Linking ≠ endorsement.
⇧ The Employment Situation – December 2014 | US Bureau of Labor Statistics
Total nonfarm payroll employment rose by 252,000 in December, and the unemployment rate declined to 5.6 percent….
The civilian labor force participation rate edged down by 0.2 percentage point to 62.7 percent in December. …
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in December at 6.8 million. …
In December, 2.3 million persons were marginally attached to the labor force, little changed from a year earlier. …
Among the marginally attached, there were 740,000 discouraged workers in December, down by 177,000 from a year earlier.
⇧ Omaha councilman says deadly fire exposed city code flaws
Among them is the city’s lack of a way to ensure that such residences have working smoke detectors. The Omaha Fire Department says smoke detectors at the boardinghouse were not working. And Jerram says the boardinghouse didn’t have to have a fire exit in the basement, although newer boardinghouses must have them.
⇧ The rottenness at the heart of the British economy
Terrific critique of austerity economics by John Aziz:
…even with all those new jobs, U.K. GDP has remained far below its pre-crisis trend. Productivity is in the doldrums. So we have some new jobs, but not ones which are actually productive in terms of GDP. So much for the old austerian adage of shrinking the unproductive state and allowing the productive marketplace to flourish. The shrinkage in government employment has actually led to lower productivity.
Of course, it is certainly true that the U.K. recovery has been swifter and stronger than the non-existent recovery in the eurozone — which has been worsened by steep government spending cuts and forced austerity as a condition for government bailouts. U.K. austerity hasn’t been especially brutal or quick compared to the austerity undertaken in parts of the eurozone, and we still have our own currency, vastly reducing the risk of a sovereign debt crisis. But our situation is akin to being the world’s thinnest morbidly obese person. Yes, we haven’t lost a foot to diabetes yet like our cousins in Greece and Spain, but we’re still in a risky position thanks to all of the slack in the economy.
See our commentary here: https://propertypak.com/2015/01/06/news- real-estate-risk-economics-jan-6-2015/#0 1061530
⇧ Why Greece Needs Syriza to Win | Foreign Policy
…a Syriza victory on Jan. 25 may not be a calamity for Europe in the end. It may be a necessary step toward resolving a crisis that has been festering since 2009.
…to avoid losses for German and French banks, eurozone policymakers, led by German Chancellor Angela Merkel, pretended that Greece was merely going through temporary funding difficulties.
…since Tsipras’s movement does not have a stake in the clientelist system, it might actually follow through with its reform pledges. And on the key issue of debt relief, Syriza is Greece’s best hope.
If Merkel were wise, she would make a virtue of a necessity and offer Greece debt relief as a gesture of solidarity. She must know that if the euro ultimately collapses, Germany will be blamed — again — for wrecking Europe.
That’s exactly what we’ve been saying Merkel should do.
⇧ Europe’s Lapse of Reason by Joseph E. Stiglitz – Project Syndicate
Blunt words from Joseph E. Stiglitz, Nobel laureate in economics, University Professor at Columbia University:
…unless the structure of the eurozone is reformed, and austerity reversed, Europe will not recover.
Germany is the problem. More to the point, Angela Merkel is the problem. Of course, the German people mistakenly choose her to run their country.
⇧ 10 Takeaways from 2015 CMBS Outlook About Property Fundamentals, Markets – CoStar Group
Through the first three quarters of 2014, occupancy levels for office, retail and lodging properties continued to increase, while the multifamily sector appears to have peaked. The two largest sectors in CMBS, office and retail, were slow to recover after the crisis due to longer lease terms and shifts in tenants’ space needs, according to Nomura Securities. While these sectors have not yet fully recovered, occupancy rates are now at post-crisis highs, and growth is expected to continue for the next few years.
The two smaller CMBS sectors, multifamily and lodging, have both shown strong growth following the crisis, with occupancy levels now exceeding pre-crisis peaks. However, both have little room for improvement may have reached a peak as new construction limits additional increases.
With the home ownership rate having fallen to 64.2%, the lowest level since early 1995, Morgan Stanley said it believes that government-sponsored enterprise (GSE) lending will accelerate in 2015 to meet demand for rental properties. Freddie Mac for its part said it expects to issue $25 billion in multifamily securities in 2015 across 17 to 20 deals. It will also be introducing a few new types of collateral to its securitizations, including 10-year floaters and small balance loans.
⇧ 2015: The Threat of Deflation — Prime Economics
It is doubtful whether central banks and finance ministries have sufficient policy tools to arrest a generalised, downward spiral of prices, which will lead to declines in profits, further falls in real wages, rising unemployment and ever-sharper falls in prices. Which is why deflation is such a terrifying prospect.
