Josh Elliott-Traficante

April 2013

Sound familiar? New Hampshire’s unemployment rate dropped from 5.8% to 5.7% in March, but not due to increased employment. According to the Household Survey Data, the number of unemployed fell by 360 people, resulting in the .1 percentage point drop. However, the number of employed residents increased only by 20, while the labor force shrank by 340.[i]

While drop is small, it does mark the second month in a row of labor force contraction in the state.

Looking at the historical data over the past three years, we see that something similar happened just last year: a strong steady increase in the size of the labor force, followed by a short contraction. However, the current situation differs in terms of the abruptness, as well as the severity of the contraction. It remains to be seen if this is a part of a longer term trend seen nationally since October, or if growth will resume.

Turning to the Establishment Data, the state saw 900 non-farm jobs created. Seeing the largest gains were Professional and Business Services (+1200), Retail Trade (+600) and Construction (+600). The areas seeing the largest losses were Durable Goods (-800), Government (-600) and Leisure and Hospitality (-500)

The Nashua and Rochester-Dover Areas each saw 200 new jobs, Portsmouth saw 900, while Manchester lost 200.


[i] While the numbers do match up they represent net movement, not gross movement. For example, of the 20 newly employed people, not all of them may have been previously unemployed; some may have been new entrants.

Charlie Arlinghaus

April 11, 2013

As originally published in the New Hampshire Union Leader

Every problem does not demand government action. Every business relationship doesn’t need micromanaging intervention by legislators. Yet in this day and age the first course of action for many businesses is to turn to their elected friends for a little help.

A classic example of crony capitalism at work is the legislature’s intervention on behalf of auto dealers in their relationship with manufacturers. Everyone likes auto dealers. They’re nice guys, big donors to a variety of civic and political interests, even think tanks on occasion. They tend to be among the largest employers in many political districts and a very visible part of the community.

It’s natural that our elected officials want to lend them a helping hand. The auto dealers managed to convince almost the entire state senate to intervene in their franchise agreements. Auto manufacturers insist, as part of the franchise agreements, on many things. The franchisees believe that some of these things just cost money and do not actually sell any more cars.

No one would suggest that McDonald’s or Dunkin Donuts can’t insist on anything it wants in its franchise agreements. It would be great if I could get a hot dog at McDonald’s. It is just silly that they won’t let their franchisees sell hot dogs. It probably costs them sales. But any suggestion government intervene in that relationship would be dismissed out of hand.

Cars are different. They’re bigger, cost more, and go fast. Apparently that means micromanaging is on the table. The state currently has 34 pages of rules and regulations about car franchise agreements and the retailers want many more.

Cars really are different from most consumer products. There is no other consumer product that you can not buy direct from the manufacturer. None. It is in fact illegal – an unfair business practice punishable by law – for Buick to sell you a car directly.

The sales monopoly provided by law to dealers is intended to protect them in two ways. First it shields them and their investment from the internet competition that is allowed in every other business (think about bookstores and competition from Amazon). This is a concern every business has but no others are allowed to shield themselves from.

Second, we are giving them leverage in their relationship with the supposedly all-powerful manufacturers. They must granted exclusive rights or the manufacturers could ruin them. This is also the supposed reason for 34 pages of current state laws that regulate this franchise system and no other.

A recent paper by the economic analysis group of the Department of Justice found potential savings of as much as $3,000 per vehicle from the currently-prohibited direct-to-consumer sales of vehicles. In recent years, direct sales have been promoted by groups as diverse as the libertarian Cato Institute, the moderate Democratic Progressive policy Institute, and the liberal Consumer Federation of America.

 

But to protect auto dealers – and we all like the local guys – we are asked to forego those potential savings and maintain a dealer sales monopoly. We are also asked to support the current 34 page set of laws that regulate this one set of franchise agreements. Now that’s not enough. Apparently the government needs to step in and pick sides yet again.

Now it’s not just cars but lawn mowers. Farm equipment and lawn mowers are being redefined as motor vehicles for the purposes of franchise regulation (I’m not making that up – your lawn mower is now a car). You can’t blame the mower guys for wanting to get in on a good deal. The only question is which product will be next.

 

In addition, we are told horror stories of franchisees forced to use non-local suppliers or do things that cost too much money (the biggest complaint is expensive remodeling too often). I’m sure any franchisee in any business can tell stories of the dumb things that “corporate” makes them do, cost them money, and don’t apparently help anyone. But in this case the dealers get to write their complaints into law.

 

I’m not about to defend any stupid decision that some auto manufacturer makes. But they are a private business and their stupidity is not the government’s business. Every stupid decision does not demand government action.

