Three Takeaways from the July Unemployment Data

Today the Bureau of Labor Statistics released its monthly jobs report for July. Suffice it to say, it does not show much of an improvement over the June data. In fact, the unemployment rate increased from 8.2% to 8.3%. While it is only a tenth of a percent increase, it means that all of the marginal improvements made this year have now been completely wiped out. Looking deeper into the data, we see more troubling data:

200,000 fewer people are working:

The loss of 200,000 employed persons is probably the worst news out of the jobs report. While some of that loss could be attributed to end of fiscal year retirements, looking at historical data, the June to July data does not show any recurring trend. In years of economic weakness, the June to July number falls and in good economic years, the number rises. Thus economic conditions as a whole are the driving force in this numbers, rather than retirements. Had retirements been the driving force, the data would have shown a consistent decline in the June to July figures.

That being said, the fact of the matter remains that there are 200,000 fewer people working in July than there were in June. No matter the reason in which those jobs were lost, be it layoffs or retirements, the problem is that those jobs were not filled.

Workforce Participation Rate Drops to 63.8%:

The workforce participation rate measures the number of people who are either looking for, or have a job. While measured as both a rate and in terms of individuals, the participation rate has fallen over the past few years to rates not seen since the early 1980s. While a small portion of this was expected due to the first wave of baby boomer retirements, the extent and sharpness of the decline is directly attributable to the recent economic turmoil. The drop in the workforce participation rate from June to July represents 150,000 people no longer employed or seeking work. Given the corresponding increases in the U-4 and U-6 unemployment figures, most, though not all, dropped out of the workforce due to economic reasons.

U-4 and U-6 also increased.

In simple terms, the U-4 and U-6 unemployment rates are different classifications of unemployment, with progressively wider definitions of what it means to be ‘unemployed.’ When you’ve heard on the news that the current unemployment rate isn’t the ‘real’ unemployment rate, these rates are usually the measurements they are referring to. While it makes sense that these rates would increase along with the official unemployment rate, the fact that they do, shows that the problem of large numbers discouraged workers is continuing, not getting any better. The U-4 rate is now 8.8% and the U-6 is 15.0%

For a more detailed discussion of the alternative means of measuring unemployment, click here

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U-3 or U-6? Federal Unemployment Rates Explained

Joshua Elliott-Traficante

August 2012

The first Friday of every month, the Department of Labor releases its monthly jobs report. The figure usually reported in the media as the ‘unemployment rate’ is actually just one of six different classifications of unemployment that the Department uses. These are numbered U-1 through U-6 and as the numbers go up, the wider the definition of unemployment. The most common reported by the media and considered the official unemployment rate is referred to as the U-3 rate.

How Rates are Calculated:

Unemployment is almost always reported in terms of percentage rates. In calculating the rates, there are two numbers that are used: The numerator, being the number of people who fit the definition of unemployment for that classification and the denominator, which is the size of the total potential workforce. Divide the two, and the result is the unemployment rate for that classification. Complicating matters is the fact that there are three different potential workforce populations used in the rates. U-1, U-2 and U-3 all use the same potential workforce number, U-4 has one all to its own, with U-5 and U-6 sharing one between them. Because the higher classifications count individuals who are no longer considered part of the workforce, when calculating those rates, those individuals must be added into the total potential workforce as well.

The Classifications:

U-1: This is the narrowest definition of unemployment, counting only those who are unemployed for 15 weeks or longer.

U-2: A slightly wider definition, including those who would be counted as U-1, plus all of those who have lost their jobs involuntarily and those who have completed temporary jobs. A recent example of a temporary job would be someone who took a job as a census taker for the 2010 Census, knowing that once it was completed, their employment with the Census Bureau would be terminated.

U-3: This is considered the official unemployment rate by the Department of Labor and the one most often cited in the media. This rate includes all those who are unemployed and are seeking employment as well as those classified as U-1 and U-2.

