Making Payroll

One of the key objectives of any business, large or small, is "making payroll". In concept, it is extremely simple. Making payroll simply means having enough funds available to pay all your employees after having paid all other expenses and taxes. If there aren't enough funds to pay everybody, some worker or workers will have to go. Whenever making payroll is already tight, the business can't afford to hire any new employees.

Right now, it is "making payroll" that is behind the loss of jobs and the high rate of unemployment. It is also why business aren't hiring. All that business owners can see ahead of them is higher expenses and higher taxes that might make them less capable of "making payroll" in the future.

Business owners see is that their own state legislatures are raising taxes in order to fight rising state deficits. They see the advantage of the Bush Tax Cuts being ripped away from them next year. These see themselves being forced to provide health care benefits to all their employees or pay an 8% payroll tax penalty under the current health care reforms that are in Congress. They see high energy related expenses and also see themselves being forced to buy carbon credits if Cap and Trade is passed or if the EPA imposes carbon-controlling fines. They could also see unionization of their workforce if Card Check passes and they wind up having to pay their employees higher union wages and benefits.

All these factors weigh on their ability to make payroll.

What Obama and his naive academic economic advisers don't seem to understand is that business won't hire unless they can be assured that they can continue to make payroll. Giving a business a silly $5,000 tax credit to entice them to hire new employees is just political B.S. and stupidity when, in fact, those same businesses could be looking at many more times that number in increased taxes and expenses due to Obama's planned legislation.

If Obama really wants to create jobs, he should scrap health care reform and Cap and Trade. He should guarantee that the Bush Tax Cuts stay in place for at least another 5 years. Then, and only then, will business start hiring again.

Gaming The Unemployment Rate

Last month, the unemployment rate unexpectedly dropped despite the loss of more jobs. The reason for is this is the fact that the Obama Administration is gaming the numbers by shrinking the workforce.

Every month, Obama's Bureau of Labor and Statistics (BLS) conducts a phone survey of about 50,000 respondents -- called the household survey -- to determine if people are working full-time or on a temporary basis; are unemployed and receiving benefits; or have just stopped looking for a job altogether (the so-called discouraged worker).

What the BLS has been able to do is to shrink the workforce by lopping off discouraged workers in the assumption that they are longer part of the overall workforce. But these are people who would really work if they could. The discouraged worker could be a college graduate who's living at home and waiting for the employment situation to improve. That kind of worker could also be a spouse who decided to be the house mom or dad until things get better. But, who ever they are, eliminating them from the report causes the overall workforce to be a smaller part of the economy; resulting in a better than actual unemployment rate.

Just think about it. If you make ten phone survey calls and you find out that you have contacted eight full-time workers; one unemployed worker still looking for work; and one unemployed discouraged worker who is not looking for work; and, you completely ignore the discouraged worker in you calculations, you wind up with an unemployment rate of about 9 percent (one unemployed worker out of nine with one other being exclude from the report completely). But, if you included that discouraged worker in the tally, the result would be a 20 percent unemployment rate because you would now have an overall workforce of 10 people; of which two workers are being truly unemployed.

Theoretically, the discouraged worker is not part of the workforce. But, then, so too is the worker who is unemployed and collecting benefits and not really looking for a job. So is the injured worker who can't start looking for work until he/she is well.

I think that this is a convenient "loophole" in the reporting that distorts the truth. To me, that is why it is important to understand the true number of non-working Americans: the unemployed, the under-employed, and the discouraged worker. You can find that data at the Shadow Government Statistics site: (Click to See Site Data)

Obama's Squandered Year

I think history will record that Barack Obama squandered a complete year of rare political power. He came into office with a tailwind at his back with a nearly 70 percent public approval rating. He had complete control of both Houses of Congress. Yet, in the end, he accomplished hardly anything and failed at many campaign promises. He couldn't even close Gitmo; one of his first promises after taking office. His approval rating slid below 50% and well below the overwhelming winning percentage of 53% that brought him into office; handing him a record low approval rating for his first year in office that has been rarely, if ever, seen.

History appreciates Presidents who can come into office and manage to achieve great accomplishments while the opposition party has complete control of one or both of the Houses of Congress. That takes a real leader.

However, it takes a completely inept and naive "bungler" to hold all the cards and still lose the card game!

Senator Landrieu Ignores The Big Bus She Threw The Rest Of America Under

In an emotional speech on the Senate floor, Louisiana Senator Mary Landrieu defended her payoff of the $300 million of taxpayer funds for her state, in exchange for her vote for ObamaCare by saying she would "never, ever throw the people of her state under the bus."



Unfortunately, Ms. Landrieu seems clueless as to why there is so much anger in America over her particular case of bribery -- now commonly referred to as the Louisiana Purchase. It isn't because she didn't throw the people of Louisiana under the bus. She was just being their pimp. Instead, the anger is over the fact that she threw the rest of America under that bus!

