Story first appeared in USA TODAY.
The dismal economy is having a profound effect on the American way of life, from delaying marriage and divorce to reducing car ownership and private school enrollment, according to new Census data.
Lingering bad times may alter expectations and lifestyles for years to come, some demographers say.
It's going to have a long-term impact and to say it's going to end is optimistic.
The Census Bureau's 2010 American Community Survey sent detailed annual questionnaires to 4.4 million people and was conducted separately from the 2010 Census.
What could become the new normal:
•Marrying later. The median age of first marriage has crept up to 28.7 for men and 26.7 for women, up from 27.5 and 25.9 respectively in 2006.
At the same time, fewer people are taking a trip to the altar, period. If the marriage rate had stayed the same as in 2006, there would have been about 4 million more married people in 2010.
•Fewer babies. There were 200,000 fewer births to women ages 20 to 34 in 2010 than just two years before even though the number of women in this prime age for having children grew by more than 1 million.
The recession is the likely cause. Economic recessions often reduce fertility because women delay … in uncertain times.
•Breaking up is harder to do. Divorces, which have been sliding for 25 years as people wait longer or choose to live together before tying the knot, continue to drop. There were about 65,000 fewer divorces in 2010 than in 2008, a 7% drop. This is not good news for a Raleigh Divorce Lawyer.
Part of that is the long-term trend, but some are convinced that some couples are delaying divorce because they can't afford to set up separate houses.
•Crowded living. After decades of steady increases, the share of solo households has stayed flat at just above 27% since 2006.
Unemployment and foreclosures are forcing more people to double up. Households that shared their homes with other relatives climbed from 6.7% in 2006 to 7.2% in 2010. Those sharing space with non-relatives have increased, too: 5.8% from 5.4%.
•Nobody's home. The home vacancy rate, a direct consequence of the housing collapse and record foreclosures, rose again in 2010 to 13.1% compared with 12.6% in 2009 and 11.6% in 2006.
•Driving solo. When people are not working, they don't carpool. The share of people ages 16 to 64 who worked dropped significantly in all but one of the 50 largest metropolitan areas (New Orleans). That has helped push the share of people driving to work alone from 76% in 2006 to 76.6% in 2010. Ride-sharing is down a full percentage point, to 9.7%.
The share of households without a car rose again to 9.1% vs. 8.8% in 2006. Households with two or more cars dropped from 58% to 57.1%.
•Going public. Private school enrollment is declining from 13.6% in 2006 to 12.8%.
The scary thing is that we're seeing the impact unfold in the younger age groups. Many college graduates are employed in jobs paying close to minimum wage with no benefits. These people are not going to be buying houses and they're certainly postponing marriage. We're just in the middle of a big transition.
Tuesday, October 4, 2011
Goodrich Corp - $16.5 Billion Cash Deal
Story first appeared on Reuters.
United Technologies Corp (UTX.N) has reached a $16.5 billion cash deal to acquire aircraft components maker Goodrich Corp (GR.N), in what would be the diversified U.S. manufacturer's biggest deal in a decade.
United Tech said on Wednesday it would pay $127.50 a share for Goodrich, a 47 percent premium over the stock's closing price last Thursday. It also includes $1.9 billion in assumed debt.
The deal comes as blue-chip United Tech looks to cash in on the upswing in plane orders and production as declining global spending on defense pressures its military business.
The acquisition can help it build critical mass in new aircraft technology and plane services as civil demand rebounds.
Goodrich is poised to grow as key commercial plane programs such as the Boeing 787 Dreamliner and upcoming Airbus A320neo ramp up production.
BUCKS M&A SLOWDOWN
The deal comes despite a broad slowdown in merger activity globally, as market volatility and economic uncertainty give many firms a pause.
But it shows large, well-capitalized companies are still willing to take on strategic transactions and financing remains available for companies with good credit.
Within the sector, the deal could also be a harbinger of more M&A as companies look to reduce their dependence on defense amid declining global spending.
Goodrich supplies parts for Hartford, Connecticut-based United Tech's Pratt & Whitney jet engines and Hamilton Sundstrand's aircraft electronics.
The deal is a big move for United Tech Chief Executive Louis Chenevert, who had long said he was interested in doing more deals but was having a hard time coming to terms with targets on price.
Goodrich delivers on all of their acquisition criteria. It is strategic to their core, has great technology and people, and strengthens their position in growth markets.
The deal is United Tech's largest since its year 2000 showdown with General Electric Co (GE.N) over Honeywell International Inc (HON.N). United Tech made a $36 billion offer for Honeywell, which GE topped. European regulators ultimately scuttled that deal.
Goodrich CEO Marshall Larsen, a 34-year Goodrich veteran, will run the new UTC Aerospace Systems unit, which will be based in Goodrich's current home town of Charlotte, North Carolina.
United Tech plans to sell $4.2 billion in stock and suspend share repurchases through next year to maintain its credit rating, according to the Wall Street Journal, which said JPMorgan Chase (JPM.N) is leading a $15 billion loan package for the deal, with HSBC Holdings (HSBA.L) and Bank of America Corp (BAC.N) also involved in the financing.
United Tech shares have risen some 8 percent over the past year, outpacing the 6 percent rise of the Dow Jones industrial average .DJI. Goodrich is up 52 percent, with more than half of that run coming over the past week.
United Technologies Corp (UTX.N) has reached a $16.5 billion cash deal to acquire aircraft components maker Goodrich Corp (GR.N), in what would be the diversified U.S. manufacturer's biggest deal in a decade.
United Tech said on Wednesday it would pay $127.50 a share for Goodrich, a 47 percent premium over the stock's closing price last Thursday. It also includes $1.9 billion in assumed debt.
The deal comes as blue-chip United Tech looks to cash in on the upswing in plane orders and production as declining global spending on defense pressures its military business.
The acquisition can help it build critical mass in new aircraft technology and plane services as civil demand rebounds.
Goodrich is poised to grow as key commercial plane programs such as the Boeing 787 Dreamliner and upcoming Airbus A320neo ramp up production.
BUCKS M&A SLOWDOWN
The deal comes despite a broad slowdown in merger activity globally, as market volatility and economic uncertainty give many firms a pause.
But it shows large, well-capitalized companies are still willing to take on strategic transactions and financing remains available for companies with good credit.
Within the sector, the deal could also be a harbinger of more M&A as companies look to reduce their dependence on defense amid declining global spending.
Goodrich supplies parts for Hartford, Connecticut-based United Tech's Pratt & Whitney jet engines and Hamilton Sundstrand's aircraft electronics.
The deal is a big move for United Tech Chief Executive Louis Chenevert, who had long said he was interested in doing more deals but was having a hard time coming to terms with targets on price.
Goodrich delivers on all of their acquisition criteria. It is strategic to their core, has great technology and people, and strengthens their position in growth markets.
The deal is United Tech's largest since its year 2000 showdown with General Electric Co (GE.N) over Honeywell International Inc (HON.N). United Tech made a $36 billion offer for Honeywell, which GE topped. European regulators ultimately scuttled that deal.
Goodrich CEO Marshall Larsen, a 34-year Goodrich veteran, will run the new UTC Aerospace Systems unit, which will be based in Goodrich's current home town of Charlotte, North Carolina.
United Tech plans to sell $4.2 billion in stock and suspend share repurchases through next year to maintain its credit rating, according to the Wall Street Journal, which said JPMorgan Chase (JPM.N) is leading a $15 billion loan package for the deal, with HSBC Holdings (HSBA.L) and Bank of America Corp (BAC.N) also involved in the financing.
United Tech shares have risen some 8 percent over the past year, outpacing the 6 percent rise of the Dow Jones industrial average .DJI. Goodrich is up 52 percent, with more than half of that run coming over the past week.
Thursday, September 29, 2011
Company Health Programs On The Rise - Company Insurance Costs Dropping
Story first appeared in USA TODAY.
Companies nationwide are looking to trim their health insurance costs by combating chronic diseases — such as diabetes, obesity and depression — in their employees, corporate and government officials say.
The need for such steps was amplified again Tuesday as a new survey from the Kaiser Family Foundation showed that health insurance premiums for families of four increased 9% this year.
The upward trend in health care costs can't all be blamed on growing doctors' bills. So, employers have started to provide on-site medical visits, access to gyms, chronic-care plans, smoking-cessation programs and even discounts for those who buy a banana rather than a cookie.
For an employer, costs can be as much as 40% higher in one year for someone who is overweight because of all the issues associated with obesity, including diabetes, back problems, asthma, depression and heart disease, said Kenneth Thorpe, who co-directs Emory University's Center on Health Outcomes and Quality.
Between 8% and 20% of health care costs is due to the persistent rise in obesity.
As an example, he cited a study he published in the journal Health Affairs about an evidence-based program that reduced type 2 diabetes cases by 71% in Medicare beneficiaries older than 60. It could save Medicare $2.3 billion over the next 10 years if pre-diabetic beneficiaries were enrolled, Thorpe said.
The U.S. Department of Health and Human Services announced a further incentive on Wednesday: It asked businesses to participate in a project to show what happens when private insurers coordinate with primary-care physicians to address health issues. This means personalized care plans, electronic records and preventive care, as well as partnerships with large firms that can offer incentives to their employees.
Tire-manufacturing giant Michelin North America began providing preventive care to all its employees three years ago, as well as chronic-care management for five diseases. Before the program started, only 7% of employees received basic care for diabetes. Now, nearly 100% do. That cut health care costs for those patients by about $700 a year.
