INCREASING WORKER'S WAGES

There is much lip service being paid today about the wages of workers not increasing as productivity increases.  As I have stated elsewhere, workers face three problems: (1) the wages of workers must be less than the costs of automation, (2) there must be some sort of parity with low-cost labor elsewhere (low-cost labor wages + costs of transportation + price of natural gas, etc.), and (3) some jobs are just being eliminated, either entirely or to a great degree (e.g. gas station attendants, clerk-typists, telephone receptionists).  The current economy of the U.S. is overall very good; however, it is concentrated in the larger cities (greater than 300,000 population) whereas smaller communities (less than 50,000) are being left behind so the recovery from the Great Recession is uneven (I.E. the jobs are not where the workers are and many jobs go unfilled because of the lack of qualified workers.]). To the best of my knowledge, no one is outlining a solution to the problem except with platitudes.

In the last half of the 1960s, I was a member of a small group of people who went one night a week to a large high-rise low-cost apartment complex in Denver, CO, in an attempt to motivate children.  It was a time of a building boom in Denver and each year you could feel the optimism rising among the people of the development as there were plenty of jobs even for the unskilled and semi-skilled.  I was transferred to Switzerland late in 1968 for a year followed by 14 mo. in Washington, D.C.  When I came back to the Denver area, the building boom was unfortunately over and the morale had reverted to the level prior to the building boom.  Additionally, the group of "motivators" had been abandoned.

The experience in Denver led me to the only solution that I can think of.  The infrastructure of the U.S. is deteriorating.  We should have had a large infrastructure program during the Great Recession because construction workers were hit hard, but we wasted this opportunity when unemployment was very high and costs would have been low.  Now construction has recovered and workers are scarce, particularly where many workers are.

But if a large infrastructure program was undertaken today, the employment picture would have to incorporate many unskilled and semi-skilled unemployed workers and infrastructure could begin in areas where the low wages continue.  There is a big problem, however, very big.  The infrastructure program could not be a three-year undertaking that is popular with politicians, but it would have to continue for a generation so the the children of the workers could be properly educated to assume jobs in the modern world, and they probably would have to be mobile.  Young people are more amenable to moving so that may not be a problem.  Though this program might work, I fear it is only a dream.

1987 STOCK MARKET CRASH (22% IN ONE DAY!)

I was investing on October 19, 1987 when the market crashed 22.68% on what has become known as Black Monday after a Friday drop of  4.6% on record volume*  from a much lower level than today.   At that time, trades were still done by hand and  I couldn't even get my broker on the phone.  By year end, both the DJIA and the S&P 500 ended up about 3%, not a lot but certainly not as bad as it looked at one time.  Thus I was nervous last Friday when the D{JIA dropped more than 500 pts in a day,because of the bounce back in 1987, I wouldn't despair yet.  Remember also that the stock market has risen in each year of President Obama's terms and that the year before a presidential election (as this one is) is often the best year of the presidential stock market cycle. 

While, the P/E of the DJIA at the close of business on Monday is within the "normal" range (15.19), the S&P 500 is still high, though the dividend is much higher than a year ago (2.71% Monday vs 2.23% a year ago).  The P/E of the S&P 500, however, is still in the "bubble" range (21.63) although there too, the dividend is much higher than a year ago (206% vs 1.90).**

Both the DOW Utility and DOW Transportation indices are still somewhat high (16.30 and 17.10) though the dividends of both are much higher than a year ago ( 3.65% vs 2.71% and 1.49% vs 1.09% respectively).**

I don't know what is normal for the Russell 2000, but the P/E is actually higher than a year ago (89.22 vs 78.97) although the dividend is much higher today (1.48% vs 1.29%). Although I also don't know what is normal for the NASDAQ 100, the P/E still looks in the "bubble" range though a tad smaller than year ago (22.35 vs 23.06 a year ago).  In this case, however, the dividend is also somewhat smaller  (1.21% vs 1.28%).**

While the U.S. economy has only 13+% of its GDP dependent on exports, a stronger dollar would hurt our economy only a little bit.  A stronger dollar, however, would hurt the country more; however, the dollar index has gone the other way (for now) at 93.33 on Monday, down from 96.81 a week ago.

