Jim & Those "12,000 New Jobs"

In his State of the State address, the Governor said "As a result of our steadfast focus on economic growth, in the last five years, we've created 12,000 new jobs".

First, according to the VT Dept. of Labor, "employment" is up 11,100 in the last 5 years, not 12,000.

Second, the Gov. was referring to "employment", which includes the self-employed and those who work without pay in family enterprises. If we count only "jobs" ("non-farm payroll employment"), the figure is 10,400. But 2,300 of those are government jobs so the private sector total is only 8,100. [Is the Governor suggesting that his "steadfast focus on economic growth" had anything to do with federal, state, and local government hiring? And why would a governor who just announced his intention to cut 400 state jobs brag about the growth in public employment?]

Third, for the five years prior to the last recession, private sector non-farm payroll jobs grew by 25,000; more than three times the 8,100 during the Governor's five year tenure.

Fourth, the 8,100 net new private sector jobs represent an increase of 3.3% over five years. During the same period, U.S. private sector non-farm payroll jobs grew by 6.9%.

Finally, the Governor said nothing about the types of jobs that have been created. Almost a third of the net new private sector jobs are in "social assistance" which has an average wage of less than $17,000.

So while being "steadfast" is usually considered a virtue, it doesn't make much sense if the policies aren't working.

Doug Hoffer

Jobs: Rest of the Story

Once again, the monthly press release from the VT Dept. of Labor failed to provide sufficient historical perspective. Here is the data the DoL did not show you. After regaining the jobs lost during the recession, we've gained only 3,500 net new private sector jobs in the last three years (and the annual figure has declined each year).

Vermont Net Priv. Sector Job Growth: Nov. - Nov.
91 - 92	4,100
92 - 93	6,400
93 - 94	5,200
94 - 95	5,800
95 - 96	3,700
96 - 97	5,400
97 - 98	3,000
98 - 99	8,300
99 -00	3,700
00 - 01	-600
01 - 02	-3,800
02 - 03	1,600
03 - 04	3,100
04 - 05	1,400
05 - 06	1,200
06 - 07	900

And as you can see below, net private sector job growth in VT even lags behind the otherwise weak US recovery. In four of the last five years, VT annual private sector job growth has been less than 1%.

Annual % Change in Priv. Sector Jobs: Nov. - Nov.
	VT	US
91 - 92	2.0%	0.8%
92 - 93	3.1%	2.7%
93 - 94	2.4%	3.9%
94 - 95	2.6%	2.3%
95 - 96	1.6%	2.7%
96 - 97	2.3%	3.0%
97 - 98	1.3%	2.6%
98 - 99	3.5%	2.6%
99 - 00	1.5%	1.7%
00 - 01	-0.2%	-1.8%
01 - 02	-1.5%	-0.7%
02 - 03	0.6%	-0.1%
03 - 04	1.2%	1.7%
04 - 05	0.6%	2.1%
05 - 06	0.5%	1.8%
06 - 07	0.4%	1.1%

What happened to Jim = Jobs?
Isn't it time to re-examine our policies?

Doug Hoffer
[all data is from the VT DoL, CES, seasonally adjusted]

A Downward Push: The Impact of Wal-Mart Stores on Retail Wages and Benefits

By Arindrajit Dube, T William Lester and Barry Eidlin

This study finds that Wal-Mart store openings lead to the replacement of better paying jobs with jobs that pay less and are less likely to provide health benefits. Wal-Mart's entry also drives wages and benefits down for workers in competing industry segments such as grocery stores.

Living Wage Policies and Wal-Mart

How a Higher Wage Standard Would Impact Wal-Mart Workers and Shoppers
by Arindrajit Dube, Dave Graham-Squire, Ken Jacobs, and Stephanie Luce

In July 2006, the Chicago City Council passed a "Big Box Living Wage Ordinance," mandating that all retail stores larger than 90,000 square feet and operated by companies making more than $1 billion a year in revenue pay workers a minimum hourly wage of $10 per hour. The ordinance was vetoed by Mayor Richard Daley in September 2006, who said the measure would be harmful to the city.

The growth of big box retail is a mixed blessing to local communities. There is strong evidence that jobs created by Wal-Mart in metropolitan areas pay less and are less likely to offer benefits than those they replace.
read more...

Home Heating Aid & Effiency

Vermonters are facing a 26 percent hike in their heating fuel bills this winter. The fuel assistance issue needs to be front and center in more minds in Vermont than it is. It can be summarized as follows: Last year, if a household was at or below 125% of federal poverty and applied for fuel assistance for the full seasonal benefit, they were awarded, on average about $1,370. This year's average full season fuel benefit is $1,170 - down $200 - while prices of nearly every fuel are up. (Home heating oil is up about 60 cents a gallon, depending on the comparison day, etc.) So each dollar of assistance buys a lot less, and people will be getting fewer dollars. Those working in heating field are expecting lots of folks to be out of fuel and out of money much earlier in the season.

Its going to be a tough year for a lot of people.

The Bush administration is turning a blind eye to that reality. President Bush recently vetoed $2.4 billion in LIHEAP help for struggling families. President Bush wants to slash $379 million from the program that provides critical help to 5.8 million senior citizens on fixed-incomes and low-income families with children, including approximately 20,000 households in Vermont.

