Invictus here, folks, with a smattering of items that caught my eye last week.  Food for thought on what will likely be a quiet Columbus Day trading session (famous last words).

Revisiting a theme I introduced here in July, I continue to follow the trend of Temporary Services jobs vs. Private Sector jobs less Temps.  As Temps has always been a leading indicator for overall nonfarm payrolls, it should have a story to tell.  What’s interesting in the updated chart below is the rate at which Temps has continued to outpace the year-over-year growth in private sector jobs less Temps, something we’ve not seen in the almost 20 years the Temps metric has been recorded.  I suspect that, with continuing economic fragility and a fairly cloudy outlook, employers have taken a “just in time” hiring posture, and using temporary workers is the best way to execute on that plan.  Remember that “Poor Sales” is the largest concern (by far) expressed by small business members of the National Federation of Independent Business (NFIB) in its monthly Small Business Economic Trends (SBET) (.PDF), and has been for quite some time.  Temps is up 23.4% year over year while Private Payrolls – Temps has just cracked through zero and now sits at +0.2% year over year (the first positive print since April 2008, a 28 month negative streak).

The preliminary read on the diffusion index for the month broke under 50 for the first time since January, which is to say that more companies are cutting payrolls than adding to them (i.e. above 50 = good, below 50 = bad).  This metric was actually higher in December 2007 — at 50.6 — when the recession started, than it is now.

To help me visualize the amount of slack in the labor market, I created this chart some time ago over at FRED.  It shows the Unemployment Rate and the Year Over Year percent change in Average Hourly Earnings for Private Industries.  As one might expect, high(er) unemployment results in stagnant (or lower) wages, while low(er) unemployment results in higher wages.  Simple supply and demand at work.  The bad news is that, as far as the labor market is currently concerned, there is way too much supply and way too little demand, as evidenced by the yawning gap we’re currently experiencing.  (On second thought, I probably should have indicated “minimal” slack instead of  “no” slack, but the point remains.)

Consumers continue repairing their balance sheets, deleveraging, and reducing their credit.  Consumer credit (ex-mortgages) is down some $168 billion since its peak in July 2008.  Some of the decline is borrower paydown, some is lender writedown.  In either case, I’d venture a guess that a new credit cycle is still not close at hand.

The Dow Jones Industrial Average has very stealthily, and to virtually no fanfare, charted another Golden Cross (50-day MA crosses the 200-day MA from below).  The S&P500 is on the brink of following suit, barring a significant short term sell off.  The Golden Cross was, if memory serves, much more widely publicized when it occurred last year.  Not being trained much in technical analysis, I’m not sure quite what to make of two Golden Crosses occurring within 18 months of each other, so I’ll leave it to the technicians to figure out what this means.

Moving on, I would throw in that I think New Jersey Governor Chris Christie’s decision to scrap a new rail tunnel between New Jersey and New York is wrong in every possible way.  I’m not even sure the most ardent austerian can deny the need to continue trying to ease congestion in and around New York City in any way possible.  There are reports that he is reconsidering his decision, and I sincerely hope he sees the light (insert balance of idiom here).

Lastly, to the folks running the Metropolitan Transit Authority, who just approved the third set of fare hikes in as many years, listen up:  Your repeated fare hikes are beyond offensive and are, at this point, making driving a very competitive alternative. I kid you not.  Between the newly approved fare hike and the monthly charge to park at the station, driving is becoming a serious alternative and, should I find a neighbor with whom to commute, it’s an absolute money-saving no-brainer.  If I needed a MetroCard, which I don’t, the MTA would have already seen the last of me.

As State Senator Carl L. Marcellino put it in a letter to MTA CEO Jay H. Walder (annual salary: $350,000 plus “living allowance”) in August of this year:

Take a Huntington rider for example. The monthly cost to ride the LIRR will increase from $274 to $299 a month, a $300 yearly increase to an astronomical $3588 a year. Add to that a proposed monthly $130 Metrocard and that Huntington resident will pay over $5,000 a year just for the privilege of using the MTA to get to work. For someone making $50,000 a year, that is more than 10% of their income. That cost is simply unaffordable and totally unacceptable.