U-4: This rate is U-3 plus those workers who are considered ‘discouraged workers.’ In laymen’s terms, these are individuals who are unemployed but not looking for employment only because they think there are no jobs available and to look would be in vain.

U-5: This rate is U-4 plus those workers who are marginally attached to the labor force. Essentially it includes people who are unemployed and not looking for work for any reason, market related or not.

U-6: This rate is U-5 plus all those who are working part-time due to the poor jobs market, but who want and are available to work full time. An example would be a recent college graduate working part-time as a waiter to get by, but would like to work full time in his or her chosen field.

The Decoupling

Before the recent economic downturn, few people discussed any rate other than the official unemployment rate, the U-3. However, the nature of the last recession, as well as the lack-luster recovery has given rise to a debate concerning U-3’s preeminence. Some have argued that given the current economic climate, the U-6 rate is actually a more accurate representation of the state of unemployment.

For the past 18 years, the difference between the U-3 rate and the U-6 rate ranged between 3 and 4.5 percentage points. Since early 2009 however, at which time the recession had been underway for more than a year, the spread rapidly ballooned to 7 percentage points and has remained at or just below that for the last 3 ½ years, unprecedented since the tracking of the U-6 rate began.[1]

This decoupling of rates spurred recent debate of using the U-6 rate over the U-3 rate. The U-6 rate counts the people who have simply given up looking for a job, due to the poor state of the economy and those who have taken part-time work but would otherwise want to be employed full time. People who fall into these categories are not counted under the official unemployment rate.

With a slower than normal recovery, we are seeing an atypical surge of those two groups of workers counted in the U-6 data, but this trend, while critically important when trying to assess the state of unemployment in the country is not represented in the official U-3 rate.

Those who argue for using the U-6 rate point to this fact specifically as the reason to use it over the U-3 rate. This is not to say that the U-3 rate is inaccurate, but its definition of unemployment is too narrow for the current economic climate, failing to capture those two groups of people, whose ranks have swelled rapidly due to an abnormally slow recovery.

As of June 2012 the spread between the two rates was 6.7 points, but trending upward. While it is impossible to say for certain, but it stands to reason that the vast majority of the roughly 3 percentage point overhang from the normal rates can be directly attributed to the tepid recovery.

A New Official Unemployment Rate? Tempting, but Short Sighted

As noted earlier, generally the U-3 and U-6 rates have stayed within a range of 3 to 4.5 percentage points, the 7+ gap as of late is an entirely new phenomenon. It is true, that while the U-3 rate has been a good measure in the past, economic conditions of late have resulted in the official unemployment rate partially masked the true extent of unemployment in the US.

At this point, it seems short sighted to abandon our current measure of unemployment, with the understanding that the current decoupling of the wider definitions of unemployment with the official rate is a fluke.

Should the current state of economic malaise become the ‘new normal’ as some have suggested, changing the designated official unemployment rate would be worth some serious consideration, although stretching to the U-6 would be a bit far. If the goal is to include people who have given up looking for work purely due to economic considerations, then the U-4 rate is worth a look. Like the U-6, it moves in tandem with U-3, albeit at a much closer statistical distance, usually in the neighborhood of .25 percentage points. As of June 2012 it was double that, .5 percentage points, putting the U-4 rate at 8.7%.

 

[1] Spread calculated by author from data published by the Bureau of Labor Statistics: http://www.bls.gov/webapps/legacy/cpsatab15.htm

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Annoy the Candidates, Ask them Questions

Charlie Arlinghaus

July 25, 2012

As originally published in the New Hampshire Union Leader

Candidates are supposed to avoid being specific during elections. They are regularly told by the bulk of the consulting corps that telling people what you might or might not do as governor only makes people mad, costs you votes and limits your options once you get elected.

Pledges and specific proposals are troublesome and should be avoided at all costs. Instead of telling us what you plan to do, discuss the problem, share your concerns for the future and say quite forcefully that we need to work together to find a solution. Message: You care.