Michelin now has primary-care facilities at all of its major workplaces for use by both employees and their families. Patients there can expect a 25-minute visit with a doctor instead of the national average of about seven minutes per visit.
They've seen a 30% reduction in employees classified as high-risk for chronic conditions, as well as an increase in people who work out.
At health insurer WellPoint, employees who receive comprehensive primary care from a company doctor have helped cut health care costs by 14%, said Sam Nussbaum, its executive vice president.
Companies nationwide are looking to trim their health insurance costs by combating chronic diseases — such as diabetes, obesity and depression — in their employees, corporate and government officials say.
The need for such steps was amplified again Tuesday as a new survey from the Kaiser Family Foundation showed that health insurance premiums for families of four increased 9% this year.
The upward trend in health care costs can't all be blamed on growing doctors' bills. So, employers have started to provide on-site medical visits, access to gyms, chronic-care plans, smoking-cessation programs and even discounts for those who buy a banana rather than a cookie.
For an employer, costs can be as much as 40% higher in one year for someone who is overweight because of all the issues associated with obesity, including diabetes, back problems, asthma, depression and heart disease, said Kenneth Thorpe, who co-directs Emory University's Center on Health Outcomes and Quality.
Between 8% and 20% of health care costs is due to the persistent rise in obesity.
As an example, he cited a study he published in the journal Health Affairs about an evidence-based program that reduced type 2 diabetes cases by 71% in Medicare beneficiaries older than 60. It could save Medicare $2.3 billion over the next 10 years if pre-diabetic beneficiaries were enrolled, Thorpe said.
The U.S. Department of Health and Human Services announced a further incentive on Wednesday: It asked businesses to participate in a project to show what happens when private insurers coordinate with primary-care physicians to address health issues. This means personalized care plans, electronic records and preventive care, as well as partnerships with large firms that can offer incentives to their employees.
Tire-manufacturing giant Michelin North America began providing preventive care to all its employees three years ago, as well as chronic-care management for five diseases. Before the program started, only 7% of employees received basic care for diabetes. Now, nearly 100% do. That cut health care costs for those patients by about $700 a year.
Michelin now has primary-care facilities at all of its major workplaces for use by both employees and their families. Patients there can expect a 25-minute visit with a doctor instead of the national average of about seven minutes per visit.
They've seen a 30% reduction in employees classified as high-risk for chronic conditions, as well as an increase in people who work out.
At health insurer WellPoint, employees who receive comprehensive primary care from a company doctor have helped cut health care costs by 14%, said Sam Nussbaum, its executive vice president.
Tuesday, September 27, 2011
Another New CEO for HP
Story first appeared in the Traverse City Record-Eagle
Hewlett-Packard Co.’s decision to fire CEO Leo Apotheker after just 11 months and replace him with former eBay chief Meg Whitman is another dizzying turn of the executive merry-go-round at a company whose leadership issues are tearing it apart.
Swapping Apotheker, who has now been ousted from two high-profile CEO jobs in two years, with Whitman, a billionaire who is best known for the decade she spent building eBay and her run for California governor, is a decision designed to stem investor fury over a series of questionable strategy moves.
Whitman’s star-power could be an asset for a company that struggled to gain credibility under Apotheker, who was previously little-known outside of the business software world. HP is no stranger to celebrity CEOs. But Carly Fiorina’s run as leading lady, from 1999 to 2005, ended in shambles.
Despite Whitman’s success at eBay, she is untested when it comes to running a sprawling company such as HP.
One professor commented that she build up a one-trick pony, an online auction site, and she oversaw the growth of the company, but the situation now is where someone needs to come in who has a technological background, and engineering and scientific background, and that that is way outside of her skill set. He added that the decision to change CEO’s so soon points to continued disarray on HP’s board, long a target of critics for the chaos it’s caused at one of Silicon Valley’s oldest and largest companies. Infighting and ego-driven drama has long plagued the board, from revelations in 2006 that HP had spied on directors and journalist to ferret out the source of leaks, to last eyar’s dismissal of CEO Mark Hurd in an ethics scandal.
The profession finished by saying that there’s no question the board is off the rails and that they need a smaller, tighter board that’s committed to the idea of what the company does.
Hewlett-Packard Co.’s decision to fire CEO Leo Apotheker after just 11 months and replace him with former eBay chief Meg Whitman is another dizzying turn of the executive merry-go-round at a company whose leadership issues are tearing it apart.
Swapping Apotheker, who has now been ousted from two high-profile CEO jobs in two years, with Whitman, a billionaire who is best known for the decade she spent building eBay and her run for California governor, is a decision designed to stem investor fury over a series of questionable strategy moves.
Whitman’s star-power could be an asset for a company that struggled to gain credibility under Apotheker, who was previously little-known outside of the business software world. HP is no stranger to celebrity CEOs. But Carly Fiorina’s run as leading lady, from 1999 to 2005, ended in shambles.
Despite Whitman’s success at eBay, she is untested when it comes to running a sprawling company such as HP.
One professor commented that she build up a one-trick pony, an online auction site, and she oversaw the growth of the company, but the situation now is where someone needs to come in who has a technological background, and engineering and scientific background, and that that is way outside of her skill set. He added that the decision to change CEO’s so soon points to continued disarray on HP’s board, long a target of critics for the chaos it’s caused at one of Silicon Valley’s oldest and largest companies. Infighting and ego-driven drama has long plagued the board, from revelations in 2006 that HP had spied on directors and journalist to ferret out the source of leaks, to last eyar’s dismissal of CEO Mark Hurd in an ethics scandal.
The profession finished by saying that there’s no question the board is off the rails and that they need a smaller, tighter board that’s committed to the idea of what the company does.
A SLOWING ECONOMY CAUSES FEDEX TO LOWER ITS PROJECTED PROFITS
Story first appeared in the Traverse City Record-Eagle.
FedEx Corp. says consumers are putting off purchases of electronics and other gadgets from China, another example of the global economic slowdown that’s prompting fears of another recession
The slowdown prompted the world’s second- largest package delivery company to lower its earning expectations for the fiscal year that ends in May. But while anxiety over the economy created a rout in the stock markets, and its own shares, FedEx isn’t yet ready to predict another recession in the U.S.
They commented that while there’s been considerable speculation that the economy has or will soon enter a recession, this is not their view at present.
FedEx’s larger rival united Parcel Service Inc. said last week that it thinks another recession is unlikely, although it warned of a bumpy ride for the global economy
Investors weren’t so sanguine. They sent FedEx shares down as low as $64.55, a level not seen in more than two years. The stock closed down $5.92, or 8.2 percent, at $66.58. The share had already lost about a quarter of their value since FedEx last reported earning in June. UPS shares dropped 3.3 percent to close at $62.17.
FedEx Corp. says consumers are putting off purchases of electronics and other gadgets from China, another example of the global economic slowdown that’s prompting fears of another recession
The slowdown prompted the world’s second- largest package delivery company to lower its earning expectations for the fiscal year that ends in May. But while anxiety over the economy created a rout in the stock markets, and its own shares, FedEx isn’t yet ready to predict another recession in the U.S.
They commented that while there’s been considerable speculation that the economy has or will soon enter a recession, this is not their view at present.
FedEx’s larger rival united Parcel Service Inc. said last week that it thinks another recession is unlikely, although it warned of a bumpy ride for the global economy
Investors weren’t so sanguine. They sent FedEx shares down as low as $64.55, a level not seen in more than two years. The stock closed down $5.92, or 8.2 percent, at $66.58. The share had already lost about a quarter of their value since FedEx last reported earning in June. UPS shares dropped 3.3 percent to close at $62.17.
Thursday, September 22, 2011
Threats of Europe Troubles
Story first appeared in USA Today.
For investors, the best European vacation right now might be an escape from the havoc the continent's problems have been wreaking on U.S. financial markets.
All summer, investors have been force-fed a mountain of bad economic news from the region. Staggering levels of debt held by several European nations — especially Greece — make the odds of defaults by entire nations increasingly likely. Big European banks are faced with the possibility of owning large pieces of debt, issued by European nations, that take a huge hit to their values. And the looming economic quagmire in Europe is hardly a help at a time U.S. economic activity is sluggish, at best.
The ramifications for U.S. investors are staggering. For the first time in recent memory, Europe isn't just a playground for vacationers. Instead, unfolding events there are holding U.S. markets hostage and threatening to unseat long-held investing truisms.
Europe is filling many investors with never-ending fear. It's the primary driver of why the markets are so volatile. If there's something to keep investors up at night, it's the European situation.
Investors wake up to a daily dose of news of economic wrangling in Europe. Central banks around the world are working to decrease the impact of a default by a major European nation — the most impending, Greece. Governments in Germany and Finland are offering bailout funds to help Greece keep servicing its debts, but in exchange, are demanding big cutbacks in government spending by the heavily in debt nation. There's also speculation that China might be interested in investing in European nations, providing much-needed cash.
Even casual investors who are trying to cobble together portfolios to save for retirement can't help but let the European turmoil affect their thinking. One of the most commonly held beliefs among investors is that a diversified portfolio should include European stocks. But that tenet isn't looking so good now, with European stocks down 16% this year and exerting a gravitational pull on an already weak U.S. market.
Simply put, people are so worried about Europe because they're invested in it. It's been a train wreck.
But for those mindful of the fact that the U.S., with the world's biggest economy, usually sets the tone globally — not the other way around — it might seem investors are becoming overly fixated on Europe. Some might wonder, does Europe really matter?
