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Here are a pair of articles about the recovery in Texas that simply did not happen. Please consider New data, new story on jobs.
For much of 2009, Central Texas business leaders hung their hats on reports that showed, even in a recession, Austin was still adding jobs.Turns out there was a problem with those positive reports: They were wrong.
Revised figures show Austin lost more in ‘09, and numbers began to decline earlier than thought.
The revised data also show that Texas as a whole had a tougher job market last year than thought. The state lost 354,000 jobs in 2009, which is 78,000 more than the 276,000 previously estimated, according to the updated data.
The commission and its counterparts around the country revise their job data each year based on newly available information from employers’ tax records that show how many people were on payrolls. The monthly numbers are estimates, based on surveys from employers.
The California Employment Development Department on March 1 reported the state had lost 292,000 more jobs in 2009 than officials had thought; the new estimate is 871,000 jobs cut, compared with the earlier estimate of 579,000. Oregon reported losing 28,000 more jobs in 2009 than previously estimated.
Texas cannot escape budget shortfall
It goes to figure when unemployment is soaring, tax revenues will drop off. And so they did. Please consider Officials: State cannot escape budget shortfall.
The Texas economy seems to have turned a corner, but the improvement will not be enough for the state to avoid a significant shortfall in the next budget, state officials said Monday.Sales tax collections are slowly picking up as more jobs are added in Texas, said John Heleman , the Texas comptroller’s chief revenue estimator.
In February, the state’s sales tax collections were down 8.8 percent compared with the same month a year earlier. Though still in the red, the February figure looked better than the previous months’ double-digit decreases that have put the state 13 percent behind last year’s collections six months into the budget year.
“One month certainly doesn’t make a trend, but it is encouraging to see that we are beginning to move in the right direction,” said Heleman, who added that he expects to see sales tax growth starting this summer.
The state’s sales tax revenue collection is a key indicator of Texas’ fiscal health because that money fills more than half of the state’s general revenue fund, which pays for expenses such as education, health care and prisons.
Even so, the state’s budget shortfall is expected to be about $11 billion at a minimum and could reach as high as $15 billion, John O’Brien, the executive director of the Legislative Budget Board, told the House Appropriations Committee.
Heads In The Sand
It is pretty amazing when you can put a positive spin on horrendous data like this:
“In February, the state’s sales tax collections were down 8.8 percent compared with the same month a year earlier. Though still in the red, the February figure looked better than the previous months’ double-digit decreases that have put the state 13 percent behind last year’s collections six months into the budget year.“
Good Grief.
Nationally, retail sales for February 2009 were completely shell-shocking horrendous, and December 2009, and January 2010 figures were revised lower. Please see Please consider Stimulus About To Wither On Vine; A look At February Retail Sales for details.
Texas could not even beat remarkably easy year over year comparisons, at least judging from national sales numbers. Regardless, there should be no conceivable way to spin that data positive, yet John Heleman, the Texas comptroller’s chief revenue estimator, managed to do just that.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
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Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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As noted on numerous occasions, public union greed and arrogance has no bounds.
Worse yet, today we have yet another major example that shows many elected politicians still have zero political willpower to do anything serious about it. In Montgomery, Maryland, the politicians are even willing to cook the books for the benefit of unions.
Please consider Montgomery, Md., pension deal eases sacrifice for unions.
The politics of shrinking government spending can lead to tortured math and bureaucratic back flips. In one of the Washington area’s wealthiest counties, recession has prompted a bout of creative bookkeeping and something called the “Phantom COLA.”As state and local officials from California to Miami have sought to cut payroll costs, officials in Montgomery County last year pressed government employees to forgo part of their negotiated pay raises. They did. But some of the county’s powerful public employee unions also benefited from an unusual deal.
Employee pensions — already a major cost — will be calculated as if employees had received their full raises.
To manage that financial sleight of hand, county computer programmers must essentially set up two sets of books, one with employees’ real salaries and another that includes what government documents refer to as the “phantom” cost-of-living adjustments.
“It makes no sense to base a pension on a salary that wasn’t paid,” said Montgomery County Council member Phil Andrews (D-Gaithersburg-Rockville), who cast the sole vote against the arrangement. “It’s indefensible policy . . . and we can’t afford it.”
