October 3, 2011
A survey of purchasing managers showed that manufacturing grew at a faster pace in September than in August, but the pace of growth remains weak.
The Institute for Supply Management says its manufacturing index increased to 51.6, up from 50.6 in August. A reading above 50 indicates manufacturing is expanding. The increase follows two months of declines.
Measures of production and exports grew, while a gauge of new orders was unchanged. Factories also added workers, the report says.
The manufacturing sector has been a key driver of the economy’s growth since the recession officially ended in June 2009. The index topped 60 for four straight months earlier this year. It rose above 50 a month after the recession ended and has topped that level ever since.
A second report Monday said builders increased spending on homes, office buildings and other projects in August after a big decline in July. The gain still left the construction industry far below levels considered healthy.
The Commerce Department says construction spending rose 1.4% in August after a 1.4% decline in July, which had been the biggest setback in six months.
The increase pushed construction activity to a seasonally adjusted annual rate of $799.1 billion. That’s 4.8% above an 11-year low hit in March. But it’s barely more than half the $1.5 trillion pace considered healthy.
Analysts say it could be four years before construction returns to healthy levels. A dismal outlook for housing and a weak economy have forced governments to cut back on building plans.
October 3, 2011
By: Karen Matthews
Protesters speaking out against corporate greed and other issues showed no signs of giving up their campaign on Monday, with organizers urging participants to dress up as corporate zombies and to take part in a rally against police brutality.
The arrests of 700 people on Brooklyn Bridge over the weekend fueled the anger of the protesters camping in a Manhattan park and sparked support elsewhere in the country as the campaign entered its third week.
Occupy Wall Street started with fewer than a dozen college students spending days and nights in Zuccotti Park, a plaza near the city’s financial center. But a day after Saturday’s mass arrests, hundreds of protesters were resolute and like-minded groups in other cities had joined in.
Group spokesman Patrick Bruner urged protesters on Monday to dress up as corporate zombies and eat Monopoly money to let financial workers “see us reflecting the metaphor of their actions.”
As the encampment slowly began waking up Monday morning, several dozen police officers stood in formation across the street.
One camper set up a table with tubes of makeup and stacks of fake money and was applying white makeup to the face of a young woman.
John Hildebrand, 24, an unemployed teacher from Norman, Oklahoma, sat up in his sleeping bag around 10 a.m. He said he arrived Saturday after getting a cheap plane ticket to New York.
“My issue is corporate influence in politics,” he said. “I would like to eliminate corporate financing from politics.”
He said was returning home on Tuesday and planned to organize a similar protest there.
One supporter, William Stack, sent an email to city officials urging that all charges be dropped against those arrested.
“It is not a crime to demand that our money be spent on meeting people’s needs, not for massive corporate bailouts,” he wrote. “The real criminals are in the boardrooms and executive offices on Wall Street, not the people marching for jobs, health care, and a moratorium on foreclosures.”
Police said the department will continue its regular patrols of the area. And “as always, if it is a lawful demonstration, we help facilitate and if they break the law we arrest them,” NYPD spokesman Paul Browne said.
Wiljago Cook, 33, of Oakland, California, who joined the protest on the first day, said “exposing police brutality wasn’t even really on my agenda but my eyes have been opened.”
She and her boyfriend and two neighbors all quit their jobs to come and planned “to stay as long as it seems useful,” said Cook, who had worked for a nonprofit theater group.
She was wearing zombie makeup that included a red streak down her forehead. “It’s a cheeky and fun way to make the same point that we’ve been making,” Cook said of her painted face.
A map of the country displayed on the plaza identified 21 places where other protests were organized.
Wall-Street style demonstrations with names like Occupy Los Angeles, Occupy Chicago, and Occupy Boston were staged in front of Federal Reserve buildings in those cities. A group in Columbus, Ohio, also marched on the capital city’s street. And signs of support were rearing up outside the U.S. In Canada, a Wall Street rally is planned for later this month in Toronto.
“It was chaos here” two weeks ago, said Jackie Fellner, a marketing manager from Westchester County, north of the city.
Campers take turns organizing a “general assembly” on the plaza where they divide tasks among themselves. They have “a protocol for most things,” said 19-year-old Kira Moyer-Sims of Portland, Oregon, including a makeshift hospital and getting legal help for people who are arrested. They rally around a website called OccupyWallSt.org, and they even started printing a newspaper — the Occupied Wall Street Journal.
The campers also have been fueled by encouraging words from well-known figures, the latest actor Alec Baldwin, who posted videos on his Twitter page that had already been widely circulated. One appeared to show police using pepper spray on a group of women, another a young man being tackled to the ground by an officer.
“This is unsettling,” Baldwin wrote. “I think the NYPD has a PR problem.”
Fellner said she has an issue with “big money dictating which politicians get elected and what programs get funded.”
But “we’re not here to take down Wall Street,” she insisted. “It’s not poor against rich.”
Still, the protesters chose Wall Street as their physical rallying point, speaking against corporate greed, social inequality, global climate change and other concerns.
