Economic Recovery Gathers Steam
Private-sector employment increased by 217,000 from January to February on a seasonally adjusted basis, according to the latest ADP National Employment Report released today. The estimated change of employment from December 2010 to January 2011 was revised up to 189,000 from the previously reported increase of 187,000. This month’s ADP National Employment Report suggests continued solid growth of nonfarm private employment early in 2011. The recent pattern of rising employment gains since the middle of last year was reinforced by today’s report, as the average gain from December through February (217,000) is well above the average gain over the prior six months (63,000).
The fears of a jobless recovery may be receding but the US economy has a long way to go before pre-recession employment levels are achieved. As we stated previously the economy needs to create over 200,000 jobs per month for 48 consecutive months to achieve pre-recession employment levels. The six month average of 63,000 is still well below the required rate of job creation for a robust recovery to occur. The Unemployment Rate still exceeds 9%.
The February report is encouraging because it points to an accelerating pace of job creation. The post Christmas season employment surge represents a 30,000 job gain over January’s strong report that triples the six month moving average. The service sector accounted for over 200,000 of the job gains. The manufacturing and goods producing sector combined to create 35,000 jobs. Construction continues to mirror the moribund housing market shedding an additional 9,000 jobs during the month. The construction industry has lost over 2.1 million jobs since its peak in 2008.
The robust recovery in the service sector is welcomed but sustainable economic growth can only be achieved by a robust turn around in the goods producing and manufacturing sectors. Service sector jobs offer lower wages, tend to be highly correlated to retail consumer spending and positions are often transient in nature. Small and Mid-Sized Enterprises (SME) is where the highest concentration of service jobs are created and the employment figures bear that out with SMEs accounting for over 204,000 jobs created during the month of February.
Large businesses added 13,000 jobs during the month of February. The balance sheets of large corporations are strong. The great recession provided large corporates an opportunity to rationalize their business franchise with layoffs, consolidations and prudent cost management. Benign inflation, global presence, outsourcing, low cost of capital and strong equity markets created ideal conditions for profitability and an improved capital structure. The balance sheets of large corporations are flush with $1 trillion in cash and it appears that the large corporates are deploying this capital resource into non-job creating initiatives.
The restructuring of the economy continues. The Federal stimulus program directed massive funds to support fiscally troubled state and local government budgets. The Federal Stimulus Program was a critical factor that help to stabilize local government workforce levels. The expiration of the Federal stimulus program is forcing state and local governments into draconian measures to balance budgets. Government employment levels are being dramatically pared back to maintain fiscal stability. Public service workers unions are under severe pressure to defend employment, compensation and benefits of workers in an increasingly conservative political climate that insists on fiscal conservatism and is highly adverse to any tax increase.
The elimination of government jobs, the expiration of unemployment funds coupled with rising interest rates, energy and commodity prices will drain significant buying power from the economy and create additional headwinds for the recovery.
Macroeconomic Factors
The principal macroeconomic factors confronting the economy are the continued high unemployment rate, weakness in the housing market, tax policy and deepening fiscal crisis of state, local and federal governments. The Tea Party tax rebellion has returned congress to Republican control and will encourage the federal government to pursue fiscally conservative policies that will dramatically cut federal spending and taxes for the small businesses and the middle class. In the short term, spending cuts in federal programs will result in layoffs, and cuts in entitlement programs will remove purchasing power from the demand side of the market. It is believed that the tax cuts to businesses will provide the necessary incentive for SME’s to invest capital surpluses back into the company to stimulate job creation.
The growing uncertainty in the Middle East and North Africa is a significant political risk factor. The expansion of political instability in the Gulf Region particularly Iran, Egypt and Saudi Arabia; a protracted civil war in Libya or a reignited regional conflict involving Israel would have a dramatic impact on oil markets; sparking a rise in commodity prices and interest rates placing additional stress on economic recovery.
