Calculated Risk on Employment Numbers and Part time Employed

Employment Declines Sharply, Unemployment Rises to 7.2 Percent

by CalculatedRisk on 1/09/2009 08:30:00 AM

From the BLS:

Nonfarm payroll employment declined sharply in December, and the unemployment rate rose from 6.8 to 7.2 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Payroll employment fell by 524,000 over the month and by 1.9 million over the last 4 months of 2008. In December, job losses were large and widespread across most major industry sectors.

Click on graph for larger image.

This graph shows the unemployment rate and the year over year change in employment vs. recessions.

Nonfarm payrolls decreased by 524,00 in December, and November payrolls were revised down to a loss of 584,000 jobs. The economy has lost over 1.5 million jobs over the last 3 months alone!

The unemployment rate rose to 7.2 percent; the highest level since January 1993.

Year over year employment is now strongly negative (there were 2.6 million fewer Americans employed in Dec 2008 than in Dec 2007). This is another extremely weak employment report ...

Posted by
CalculatedRisk


on 1/09/2009 08:30:00 AM

Over 8 Million Part Time Workers

by CalculatedRisk on 1/09/2009 09:01:00 AM

From the BLS report:

In December, the number of persons who worked part time for economic reasons (some-times referred to as involuntary part-time workers) continued to increase, reaching 8.0 million. The number of such workers rose by 3.4 million over the past 12 months. This category includes persons who would like to work full time but were working part time because their hours had been cut back or because they were unable to find full-time jobs.

Click on graph for larger image.

Not only has the unemployment rate risen sharply to 7.2%, but the number of workers only able to find part time jobs (or have had their hours cut for economic reasons) is now over 8 million.

Of course the U.S. population is significantly larger today (about 305 million) than in the early '80s (about 228 million) when the number of part time workers almost reached 7 million, but the rapid increase in part time workers is pretty stunning.

Posted by
CalculatedRisk


on 1/09/2009 09:01:00 AM

Calculated Risk: On Roubini's 2 yr recession

Thursday, January 08, 2009

Roubini: Two Year Recession
by CalculatedRisk on 1/08/2009 04:30:00 PM

From Rex Nutting at MarketWatch: Roubini forecasts recession will last 2 years

The U.S. recession will last two full years, with gross domestic product falling a cumulative 5%, said Nouriel Roubini, ... For 2009, Roubini predicts GDP will fall 3.4%, with declines in every quarter of the year. The unemployment rate should peak at about 9% in early 2010 ...
Roubini is forecasting a pretty serious recession, but far short of a "depression" which is usually defined as a 10% decline in real GDP.

The concensus (and the Fed forecast) is that the economy will bottom in Q2 2009 with a sluggish recovery in the 2nd half of this year.

The recession started officially around Dec 06 - Jan 07. Roubini is prediciting that the recession will last through Jan ' 09 ish. This is exactly my prediction as well (read earlier posts) and I believe Calculated Risk has come up with similar projections himself. Its worth bearing in mind that my projection is based on the following "givens": Obama's Stimulus plan being over 800B and that the US will nationalize major banks QUICKLY. Both of these are policy responses and may not happen in Q1 of 2008 and if there is a substantial delay by the Obama Administration - the recession may drag out further into 2010. I am making my business plans on the assumption that Q1 of 2010 will see the end of the recession.

How the Swedes Did It

from nytimes.com
September 23, 2008
Stopping a Financial Crisis, the Swedish Way
By CARTER DOUGHERTY

A banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic. Sound familiar?
It does to Sweden. The country was so far in the hole in 1992 — after years of imprudent regulation, short-sighted economic policy and the end of its property boom — that its banking system was, for all practical purposes, insolvent.

But Sweden took a different course than the one now being proposed by the United States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing.

Sweden did not just bail out its financial institutions by having the government take over the bad debts. It extracted pounds of flesh from bank shareholders before writing checks. Banks had to write down losses and issue warrants to the government.

That strategy held banks responsible and turned the government into an owner. When distressed assets were sold, the profits flowed to taxpayers, and the government was able to recoup more money later by selling its shares in the companies as well.

“If I go into a bank,” said Bo Lundgren, who was Sweden’s finance minister at the time, “I’d rather get equity so that there is some upside for the taxpayer.”

Sweden spent 4 percent of its gross domestic product, or 65 billion kronor, the equivalent of $11.7 billion at the time, or $18.3 billion in today’s dollars, to rescue ailing banks. That is slightly less, proportionate to the national economy, than the $700 billion, or roughly 5 percent of gross domestic product, that the Bush administration estimates its own move will cost in the United States.

But the final cost to Sweden ended up being less than 2 percent of its G.D.P. Some officials say they believe it was closer to zero, depending on how certain rates of return are calculated.
The tumultuous events of the last few weeks have produced a lot of tight-lipped nods in Stockholm. Mr. Lundgren even made the rounds in New York in early September, explaining what the country did in the early 1990s.

A few American commentators have proposed that the United States government extract equity from banks as a price for their rescue. But it does not seem to be under serious consideration yet in the Bush administration or Congress.

The reason is not quite clear. The government has already swapped its sovereign guarantee for equity in Fannie Mae and Freddie Mac, the mortgage finance institutions, and the American International Group, the global insurance giant.

Putting taxpayers on the hook without anything in return could be a mistake, said Urban Backstrom, a senior Swedish finance ministry official at the time. “The public will not support a plan if you leave the former shareholders with anything,” he said.

The Swedish crisis had strikingly similar origins to the American one, and its neighbors, Norway and Finland, were hobbled to the point of needing a government bailout to escape the morass as well.

Financial deregulation in the 1980s fed a frenzy of real estate lending by Sweden’s banks, which did not worry enough about whether the value of their collateral might evaporate in tougher times.

Property prices imploded. The bubble deflated fast in 1991 and 1992. A vain effort to defend Sweden’s currency, the krona, caused overnight interest rates to spike at one point to 500 percent. The Swedish economy contracted for two consecutive years after a long expansion, and unemployment, at 3 percent in 1990, quadrupled in three years.