This is a great plan for the politician who seeks popularity and adulation. If your goal is to be likeable and liked, specifics are not your friend. If your goal is to lead the state and build support for solution-oriented proposals, you might want to be specific during a campaign, lay out concrete proposals and provide details about your preferred solution.

Specifics will keep you from achieving 80 and 90 percent approval ratings. Lack of specifics will keep you from achieving much if you do manage to get elected. In addition to everything else, policy is boring and requires a lot of studying and reading numbers.

So candidates go forward in an election talking in vague generalities about the importance of jobs, bringing people together, fighting for a stronger economy, hot dogs and apple pie — unless, of course, you prefer lemon meringue.

Voters are in a unique position during the election cycle. Candidates desperately need us. They cross the state seeking handfuls of us to speak with and are forced to take questions from anyone who happens to show up about anything they want to ask about.

After the election, they are surrounded by lobbyists, agency heads and people who have time to spend at the State House during the middle of a work day. But during the election phase, we can force them to commit to us on specific issues, answer questions in public about where they stand on every issue and get them to rule in or rule out approaches to the problems of the day.

This is particularly important. Many a candidate in history (although no one running this year I should hasten to add) has told one group he’s in favor of something and another group he’s opposed to, or at least given each diametrically-opposed group the impression he’s sympathetic to them. Only when forced to publicly declare a position is one group then surprised.

The next Legislature will deal with a host of issues large and small, none of which is new to any candidate. I want to know where everyone stands in some detail.

The state’s pension system is among the worst funded in the country. Everyone is planning on doing something, but what specifically? Will you support a defined contribution or insist that defined benefits be required? What specific changes would you make if elected, how would that affect the cost to taxpayers at every level, and would those changes actually stop liabilities from growing much faster than the assets we have to pay those liabilities?

Taxes are always an issue in New Hampshire. Part of candidate transparency is the pledge. At this point, every politician knows where he or she stands on an income tax — yes or no? How about other taxes? The economy is still uncertain, will increasing other taxes be part of your budget or not? You know enough today to tell us that.

The Tax Foundation finds our business taxes the highest in the country. Will you lower them over time? How much? What will that cost and how would you pay for it?

I’m not revealing any secrets when I tell you that the last budget was the most significant cut in modern history. Will you preserve those cuts? If you intend to add some spending back, what areas would you increase first, and how would you pay for that increase?

Are current government structures appropriate? Would you give the governor greater control over the executive branch? How do you feel about biennial sessions for legislators to allow more people to serve?

Would you support an education funding amendment? Will you restructure state aid to education? Will you support or try to repeal the school choice plan enacted last year?

There are dozens of other issues. You should ask each candidate his or her opinion on each of them. The more we know, the fewer surprises we have. Political consultants want them to tell us less. We should demand more.

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June sees slight uptick in foreclosure filings in New Hampshire

According to RealtyTrac, a foreclosure tracking firm, foreclosure filings in New Hampshire, for the month of June saw a slight uptick versus the previous month. May saw 704 filings, while June had 789.

Just under 60% of these filings were concentrated in Hillsborough and Rockingham Counties.

The state as a whole saw one in 789 households received a foreclosure filing in June, better than the national average of one in 666.

California saw the most filings in both real and relative terms, nearly 48,000 filings, meaning one in 288 California households received one.

In terms of what happened to the homes receiving filings in June, roughly half reverted to bank ownership, with the other half ending up on the auction block.

 

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Three Takeaways from the June Unemployment Figures

The US Department of Labor released its June unemployment report, which showed the country added 80,000 new jobs, while the unemployment rate remained the same at 8.2%.

Often times that is the only figure the news media will report, however there is a treasure trove of data the the Department of Labor releases at  the same time that paints a far more detailed picture of the labor force than just the unemployment rate does.