Beside the mass arrest Saturday, police arrested about 100 people Sept. 24 when protesters marched to other parts of the city and got into a tense standoff with officers.
Some said protesters on the Brooklyn Bridge were lured onto the roadway by police, or they didn’t hear the calls from authorities to head to the pedestrian walkway. Police said no one was tricked into being arrested, and that those in the back of the group who couldn’t hear were allowed to leave.
The NYPD released video footage Sunday to back up its stance. In one of the videos, an official uses a bullhorn to warn the crowd. Marchers can be seen chanting, “Take the bridge.”
October 3, 2011
The Huffington Post
By: Sam Stein
President Barack Obama pushed Congress again on Monday to bring his American Jobs Act to a vote, promising to “put as much pressure” as he could on lawmakers to act with haste. But with growing recalcitrance among Republicans, resistance among some Democrats and an election season heating up, the prospects for quick action look increasingly slim.
The Democratic leadership is now taking more seriously the possibility that if components of the jobs plan are to be enacted, they’ll have to be attached to the recommendations produced by the congressional super committee in charge of finding $1.2 trillion in deficit reduction.
On Monday, the president offered his customary insistence about passing his plan — which includes major tax cuts to encourage hiring, insurance for the unemployed, and money for infrastructure and school repair — in an expedient manner.
“It’s been several weeks now since I sent up the American Jobs Act, and as I’ve been saying on the road, I want it back. I’m ready to sign it,” he said. “My expectation is, now that we’re in the month of October, that we’ll schedule a vote before the end of this month. I’ll be talking to Senator Reid, [Senator] McConnell, as well as Speaker Boehner and [Representative] Nancy Pelosi, and insisting that we have a vote on this bill.”
In a background briefing with reporters before Obama spoke, senior administration officials laid out the case that legislative delay does more damage to the Republicans responsible for holding up the jobs bill than to the bill’s primary booster. A Fox News Poll released shortly thereafter appeared to underscore their premise. While 26 percent of respondents thought Obama had helped the economy and 45 percent thought he had hurt it, only 15 percent thought congressional Republicans had helped and 50 percent thought they had hurt the economy.
Still, legislative processes are rarely dictated by polling pressures. And while the president was publicly demanding a vote sometime in October, expectations have been adjusted a touch in private.
Those same senior administration officials said that the White House has been in talks with members of the super committee about both job creation legislation and their work in general. While the officials wouldn’t go too far into specifics, they noted that this past summer the president and House Speaker John Boehner (R-Ohio) had discussed including infrastructure spending, payroll tax cut relief and the extension of unemployment insurance in their proposed “grand bargain.”
Obama has already asked the committee to find budget cuts to help cover the $447 billion cost of his jobs package. If he were to push the committee to include the jobs act itself as part of its recommendations, that would up the ante significantly more.
On the one hand, the jobs plan would be granted the same sort of procedural advantages (it can be neither filibustered nor amended) that the super committee’s debt and deficit reduction suggestions will receive. On the other, the idea could potentially alienate the committee’s six GOP members, who don’t want to be seen as providing the critical votes for the president’s chief jobs proposal. Seven of the 12 committee members must back the deficit recommendations before they can be sent to Congress.
A senior Democratic aide told The Huffington Post that the party is looking to find a “balanced approach to deficit reduction” that includes “efforts at job creation, most definitely including the president’s” jobs plan.
But a top Democratic operative who has been privy to debt and deficit reduction talks on the Hill said it was hardly a given that Obama’s jobs plan will find its way into the super committee’s recommendations, let alone receive a regular floor vote. That’s not because the provision themselves are disagreeable, but because the measures to cover their cost — namely, eliminating tax deductions for the wealthy, closing loopholes for corporate jet owners, and taxing subsidies for oil and gas companies — have no cross-party support.
“To put it in the super committee, you would need to have pay-for provisions as well,” the operative noted. “Not only can Republicans and Democrats not agree on those pay-fors; Democrats can’t agree on those pay-fors.”
October 3, 2011
The Huffington Post
By: Christopher Sherman and Steve Peoples
Ron Paul, antagonist of the Federal Reserve and advocate for the gold standard, probably won’t capture the Republican presidential nomination. But with his libertarian leanings energizing a small though growing group of passionate conservatives, the quirky Texas congressman is proving to be a force in the 2012 contest.
Four months before the initial voting, Paul is having such a big impact on the race that some Republican operatives are convinced that he will play spoiler in important states, siphoning votes and attention from his rivals for months to come and helping determine the nominee.
He’s empowered by unconventional but successful fundraising techniques, a more sophisticated campaign than his two previous attempts at the presidency, and a fiery message he’s preached for decades but only now is resonating with Americans concerned about the nation’s debt.
In short, he could prove dangerous for the early front-runners, Texas Gov. Rick Perry and former Massachusetts Gov. Mitt Romney.
