| Mush for Brains in California; Ohio Union Negotiators Picket Union Teachers in Contract Dispute; Oregon Nickeled to Death by Bus Union Posted: 02 Sep 2010 07:15 PM PDT One might think that a salary of $111,000 negotiating contracts for teachers was more than ample pay, especially when teachers themselves have been forced to make contract concessions. Yet, One would be wrong. Greedy negotiators walked off the job even though 80% of the workers make over $111,000 a year. The Columbus Dispatch reports Teachers union has labor trouble of its ownOhio's largest teachers union is having labor problems of its own.
Labor-relations consultants, who help local teachers unions negotiate contracts with school districts, and other employees of the Ohio Education Association walked off the job this morning.
Most of the 110 striking workers - all members of the OEA's Professional Staff Union - earn more than $100,000 a year, according to reports filed with the U.S. Department of Labor. For instance, labor-relations consultants - who make up about 80 percent of the striking workers - were paid an average salary of $111,350 in 2009.
That is about $10,000 more than the average Ohio school-district superintendent made last school year, and more than double what the average teacher made, according to the state statistics. The appropriate response from the Teacher's unions would be to fire the negotiators, thereby saving $12 million dollars a year. Anyone making over $100,000 and goes on strike in this environment deserves to lose their job, their home, and their lifestyle. Salem Oregon At Double-Dip RiskPlease consider Analysts: Salem at risk for double-dip recessionAccording to the economists, Salem is one of 22 U.S. cities at risk for a double-dip recession. There are 76,000 state employees in Oregon and 21,500 of them work in Salem. That's almost a third of the entire state government workforce in the capital city.
At Saigon Restaurant, which caters to state employees, business started getting bad about a year ago. The owners say business has dropped off by 70 percent. In fact, they say they are no longer able to pay their bills.
"Very, very worried right now," said owner Hien Tran.
There were few patrons at the restaurant during the noon lunch hour Tuesday. Things are so bad for the owners of Saigon they have lost their home and have been forced to live with their son.
They don't have to go far to realize they are not alone. The Quiznos next door shut down six months ago. Nickeled to Death by Bus UnionOregon Live reports Trimet and taxpayers: Bus riders' dismay grows one nickel at a timeIt's only a nickel. The latest fare increase from TriMet won't bankrupt anyone, not even the job seekers, college students and low-wage workers who make up a big portion of the Portland metro transit agency's ridership.
But frustration grows a nickel at a time. One more fare increase, another canceled bus route, a longer wait at the stop between buses -- it all adds up. The disquiet builds until, seemingly without warning, a nickel becomes a last straw.
TriMet is at that point now, as it raises fares and angles for more tax money before getting its labor costs under control. The transit agency shouldn't be surprised by Wednesday's rally against the new fare hikes and service cuts -- and it certainly shouldn't be shocked if voters reject the transit agency's bond measure this fall.
TriMet wants voters to approve a $125 million bond measure in November to replace old buses and improve bus stops.
TriMet's health care costs for transit operators continue to spiral unchecked. Out of 171 transit agencies surveyed last year, TriMet boasted the fourth highest insurance premiums in the country. Transit operators pay none of their $2,200 monthly premium, no deductible and token copays. Benefits for dependents and former workers are plush and far beyond the norm, even for public employees. Abolish Tri-MetIt is time to send Tri-Met packing. The correct response is to put the bus contract out to bid and take the lowest offer. It is absurd for bus drivers to have $2,200 per month health care costs at public expense. Bear in mind that pension costs are on top of that. It's no wonder Oregon is falling apart. Schwarzenegger Targets PensionsThe Sacramento Bee reports Schwarzenegger targets pensions in budget press conferenceGov. Arnold Schwarzenegger left little doubt today that cutting state employee pensions remains one of his top priorities in budget negotiations. He is demanding that lawmakers roll back pension guarantees for future state hires as a condition to signing the budget.
"The question we have to ask ourselves is, is it pensions or is it parks?" he said today in a budget press conference. "Is it pensions or higher education? Is it pensions or child care? And the list goes on and on, because that's where the money comes from. Those are the areas where we are taking this money because of the pensions."