The answer, say economists and institutional investors, is a resounding yes.
Decades ago, Americans could easily ignore developments in the Old Country. But now, thanks to a global economy, problems in Europe are also our problems, due to some less-than-apparent linkages between the U.S. and European economies. Worldwide stock markets are taking cues from each other, which is applauded during prosperity, but festers fear and unknowns during downturns.
The increased linkage between U.S. and European stocks isn't just a topic for business journalists; it's shown statistically. European and U.S. stock markets have had a correlation of 0.9 in the past three years. That seemingly arcane statistical measure, when translated into English, means that when Europe zigs, the U.S. zigs, almost in lockstep.
Investors and traders have defined five distinct reasons why Europe's woes are a real threat to the U.S. economy and stock market:
Fear of a global bank ripple effect
U.S. banks aren't big owners of European government debt directly. It's the indirect connection that's deep and potentially troubling. Many large non-government money market funds, places where U.S. investors often park cash for safekeeping, have half their money invested in commercial paper issued by European banks, he says. And those European banks are heavily invested in debt issued by most of the European nations.
While much of the problem is centered around Greece, for now, the possibility of a ripple effect is what investors are fretting about.
If Greece defaults, as many analysts expect in some form or another as early as this year, that could greatly reduce the value of Greek bonds held by many European banks. Suddenly seeing the value of their Greek holdings evaporate, the assets of many of these European banks would not be worth as much as previously thought, and the banks could have troubles of their own as they need to raise money to meet capital requirements.
It doesn't take much imagination to see a game of European economic dominoes unfolding. All eyes are on Italy, which is one of the European nations that investors fear is in the next worse shape after Greece and Portugal. If Italy runs into trouble due to its debt load, and the value of its government debt takes a hit, that could quickly bleed into France, for instance, since many French banks own Italian debt. "It was just Greece, Portugal and Ireland. Now, we're talking Italy and Spain."
Anti-stimulus for global economy
The U.S. economy's growth is sluggish, but it's hard to make a case that conditions are bad enough for the economy to slip back into recession due to a U.S.-centric problem, says Barry Knapp, chief U.S. equity strategist at Barclays Capital. But as often has been the case in recent recessions, it's usually an outside event that spells serious economic problems for the U.S. Investors fear the European debt crisis is potentially an event that could be trouble for the U.S. economy.
Waning demand in Europe due to a recession would cut into a big export market for many top U.S. companies. Europe as a group has a gross domestic product roughly in line with that of the U.S., underscoring its importance as a global trading partner.
Brings up memories of Lehman
Investors are shaped by past crises, and the market meltdown that started following the fall of Lehman Bros. in 2008 is still a fresh wound. Investors are sorely afraid the global capital structure, which allows for the free movement of goods and money worldwide between trading partners, would slow following a European default, much as the collapse of Lehman did in the U.S. Investors are worried things go so badly in Europe … we have a Lehman-like moment.
The nightmare scenario would arise if there's so much selling of European debt, it overwhelms the banking system as the value of government securities falls, Knapp says. If that happened, most European banks would see their reserves lose value, causing them to be short of the capital needed to lend. That, in turn, could spark selling of any liquid securities, which could include U.S. stocks.
Stokes lack of confidence in policymakers
Investors rely on central governments to manage an erosion of confidence in capital markets before they get out of hand. German officials have attempted to assure investors it would stem the crisis. But given how economic decision-making in Europe is so fragmented, investors have little faith that nations, with their different needs, positions and historical baggage, will be able to navigate the situation.
Conjures questions of the eurozone's future
Perhaps the biggest wild card is the idea that some nations that use the euro could stop using it, retreating to their original currencies. Such an event could have profound influences on the entire banking system that are impossible to forecast.
Nations understand the contagion would be so devastating, however, the odds of it happening are practically zero.
Yet, analysts conclude Europe's woes will be resolved. The solution might be uncomfortable for Europe and will take longer than optimists hope. Europe will ultimately reform the way that stronger nations can apply fiscal discipline to nations, such as Greece, that are living beyond their means.
European nations understand that they must stop the crisis by whatever means needed, or risk dragging the global economy down."While the house may catch fire, they're all in the same house. They have to put out the fire.
For investors, the best European vacation right now might be an escape from the havoc the continent's problems have been wreaking on U.S. financial markets.
All summer, investors have been force-fed a mountain of bad economic news from the region. Staggering levels of debt held by several European nations — especially Greece — make the odds of defaults by entire nations increasingly likely. Big European banks are faced with the possibility of owning large pieces of debt, issued by European nations, that take a huge hit to their values. And the looming economic quagmire in Europe is hardly a help at a time U.S. economic activity is sluggish, at best.
The ramifications for U.S. investors are staggering. For the first time in recent memory, Europe isn't just a playground for vacationers. Instead, unfolding events there are holding U.S. markets hostage and threatening to unseat long-held investing truisms.
Europe is filling many investors with never-ending fear. It's the primary driver of why the markets are so volatile. If there's something to keep investors up at night, it's the European situation.
Investors wake up to a daily dose of news of economic wrangling in Europe. Central banks around the world are working to decrease the impact of a default by a major European nation — the most impending, Greece. Governments in Germany and Finland are offering bailout funds to help Greece keep servicing its debts, but in exchange, are demanding big cutbacks in government spending by the heavily in debt nation. There's also speculation that China might be interested in investing in European nations, providing much-needed cash.
Even casual investors who are trying to cobble together portfolios to save for retirement can't help but let the European turmoil affect their thinking. One of the most commonly held beliefs among investors is that a diversified portfolio should include European stocks. But that tenet isn't looking so good now, with European stocks down 16% this year and exerting a gravitational pull on an already weak U.S. market.
Simply put, people are so worried about Europe because they're invested in it. It's been a train wreck.
But for those mindful of the fact that the U.S., with the world's biggest economy, usually sets the tone globally — not the other way around — it might seem investors are becoming overly fixated on Europe. Some might wonder, does Europe really matter?
The answer, say economists and institutional investors, is a resounding yes.
Decades ago, Americans could easily ignore developments in the Old Country. But now, thanks to a global economy, problems in Europe are also our problems, due to some less-than-apparent linkages between the U.S. and European economies. Worldwide stock markets are taking cues from each other, which is applauded during prosperity, but festers fear and unknowns during downturns.
The increased linkage between U.S. and European stocks isn't just a topic for business journalists; it's shown statistically. European and U.S. stock markets have had a correlation of 0.9 in the past three years. That seemingly arcane statistical measure, when translated into English, means that when Europe zigs, the U.S. zigs, almost in lockstep.
Investors and traders have defined five distinct reasons why Europe's woes are a real threat to the U.S. economy and stock market:
Fear of a global bank ripple effect
U.S. banks aren't big owners of European government debt directly. It's the indirect connection that's deep and potentially troubling. Many large non-government money market funds, places where U.S. investors often park cash for safekeeping, have half their money invested in commercial paper issued by European banks, he says. And those European banks are heavily invested in debt issued by most of the European nations.
While much of the problem is centered around Greece, for now, the possibility of a ripple effect is what investors are fretting about.
If Greece defaults, as many analysts expect in some form or another as early as this year, that could greatly reduce the value of Greek bonds held by many European banks. Suddenly seeing the value of their Greek holdings evaporate, the assets of many of these European banks would not be worth as much as previously thought, and the banks could have troubles of their own as they need to raise money to meet capital requirements.
It doesn't take much imagination to see a game of European economic dominoes unfolding. All eyes are on Italy, which is one of the European nations that investors fear is in the next worse shape after Greece and Portugal. If Italy runs into trouble due to its debt load, and the value of its government debt takes a hit, that could quickly bleed into France, for instance, since many French banks own Italian debt. "It was just Greece, Portugal and Ireland. Now, we're talking Italy and Spain."
Anti-stimulus for global economy
The U.S. economy's growth is sluggish, but it's hard to make a case that conditions are bad enough for the economy to slip back into recession due to a U.S.-centric problem, says Barry Knapp, chief U.S. equity strategist at Barclays Capital. But as often has been the case in recent recessions, it's usually an outside event that spells serious economic problems for the U.S. Investors fear the European debt crisis is potentially an event that could be trouble for the U.S. economy.
Waning demand in Europe due to a recession would cut into a big export market for many top U.S. companies. Europe as a group has a gross domestic product roughly in line with that of the U.S., underscoring its importance as a global trading partner.
Brings up memories of Lehman
Investors are shaped by past crises, and the market meltdown that started following the fall of Lehman Bros. in 2008 is still a fresh wound. Investors are sorely afraid the global capital structure, which allows for the free movement of goods and money worldwide between trading partners, would slow following a European default, much as the collapse of Lehman did in the U.S. Investors are worried things go so badly in Europe … we have a Lehman-like moment.
The nightmare scenario would arise if there's so much selling of European debt, it overwhelms the banking system as the value of government securities falls, Knapp says. If that happened, most European banks would see their reserves lose value, causing them to be short of the capital needed to lend. That, in turn, could spark selling of any liquid securities, which could include U.S. stocks.
Stokes lack of confidence in policymakers
Investors rely on central governments to manage an erosion of confidence in capital markets before they get out of hand. German officials have attempted to assure investors it would stem the crisis. But given how economic decision-making in Europe is so fragmented, investors have little faith that nations, with their different needs, positions and historical baggage, will be able to navigate the situation.