Political uncertainty tends to heighten risk aversion in credit markets. The financial rescue of banks with generous capital infusions and accommodating monetary policies from sovereign governments has buttressed the profitability and capital position of banks. Regulatory uncertainty of Basel III, Dodd-Frank, and the continued rationalization of the commercial banking system and continued concern about the quality of credit portfolios continue to curtail availability of credit for SME lending. Governments are encouraging banks to lend more aggressively but banks continue to exercise extreme caution in making loans to financially stressed and capital starved SMEs.
Highlights of the ADP Report for February include:
Private sector employment increased by 217,000
Employment in the service-providing sector rose 202,000
Employment in the goods-producing sector declined 15,000
Employment in the manufacturing sector declined 20,000
Construction employment declined 9,000
Large businesses with 500 or more workers declined 2,000
Medium-size businesses, defined as those with between 50 and 499 workers increased 24,000
Employment among small-size businesses with fewer than 50 workers, increased 21,000
Overview of Numbers
The 202,000 jobs created by the SME sectors represents over 90% of new job creation. Large businesses comprise approximately 20% of the private sector employment and continues to underperform SMEs in post recession job creation. The strong growth of service sector though welcomed continues to mask the under performance of the manufacturing sector. The 11 million manufacturing jobs comprise approximately 10% of the private sector US workforce. The 20 thousand jobs created during February accounted for 10% of new jobs. Considering the severely distressed condition and capacity utilization of the sector and the favorable conditions for export markets and cost of capital the job growth of the sector appears extremely weak. The US economy is still in search of a driver. The automotive manufacturers have returned to profitability due to global sales in Latin America and China with a large portion of the manufacturing done in local oversea markets.
The stock market continues to perform well. The Fed is optimistic that the QE2 initiative will allay bankers credit risk concerns and ease lending restrictions to SMEs. A projected GDP growth rate of 3% appears to be an achievable goal. The danger of a double dip recession is receding but severe geopolitical risk factors continue to keep the possibility alive.
Interest rates have been at historic lows for two years and will begin to notch upward as central bankers continue to manage growth with a mix of inflation and higher costs of capital. The stability of the euro and the EU’s sovereign debt crisis will remain a concern and put upward pressure on interest rates and the dollar.
As the price of commodities and food spikes higher the potential of civil unrest and political instability in emerging markets of Southeast Asia, Africa and Latin America grows. Some even suggest this instability may touch China.
The balance sheets of large corporate entities remain flush with cash. The availability of distressed assets and volatile markets will encourage corporate treasurers to put that capital to work to capitalize on emerging opportunities. The day of the lazy corporate balance sheet is over.
Solutions from Sum2
Credit Redi offers SMEs tools to manage financial health and improve corporate credit rating to attract and minimize the cost of capital. Credit Redi helps SMEs improve credit standing and demonstrate to bankers that you are a good credit risk.
For information on the construction and use of the ADP Report, please visit the methodology section of the ADP National Employment Report website.
You Tube Video: John Handy, Hard Work
Risk: unemployment, recession, recovery, SME, political
Leaking Visions of a New World Order
Every once a while an event happens that shifts the prevailing scheme of things. Julian Assange’s dump and release of US State Department cables (CableGate) for global distribution on WikiLeaks is such an event. It radically alters existing convention and the public’s general perception of normalcy, acceptability and protocol. It brings into question the motives and interests of nations and their leaders. It squarely plops an 800 pound gorilla on the sofa in everyone’s living room and provokes questions that naggingly insist answers. Asking leaders about duplicity, conflicts of interest, distortions, fabrications, fibs and outright lies all done in the national interest. It is how a new Weltanschauung is cast and forged to conform to the needs a new world order. The sun has set on the American Century. Blessedly, America’s days as a self righteous post Cold War marauding superpower are coming to a close. The WikiLeaks disclosures gives us some insights into the thinking and banter world leaders engage as they move the Chess pieces across the board on the great global game of new world order.
There are moral considerations and ethical arguments to be made on each side of Mr. Assange’s incendiary action. CableGate raises complex multidimensional issues of national security, informed citizenry, the protection of information, its public disclosure and citizens right to know. The natural tension between the simultaneous need for confidentiality and transparency is a reality of our complex and interconnected world. The management of these issues have escalated to become a preeminent dilemma of our time. This raises significant challenges to democratic societies and the governance structures of both public and private institutions. It threatens institutional sustainability and undermines institutional capability to function in highly interdependent stakeholder ecosystems. The risk of seeking pathways to safely navigate the virtual minefields of a digitized global world is great and continues to grow.