Below are three points that I’ve picked out that I think say something important about the economy as a whole. Rather than showing signs of economic expansion, these data points show a lackluster recovery, with more than a few showing negative trends:

1) U-6 Unemployment Rate Increases from 14.8% to 14.9%

As a refresher, the Bureau of Labor Statistics has a number of metrics that they measure unemployment by, numbered U-1 through U-6. As the number goes up, the classification has a wider definition.  The most common one heard on the news, and considered the “Official Unemployment Rate” is referred to as the U-3 rate.

The U-6 rate however, includes everyone considered under the U-3 rate, “plus all persons marginally attached to the labor force, total employed part time for economic reasons, as a percent of the civilian labor force and all persons marginally attached to the labor force.” In layman’s terms, it includes everyone who would like a full time job, but either only works part time, or have dropped out of the labor force entirely for lack of work.

While an increase of a tenth of a percent U-6 unemployment rate may seem small, unfortunately it is part of an upward trend. This unemployment metric is not near it’s high of 17% in April of 2010, it has gone up every single month for the past four months, which is cause for concern. While last month’s increase could conceivably be attributed to the increase in the labor force participation rate, there is no obvious reason for the uptick other than a tepid recovery.

2) African Americans and Hispanics see Unemployment Rolls Grow by Half a Million Since April.

This recession has hit African Americans and Hispanics disproportionally hard in comparison to Whites and Asians. Rather than getting better, the unemployment data shows that it is getting worst for these already hard hit groups. African American unemployment rate has increase from 13.0% in April to 14.4% in June. Of that increase, .6% was in May with an additional .8% in June, meaning a whopping 1.4% increase. Granted using a smaller population size means that small changes can look larger statistically, but an increase this large can not be dismissed. That increase accounts for nearly 300,000 additional people being unemployed.

Hispanics did do better comparatively, but still saw an increase of .7% since April, seeing rates jump for 10.3% to 11.0%. This increase translates to nearly 200,000 more unemployed workers.

3) College Aged Workers Unemployment Rates Trending Upward

College aged workers, being those aged 20-25 have seen much higher unemployment rates of around 13%. Unfortunately June data shows a remarkable spike over the May data, with the rate increasing from 12.9% to 13.7%, rolling back any gains made to February. I am sure many of you are thinking what I thought when I saw the jump and thought “That must have something to do with the school year ending in May for college students.” A reasonable assumption to make, but an incorrect one. Based on the data doing back for the past 60+ years, there is no trend of a May to June bump, effectively disproving that thesis.

Looking at the year to date figures for this age group, when broken out between the two genders, we see men disproportionally hit and experiencing a slower recovery. June 2012 had unemployment rates of 15.4% for men and 11.8% for women while June 2011 saw 15.6% and 13.3% respectively. While the lack of equal improvement is noteworthy, a gap in rates between men and women is consistent with the data for the past 25 years although the spread tends to be between 1 and two points, not 3.6.

Lastly an update to the takeaways from the May report not covered above:

1) Labor Force Participation Rate Holds Steady at 63.8%

The fact that this rate did not go up indicates there are still a decent number of people who have left the workforce but do not think economic conditions are good enough yet to rejoin. While the lack of a decline means more people haven’t become discouraged and left the workforce, the lack of an increase means the situation isn’t getting any better.

2) Mixed Data on Long Term Unemployment

Those unemployed for more than 27 weeks saw a drop from 42.8% to 41.9% of all those unemployed. While this is an encouraging trend, those unemployed for 15-27 weeks saw an increase from 13.1% to 14.1% of the total.

 

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End New Hampshire’s Archaic Government Structure

 Charlie Arlinghaus

July 4, 2012

As originally published in the New Hampshire Union Leader

 New Hampshire’s state government contains a design flaw intended to make the governing bureaucracy somewhat independent of the elected chief executive and ensure that the state’s CEO has only limited authority over his department heads. As we prepare to transition to a new chief executive next year, there are steps government can and should take to make the new governor more accountable and effective.