After a series of bank failures and ad hoc solutions, the moment of truth arrived in September 1992, when the government of Prime Minister Carl Bildt decided it was time to clear the decks.
Standing shoulder-to-shoulder with the opposition center-left, Mr. Bildt’s conservative government announced that the Swedish state would guarantee all bank deposits and creditors of the nation’s 114 banks. Sweden formed a new agency to supervise institutions that needed recapitalization, and another that sold off the assets, mainly real estate, that the banks held as collateral.

Sweden told its banks to write down their losses promptly before coming to the state for recapitalization. Facing its own problem later in the decade, Japan made the mistake of dragging this process out, delaying a solution for years.

Then came the imperative to bleed shareholders first. Mr. Lundgren recalls a conversation with Peter Wallenberg, at the time chairman of SEB, Sweden’s largest bank. Mr. Wallenberg, the scion of the country’s most famous family and steward of large chunks of its economy, heard that there would be no sacred cows.

The Wallenbergs turned around and arranged a recapitalization on their own, obviating the need for a bailout. SEB turned a profit the following year, 1993.

“For every krona we put into the bank, we wanted the same influence,” Mr. Lundgren said. “That ensured that we did not have to go into certain banks at all.”

By the end of the crisis, the Swedish government had seized a vast portion of the banking sector, and the agency had mostly fulfilled its hard-nosed mandate to drain share capital before injecting cash. When markets stabilized, the Swedish state then reaped the benefits by taking the banks public again.

More money may yet come into official coffers. The government still owns 19.9 percent of Nordea, a Stockholm bank that was fully nationalized and is now a highly regarded giant in Scandinavia and the Baltic Sea region.

The politics of Sweden’s crisis management were similarly tough-minded, though much quieter.
Soon after the plan was announced, the Swedish government found that international confidence returned more quickly than expected, easing pressure on its currency and bringing money back into the country. The center-left opposition, while wary that the government might yet let the banks off the hook, made its points about penalizing shareholders privately.

“The only thing that held back an avalanche was the hope that the system was holding,” said Leif Pagrotzky, a senior member of the opposition at the time. “In public we stuck together 100 percent, but we fought behind the scenes.”

Bush: BOO! Entire economy is in Danger!

from nytimes.com

September 25, 2008
Bush and Candidates to Meet on Bailout
By SHERYL GAY STOLBERG and DAVID M. HERSZENHORN

WASHINGTON — President Bush appealed to the nation Wednesday night to support a $700 billion plan to avert a widespread financial meltdown, and signaled that he is willing to accept tougher controls over how the money is spent.

As Democrats and the administration negotiated details of the package late into the night, the presidential candidates of both major parties planned to meet Mr. Bush at the White House on Thursday, along with leaders of Congress. The president said he hoped the session would “speed our discussions toward a bipartisan bill.”

Mr. Bush used a prime-time address to warn Americans that “a long and painful recession” could occur if Congress does not act quickly.

“Our entire economy is in danger,” he said.

On Capitol Hill, Democrats said that progress toward a deal had come after the White House had offered two major concessions: a plan to limit pay of executives whose firms seek government assistance, and a provision that would give taxpayers an equity stake in some of the firms so that the government can profit if the companies prosper in the future. Details of those provisions, and many others, were still under discussion.

Mr. Bush’s televised address, and his extraordinary offer to bring together Senator Barack Obama, the Democratic presidential nominee, and Senator John McCain, the Republican, just weeks before the election underscored a growing sense of urgency on the part of the administration that Congress must act to avert an economic collapse.

It was the first time in Mr. Bush’s presidency that he delivered a prime-time speech devoted exclusively to the economy. It came at a time when deep public unease about shaky financial markets and the demise of Wall Street icons such as Lehman Brothers has been coupled with skepticism and anger directed at a government bailout that could become the most expensive in American history.

The administration’s plan seeks to restore liquidity to the market and restore the economy by buying up distressed securities, many of them tied to mortgages, from struggling financial firms.
The address capped a fast-moving and chaotic day, in Washington, on the presidential campaign trail and on Wall Street.

On Capitol Hill, delicate negotiations between Treasury Secretary Henry M. Paulson Jr. and Congressional leaders were complicated by resistance from rank-and-file lawmakers, who were fielding torrents of complaints from constituents furious that their tax money was going to be spent to clean up a mess created by high-paid financial executives.

On Wall Street, financial markets continued to struggle. The cost of borrowing for banks, businesses and consumers shot up and investors rushed to safe havens like Treasury bills — a reminder that credit markets, which had recovered somewhat after Mr. Paulson announced the broad outlines of the bailout plan last week, remain under severe stress, with many investors still skittish.

Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the banking committee, said a deal could come together as early as Thursday. “Working in a bipartisan manner, we have made progress,” the House speaker, Nancy Pelosi, and Representative John A. Boehner, the Republican leader, said in a joint statement.

“We agree that key changes should be made to the administration’s proposal. It must include basic good-government principles, including rigorous and independent oversight, strong executive compensation standards and protections for taxpayers.”

Mr. Bush used his speech to signal that he was willing to address lawmakers’ concerns, including fears that tax dollars will be used to pay Wall Street executives and that the plan would put too much authority in the hands of the Treasury secretary without sufficient oversight.

“Any rescue plan should also be designed to ensure that taxpayers are protected,” Mr. Bush said. “It should welcome the participation of financial institutions, large and small. It should make certain that failed executives do not receive a windfall from your tax dollars. It should establish a bipartisan board to oversee the plan’s implementation. And it should be enacted as soon as possible.”

The speech came after the White House, under pressure from Republican lawmakers, opened an aggressive effort to portray the financial rescue package as crucial not just to stabilize Wall Street but to protect the livelihoods of all Americans.

But the White House gave careful thought to the timing; aides to Mr. Bush said they did not want to appear to have the president forcing a solution on Congress.

On Capitol Hill, Mr. Paulson, facing a second day of questioning by lawmakers, this time before the House Financial Services Committee, tried to focus as much on Main Street as Wall Street.
“This entire proposal is about benefiting the American people because today’s fragile financial system puts their economic well being at risk,” Mr. Paulson said. Without action, he added: “Americans’ personal savings and the ability of consumers and business to finance spending, investment and job creation are threatened.”