The most impassioned issue raised by CableGate is the ethical violation of stolen property. The cables were not Mr. Assange’s property and what gives him the right to publish and violate diplomats right to confidentiality and privacy? His actions could endanger diplomatic relationships, compromise government initiatives or derail delicate negotiations. Do governments have a right to privacy? If so, what information needs to be classified as secret and confidential? If all documents are secret then the designation is meaningless and government nothing more then a ruthless leviathan lording over a clueless citizenry.
Another critical question CableGate raises is who is served by the publication of these cables? Certainly American citizens in whose interest the State Department purportedly acts benefits from the added transparency. US citizens must admit there is a certain level of comfort in being able to track the satchel of an Afghanistan Vice President stuffed $52 million of taxpayers money through the U.A.E. Customs.
Detractors of CableGate assert that the leaks are a danger to America and its citizens. If so why is the public aggrieved and who exactly is the “aggrieved public”? Soldiers and servicemen fighting in Afghanistan? Does State Department Cables provide tactical and strategic information on troop deployments? Highly doubtful. More likely it is the special interests enriching themselves at the public troughs by cutting deals to shamelessly engorge themselves as insidious war profiteers. Better to ask why our country has placed our young servicemen and woman at risk in wars that makes little sense and accomplishes nothing.
Another set of critical questions CableGate raises are “Do citizens have a right to truth? Is access to information meaningful? Does the information help citizens of democratic societies understand the actions and motivations of their government? Why do diplomats pursue certain course of action and who is profiting from the course of action pursued? These are critical tenants citizens require to make informed decisions in a democratic society and CableGate certainly supports the notion of information empowerment for citizens.
Arguing the contrary one must ask “is it better to be mislead and be lied too in the name of propriety and protocol then to be victimized by the truth? I’ll take conviction in a court of truth and pray for a life sentence every time.
If you believe that the public can’t handle the truth or needs protection from it; imagine yourself living near a nuclear power plant and it was leaking radiation into your drinking water. Would you like to know about it? What if disclosure led to wide spread panic? I believe that truth and transparency always serves to discover and determine the best course of action to pursue.
CableGate has also shed damaging light on the power exercised by private corporations and the commercial control and open access and free availability of information. Amazon’s cloud computing service had no silver lining for WikiLeaks. After the WikiLeak dump it shut down access to the cables due to the unacceptable risk posed by denial of service attacks mounted by computer hackers. This was followed by PayPal’s closure of WikiLeaks donation solicitation account. Was PayPal’s motive purely patriotic? Where they just pissed at WikiLeaks or were they at risk of aiding and abetting a subversive organization that risked prosecution under certain provisions of THE USA PATRIOT ACT?
Academic freedom also seems to have taken a blow due to CableGate. This weekend, Columbia University warned its students not to download or distribute WikiLeak cables because it may affect future employment opportunities with the State Department. Government employees were also warned not to read or access the cables because they had no security clearance to do so. If they were caught accessing the leaked cables it could cost them their jobs. Even though the cables are published in great detail everyday by newspapers throughout the world, government employees must be careful not to notice for risk of losing their employment. This is truly a Kafkaesque dilemma for some, a divine comedy for others and a growing political drama for everyone.
I’m still not sure that Cablegate is what it purports to be. As the old saying goes and the cables affirm nothing is ever as it seems. I find it most improbable that a Private First Class sitting at a PC in Baghdad could download the Iraq War Logs and throw a great superpower into a first class crisis of the new world order. I liken the leaks to the past practice of “special unnamed high placed sources” leaking inside information to the liberal mainstream media outlets. Its done to float trial balloons about new government directions. They do it to test the waters of public sentiment to new ideas, or change in policy course or potentially damaging information to see how the public reacts. Not one to be of a conspiratorial mindset, I perceive CableGate in this light. As expected the public reaction thus far has elevated our collective sense of outrage to a heightened level of ambivalence.
