MacroScope

It’s something many people know intuitively but that makes the reality no less harsh when it is framed by concrete figures: the sluggish U.S. economy is squeezing black and Latino seniors even harder than their white counterparts.

The deep recession of 2008-2009 took a heavy toll on the retirement prospects of aging Americans. With so many retirement savings plans linked to employer-based stock market investments, the downturn took a steep toll on the holdings of those who were lucky enough to have savings.

A new study from the University of California, Berkeley’s Labor Center shows the extent of the difficulties facing elderly minorities. Here are some of the low-lights:

Elder poverty rates are twice as high among Blacks and Latinos compared to the U.S. population as a whole: 19.4 percent of Black seniors and 19.0 percent of Latino seniors have incomes below the federal poverty line, compared to 9.4 percent for the senior population overall.

Less than a third of employed Latinos and less than half of Black workers are covered by an employer sponsored retirement plan, a critical resource in ensuring adequate retirement income.  As a result, they are disproportionately reliant on the limited income provided by Social Security.

There was something for everyone in the January existing home sales report. Bulls could point to the level of sales, which reached a 1-1/2 year high, and the decline in housing supply, long an impediment to the sector’s recovery. Bears might focus on the sharp downward revisions to prior months that suggested conditions were improving but from considerably more depressed levels.

But one nugget in the report was unequivocally bad: the proportion of distressed sales surged to 35 percent from 32 percent, a considerable one-month rise. For Michael Meyer, economist at Bank of America-Merrill Lynch, this means existing home sales numbers have become less reliable:

We think that simply looking at existing home sales is an insufficient way to gauge underlying housing demand since the data are heavily affected by investors and distressed sales. The best measure for demand from primary homebuyers is to look at mortgage purchase applications, which have remained sluggish. In addition, we think it is prudent to wait for the spring selling season before making conclusions about underlying housing demand. The winter is typically the slow season for home sales, making the data less reliable. We expect the spring selling season to show some improvement, but we believe it risks disappointing relative to market expectations.

Ed Krudy contributed to this post

The Philadelphia Fed’s Mid-Atlantic manufacturing survey covers a pretty small chunk of an already shrunken U.S. factory sector. Still, analysts at Harris Bank have found that the survey’s employment component has been a pretty solid leading indicator of the monthly payrolls figures.

If the trend persists, then February’s report could be a bit of a letdown following a surprisingly robust gain of 243,000 jobs last month. The Philly Fed’s employment index dropped sharply in February to its lowest level since August.

According to Jack Ablin, Harris Bank’s chief investment officer:

For the last several months, the Business Outlook survey has been a keen predictor of the monthly change in the Bureau of Labor Statistics’ non-farm payroll. The survey came close to nailing last month’s 243,000 gain, even though economists expected a 140,000 pickup on average. Should the survey’s predictive power continue, investors could be disappointed with February’s BLS report. The Philly Fed survey implies roughly 50,000 net new non-farm payroll jobs added in February. Positive yes, but it would be a big momentum killer. Stay tuned. The payroll report is not due out until March 9th.

After the initial jubilance that followed last week’s employment report, Wall Street economists are having a second look at the data. Their conclusions are not quite as rosy.

The rapid decline in the U.S. jobless rate in recent months – from 9.1 percent last summer to 8.3  percent in January – has caught forecasters by surprise given the rather soft pace of underlying economic growth. Steve Ricchiuto, chief economist at Mizuho, says a shrinking U.S. labor force helps explain the apparent discrepancy.

The fact that the employment-to-population ratio has not moved since September even as the jobless rate has fallen by 0.7% suggests that this improvement is a statistical mirage. The fact that the labor force participation rate has also declined by 0.4% during this four month period is another warning that the jobless rate is improving for the wrong reasons. This more realistic look at the data suggests that over-thinking the jobs data will lead to investor disappointment in the months ahead.

President Barack Obama will seek $80 million in new funding for a program to boost science and math education in U.S. schools. Here is a graph from the Organization for Economic Cooperation and Development that illustrates the extent of the shortfall on a population-adjusted basis:



Not that the battered U.S. labor market needs anymore bad news, but here it is: A new report that derives employment growth from tax data suggests recent strides have been even meeker than the official Labor Department data suggests.