Conjures questions of the eurozone's future
Perhaps the biggest wild card is the idea that some nations that use the euro could stop using it, retreating to their original currencies. Such an event could have profound influences on the entire banking system that are impossible to forecast.
Nations understand the contagion would be so devastating, however, the odds of it happening are practically zero.
Yet, analysts conclude Europe's woes will be resolved. The solution might be uncomfortable for Europe and will take longer than optimists hope. Europe will ultimately reform the way that stronger nations can apply fiscal discipline to nations, such as Greece, that are living beyond their means.
European nations understand that they must stop the crisis by whatever means needed, or risk dragging the global economy down."While the house may catch fire, they're all in the same house. They have to put out the fire.
CEO Of Wal-Mart Speaks About Jobs
Story frist appeared in USA Today
The largest employer in the U.S. says short-term economic fixes could work, but sustained job creation won't happen without tax reform and new trade agreements. One week after President Obama and Congress launched new jobs plans, Wal-Mart CEO Mike Duke says there are structural issues holding back American companies. One reporter caught up with the man running the largest retailer in the world to find out what to expect for the rest of the year and how to get businesses hiring again. Her conversation below has been edited for clarity and length.
Q: September caps what has been a tough summer after the U.S. credit downgrade and a volatile stock market. For the rest of the year, what do you expect to see for the economy?
A: I'm not an economist, so I always qualify any forecast with a simple approach of how I hear customers talking in our stores. And customers today are concerned. If we could start to see improvements in unemployment or lower fuel prices, then I could see that lead to more positive consumer confidence and consumer spending.
The overall global economy is still struggling. Because we operate in 28 countries, we get a pretty good perspective. I'm out visiting stores virtually every week, and consumer confidence is not good. Probably the single biggest topic of concern is unemployment and jobs. This lengthy period of high unemployment is causing that cycle of consumer confidence to really be down. Increases in fuel costs really take from the consumer's spending ability. The U.S. consumer is under a lot of pressure. Meanwhile, we have large businesses in China and Brazil, and that's a different story. Those markets have recovered faster. There's more optimism. A strong consumer and emerging middle class is leading to faster rates of growth in the emerging markets around the world.
Q: So growth is coming from outside of the U.S.?
A: We still see a lot of opportunity in the U.S. But there will be a lot of growth in emerging markets. In the U.S., we have pockets of areas that have very, very little penetration and have millions of customers that just really don't have access to a Wal-Mart store. So we do see growth in the U.S. Outside the U.S., our investment in capital and number of stores, potential acquisitions in emerging markets will be an area of real growth opportunity. I was really pleased recently that we completed an acquisition of South Africa-based Massmart. Even entering a new continent like Africa helps us to reach millions more customers in the emerging market status. We're growing rapidly in China, Brazil and other Latin American countries. So we will be having a greater percentage of our capital invested in emerging markets.
Q: What will it take to get businesses to create jobs in the U.S.?
A: The priority on jobs that Washington is giving right now is very appropriate. There will be short-term steps that I'm sure the president and Congress should be working on. But there are also longer-term structural issues that need to be addressed. I recently testified before the Senate Finance Committee about corporate tax reform because of the uncompetitive situation we put American companies in in a global environment. We need to lower the corporate tax rate as much as we can, make the tax base as broad as we can make it, and we need to move to a territorial system as quickly as we can. Corporate tax reform is one of those real structural issues that face American companies. Another would be the trade agreements that are holding up the development and expansion of American jobs. A third one is in the area of health care. We need to find ways to bend the cost curve for both public and private sectors of health care.
Q: In that testimony, you laid out specifically how the current tax code puts Wal-Mart at a disadvantage vs. international competitors. How?
A: Wal-Mart has an effective tax rate, and pays it, of about 34%. A very large international retailer based in the U.K. would have an effective rate in the range of 20%. When we are looking at expansion in markets around the world, we would be bidding for real estate or potential acquisitions against another competitor that has a much lower effective tax rate. So this competitor could afford to outbid us and be able to grow their company when Wal-Mart would kind of have one hand tied behind our back.
Q: Here at home there are other large online retailers, such as Amazon, not paying the same tax rates as you do. What can you do about it?
A: We're trying to communicate with elected officials because we do think there is a loophole in the current system. But it's not just Wal-Mart. The very small retailers, the locally owned retailers, are affected by this, those companies that create jobs locally across small towns and cities across America. It's the same customer, the same purchase, and if they buy it in a bricks-and-mortar store, they are paying a sales tax, and if they buy it from an online-only retailer, they're not. That's probably one of those loopholes that probably needs to be closed.
Q: What would you like to see come out of the president's and Congress' jobs plans?
A: The discussions around infrastructure investment and other steps, potential payroll tax benefits that would attempt to provide for still some consumer spending ability. So these kind of short-term discussions that Congress and the president will be having and I know that businesses would support. But I think it would be a mistake to stop and not address the longer-term issues, the corporate tax reform and trade agreements.
Q: What are the priorities at Wal-Mart right now?
A: Wal-Mart U.S. is our largest segment, and the high priority on growing comp sales or existing store sales in the U.S. is the very, very top priority. The key to that is driving the productivity loop. At Wal-Mart it goes back to Sam Walton and the foundation and business model that we simply operate for less, or everyday low cost. We're known for operating in a very efficient way and then giving those savings to customers. That's why everyday low price is the second part of the productivity loop. Having low prices ends up driving traffic to our stores and increasing sales, which allows us then to lower expenses again and lower prices. A third would be global e-commerce and multichannel. Customers today are using technology to shop. Today in the world of the new technology, the way that customers are using social media is just fast changing. We are in a great position to be serving customers in this new age. And then the overriding priority that makes all of this happen is the development of people. I spend more time on the people-development priorities than I do any other single thing as CEO. The greatest responsibility rests with our people. We have about 2.2 million associates.
Someone asked me about what's it like managing 2.2 million associates, and I said, 'When they're Wal-Mart associates, it's not all that hard because of the quality and the depth of our talent.' I'm really proud of the fact that 70% of the managers in the U.S. started as hourly associates with our company. So talent development, people development, is the overriding, most important priority that enables those other priorities to take place.
Q: How do you keep fostering the Wal-Mart culture?
A: I was always intrigued when I was growing up, and then in engineering school, with the idea of a perpetual machine. I think of the Wal-Mart culture as that. It's kind of self-creating. Our day-to-day process of managing the company and the basic beliefs, the basic foundation of integrity in the company, the way that we train and develop people ends up perpetuating the culture of the company. Sam Walton, if he could come back today, would be very, very proud of the culture that he created and still exists at Wal-Mart.
The largest employer in the U.S. says short-term economic fixes could work, but sustained job creation won't happen without tax reform and new trade agreements. One week after President Obama and Congress launched new jobs plans, Wal-Mart CEO Mike Duke says there are structural issues holding back American companies. One reporter caught up with the man running the largest retailer in the world to find out what to expect for the rest of the year and how to get businesses hiring again. Her conversation below has been edited for clarity and length.
Q: September caps what has been a tough summer after the U.S. credit downgrade and a volatile stock market. For the rest of the year, what do you expect to see for the economy?
A: I'm not an economist, so I always qualify any forecast with a simple approach of how I hear customers talking in our stores. And customers today are concerned. If we could start to see improvements in unemployment or lower fuel prices, then I could see that lead to more positive consumer confidence and consumer spending.
The overall global economy is still struggling. Because we operate in 28 countries, we get a pretty good perspective. I'm out visiting stores virtually every week, and consumer confidence is not good. Probably the single biggest topic of concern is unemployment and jobs. This lengthy period of high unemployment is causing that cycle of consumer confidence to really be down. Increases in fuel costs really take from the consumer's spending ability. The U.S. consumer is under a lot of pressure. Meanwhile, we have large businesses in China and Brazil, and that's a different story. Those markets have recovered faster. There's more optimism. A strong consumer and emerging middle class is leading to faster rates of growth in the emerging markets around the world.
Q: So growth is coming from outside of the U.S.?
A: We still see a lot of opportunity in the U.S. But there will be a lot of growth in emerging markets. In the U.S., we have pockets of areas that have very, very little penetration and have millions of customers that just really don't have access to a Wal-Mart store. So we do see growth in the U.S. Outside the U.S., our investment in capital and number of stores, potential acquisitions in emerging markets will be an area of real growth opportunity. I was really pleased recently that we completed an acquisition of South Africa-based Massmart. Even entering a new continent like Africa helps us to reach millions more customers in the emerging market status. We're growing rapidly in China, Brazil and other Latin American countries. So we will be having a greater percentage of our capital invested in emerging markets.
Q: What will it take to get businesses to create jobs in the U.S.?
A: The priority on jobs that Washington is giving right now is very appropriate. There will be short-term steps that I'm sure the president and Congress should be working on. But there are also longer-term structural issues that need to be addressed. I recently testified before the Senate Finance Committee about corporate tax reform because of the uncompetitive situation we put American companies in in a global environment. We need to lower the corporate tax rate as much as we can, make the tax base as broad as we can make it, and we need to move to a territorial system as quickly as we can. Corporate tax reform is one of those real structural issues that face American companies. Another would be the trade agreements that are holding up the development and expansion of American jobs. A third one is in the area of health care. We need to find ways to bend the cost curve for both public and private sectors of health care.
Q: In that testimony, you laid out specifically how the current tax code puts Wal-Mart at a disadvantage vs. international competitors. How?