⇧ John Kay – Rise in US and UK inequality principally due to financialisation and executive pay
The rise in inequality in some western countries is principally the result of two interrelated causes: the growth of the finance sector; and the explosion of the remuneration of senior executives. The people who ran big companies were always relatively well paid, but the meaning of “relatively well paid” is now altogether different. Finance employs more people, recruits more able people and pays them a lot more.
These effects have not been seen in countries, such as France and Germany, that have proved more resistant to financialisation. It is in Britain and the US, which have experienced the most extensive growth in the sector, where they have made their greatest impact.
⇧ Fabian Society – Making the case for higher investment rather than higher taxes
Ann Pettifor, “honorary research fellow at City University’s City Political Economy Research Centre”:
We know from experience and history, in both Europe and the United States, that there are effective policies for reducing the deficit. These include: full, secure employment; rising skill levels which lead to rising incomes and increased productivity; rising profits; and buoyant tax revenues. And despite the existing deficit, these policies can be kickstarted by public investment and spending financed by borrowed or electronic money (also known as quantitative easing (QE) or open market operations by central banks). Such increases in private incomes can only be generated, as John Maynard Keynes once argued, by “public authority … called in aid to create additional current incomes through the expenditure of borrowed or printed money.”
Note that he said “borrowed or printed.” They don’t have to be the same thing! We can create un-borrowed money, and that’s exactly what we ought to do at this juncture while we work our way toward a new age (enlightened) where money ends up being completely unneeded.
⇧ Most of America’s rich think the poor have it easy – The Washington Post
Right on, Roberto A. Ferdman:
…as my colleague Christopher Ingraham pointed out last year, to say that the poor have it easy is to ignore how serious their struggle is in comparison to the rest of the population, and especially those with money to spare. The poor are much less likely to have health insurance, much more likely to be the victim of a crime. They don’t get the same level of education or have the same food options. Inequality, as my colleague Matt O’Brien wrote, “starts in the crib,” and it plays out even in what babies of different socioeconomic backgrounds are fed. And that’s just the tip of the iceberg.
⇧ Wage Growth – or Lack of – Continues to Surprise – Tim Duy’s Fed Watch
Realism about the Fed and rate hikes from Tim Duy:
If June rolls around with no inflation and no greater wage growth, the Fed will find it challenging to begin normalization. In that case, they would need to focus on the employment mandate or pivot to some financial stability story to justify a rate hike.
Bottom Line: Generally a very solid report. But the wage numbers present a dilemma for the Fed. Simply put, no wage growth means the Fed can’t be particularly confident that inflation will trend toward target. Not that a rate hike was imminent in any event; Fed is still looking at June, but they need some more help from the data. Of course, June is still a long way off – we have five more employment reports before that meeting. Time enough for these numbers to turn around. Note that if the wage trend does reverse quickly, policy expectations would shift just as quickly.
We don’t think the Fed will offer up some lame excuses to raise rates if the labor and wage numbers don’t support hiking.
⇧ Voices Join Greek Left’s Call for a New Deal on Debt – NYTimes.com
A victory for Mr. Tsipras is not guaranteed. Recent polls show his 4 percent lead over the governing party of Prime Minister Antonis Samaras to be narrowing, as Mr. Samaras and European leaders have warned ominously of Mr. Tsipras’s radical bent.
“I am surprised to see these political interventions,” said Mr. Bastian, the consultant based in Athens. “Because they really speak little to what Mr. Tsipras has actually been saying since 2012.”
Exactly, with the exception that we aren’t surprised at all. Financial fear-mongering against progressivism is a standard-operating procedure for the austerity/neoliberal right.
⇧ Why You Should Be More Optimistic About Wage Growth – NYTimes.com
Good food for thought from Justin Wolfers:
In the economic models that inform these debates, wage and price inflation is expected to rise whenever unemployment falls below its so-called natural rate. The problem, though, is that no one really knows what that rate is. Our uncertainty is even greater today than it normally is, because no one knows the extent to which those workers who dropped out of the labor force in response to the financial crisis will return when jobs become plentiful. By this view, today’s most important macroeconomic question is what the natural rate actually is.
The latest jobs report helps answer this question. The unemployment rate has fallen to 5.6 percent, and there are still no signs that wage inflation is rising. Indeed, with wage growth running at only 1.7 percent, the economy is telling us that we still have the ability to bring many more of the jobless back into the fold without setting off inflation.
It is only when nominal wage growth exceeds the sum of inflation (about 2 percent) and productivity growth (about 1.5 percent) that the Fed needs to be concerned that the labor market is generating cost pressures that might raise inflation. So the latest wage growth numbers suggest that we are not yet near the natural rate. And that means the Fed should be content to let the recovery continue to generate more new jobs.
So yes, there’s good news to be gleaned from reports that nominal wage growth remains muted: It’s the economy telling us that it’s ready to put more people back to work.