But it was the comments of Mr. Paulson, a former chief of Goldman Sachs, about limiting the pay of executives that signaled the biggest shift in the White House position and the urgency that the administration has placed in winning Congressional approval as quickly as possible.
“The American people are angry about executive compensation, and rightly so,” he said. “No one understands pay for failure.”

Officials said the legislation would almost certainly include a ban on so-called golden parachutes, the generous severance packages that many executives receive on their way out the door, for firms that seek government help. The measure also is likely to include a mechanism for firms to recover any bonus or incentive pay based on corporate earnings or other results that later turn out to have been overstated.

Democrats were also working to include tax provisions that would cap the amount of an executive’s salary that a company could deduct to $400,000 — the amount earned by the president.

At the same time, Congressional Democrats said they were prepared to drop one of their most contentious demands: new authority for bankruptcy judges to modify the terms of first mortgages. That provision was heavily opposed by Senate Republicans.

In addition, Democrats also are leaning toward authorizing the entire $700 billion that Mr. Paulson is seeking but disbursing a smaller amount, perhaps only $150 billion, to start the program, with future funds dependent on how well it is working.

Representative Barney Frank of Massachusetts, the lead negotiator for Congressional Democrats, said they also planned to insert a tax break to aid community banks that have suffered steep losses on preferred stock that they own in the mortgage finance giants Fannie Mae and Freddie Mac.

That change is in addition to others that already have been accepted by Mr. Paulson that would create an independent oversight board and require the government to do more to prevent foreclosures.
Mark Landler and Carl Hulse contributed reporting.

New era on Wall Street

from nytimes.com
September 23, 2008
Starting a New Era at Goldman and Morgan
By BEN WHITE

The transformation of Wall Street picked up pace on Monday as Goldman Sachs and Morgan Stanley, the last big independent investment banks, moved to restructure into larger, less risk-taking organizations that will be subject to far greater regulation by the Federal Reserve.

The changes came after Goldman and Morgan Stanley on Sunday night received permission from the Federal Reserve to become bank holding companies. The change means they will be able finance their activities with insured deposits but in return must reduce the amount they can borrow to make the kind of big trading bets that drove huge profits, and massive bonuses for executives, over the last several years of Wall Street’s latest Gilded Age.

Morgan Stanley moved quickly into the new era on Monday, announcing that it planned to sell up to a 20 percent stake in itself to Mitsubishi UFJ Financial Group, Japan’s largest commercial bank, for about $8 billion. Mitsubishi has $1.1 trillion in bank deposits, which will help bolster Morgan’s stability of financing. Goldman Sachs is also expected to move to increase its deposit base and add more capital to its balance sheet.

The changes by Morgan Stanley and Goldman essentially bring to an end the era of the big, independent Wall Street investment bank and a return to the model that dominated before the Glass-Steagall Act of 1933 forbade commercial banks from also owning securities firms.
Both banks said they requested the change in their status. But the changes also closely follow comments from executives at both investment houses saying their business model was not broken and that transforming into deposit-funded commercial banks would not necessarily help them perform better. This raised the question of whether the change was really voluntary, which both banks insist it was, or was mandated by a Federal Reserve eager not to have to come to the rescue of another flailing financial institution.

The changes, which came as Congress and the Bush administration rushed to pass a $700 billion rescue of financial firms, amount to a blunt acknowledgment that their model of finance and investing had become too risky and that they needed the cushion of bank deposits that had kept big commercial banks like Bank of America and JPMorgan Chase relatively safe amid the recent turmoil.

It also is a turning point for the high-rolling culture of Wall Street, with its seven-figure bonuses and lavish perks for even midlevel executives.

Commercial banks tend to produce both more modest profits and payouts to top executives.
“The kind of bonuses you saw on Wall Street over the last five years are not something you are likely to ever see again, not in our lifetime,” said Charles Geisst, a Wall Street historian and professor at Manhattan College.

By becoming bank holding companies, Morgan Stanley and Goldman are agreeing to significantly tighter regulations and much closer supervision by bank examiners from several government agencies rather than only the Securities and Exchange Commission. Now, the firms will look more like commercial banks, with more disclosure, higher capital reserves and less risk-taking.
For decades, firms like Morgan Stanley and Goldman Sachs thrived by taking bold bets with their own money, often using enormous amounts of debt to increase their profits, with little outside oversight.

They were the envy of Wall Street, dominating the industry’s most lucrative businesses, landing headline-grabbing deals and advising companies and governments on mergers, stock offerings and restructurings.

But that brash model was torn apart over the last several weeks as investors lost confidence in the way they made those bets during the recent credit boom, when investment banks expanded with aplomb into esoteric securities, the risks of which were not easily understood.

Over several harrowing days, clients started pulling their money, share prices plunged and these banks’ entire enterprises were brought to the brink.

In exchange for subjecting themselves to more regulation, the companies will have access to the full array of the Federal Reserve’s lending facilities.

It should help them avoid the fate of Lehman Brothers, which filed for bankruptcy last week, and Bear Stearns and Merrill Lynch — both of which agreed to be acquired by big bank holding companies.

The decision by the banks to become a holding company also raises questions about whether the Federal Reserve will seek to regulate hedge funds, many of the largest of which closely resemble investment banks like Goldman.

Just a year ago investment banks, the titans of global finance, considered bank regulation a millstone to be avoided at all costs. Commercial banks have to subject themselves to restrictions on how much money they can borrow and what kinds of businesses they can be in. Lobbyists for firms like Goldman spent years fending off closer supervision of their business.
As bank holding companies, the two banks, whose shares have lost about half their value this year, will have to reduce the amount of money they can borrow relative to their capital.
That will make them more financially sound but will also significantly limit their profits. Today, both Goldman Sachs and Morgan Stanley have $1 of capital for every $22 of assets. By contrast, Bank of America’s has less than $11 for every $1 of capital.

JPMorgan Chase acquired Bear Stearns this spring in a fire sale brokered by the federal government, while Bank of America has agreed to buy Merrill Lynch for $50 billion.
As bank holding companies, Morgan and Goldman will have greater access to the discount window of the Federal Reserve, which banks can use to borrow money from the central bank. While they were allowed to draw on temporary Fed lending facilities in recent months, they could not borrow against the same wide array of collateral that commercial banks could. The discount window access for investment banks is expected to be phased out in January.