A: Wal-Mart has an effective tax rate, and pays it, of about 34%. A very large international retailer based in the U.K. would have an effective rate in the range of 20%. When we are looking at expansion in markets around the world, we would be bidding for real estate or potential acquisitions against another competitor that has a much lower effective tax rate. So this competitor could afford to outbid us and be able to grow their company when Wal-Mart would kind of have one hand tied behind our back.
Q: Here at home there are other large online retailers, such as Amazon, not paying the same tax rates as you do. What can you do about it?
A: We're trying to communicate with elected officials because we do think there is a loophole in the current system. But it's not just Wal-Mart. The very small retailers, the locally owned retailers, are affected by this, those companies that create jobs locally across small towns and cities across America. It's the same customer, the same purchase, and if they buy it in a bricks-and-mortar store, they are paying a sales tax, and if they buy it from an online-only retailer, they're not. That's probably one of those loopholes that probably needs to be closed.
Q: What would you like to see come out of the president's and Congress' jobs plans?
A: The discussions around infrastructure investment and other steps, potential payroll tax benefits that would attempt to provide for still some consumer spending ability. So these kind of short-term discussions that Congress and the president will be having and I know that businesses would support. But I think it would be a mistake to stop and not address the longer-term issues, the corporate tax reform and trade agreements.
Q: What are the priorities at Wal-Mart right now?
A: Wal-Mart U.S. is our largest segment, and the high priority on growing comp sales or existing store sales in the U.S. is the very, very top priority. The key to that is driving the productivity loop. At Wal-Mart it goes back to Sam Walton and the foundation and business model that we simply operate for less, or everyday low cost. We're known for operating in a very efficient way and then giving those savings to customers. That's why everyday low price is the second part of the productivity loop. Having low prices ends up driving traffic to our stores and increasing sales, which allows us then to lower expenses again and lower prices. A third would be global e-commerce and multichannel. Customers today are using technology to shop. Today in the world of the new technology, the way that customers are using social media is just fast changing. We are in a great position to be serving customers in this new age. And then the overriding priority that makes all of this happen is the development of people. I spend more time on the people-development priorities than I do any other single thing as CEO. The greatest responsibility rests with our people. We have about 2.2 million associates.
Someone asked me about what's it like managing 2.2 million associates, and I said, 'When they're Wal-Mart associates, it's not all that hard because of the quality and the depth of our talent.' I'm really proud of the fact that 70% of the managers in the U.S. started as hourly associates with our company. So talent development, people development, is the overriding, most important priority that enables those other priorities to take place.
Q: How do you keep fostering the Wal-Mart culture?
A: I was always intrigued when I was growing up, and then in engineering school, with the idea of a perpetual machine. I think of the Wal-Mart culture as that. It's kind of self-creating. Our day-to-day process of managing the company and the basic beliefs, the basic foundation of integrity in the company, the way that we train and develop people ends up perpetuating the culture of the company. Sam Walton, if he could come back today, would be very, very proud of the culture that he created and still exists at Wal-Mart.
Fed After Gibson Guitar For Use of Endangered Woods
Story first appeared in USA TODAY.
Justice Department officials have requested a meeting with Gibson Guitar owners this coming week while federal lawmakers continue to ask why the factories and offices of the prized Guitar Making business guitars were raided Aug. 24.
Gibson Chief Executive Henry Juszkiewicz said he will meet with federal officials Wednesday here to discuss the raids. Juszkiewicz said he is unsure where the conversation will lead.
In Congress, U.S. Fish & Wildlife officials have agreed to brief lawmakers on the House Energy and Commerce Committee in the next two weeks on the issue.
The agency oversaw the Gibson raids, with agents confiscating computer hard drives, and pallets of wood and guitars suspected of being imported illegally in violation of the Lacey Act, which bans the importing of environmentally threatened plants and animals.
Meanwhile, the raid has created uncertainty in the music, furniture and timber industries, which routinely import exotic hardwoods.
In the case of musicians, some say they fear the U.S. government may decide to confiscate instruments made long ago from woods now considered endangered when musicians travel or their gear is shipped abroad.
People are very confused, said a Nashville-based vintage guitar dealer, whose global business entails shipping instruments, some of which are made from woods that their owners might not be able to properly identify as the law now requires.
The raid on Gibson last month was the second in two years on the 117-year-old guitar building company, which was bought by Juszkiewicz and two partners in 1986.
In both instances, federal officials spelled out in search warrants that they suspect Gibson of illegally importing hardwoods barred by law.
In the first raid, in 2009, federal officials indicated they suspected Gibson was illegally importing protected ebony from Madagascar rainforests — an allegation Gibson denies. No charges have been filed in that case. Gibson and federal officials continue to fight in federal court over the fate of those confiscated materials.
In last month's raid, a government affidavit stated that ebony and rosewood imported from India and in Gibson's possession was deliberately mislabeled with incorrect tariff codes twice to hide the fact that the wood was illegal to ship here both under Indian and U.S. law. It's a contention that Gibson has denied.
U.S. Fish & Wildlife officials and the U.S. Attorney's Office declined to comment on an ongoing investigation.
Warehouse raided
New details about the August raid have emerged.
In addition to raids at Gibson factories and corporate offices in Nashville and Memphis, agents also seized $200,000 worth of Indian ebony and rosewood belonging to Windsor, Calif.-based Luthier Mercantile International, or LMI.
The wood — about 60,000 pieces cut in the shape of fingerboards used to overlay on guitar necks -- was seized from a warehouse here owned by Red Arrow Delivery Service, which contracted to store the wood that would ultimately be sold to Gibson.
It is the same cut and kind of wood the company routinely sells to other guitar manufacturers.
If Indian rosewood is now suspect and subject to seizure, they said they were not sure how their company could continue to operate.
They are just a little company, and they want to go on doing their business, but a big part of their business is Indian rosewood.
Meanwhile, environmental groups have expressed concern about Gibson's practices.
The Forest Stewardship Council conducts rigorous investigations of the point of origin of harvested wood and the condition of forestry workers before bestowing a certification on the woods that companies import.
Last week, the group said that although Gibson does import FSC certified woods, the Indian rosewood confiscated in last month's raid did not have its more rigorous stamp of approval. Instead, the wood had a less rigorous classification that signaled the point of origin had not been as thoroughly investigated.
There are plans to introduce legislation to amend the Lacey Act that would grandfather in musical instruments made before 2008 to address musicians' concerns about travel. Also, the law should be revised to make it less onerous for businesses to understand and follow.
No one wants endangered species harmed anywhere on the planet, but we have to have a better way of dealing with this issue so innocent Americans aren't hurt in the process.
Meanwhile, Indian timber exporters are lobbying their government to clarify that the woods are legal to export for Guitar Repair.
Justice Department officials have requested a meeting with Gibson Guitar owners this coming week while federal lawmakers continue to ask why the factories and offices of the prized Guitar Making business guitars were raided Aug. 24.
Gibson Chief Executive Henry Juszkiewicz said he will meet with federal officials Wednesday here to discuss the raids. Juszkiewicz said he is unsure where the conversation will lead.
In Congress, U.S. Fish & Wildlife officials have agreed to brief lawmakers on the House Energy and Commerce Committee in the next two weeks on the issue.
The agency oversaw the Gibson raids, with agents confiscating computer hard drives, and pallets of wood and guitars suspected of being imported illegally in violation of the Lacey Act, which bans the importing of environmentally threatened plants and animals.
Meanwhile, the raid has created uncertainty in the music, furniture and timber industries, which routinely import exotic hardwoods.
In the case of musicians, some say they fear the U.S. government may decide to confiscate instruments made long ago from woods now considered endangered when musicians travel or their gear is shipped abroad.
People are very confused, said a Nashville-based vintage guitar dealer, whose global business entails shipping instruments, some of which are made from woods that their owners might not be able to properly identify as the law now requires.
The raid on Gibson last month was the second in two years on the 117-year-old guitar building company, which was bought by Juszkiewicz and two partners in 1986.
In both instances, federal officials spelled out in search warrants that they suspect Gibson of illegally importing hardwoods barred by law.
In the first raid, in 2009, federal officials indicated they suspected Gibson was illegally importing protected ebony from Madagascar rainforests — an allegation Gibson denies. No charges have been filed in that case. Gibson and federal officials continue to fight in federal court over the fate of those confiscated materials.
In last month's raid, a government affidavit stated that ebony and rosewood imported from India and in Gibson's possession was deliberately mislabeled with incorrect tariff codes twice to hide the fact that the wood was illegal to ship here both under Indian and U.S. law. It's a contention that Gibson has denied.
U.S. Fish & Wildlife officials and the U.S. Attorney's Office declined to comment on an ongoing investigation.
Warehouse raided
New details about the August raid have emerged.
In addition to raids at Gibson factories and corporate offices in Nashville and Memphis, agents also seized $200,000 worth of Indian ebony and rosewood belonging to Windsor, Calif.-based Luthier Mercantile International, or LMI.
The wood — about 60,000 pieces cut in the shape of fingerboards used to overlay on guitar necks -- was seized from a warehouse here owned by Red Arrow Delivery Service, which contracted to store the wood that would ultimately be sold to Gibson.
It is the same cut and kind of wood the company routinely sells to other guitar manufacturers.
If Indian rosewood is now suspect and subject to seizure, they said they were not sure how their company could continue to operate.
They are just a little company, and they want to go on doing their business, but a big part of their business is Indian rosewood.
Meanwhile, environmental groups have expressed concern about Gibson's practices.