⇧ Surprising New Findings Point to “Perfect Storm” Brewing in Your Financial Future | The Institute for New Economic Thinking
Alan Taylor, “professor and Director of the Center for the Evolution of the Global Economy at the University of California, Davis”:
We have been able to show that this trend matters: in the data, when we observe a sharp run-up in this kind of leverage measure, financial crises have tended to become more likely; and when those crises strike, recessions tend to be worse, and even more painful in the cases where a large run-up in leverage was observed.
These are findings from 200+ recessions over a century or more of experience, and they are some of the most robust pieces of evidence found to date concerning the drivers of financial instability and the fallout that results. Once we look at the current crisis through this lens, it starts to look comprehensible: a bad event, certainly, but not outside historical norms once we take into account the preceding explosion of credit. Under those conditions, it turns out, a deep recession followed by a long sub-par recovery should not be seen as surprising at all. Sadly, nobody had put together this sort of empirical work before the crisis, but now at least we have a better guide going forward.
In the immediate postwar era, financial crises in advanced countries were rare events, and before 1970 did not happen at all. Since then they have occurred more often, and 2008 was the most damaging of them all to date. If we have moved back to a regime of regular financial crises — like the one we had from the 1870s to the 1930s — then our economic future will be very different from our recent past.
Macroeconomic stability will be more elusive and that will affect all of our lives: from the risks many will face in childhood, to the security of employment at working age, to the challenge of accumulating for retirement. More financial instability will introduce more uncertainty all down the line, and that will be a very different world than the one we would have lived in only a couple of decades ago. But that period of calm also tells us that such instability isn’t necessarily a fact of life, and addressing that is likely to be the policy challenge going forward.
… The puzzle then is how we redirect retirement and other desired saving currently going into credit channels, or at least outside the banking systems. We may end up with a world based more on equity than debt, or more on market debt instruments than bank intermediation; but how and why we get there is a mystery.
However, we have the alternative of issuing debt-free money rather than borrowing via issuing bonds.
⇧ Great Job Growth. Now Where’s That Raise? – Bloomberg View
Some economists worry that keeping interest rates lower for longer will stoke an inflationary spiral of rising wages and prices, as employers compete for a shrinking pool of available and qualified workers. So far, though, the data suggest that this is far from the case.
Will this view become more of the consensus, and will the Fed’s leadership step out in the open to profess it, as it should?
⇧ Sex offender arrested in real estate agent kidnapping in Elk Grove | The Sacramento Bee
A registered sex offender was arrested Friday in connection with the kidnapping of a real estate agent at gunpoint during a showing of a model home, according to Elk Grove police.
The incident has shaken the local real estate community, said Paula Swayne, immediate past president of the Sacramento Association of Realtors.
Agents who show empty homes to strangers can be at risk of violence. An Arkansas agent was murdered last year by a man who requested a house tour.
Realtors are cautioned to go to showings in pairs if they don’t know a client.
⇧ Fed Paid U.S. Treasury a Record $98.7 Billion Last Year – Bloomberg
This is something the Fed doesn’t talk about enough.
The Federal Reserve paid a record $98.7 billion of its estimated 2014 net income to the U.S. Treasury as part of an annual dividend it remits after covering its own expenses from interest on its balance sheet and other gains.
The Fed’s 2014 estimated net income of $101.5 billion comes mostly from $115.9 billion in interest income on securities it holds, such as Treasuries and mortgage-backed securities, the central bank said today in a statement. Operating expenses of the 12 reserve banks were $3.6 billion.
“Operating expenses of the 12 reserve banks were $3.6 billion.” We could get that down to zero.
Why issue interest-income bonds if the Fed is going to buy them and then simply give the gains back to the government?
Well, not all of the bonds are purchased by the Fed. The Fed uses its purchases to try to manipulate the interest rate.
Meanwhile, all the other bond buyers make gains off taxpayers.
Plus, the operating expenses are covered by taxpayers, even though the Fed is technically a private organization.
⇧ Scientists: Great Lakes teeming with plastic – 13WHAM ABC Rochester NY – Top Stories
This matters from a real-estate-economic perspective because of the costs to treat and clean the water.
Obviously, that’s not the only thing that matters here.
Traverse City, Mich. (AP) — First, it was tiny plastic beads from facial washes and toothpaste turning up in the Great Lakes. Scientists now are raising concerns about fibers from synthetic clothing.
⇧ COLUMBIA, S.C.: SC fire deaths up from 2013; fire marshal urging caution | State | The State
Alternative heating sources are the biggest cause of fires between December and March, when fire deaths tend to spike, Fire Marshal Robert Polk said.
According to his office, 94 people died in fires last year, 43 of them during those months. Sixteen people died in December alone. The total for 2014 is a nearly 50 percent increase from five years ago, when 63 people died, and the highest number of fire-related deaths since 2000.
The article contains some good tips to avoid fires.