It will take time for Goldman and Morgan to transform into fully regulated banks because they cannot quickly reduce how much money they borrow relative to their assets. Both banks are likely to seek waivers from the Federal Reserve to give them time to comply with the capital requirements imposed on deposit-funded commercial banks.

The Fed and the Securities and Exchange Commission have had examiners at investment banks since March, giving regulators huge insight into their operations.

Both banks already have limited retail deposit-taking businesses, which they plan to expand over time. Morgan Stanley had $36 billion in retail deposits as of Aug. 31 and Goldman Sachs had $20 billion in deposits.

“We believe that Goldman Sachs, under Federal Reserve supervision, will be regarded as an even more secure institution with an exceptionally clean balance sheet and a greater diversity of funding sources,” Lloyd C.Blankfein, the chairman and chief executive of Goldman, said in a statement on Sunday night.

John J. Mack, the chairman and chief executive of Morgan Stanley, said: “This new bank holding structure will ensure that Morgan Stanley is in the strongest possible position — with the stability and flexibility to seize opportunities in the rapidly changing financial marketplace.”

In recent days, Morgan Stanley had sought other ways to bolster its capital and had been in advanced talks with China’s sovereign wealth fund and others about raising billions of dollars, people briefed on the matter said Sunday night. It had also been talking about a merger with Wachovia, a large commercial bank based in Charlotte, N.C.

With their transition to operating as bank holding companies, those talks are likely to take a different form, because now Morgan Stanley can buy a commercial bank.

How the mighty have fallen. This ends the era of Investment Banks and 30:1 leverage and brings us into a European model with a merging of deposit and investment banking where fractal banking ratios allow leverage of about 9:1. I still feel thats very high but its "manageable." About time.

The "Dubya" Effect

from nytimes.com

August 5, 2008
G.O.P. Drops in Voting Rolls in Many States
By JENNIFER STEINHAUER

Well before Senators Barack Obama and John McCain rose to the top of their parties, a partisan shift was under way at the local and state level. For more than three years starting in 2005, there has been a reduction in the number of voters who register with the Republican Party and a rise among voters who affiliate with Democrats and, almost as often, with no party at all.

While the implications of the changing landscape for Mr. Obama and Mr. McCain are far from clear, voting experts say the registration numbers may signal the beginning of a move away from Republicans that could affect local, state and national politics over several election cycles. Already, there has been a sharp reversal for Republicans in many statehouses and governors’ mansions.

In several states, including the traditional battlegrounds of Nevada and Iowa, Democrats have surprised their own party officials with significant gains in registration. In both of those states, there are now more registered Democrats than Republicans, a flip from 2004. No states have switched to the Republicans over the same period, according to data from 26 of the 29 states in which voters register by party. (Three of the states did not have complete data.)

In six states, including Iowa, New Hampshire and Pennsylvania, the Democratic piece of the registration pie grew more than three percentage points, while the Republican share declined. In only three states — Kentucky, Louisiana and Oklahoma — did Republican registration rise while Democratic registration fell, but the Republican increase was less than a percentage point in Kentucky and Oklahoma. Louisiana was the only state to register a gain of more than one percentage point for Republicans as Democratic numbers declined.

Over the same period, the share of the electorate that registers as independent has grown at a faster rate than Republicans or Democrats in 12 states. The rise has been so significant that in states like Arizona, Colorado and North Carolina, nonpartisan voters essentially constitute a third party.

Swings in party registration are not uncommon from one year to the next, or even over two years. Registration, moreover, often has no impact on how people actually vote, and people sometimes switch registration to vote in a primary, then flip again come Election Day.

But for a shift away from one party to sustain itself — the current registration trend is now in its fourth year — is remarkable, researchers who study voting patterns say. And though comparable data are not available for the 21 states where voters do not register by party, there is evidence that an increasing number of voters in those states are also moving away from the Republican Party based on the results of recent state and Congressional elections, the researchers said.

“This is very suggestive that there is a fundamental change going on in the electorate,” said Michael P. McDonald, a senior fellow at the Brookings Institution and an associate professor of political science at George Mason University who has studied voting patterns.
Mr. McDonald added that, more typically, voting and registration patterns tended to even out or revert to the opposing party between elections.

Dick Armey, the former House majority leader and one of the designers of the so-called Republican Revolution of 1994, said: “Obviously, these are not good numbers for the party to be looking at. Democrats have always had extremely broad multifaceted registration programs.”
But in terms of the presidential election, Mr. Armey said the tea leaves were harder to read.
“I think the key in this one is, where do all these new independent voters break?” he said. “I think right now, you’ve got a guy in western Pennsylvania saying, ‘I am really disgusted right now and I’m not going to register as a Republican anymore, but I really don’t want this guy Obama elected.’ ”

Those in charge of state Democratic parties cite a national displeasure with the Bush administration as an impetus for the changing numbers, which run counter to a goal of Karl Rove, President Bush’s former top adviser, to create a permanent realignment in favor of Republicans.

“I think nationally and here, people are kind of tired of the way this administration has been conducting the policies of this country,” said Pat Waak, chairwoman of the Colorado Democratic Party.

Yet while an unpopular war, a faltering economy and a president held in low esteem have combined to hurt the Republican Party, Democrats are also benefiting from demographic changes, including the rise in the number of younger voters and the urbanization of suburbs, which has resulted in a different political flavor there, voting and campaign experts said. The party has also been helped by a willingness to run more pragmatic candidates, who have helped make the party more appealing to a broader swath of the electorate.

Among the 26 states with registration data, the percentage of those who have signed on with Democrats has risen in 15 states since 2004, and the percentage for Republicans has risen in six, according to state data. The number of registered Democrats fell in 11 states, compared with 20 states where Republican registration numbers fell.

In the 26 states and the District of Columbia where registration data were available, the total number of registered Democrats increased by 214,656, while the number of Republicans fell by 1,407,971.

The unsettled political ground has manifested itself in state and local elections. Twenty-three state legislatures are controlled by Democrats and 14 by Republicans, with 12 states with divided chambers (Nebraska has a nonpartisan legislature). After the 2000 election, 16 state legislatures were dominated by Democrats, and 17 by Republicans, with 16 divided.
It is a similar story in governors’ mansions. After the 2004 election, there were 28 Republican governors and 22 Democrats; those numbers are now reversed. After the 2000 election, there were only 19 Democratic governors.