 

It is inconsistent to insist on the government protecting your exclusive franchise monopoly and then complain that the monopoly comes with annoying strings attached.

 

Rather than micromanaging a private agreement between a business and a franchisee, perhaps the government ought to eliminate the restrictions that make this the only consumer product in America that I can’t buy direct from the factory.

According to the BLS, the national unemployment rate fell in March to 7.6%, from 7.7% in February. On the surface it would appear that the labor is recovering, however the data contained within the report shows the opposite to be true.

Labor Force Participation Rate drops to Lowest Level since 1979

The Labor Force Participation Rate fell to 63.3%. The last time the ratio was at this level was in May of 1979. After falling precipitously during the recession, the rate had essentially leveled off in 2012, ranging between 63.5% and 63.9%. However, there has been a downward trend since October of last year, slipping from 63.8% to 63.6%. After three months of holding steady at that rate, it fell in February to 63.5% and now down to 63.3% in March.

 

 This drop in the rate since October translates into a loss of more than 1.5 million people from the labor force. March alone saw more than 650,000 leave the labor force.

While one may be tempted to chalk up this decline to the first wave of baby-boomer retirements, however, the data shows that rather than retiring, many of them are staying in the labor force.

The way unemployment is calculated (click here for a full explanation) does not include people who have left the workforce. From the point of view of calculating unemployment, these people do not exist. However, if they were unemployed and stopped looking for work, they no longer count as unemployed, driving the rate down.

Only 88,000 Jobs were Created

The general rule of thumb used by economists is that roughly 150,000 jobs need to be created every month just to keep up with the natural growth in population, while March saw a paltry 88,000 created. For comparison, January saw 148,000 and February saw 268,000.

Of the jobs that were created, the two biggest gainers were Healthcare and Social Services (+27,900), Construction (+18,000) and Temporary Help Services (+20,300). Given that it is tax season, a large portion of the Temporary Help Services hires are likely related to tax preparation.

The sectors seeing the biggest losses were Retail Trade (-24,100), Government (-7,000), and Non-durable Goods (-7,000). Some have attributed the large decline in retail trade jobs to the increase in the Social Security Payroll Tax, which effectively reduced take home pay by 2% across the board. With less disposable income, people buy less and retail jobs are lost.

New Hampshire’s unemployment rate dropped to 5.3% in February from 5.8% in January. This drop represents 290 fewer unemployed persons in the state, leaving 43,000 total people unemployed.

At the same time however, the total labor force shrank by 660. This decline in the labor force actually accounts for a larger percentage of the fall in the unemployment rate, than the decline in unemployed persons does. In other words, while the unemployment rate did go down, most of the drop was not because of increased employment.

In comparison to February of 2012, there are 3570 more unemployed people but the workforce has also grown by 3110.

State wide 1,400 nonfarm jobs were added in February. The sectors seeing the biggest gains were Profession and Business Services (+700), Education and Health Services (+900) and State Government (+600)

Sectors seeing the largest losses were Retail Trade (-1,200), Accommodation and Food Services (-600) and Wholesale Trade (-400).

Turning to the cities, Manchester lost 200 jobs, Nashua gained 100, Portsmouth lost 900 and Rochester-Dover gained 300. Despite some short-term losses, each city has shown growth over the past year.

Josh Elliott-Traficante

February saw the national unemployment rate decrease from 7.9% to 7.7% with the Establishment Survey Data showing 236,000 jobs added over the month. Looking further into the data there are a few signs of growth but there are some discouraging ones as well.

The Good News:

Establishment Data shows 236,000 jobs added-

Economists generally agree that roughly 150,000 jobs need to be created every month just to keep up with the natural growth in population. With 236,000 jobs created in February, it means actual improvement was made in reducing the number of unemployed, rather than just enough jobs being created to tread water. However, one data point does not a trend make. While adding 236,000 jobs is an encouraging sign, it does not mean that a true recovery is under way.

Sectors seeing the biggest gains were Retail Sale: +23.7k, Information: +20k, and Health Care and Social Assistance: +39.1k.

The Bad News:

Workforce Participation Rate Dropped to 63.5

The workforce participation rate, which measures the percentage of the total civilian labor force in the workforce, dropped from 63.6 to 63.5, continuing a streak of record lows. The hallmark of this economic downturn has been the millions of people leaving the workforce, depressing this indicator. If a full recovery were underway, this number would be increasing, not decreasing, as those who have left, seeing their employment prospects brighten, return to the workforce.

