ECOMINOES

ECOMINOES Radio Live @ 3:30 ET

2013-05-17T14:24:00.000-04:00

Join me live at 3:30 ET as I discuss the sad state of our nation's economy, the sad state of our nation's political system, and a unique analysis of Obama's recent scandals. Tune in live here, and don't forget to check out past episodes in the archives.

Death Of The American Worker In 10 Charts

2013-05-17T13:42:00.000-04:00

I find myself balancing a concerted effort to remain positive despite the economic hardship I've experienced since 2008 and revealing the hidden inconvenient truths regarding the U.S. economy. The truth is that the state of the economy is much worse than the MSM has been reporting, and America's unfortunate economic reality has been papered-over by a false sense of prosperity that has resulted from unprecedented liquidity pumping by the Fed. For an accurate gauge of how the economy is faring, one need only look at how the average American worker has been faring. From Michael Snyder of The Economic Collapse Blog:

The following are 10 amazing charts that demonstrate the slow, agonizing death of the American worker...

#1 Wages And Salaries As A Percentage Of GDP

As you can see, wages as a percentage of GDP are hovering near an all-time record low. That means that American workers are bringing home a smaller share of the economic pie than ever before.

#2 Average Annual Hours Worked Per Employed Person In The United States

We are an economy that is rapidly trading good paying full-time jobs for low paying part-time jobs. The decline in average annual hours worked that we have witnessed represents the equivalent of losing millions of jobs. There has been an explosion of "the working poor" in the United States, and this trend is probably only going to accelerate in the years to come.

#3 Manufacturing Employment

As you can see, there are less Americans working in manufacturing today than there was in 1950 even though the population of the country has more than doubled since then. The United States has lost more than 56,000 manufacturing facilities since 2001, and yet our politicians stand around and do nothing about it.

#4 Employment-Population Ratio

This is one of my favorite charts. It shows that there has been absolutely no employment recovery at all since the end of the last recession. The percentage of working age Americans that have a job has stayed under 59 percent for 44 months in a row. How much worse will things get when the next major economic downturn strikes?

#5 Labor Force Participation Rate

This is how the Obama administration is getting the "unemployment rate" to magically go down. They are pretending that millions upon millions of Americans simply do not want to work anymore. As you will notice, the decline of the labor force participation rate has accelerated greatly since Barack Obama entered the White House.

#6 Duration Of Unemployment

The average amount of time that it takes an unemployed worker to find a new job has declined slightly, but it is still far above normal historical levels. It is a crying shame that it takes the average unemployed worker two-thirds of a year to find a new job, but this is the new economic reality that we are all living in.

#7 Delinquency Rate On Residential Mortgages

Since there are not enough jobs for all of us, and since our wages are not rising as rapidly as the cost of living is, a whole bunch of us are falling behind on our mortgages. As you can see, the mortgage delinquency rate has only dropped slightly and is still way, way above typical levels.

#8 New Homes Sold

American workers also don't have enough money to go out and buy new homes either. Yes, new home sales have rebounded slightly this year, but we are nowhere near where we used to be.

Note from ECOMINOES: Investors are responsible for 32% of new home sales. The rebound in housing hasn't been because more young Americans are doing well enough to become first-time home buyers. To the contrary, the housing market has been rebounding because the Fed has provided cheap money for investors to throw around, just as it did during the first housing bubble.

#9 Consumer Credit

Millions of American families continue to resort to going into debt in a desperate attempt to make ends meet. After a slight interruption during the last recession, consumer credit once again is growing at a frightening pace.

#10 Self-Employment At A Record Low

Since there aren't enough jobs for everyone, why aren't more Americans trying to start their own businesses? Well, the reality of the matter is that the government has made it exceedingly difficult to start your own business today. Taxes, rules, regulations and red tape are choking the life out of millions of small businesses in the United States. As a result, the percentage of self-employed Americans is at a record low.