"They are giving it to pensions, to the public employee unions," he said, apparently referring to Democrats. "They are taking the money away from those poor people. They are taking away the money from higher education. They are taking away the money from parks, from all of those things, so we have to make those cuts." While I welcome this stance from Schwarzenegger, it is a stance 3 years late in coming. California Budget Impasse in Third MonthBloomberg reports California Republicans Block Budget Plan Proposed by DemocratsRepublicans in the California Legislature blocked passage of a budget sought by Democrats who want to close a $19.1 billion deficit with higher taxes and less spending cuts than preferred by Governor Arnold Schwarzenegger.
The budget bill failed on a 50-25 Assembly vote today. It needed a two-thirds majority to pass. The Democrats' centerpiece proposals are higher income taxes, a lower sales tax, a new levy on oil production, an increase in vehicle-registration fees and a suspension of corporate tax breaks. Those changes all require separate bills that weren't voted on today.
Controller John Chiang, a Democrat, has said he may need to issue IOUs to pay bills for the second straight year if the impasse goes deep into September.
Assembly Democrats earlier rejected a competing budget plan proposed by Schwarzenegger and Republicans that sought to eliminate the state's main welfare program for families.
Budget passage by legislative supermajority votes is written into the state constitution. While Democrats have majorities in both chambers, they are short of the two-thirds level by two votes in the Senate and five in the Assembly. Republicans should hold out, forever if necessary. Whitman Leads Brown in California Governor RaceBloomberg reports Union-Led Group Halts Ads Attacking Whitman in California RaceA union-funded group that spent almost $9 million on negative advertising targeting Meg Whitman, the Republican running for governor in California, has suspended its campaign, designed to help Democrat Jerry Brown.
The ads were halted because Brown, the state attorney general, has kept competitive with Whitman, a billionaire who has dug into her personal fortune to finance her campaign, according to members of the group.
One ad accused Whitman of raising fees and creating "huge losses from failed mergers" while chief executive officer of EBay Inc.
"It's rock-solid proof that there is seamless coordination between what is essentially the same political organization: Jerry Brown and the government unions that control him," Andrea Rivera, a Whitman campaign spokeswoman, said by e-mail.
Whitman is supported by 48 percent of likely voters in the November election, an 8 percentage-point lead over Brown, according to a survey by Rasmussen Reports released on Aug. 26. A poll released July 7 by Field Research Corp. showed the two candidates in a "virtual tie."
"On a return-on-investment basis, she hasn't done well," said Lou Paulson, president of the California Professional Firefighters and one of the leaders of the Working Families group. IndicationsThe dropped union funded ads are indicative of one or more things. - The union group is out of money
- The ads are backfiring
- Both of the above
All You Need To KnowThe way to access how to vote in any election is to look at the candidate endorsed by labor and vote the other way. No matter how much one likes or dislikes Meg Whitman, she is going to do a far better job than socialist Jerry Brown whose primary interests are to pander to public unions and raise your taxes. Mush for BrainsIf you intend to vote for Brown, you or your family are members of a public union, you are on welfare, you work for the state, or you have mush for brains. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| Rosenberg says "ISM Flunks Sniff Test "; Cashin calls ISM "an Outlier"; ADP, Other Data Does Not Confirm Posted: 02 Sep 2010 01:44 PM PDT When futures ramped into the close on Tuesday, with heavier volume, I had an inkling the ISM number would be hot Wednesday morning. Indeed, that was the case. However, a hot manufacturing ISM makes little sense (not that any economic numbers have to make sense except perhaps in the long haul). One thing that struck me right off the bat was how the monthly ADP jobs report does not confirm the ISM number. Nor do the regional Fed reports that I have been following, especially the Philly Fed report as noted in 58 out of 58 Economists Overoptimistic on Philly Fed Manufacturing Estimate; Median Forecast +7 Actual Result -7.7, a "Veritable Disaster". August ADP Employment Reports Shows Contraction in Manufacturing JobsInquiring minds are reading the ADP August 2010 National Employment Report for clues on strength of hiring trends. Private-sector employment decreased by 10,000 from July to August on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The estimated change of employment from June to July was revised down slightly, from the previously reported increase of 42,000 to an increase of 37,000.
The decline in private employment in August confirms a pause in the recovery, already evident in other economic data. The deceleration in employment was evident in the major sectors and by size of business. This month's decline in employment followed six monthly increases from February through July. Over those six months, the average monthly gain in employment was 37,000 with no evidence of acceleration.