Elected Democrats have made significant inroads even in places where Republicans have enjoyed a generation of dominance. In Colorado, for example, Democrats control the governorship and both houses of the Legislature for the first time in over four decades. Last year, Virginia Democrats gained a 21-to-19 majority over Republicans in the State Senate, the first time the party has controlled that body in a decade.

In New Hampshire, Democrats are in control of both the legislative and executive branches for the first time since 1874. In Iowa, Democrats have taken over the statehouse and the governor’s office simultaneously for the first time in a generation.

The changes in state government could have broad implications for Congressional redistricting and on policies like immigration, health care reform and environmental regulation, which are increasingly decided at the state level.

In many states, Democrats have benefited from a rise in younger potential voters, after declines or small increases in the number of those voters in the 1980s and ’90s. The population of 18- to 24-year-olds rose from about 27 million in 2000 to nearly 30 million in 2006, according to Census figures.

Mr. Obama’s candidacy has drawn many young people to register to vote, and some of the recent gains by Democrats have no doubt been influenced by excitement over his campaign. But even before Mr. Obama’s ascendancy among Democrats, younger voters were moving toward the Democratic Party, demographers said.

Dowell Myers, a professor of policy, planning and development at the University of Southern California, also noted that a younger, native-born generation of Latinos who have a tendency to support Democrats is coming of age.

Further, young Americans have migrated in recent years to high-growth states that have traditionally been dominated by Republicans, like Arizona, Colorado and Nevada, which may have had an impact on the changing registration numbers in those places.

The changing face of many American suburbs has also had in impact both in voter registration and voting patterns. In many major metropolitan areas, suburbs that were once largely white and Republican have become more mixed, as people living in cities have been priced out into surrounding areas, and exurban regions have absorbed those residents who once favored the close-in suburbs of cities.

“What we speculate is that density attracts Democrats,” said Robert Lang, director of the Metropolitan Institute at Virginia Tech who has researched voting patterns. “It is not that people move to those areas and change positions. It tends now to be a self-selection of singles, childless couples,” who tend to vote Democrat more than their married with children counterparts.

In the nation’s 50 largest metropolitan areas, Democrats carried nearly 60 percent of the Congressional vote in 2006 in inner suburbs, up from about 53 percent in 2002, according to Mr. Lang’s research.

This trend is particularly evident in places like St. Louis, southern Pennsylvania and Fairfax County, Va., which President Bush won in 2000 but lost in 2004.

Senator Claire McCaskill, Democrat of Missouri, who won her seat in 2006, picked up the large majority of voters in the St. Louis and Kansas City metropolitan areas, and Senator Jim Webb, also a Democrat, won his seat in a similar manner in Virginia, which has not voted for a Democrat for president since 1964.

Democrats have also succeeded, at least in part, by running centrist candidates where they are most needed. Bill Ritter, the Democratic governor of Colorado and former district attorney of Denver, opposes abortion rights. Among the men who flipped three of Indiana’s eight Congressional seats in the midterm election in 2006, two also oppose both abortion rights and gun control.

What the demographers, political scientists and party officials wonder now is whether the shift of the last few years will be sustained.

“Major political realignment is not just controlling the branches of government,” said Mr. McDonald of the Brookings Institution. “It is when you decisively do it. We haven’t seen that in modern generations.”

Rebecca Cathcart contributed reporting.

Recession - Q4 07?

U.S. Recession May Have Begun in Last Quarter of 2007 (Update2)
By Timothy R. Homan

July 31 (Bloomberg) -- The U.S. economy may have tipped into a recession in the last three months of 2007 as consumer spending slowed more than previously estimated and the housing slump worsened, revised government figures showed.

The world's largest economy contracted at a 0.2 percent annual pace in the fourth quarter of last year compared with a previously reported 0.6 percent gain, the Commerce Department said today in Washington. Growth for the period from 2005 through 2007 was also trimmed.
The revisions now reinforce measures such as employment and production that already signaled the economy was shrinking. The National Bureau of Economic Research, the Cambridge, Massachusetts-based arbiter of economic cycles, defines a recession as a ``significant'' decrease in activity over a sustained period of time. The declines would be visible in GDP, payrolls, production, sales and incomes.

``We're in a recession,'' Allen Sinai, chief economist at Decision Economics Inc. in New York, said in a Bloomberg Television interview. ``It's going to widen, it's going to deepen.''

The government also said incomes grew less than previously thought, raising the risk that consumer spending will again stumble after getting a temporary boost from the tax rebates last quarter.

Previous Contraction
The prior time the economy shrank was in the third quarter of 2001 during the last recession, when it contracted at a 1.4 percent pace. Growth from January through March was revised down to a 0.9 percent pace from 1 percent. Initial jobless claims increased by 44,000 to 448,000 in the week ended July 26, from a revised 404,000 the prior week, the Labor Department said.
The revisions of growth are part of the government's annual adjustments to gross domestic product based on additional information from surveys and Internal Revenue Service data.
For 2005, growth was cut to 2.9 percent from 3.1 percent, and the rate of expansion for 2006 was reduced to 2.8 percent from 2.9 percent. The economy grew 2 percent last year, down from a previously reported 2.2 percent.

Nine of the 13 quarters under review were revised down, three increased and one was unchanged.

The largest downward revision was for the last three months of 2007, as the previously reported 2.3 percent gain in consumer spending was reduced by more than half, to 1 percent. Americans cut back on the use of electricity and gas as fuel bills soared.

Upward Swing
The largest upward swing, from 3.8 percent to 4.8 percent, was for the second quarter of last year.

The figures also showed the housing slide that began in 2006 was worse than previously thought. Residential investment fell 32 percent in the two years ended in December 2007, compared with a prior estimate of 29 percent.

The popular definition of a recession -- two consecutive quarters during which the economy shrinks -- isn't always fulfilled.

``While everyone focuses on GDP, keep in mind that it is not the only barometer of economic activity,'' David Rosenberg, chief North American economist at Merrill Lynch & Co. in New York, said in a July 28 note to clients. Growth ``is subject to huge historical revisions.''