Those ‘Not in the Labor Force, but Want a Job’ Jumps by 190,000

Like the Work Force Participation Rate, the total number of those Not in the Labor Force is a good metric to gauge worker confidence in the labor market. Granted, the entire 300,000 drop seen last month isn’t due to economic discouragement, but the fact that unemployment dipped by the same number seems to indicate that there is still a widespread and genuine concern over job prospects. The BLS also tracks those ‘Not in the Labor Force, but Would Like a Job’ which jumped by 190,000. This data point gives a better idea of the number who have left the workforce for economic reasons, rather than by choice.

The Real Unemployment Rate, Calculated to Count Those Who Left the Workforce: 9.0% (unchanged) Click here to see methodology.

According to the foreclosure tracking firm RealtyTrac, 512 New Hampshire residential properties received foreclosure notices in January. While this is an increase from the 405 in December, the number of filings seen last month is substantially lower than the 2012 monthly average.

Statewide, 1 in 1175 units received a notice in January. The national average for the month was 1 in 869, with heavy hit Florida seeing the worst ratio of 1 in 300.

Of the properties receiving a notice, half were destined for the auction block, while the remaining half reverted to bank ownership.

There are currently 3840 foreclosure properties in the state with 140 sold in January. The average selling price was $150,372.

Turning to the traditional housing market, according to the New Hampshire Association of Realtors, 800 houses were sold in January, a drop from 1037 sold in December, but up from the 660 sold in January 2012.

Only Sullivan County did not report an increase in sales over the January 2012 figures.

The median sale price increased in Coos, Grafton, Stafford and Carroll counties and fell in the remaining 6 counties.

Josh Elliott-Traficante

As we do every month, we take a closer look at the monthly jobs report, released the first Friday of the month. January saw the national unemployment rate increase from 7.8% to 7.9%. Looking into the data, there are few signs of growth. In short, much like December, January saw the labor market remain in neutral.

The Civilian Participation Rate Remained at 63.6%

As loyal readers will know, I think this particular data point is one of the most important in all of the household survey data, second only the unemployment rate itself. This rate, which measures the percentage of the population in the workforce, has stayed near record lows for the past year, with no movement at all in the past three months. While this shows that the labor force is not contracting further, it also shows that the people who have left are not returning.

In a recovering economy, this rate would increase, as those who left the workforce for economic reasons begin to rejoin it. It is possible that enough may rejoin at once that it would actually push up the unemployment rate, despite a recovering economy, at least temporarily. However, January’s increase in the unemployment rate cannot be attributed to this.

The Total Number of Unemployed Increased by 100k

January also marked the third straight month of increases in the number of unemployed, with nearly 300,000 additional since November. Looking at the data, since the number of people not in the work force actually increased over the month, it does not appear that these people joining the ranks of the unemployed are coming from those reentering the workforce.

Establishment Data Shows 157,000 non-Farm Jobs Created

The Establishment Survey, seen as the more accurate survey of job creation, showed 157,000 jobs were created in January. The biggest gainers were in Construction, with 28,000, Leisure and Hospitality at 23,000, Retail Trade at 32,600, Health Care with 22,000. The biggest decline in employment was seen in Transportation and Warehousing with 14,000 jobs lost. Most industries and sectors saw nominal job growth for the month.

While 157,000 new jobs created over the month is enough to keep up with natural population growth, it is not enough to begin to chip away at the large pool of unemployed.

The Revised Unemployment Rate for January, with methodology here, is 9.0%, unchanged from the December rate.

According to the foreclosure tracking firm RealtyTrac, foreclosure filings in New Hampshire fell again in December, marking the third straight month of decreases. Statewide, 405 houses received a foreclosure filing, compared to 578 in November and 739 in October. There are currently 3703 foreclosure properties in the state.

The December filing data translates into 1 in every 1,518 houses receiving a notice statewide. In comparison, the national average for the month was 1 in 810. At 405, last month saw the fewest filings of any month in 2012.

Of the homes receiving a notice, 178 went to auction with 227 being repossessed by the lender.

December also saw a drop in foreclosure home sales with 150 being sold, a low for the year. However, the low number is not because of weakness in the market, but normal seasonal trends.

Josh Elliott-Traficante

According to New Hampshire Employment Security, December’s unemployment rate for the state was 5.7%, a .1 percentage point increase over last month. This upturn translates to 430 additional unemployed workers. There were 7368 initial claimants over the month with 45,784 continued claimants.

December Establishment Survey: Net Loss of 300 Jobs

According to the Establishment Survey Data, the state saw a net loss of 300 jobs. The sectors seeing the sharpest losses were Retail, which shed 1300 positions and Accommodation/Food Services, which lost 800 jobs. A sizable portion of both of these losses can be attributed to the end of the holiday shopping season.

The leading industries in job creation were Construction at 600 new jobs and Durable Goods at 800. While increased employment in these fields in particular are leading indicators of a recovery, both areas saw a net job losses for 2012.