“I have no idea what exactly spoiler means,” Paul said recently while in New Hampshire. “If you’re a participant and you have an influence and you win or come close and you influence the debate, I think that’s pretty important. So I don’t put a negative term on that as spoiling anything. Spoiling their fun? Maybe they need a little spoiling.”
It’s unclear which rival the 76-year-old Texan stands to hurt the most.
Paul’s most devoted followers have been committed to him for years. But the “converts,” as the congressman calls them, seem to be growing with little regard for whether their support of Paul unintentionally helps another candidate.
Kate Baker is among the many die-hard Paul supporters in New Hampshire who shrug off the suggestion that their candidate may play spoiler. She holds out hope of victory.
“Ron Paul is doing well enough he has the possibility to win, particularly in key states. This time I can taste success,” said Baker, the volunteer head of New Hampshire’s Women for Ron Paul Coalition. She also worked to help Paul get elected four years ago.
But for Baker and others, winning almost sounds less important than spreading Paul’s message of fiscal discipline and smaller government. That’s a pitch he’s made for years and one that others suddenly have adopted, sometimes with more success.
“Look at how much the message is traveling right now. He’s honest and consistent. That’s the kind of person I can put my money and effort behind,” said Baker, a 37-year-old Manchester resident. “I vote for Ron Paul on principle.”
Others like her have helped Paul build a grass-roots fundraising network so robust that his team is preparing for a primary campaign that goes the distance, confident Paul will raise enough money to stay in the race as long as he wants.
His fundraising prowess dropped jaws four years ago when, during one cash-grab blitz, he raised more than $5 million in 24 hours. Drawing on thousands of small online donations, Paul has raised at least $1 million in five individual “money bombs” this year, according to his campaign.
Overall, he raised $4.5 million this year through June 30 and is expected to report $5 million more through the end of September. That’s well behind Romney and probably Perry, too. But it’s far more than most of the second-tier candidates.
It’s not just money that’s helped him become a more credible candidate this time around. It’s also the improved quality of his campaign.
Paul moved more quickly this year to put organizers and experienced workers in important states. He was the first candidate to run television ads in New Hampshire. At the straw poll in Ames, Iowa, a test of campaign organization, Paul finished second to Minnesota Rep. Michele Bachmann by only 152 votes.
“The fact that we have so many county chairmen and precinct chairmen and all this all through Iowa, we never had that before,” Paul said recently from his office in Washington.
There are signs that Paul is adopting more traditional, and possibly successful, campaign strategies, according to Eric Woolson, who managed former Arkansas Gov. Mike Huckabee’s victory in the 2008 Iowa caucuses. The strong straw poll finish was “maybe a little more of an acknowledgement that this is the way the game is played,” he said.
In New Hampshire, the difference goes beyond organization.
Paul still talks freely about some subjects that place him on the fringe, such as ending the fight against drugs. But his early ads in the state seemed to “recast” his image, said Richard Killion, an unaffiliated Republican strategist who had advised former Minnesota Gov. Tim Pawlenty, a 2012 race dropout, in New Hampshire.
The ads give the impression that Paul is the most electable and best positioned to beat President Barack Obama, going against the conventional wisdom that Paul “speaks out well on big problems in Washington, but may not be the best messenger to tackle them,” Killion said.
Paul is working to remedy that perception.
“I keep thinking maybe how I can improve on saying things so the people can understand what I’m talking about and make sure that they don’t misinterpret me,” he said.
All this suggests Paul is poised to improve upon his 2008 performance, when he grabbed more than 7 percent in the New Hampshire Republican primary and reached as high as 14 percent in Nevada.
“There’s no doubt in my mind that Ron Paul will get somewhere north of 10 percent, possibly even in the high teens, which will have a major effect and impact on the race and who wins – whether its Perry or Romney – in New Hampshire,” said Michael Dennehy, a New Hampshire-based operative who led Sen. John McCain’s campaign four years ago.
“I would go so far as to say he will play spoiler,” Dennehy said. “I do not see his support waning below 10 percent.”
Paul also seems more willing to mix it up with the other candidates that he was in 2008.
He acknowledges trying to score political points that raise his profile in addition to his standard no-frills discussion of the issues.
A Paul television ad calling Perry “Al Gore’s Texas cheerleader” garnered loads of attention and drew attacks from Perry. That was an unusual reaction from a front-runner who would typically ignore attacks from lesser candidates.
Paul said he wrestles with how to apply the new style.
But as much as other candidates pull Paul’s ideas into the conservative mainstream, it’s easy to forget he was the Libertarian Party’s candidate for president in 1988.
Paul calls for immediate withdrawal of troops around the world, brushes aside concerns about Iran obtaining a nuclear bomb and has suggested Israel be left to defend itself. He would return to the days when the currency was backed by gold. He would eliminate a host of federal agencies and says, “There is no greater threat to the security and prosperity of the United States today than the out-of-control, secretive Federal Reserve.”
Mostly, Paul is pleased that some ideas he’s hammered for years are echoing all around him.
