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

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 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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Lamar Alexander is Making Sense. Let’s Listen to Him

 Charlie Arlinghaus

May 23, 2012

As originally published in the New Hampshire Union Leader

Last week, Lamar Alexander proposed a budgeting swap that New Hampshire should support. Instead of the federal government dividing responsibility, funding and accountability for programs, they should make one entity responsible for one program. Alexander proposed starting with education and Medicaid but the principle could work at all levels of government.

Lamar Alexander, senator from Tennessee, was known by supporters and opponents alike as a thoughtful former governor when he ran for presidents. And also for plaid shirts. Yet, despite his sartorial gimmickry, his policies were generally sound and thoughtful. Continuing that tradition, his latest budget proposal is simple but revolutionary.

As a governor in the 1980s, he had approached President Ronald Reagan and suggested a swap: instead of divided loyalties, accountabilities and funding, why didn’t the federal take care of Medicaid by itself and leave education to the states? Reagan liked the idea but it never came close to becoming law.

Last week, Sen. Alexander proposed the idea again and it makes more sense than ever.

Too many programs are divided between federal and state government (or between local and state government) and it leads to bad incentives. Each side blames the shortcomings of any program on the other. One the financial side, the managers of the program always complain that the other side isn’t paying enough in, sets up too many rules and then doesn’t provide the funding, or shortchanges us in some other way. The administrator of the program can’t set the rules by itself, can’t make the changes needed for our particular circumstances, or can’t be expected to do everything we’re told to do without the money.

In Medicaid, for example, it becomes easy for the federal government to propose new mandates, limit flexibility, or require greater paperwork. They feel free to impose the rules because they are providing some funding. Yet because they aren’t providing all of the funding, they feel free to not worry about the cost of the rules they impose.

This particular swap makes sense for the states. Medicaid is a growing program. It costs the federal government $149 billion each year for the half or a little more that the feds pay of the costs. However, the rules are primarily set in Washington with some modest degree of flexibility chiefly regarding rates.

Federal education spending costs about 40% of what Medicaid does – about $57 billion a year. In addition, while the federal share of Medicaid is the majority and gives them enormous authority to set rules, federal education payments are only a small part total state education spending. In New Hampshire, federal revenues are only about 7% of the total $2.7 billion we spend on education at the local level.

In terms of the state budget, total federal funds going to the department of education (often as a pass through to towns) will be $221 million in FY2013. In exchange for eliminating that spending, we’d turn over Medicaid on which we spend more than $600 million or about three times as much.

Divided management is never more efficient management. Too often it is an excuse to allow the more powerful entity to have budget certainty while delegating the hard decisions to the weaker partner.

This would be a bad deal if education were something that ought to be done federally but the opposite is true. Does anyone think any decision made in a non-descript building in Southwest D.C. can possibly have taken into account the probably different needs of the enormous Chicago school district and the somewhat smaller district in Henniker?

Washington rules don’t help. We certainly don’t need some sort of standardized federal curriculum. These are decision that can, should, and will be made at the local level.

By the way, this would increase federal spending a little bit. It may be they need to come up with something else to even out the swap. On the other hand it’s better than aid programs of the past. Eliminating a responsibility is a better support than a little extra money and increased responsibility.

This is something we can pursue at the state level as well. The current budget transfers $1.1 billion from the state to cities and towns in sixteen different programs many of which are jointly managed. There are additional joint programs at the county level. Instead of more programs and mixed management, let’s make one level of government responsible for each program.

Lamar Alexander is making sense. Let’s listen to him. The federal government doesn’t need to stick its fingers in every pie. Let’s divide the tasks and make one entity responsible for one project.

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NH Forclosure Filings up slightly for April

Figures from Realtytrac, a foreclosure tracking firm, show foreclosure filings increased slightly in New Hampshire for the month of April to 727. This is up from 674 in March. Foreclosure filings for the purpose of this snapshot are the number of properties receiving a default notice, a foreclosure auction notice or bank repossession.

The state foreclosure rate is now 1 in 846 properties, up slightly from 1 in 912.

However, New Hampshire continues to have a much lower rate than the national average of 1 in 698.