August's ADP Report estimates nonfarm private employment in the service-providing sector rose by 30,000, the seventh consecutive monthly gain. This increase was not enough to offset an employment decline in the goods-producing sector of 40,000. Employment in the manufacturing sector decreased 6,000, the second consecutive monthly decline.
Large businesses, defined as those with 500 or more workers, saw employment remain essentially flat while employment among medium-size businesses, defined as those with between 50 and 499 workers, decreased by 5,000. Employment among small-size businesses, defined as those with fewer than 50 workers, decreased by 6,000. In August, construction employment dropped 33,000. Construction employment has declined for over three years and the total decline in construction jobs since the peak in January 2007 is 2,275,000. Employment in the financial services sector dropped 5,000. Financial Services employment has declined for over 3 years. ISM Smell TestRosenberg blasted the ISM report in Breakfast with Dave. STRANGE ISM NUMBER ... DOESN'T PASS "SNIFF TEST"
Here's why:
1.Most of the regional reports were very poor in August. Either they are collectively all wrong or the ISM is.
2. The share of respondents saying they experienced "growth" was 61%, the exact same as a year ago when ISM was sitting at 52.8.
3. The ISM gain was led by employment (58.6 to 60.4 — best since December 1983) in the same month that ADP manufacturing fell 6,000 (second decline in a row — it was -11k in July when ISM employment was 58.6, so clearly the latter is proving to be, at least for now, an unreliable labour market barometer). Production also ticked up to 59.9 from 57.0 and inventories rose to 51.4 from 50.2. These are all coincident indicators, as an aside (but an important aside).
Strange ISM number, it doesn't pass the sniff test and here is one reason: most of the regional reports were very poor in August... either they're wrong or the ISM is
4. According to the ISM, 76% of the manufacturers surveyed said that in August, their customer inventory levels were either "too high" or "about right". At the turn of the year, just ahead of the big inventory swing that bolstered the GDP data, this metric was sitting at 60%. As a result, it would be folly to assume that the inventory and production categories will contribute to further ISM increases in the near- and intermediate-term. Norbert Ore, who presides over the ISM survey, had this to say about inventories: "If the inventory build isn't voluntary then we have a huge issue on our hands."
5. Meanwhile, the more forward-looking components dropped, though were hardly a disaster. But orders slipped for the third month in a row, to 53.1 from 53.5 in July, 58.5 in June and 65.7 in both April and May. That is still a sharp squeeze in the growth rate of capital goods-related order books. At 53.1, ISM orders index is down to levels last seen in June 2009 (but when they were rising in "green shooty" fashion).
6. Backlogs were down as well, to 51.5 from 54.5 in July, 57.0 in June and 59.5 in May (and peaked in February at 61.0). At 51.5, order backlogs stand at their low-water mark of the year.
7. Supplier deliveries (measure of production bottlenecks) eased for the fifth month in a row — to 56.6 from 58.3 in July and well off the March peak of 64.9.
8. Looking at five decades worth of data, the share of the time in which we see orders, backlogs and vendor deliveries all decline in tandem, and the headline ISM index rise, is the grand total of 1%. No wonder equities rallies so much — we just witnessed a 1-in-100 event! Bring your camera.
9. Export orders dipped to 55.5 from 56.5 — the lowest they have been since last December. If the overseas economy is rocking and rolling, then why on earth would this component be declining? Not only that, but it looks as though, yet again, a good part of the inventory boost we still seem to be getting is being filled by imports — that sub-index jumped four points in August and does not bode well for the trade deficit, which subtracted 3.4 percentage points from headline GDP growth in Q2.