But the politics are not that simple in Montgomery, or elsewhere, as recession-squeezed budgets are forcing uncomfortable interactions between some Democrats and the party’s allies in the labor movement, a significant electoral force. Rory Reid, son of Senate Majority Leader Harry M. Reid (D-Nevada) and a candidate for governor in Nevada, has questioned the sustainability of public-employee pay.
In a recent newspaper column, Willie Brown, the former speaker of the California State Assembly and former San Francisco mayor, took on the state’s “out of control civil service.” “We politicians, pushed by our friends in labor, gradually expanded pay and benefits” and layered on “incredibly generous retirement packages,” he wrote. “At some point, someone is going to have to get honest.”
Time To Get Honest Is Always
The time to get honest is always. The time to show leadership and face reality is now. A few politicians are facing reality.
Facing Reality
- March 12, 2010 Kansas City School Superintendent John Covington: Kansas City School District Faces Bankruptcy, Closes 29 of 61 schools; Every Child Left Behind For Decades
- March 11, 2010 Governor Christie, Las Vegas Mayor Oscar Goodman: Hardball In New Jersey, No Balls In Virginia; Brass Balls In Las Vegas
- March 2, 2010 New Jersey Governor Chris Christie: Governor Christie: “Time to Hold Hands and Jump Off the Cliff” - Chris Christie For President?
- January 25, 2010 Numerous Small Cities: Growing Movement To Disband Police Departments
Facing reality at long last and taking a leadership role are two different things.
The one person clearly taking an actual leadership role is New Jersey Governor Chris Christie. The governor continues to impress.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
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Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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On March 12 the Guardian reported Greece debt: EU agrees bailout deal
Exclusive: Germany plays pivotal role in potential eurozone rescue package for Greek debtsThe eurozone has agreed a multibillion-euro bailout for Greece as part of a package to shore up the single currency after weeks of crisis, the Guardian has learnt.
Senior sources in Brussels said that Berlin had bowed to the bailout agreement despite huge resistance in Germany and that the finance ministers of the “eurozone” – the 16 member states including Greece who use the euro – are to finalise the rescue package on Monday. The single currency’s rulebook will also be rewritten to enforce greater fiscal discipline among members.
The member states have agreed on “co-ordinated bilateral contributions” in the form of loans or loan guarantees to Greece if Athens finds itself unable to refinance its soaring debt and requests help from the EU, a senior European commission official said.
Other sources said the aid could rise to €25bn (£22.6bn), although it is estimated in European capitals that Greece could need up to €55bn by the end of the year.
EU Bonds For Greece Rescue
Also on March 12 Bloomberg reported EU Said to Discuss EU Bonds to Fund Any Greek Rescue.
European Union finance ministers will discuss next week whether any Greek bailout should be funded by EU bonds guaranteed by euro region governments, said three people briefed on preparations for March 15-16 meetings.Another option would be for governments in the 16-nation euro region to give Greece loans to help the country finance its budget deficit, said the people, who spoke on condition of anonymity because the talks are private. Any EU bond sale would have to be agreed upon by all 27 EU nations, they said. Ministers from countries using the euro meet in Brussels on March 15 and will be joined by the rest of the EU the next day.
EU leaders have signaled they may offer Greece financial assistance if necessary, though German Chancellor Angela Merkel has so far refused to publicly give the green light for any such aid.
The German government has dropped its opposition to a bailout, paving the way for the EU to approve the plan to aid Greece at the Brussels meeting on March 15, the Guardian newspaper in London reported. Aid to Greece through the loans could reach 25 billion euros ($35 billion), the newspaper said.
Elmar Brok, a member of Merkel’s Christian Democrats in the European Parliament, said there is “unity in the euro group on finalizing a package that can be used to help Greece.”
German Finance Ministry Unaware of Greek Bailout Deal
The Guardian may have an exclusive story, but is it correct? On March 13 ABC News is reporting German Finance Ministry Unaware of Greek Bailout Deal.
The German Finance Ministry said on Saturday it was not aware of any agreement by euro zone members to provide a multi-billion euro bailout package for heavily indebted Greece.“We are not aware that this is being planned,” a ministry spokesman said, adding that Greece had not requested any aid.
“Greece is implementing its (savings) program and we expect that it will manage it alone,” he said.