The Forest Stewardship Council conducts rigorous investigations of the point of origin of harvested wood and the condition of forestry workers before bestowing a certification on the woods that companies import.
Last week, the group said that although Gibson does import FSC certified woods, the Indian rosewood confiscated in last month's raid did not have its more rigorous stamp of approval. Instead, the wood had a less rigorous classification that signaled the point of origin had not been as thoroughly investigated.
There are plans to introduce legislation to amend the Lacey Act that would grandfather in musical instruments made before 2008 to address musicians' concerns about travel. Also, the law should be revised to make it less onerous for businesses to understand and follow.
No one wants endangered species harmed anywhere on the planet, but we have to have a better way of dealing with this issue so innocent Americans aren't hurt in the process.
Meanwhile, Indian timber exporters are lobbying their government to clarify that the woods are legal to export for Guitar Repair.
Friday, September 16, 2011
New Water Stations Help The Environment
Filling stations are no longer just for gas. In an eco-friendly push, hundreds of U.S. colleges, including those offering a Healtcare Degree, are installing water fountains known as hydration stations so students can refill water bottles rather than buy new ones. Some campuses are even banning the sale of bottled water.
The stations are also popping up in airports, parks, office buildings — and even on tours with bands, including the Black Eyed Peas— as efforts proliferate to reduce plastic waste by promoting tap water.
Adding to this push is a network of more than 800 restaurants and cafes nationwide that have agreed to give people with reusable bottles free water refills. New York-based TapIt, a non-profit group launched in 2009, has worked with city governments to sign up eateries in 22 states. Next month, Philadelphia is slated to join, TapIt's William Schwartz says.
Rod Magnuson, of Elkay, which began selling several versions of the water stations last year said it's the right product at the right time especially.
Elkay reports more than 150 colleges and universities have installed its refilling stations. About the same number have installed Brita ones, which launched in November, spokeswoman Katy Loos says.
What will this mean for bottled water? After a two-year dip, consumption rose 3.5% last year when it averaged 28.3 gallons per American, according to the International Bottled Water Association, an industry group.
It has a following that's strong, especially as recycling of plastic bottles gets easier, says the group's Tom Lauria. He doesn't expect hydration stations to hurt sales, adding that there's probably enough room for both because there are still colleges that offer online mat courses.
The stations are also popping up in airports, parks, office buildings — and even on tours with bands, including the Black Eyed Peas— as efforts proliferate to reduce plastic waste by promoting tap water.
Adding to this push is a network of more than 800 restaurants and cafes nationwide that have agreed to give people with reusable bottles free water refills. New York-based TapIt, a non-profit group launched in 2009, has worked with city governments to sign up eateries in 22 states. Next month, Philadelphia is slated to join, TapIt's William Schwartz says.
Rod Magnuson, of Elkay, which began selling several versions of the water stations last year said it's the right product at the right time especially.
Elkay reports more than 150 colleges and universities have installed its refilling stations. About the same number have installed Brita ones, which launched in November, spokeswoman Katy Loos says.
What will this mean for bottled water? After a two-year dip, consumption rose 3.5% last year when it averaged 28.3 gallons per American, according to the International Bottled Water Association, an industry group.
It has a following that's strong, especially as recycling of plastic bottles gets easier, says the group's Tom Lauria. He doesn't expect hydration stations to hurt sales, adding that there's probably enough room for both because there are still colleges that offer online mat courses.
Government Job Training Programs Are Huge Failures
Story first appeared in the Wall Street Journal.
Last Thursday, President Obama proposed new federal jobs and job-training programs for youth and the long-term unemployed. The federal government has experimented with these programs for almost a half century. The record is one of failure and scandal.
In 1962, Congress passed the Manpower Development and Training Act (MDTA) to provide training for workers who lost their jobs due to automation or other technological developments. Two years later, the General Accounting Office (GAO) discovered that any trainee in this program who held a job for a single day was counted as "permanently employed"—a statistical charade by the Department of Labor to camouflage its lack of results. A decade after MDTA's inception, GAO reported that it was failing to teach valuable job skills or place trainees in private jobs and was marred by an overriding concern with filling available slots for a particular program, regardless of what trainees actually needed.
Congress responded in 1973 by enacting the Comprehensive Employment and Training Act (CETA). The preface to the new law noted that it has been impossible to develop rational priorities in job training. So instead of setting priorities, CETA spent vastly more money, especially on job creation. Notorious examples reported in the press in those years included paying to build an artificial rock for rock climbers, providing nude sculpture classes (where, as the Pharos-Tribune of Logansport, Ind., explained, aspiring artists pawed each others bodies to recognize that they had both male and female characteristics), and conducting door-to-door food-stamp recruiting campaigns.
Between 1961 and 1980, the feds spent tens of billions on federal job-training and employment programs. To what effect? A 1979 Washington Post investigation concluded that incredibly, the government has kept no meaningful statistics on the effectiveness of these programs—making the past 15 years' effort almost worthless in terms of learning what works. CETA hirees were often assigned to do whatever benefited the government agency or nonprofit that put them on the payroll, with no concern for the trainees' development. An Urban Institute study of the mid-1980s concluded that participation in CETA programs resulted in significant earnings losses for young men of all races and no significant effects for young women.
After CETA became a laughingstock, Congress replaced it in 1982 with the Job Training Partnership Act. JTPA spent lavishly—to expand an Indiana circus museum, teach Washington taxi drivers to smile, provide foreign junkets for state and local politicians, and bankroll business relocations. According to the Labor Department's inspector general, young trainees were twice as likely to rely on food stamps after JTPA involvement than before since the training often included instructions on applying for an array of government benefits.
For years the Labor Department scorned the mandate in the 1982 legislation to speedily and thoroughly evaluate whether the programs actually benefitted trainees. Finally, in 1993, it released a study that showed participation in JTPA actually reduced the earnings of male out-of-school youths. Young males enrolled in JTPA programs had 10% lower earnings than a control group that never participated.
The Workforce Investment Act (WIA) replaced JTPA in 1998. Congress required a thorough evaluation of the law's impact on trainees by 2005. At last report, the Labor Department is promising it will be completed by 2015.
In his speech to Congress, Mr. Obama called for funding hundreds of thousands of summer jobs for teens, which he labeled investing in low-income youth and adults. Yet such programs have been blighting work ethics for decades.
The GAO warned in 1969 that many teens in federal summer jobs programs regressed in their conception of what should reasonably be required in return for wages paid. A decade later, it reported that most urban teens were exposed to a worksite where good work habits were not learned or reinforced. And in 1985, a National Academy of Science study found that government jobs and training programs isolated disadvantaged youth, thus making it harder for them to fit into the real job market.
More recently, Mr. Obama's 2009 stimulus package expanded federally funded summer jobs. And so young men and women used puppets to greet aquarium visitors in Boston. Teens in Washington, D.C.'s Green Summer Jobs Corps maintained school-yard butterfly habitats. And summer workers in Florida, the Orlando Sentinel reported, practiced firm handshakes to ensure that employers quickly understand their serious intent to work."
Did any of this investing work? There's no evidence it did.
Mr. Obama also wants a new federal initiative to be based on Georgia Work$, which the president describes as a program in which people who collect unemployment insurance participate in temporary work as a way to build their skills while they look for a permanent job. But Georgia Work$ has produced far more headlines than jobs—fewer than 200 this year, according to a recent article in Politico.
Begun in 2003, Georgia Work$ gives people a chance to train at an employer for eight weeks. They receive no salary but continue collecting unemployment compensation and as well as a $240 weekly stipend from the state of Georgia. Last year, the stipend was increased to $600 a week and anyone who said they needed a job was allowed to participate. After costs exploded, Georgia Work$ was scaled back early this year.
Mark Butler, Georgia's current labor commissioner, stated that the program suffered from a lack of oversight before he took over in January. At last report, only 14% of trainees were hired by employers—a success rate akin to other unemployed Georgians who do not participate in the program.
Earlier this year, the Government Accountability Office reported that there were 47 different federal employment and training programs, costing taxpayers $18 billion a year. There is massive overlap and duplication, and few programs seriously evaluate their impact on trainees.
If federal job training efforts worked, Congress would not have thrown out the programs it has created every decade or so and enacted new ones. In reality, government training has always been driven by bureaucratic convenience, or politicians' re-election considerations. There is no reason to believe the latest round of proposals will be any different.
Last Thursday, President Obama proposed new federal jobs and job-training programs for youth and the long-term unemployed. The federal government has experimented with these programs for almost a half century. The record is one of failure and scandal.
In 1962, Congress passed the Manpower Development and Training Act (MDTA) to provide training for workers who lost their jobs due to automation or other technological developments. Two years later, the General Accounting Office (GAO) discovered that any trainee in this program who held a job for a single day was counted as "permanently employed"—a statistical charade by the Department of Labor to camouflage its lack of results. A decade after MDTA's inception, GAO reported that it was failing to teach valuable job skills or place trainees in private jobs and was marred by an overriding concern with filling available slots for a particular program, regardless of what trainees actually needed.
Congress responded in 1973 by enacting the Comprehensive Employment and Training Act (CETA). The preface to the new law noted that it has been impossible to develop rational priorities in job training. So instead of setting priorities, CETA spent vastly more money, especially on job creation. Notorious examples reported in the press in those years included paying to build an artificial rock for rock climbers, providing nude sculpture classes (where, as the Pharos-Tribune of Logansport, Ind., explained, aspiring artists pawed each others bodies to recognize that they had both male and female characteristics), and conducting door-to-door food-stamp recruiting campaigns.