“Nobody ever did this and now it’s not just me doing this,” he said. “I think that’s all good.”
October 3rd, 2011
The Huffington Post
By: Kristin Kirkpatrick, R.D.
Between specialty food stores and going organic, it can get pretty pricey to eat your best. Luckily, there are tons of actions you can take to not fall into this food trap. It all comes down to planning ahead. I’ve compiled the tips you need to get on your way to a week of eating beautifully for $36. You can check your progress with the eat pretty quiz below. To start eating pretty for cheap, get your shopping list and the day-by-day menu.
October 3rd, 2011
The Huffington Post
By: Rita Altman, R.N.
People with Alzheimer’s disease or other forms of memory loss often seem to live in a different reality or a different time and place. Despite this disconnect, we should not simply dismiss a person as “gone” or focus so narrowly on all the abilities that the person has lost. Instead, we must focus on the uniqueness of each person and bring an open mind to how we address their needs — the basic human needs we all share.
The most basic human need is for safety and security. Although there is certainly a physical component, it is really the consistent, caring relationships with others that give a person with memory loss a feeling of well-being. At Sunrise Senior Living, we satisfy this need by our designated care model, in which each resident is consistently cared for by the same care managers. Designated care managers become trusted friends who know each resident’s likes and dislikes, as well as all of the small details that can mean the difference between a resident having a good day and having a great day. Although a resident may not remember their designated care manager’s name, a familiar face and reassuring hug can go a long way to help them feel secure.
Another basic need all human beings share is the need for love and friendship. People with memory loss might feel embarrassed or afraid to communicate with others because of their forgetfulness or difficulties finding the right words. These feelings can lead to loneliness, isolation and depression. That’s why it’s especially important that caregivers do all they can to fulfill their loved one’s need for meaningful social interactions with family and friends. Even when a person with memory loss seems to be living in his or her own reality, it is still possible — and beneficial — to connect with the person on an emotional level and express your love for them.
We also all share a basic need for meaning and purpose in life. As memory loss progresses, it becomes more difficult for a person to perform life skill tasks. However, there are still many ways we can enrich the person’s life by adapting activities so that they can participate in a way that is meaningful. Life enriching experiences go beyond “typical” activities; they actually speak to who a person is, to their specific interests, and to what provides fulfillment for each individual. In addition to boosting a person’s self-confidence and enhancing their quality of life, personalized life enrichment also helps reduce frustration and anxiety.
I know of a resident who had just moved into one of Sunrise’s memory care neighborhoods and seemed very withdrawn. The life enrichment manager spent some time talking with him and learned that he no longer felt as if he had a purpose in life. He mentioned that he used to love placing a flag on his front porch every morning and taking it down each evening. The flag symbolized his love of country and all the years he served in the military. She arranged for him to do the same thing, and he now hangs the flag outside the memory care neighborhood every day. This validates the resident’s need for purpose as well as his strong sense of patriotism.
The basic human need to be listened to and heard is also important. Each of us desires to communicate and form relationships with others. However, memory loss can make it very difficult for a person to express their thoughts with words. That’s why it’s vitally important that caregivers take the time to really focus on the meaning behind their loved ones’ words and actions. This takes patience, steadfastness and most of all, empathy. Making eye contact and giving your loved one your full attention makes them feel important and acknowledged, which are feelings that can often be missing for those with memory loss.
Below is a video that we recently developed at Sunrise that provides an overview of the above approaches as well as additional tips for caregivers. Fundamentally, we need to recognize that every person — regardless of memory loss — is still a human being with the same needs as the rest of us. It is up to us as caregivers to help meet those needs.
October 3rd, 2011
By: Carla Fried
Anyone who puts even minimal elbow grease into retirement planning is well aware of “the number,” the anxiety-producing seven-figure sum online calculators and financial advisers say you’ll need to enjoy a comfortable lifestyle after your career ends. There’s a far smaller number that deserves more attention now — the rate of return at the heart of that calculation.
According to Ibbotson data, the long-term annualized gain for the Standard & Poor’s 500-stock index dating back to 1926 is 9.9 percent. For bonds, it’s 5.4 percent. (From 1970 to 2010, the Barclays Capital Aggregate Bond index average was 8.3 percent.) Plug those numbers into a portfolio of 60 percent stocks and 40 percent bonds and the return is about 8 percent, which is precisely the number most financial planners — and retirement calculators — were using up until recently.
With bond yields at record lows and stock dividend yields less than half their long-term norm, however, expecting portfolios to deliver returns in line with those historical averages may be a dangerous assumption. Using lower return numbers and seeing a higher savings target emerge may be a harsh reality check, but better to grapple with it now than be shocked when there’s less time to ramp up savings or cut spending to remedy a shortfall.