The four other factors that the NBER takes into account, Rosenberg said, peaked between October 2007 and February 2008. The NBER usually declares a recession has started between six to 18 months after it's begun, according to its Web site.

Less Income
American workers also earned less in the last two years than the government previously estimated. Employee compensation was reduced by $69 billion, or 0.9 percent, in 2007. Figures for wages and for benefits were reduced about equally. The reduction in benefits reflected smaller contributions by employers to health insurance plans.

The income reduction for last year was smaller than the drop in the spending estimate, leading to an increase in the savings rate to 0.6 percent from 0.5 percent.

In contrast, companies did better than previously thought for all three years. Corporate profits were boosted by $75 billion for 2005, by $115 billion for 2006, and by $47 billion last year.
There was little change on the inflation front. The price measure tied to consumer spending rose 3.5 percent in the fourth quarter of 2007 compared with the same period the prior year, up 0.1 percentage point from the prior estimate. Excluding food and fuel, the Federal Reserve's preferred measure, it rose 2.2 percent, also 0.1 percentage point higher.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net Last Updated: July 31, 2008 09:12 EDT

Unemployment claims rise over 400K

Thursday, July 03, 2008
Unemployment Claims Over 400K
by CalculatedRisk

First a correction: last week I mentioned that historically weekly claims increase after Congress passes an extension to unemployment insurance benefits. In the past, workers who had exhausted their benefits could reapply for extended benefits, and these workers were included in the first time claims report. Although the above was true during previous downturns, the DOL BLS has apparently changed their methodology and the extended benefits are not included in first time claims anymore.So the jump to 400K first time claims is not the result of Congress extending benefits (and it would be too soon anyway).Here is the current report from the Department of Labor for the week ending June 28, showing initial unemployment claims increased to 404,000, and the 4-week moving average was 390,500.

This graph shows the weekly claims and the four week moving average of weekly unemployment claims since 1989.

The four week moving average has been trending upwards for the last few months, and is now at 390,500 - solidly above the possible recession level (approximately 350K).

Posted by
CalculatedRisk
This graph shows the weekly claims and the four week moving average of weekly unemployment claims since 1989. The four week moving average has been trending upwards for the last few months, and is now at 390,500 - solidly above the possible recession level (approximately 350K).

Thank you again CR and Tanta for all the work you do. Calculated Risk listed in the blogroll is one of the best (if not THE best) economics blog out there. Unemployment is rising. As laid of workers retrain, for profit Education stocks will rise. Please do your own research. This is not a recommendation to buy or sell anything. This blog is not responsible for losses.

Dow Enters Bear Market! Its Official

U.S. Stocks Slump as Oil Surges; Dow Average Enters Bear Market
By Michael Patterson
July 2 (Bloomberg) -- U.S. stocks tumbled, sending the Dow Jones Industrial Average into a bear market, after oil rose to a record and steelmakers and coal producers tumbled on concern the economic slump will worsen.

The Standard & Poor's 500 Index slid to its lowest since July 2006 as crude climbed above $143 a barrel, dimming the outlook for corporate profits. General Motors Corp., the biggest U.S. automaker, plunged to a 54-year low on Merrill Lynch & Co.'s warning that ``bankruptcy is not impossible.'' Nucor Corp. led the biggest tumble in steel shares since 2002 as concern grew that the auto slump will cut demand and the government said metals orders declined. Peabody Energy Co., the biggest U.S. coal producer, tumbled as European prices fell the most since 2005.

``Investor sentiment is clearly miserable right now,'' said Wayne Wilbanks, who oversees about $1.2 billion as chief investment officer of Wilbanks Smith & Thomas Asset Management in Norfolk, Virginia. ``A lot of this misery among investors is starting to get priced into the indices.''
The Dow lost 166.75 points, or 1.5 percent, to 11,215.51. The S&P 500 plunged 23.38, or 1.8 percent, to 1,261.53, extending its 2008 loss to 14 percent. The Nasdaq Composite Index slid 53.51, or 2.3 percent, to 2,251.46. More than five stocks fell for each that rose on the New York Stock Exchange.

Technology and consumer shares also helped fuel the market's retreat after a private report showed a bigger-than-forecast drop in jobs last month. The 30-stock Dow average extended its retreat from the October record to more than the 20 percent, the first time since 2002 the gauge has closed below the threshold that signals a so-called bear market.

To contact the reporter on this story: Michael Patterson in New York at mpatterson10@bloomberg.net. Last Updated: July 2, 2008 16:09 EDT

Its official. The recession is here.

Case Schiller declines over 17% yoy

Case-Shiller Composite 20 Price Index Off 17.8% from Peak
by CalculatedRisk
From MarketWatch: Four years of home gains have been wiped out
Home prices in 20 major U.S. cities have dropped a record 15.3% in the past year and are now back to where they were in 2004, according to the Case-Shiller home price index released Tuesday by Standard & Poor's.Prices in the 20 cities are now down 17.8% from the peak two years ago. The biggest declines were seen in Las Vegas, Miami and Phoenix, with prices falling by 25% or more in the past year. Prices in 10 cities have fallen by more than 10%. Prices were lower in April than they were a year earlier in all 20 cities tracked by the Case-Shiller index.Note that the Composite 20 is not the national index, but this show prices are still falling in many areas of the country - and still falling quickly (the Composite 20 fell 1.4% in April alone).

As noted earlier, S&P reported that the Case-Shiller home price composite indices declined sharply in April. The Case-Shiller composite 20 index (20 large cities) was off 15.3% YoY through April, and off 17.8% from the peak.Note: the composite 20 index is not the National Price index, but this does suggests the national index will be off sharply in Q2.However, 8 of the 12 cities in the composite 20 saw month to month price increases.

Click on graph for larger image in new window.



This graph shows the price changes for several selected cities that I've been following. Prices continue to fall in the 'bubble' cities, like San Diego, Miami, and Las Vegas. Prices actually rose slightly in areas that saw less appreciation, like Denver and Cleveland. However this could just be seasonal noise, as these cities saw small increases last year at this time too.

The above post is courtesy Calculated Risk which is a blog I follow very closely. CR and Tanta the co-posters of that blog are very astute and they have been calling the housing downturn play by play. Thank you CR & Tanta for all the work you do.