Hillsborough County has the highest rate of 1 in 686, while Carroll County came in the lowest with 1 in 1327

While the uptick is not good news in term of the housing recovery, the magnitude is only 53 additional housing units. This slight increase is not New Hampshire specific however, other states in the region also saw slight increases in April.

However, it remains to be seen if the April data is a blip, or the beginning of a trend. Previous months figures, as well as other series of economic data indicate that the housing market is generally recovering, albeit slowly which makes it unlikely, (though not impossible) that this is the beginning of an serious upward trend.

 

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New Hampshire is a Good Example for Washington Borrowers

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 Charlie Arlinghaus

May 2, 2012

As originally publish in the New Hampshire Union Leader

Elections and governments produce many tall tales. One of the tallest was the wishful thinking that the federal and state governments are in fine shape fiscally. Each month, something else emerges that tells us how bad things really are. This month’s dead canary in the fiscal coal mine is the sooner-than-expected exhaustion of the fictional social security and Medicare trust funds. Like the federal government, New Hampshire has hidden problems. Unlike the federal government, ours are getting better.

The Social Security Trustees release regular reports projecting the long term insolvency of the programs. What we call social security consists of the larger “Old Age and Survivors Insurance (OASI)” – the pension program we traditionally think of as social security – and a smaller “Disability Insurance (DI)” program which will be bankrupt much sooner.

For decades, the amount of tax taken from your paycheck was greater than the amount needed to pay that year’s bills so Congress took the money and gave the trust fund an IOU. But those fictional assets consisting only of a government IOU continue to grow. However, they grow slower as benefits paid rise faster than taxes taken. And in a few years, assets will start decreasing. So the trustees make long range projections to warn us about the future.

Twenty years ago, we were told that the theoretical assets would be exhausted in 2057, long after everyone reading the report would be dead so nobody cared. Ten years ago, the bankruptcy date was moved to 2038, a year many of us hope to reach. And this year we have been told that the money runs out in 2033 – the year I might have started collecting.

Actually, considered separately, the disability plan runs out in 2016, before the next presidential election. The old age and survivors pension portion might struggle on until 2035.

By the way, the Medicare trust fund is equally fictitious in the sense that it too exists as a bookkeeping tool so the government knows what it didn’t actually set aside. That theoretical trust fund will be spent in 2024. As Bill Clinton noted, the theoretical trust fund “does not have any impact on the government’s ability to pay benefits.” They have to be paid, like everything else, with this year’s revenues.

For decades, politicians of both parties have borrowed the trust fund money and trillions more (actually a trillion a year these days) to finance their spending wishes on the backs of those yet to be born. This strategy – called pretending the future doesn’t exist – is good politics and worked well for Greece and Portugal, at least until it exploded and ruined those two countries.

Despite all the warning signs in Europe and a subtle alarm from trustees, politicians in the swamps of Washington continue to pretend nothing need happen. Paul Ryan’s an alarmist. All is well.

Back at home, we have similar problems but we’re doing something about them. Some politicians have been critical of my description of fiscal crisis and claimed that we didn’t need to cut the budget 10% because previous budgets were nominally balanced.

But over the two budgets previous to the cut, we increased spending without the revenues to pay for them. New funds were created to obscure general fund spending and spending paid for with borrowed money doesn’t count under our accounting rules but, comparing apples to apples, general fund revenue rose over two budgets by 14.5% in regular tax funds and 20% in total funds despite an actual decline in tax revenue.

How was that possible? A federal bailout of one-time used to pay for ongoing expenses was one way but borrowing was another. Unique borrowing methods shifted money off the regular books to make comparisons difficult. We even borrowed money to pay for our borrowing costs.

Look at state debt. From 2007 to 2011, state debt rose 43.5%. The previous two four years cycles, it rose by 8% and 4%. Put another way, the annual increase from 1999-2007 was 1.4%. From 2007-2011 it was 9.5%. So we borrowed to balance. Nice work in Washington, unusual in New Hampshire.

In the current spending declined because we don’t have the money. Debt is going to decline as well. Although be careful. There are some politicians today who want to borrow more while the interest rates are low. That makes sense if it replaces borrowing in later years but I fear they want to borrow in addition to not instead of.

New Hampshire learned the lesson of Greece and Portugal. Washington still hasn’t.

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