Posts filed under “Wages & Income”

Wage Deflation in Our Midst

I am especially pleased to introduce today’s Think Tank guest, Economist David Rosenberg of Canada’s Gluskin Sheff.  For most of you, however, David needs no introduction: A 20 year veteran of the Street, David most recently was Merrill Lynch’s chief North American Economist, where he correctly warned about the Housing and Credit Collapse and Recession in advance.

With Non-Farm Payroll scheduled to be released tomorrow, the timing is perfect to hear some thoughts from David about Employment . . .

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A survey conducted by YouGov for the Economist magazine found that 5% of respondents had taken a furlough this year and 15% had accepted a pay cut (see The Recession and Pay: The Quiet Americans on page 33 of this week’s edition).

As wages deflate, workers are looking for ways to supplement their shrinking income base, for example, by moonlighting. Indeed, a poll undertaken by CareerBuilder.com and cited in the USA Today found that one in every ten Americans took on an extra job over the last year; another one in five said they intend to do so in the coming year. These numbers are double for the 45 to 54 year olds who now see early retirement, once around the corner, as an elusive concept.

Most pundits who crow about green shoots and about an inventory restocking in the third quarter giving way towards some sustainable economic expansion live in the old paradigm. They don’t realize, for whatever reason, that the deflationary aftershocks that follow a post-bubble credit collapse typically last for 5 to 10 years. Businesses understand better than the typical Wall Street or Bay Street economist and strategist that everything from order books, to output, to staffing have to now be restructured to adequately reflect a permanently lower level of leverage in the economy.

Indeed, by our estimates, there is up to another $5 trillion of household debt that has to be eliminated in coming years and that process is going to require that consumers go on a semi-permanent spending diet. Companies see this, which is why they are not just downsizing their payroll, but have also cut the workweek to a record low of 33.1 hours. Fewer people are working and those that are still working have seen their hours dramatically cut this cycle.

Companies are finding other ways to save on the aggregate labour cost bill as well, which may be a factor reinforcing the uptrend in the personal savings rate (see more below). For example, a rapidly growing number of employers are now suspending contributions to worker 401(k) plans. According to a joint survey by CFO Research Services and Charles Schwab, nearly 25% of U.S. companies have either suspended their plans or are planning to do so (this is up from 2% at the turn of the year). Again, how we end up squeezing inflation out of the system when the labour market is clearly deflating wages and benefits for the 70% of the economy called the consumer is going to be interesting to watch.

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Category: Employment, Think Tank, Wages & Income

Personal Income and Employment Interactive Map

We can’t let a Friday go by without something Employment/Income related. Hence, this lovely  BEA chart, showing changes in personal income by state: The data for Q1 — yes, it is both old and lagging — is still stunning nonetheless:  74% of the states showed a drop in Personal Income. > Personal Income Changes, by…Read More

Category: Data Analysis, Employment, Wages & Income

Inside Look – Executive Pay at Financial Companies

An In-Depth Look at “The Finance 50″; Further Analysis and Discussion with Columbia University Professor John Coffee (Bloomberg News)

Category: Bailouts, Corporate Management, Video, Wages & Income

Trickledown Whackonomics

Not surprisingly, when a person goes from making $750k as a bond trader, to $60k as a high school teacher, their spending habits change. That is the obvious but nonetheless interesting point of a Bloomberg article on the impact of Wall Street’s meltdown beyond lost finance jobs. The net result is less business, revenue and…Read More

Category: Consumer Spending, Economy, Employment, Wages & Income

Wall Street Pay Bounces Back

To be filed under “Are you shitting me?”: “Workers at the largest financial institutions are on track to earn as much money this year as they did before the financial crisis began, because of the strong start of the year for bank profits. Even as the industry’s compensation has been put in the spotlight for…Read More

Category: Bailouts, Corporate Management, Wages & Income

Median Income vs Median Home Price

Great interactive chart I meant to get to earlier this week, via the NYT: > > Source: For Housing Crisis, the End Probably Isn’t Near DAVID LEONHARDT NYT, April 21, 2009 http://www.nytimes.com/2009/04/22/business/economy/22leonhardt.html

Category: Real Estate, Wages & Income

Pyramid of Misery

From Portfolio, by The Number author Lee Eisenberg. “The Number” used to be the “Fuck You Number”– the dollar amount that allowed you to tell your boss fuck you. In a recent Portfolio article, Eisenberg’s latest variation is the “I’m Fucked number” — the smallest number that you can get by on. > > via…Read More

Category: Economy, Employment, Markets, Psychology, Wages & Income

Merrill Lynch Bonus Investigation

New York State Attorney General Andrew Cuomo is none too happy with $4 billion in recent Merrill Lynch bonuses! Enjoy: > AG Cuomo. MERpdf Publish at Scribd or explore others: Finance & Investing Business & Legal executive compensati

Category: Corporate Management, Digital Media, Legal, Markets, Wages & Income

Executive Pay & Perks

Nice pair of tables from the NYT: > Sources: In Curbing Pay, Obama Seeks to Alter Corporate Culture STEPHEN LABATON and VIKAS BAJAJ NYT, February 4, 2009 http://www.nytimes.com/2009/02/05/us/politics/05pay.html Scrutiny of Bankers’ Perks Will Grow, Too ERIC DASH NYT, February 4, 2009 http://www.nytimes.com/2009/02/05/business/05perks.html

Category: Data Analysis, Digital Media, Wages & Income

Wall Street Pay

Shorter Floyd Norris: It is one thing when the best-paid people seem to be the smartest and the most accomplished. Those who make much less may not like it, but the differential seems understandable. It is another thing when those people are shown to have committed huge blunders that would have driven their companies out…Read More

Category: Bailouts, Markets, Taxes and Policy, Wages & Income