Our exports grew by 27% from 2009 through 2013, adjusted for inflation. China, it should be remembered China is only number 3 of our export countries, Mexico and Canada each being larger.  See predominant export and import by state:***

Predominant Export by state:

 Predominant Import by State:

* https://en.wikipedia.org/wiki/Black_Monday_(1987)
** http://online.wsj.com/mdc/public/page/2_3021-peyield.html
*** http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS;
http://trade.gov/neinext/role-of-exports-in-us-economy.pdf;
http://www.ibtimes.com/us-economy-2015-check-out-top-imports-exports-every-us-state-1910766

ON GOVERNMENT CLASSIFICATION

We are told that a document does not have to be stamped classified, but that you have to use common sense.  HOLY COW!

I had secret clearance once and I was glad the only classified meeting I was at was classified because EVERYTHING said at the meeting was false, including what I was forced to say.  Had I thought what I said was important, I probably would not have said what I did.

Once upon a time I had a classification above Top Secret.  The only meeting I was at in which this level of secrecy was imposed consisted of material all of which I felt was in the Public Domain.  I guess common sense said it was classified?

Classification is way overdone in the government.  Often something is classified to cover up errors.  But dealing with classified documents is a real problem, even those stamped classified.  For example at the top of the page in capital letters will be printed SECRET SECRET SECRET .....  .  Handling this is bad enough, especially when you think it shouldn't have been classified, but when you are supposed to "use common sense" on something not so stamped is incredible.

It is not that I think that there is nothing that should be classified, it is just that it is way, way, way overdone.

What I think should be done when someone is accused of wrongly transmitting classified or "common sense" classified material should be a review to determine whether any damage was actually done.  I  think that in very few cases will it be determined that any damage to national security or people's lives was done.

In the case of Gen Patraeus, his giving of "common sense" classified material to his girlfriend was wrong, but it does not seem as if any harm was done.  In the case of Hileray Clinton, it is yet to be determined whether any harm was done by her receiving or transmitting "common sense" classified information.  I find it amusing that there are those who feel that any information transmitted on Bengazhi is "presumed classified."  What crap.

ALL REPUBLICANS ARE FOR ....

DONALD TRUMP.  When you hear the weekend news programs, Morning Joe, and perhaps others, you only hear about Donald Trump and how poorly the rest are doing.  But wait, wait!  Donald Trump is getting about 25% of the votes in polls.  That means that 75% of the people polled are not for Donald Trump!  You don't hear that.

Most Republicans the new media meets must not be for Donald Trump, it means the news media is carefully selecting audiences to give support to Donald Trump.  Boy the free advertising he is getting compared to any other candidate.  He must be rolling on the floor and laughing.

What they should do is ask the 75% not polling for The Donald who is their second choice.  I haven't ever heard this question asked of any of the candidate other and Donald Troop so I don't know the answer.  But for Trump supporters, the second choice seems to be the African American Ben Carson!  I think it would be wonderful if the Republican Party nominated an African American for President, even if I don't like him and I don't.

I am much bothered by the religious nature of the Republican Party, and especially that this crazy idea that a fertilized egg is a "person."  Actually, pregnancy doesn't begin until the fertilized egg attaches to the  wall of the womb and that can take as long as 10 or even 122 days, something you don't hear about.  There is plenty of time for a fertilized egg to be expelled from the woman, and I suspect that most fertilized eggs are expelled or women would be pregnant all the time.  I admit I can't find any references to back this up, but it just stands to reason.  So far as I know, no one worries (yet) about these expelled "persons."