Bailout No Longer Needed?
The Wall Street Journal is reporting No Need for Greek Bailout Now, France’s Lagarde Says
Credible efforts by Greece’s government to clean up its finances have so far negated the need for any bailout from the European Union, French Finance Minister Christine Lagarde said Friday.In offering a strong vote of confidence in the new Greek government, Ms. Lagarde said in a Wall Street Journal interview that Greece had “for once, over-delivered from what was expected” in terms of legislation intended to cut spending.
Whereas she had expected cuts worth 1.5% of gross domestic product, the government had come up with 2%, she said.
Nonetheless, Ms. Lagarde said that “technical experts” at the EU have been working on a contingency plan, so that if the need arose, “all we would have to do is press the button.”
Ms. Lagarde gave only guarded support for the creation of a European Monetary Fund, a new project currently under debate within the European Commission. “The European Monetary Fund is one of many options that we should explore [and] examine to see whether there is virtue and value in having it,” she said. “I am not sure it is the ultimate answer to the issues we are dealing with at the moment.”
Asked why the E.U. is so opposed to having the IMF simply fill such a role now and come to the aid of one of the euro zone’s members, Ms. Lagarde said it is complicated by the presence of a monetary union. Whereas the E.U. worked with the IMF to provide support to Hungary and Latvia, both members of the broader European Union but not part of the euro zone, having the IMF involved in the euro zone “is a bit different.”
“It is as if California were in terrible shape and you were to call the IMF to rescue California. That’s a bit odd within the same monetary zone,” she said.
In reference to the euro’s slide against the dollar since the Greek crisis erupted, Ms. Lagarde said she was “kind of pleased that it has come down a bit” because it means that French exporters are “not knocking on my door” and pressuring her to do something about the high exchange rate.
Patchwork Pension Plan Adds to Greek Debt Woes
While pondering the Greek bailout ping-pong match now currently set to no after being set to yes just a day earlier, please consider Patchwork Pension Plan Adds to Greek Debt Woes
Vasia Veremi may be only 28, but as a hairdresser in Athens, she is keenly aware that, under a current law that treats her job as hazardous to her health, she has the right to retire with a full pension at age 50.“I use a hundred different chemicals every day — dyes, ammonia, you name it,” she said. “You think there’s no risk in that?”
“People should be able to retire at a decent age,” Ms. Veremi added. “We are not made to live 150 years.”
Perhaps not, but it is still difficult to explain to outsiders why the Greek government has identified at least 580 job categories deemed to be hazardous enough to merit retiring early — at age 50 for women and 55 for men.
As a consequence of decades of bargains struck between strong unions and weak governments, Greece has promised early retirement to about 700,000 employees, or 14 percent of its work force, giving it an average retirement age of 61, one of the lowest in Europe.
The law includes dangerous jobs like coal mining and bomb disposal. But it also covers radio and television presenters, who are thought to be at risk from the bacteria on their microphones, and musicians playing wind instruments, who must contend with gastric reflux as they puff and blow.
The situation in the United States is different but also painful. The government will face its own fiscal reckoning, analysts say, as 78 million baby boomers begin drawing on Social Security and Medicare programs to support them in retirement. Without some combination of higher taxes, benefit reductions or an increase in the retirement age, both programs will run short of money to make their promised payments within the next few decades. And many American states are woefully behind on funding their pension obligations for public employees.
In Europe, the conflict has already erupted on the streets, with workers demanding that generous retirement policies be kept while governments press to pare pensions and raise retirement ages because taxpayers cannot bear any additional weight and creditors will no longer finance excessive borrowing.
According to research by Jagadeesh Gokhale, an economist at the Cato Institute in Washington, bringing Greece’s pension obligations onto its balance sheet would show that the government’s debt is in reality equal to 875 percent of its gross domestic product, which is the broadest measure of a nation’s economic output. That would be the highest debt level among the 16 nations that use the euro, and far above Greece’s official debt level of 113 percent.
Other countries have obscured their total obligations as well. In France, where the official debt level is 76 percent of economic output, total debt rises to 549 percent once all of its current pension promises are taken into account. And in Germany, the current debt level of 69 percent would soar to 418 percent.
There is much more in the article including a nice country by country table of current debt obligations and unfunded liabilities. Here is a partial list.
