David Kirkpatrick

May 14, 2010

Good news everyone, unemployment is rising

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 5:40 pm

Here’s the story behind that counterintuitive header:

It sounds dreadful. After drifting down consistently since last fall, the unemployment rate has suddenly shot up again, from 9.7 percent in March to 9.9 percent in April. But don’t despair: A rising unemployment rate is actually one of the best signs yet that the economy is bouncing back.

The unemployment rate rose for the right reason. Instead of shedding jobs, employers added 290,000 jobs in April, the strongest showing since 2007. The reason the unemployment rate went up is that a lot more people are suddenly looking for work. The government said that the labor force swelled by 805,000 people in April. That’s more than three times the number of new jobs, so the proportion of people looking for a job but unable to find one went up. Still, that big increase in the labor force marks an important shift in sentiment among people on the fringes of the economy.

March 25, 2010

Congress working on small business and construction aid

With health care over and done Congress is already looking to boost an ailing Main Street.

From the link:

The House approved 246-178 a bill designed to boost investment in small businesses, which have been reluctant to take on new workers as the economy recovers from the worst recession in 70 years.

The bill would also expand subsidies for state and local construction bonds in an effort to bring down the 9.7 percent unemployment rate ahead of the November congressional elections.

Democrats noted that the popular Build America bond-subsidy program has funded $78 billion in state and local construction projects.

“It’s been an effective tool in job creation,” said the bill’s author, Ways and Means Committee Chairman Sander Levin.

January 26, 2010

Small business tax credit still in play

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 2:09 pm

It may have died in Congress, but a tax credit for small businesses creating jobs is a good idea. There are pros and cons, but overall Main Street needs this. Companies need a little more financial flexibility, especially if they legitimately need to add employees, and people out there just need more jobs.

From the link:

President Barack Obama’s push to create jobs includes a new tax credit for small businesses that add employees, an idea that fell flat in Congress last year and continues to have skeptics this year.

The idea has appeal as the nation struggles with an unemployment rate topping 10 percent. But House Democrats left out Obama’s proposal when they passed a jobs bill in December because they didn’t know how to target the credit effectively. The Obama administration still hasn’t provided details on how the tax credit would work, and some tax experts question whether it would.

December 10, 2009

TARP costs coming in $200B under expectations

Looks like the Obama administration is going to put some toward the deficit and some toward Main Street. Given the facts on the ground, this sounds like fairly conservative fiscal policy to me. Quite a revelation after the last eight years.

From the link:

The government recently announced that the Troubled Asset Relief Program (TARP), established at the height of the financial crisis last year to recapitalize the nation’s banking system, will cost $200 billion less than expected. Obama wants that money redeployed into additional stimulus initiatives: “This gives us a chance to pay down the deficit faster than we thought possible and to shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street,” Obama said Tuesday.

Getting Main Street hiring again is key to job recovery: Small businesses have created 65% of new jobs in the past 15 years, according to government estimates. Obama’s latest set of proposals includes several brand-new measures, as well as extensions of existing stimulus acts.

December 7, 2009

The small business credit crunch and unemployment

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 5:41 pm

These two elements — little to no credit for small business and a difficult rebound from deep unemployment — are integrally tied together. Small business jobs are the backbone of the U.S. economy, and small businesses need revolving credit to help ensure cash flow. When your accounts receivable go from averaging 20 days to averaging 45 days, ongoing business expenses become an issue.

I know several small businesses that are currently in a state where invoices are getting paid late so in consequence the companies pay late and the entire cycle helps no one. With banks not providing credit to worthy small businesses the entire system is being ground down by a lack of liquidity.

This example is almost beyond belief and perfectly illustrates where the banking industry — both local and national — is doing real damage to the economy’s small business backbone.

From the link:

Veteran Chicago restaurateur Ivan Matsunaga needs a $300,000 loan to finance a renovation of his flagship pizza restaurant into a higher-end eatery. The revamp is required for his lease renewal, but it will also create job opportunities: Matsunaga estimates that he’ll need five additional staffers to run the updated restaurant.

Three banks turned down his loan request — including a community bank Matsunaga personally invested in at its launch three years ago.

“How perplexing is it that they would not reciprocate? What type of banking environment exists where they currently have $100,000 of my money and yet they won’t give me a loan?,” Matsunaga asked at the hearing. “If my bank were to approve my loan today, I, for one, would create jobs immediately.”