The January jobs report is due out on Friday, and analysts in a Reuters poll are forecasting the jobless rate remained stuck at 8.5 percent while a median of 150,000 net new positions were created last month, down from 200,000 in December.

Not so fast, say analysts at investment research firm TrimTabs. They cull figures on tax withholding to generate what they say is a more accurate real-time reading of job market conditions. Their findings are grim:

Manufacturing activity picked up in January, an encouraging sign for U.S. growth prospects. Right? Perhaps not as much as it used to be. The shrinking role of factory production in the U.S. economy – now just over a tenth of the nation’s output – means the Institute for Supply Management’s closely watched survey is a less sturdy predictor of broader trends.

Neil Dutta, U.S. economist at Bank of America-Merrill Lynch, explains:

The ISM Manufacturing Index improved to 54.1 in January from 53.1 in December, the highest since June 2011 and broadly in line with market expectations. A level of 54.1 on ISM is consistent with roughly 3.5 percent real GDP growth. This tells you more about the state of the manufacturing sector than the broader economy, in our view. And, we are skeptical the pick-up in the ISM manufacturing index is a harbinger of a coming acceleration in economic growth.

A 3.5 percent rate looks lofty indeed: Current expectations according to Reuters polls are for a 2 percent GDP reading in the first quarter, with a number of analysts citing downside risks to their forecasts.

It used to be the low-end stuff like shoes, clothes and furniture that displaced American manufacturing, then cars and consumer electronics.  A new report by Alan Tonelson, a researcher at the U.S. Business and Industry Council which represents 1,500 American companies, now shows that high-end U.S. industry is facing ever tougher foreign competition in its own backyard.

Tonelson has crunched the numbers since 1997 on high-value, advanced manufacturing – the crown jewel of American industry that is capital intensive and depends on technological superiority such as turbines, pharmaceuticals and electrical engineering. He finds that imported products had captured 38 percent of the $1.63 trillion U.S. market for advanced manufactured products by 2010, up from 24.5 percent when the government started collected the data in 1997.  Only six U.S.-based advanced manufacturers have gained market share in the United States in the 13-year period.  Sectors that are more than 50 percent dominated by foreign producers have risen from eight in 1997 to 32 by 2010, he said.

The high-value core of America’s domestic manufacturing sector is suffering chronic and significant weaknesses. They strongly indicate that advanced U.S.-based manufacturing industries as a whole are failing a basic test of competitiveness – thriving in a market that is not only the world’s largest single market for such goods, but the market that they should know far better than their overseas counterparts.

The Fed is being more transparent. Any questions? Lots, apparently. Wall Street economists have published a flurry of research notes speculating about just how much new information the U.S. central bank will release along with its federal funds forecasts on Wednesday, and what form it will be presented in.

Even Vincent Reinhart, a former Fed economist now at Morgan Stanley, doesn’t know what to make of it:

Many market participants admit to being somewhat confused about the new disclosure policy. The exercise should be viewed as incremental in nature, limited by design flaws, and as likely to cloud as to clarify the public’s understanding of policy intent, at least at the outset. And the mission statement, if one appears, may amount to little more than a strong commitment to motherhood and apple pie among central bankers – i.e., the importance of price stability in the long run – but provide no practical guidance as to near-term policy choices.

Rising income inequality in rich nations has cast doubt on the old adage, often upheld by the economics profession, that a rising tide lifts all boats. A new report from Oxfam reinforces the notion that wealth does not trickle down of its own accord. The anti-poverty advocacy group says sometimes actively redistributive policies may be needed to address huge income gaps. It also says that, contrary to conventional economic thinking, such policies will directly contribute to better growth rather than impede it.

Inequality, often viewed as an inevitable result of economic progress, in fact acts as a brake on growth. Among the best ways to assure inclusive, sustainable growth and fight poverty, finds the study, are policies that reduce inequality. […]

Inequality erodes the social fabric, and severely limits individuals’opportunities to escape poverty. Where income inequality is high or growing, the evidence is clear that economic growth has significantly less impact on poverty: a trickle-down approach does not work.