Well, Ben Carson hoes the party line on abortion for ALL cases.  For that matter, so does Marco Rubio, a former media favorite.  Donald Trump, however, is more nuanced in that he would permit abortion for rape, incest and to save the life of the mother.  I heard him try to say that when it comes to which life to save, he would choose the born over the unborn.  This is contrary to the Roman Catholic  dogma that seems to rule the Republican Party.*

Marco Rubio is an Hispanic American, albeit from Cuba and not Mexico.  It may be that Republicans are more likely to accept a Cuban American (a favored class) than a Mexican American (and other Hispanic) Americans; however, I am on record saying Rubio is one candidate that will not be chosen and so far his poll numbers support this, rather to the surprise of the news media.**

I have also said that John Kasich is my choice for a Republican president if I have to have one, but that Scott Walker will probably win the nomination.*** I continue to go along with this although currently Walker is not doing that well in the polls, but he has strong Republican credentials in breaking a teacher's union and getting Wisconsin to be a Right to Work state.  And Kasich seems to be a real Christian in that he feels we need to take care of those less fortunate than we are, in contrast to the Religious Right who seem to feel the poor are all lazy trash.

*http://www.catholicculture.org/culture/library/view.cfm?id=3361; http://www.catholicculture.org/culture/library/view.cfm?id=3362
** http://stopcontinentaldrift.blogspot.com/2014/04/three-republicans-who-wont-get.html
*** http://stopcontinentaldrift.blogspot.com/2015/05/if-i-had-to-have-republican-president.html; http://stopcontinentaldrift.blogspot.com/2015/03/scott-walker-for-republican.html

KEEPING INDUSTRY COMPETING

A popular claim by the business wing of the Republican Party is that free enterprise has lifted more people out of poverty than any other system.  This is only partially true because free enterprise does not have the goal of lifting people out of poverty but of making money.  It is only through government regulation on top of free enterprise that lifts people out of poverty.  Regulation is needed also to keep companies competing with each other and not conspiring together to control an industry to increase profits on less than favorable terms for the public.  Keeping companies competing is a major problem in free enterprise.*  In U.S. history there was an age of "all the traffic can bear" on railroad pricing.  And Teddy Roosevelt became famous for breaking up the monopolies.

I guess you can say that in some limited way, free enterprise without government regulation does lift people marginally better.  How else to explain the migration of minorities from the South to the sweat shops of the North?  Or groups in countries like Bangladesh to work in the hazardous garment  buildings and those in  SE Asia who migrate to the sweat shops of the sport-shoe industry? But this just seems to lift people from being very, very poor to very poor.

But to get rid of things like child labor, the 60 hour or longer work week, and increase workplace safety takes government regulation for a major increase in the well being of the public.  Even today, issues like forced overtime, often without pay, much less time and a half, is an issue as companies jockey to resist increasing their labor force.

And this is not to say that labor demands can be unreasonable.  The best known cases of unreasonable labor demands are perhaps Roosevelt and the Coal Miners Strike of 1943** Truman and the Railroad Strike*** plus Reagan and the Traffic Controllers Strike.****  The Air Traffic Controllers action by Reagan was probably his most important action (or at least one of his most important) as it seems to me this hastened the decline of unions and the wages of workers.

* Today investors look for companies "with a mote"  and "barriers to entry" to give the companies :pricing power."  These are just more pleasant words to say companies that have limited competition
** https://en.wikipedia.org/wiki/John_L._Lewis
*** http://historymatters.gmu.edu/d/5137/
****  (ttps://en.wikipedia.org/wiki/Professional_Air_Traffic_Controllers_Organization_(1968)

JOBS AND THE ECONOMIC RECOVERY (2015)

My forecast is that President Obama's major accomplishment as president will be viewed as the incredible economic recovery the nation has witnessed since the Great Recession the second worst economic collapse in over 100 years.  It could have been faster, perhaps, with a more agreeable congress (on matters such as funding infrastructure improvements), but their drag on the economy has resulted in a slow but sure recovery.

The Wall Street Journal runs a wonderful series on jobs every month, this article is taken from the July report.* You are encouraged to look at the total report that contains 12 figures.

The job market continues to improve in 2015:

(Click on picture to enlarge)
Contrary to what some politicians want you to believe, part-time jobs are relatively rare and are not increasing.  It is full-time jobs that are increasing; however, though the part-time workers comprise less than 3% of the workforce, it is a number still higher than before the great recession.