In many respects Iraq War Logs supports the construction of a new narrative about an exit strategy from Iraq and Afghanistan. The revelations of wastefulness, corruption and back room deal making with a full caste of sordid characters reinforces the public perception about the uselessness of these wasteful and expensive misadventures. The cables may prove to be the documentary evidence of America’s Waterloo and CableGate may be seen by future generations as the historical high watermark of an expired global empire.
As the Iraq and Afghanistan War Logs helped to prepare the public psyche for an exit strategy in Afghanistan and Iraq; CableGate helps construct a narrative surrounding the need to “cut off the head of the snake in Iran”. These cables implicate Arab States in a desire to undermine the apostate Persians and abrogates Israeli culpability as the driving force behind an attack on Iran.
Iranian President Mahmoud Ahmadinejad called the cables psychological warfare. I don’t doubt for a second that atomic weapons in the hands of Iran is a dangerous development that needs to be mitigated. That does not mean that we should employ bombers to destroy Iranian nuclear processing facilities. This would only create an environmental disaster and political crisis that further destabilizes the region. It would secure the enmity of new generations of Muslims and no doubt stoke the escalation of the Crusade against Islam.
In the Far East,China’s growth as a world super power and ascending rival to US dominance makes for compelling reading. Here its no surprise that cables assess a strengthening China, its growing nationalism and military readiness. Reading these cables against the backdrop of rising tensions on the Korean peninsula, China’s complicity in helping North Korea ship nuclear materials to Iran and the changing sentiment in the US concerning the largest note holder of government bonds may prove to carry grave consequences for harmonious US/China relations. The cable revealing China’s ambivalence toward its North Korean surrogate state is laid bare as long as it can secure preferred trade agreements with a unified Korea.
The revelations offered by Pakistan’s leaders about support for the Taliban and a growing concern about the safety of their nuclear arsenals raised the possibility of a US military move to quarantine or neutralize Pakistani weapon systems. Though so far India seems to come off unscathed by the cables it must be heartening for India’s leaders to know that its budding friendship with the US may encourage a move to disarm the nuclear capability of its northern antagonist and the worlds sole Islamic atomic state.
These WikiLeaks offer up a brand new narrative for an emerging new world order. The damaging realization of the spillage of confidential proprietary discussions and dialogs between world governments and the mishandling of those documents diminishes the stature of US federalism. The undermining of federalism and its suitability as a governance structure for the new millennium foreshadows the growing antagonism of global corporate entities like Google and the nationalistic government of the People’s Republic of China augers an era of conflict between statism and corporatism.
CableGate is a deliberate attempt to have institutions open up with greater transparency and construct a democratic narrative that force governments to change. Mr. Assange’s avowed goal is to, “allow governments and institutions to become more transparent or force them to become more opaque” Depending on the what side of the fence your sitting on, openness and transparency benefits the public interest. The struggle for democracy requires the open access and the free flow of information.
In the digital age denial of free, open and equal access to information is tantamount to fascism. Withheld, it will encourage people to rise up demanding the means to pursue conscious enlightenment. This may spur political activism that demands institutional accountability, and the practice of democratic governance based on constitutional principles. Failing that once free citizens will be forced to accept the meager lies and obfuscations of leaders and power elites whose self interest is the sole interest of government.
So as Secretary of State Hillary Clinton tries to plug the leaks in a failing dike system, we cannot content ourselves to live with our heads buried in the sand, filling our minds with reality TV reruns of Jack Ass Three and Bristol Palin bustin a move on Dance Fever. I’ve heard it said that the best way to influence the future is to invent it. Mr. Assange has given us a world of insights and a basic tool set to start constructing a foundation for a new world order.
You Tube Music Video: REM, End of the World As We Know It
Risk: diplomacy, international relations, governance
Prognostications and Expostulations
We’re going out on a limb with this one or given thats its winter we’ll say we’re walking on thin ice. We’ll gaze into the crystal ball and pontificate on eleven subject areas for 2010. With some we hope we will be wrong. With some we hope we will be right.