Today many advisers are looking out a decade or so and lowering the rate of return they expect from stocks and bonds. Jon West, a director at Research Affiliates, which manages $50 billion, says the firm’s number crunching leads it to estimate that stocks could deliver 5 percent to 6 percent, and bonds 2 percent or so. That’s based on getting “at least 2 percent less from dividends,” anemic earnings growth, and no growth in the stock market’s price-earnings ratio, he says. It produces a return below 5 percent for a 60/40 portfolio. That’s a far cry from 8 percent.
Vanguard founder Jack Bogle has a slightly more upbeat assessment. He expects stock returns of 7 percent to 7.5 percent over the next decade. He assumes no expansion in the market’s price-earnings ratio, dividend yields of 2.2 percent, and earnings growth of at least 5 percent. Bogle expects bond returns to be about 3 percent. For a balanced portfolio, that produces a net nominal return of slightly more than 6 percent. A higher forecast is T. Rowe Price’s estimate of 7 percent; until this year it had used 8 percent.
Lower return expectations are a function of pretty straightforward math. Dividend income has historically played a large role in stocks’ total return. Dating back nearly 100 years, dividends have contributed slightly less than half (4.5 percentage points, to be exact) of the S&P 500′s 9.9 percent annualized total return. And since 1995 dividends have practically gone into witness protection, averaging about 2 percent.
The challenge for bond investors is today’s low yields. A bond’s total return comprises yield plus any changes in the underlying price of the bond. Bond prices rise when yields fall, and with the 10-year Treasury at a record low and the Barclays Capital Aggregate Bond index below 3 percent, there’s little room for prices to rise. So figure an annualized return below 3 percent for bonds over the next decade, says West.
More sober return realities aren’t reflected in all of the online retirement calculators. Some, such as ones offered by Principal Group and Yahoo! Finance, use 8 percent as the default rate. Others, including the AARP and Bloomberg calculators, default to 6 percent. The Labor Dept.’s calculator plugs in 5 percent. Vanguard’s gives savers a slider to play with that’s initially set at 5 percent. It labels 5 percent “conservative” and describes a return anywhere from 6 percent to 9 percent as “moderate.” That’s a mighty wide range.
Vanguard senior investment analyst Maria Bruno says the range gives users “flexibility” and is based on the different outcomes investors have experienced historically depending on whether they held only stocks, only bonds or combinations of the two. Because these are based on long-term data, “we don’t modify ranges like this in different types of market conditions,” she says.
Principal says in an e-mail that its 8 percent figure is based on a 10 to 30 year view of the market “which we believe is appropriate for long-term retirement savings.” When contacted, Yahoo Finance said it is reviewing the rates used on the site’s personal finance calculators.
Going to Monte Carlo
Online retirement calculators may also rely on what’s known as Monte Carlo simulations. Rather than choose one rate of return to base calculations on, Monte Carlo incorporates thousands of return scenarios that deviate from assumed benchmark rates of return based on different volatility scenarios, as well as assumed withdrawal scenarios for retirees. After the program runs the numbers, it gives a “success rate” showing the percentage of market scenarios where a saver arrived at the end of his life span and still had money. There are free calculators using Monte Carlo simulations at T. Rowe Price, Fidelity, and Schwab.
Monte Carlo simulations are useful but can have shortcomings. William Bernstein, a principal at Efficient Frontier Advisors and author of “The Investor’s Manifesto,” worries they can give a false sense of security since, for the most part, they assume normally distributed returns — not the dramatic market meltdowns of recent years. Fidelity’s calculator shows savers two probabilities: one that assumes the historical rates of return are borne out, and another shows how savers would fare if they had below-average outcomes.
If using any of the calculations shows that a savings goal needs to be hiked, one way to eke more return out of a portfolio is to focus on fees. Forking over 1 percent to 1.5 percent of your money each year to cover a mutual fund’s expense ratio may have been easy to overlook in the 1990s when the S&P 500′s annualized return was 18.2 percent. If returns are 6 percent or 7 percent over the next decade, a 1.5 percent expense ratio cuts a net return by about 25 percent.
“In this day and age, there’s simply no excuse for paying [an expense ratio of] more than 0.25 percent for a portfolio of U.S. stocks and bonds, and maybe 0.5 percent for a portfolio of foreign stocks,” says Bernstein.
October 3rd, 2011
By: Sho Chandra and Steve Matthews
Ninety-one percent of people in the U.S. labor force have a job. That may be the extent of the good news for these Americans, whose incomes tell a darker story.
Take-home pay, adjusted for prices, fell 0.3 percent in August, the third decrease in five months, and personal income dropped for the first time in two years, the Commerce Department reported last week. The declines followed news from the Census Bureau that median household income in 2010 fell to $49,445, the lowest in more than a decade, and the poverty rate jumped to 15.1 percent, a 17-year high.
Salary and benefit growth “has been going nowhere,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “One of the key reasons the recovery has stalled is that real incomes have fallen.”
While policy makers from Federal Reserve Chairman Ben S. Bernanke to President Barack Obama focus on cutting unemployment stuck near or above 9 percent since April 2009, the widespread stagnation in wages may offer a better explanation for the failure of economic growth to accelerate two years after the end of the recession. Workers’ ability to negotiate higher earnings won’t return until the job market strengthens, and flagging confidence has raised the risk that consumers may retrench.