(Click on picture to enlarge)
It seems to be in larger cities where the economy is improving the most so smaller communities may not be seeing the full benefits from the rising economy (http://stopcontinentaldrift.blogspot.com/2015/08/large-cities-lead-way-economically.html).

* http://blogs.wsj.com/economics/2015/08/07/the-july-jobs-report-in-12-charts/?mod=djemRTE_h

LARGE CITIES LEAD THE WAY ECONOMICALLY

Mid-Sized Cities (1,000 to 299,00) have reported that 40% have seen greatly improved economic conditions whereas only 20% of those with populations  with fewer than 50,000 have reported greatly improved conditions.*   No large city (population greater than 300,000) reported worsening conditions with 23% reporting greatly improved conditions.  In contrast 5% of the cities of population 50,000 or less reported slightly to greatly worsening conditions.  See the figure:*

(Click on the picture to enlarge)

Meanwhile it is getting more difficult to find a city with a strong labor market and cheap housing:
“With affordability continuing to erode and employment growth slowing in many energy-producing states, the number of ‘sweet spots’ with both strong labor markets and cheap housing is shrinking,” said Svenja Gudell, senior director of economic research at Zillow. “Even as the job market improves, absent strong, sustained income growth, more and more cities will move toward the upper right of the chart—having good employment but also pricey housing.”**

See the figure in the article cited for a figure regarding cities with good job markets and affordable housing.  However, the best city is Dalton, GA,next is Fayettville, AR, and third is Atlanta, GA, followed by Dallas-Fort Worth and Houston, TX.  Three major cities with lots of jobs but expensive housing are  San Jose, San Francisco Santa Cruse and Los Angeles, in decreasing order of job growth.  Perhaps the worst city is Atlantic city New Jersey, though Washington, D.C. and Boston MA are not good among the large cities.

An article that compares job growth in the period of 2004-2007 to 2014 is given in: file:///C:/Users/b/Documents/Cities%20Where%20Wage%20Growth%20Has%20Lagged%20Job%20Growth08-04-2015.htm
for 33 cities of various sizes with unemployment roughly the same for the two periods.

*
http://blogs.wsj.com/economics/2015/07/31/big-u-s-cities-lead-the-way-in-economic-recovery/?mod=djemRTE_h
** http://blogs.wsj.com/economics/2015/06/01/where-are-the-cities-with-good-job-markets-and-affordable-housing/

EXPAND MEDICARE TO REPEAL OBAMACARE?

In the August 1 WSJ, conservative Peggy Noonan (a spech writer for President Reagan) says she thinks Obamacare will gradually be replaced by expanding medicare.  What a surprise!  Is there a liberal out there that wouldn't love that?

A reason that conservatives have such a hard time coming up with an alternative to the Affordable Care Act (ACA) or Obamacare is that Obamacare IS the conservative health care plan.  It is not that liberals like the ACA, it is that it was the best plan that Democrats could get past.  There are DINOs in the Democratic Party (Democrats In Name Only) that had to be catered to.  So an attempt was made to appeal to DINOs and Republicans to vote for the plan.  Republicans voted against it and oppose it only because it was proposed by a Democratic administration.

An unusual feature of the ACA is that an attempt was made to PAY FOR IT.  Republicans don't like to pay for health care.  President Reagan, for example, instituted the plan where hospitals with emergency rooms had to take all comers whether they could pay for it or not.  But he left it up to the hospitals to find a way to pay for this service.  Ditto President Bush (Bush-43) with Medicare D, the prescription drug plan where no attempt was made to pay for it.  And Republicans seem to try to repeal all attempts to pay for Obamacare (e.g. the business mandate and the tax on artificial limbs and replacements).  It is a disappointment that Republicans, supposedly the party of fiscal responsibility are so irresponsible on health care.  It is as if Republicans don't want health care for the poor at all.  This is strange because the Republican Party has been taken over by Evangelicals.  They even criticize John Kasich, an evangelical with a small e, for accepting the Federal Medicaid money.  He believes that Christians need to take care of the less fortunate among us.  After all Poor and Poverty appear 446 times in the bible.*

* http://stopcontinentaldrift.blogspot.com/2014/03/poor-and-poverty-appear-446-times-in.html