As this happens, there is great potential for tightening homes, and other thermal efficiency implementations. Remember last January's study with the unwieldy title “Vermont Energy Efficiency Potential Study for Oil, Propane, Kerosene and Wood Fuels Report” which spawned H 520? Succinctly, it found "the net present savings for the State of Vermont for long-term implementation of energy efficiency programs for oil, propane, kerosene and wood throughout the State over the next decade (2007-2016) is $486 million". Translation - that is $486 million in savings in Vermont after expenses. And $253 million of those net savings could be realized in the residential sector. That’s over $1,000 per Vermont household. According to the report, every dollar spent on thermal efficiency would save over $4.

Lets just find a way to make our houses warmer, while helping the planet too.

Inadequate Mortgage Rate Freeze Plan

Statement by AFL-CIO President John Sweeney

on Bush Administration Mortgage Rate Freeze Plan

After sitting idly by for months while countless Americans saw their dreams slip away, the Bush Administration has put forth a plan to deal with the subprime mortgage crisis that is both too little and too late.

The plan to freeze rates that was outlined this afternoon would cover only a small fraction of the mortgages at risk. But this is not the time to pick and choose who deserves help and who doesn't. We need a moratorium on subprime mortgage foreclosures for at least six to 12 months - enough time to restructure the loans in question.

Guaranteed, that will dam the flood of Americans losing their homes and their life savings. That's the kind of bold leadership we need. Otherwise, the wave of foreclosures is going to crush our economy because banks will not actually restructure enough loans to head off a crisis. A foreclosure moratorium will give banks no choice.

Next, the mortgage industry and government must create a structured program providing for the replacement of teaser rate loans with conventional 30 year mortgages at the teaser rate.

Servicers must renounce those servicing agreements that reward mortgage companies for foreclosing on homes rather than encourage refinancing or other workout strategies. And servicers must commit to publicly reporting -- company by company -- how many subprime loans they are servicing, how many have reset, how many have been restructured and how many foreclosures are occurring and where.

Finally, the federal government must reach out to subprime borrowers to let them know how they can keep their homes. The Treasury Department has encouraged this type of outreach by private groups, but this effort should be much more extensive and should be led by the government.

These are the steps necessary to stabilize our housing markets, prevent cascading defaults and safeguard our economy. The subprime crisis is not just a subprime crisis, and it is not just a housing crisis or a financial crisis. It threatens to become a full-blown economic crisis affecting both growth and employment. The roots of this crisis lie in the lack of effective regulation of the mortgage and other financial markets and on our economic policy makers' reliance on asset inflation to power economic growth in recent years. Falling or stagnant real wages, extreme inequality and the dominance of financial gimmickry over good jobs that create real value have left tens of millions of Americans dependent on borrowing to sustain their standard of living. Enacting these reforms are the first, critical step toward creating an economy that works for all Americans.

The “F” Word

It’s out. It’s not resetting interest rates that are the big factor behind the surge in home loan defaults YET. Most of the defaults happening today are for mortgages under a year old and so hadn’t even hit the two year reset mark. (Nationwide, more than half of the subprime delinquencies and foreclosures this year were loans that hadn’t reset.) Its not lending to people with poor credit scores. Nope, what we have here are loans made by lenders 1) without following prudent underwriting practices, like checking pay stubs for income verification, 2) by lenders creating ever more precarious mortgage products, and 3) some mixture of fraud. Fraud includes that by borrowers – who lied about their financial status - and lenders – who encouraged, aided and abetted the lies, while hiding the mortgage’s risky terms.

As Countrywide Financial Corp’s CEO was recently quoted, “Capitalism isn’t perfect.” Countrywide Credit is widely expected to file for bankruptcy.

Despite a lot of regulation in the banking industry, over 50% of mortgages are made by companies which are unregulated at the federal level. This reflects the fashionable bipartisan deregulation policies of the past 25 years.

If left to the market, resetting interest rates are going to push up defaults over the next eight months or so. This is true to a lesser extent in Vermont, where foreclosures through the first ten months of the year were 994, up 30% from a year ago, according to the Vermont Department of Banking, Insurance, Securities & Health Care Administration.

The state doesn’t have numbers on the number of mortgages which are due to reset in 2008-2009. One approach is to take the national average – about 35% of mortgages nationwide sold in 2005-2006 were adjustable rate mortgages – and apply that to the number of homes sold in 2005 and 2006. In 2005, 17,815 homes were sold, while last year 15,878 homes were sold, according to Vermont Realtors. That means that maybe there are maybe 11,800 or so adjustable rate mortgages in Vermont which will face increasing interest rates next year. Its not a huge number, but it could certainly spell trouble for the families and neighborhoods involved.

Foreclosure impacts everybody, the foreclosed family, renters and solvent homeowners, just in different ways. Foreclosed homes typically sell at a discount of 20-25% to other owner-occupied homes. This price drop drags down comparable prices in the neighborhood as the foreclosed home sales price is factored in. Renters can face eviction.

A few proposals being floated would limit the pain. The chair of the Federal Deposit Insurance Corp. is proposing that mortgage companies freeze interest rates on adjustable rate mortgages at the current rate to help borrowers avoid trouble. Essentially, this would convert the starter rate to a fixed rate. Banks will not be happy. Hey, if the “teaser” starter interest rate was good enough for the lending institution when it made the loan, it should be good enough for it for the life of the loan, no? A more tentative approach is being promoted by California Gov. Schwarzenegger who advocates freezing interest rates on certain adjustable rate mortgages for a period of time. Much more meaningful steps to protect homeowners and renters were taken during the New Deal, as in Canada today. What can and should Vermont policymakers do?