as unemployment for white Americans ticked down to 8 percent from 8.1 percent.
Obama has faced doubts within his own party, including black lawmakers who say he hasn't done enough to help chronic unemployment in black communities.
Yet Obama is unlikely to win support for any new stimulus spending from congressional Republicans, who oppose further spending and argue that the president's economic policies have failed. They favor spending cuts and less government regulation.
On Friday, Obama took a step toward winning their support. He directed the Environmental Protection Agency to abandon rules that would have tightened health-based standards for smog. Republicans and some business leaders have said the proposed rules would have cost jobs.
Kurt Karl, chief economist for the Americas at Swiss Re, said the August jobs report "implies a rising probability of recession."
Still, he noted, employment fell for 18 months after the 2001 recession -- and the economy kept chugging along at an annual rate of 2.1 percent over that time.
The economy's 0.7 percent growth rate in the first half of 2011 was the slowest six months of growth since the recession officially ended in June 2009.
Most economists expect growth to improve to about a 2 percent annual rate in the July-September quarter -- though Friday's bleak report may cause some economists to downgrade their forecasts.
Lower gasoline prices have provided some relief to consumers. And factories are revving up again after being interrupted by Japan's earthquake and nuclear crisis.
Before Friday's jobs report, the economy had been showing signs of better health. Consumer spending was strong in August. Auto sales were brisk. Manufacturing expanded. And fewer people applied for unemployment benefits.
Yet even 2 percent growth isn't fast enough to generate many jobs. And the economy remains vulnerable to outside shocks -- a worsening European debt crisis or more political brinkmanship in Washington.
"The economy's perforated at this point," said Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness. "Any additional strain on it will tear it apart."
The Obama administration has estimated that unemployment will average about 9 percent next year, when Obama will seek re-election. The rate was 7.8 percent when he took office.
The White House Office of Management and Budget projects overall growth of just 1.7 percent this year.
"The economy continues to stagger," said Sung Won Sohn, economist at California State University Channel Islands. "It wouldn't take much (of a) shock to tip it onto a recession."
http://finance.yahoo.com/news/Hiring-standstill-points-to-apf-4252098583.html?x=0
Worries flared Friday after the release of the worst jobs report since September 2010. Total payrolls were unchanged, the first time since 1945 that the government reported a net job change of zero. The unemployment rate stayed at 9.1 percent.
The dismal news two day before Labor Day sent stocks plunging. The Dow Jones industrial average fell 253 points, or more than 2 percent.
Analysts say the economy cannot continue to expand unless hiring picks up. In the first six months of 2011, growth was measured at an annual rate of 0.7 percent.
Companies are mostly keeping their payrolls intact. They're not laying off many workers. But they're not hiring, either. Without more jobs to fuel consumer spending, economists say another recession would be inevitable. Consumer spending accounts for about 70 percent of economic growth.
Like a wobbling bicycle, "you either reaccelerate or you fall over, said James O'Sullivan, chief economist at MF Global. "Something has to give."
When growth is slow and unemployment high, companies feel little pressure to increase pay and benefits. In August, for instance, hourly wages fell.
And when unemployment is chronically high, even many people who have jobs worry about losing them. So they're less likely to spend.
Eventually, as consumers cut back, corporate sales decline. Companies scale back hiring even more. Weak spending and hiring can feed on each other and edge the economy closer to recession.
When the economy is barely growing, it's also vulnerable to shocks like natural disasters and political upheavals. An economy growing 5 percent a year can absorb more punishment than one growing at 1 percent before it would slip into recession.
Consumer and business confidence was shaken this summer by the political standoff over the federal debt limit, a downgrade of long-term U.S. debt and the financial crisis in Europe. Tumbling stock prices escalated the worries.
Even before it stalled last month, job growth had been sputtering. The economy added 166,000 jobs a month in the January-March quarter, 97,000 a month in the April-June quarter and just 43,000 a month so far in the July-September period.
"Underlying job growth needs to improve immediately in order to avoid a recession," said HSBC economist Ryan Wang.
The dispiriting job numbers for August will heighten the pressure on the Federal Reserve, President Barack Obama and Congress to find ways to stimulate the economy.
So far, the Fed has been reluctant to launch another round of Treasury bond purchases. Its previous bond-buying programs were intended to force down long-term interest rates, encourage borrowing and boost stock prices.
On Thursday, Obama will give a televised speech to a joint session of Congress to introduce a plan for creating jobs and spurring economic growth.
"The importance of job growth cannot be overstated," said Joshua Shapiro, chief U.S. economist at MFR Inc.
The economy needs to add at least 250,000 jobs a month to rapidly bring down the unemployment rate. The rate has been above 9 percent in all but two months since May 2009.
Roughly 14 million Americans are unemployed. An additional 11.4 million are either working part time but want full-time jobs or have given up looking for work and aren't counted as unemployed.
The weakness was underscored by revisions to the jobs data for June and July. Collectively, those figures were lowered to show 58,000 fewer jobs added than previously thought. The downward revisions were all in government jobs.
The average workweek declined in August. Cutbacks by federal, state and local governments have erased 290,000 government jobs this year, including 17,000 in August.
"There is no silver lining in this one," said Steve Blitz, senior economist at ITG Investment Research. "It is difficult to walk away from these numbers without the conclusion that the economy is simply grinding to a halt."
The unemployment rate for black men jumped a full percentage point in August to 18 percent. That's the highest level for that group since March 2010. And unemployment for black people as a whole surged from 15.9 percent to 16.7 percent even as unemployment for white Americans ticked down to 8 percent from 8.1 percent.
Obama has faced doubts within his own party, including black lawmakers who say he hasn't done enough to help chronic unemployment in black communities.
Yet Obama is unlikely to win support for any new stimulus spending from congressional Republicans, who oppose further spending and argue that the president's economic policies have failed. They favor spending cuts and less government regulation.
On Friday, Obama took a step toward winning their support. He directed the Environmental Protection Agency to abandon rules that would have tightened health-based standards for smog. Republicans and some business leaders have said the proposed rules would have cost jobs.
Kurt Karl, chief economist for the Americas at Swiss Re, said the August jobs report "implies a rising probability of recession."
Still, he noted, employment fell for 18 months after the 2001 recession -- and the economy kept chugging along at an annual rate of 2.1 percent over that time.
The economy's 0.7 percent growth rate in the first half of 2011 was the slowest six months of growth since the recession officially ended in June 2009.
Most economists expect growth to improve to about a 2 percent annual rate in the July-September quarter -- though Friday's bleak report may cause some economists to downgrade their forecasts.
Lower gasoline prices have provided some relief to consumers. And factories are revving up again after being interrupted by Japan's earthquake and nuclear crisis.
Before Friday's jobs report, the economy had been showing signs of better health. Consumer spending was strong in August. Auto sales were brisk. Manufacturing expanded. And fewer people applied for unemployment benefits.
Yet even 2 percent growth isn't fast enough to generate many jobs. And the economy remains vulnerable to outside shocks -- a worsening European debt crisis or more political brinkmanship in Washington.
"The economy's perforated at this point," said Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness. "Any additional strain on it will tear it apart."
The Obama administration has estimated that unemployment will average about 9 percent next year, when Obama will seek re-election. The rate was 7.8 percent when he took office.
The White House Office of Management and Budget projects overall growth of just 1.7 percent this year.
"The economy continues to stagger," said Sung Won Sohn, economist at California State University Channel Islands. "It wouldn't take much (of a) shock to tip it onto a recession."
http://finance.yahoo.com/news/Hiring-standstill-points-to-apf-4252098583.html?x=0
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