Clinton Sweeps West Virginia

From nytimes.com
May 13, 2008

Transcript
Clinton’s Remarks in Charleston, W.Va.
The following is a transcript of Senator Hillary Rodham Clinton’s speech to supporters following the West Virginia primary, as provided by CQ Transcriptions.
HILLARY RODHAM CLINTON: Thank you all so much. Thank you.
(APPLAUSE)
You know, like the song says, it's almost heaven. (APPLAUSE)
And I am so grateful for this overwhelming vote of confidence.
(APPLAUSE)
Now, there are some who have wanted to cut this race short. They say, "Give up. It's too hard. The mountain is too high." But here in West Virginia, you know a thing or two about rough roads to the top of the mountain.
(APPLAUSE)
We know from the Bible that faith can move mountains.
(APPLAUSE)
And, my friends, the faith of the Mountain State has moved me.
(APPLAUSE)
I am more determined than ever to carry on this campaign...
(APPLAUSE)
... until everyone has had a chance to make their voices heard.
I want to command Senator Obama and his supporters. This continues to be a hard-fought race from one end of our country to the other. And, yes, we've had a few dust-ups along the way, but our commitment to bring America new leadership that will renew America's promise means that we have always stood together on what is most important.
Now, tonight, tonight, I need your help to continue this journey.
(APPLAUSE)
We are in the homestretch. There are only three weeks left in the final contests. And your support can make the difference between winning and losing. So I hope you'll go to HillaryClinton.com...
(APPLAUSE)
... and support our campaign.
You've heard this before. There are many who wanted to declare a nominee before the ballots were counted or even cast. Some said our campaign was over after Iowa, but then we won New Hampshire. Then we had big victories on Super Tuesday, and in Ohio, and Texas, and Pennsylvania. And, of course, we came from behind to win in Indiana.
So this race isn't over yet. Neither of us has the total delegates it takes to win. And both Senator Obama and I believe that the delegates from Florida and Michigan should be seated.
(APPLAUSE)
I believe we should honor the votes cast by 2.3 million people in those states and seat all of their delegates.
(APPLAUSE)
Under the rules of our party, when you include all 50 states, the number of delegates needed to win is 2,209, and neither of us has reached that threshold yet. This win in West Virginia will help me move even closer.
(APPLAUSE)
Now, in a campaign, it can be easy to get lost in the political spin and the polls or the punditry, but we must never lose sight of what really counts, of why all of us care so much about who wins and who loses in our political system.
An enormous decision falls on the shoulders of Democratic voters in these final contests and those Democrats empowered to vote at our convention. And, tonight, in light of our overwhelming victory here in West Virginia, I want to send a message to everyone still making up their mind.
I am in this race because I believe I am the strongest candidate...
(APPLAUSE)
... the strongest candidate to lead our party in November of 2008, and the strongest president to lead our nation starting in January of 2009.
(APPLAUSE)
I can win this nomination, if you decide I should. And I can lead this party to victory in the general election, if you lead me to victory now. The choice falls to all of you, and I don't envy you.
I deeply admire Senator Obama, but I believe our case -- a case West Virginia has helped to make -- our case is stronger. Together, we have won millions and millions of votes. By the time tonight is over, probably 17 million, close to it.
We've won them in states that we must be prepared and ready to win in November: Pennsylvania and Ohio, Arkansas and New Hampshire, New Jersey, New Mexico, Nevada, Michigan, Florida, and now West Virginia.
(APPLAUSE)
It is a fact that no Democrat has won the White House since 1916 without winning West Virginia.
(APPLAUSE)
The bottom line is this: The White House is won in the swing states, and I am winning the swing states.
(APPLAUSE)
And we have done it by standing up for the deepest principles of our party, with a vision for an America that rewards hard work again, that values the middle class, and helps to make it stronger.
With your help, I am ready to go head-to-head with John McCain to put our vision for America...
(APPLAUSE)
... up against the one he shares with President Bush.
Now, I believe our party is strong enough for this challenge. I am strong enough for it. You know I never give up. I'll keep coming back, and I'll stand with you as long as you stand with me.
(APPLAUSE)
Together, we will draw the stark distinctions that will determine the future direction of our nation, the difference between ending the war in Iraq responsibly or continuing it indefinitely, between health care for everyone and more uninsured Americans, between standing up for the middle-class families that you represent or standing up for the corporate special interests.
So I ask you, Democrats, to choose who you believe will make the strongest candidate in the fall and who is ready to execute the office of the presidency of the United States.
(APPLAUSE)
People ask me all the time, why am I in this race? Well, I'm in it because of the people that I have worked for my entire life and the people I meet along the campaign trail, people who need someone who fights for them, because they're fighting so hard every single day, the people who drive for miles to show their support, who come with the homemade signs, who raise money by skipping those dinners out, who have stood fast and stood strong.
I'm in this race for the millions of Americans who know that we can do better in our country...
(APPLAUSE)
... for the nurse on her second shift, for the worker on the line, for the waitress on her feet, for the small business owner, the farmer, the teacher, the coal miner, the trucker, the soldier, the vet, the college student...
(APPLAUSE)
... all of the hardworking men and women who defy the odds to build a better life for themselves and their children, you will never be counted out, and I won't, either. You will never quit, and I won't, either.
(APPLAUSE)
The question is, why do so many people keep voting? Why did 64 percent of Democrats say in a recent poll they wanted this race to continue? Because...
(APPLAUSE)
... in the face of the pundits and the naysayers, they know what is at stake. They know that we have two wars, an economy in crisis, on the brink of a recession, $9 trillion of debt, oil prices shooting through the roof, gas prices and grocery prices hurting people who desperately are looking for a way to just keep going day to day.
They know they need a champion. They need someone who's going to never stop fighting for health care that covers everyone, no exceptions; for an economy that lifts everyone up; for good jobs that won't be shipped overseas; for college affordability; for all that you can do to own a home and then to keep it.
(APPLAUSE)
AUDIENCE: Hillary! Hillary! Hillary! Hillary! Hillary! Hillary! Hillary! Hillary! Hillary! Hillary! Hillary! Hillary!
MRS. CLINTON: This election is fundamentally about whether or not the American dream remains alive and well, for our children and our grandchildren. This is the core of my life and my political beliefs, that we owe so much to future generations, that we do not want to see that dream recede, that we know people have to work hard, and we expect you to do just that, and to take responsibility.
But at the very least, you should have a president who's on your side again.
(APPLAUSE)
And I believe that this campaign has been good for the Democratic Party and good for our country. People are discussing and debating issues. They are turning out in record numbers to register and to vote. There is an excitement about politics that is the lifeblood of our democracy.
(APPLAUSE)
For me, this election isn't about who's in or who's out or who's up or who's down. It's about the common threads that tie us together: rich and poor, young and old, black and white, Latino and Asian, Democrats, Republicans, and independents, we are united by common values.
We all want a better world for our children, and we want the best for our country. And we are committed to putting a Democrat back in the White House.
(APPLAUSE)
And our nominee will be stronger for having campaigned long and hard, building enthusiasm and excitement, hearing your stories, and answering your questions. And I will work my heart out for the nominee of the Democratic Party to make sure we have a Democratic president.
So as we look at the stakes in this election, I think we can all agree it's been unprecedented. We haven't had an election like it for as long as anyone can remember.
It is still so close, and it really does depend upon those who will vote in these next contests and those who have the awesome responsibility as delegates of our great Democratic Party.
I'm asking that people think hard about where we are in this election, about how we will win in November, because this is not an abstract exercise. This is for a solemn, crucial purpose: to elect a president to turn our country around, to meet the challenges we face and seize the opportunities.
It has been a long campaign. But it is just an instant in time when compared with the lasting consequences of the choice we will make in November.
That is why I am carrying on. And if you give me a chance, Democrats, I'll come back to West Virginia in the general election, and we'll win this state, and we'll win the White House.
(APPLAUSE)
I am honored and grateful for the support and hospitality of the people of West Virginia. I spent a few minutes with your wonderful national treasure, Senator Byrd, this morning.
(APPLAUSE)
And we talked about his beloved West Virginia. I told him where I'd gone and what I'd seen. I talked about the people I had met. And he just broke into the biggest smile.
(LAUGHTER)
I don't know that any man has ever loved a state more than Robert C. Byrd loves West Virginia.
(APPLAUSE)
I am grateful for the graciousness of Governor and Mrs. Manchin. Governor Manchin is winning a great victory himself tonight, and I want to thank Joe and Gayle for welcoming me to Governor Manchin's hometown, as we went to Fairmont for a great election last night.
I want to thank Senate Majority Leader Truman Chafin, former Governor Hulett Smith, Brigadier General Jack Yeager, all of the West Virginia veterans who honored me by their support, and I honor their service.
(APPLAUSE)
Thanks to my friends in the labor unions who stood with us every step of the way. We wouldn't be here without you.
(APPLAUSE)
And a special thanks to my outstanding staff, volunteers and supporters here in West Virginia and across America.
(APPLAUSE)
You know, at least once, usually a half-a-dozen times a day, Bill and Chelsea and I check in with each other. And I wish every West Virginian could have heard our calls as we compared our experiences here in this state.
(LAUGHTER)
We've had the best time.
(APPLAUSE)
And I will be back. As we move on now to the next contests, in Kentucky and Oregon, in Puerto Rico, in Montana and South Dakota, tonight I'm thinking about Florence Steen from South Dakota, 88 years old and in failing health when she asked that her daughter bring an absentee ballot to her hospice bedside.
Florence was born before women had the right to vote, and she was determined to exercise that right...
(APPLAUSE)
... to cast a ballot for her candidate, who just happened to be a woman running for president.
(APPLAUSE)
Florence passed on a few days ago, but I am eternally grateful to her and her family for making this such an important and incredible milestone in her life that means so much to me.
I'm also thinking of Dalton Hatfield, an 11-year-old boy from Kentucky, who sold his bike and sold his video games to raise money to support my campaign.
(APPLAUSE)
This is a great and good nation because of people like Florence Steen, Dalton Hatfield, and their families. Her memory and his future are worth fighting for, as long as we remember that there is no challenge we cannot meet, no barrier we cannot break, no dream we cannot realize.
So let's finish the job we started. America is worth fighting for.
Thank you, and God bless you, and God bless America. Thank you all so very much.