Inflation-adjusted weekly earnings have fallen for six consecutive months, dropping 1.8 percent in August from a year earlier, a pace not seen since the 18-month economic slump ended in June 2009.
“Those who are employed are worried about their income and are seeing real purchasing power get squeezed, therefore they’re set to retrench a bit,” said Julia Coronado, chief economist for North America at BNP Paribas in New York, who has served on the Fed board’s forecasting team. “That’s the danger right now. It means the recovery remains very fragile.”
Companies including United Parcel Service Inc. (UPS) say they have flexibility to hold down employee earnings, given uncertain demand and an excess supply of labor. Retailers such as Kohl’s Corp. (KSS) report that elevated food and fuel prices have cut into paychecks, restraining shoppers.
“The biggest issue is that labor income is soft at a time when we’re getting no offset” from other sources, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. Unlike in the early part of the recovery, stock-market losses are eroding wealth and home prices continue to decline, he said.
Standard & Poor’s 500 Index futures expiring in December dropped 0.4 percent to 1,121.20 at 9:54 a.m. in London, having earlier retreated 1.3 percent. The S&P 500 Index (SPX) has fallen 17 percent since this year’s high of 1363.61 on April 29. The S&P/Case-Shiller index of property values in 20 cities is down 31 percent from the pre-recession peak in July 2006.
Support from the government may shrink if Congress fails to extend payroll-tax cuts and unemployment benefits set to expire at the end of the year, and limited access to borrowing means Americans have few means to fund their purchases, said Feroli, a former Fed economist.
“It’s hard to see where consumers are going to get a lot of wherewithal to sustain strong spending,” he said. “It’s certainly a concern that, rather than sluggish consumption growth, we see flat or declining consumption.”
The stalled labor market and stagnant wages are easing one source of concern for Fed officials watching inflation.
“The painfully high unemployment rate is consistent with considerable slack or excess capacity in the economy, which tends to constrain wage growth,” Federal Reserve Bank of Atlanta President Dennis Lockhart said during a Sept. 27 speech in Jacksonville, Florida.
“You are familiar with the term wage-price spiral. I don’t see any prospect of such a development in the foreseeable future, as long as unemployment remains high and longer-term inflation expectations remain well-anchored,” he said.
The worsening outlook for incomes will cause “continued pressure on home prices and on the stock market,” said Malcolm Polley, who oversees $1 billion as chief investment officer at Stewart Capital in Indiana, Pennsylvania. Corporate sales may be hurt as demand cools, and there may be more withdrawals from retirement plans and higher use of 401(k) loans, he said.
Sales at some luxury stores may be hurt because “at the margin, the upper end of the middle class will probably feel less inclined to spend extra money,” he said. Among chains catering to “the lower end of the earnings totem pole,” discounters including Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT) may fare better as shoppers trade down.
“Perception is reality from the standpoint of consumers and investors,” Polley said. “We need people to start feeling good about themselves.”
Bad Time to Buy
The Bloomberg Consumer Comfort Index slumped in the week ended Sept. 25 to the second-lowest level on record as Americans grew more concerned with their financial situation. The share of households saying it was a bad time to buy goods and services was the highest in three years.
A record 91 percent of consumers expect that growth in their incomes will match or fall behind price gains in the coming year, according to participants in the September Thomson Reuters/University of Michigan sentiment survey, which dates back to 1978.
Until people see their wages or the labor market get better, they will be “spending on necessities, not desires,” said Chris G. Christopher, senior principal economist at IHS Global Insight in Lexington, Massachusetts.
Tamra Loomis, a graphic designer and single mother of two boys, uses the Internet at her parents’ home, grows vegetables to trim grocery bills and takes advantage of coupons to shop. She makes $17 an hour and hasn’t had a raise since September 2008, three months after she started working at a sign company in Antioch, California, about 40 miles northeast of San Francisco.
The owner has twice denied her request for higher wages and in January cut the hours for her and the company’s other employee to 30 a week from 40, she said.
“My boss says because of the economy, things are tight, business is slow,” so “at this point, I’m paycheck to paycheck,” said Loomis, 32. “A lot of people aren’t hiring, and when they are, they offer even less than what I make. It’s really difficult.”
The jobless rate held at 9.1 percent in September for a third consecutive month, while payrolls grew by 50,000 after no change in August, according to the median forecast in a Bloomberg News survey of economists ahead of Labor Department figures due Oct. 7.
The unemployment situation is a “national crisis,” Bernanke said in response to questions after a speech Sept. 28 in Cleveland. Obama is campaigning for congressional support of a $447 billion jobs program centered on rebuilding infrastructure and expanding payroll-tax breaks for workers and employers.
“It’s certainly easier to focus on the greater sources of distress,” BNP’s Coronado said, referring to officials’ concern about Americans who are out of work. “But the bigger bulk of economic momentum is going to be driven by people who are employed and how they feel about their prospects.”