In other states the Governor is elected to manage the operation of state government.  He or she is the chief executive of the state, appoints department heads or commissioners as assistants to carry out the various functions of state government. Voters elect a governor to lead the government and run the state. New Hampshire is different.

The Executive Branch in New Hampshire is divided into two very distinct pieces.  The elected Governor has a small office and staff.  Rather than appointing his cabinet upon taking over the office, department heads are appointed for fixed terms that are completely unrelated to elections. A governor inherits the senior management staff of the executive branch and has no ability to remove them.  Their terms of office quite often last longer than the governor’s term. If a senior official’s term happens to expire during the Governor’s tenure, the governor has the opportunity to appoint a new person or reappoint the commissioner. If it doesn’t happen to expire, he’s stuck with that person and can’t remove him or her except for malfeasance.

The biggest problem with this system is that it reduces responsiveness to the people and makes a managerial model of government nearly impossible. New Hampshire elects her governor every two years to keep him or her as accountable as possible. Yet the governor is not given the authority to carry out the vision he placed before the voters by appointing key lieutenants or changing key members of the senior leadership.

Governor Lynch has been in place for almost eight years at this point but in his first six months in office, he had the opportunity to appoint or re-appoint only 5 of the eighteen department heads. For example, the largest department was headed by John Stephen, appointed by Lynch’s predecessor, publicly at odds with the governor, but who didn’t leave until well into the governor’s second term.

The situation was not unique to Governor Lynch. His predecessor, Craig Benson, had the opportunity to appoint or re-appoint only 6 of the 18 department heads. During her first six months in office, Jeanne Shaheen was able to appoint only seven of the eighteen; Steve Merrill four of eighteen and Judd Gregg five of the eighteen.

Both Gregg’s and Merrill’s numbers include two commissioners whose offices were changed to serve at the pleasure of the Governor. That sensible change made during the significant modernization in the Sununu administration was later reversed. Of the 16 more or less comparable positions that existed before his modernization efforts, John Sununu was able to appoint only 1 in his first six months.

Going forward, both the Republican and Democratic candidates for governor have cause for concern. Only 3 of the 18 department heads will be open during the first six months of the new governor’s term. Six of the new CEO’s department heads are locked in stone and don’t expire during the governor’s term at all including huge areas like Health and human Services, Safety, Transportation and Administrative Services.

The effect of the current management structure is to create a semi-autonomous bureaucracy independent of the elected executive. A good personality can manage by persuasion or antagonism but the underlying structure creates problems. A few years ago one commissioner was criticized by his department for sharing too much information with the Governor’s office – a concept inconceivable to any management theory. Famously, one governor twenty years ago demanded his transportation commissioner’s resignation. The commissioner is said to have replied “I don’t work for you” and ignored the request.

The independence creates a dynamic in which a governor elected by the voters to run government a certain way has only limited authority over the management over the enterprise he’s been hired to run. His or her deputies, department heads, “vice presidents,” don’t work for the chief executive but have an independence that leads to the reluctance to share information referenced above.

As a start, policymakers should not make any appointments between now and the new governor taking office, at least in the major departments of government. Next, the structure of government needs to be changed to both give the elected CEO the authority to run the government and us the ability to hold him or her accountable for performance.

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New Hampshire Home Foreclosure Filings Fall Slightly for May

According to RealtyTrac, foreclosure filings for the month of May fell slightly over the April figures. May saw 704 filings, while March had 727.

Hillsborough and Rockingham Counties accounted for just over half of the filings, which makes sense given the concentration of the state’s population in the Southern Tier.

New Hampshire as a whole saw 1 foreclosure filing for every 873 households. Sullivan and Belknap Counties saw the worst ratios of 1 in 677 and 1 in 692 respectively. However, in real terms, number of homes receiving a filing notice in these two counties combined was only 87.