Over the month, Manchester lost 100 jobs and Portsmouth shed 1000. However, Rochester-Dover gained 500 and Nashua led the way with 1700 new jobs.

2012 in Review:

Looking back over 2012, it was not a good year for New Hampshire workers, but not a horrific one either. According to Household Survey Data the number of unemployed increased by 4000 while the size of the labor force contracted by 1700. The first 6 months of the year saw the unemployment rate stay around 5.1%. July, however, saw a jump to 5.4% followed by a second jump to 5.7% in August. Since then, the unemployment rate for the state has remained essentially unchanged. One could argue that while the baseline changed halfway through, the economy of the state has been in neutral for most of the year. This stands in contrast to the country as a whole, which saw a gradual decline over the same time frame.

Turning to the Establishment Data, the state saw a net loss of 200 jobs over the year. In comparison, during times of economic expansion,  job growth would be in the neighborhood of 10,000 per year.

The biggest losses were in Educational Services, with 1300 jobs shed and Local Government which saw the same. The biggest gainers were wholesale trade which saw 1300 jobs added, followed by Professional and Business Services, which grew by 1200 positions.

For the year, Manchester lost 800 jobs and Rochester-Dover 300, with Nashua gaining 500 and Portsmouth 800.

Charlie Arlinghaus

January 9, 2013

As originally published in the New Hampshire Union Leader

The music for the Washington fiscal cliff debate ought to be that written by Sergei Prokofiev for his “Tale of the Buffoon who Outwits Seven Other Buffoons.” Hard to believe he hadn’t of the fiscal cliff when he wrote it.

It’s easy to mock what passes for debate in Washington because we know it will recur again and again for months to come. The problem in short is that success is not possible because politicians in Washington have been released from the rules most politicians follow. What results is what would happen if gravity were similar repealed: a bunch of confused people floating about with no defined purpose.

Gravity in this case is some sort of incentive or requirement that something be accomplished. In the case of almost all local and state governments, gravity is represented by the requirement that the budget be balanced. Various factions can disagree but at the end, a deal of some sort must happen because the budget must be balanced.

The Washington problem is worse. The fiscal cliff of last week (and we have another one coming in two months) wasn’t a hard and fast thing. Not making a deal was legal. It wasn’t as if the budget had to be passed by a date certain. In fact, Washington doesn’t pass budgets anymore. They sort of want to. They all think it would be a good idea everything else being equal. But it isn’t a requirement so getting to agreement on one is difficult.

Even were they to shock those of us on the human being side of the Washington-reality divide and pass a budget, there are few requirements on that budget. Notably it doesn’t have to be balanced so it isn’t.

I’d applaud state legislators here for providing a good contrast by balancing their budget but the real contrast is that they have no other choice. They have to pass a balanced budget by June 30 – no later – and they may not spend more than they raise. They can’t disagree about how much deficit reduction is good or bad, they have to reduce it to zero.

In Washington, they can and do disagree. The budget doesn’t have to be balanced. Balancing it is difficult. So no one proposes actually balancing the budget.

One possible incentive would be a balanced budget amendment. Change the rules so Washington can do what it wants within certain guidelines but the chief guideline is that spending and revenue must match. In a perfect world, our representatives would decide when to balance and when to pay for a few large projects over time and run a small deficit.

But Congress has demonstrated that they are fairly close to the inverse of a perfect world.

Our own Senator Kelly Ayotte’s reaction to the budget debate contains the seed that might bring responsibility to her juvenile colleagues.

In the midst of the debate over record deficits, the president nonetheless signed an executive order granted federal employees and members of congress a pay increase. Sen. Ayotte quite sensibly saw this as ridiculous and introduced a bill to rescind the pay hike. The final deal included her sensible advice.

Congress can’t be expected to balance the budget if they continue to get raises for dereliction of duty. Ayotte is also a sponsor of the No Budget, No Pay bill which would keep Congress from being paid if it doesn’t pass an actual budget.

For some congressmen, actually denying them their whole paycheck should their colleagues do something they routinely do might seem too risky. Getting a majority of them to pass a rule that makes their life more difficult is a tall order but I think a variation might be possible and still provide an incentive.

Congressmen respond to their own pocketbook. A modest step would be one that provided a financial penalty but that is less severe so as to attract a few more supporters. We should reduce their salary by 5% each year that the budget isn’t balanced. For the first few years of implementation, we can set gradually reducing targets to get to zero in five or six years. Does anyone doubt that their incentives would change?

Many incentive systems like sequestration create automatic penalties for other people when Congress doesn’t get its job done. That incentive is not quite right. They might take things a bit more seriously if we penalize them for their own failures.