Between 1961 and 1980, the feds spent tens of billions on federal job-training and employment programs. To what effect? A 1979 Washington Post investigation concluded that incredibly, the government has kept no meaningful statistics on the effectiveness of these programs—making the past 15 years' effort almost worthless in terms of learning what works. CETA hirees were often assigned to do whatever benefited the government agency or nonprofit that put them on the payroll, with no concern for the trainees' development. An Urban Institute study of the mid-1980s concluded that participation in CETA programs resulted in significant earnings losses for young men of all races and no significant effects for young women.
After CETA became a laughingstock, Congress replaced it in 1982 with the Job Training Partnership Act. JTPA spent lavishly—to expand an Indiana circus museum, teach Washington taxi drivers to smile, provide foreign junkets for state and local politicians, and bankroll business relocations. According to the Labor Department's inspector general, young trainees were twice as likely to rely on food stamps after JTPA involvement than before since the training often included instructions on applying for an array of government benefits.
For years the Labor Department scorned the mandate in the 1982 legislation to speedily and thoroughly evaluate whether the programs actually benefitted trainees. Finally, in 1993, it released a study that showed participation in JTPA actually reduced the earnings of male out-of-school youths. Young males enrolled in JTPA programs had 10% lower earnings than a control group that never participated.
The Workforce Investment Act (WIA) replaced JTPA in 1998. Congress required a thorough evaluation of the law's impact on trainees by 2005. At last report, the Labor Department is promising it will be completed by 2015.
In his speech to Congress, Mr. Obama called for funding hundreds of thousands of summer jobs for teens, which he labeled investing in low-income youth and adults. Yet such programs have been blighting work ethics for decades.
The GAO warned in 1969 that many teens in federal summer jobs programs regressed in their conception of what should reasonably be required in return for wages paid. A decade later, it reported that most urban teens were exposed to a worksite where good work habits were not learned or reinforced. And in 1985, a National Academy of Science study found that government jobs and training programs isolated disadvantaged youth, thus making it harder for them to fit into the real job market.
More recently, Mr. Obama's 2009 stimulus package expanded federally funded summer jobs. And so young men and women used puppets to greet aquarium visitors in Boston. Teens in Washington, D.C.'s Green Summer Jobs Corps maintained school-yard butterfly habitats. And summer workers in Florida, the Orlando Sentinel reported, practiced firm handshakes to ensure that employers quickly understand their serious intent to work."
Did any of this investing work? There's no evidence it did.
Mr. Obama also wants a new federal initiative to be based on Georgia Work$, which the president describes as a program in which people who collect unemployment insurance participate in temporary work as a way to build their skills while they look for a permanent job. But Georgia Work$ has produced far more headlines than jobs—fewer than 200 this year, according to a recent article in Politico.
Begun in 2003, Georgia Work$ gives people a chance to train at an employer for eight weeks. They receive no salary but continue collecting unemployment compensation and as well as a $240 weekly stipend from the state of Georgia. Last year, the stipend was increased to $600 a week and anyone who said they needed a job was allowed to participate. After costs exploded, Georgia Work$ was scaled back early this year.
Mark Butler, Georgia's current labor commissioner, stated that the program suffered from a lack of oversight before he took over in January. At last report, only 14% of trainees were hired by employers—a success rate akin to other unemployed Georgians who do not participate in the program.
Earlier this year, the Government Accountability Office reported that there were 47 different federal employment and training programs, costing taxpayers $18 billion a year. There is massive overlap and duplication, and few programs seriously evaluate their impact on trainees.
If federal job training efforts worked, Congress would not have thrown out the programs it has created every decade or so and enacted new ones. In reality, government training has always been driven by bureaucratic convenience, or politicians' re-election considerations. There is no reason to believe the latest round of proposals will be any different.
Less People Pursuing M.B.A.
Story first appeared in the Wall Street Journal.
Thinking of applying to business school? Now may be a good time.
Applications for two-year, full-time M.B.A. programs that start this fall dropped an average of 9.9% from a year earlier, according to new data from the Graduate Management Admission Council, which administers the Graduate Management Admission Test. The decline marks the third year in a row that applications have fallen.
One-third of full-time M.B.A. programs reported drops of more than 10%, according to the survey, which included 649 M.B.A. and other business programs at 331 schools world-wide. This correlates to reports from schools offering a MAT Degree.
Historically, interest in graduate school has increased when the job market soured, but the prolonged uncertainty about future growth has discouraged some prospective M.B.A. applicants. This, despite the fact that some companies that have traditionally helped students pay their way through business school haven't altered their policies. Spokespeople at Goldman Sachs Group Inc., Credit Suisse Group AG and Morgan Stanley said they aren't changing the amount they contribute to business-school tuition.
Wendy Huber, associate director of admissions at the University of Virginia's Darden School of Business said people will stay in their jobs until they see that there'll be a return on this investment, and they want to know that recruiters will be waiting in line. Applications for Darden's full-time M.B.A. program fell roughly 10%, Ms. Huber said.
Harvard Business School also wasn't immune. Applications for its full-time M.B.A. class entering this fall slid 4% to 9,134 from a year earlier, helping to boost the school's acceptance rate to 12% from 11%.
Part-time programs are struggling to attract students, too, with 46% reporting declines in application volume this year.
New York University's Stern School of Business had a 9.8% drop in applicants to its part-time program this year. Most people who apply to that program are employed, and there are fewer working professionals these days, said Isser Gallogly, assistant dean of M.B.A. admissions. He said people are not going to be applying to an M.B.A. program when they're trying to find a job.
One bright spot for business education is specialized master's programs for MBA Degrees. Courses for management, accounting and finance all reported increased volume. Applications for these programs have risen in recent years as undergraduates have sought to beef up their credentials before hitting the job market.
Additional interest in the short, specialized programs comes as professional certification boards toughen entry requirements. For example, students wishing to become certified public accountants in certain states must now have 150 hours of college credit to qualify for the CPA exam, more than most get in an undergraduate program.
Applications for the Master of Finance program at MIT Sloan School of Management rose 3% for students entering this fall. Applications had already soared to more than 940 for the class entering in fall 2010, nearly eight times when the program was first introduced in 2009.
A similar spike occurred at Temple University's Fox School of Business, which introduced a new Master of Accountancy this fall.
But even though M.B.A. application volume has slumped, most schools report the quality of candidates, based on their GMAT scores, undergraduate transcripts and work experience, is getting stronger.
The number of people taking the GMAT this year increased through the end of July, and historically test taking has been a leading indicator of higher application volume soon after.
Thinking of applying to business school? Now may be a good time.
Applications for two-year, full-time M.B.A. programs that start this fall dropped an average of 9.9% from a year earlier, according to new data from the Graduate Management Admission Council, which administers the Graduate Management Admission Test. The decline marks the third year in a row that applications have fallen.
One-third of full-time M.B.A. programs reported drops of more than 10%, according to the survey, which included 649 M.B.A. and other business programs at 331 schools world-wide. This correlates to reports from schools offering a MAT Degree.
Historically, interest in graduate school has increased when the job market soured, but the prolonged uncertainty about future growth has discouraged some prospective M.B.A. applicants. This, despite the fact that some companies that have traditionally helped students pay their way through business school haven't altered their policies. Spokespeople at Goldman Sachs Group Inc., Credit Suisse Group AG and Morgan Stanley said they aren't changing the amount they contribute to business-school tuition.
Wendy Huber, associate director of admissions at the University of Virginia's Darden School of Business said people will stay in their jobs until they see that there'll be a return on this investment, and they want to know that recruiters will be waiting in line. Applications for Darden's full-time M.B.A. program fell roughly 10%, Ms. Huber said.
Harvard Business School also wasn't immune. Applications for its full-time M.B.A. class entering this fall slid 4% to 9,134 from a year earlier, helping to boost the school's acceptance rate to 12% from 11%.
Part-time programs are struggling to attract students, too, with 46% reporting declines in application volume this year.
New York University's Stern School of Business had a 9.8% drop in applicants to its part-time program this year. Most people who apply to that program are employed, and there are fewer working professionals these days, said Isser Gallogly, assistant dean of M.B.A. admissions. He said people are not going to be applying to an M.B.A. program when they're trying to find a job.
One bright spot for business education is specialized master's programs for MBA Degrees. Courses for management, accounting and finance all reported increased volume. Applications for these programs have risen in recent years as undergraduates have sought to beef up their credentials before hitting the job market.
Additional interest in the short, specialized programs comes as professional certification boards toughen entry requirements. For example, students wishing to become certified public accountants in certain states must now have 150 hours of college credit to qualify for the CPA exam, more than most get in an undergraduate program.
Applications for the Master of Finance program at MIT Sloan School of Management rose 3% for students entering this fall. Applications had already soared to more than 940 for the class entering in fall 2010, nearly eight times when the program was first introduced in 2009.
A similar spike occurred at Temple University's Fox School of Business, which introduced a new Master of Accountancy this fall.
But even though M.B.A. application volume has slumped, most schools report the quality of candidates, based on their GMAT scores, undergraduate transcripts and work experience, is getting stronger.
The number of people taking the GMAT this year increased through the end of July, and historically test taking has been a leading indicator of higher application volume soon after.
Teacher Evaluations Evaluated
Story first appeared in the Wall Street Journal.
Teacher evaluations for years were based on brief classroom observations by the principal. But now, prodded by President Barack Obama's $4.35 billion Race to the Top program, at least 26 states have agreed to judge teachers based, in part, on results from their students' performance on standardized tests.