Marcellino’s point is well taken, but the bottom line is this:  Anything in the vicinity of $400/month to commute is simply outrageous, no matter one’s earnings.  Commuters have gotten nothing — nada, zilch, naught, cipher — in exchange for ponying up more and more for a monthly commutation.  In fact, we’ve faced nothing but cuts.  Keep it up and the mass exodus of employers (and their employees) from New York will continue unabated.  Please, stop the insanity.  (As an aside, and a final thought:  Is there a bigger joke than the pretense that anything anyone says during the requisite “public comment” period will be taken seriously?).

Category: Credit, Cycles, Data Analysis, Economy, Employment

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

23 Responses to “Monday Morning Grab Bag”

  1. bscanlon says:

    Interesting data about small businesses employing more temps, in fact, it looks like LOTS more temps. The thing about temps is that the cost to the business is often higher than a regular employee. Sure, no benefits and HR overhead, but over the long term the actual employees cost less I reckon. Not in all cases of course.

    If my assertion is correct, then these small businesses that are already experiencing poor sales will be paying out more for their labor to temp agencies. Obviously a situation that cannot persist, or will possibly increase the fail rate for small businesses. I will make another generalization/guess here and suggest that while the businesses employing temps may be small, the temp agencies are often quite large.

    So we have larger companies currently benefiting from a situation that is in the long term less beneficial for smaller companies.

    Which puts me in mind of this post from Stirling Newberry, http://www.correntewire.com/pyramids_eat_their_own who despite his lack of perfection is a very deep and forward looking economic thinker, having among other things predicted the Japan scenario for the USA quite a number of years ago. He’s also the person that turned me on to The Big Picture those many years ago, and so also worthy of mention here.

  2. maspablo says:

    I do agree that the mta is insensitive to commuters.(I’m one) The rairoad rider is subsidized at the expense of the subway rider. But the average usa driver is subsidized at the expense of the northeast commuter . Always has been always will be. We are selfish.

  3. mathman says:

    Good luck getting unemployment down with businesses doing this:

    http://news.yahoo.com/s/ap/20101011/ap_on_bi_ge/us_tougher_jobs

  4. constantnormal says:

    The MTA is just getting ahead of the coming increase in gasoline prices. Once the impact of Bernanke’s $3T monetary injection takes hold (via a decimation of the USD), and imported oil increases (by virtue of that same plummeting USD) to $150/bbl and beyond, $4 and higher gasoline prices will put the sparkle back into the MTA, and riders will clamor to spend the $5K per year for the privilege of “inexpensive mass transit”. At least those that have jobs will do so.

    As Einstein so adroitly observed, “It’s all relative”.

  5. ACS says:

    “Not being trained much in technical analysis, I’m not sure quite what to make of two Golden Crosses occurring within 18 months of each other, so I’ll leave it to the technicians to figure out what this means.”

    Um, it means the market is in a trading range.

  6. Kort says:

    Interestng, but not surprising, that you’d pick on Christie of all people but:

    The project was to cost $8.7B. The review came back and said $11-14B. He can’t afford it and he killed it (for now) and wants to spend what money he does have on other things. People cry and complain.

    Ok, so—if $11B to $14B is still what you would want to spend–at what level would you think it’s “too much” since clearly, spending $14B to build this is still a good idea to you? Would $20B be too much? $20 quadrillion dollars? How much is too much? For him, $14B is too much. So, sue him for having a different opinion as CEO of NJ.

    As for the “stimulus”…it’s 6,000 jobs which, at say $60K per year, is enough to pay those 6,000 people for nearly 40 years(!) to build something, anything. We’ve lost respect for the word “billion” when talking about potentially wasteful spending.

  7. Lugnut says:

    “Keep it up and the mass exodus of employers (and their employees) from New York will continue unabated. ”

    And those businesses will move, in part to…..NJ

    Which perhaps explains in part Gov. Christies thinking. Lets face it, NY gets the lions share of the benefit from the rail tunnel expansion(business revenue, taxes, localized spending), and only has to pay half the costs. So of course Bloomberg is going to grouse about Christie’s decision. No surprise there. The state has an annual budget deficit of $11BB right now. Christie has bigger fish to fry over the next couple of years before he can worry about floating a massive bond issue for a rail tunnel.