For comparison the national average for May was 1 filing for every 639 households. Problematic states such as California, Nevada and Florida saw rates of roughly 1 filing for every 310 households, twice the national rate and just shy of three times the rate here in New Hampshire.

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Three Take Aways from the May Unemployment Figures

Josh Elliott-Traficante

June 1, 2012

The Bureau of Labor Statistics, while showing 69,000 jobs were added in May, also saw the unemployment rate move upwards from 8.1% to 8.2%. While the addition of any jobs is a good thing, most economists were predicting in the neighborhood of 150,000 new jobs, not 69,000. These employment figures shows that there are still underlying weaknesses in the US economy.

In addition to the unemployment rate, Labor Statistics also publishes a myriad of other data points, that paint a far more complete picture of the job market.

Here are a three interesting take away points from the May data:

1) Labor force participation rate increased from 63.6% to 63.8%

Essentially the labor force participation rate measures of all the people in the country over the age of 16, how many of them can be considered a part of the labor force. An increase in this percentage means there are more people in the workforce.

While the participation rate did increase over last month, (the increase probably cause the uptick in the unemployment figures) the fact that the last time it was this low was in the early 1983 is cause for major concern.

In the chart below, from the Labor Statistics shows the trends of the last 50 year with the boom from the mid-1960s to 1990 caused by the influx of women entering into the work force.

The downward trend from 2008 to the present however is largely because of the lackluster economy. Rather than continue try to find a job, roughly 4.6 million  have left the workforce entirely. Many commentators have correctly pointed out, that were workforce participation levels the same now that they were at the beginning of 2008, unemployment rate would be north of 10%.

2) U-6 Unemployment Figures Increased from 14.5% to 14.8%

The Bureau of Labor Statistics has a number of metrics that they measure unemployment by, numbered U-1 through U-6. As the number goes up, the classification has a wider definition.  The most common one heard on the news, and considered the “Official Unemployment Rate” is referred to as the U-3 rate.

The U-6 rate however, includes everyone considered under the U-3 rate, “plus all persons marginally attached to the labor force, total employed part time for economic reasons, as a percent of the civilian labor force and all persons marginally attached to the labor force.” In layman’s terms, it includes everyone who would like a full time job, but either only works part time, or have dropped out of the labor force entirely for lack of work.

With the decline in the workforce participation rate noted above, U-6 and less frequently U-5 unemployment figures have been cited as more accurate representation of the job market precisely because they capture those who have dropped out of the workforce entirely due to a lack of work, where as the Official Unemployment Rate does not count these people.

3) Long Term Unemployment Continues to be a Problem

Of those considered unemployed by the official unemployment rate, a staggering number have been so for a long time. Those who have been unemployed for more than 27 weeks, increased from 41.3% to 42.8% of the total. While it is still lower than it was a year ago, it appears that April’s drop was only temporary.

While the raw numbers show a drop of those who have been unemployed for more than 27 weeks, the continual slide in the workforce participation rate mentioned above means these individuals have left the work force rather than have found jobs.

As shown by these three data points, while the increase in the unemployment rate to 8.2% is bad enough, finer data points of the monthly jobs report show a much weaker jobs market than that 8.2% indicates. The general rule of thumb is that for a recovery to be fully underway, the US should be adding about 400,000 jobs a month. May saw less than 1/4 of that. Our friends over at AEI have pointed out that at the rate we’re going, the job market might not return to normalcy until as late as 2019.

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Let’s Follow the Path Canada Laid Out For Us

,

 Charlie Arlinghaus

May 30, 2012

As originally published in the New Hampshire Union Leader

In the general debt and spending crisis that envelops Europe and is spilling across the Atlantic, we can find inspiration in unlikely places – this time, Canada. The recent Canadian experience shows what’s wrong with the rhetoric of both parties, the benefit of sequestration, and the parallel to the recent New Hampshire experience.