1. Stock Market: Buoyed by well managed earnings by the large multinational companies in the DOW, principally as a result of cost reduction initiatives and exposure to global markets the Index will finish up 6% and close at 11, 011 on the last trading day of 2010. Given an inflation rate of 4% investors will realize a 2% gain on equity investments in DOW constituents. S&P 500 and NASDAQ will be flat gaining 2% for the year.
2. Iraq War: The war in Iraq will continue to wind down. America will scale down its military presence in the country. Troop levels in the country will approximate 85,000 by the close of 2010. Though direct American military involvement in conflicts will decline, Iraq will experience civil unrest as Kurd nationalists, Shiite and Sunni Muslims seek to protect their political and economic interests.
3. Afghanistan War: The escalation of America’s military presence in Afghanistan will move the theater of war further into Pakistan. The Taliban will be satisfied to harass US forces by engaging in a guerrilla war. Taliban and Al-Qaeda supporters will use the opportunity to increase the level of urban terrorist attacks in the large cities of Pakistan. Al-Qaeda confederates will seek to reestablish base of support in Somalia, Yemen and ties will begin to emerge in Latin American narco-terror states.
4. Iran: The political situation in Iran will continue to deteriorate. This is a positive development for regional stability because it will force the ruling regime to cede its nuclear program development initiatives. Iran will not be able to capitalize on the US draw down in Iraq. It will become increasingly isolated as Hezbollah and Hamas pursue actions that are less confrontational to Israel in Palestine and Lebanon. The ruling Caliphate position will weaken due to internal political dissent and external economic pressures.
5. China: It will be a year of ultra-nationalism in China. Its stimulus program that is targeted to internal development will sustain a GDP growth rate of 8%. China will use this opportunity to strengthen the ideological support of its citizens to fall in line with the national development initiative. Globally China will continue to expand its interests in Africa and will cull deeper relationships with its Pacific Rim club member Latin America. China will continue to use US preoccupation with its wars in Afghanistan, Iraq and skirmishes in Yemen and Somalia as an opportunity to expand its global presence with a message of peace and cooperation.
5. US Mid Term Elections: Republicans will gain a number of seats in Congress. The continued soft economic conditions, state and local government fiscal crisis, war weariness and cut back in services and rising expenses will make this a bad year for incumbents and the party in power, namely the democrats. Sarah Palin will play a large role in supporting anti-government candidates drooling over the prospect of winning a seat in government.
6. Recession: Though the recession may be officially over, high unemployment, home foreclosures and spiking interest rates will hamper a robust recovery. The end of large government stimulus programs and the continued decrease in real estate values also present strong headwinds to recovery. We predict a GDP growth rate of 2% for the US economy. Outsourcing will abate and a move to reintroduce SME manufacturing will commence.
7. Technology: The new green technology will focus on the development of nuclear power plants. The clash of the titan’s between Google’s Droid and Apple’s I Phone will dominate tech news during the year. Lesser skirmishes between Smart Phones makers or the war of the clones will continue to explode altering the home PC market and continue to change the market paradigm for old line firms like DELL, Microsoft and HP. SaaS or cloud computing will gain on the back of lean business process initiatives and smart phone application development and processing infrastructure will encourage cottage industries fueling the cloud and making for some new millionaires. The tension between the creators of content and search and delivery will begin to tilt back toward the content providers. Litigation involving social networking sites will be filed to create safeguards against its use as a tool to control and manipulate behaviors thus threatening civil liberties and privacy rights.
8. Culture: The Googlization of civilization will allow individuals to embrace more corporatism as a pillar to add efficiency and order to their lives. Multiculturalism will continue to grow in the US. However a growing political backlash against it will become more of a prominent theme as Teabaggers agitate for a return to the true values of America. Electronic arts will make major leaps and bounds as commodification continues to be a driving force in the world of art. Printed words like books and newspapers will continue to dramatically decline. Writing, drawing and playing musical instruments skills will ebb as people prefer to develop digital skill sets. Texting and Tweeting make for poor practice for extended compositions.