I think she meant "time to COMMEND Senator Obama and his supporters." This is not about being the nominee anymore. This is about being in history books. And I say Good for you Hillary. You have been a good foil for Barack. The dual campaigns have been driving Republicans CRAZY! They dont have enough time to brand Barack Hussein Obama by transposing his name and his picture with Saddam Hussein and Osama Bin Laden." Take your campaign all the way to the convention and buy Barack more time.

Jamie Dimon on the Consumer Recession

Long slump may follow crunch: JPMorgan CEO
Mon May 12, 2008 2:37pm EDT

By Joseph A. Giannone
NEW YORK (Reuters) - JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) Chairman and Chief Executive Jamie Dimon on Monday told bank investors that while the current credit market crunch may soon be over, the U.S. economy could still face a deep and extended recession.
The slump in mortgage and corporate loan markets could bottom out this year, said Dimon, whose bank largely side-stepped the losses and mark-downs that have hobbled rivals during the past year.
Yet the economy may face a longer-term challenge even as financial markets begin to function again, the "slower burn" of a recession that may rival the severity of the 1982 contraction, he said.
These challenging conditions, marked by tighter bank credit, new rounds of mark-downs, further capital infusions and asset sales by banks, could last through next year and into 2010, he said.
If that happens, Dimon warned that New York-based JPMorgan and its national consumer lending businesses would suffer some significant losses, such as home equity losses doubling to $900 million by year-end.
Dimon further warned that the bank would have to continue boosting loan-loss reserves if economic conditions deteriorate, further eating into profit.
In the current quarter, Dimon said subprime mortgage losses could rise to between $200 million and $250 million, with prime mortgages generating about $100 million in losses.
Loss rates in JPMorgan Chase's massive credit card business are expected to reach 5 percent in the second quarter and rise to as high as 6 percent next year, while at the same time interest and fee revenue decline.
The third-largest U.S. bank also expects to write down "several-hundred-million" dollars of auction rate securities, he said.
(Editing by Braden Reddall)