  8. ACS says:

    Perhaps if more politicians were willing to hold the feet to the fire then public works projects would start costing what they were projected to cost and not some obscene multiple thereof.

  9. Trevor says:

    Notwithstanding that the recent absolute employment numbers remain bleak, I’m surprised I’ve not seen chatter that Obama’s team seems to have managed something curious: private employment is rising (albeit too slowly) and government employment is falling. Isn’t that what the Republican politicians and tea partiers wanted: less government and more private enterprise? I guess I’ll put this strange situation down to being an oxymoron.

  10. tt says:

    i left nyc over 17 years ago.

    my question. how much would it cost to own and operate and auto from a far away suburb like huntington to get to the city for work. add up all the costs of wear and tear an parking and insurance…………and i bet the cost is close.

    if you add the true cost of down time, your hourly rate of being able to work or snooze on the lirr instead of driving.

    i don’t have a dog in this fight anymore, but i think the argument is not so black and white.

    i used to do accounting in nyc years ago. when we analyzed everything, suburban living in nyc area is really stupid and expensive. you could live in good neighborhoods of brooklyn for a great deal less, or maybe even manhattan.

    burbs are a waste, of brain cells and dollars, for most situations

  11. Livermore Shimervore says:

    A third tunnel is something that you can NOT afford to pass on. The trip into NYC from NJ is getting beyond silly. On a Sunday morning I can drive into Central Park in about 20 minutes flat. Same trek during the week into Port Authority and you’re looking at six times as long and that’s before switching to the NYC subway which has its own issues. Every day there is some new hassle. If there’s a drop of water forget it that’s another 30 minutes in the penalty box. One bus stalls and the chain reaction is immediate and costly. That’s what I call a big ole waste of productivity. On a side note, its been interesting to see the demographic changes of professional commutters into NYC over the years. Indians, Pakistanis, Chinese, Japanese are on the rise, presumably from the need for engineers and IT and middle aged white guys on the decline, layed off or deemed to expensive…Symbolic of our greater economy once the credit bubble air bag was pinched and we kissed 5% employment addios.

  12. QevolveQ says:

    In connection with the MTA’s budget issues and subsequent fare hikes, it’s no wonder this is occurring repeatedly year after year. These idiots are paying over 8,000+ people OVER $100,000 per year! That is simply astounding:

    http://www.nytimes.com/2010/06/03/nyregion/03mta.html

  13. Koil says:

    There is some irony in the fact that $9B for a tunnel project (minimum cost) is necessary – but $400 for a monthly commuter pass and subway ticket (now that MTA has agreed to $104 and not $130 for a monthly pass) is too much. $400 is too much to pay to commute? Maybe – it certainly does hit those earning $50k/year in the pocket book.

    I disagree with your conclusion, though, that the car is a “very competitive” alternative.

    Some rough costs for the Huntington commuter:
    $3/gal gas – 30 mpg car – 10 cents/mile gas. 70 mile roundtrip x 20 business days equals $140/mo in gas.
    Parking will run $250-375 in mid town area.
    Tolls – $4.57 (EZ Pass) one way MidTown Tunnel – $91-182/month.
    Depreciation (that extra 17,000 miles/year will hit most commuters who don’t hold on to their cars for ever) as well as add’l maintenance – lets say combined 15 cents mile – .15*70*20 = $210/month.

    Total – $140 + $250-$375 + $91-$182 + $210 = $691 – 907 month versus $400/month LIRR and subway unlimited monthly cards, a savings of over 40%/month.

    Competitively – it’s not even close. I understand commuters’ frustration with the service they get from MTA – but I think you’re “very competitive” alternative statement demonstrates how little commuters really understand the costs of driving their car to work.

  14. Mannwich says:

    @Invictus: Ahem, the proper term today is “consultants”. :-)

  15. Invictus says:

    @Koil

    My situation is not like that of the commuter from Huntington about whom Senator Marcellino wrote (presumably because Huntington is part of his district).