Although some of us have been caterwauling about debt for the last thirty years, the potential collapse of Europe has finally pushed debt to the front pages. At this point, everyone agrees we can’t keep borrowing money from our great-grandchildren to pay our bills.

With total debt significantly larger than the size of their entire economy, Greece has become the poster nation for debt disaster debt but a handful of countries wait in the wings to follow along. The Unites States used to be well away from the basket case countries but we’ve been accumulating more debt since 2002 and have seen an explosion in the last few years.

But a neighbor has already trail blazed a path to solution. I have written before about emulating the Canadian example to get our fiscal house in order. Chris Edwards of the Cato Institute has done much to publicize Canada’s sensible reforms recently.

In the middle of the 1990s, Canada’s debt had risen to levels seen as ridiculous and burdensome. Canadian debt was 68% of GDP (the size of the economy). For comparison purposes, our public debt is now 73% of GDP. The difference is that Canada decided to do something about it.

Canada was governed by the Liberal party, not some sort of right wing cabal, but to reduce debt they reduced spending. Not just a small program here or there. To make a difference, everyone had to be on the team. Every area of government was cut without exception. Some were cut more and some were cut less but every area was cut. This way, no minister felt like his ox was being gored to pass the saving along to some other minister who escaped helping out.

The results were impressive. The budget was balanced and Canada’s debt was reduced from 68% of GDP down to 34% of GDP. As a result, the economy boomed and Canada was able to cut corporate taxes from 29% to 15% and create more jobs.

Budget cuts can be difficult because everyone has a favorite program or area that they believe ought to be spared. When New Hampshire faced the enormous potential deficit in 2011, I told any policymaker I could find that the only way to accomplish such a Herculean task would be to make everyone pull on an oar. If any department was exempt, every department would fight to be exempt. We’re either all in this together or we fight.

Our federal task looks just as Herculean but is no more impossible than New Hampshire’s or Canada’s were. The difference is that there are few voices arguing that we’re all in this together.

Instead, each area of the federal government warns that while the budget ought to be balanced and cuts are necessary, my area should be exempt. For more liberal analysts, every transfer program is a burden on states and recipients. There are more than 1,000 different programs that transfer money from the federal government to the states but eliminating even one or perhaps combining a few is attacked as impossible.

Conservatives are no better. Conservatives talk a lot about cutting the budget but are just as likely to count a slowed increase as a cut as if reducing the rate of increase from 4% to 3% is somehow devastating. More important, some conservatives have their own exempt categories – notable defense. Some conservatives want to cut the budget but not the 19% of the budget spent by the defense department.

Is this because of previous massive cuts? No. Over the last ten years, defense has gone from 17.3% of the budget to 18.9% — a significantly greater percentage of a budget that itself increased from $2 trillion to $3.8 trillion.

The federal budget sequester has focused Congress’s collective mind. If they can’t reach a deal, the sequester is an automatic reduction in every bit of discretionary spending. If it didn’t exist, disagreement would lead to more spending by default. It changes that so that disagreement now leads to less spending by default.

Balance needn’t be draconian. Spending will increase by 4.4% each year if we do nothing. The budget can be balanced in ten years if we grow spending at 3.8% instead. If every department grows but just a little less we can be more like Canada and that’s a good thing.

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NH Gas Prices Continue to Fall

Gas prices in New Hampshire have continued to fall over the past month from their mid-April peak. Prices which touched $3.87/gal have steadily fallen to $3.66/gal.

Historically gas prices reach their highs around Memorial Day and then begin to fall, but with a lessening of tensions with Iran, a tepid economic in the US, the recurring Eurozone crisis and the increasing likelihood of a Greek exit from the Euro together have put downward pressure on the price of oil, causing crude oil to tumble to the $90/ barrel mark.

This drop in oil prices as well as the completion of the switchover to summer gas blends has caused gas prices to fall as well.

At an average of $3.66/ gallon, this is the lowest price that gas have been in New Hampshire since the end of February.

 

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