Consumer spending rose at a 0.7 percent annual rate in the second quarter, less than half the 2.1 percent pace in January- March, the Commerce Department reported last week. Gross domestic product expanded less than 1 percent on average in January-June, the worst six months of the recovery.
“The economy isn’t growing fast enough to boost job growth to increase incomes,” said Omair Sharif, an economist at RBS Securities LLC in Stamford, Connecticut. “Most workers don’t have a lot of sway in demanding higher wages unless they have very specialized skills.”
‘Hold the Line’
Werner Enterprises Inc. (WERN), an Omaha, Nebraska-based truck operator, has “been able to hold the line on our salary, wages and benefits costs,” John Steele, chief financial officer, said on a Sept. 8 analyst conference call. In today’s “uncertain” economic environment, “there’s a little less pressure on driver pay than there was a couple of months ago.”
UPS, the Atlanta-based package-delivery company whose shipments make it an economic bellwether, has “a very reasonable contract in place that will show modest, below- inflation increases in wages” for drivers, Chief Financial Officer Kurt Kuehn said on a July 26 teleconference. “We’ve got a good outlook for the cost structure.”
Employees cannot hope for more bargaining power anytime soon, said Harry Holzer, a professor of public policy at Georgetown University in Washington and former chief economist at the Labor Department. Through August, the U.S. had recovered only about 1.89 million of the 8.75 million jobs lost as a result of the recession.
“There is so much slack, it will keep earnings from rising very much,” he said. “It will take most of this decade” to repair the damage “unless there is a big spurt in hiring.”
October 3rd, 2011
By: Asjylyn Loder and David Evans
In May 2008, a unit of Koch Industries Inc., one of the world’s largest privately held companies, sent Ludmila Egorova-Farines, its newly hired compliance officer and ethics manager, to investigate the management of a subsidiary in Arles in southern France. In less than a week, she discovered that the company had paid bribes to win contracts.
“I uncovered the practices within a few days,” Egorova- Farines says. “They were not hidden at all.”
She immediately notified her supervisors in the U.S. A week later, Wichita, Kansas-based Koch Industries dispatched an investigative team to look into her findings, Bloomberg Markets magazine reports in its November issue.
By September of that year, the researchers had found evidence of improper payments to secure contracts in six countries dating back to 2002, authorized by the business director of the company’s Koch-Glitsch affiliate in France.
“Those activities constitute violations of criminal law,” Koch Industries wrote in a Dec. 8, 2008, letter giving details of its findings. The letter was made public in a civil court ruling in France in September 2010; the document has never before been reported by the media.
Egorova-Farines wasn’t rewarded for bringing the illicit payments to the company’s attention. Her superiors removed her from the inquiry in August 2008 and fired her in June 2009, calling her incompetent, even after Koch’s investigators substantiated her findings. She sued Koch-Glitsch in France for wrongful termination.
Obsessed with Secrecy
Koch-Glitsch is part of a global empire run by billionaire brothers Charles and David Koch, who have taken a small oil company they inherited from their father, Fred, after his death in 1967, and built it into a chemical, textile, trading and refining conglomerate spanning more than 50 countries.
Koch Industries is obsessed with secrecy, to the point that it discloses only an approximation of its annual revenue — $100 billion a year — and says nothing about its profits.
The most visible part of Koch Industries is its consumer brands, including Lycra fiber and Stainmaster carpet. Georgia- Pacific LLC, which Koch owns, makes Dixie cups, Brawny paper towels and Quilted Northern bath tissue.
Charles, 75, and David, 71, each worth about $20 billion, are prominent financial backers of groups that believe that excessive regulation is sapping the competitiveness of American business. They inherited their anti-government leanings from their father.
Abolishing Social Security
Fred was an early adviser to the founder of the anti- communist John Birch Society, which fought against the civil rights movement and the United Nations. Charles and David have supported the Tea Party, a loosely organized group that aims to shrink the size of government and cut federal spending.
These are long-standing tenets for the Kochs. In 1980, David Koch ran for vice president on the Libertarian ticket, pledging to abolish Social Security, the Federal Reserve System, welfare, minimum wage laws and federal agencies — including the Department of Energy, the Federal Bureau of Investigation and the Central Intelligence Agency.
What many people don’t know is how the Kochs’ anti- regulation political ideology has influenced the way they conduct business.
A Bloomberg Markets investigation has found that Koch Industries — in addition to being involved in improper payments to win business in Africa, India and the Middle East — has sold millions of dollars of petrochemical equipment to Iran, a country the U.S. identifies as a sponsor of global terrorism.