9. Latin America: Instability will grow in Latin America as narcodollars continue to undermine political stability in Columbia, Venezuela, Mexico and Panama. The US will increasingly become involved in the conflicts between petro and narcodollars. Mexico’s stability will be increasingly undermined by the power and corruptible influence of the drug trade. China’s influence on the continent will grow.
10. European Union: The EU will continue to manage itself for stability. It will yearn to return to its aristocratic roots and will become increasingly conservative. It will continue to have a complex relationship with the expanding Muslim community. A call to deeper nationalism will arise out of a growing influence of Islam and the inefficiencies of EC bureaucrats in Belgium. The EU will continue its union of expediency to counterbalance their distrust of Russia and their distaste for America.
11. Environmental Justice: Though awareness continues to grow concerning the need to mount and implement large scale solutions to halt the problem of global climate change; the political will and resources required to drastically alter the planets current trajectory in growth of carbon emissions from the burning of fossil fuels remains unaltered. Social responsible enterprises, small businesses and individuals continue to make a difference. Eco friendly small businesses, urban farming, capital formation initiatives around renewable energy businesses are hopeful signs of a market response to the pressing problem. China is investing heavily in becoming a market leader out of business savvy and environmental necessity. Until the great powers of the world can come to some collective agreement on how to limit , cap or trade carbon credits we’ll have to be content to separate the trash and recycle, reuse and reduce.
You Tube Music Video: Donald Byrd, Stepping Into Tomorrow
Risk: unfulfilled predictions will make me look bad
Many Concentric Disturbances
If President Bush sits atop the Dome of the Rock during his visit to Jerusalem and takes a 360 look around he will witness the widening concentric circles of war and violence that continue to expand throughout the region.
Looking north, Lebanon appears to be on the precipice of all out civil war. Iran and Syria are doing all they can to destabilize Lebanon’s weak government by supporting Hezbollah. They have formed some type of unholy alliance to flex their muscles with the development of a nuclear power infrastructure while they continue to extend their tentacles of influence into the civil war in Iraq.
Up the coast where Europe meets Asia, Turkey embarks on periodic bombing runs against the Kurds in Northern Iraq while Russia continues to put out pesky flareups in it’s former Black Sea Republics. To the south and down to the tip of the Red Sea, Ethiopia is being drawn into a war with Somalia and to the west the great powers of the world shadow box in Darfur, stoking the flames of a proxy war between Chad and Sudan. If Mr. Bush strains his neck, way to the east he’ll be able to see the continued disintegration of political stability of Pakistan, Islam’s only nuclear state and Afghanistan’s inability to shake the Taliban infection.
As Mr. Bush sits atop the holy space where the Prophet Muhammad ascended to heaven, where Jesus Christ proclaimed peace to the people on earth and where Solomon installed the Arc of the Covenant, it will serve the world well for him to look into his own soul and examine how his actions and inactions have contributed to the regions instability. The escalation of war and hostilities is never a harbinger of peace. War is averted and peace is won through negotiations, communications and the building of trust through the recognition and pursuit of shared interests and objectives.
As a Christian, Mr. Bush should be able to grasp the need to make sacrifices to achieve a lasting peace in the Middle East. Mr. Bush’s ego may just be “the perfect sacrifice” the world needs to set the region on a track of peace. Mr. Bush can begin with a de-escalation of the rhetoric about Iran, speaking with Hamas representatives in Gaza and the immediate commencement of peace talks in line with the recommendations of the Iraq Study Group to end the war in Babylon.
Sacrifice is a sign of strength Mr. Bush. The alternative is ceding power to the regions growing conflicts. The overlapping rippling effects of these concentric disturbances threatens to immolate the entire region. Consider an Israeli bombing run on a nuclear reactor in Iran, or the fall of the Pakistani government to a Taliban friendly regime. It is time to make the perfect sacrifice Mr. Bush.
You Tube Video: Santana at Royal Albert Hall, Soul Sacrifice
Risk: Political, War, Middle East, Nuclear Exchange, Peace,