MORE ON THE DATA
It would be something if the ISM was being fuelled by broad based increases and occurring alongside a decent path in domestic spending. But the ISM gains were narrowly based and the inventories are continuing to be built up even as domestic demand is slowing down. And it is spending that drives production, not the other way around. The fact that fewer respondents are saying inventories are at low or desirable levels is going to set us up for some pretty hefty production and ISM reversals through the fall. Art Cashin says "ISM is an Outlier"For more from Art Cashin, please see 26 of Last 88 Trading Days have been 90% Days (Either Up or Down); 7 More Lean Years in Stock Market?Let's assume for a moment the ISM number is correct. If so, manufacturers are ramping up production just as the economy is dramatically slowing by nearly every other measure. I smell huge inventory problems coming up in the 4th quarter. In the meantime, let's party over a ramp in production with no buyers. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| State Tax Revenues Slowly Rebound, But ... Posted: 02 Sep 2010 09:22 AM PDT The Nelson Rockefeller Institute reports State Tax Revenues Are Slowly Rebounding. However, as always, the devil is in the details. Let's take a look. Preliminary tax collection data for the April-June quarter of 2010 show improvement in overall state tax collections as well as for personal income tax and sales tax revenue. However, revenue collections remain significantly below peak levels and are still weak in a number of states.
The Rockefeller Institute's compilation of data from 47 early reporting states shows collections from major tax sources increased by 2.2 percent in nominal terms compared to the second quarter of 2009, but was 17.2 percent below the same period two years ago.
State Tax Collections
Gains were widespread, with 30 states showing an increase in revenues compared to a year earlier. After adjusting for inflation, tax revenues increased by 1.4 percent in the second quarter of 2010 compared to the same quarter of 2009.
In terms of dollars, California reported the largest increase in personal income tax collections in the second quarter of 2010, where revenue collections rose by $1.6 billion or 11.5 percent. Such increase is mostly attributable to legislated changes. Without California, personal income tax collections for the second quarter of 2010 show a 1.1 percent decline nationally in the April-June quarter, compared to the same period of 2009.
Sales tax collections increased by 5.9 percent in the second quarter of 2010 compared to the same quarter of 2009, but were still 5.4 percent lower than two years ago. With 42 of 45 sales-tax states reporting so far, only seven states reported declines in sales tax collections compared with the same quarter last year.
Among the corporate income tax states, 19 of 43 early reporting states reported declines for the second quarter compared to the same quarter of the previous year, while 24 showed gains. Fourteen states reported double-digit declines, while seventeen states reported double-digit growth in corporate income tax collections in the second quarter of 2010. The large variation among states' corporate income tax revenues is due to volatility in corporate profits and in the timing of tax payments.
Among individual states, California reported the largest decline in corporate income tax collections in the second quarter of 2010, where revenue collections declined by $2.7 billion or 42.3 percent. California's corporate income tax collections were strong in the April-June quarter of 2009 due to legislation that required taxpayers to pay 30 percent of annual estimated payments in each of their two first prepayments (April and June for calendar year corporations) versus the prior requirement of 25 percent. Without California, corporate income tax collections for the second quarter of 2010 show a 1.9 percent decline nationally in the April-June quarter, compared to the same period of 2009.
The Outlook
The state tax revenue picture in the first two quarters of the calendar year 2010 represented significant improvement from the collapse of the preceding quarters. Still, in most states, the overall trend for fiscal 2010 was very much in the negative. Now that most states have closed the books for fiscal year 2010, preliminary figures show that 34 of 44 states for which complete fiscal 2010 data are available saw declines in overall tax collections for the year. Collections from the two major tax sources — personal income and sales — were also negative for the fiscal year. With revenues still below prerecession levels and question marks surrounding the national economy, states face continued uncertainty at best — with continuing budget challenges a sure bet. Improvement MiragePlease see article for more charts, data, and analysis. The "improvement" in personal income taxes was a mirage caused by California speeding up collection of personal income taxes. California required payment of estimated taxes before money was even earned! Ignoring California, income tax collections actually declined from a year ago. Much of the improvement in sales taxes is a result of tax hikes, not increased sales. Those effects will soon wear off in year-over-year comparisons (assuming of course there is not another round of sales tax hikes, by no means a good bet). In simple terms that dramatic rebound shown in the first chart merely means things have stabilized but only vs. the rock bottom depressed level of second quarter of 2009. Gallup Polls and sales data from MasterCard Advisors paints the same grim picture. Please see Gallup Poll Shows Consumer Spending Pullback, Consumer Confidence Levels Below Depressed 2009 Levels ; Back-to-School Sales Bust Says WSJ for details. States remain in a world of hurt and the economy is slowing once again. I expect GDP contraction in the third quarter. Thus, states are going to have to address the problem of public union wages and pension benefits whether they like it or not. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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