October 3rd, 2011
The New Yorker
By: Jane Mayer
In the spring of 2010, the conservative political strategist Ed Gillespie flew from Washington, D.C., to Raleigh, North Carolina, to spend a day laying the groundwork for REDMAP, a new project aimed at engineering a Republican takeover of state legislatures. Gillespie hoped to help his party get control of statehouses where congressional redistricting was pending, thereby leveraging victories in cheap local races into a means of shifting the balance of power in Washington. It was an ingenious plan, and Gillespie is a skilled tactician—he once ran the Republican National Committee—but REDMAP seemed like a long shot in North Carolina. Barack Obama carried the state in 2008 and remained popular. The Republicans hadn’t controlled both houses of the North Carolina General Assembly for more than a century. (“Not since General Sherman,” a state politico joked to me.) That day in Raleigh, though, Gillespie had lunch with an ideal ally: James Arthur (Art) Pope, the chairman and C.E.O. of Variety Wholesalers, a discount-store conglomerate. The Raleigh News and Observer had called Pope, a conservative multimillionaire, the Knight of the Right. The REDMAP project offered Pope a new way to spend his money.
That fall, in the remote western corner of the state, John Snow, a retired Democratic judge who had represented the district in the State Senate for three terms, found himself subjected to one political attack after another. Snow, who often voted with the Republicans, was considered one of the most conservative Democrats in the General Assembly, and his record reflected the views of his constituents. His Republican opponent, Jim Davis—an orthodontist loosely allied with the Tea Party—had minimal political experience, and Snow, a former college football star, was expected to be reëlected easily. Yet somehow Davis seemed to have almost unlimited money with which to assail Snow.
Snow recalls, “I voted to help build a pier with an aquarium on the coast, as did every other member of the North Carolina House and Senate who voted.” But a television attack ad presented the “luxury pier” as Snow’s wasteful scheme. “We’ve lost jobs,” an actress said in the ad. “John Snow’s solution for our economy? ‘Go fish!’ ” A mass mailing, decorated with a cartoon pig, denounced the pier as one of Snow’s “pork projects.” It criticized Snow for “wasting our tax dollars,” citing his vote to “spend $218,000 on a Shakespeare festival,” but failing to note that this sum represented a budget cut for the program, which had been funded by the legislature since 1999.
In all, Snow says, he was the target of two dozen mass mailings, one of them reminiscent of the Willie Horton ad that became notorious during the 1988 Presidential campaign. It featured a photograph of Henry Lee McCollum, a menacing-looking African-American convict on death row, who, along with three other men, raped and murdered an eleven-year-old girl. After describing McCollum’s crimes in lurid detail, the mailing noted, “Thanks to arrogant State Senator John Snow, McCollum could soon be let off of death row.” Snow, in fact, supported the death penalty and had prosecuted murder cases. But, in 2009, he had helped pass a new state law, the Racial Justice Act, that enabled judges to reconsider a death sentence if a convict could prove that the jury’s verdict had been tainted by racism. The law was an attempt to address the overwhelming racial disparity in capital sentences.
“The attacks just went on and on,” Snow told me recently. “My opponents used fear tactics. I’m a moderate, but they tried to make me look liberal.” On Election Night, he lost by an agonizingly slim margin—fewer than two hundred votes.
After the election, the North Carolina Free Enterprise Foundation, a nonpartisan, pro-business organization, revealed that two seemingly independent political groups had spent several hundred thousand dollars on ads against Snow—a huge amount in a poor, backwoods district. Art Pope was instrumental in funding and creating both groups, Real Jobs NC and Civitas Action. Real Jobs NC was responsible for the “Go fish!” ad and the mass mailing that attacked Snow’s “pork projects.” The racially charged ad was produced by the North Carolina Republican Party, and Pope says that he was not involved in its creation. But Pope and three members of his family gave the Davis campaign a four-thousand-dollar check each—the maximum individual donation allowed by state law.
Snow, whose defeat was first chronicled by the Institute for Southern Studies, a progressive nonprofit organization, told me, “It’s getting to the point where, in politics, money is the most important thing. They spent nearly a million dollars to win that seat. A lot of it was from corporations and outside groups related to Art Pope. He was their sugar daddy.”
Bob Phillips, the head of the North Carolina chapter of Common Cause, an organization that promotes campaign-finance reform, said that Snow’s loss signals a troubling trend in American politics. “John Snow raised a significant amount of money,” he said. “But it was exceeded by what outside groups spent in that race, mostly on commercials against John Snow.” Such lopsided campaigns will likely become more common, thanks to the Supreme Court, which, in a controversial ruling in January, 2010, struck down limits on corporate campaign spending. For the first time in more than a century, businesses and unions can spend unlimited sums to express support or opposition to candidates.
Phillips argues that the Court’s decision, in Citizens United v. Federal Election Commission, has been a “game changer,” especially in the realm of state politics. In swing states like North Carolina—which the Democrats consider so important that they have scheduled their 2012 National Convention there—an individual donor, particularly one with access to corporate funds, can play a significant, and sometimes decisive, role. “We didn’t have that before 2010,” Phillips says. “Citizens United opened up the door. Now a candidate can literally be outspent by independent groups. We saw it in North Carolina, and a lot of the money was traced back to Art Pope.”