    I live about 20 miles from my office, and drive a car that gets about 20MPG. So I’d be spending $6/day, or $120/month, on gas. I can get to the City without paying a toll, so tolls/month = $0. If I pay $325/month for parking, I’m now at $445 plus the intangibles to which you refer. So mine is a much closer call and if, as I mentioned, I can find a neighbor or two with whom to commute and share the financial burden (i.e. gas, parking), it’s a no-brainer.

  16. Invictus says:

    @Those who are anti-tunnel and think I’m anti-Christie

    I’m not anti-Christie per se. I would oppose any governor who scrapped a project as important as this tunnel. Here’s an excerpt from a NY Times article:

    The growth in jobs and housing in the New York metropolitan region is sending New Jersey commuters across the Hudson River in rapidly increasing numbers and taxing transportation systems.

    Since 1980, the number of commuters crossing the Hudson by car, bus and rail each workday between 7 and 10 A.M. has increased 21.6 percent – to 232,000 – according to the Port Authority of New York and New Jersey. The number is expected to reach 265,000 by 1990.

    The rapid pace of growth – there were 190,800 rush-hour commuters six years ago – has spawned a number of cooperative studies by agencies that operate parts of the trans-Hudson system to see whether it can be made to do more and do it better.

    ”Regional transportation facilities, in general, are strained to capacity,’ according to the assistant executive director for trans-Hudson transportation of the Port Authority, Louis J. Gambaccini. ”Expanded public transportation is vital to support continued economic growth and the trips that growth will generate in the next five years.”

    Please note that the article was printed on February 13. Of 1987. And not much has changed in the almost 24 years since, but for the fact that everything has gotten significantly more and more crowded. So, I don’t know what the “right” dollar amount is for such a project, but what I do know is that in the long run the benefits will far outweigh the costs.

  17. Lugnut says:

    Qui Bono

    If

    1. NY paid a more realistic share of the costs

    and

    2. It weren’t such a bloated union grab bag with guaranteed gift wrapped cost overuns…

    I would imagine Christie would be more ammenable. No doubt it needs be done, I suspect the Governor is just playing chess right now. I don’t think the final chapter on this project has been written quite yet.

  18. cognos says:

    This analysis is mainly silly.

    Take, for example, the “labor slack” chart. Why not just chart “slack” as the unemployment rate above some fixed rate — 4%, 4.5%, 5% – huh? Your choice of a negative correlated avg hourly earnings rate is bad economics, bad journalism.

  19. Jack says:

    I’m not a Christie guy by any stretch. But: NJ pays for ALL the overrun? Bloomberg pays nothing? Nothing? What is this: noblesse oblige?

    I think Christie will go for the tunnel after some serious federal modifications are made. I hope these modifications include a provision that all workers are from Jersey as well as most contractors.

    I also hope he squeezes Bloomie’s nuts so the 150 foot elevator ride is eliminated.

    Anyone who believes this job won’t have cost overruns can join my weekly poker game.

  20. Invictus says:

    @Cognos

    Your choice of a negative correlated avg hourly earnings rate is bad economics, bad journalism.

    Because?

  21. toddie.g says:

    Whoa. This post about commuting into Manhattan is giving me ugly flashbacks to my daily stressful commute from Connecticut, racing to catch the packed 6:20 train, and not often getting a seat. 7 years of unbelievable hassles, at ridiculous expense, and I didn’t even have to deal with taking the subway downtown from Grand Central.

    Tomorrow morning, I will take extra pleasure in my commute from my bedroom to my dining room table. My leisurely cup of coffee, catching up on the news and strategizing about the markets ahead of the open. The rat race is a distant memory now. Phew……!!!!

  22. dtc says:

    It’s not really the MTA’s fault. It’s the fault NY’s citizens for allowing the politicians to rob the MTA:

    http://secondavenuesagas.com/2010/10/01/new-york-state-again-reappropriates-dedicated-mta-funds/

    The latest funding cuts by New York State, the Federal Medical Assistance Percentage (FMAP) cuts, effective September 15, 2010, are reducing dedicated taxes and subsidies earmarked for the MTA in NYS’ Budget by $16.7 million in 2010

    http://secondavenuesagas.com/2010/10/08/the-know-nothingness-of-new-yorkers/

  23. [...] a recent smorgasbord post, I railed a bit about an upcoming increase in my monthly commutation (via the MTA), the third in as [...]