Greece…… 116% 875%
France…… 76% 549%
Germany… 72% 418%
UK………… 63% 442%
Poland…… 50% 1550%
US…………. 84% 500%
For all the talk about how the US will implode because of Social Security and Medicare, it appears much of the Western world is in the same boat. This is certainly not a pretty picture.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
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Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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I had the great pleasure of meeting Marc Faber in person over the past couple of days after having exchanged emails with him about various things for the past several years. Marc is not only extremely knowledgeable about investments and strategies, he is also a lot of fun to be with personally.
Marc was in Madison Wisconsin for a speech in front of an investment group, CFA Madison. We arranged a couple of Market Tickers with Aaron Task and Henry Blodget at a local ABC affiliate station while in Madison.
Marc took the inflation side of the debate and I the Deflation side. Here are links to the Tech Tickers as well as the videos.
Marc Faber: Don’t Expect Another Crash … Bernanke Won’t Allow it
“I would rather be lightening up on positions in the next couple of weeks than heavily buying in here,” says Marc Faber, editor of the Gloom, Boom and Doom Report.
Accompanied by Michael “Mish” Shedlock, the man behind the economics blog, MISH’S Global Economic Trend Analysis, Faber tells Tech Ticker there’s very few opportunities to make money in the market right now.
“Mish” who also thinks it’s time to take profits, goes even further, predicting a “50-50 chance the bottom is not in yet.”
Faber, however, is confident we won’t “see 666 on the S&P 500 ever again.” He says “if we go down by 10-20% on the S&P 500, our money printer Ben Bernanke will flood the market, weakening the dollar,” and thereby driving up stock prices.
If you are going to put money to work in stocks both market watchers think Japan is the place to be. After a 20 year bear market and despite high-debt-to-GDP levels, the pair think the market has become too cheap to ignore. Always a contrarian, Faber believes the lack of interest in Japanese stocks makes it one of the most compelling buys in the world.
– Stay tuned for more from Faber and Mish: In forthcoming clips the two debate the fate of the U.S. and if inflation or deflation will cause the our downfall.
The Great “Inflation or Deflation?” Debate: Mish vs. Dr. Doom
Here is part two of three: The Great “Inflation or Deflation?” Debate: Mish vs. Dr. Doom
Which is the greater threat, inflation or deflation?In Marc Faber and Michael “Mish” Shedlock, we found two market watchers ready (and able) to champion both sides of this great debate.
Shedlock, an investment advisor with SitkaPacific Capital and author of the economics blog, MISH’S Global Economic Trend Analysis, made the case for deflation: Credit is contracting, despite Ben Bernanke’s best efforts to flood the financial system with liquidity.
“The money supply is just sitting there as excess reserves on bank balance sheets,” Mish says. “Bernanke can print this money but unless it makes its way into the real economy we’re not going to see inflation.”
In addition, he predicts “another leg down” in housing and commercial real estate, more consumer loan defaults, and notes state and local governments are (finally) cutting back on spending in the face of falling tax receipts and budget deficits. All these trends will contribute to the deflationary force of credit contraction, Mish declares.
But Shedlock is missing one critical factor says Faber, publisher of the Gloom, Boom and Doom Report: “When the economy’s bad, governments pile up these fiscal deficits and they print money” to offset the deleveraging of the private sector, he says. “They’re going to print and print and print.”
If the economy sours again and especially if deflationary forces take hold, we’ll have “even more stimulus packages and even more printing,” Faber says. “That will bankrupt western governments - not just in the U.S. but everywhere. ”
Faber and Mish: We’re Doomed and Washington Can’t Do Anything About It
Part 3: Faber and Mish: We’re Doomed and Washington Can’t Do Anything About It
Washington is patting itself on the back for having orchestrated an amazing economic recovery. But Washington lawmakers are a delusional bunch of boneheads, say Marc Faber and Mike “Mish” Shedlock, editor of the Gloom, Boom, and Doom Report and investment advisor at SitkaPacific Capital Management, respectively.The economy is NOT recovering, they say, and the U.S. faces a depressing “eventuality” of either crushing deflation (Shedlock) or runaway inflation (Faber). The timing and type of this eventuality is uncertain, say the gurus, but they are certain it’s too late for America to change course.