The Stimulus Package: Prolonging Bad Behavior

If you listen to Barack Obama, the Stimulus Package helped keep teachers, policemen, and fireman in their jobs. But, this was just enabling bad fiscal behavior. That bad behavior was excessive spending by extremely liberal legislatures -- with California, New York, Michigan, Pennsylvania, and New Jersey leading the pack.

By filling the state's coffers with additional Federal funds to supposedly save these jobs, these states failed to arrive at the hard decisions that are necessary to make them fiscally responsible going forward. So, just like a druggie son who gets cash from his parents to keep enabling his habit, the states will ultimately have to come back to the well to visit their rich uncle -- Uncle Sam -- in order to keep there spending habits going until such time as they really do make the hard choices that are needed to shake them free of their Federal sugar daddy.

In this recession, many households and businesses are going without or with a lot less in order to survive. The state governments should do the same and should learn that -- going forward --- they can't just keep raising taxes and keep spending every tax dollar that comes in the door on new and more expensive programs. The teacher, police, and fire unions need to understand that constantly pressing for higher and higher salaries, earlier retirements, and more and more luxury benefit packages has its consequences when the economy goes sour.

Sadly -- and thanks to Obama's Stimulus Package -- that is a lesson that these states haven't learned. It, too, is a lesson that AIG and some banks should have learned and didn't because of the Federal TARP bailouts. We need to let some entities fail so that they can become leaner and meaner and able to survive any future recessions. There are other ways to handle "too big to fail" without giving handouts. And, that's just my opinion.

Job Losses Make The Unemployment Rate Better?

Last month, our economy shed another 20,000 jobs. Yet, the unemployment rate went down from 10% to 9.7% (Click to See the Full CNBC Story: "Economy Sheds 20,000 Jobs But Rate Drops to 9.7 Percent").

The Bureau of Labor and Statistics (BLS) said that the rate went down because they "found" 541,000 jobs that they hadn't counted before. But, in contradiction to that number, the BLS also said that our economy shed more jobs than had been previously thought. Instead of our economy losing 7.2 million workers since the beginning of the recession, it is now estimated that 8.4 million workers actually lost their jobs in that very same time frame. That's 1.2 million more jobs lost in comparison to the 541,000 that the BLS said they had magically found. Yet, still, the unemployment rate dropped!

Remember, at one time the unemployment rate was 10.4 percent. Since then we have continued to lose more and more jobs. But, unbelievably, the rate has managed to drop to 9.7 percent in this latest month's report. That's almost a miracle! And, how convenient going into this year's election cycle.

Most people will just look at the headline number of 9.7% and will see that the unemployment rate is getting better without even questioning how illogical that number actually is. And, politically, that's all that the Obama Administration and the Democrats really want.

As I had noted before, it is hard to believe that the national unemployment rate has fallen when the majority of States and a majority of our metropolitan areas are seeing higher and higher rates of unemployment each month.

As Mark Twain aptly said: "There are lies, damned lies, and statistics." However, I would think that if Mr. Twain lived today, he might just say: "There are lies, damned lies, and the Bureau of Labor and Statistics."

Please also note that the BLS is arbitrarily "shrinking" the workforce by excluding those people who have stopped looking for jobs -- the so-called discouraged worker. I will write a blog on this distortion in the not too distant future.

Increased Productivitiy: Labor's Nemesis During a Recession

Last week's first-time claims for unemployment insurance came out this morning and, once again, they were higher than expected. A consensus survey of economists had projected that the claims number would be around 455,000; but, it was higher at 480,000. In a non-recessionary period, that number would normally be below 300,000.

But, more than the fact that more workers were laid off than expected, the productivity number for this report jumped by an amazing 6.2 percent (Click to See Full Story from CNBC: "Jobless Claims Still Gaining; Productivity Up 6.2 Percent").

Simply speaking, a productivity increase like that means that businesses are finding ways to do the same amount of work with fewer people. With the job market as tight as it is, the average worker is being forced to work harder or longer and there isn't much that they can say or do about it because there is -- on average -- more than 6 unemployed workers who would be standing in line for any job that becomes available. So, now is not the time to quit your job if you have one.

Productivity increases have a long term effect on labor as businesses find better ways to produce the same output with less people and lower costs. Often, it is these "learned" productivity increases that help sustain high unemployment levels for long periods of time after an economic recovery has actually taken place. That's why unemployment is often referred to as a lagging indicator of recovery. So, in effect, time is not on labor's side. The longer the recession lasts, the harder it will be for America to get completely back to work. That's what happened during the Great Depression.

Sadly, we lost a whole year of high unemployment and stiff increases in productivity to this President and a Congress whose policies were more focused on health care, closing Gitmo, passing Cap and Trade, and paying off a voting constituency with a phony stimulus plan. In that year, businesses "learned" how to increase productivity and, ultimately, the unemployed will suffer a lot longer because of it.