Big banks have shaved more than $10 billion from their small business lending totals over the past six months, which drew sharp criticism from Senators at Wednesday’s hearing. “I know that my situation is not unique,” Matsunaga said. “I have had numerous discussions with my peers who are frustrated by these same issues.”

November 16, 2009

Business tax credit for job creation

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 4:56 pm

A good idea that ought to become a law:

A Democratic US senator on Friday unveiled details of a plan to create a tax credit for businesses that create jobs, as the White House has called a December summit to tackle sky-high unemployment

Senator Russ Feingold’s proposal would establish a tax credit over the next two years for businesses that hire new employees, expand work hours for current employees, or raise worker pay, his office said.

“While there’s no easy way to solve the unemployment problem, the jobs tax credit would be a targeted and responsible tool to help businesses hire workers and bring down unemployment,” according to Feingold.

The credit would amount to 15 percent of eligible payroll for 2010 and 10 percent in 2011 — and would exclude pay increases for very highly salaried workers, as well as the wages of firm owners or family members.

June 26, 2009

News on the stimulus

This is one of those bonus two posts in one.

Up first is an update on the stimulus job guidelines, something the states have been waiting for from the Fed. Sounds like the method for counting jobs created by the stimulus program is a bit fast and loose.

From the link:

From the minute President Obama declared that the $787 billion federal economic stimulus package would save or create 3.5 million jobs, state officials have been confused about how to count those jobs.

Now, four months later, the White House has offered states guidance. The advice includes a description of the programs subject to the job-reporting requirements.

“All we’re asking them (states) to do is a simple headcount,” Rob Nabors, deputy director of the White House Office of Management and Budget, told the Wall Street Journal.

In other words, he said, recipients of federal stimulus dollars should use their best guess as to whether a job would have been saved or created if the stimulus plan had not been approved.

Some critics say such leeway could lead to contractors and state officials inflating the job numbers, or undercounting.  They also worry that employers, in reporting to states the number of jobs generated or saved, will not be diligent about including subcontractors.

“It also seems that OMB is not imposing strict rules on how employers measure the number of jobs retained as a result of stimulus funding and is willing to let them lump together jobs created and jobs retained,” said  Good Jobs First, a national jobs policy resource center in Washington, D.C.

Next up is a little analysis on why the stimulus isn’t doing all that much stimulating from Bruce Bartlett.

From the link:

For a program to be stimulative, it must bring forth economic activity that otherwise would not have taken place. The classic example is public works. When a new road or bridge is built, construction companies have to purchase concrete, steel and other materials that create business for other companies. They also employ workers that otherwise would not be working, paying them wages that they will spend, producing jobs and incomes for other workers.

If this works the way it is supposed to, stimulus spending has a multiplier effect throughout the economy. A Council of Economic Advisers study estimated that government purchases of goods and services raise the gross domestic product by $1.57 for every $1 spent. By contrast, tax credits and income transfers are much less stimulative, raising GDP by considerably less than $1 for every $1 rise in the deficit.

Since 60% of the stimulus package had a multiplier effect of less than one, only 40% of the package went to programs like public works that have a high multiplier. Moreover, the programs with a low multiplier were the fastest ones to implement; those with a high multiplier take much more time to come online. According to Elmendorf, by the end of fiscal year 2009, which ends on Sept. 30, about a third of the least stimulative spending will have been spent vs. only 11% of the highly stimulative spending.

January 15, 2009

House Democrats ready $850B stimulus

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 4:17 pm

We all knew it was coming, but get ready. The House is putting the finishing touches on a $850 billion stimulus package.

Wow.

From the link:

House Speaker Nancy Pelosi said Wednesday that Democrats are close to finalizing the details of an economic recovery package.

Pelosi declined to give reporters any details of the bill, but said she is more confident that Congress would reach the mid-February deadline for getting a bill to Obama’s desk.

“It’s about four words — jobs, jobs, jobs, jobs,” she said.

The overall price tag for the package is $800 billion to $850 billion, with $300 billion to $325 billion designated for tax cuts and $500 billion to $525 billion dedicated to infrastructure spending and aid to the states, according to a senior House Democratic aide.

It’s possible an announcement will be made on Thursday, the aide said.

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