“It’s beyond repair — it’s too late,” to avert fiscal disaster, Faber declares.
Mish agrees: “The day of reckoning has arrived. The question is how long it takes to play out.”
This grim outlook doesn’t mean you’re helpless. Faber recommends individuals prepare for doomsday by buying gold, owning assets abroad and buying property outside of major cities.
Thanks Marc, That was a blast!
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
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Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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Jed Graham writing for Investor’s Business Daily says something I have been saying for several months: Extra Stimulus Aid Fuels Sales, But Fiscal Flood Cresting Early
In gauging the economic recovery’s trajectory, you shouldn’t forget that this is not a normal tax season.People who don’t pay income tax are getting an extra $30 billion in refundable tax credits thanks to the Recovery Act, the Joint Committee on Taxation has estimated. Based on the timing of tax refunds in past years, well over half of that has likely been paid out already.
Mark Zandi, chief economist at Moody’s Economy.com, said the extra serving of tax-season cash to modest-income families “helps explain the somewhat surprising strength in retail” in February.
Excluding AMT relief, Zandi figures peak stimulus hits this month or next.
Just how big of a boost will this extra cash provide? If the economic impact came in a single quarter, CBO’s analysis implies that it would hike GDP by 0.6-1.5 percentage points. In all likelihood, the effects will be over a longer period.
Retail Sales Mirage
“I think we are seeing the effects (of Recovery Act tax refunds) on retail sales and spending,” said Allen Sinai, president of Decision Economics.
Same-store sales at major retailers rose 4.1% in February, the best year-over-year gain in over two years, Retail Metrics said March 4.
January 2010 sales were nothing to brag about and February 2010 same store sales will not be either.
February 2009 sales were horrible so year over year comparisons will be extremely easy. Moreover, the whole same store sales methodology is flawed to begin with on account of closed stores, and even closed chains like Circuit City. For details, please see Retail Sales Rise: Where? Let’s Take a Look; Expect Nothing Less Than Panic
Finally, one has to take into consideration favorable income tax returns.
In spite of that, tax collections are down although many states have raised sales taxes. That’s what really matters.
Moreover tax credits for houses have run out of stimulus effect as has cash-for-clunkers.
Expect actual tax collections (reported later) will likely fall short regardless of what the report says.
I am on the road now. The above was written ahead of Friday’s advance sales report.
Addendum:
A quick post before I hit the road returning home.
Bloomberg reports U.S. Stocks Advance as Retail Sales Bolster Economic Optimism
U.S. stocks rose, keeping the Standard & Poor’s 500 Index at a 17-month high as an unexpected increase in retail sales added to evidence the economic recovery is strengthening.Google Inc. and Target Corp. climbed more than 0.4 percent after the Commerce Department said purchases at U.S. retailers increased 0.3 percent last month, compared with a 0.2 percent drop forecast in a Bloomberg survey of economists. National Semiconductor Corp. rose 1.3 percent after the chipmaker forecast better-than-estimated revenue.
“People are looking to buy stocks,” said Mark Bronzo, a money manager in Irvington, New York, at Security Global Investors, which oversees $21 billion. “Risk appetite seems to be growing as people become more comfortable with the sustainability of the economic recovery. Today’s retail sales numbers and the better outlooks from retailers confirm that.”
Please consider the Department of Commerce Advance Monthly Sales For Retail and Food Services for February 2010.
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for February, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $355.5 billion, an increase of 0.3 percent (±0.5%)* from the previous month and 3.9 percent (±0.5%) above February 2009. Total sales for the December 2009 through February 2010 period were up 4.5 percent (±0.3%) from the same period a year ago. The December 2009 to January 2010 percent change was revised from +0.5 percent (±0.5%)* to +0.1 percent (±0.3%)*.
Note the big downward revision in January. So now February is artificially elevated sequentially.
Also note that economists were surprised by the strength of February sales (that really were not very good in the first place for multiple reasons) even though Retail Metrics said on March 4 that “Same-store sales at major retailers rose 4.1% in February”
You can’t make this stuff up. No one would believe it.
Let’s see how the market closes. A gap and crap on silly misplaced optimism as well as silly reporting from those who do not understand retail sales would fit the bill. But hey, who knows.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