So with millions of teachers back in the classroom, many are finding their careers increasingly hinge on obscure formulas.
The metric created by Value-Added Research Center, a nonprofit housed at the University of Wisconsin-Madison's School of Education, is a new kind of report card that attempts to gauge how much of students' growth on tests is attributable to the teacher.
For the first time this year, teachers in Rhode Island and Florida will see their evaluations linked to the complex metric. Louisiana and New Jersey will pilot the formulas this year and roll them out next school year. At least a dozen other states and school districts will spend the year finalizing their teacher-rating formulas.
Rob Meyer, the bowtie-wearing economist who runs the Value-Added Research Center, known as VARC, and calls his statistical model a well-crafted recipe said they have to deliver quality and speed, because schools need the data now.
VARC is one of at least eight entities developing such models.
Supporters say the new measuring sticks could improve U.S. educational performance by holding teachers accountable for students' progress. Teachers unions and other critics say the tests' measurements are narrow and that the teachers' scores jump around too much, casting doubt on the validity of the formulas.
Janice Poda, strategic-initiatives director for the Council of Chief State School Officers, said education officials are trying to make sense of the complicated models. States have to trust the vendor is designing a system that is fair and, right now, a lot of the state officials simply don't have the information they need, she said.
Bill Sanders, who developed the nation's first model to measure teachers' effect on student test scores, advises caution. People smell the money and there are lots of people rushing out with unsophisticated formulas, said Mr. Sanders, who works as a senior researcher at software firm SAS Institute Inc., which competes with VARC for contracts.
In general, the models use a student's score on, say, a fourth-grade math test to predict how she or he would perform on the fifth-grade test. Some groups, such as VARC, adjust those raw test scores to control for students' outside factors, such as income or race. The actual fifth-grade score is then compared with the expected score, which then translates into the measure of the teacher's added value.
The teacher's overall effectiveness with every student in the classroom is boiled down to one number to rate them from least effective to most effective.
For states and school districts, deciding which vendor to use is critical. The metrics differ in substantial ways and those distinctions can have a significant influence on whether a teacher is rated superior or subpar.
Teaching Moments
1982 Bill Sanders, a professor at the University of Tennessee, begins building value-added models to measure teachers' impact on student achievement. By 1992, Tennessee education officials adopt a refined version of the model to evaluate the state's schools.
2002 President George W. Bush's No Child Left Behind law goes into effect, providing data that can be used to evaluate students' growth.
2005 The University of Wisconsin's Value-Added Research Center, or VARC, is formed by Rob Meyer.
2006 The federal Teacher Incentive Fund begins issuing grants to school systems and states to develop programs to award teachers who raise test scores.
2008 The Houston Independent School District begins issuing bonuses to teachers with high value-added rankings.
2009-2010 New York City starts including value-added data in decisions about whether to grant tenure to teachers.
2010 The $4.35 billion Race to the Top grants create incentives for states to adopt new education policies, including linking test scores to teacher evaluations.
Summer 2010 The Washington, D.C., school district uses value-added data to evaluate and fire teachers.
In August, a New York State Supreme Court judge invalidated a vote by state education officials that would have let districts base 40% of teacher evaluations on state test scores, after the state teachers unions sued saying the law allowed for only 20%. The Los Angeles teachers union has sued to stop the district from launching a pilot program that would grade some teachers using a VARC formula.
Until this year, only a few districts used value-added data. Washington, D.C., used it to fire about 60 teachers; New York City employed it to deny tenure to what it considered underperforming teachers; and Houston relied on it to award bonuses.
Michelle Rhee, who instituted a tough evaluation system when she was schools chancellor in Washington, said she took over a district where many students failed achievement exams, yet virtually every teacher was rated effective.
Ms. Rhee, who now heads StudentsFirst, a nonprofit advocate for education overhauls said while it's not a perfect measure, it was a much fairer, more transparent and consistent way to evaluate teachers.
Andy Dewey, an 11th-grade history teacher in Houston, is not a fan. He saw his score bounce from a positive rating in the 2008-09 school year to a negative rating the following year, decreasing his bonus by about $2,300.
In New York City, value-added data has been used for the last two years by principals only to make teacher tenure decisions. Last year, 3% of teachers did not receive tenure protection based, in part, on that data. A new state law, passed in an effort to compete for Race the Top, requires the data become an official part of every teacher evaluation.
At Frederick Douglass Academy in Harlem, principal Gregory Hodge uses the value-added results to alter instruction, move teachers to new classroom assignments and pair weak students with the highest performing teachers. Mr. Hodge said the data for teachers generally aligns with his classroom observations. He said it's confirming what an experienced principal knows.
Teacher evaluations for years were based on brief classroom observations by the principal. But now, prodded by President Barack Obama's $4.35 billion Race to the Top program, at least 26 states have agreed to judge teachers based, in part, on results from their students' performance on standardized tests.
So with millions of teachers back in the classroom, many are finding their careers increasingly hinge on obscure formulas.
The metric created by Value-Added Research Center, a nonprofit housed at the University of Wisconsin-Madison's School of Education, is a new kind of report card that attempts to gauge how much of students' growth on tests is attributable to the teacher.
For the first time this year, teachers in Rhode Island and Florida will see their evaluations linked to the complex metric. Louisiana and New Jersey will pilot the formulas this year and roll them out next school year. At least a dozen other states and school districts will spend the year finalizing their teacher-rating formulas.
Rob Meyer, the bowtie-wearing economist who runs the Value-Added Research Center, known as VARC, and calls his statistical model a well-crafted recipe said they have to deliver quality and speed, because schools need the data now.
VARC is one of at least eight entities developing such models.
Supporters say the new measuring sticks could improve U.S. educational performance by holding teachers accountable for students' progress. Teachers unions and other critics say the tests' measurements are narrow and that the teachers' scores jump around too much, casting doubt on the validity of the formulas.
Janice Poda, strategic-initiatives director for the Council of Chief State School Officers, said education officials are trying to make sense of the complicated models. States have to trust the vendor is designing a system that is fair and, right now, a lot of the state officials simply don't have the information they need, she said.
Bill Sanders, who developed the nation's first model to measure teachers' effect on student test scores, advises caution. People smell the money and there are lots of people rushing out with unsophisticated formulas, said Mr. Sanders, who works as a senior researcher at software firm SAS Institute Inc., which competes with VARC for contracts.
In general, the models use a student's score on, say, a fourth-grade math test to predict how she or he would perform on the fifth-grade test. Some groups, such as VARC, adjust those raw test scores to control for students' outside factors, such as income or race. The actual fifth-grade score is then compared with the expected score, which then translates into the measure of the teacher's added value.
The teacher's overall effectiveness with every student in the classroom is boiled down to one number to rate them from least effective to most effective.
For states and school districts, deciding which vendor to use is critical. The metrics differ in substantial ways and those distinctions can have a significant influence on whether a teacher is rated superior or subpar.
Teaching Moments
1982 Bill Sanders, a professor at the University of Tennessee, begins building value-added models to measure teachers' impact on student achievement. By 1992, Tennessee education officials adopt a refined version of the model to evaluate the state's schools.
2002 President George W. Bush's No Child Left Behind law goes into effect, providing data that can be used to evaluate students' growth.
2005 The University of Wisconsin's Value-Added Research Center, or VARC, is formed by Rob Meyer.
2006 The federal Teacher Incentive Fund begins issuing grants to school systems and states to develop programs to award teachers who raise test scores.
2008 The Houston Independent School District begins issuing bonuses to teachers with high value-added rankings.
2009-2010 New York City starts including value-added data in decisions about whether to grant tenure to teachers.
2010 The $4.35 billion Race to the Top grants create incentives for states to adopt new education policies, including linking test scores to teacher evaluations.
Summer 2010 The Washington, D.C., school district uses value-added data to evaluate and fire teachers.
In August, a New York State Supreme Court judge invalidated a vote by state education officials that would have let districts base 40% of teacher evaluations on state test scores, after the state teachers unions sued saying the law allowed for only 20%. The Los Angeles teachers union has sued to stop the district from launching a pilot program that would grade some teachers using a VARC formula.
Until this year, only a few districts used value-added data. Washington, D.C., used it to fire about 60 teachers; New York City employed it to deny tenure to what it considered underperforming teachers; and Houston relied on it to award bonuses.
Michelle Rhee, who instituted a tough evaluation system when she was schools chancellor in Washington, said she took over a district where many students failed achievement exams, yet virtually every teacher was rated effective.
Ms. Rhee, who now heads StudentsFirst, a nonprofit advocate for education overhauls said while it's not a perfect measure, it was a much fairer, more transparent and consistent way to evaluate teachers.
Andy Dewey, an 11th-grade history teacher in Houston, is not a fan. He saw his score bounce from a positive rating in the 2008-09 school year to a negative rating the following year, decreasing his bonus by about $2,300.
In New York City, value-added data has been used for the last two years by principals only to make teacher tenure decisions. Last year, 3% of teachers did not receive tenure protection based, in part, on that data. A new state law, passed in an effort to compete for Race the Top, requires the data become an official part of every teacher evaluation.
At Frederick Douglass Academy in Harlem, principal Gregory Hodge uses the value-added results to alter instruction, move teachers to new classroom assignments and pair weak students with the highest performing teachers. Mr. Hodge said the data for teachers generally aligns with his classroom observations. He said it's confirming what an experienced principal knows.
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