Note from ECOMINOES: Loans to small businesses have been scarce during this economic depression. I'd say that access to capital is a bigger barrier to entry than government regulations.

As all of these long-term trends continue, the middle class will continue to shrink, poverty in America will continue to explode and government dependence will continue to rise.

The numbers don't lie. Today, the number of Americans on Social Security Disability now exceeds the entire population of Greece, and the number of Americans on food stamps now exceeds the entire population of Spain.

We are in the midst of a horrifying economic collapse, and the next major wave of that collapse is rapidly approaching.

I don't dispute Micheal's last point. When the Fed's "mother of all bubbles" bursts, we're going to have a 2008 redux...or worse.

Welcome To Job Market Hell, Class Of 2013!

2013-05-15T23:29:00.001-04:00

A recent Pacific Standard article echos what I've been saying all along: there has been no recovery in the job market. 5 years into this economic depression, the rate of job growth remains woefully insufficient, the majority of jobs created continues to be menial in nature, and, as the Standard notes, graduates of the class of 2013 face the same scarcity of opportunity my graduating class faced in 2008. (I earned my M.B.A. at the worst possible time: during the fall of Lehman.) As I have noted and this article confirms, younger Americans, whose careers have been derailed from the get-go, risk a lifetime of limited upward mobility:

Stacey Kalivas should be celebrating her graduation from college later this week. Instead, the 22 year-old is getting ready to move back home with broken dreams and in debt. Kalivas is a member of the class of 2013, the fifth successive wave of students to enter into a stubbornly weak U.S. labor market—marked by high unemployment, a large number of part-time workers, and many who have given up the hunt for jobs. “It’s kind of tough to be graduating and not having anything,” said Kalivas. The finance major will graduate from Bryant University in Smithfield, Rhode Island, on May 18.

It has been nearly four years since the end of the worst U.S. economic downturn since the Great Depression, but the recovery has been too spotty to patch up the deep scars. Growth has struggled to rise much above two percent on a yearly basis, with quarters of relatively strong expansion typically followed by lulls. Employers have been reluctant to ramp-up hiring, leaving unemployment at 7.5 percent—nearly three percentage points above its pre-recession level. Employers plan to hire only 2.1 percent more new college graduates this year than in 2012, according to a survey from the National Association of Colleges and Employers. Last fall they thought the increase would be 13 percent.

A separate survey by staffing firm Adecco found that about 58 percent of 500 hiring managers across the country have no plans to hire new graduates. Of those hiring, more than two thirds said they would take only one or two candidates. These grim statistics resonate with Kalivas. In her search for a job as a financial analyst, she has applied for seven positions. “It’s frustrating because I feel like I will be more than qualified for the job description, but I am not even making it past the first stage,” she said.

Similar tales are recounted by other students.

“Nobody is hiring or accepting interns,” said Brian Dobson, who recently graduated from the University of New Hampshire with a degree in political science. The 29-year-old Iraq war veteran has submitted resumes to 15 companies hoping to find employment in either public affairs, marketing, or as a lobbyist. All have been met with rejections.

HIGH GRADUATE UNDEREMPLOYMENT

The Class of 2013 is competing with four other groups of graduates going back to 2009, many of whom are still struggling to get a job or find full-time work.

Brian Hackett graduated in 2010 with a political science and public policy degree. “I am working part-time at a research company, but it’s not enough hours, it’s not enough pay and it’s not my career path. That’s the type of rut a lot of people like myself are falling in,” said Hackett.

In April, unemployment among workers under the age of 25 was at 16.1 percent, more than double the national rate.

While the unemployment rate for young college graduates between the ages of 21-24 who are not enrolled in further schooling is 8.8 percent, the underemployment rate, a gauge of those only working part time or who want a job but have given up looking, is at 18.3 percent. The jobless rate for this group was 5.7 percent in 2007; the underemployment rate was 9.9 percent.

“In addition to the substantial share who are officially unemployed, a large swath of these young, highly educated workers have either a job but cannot attain the hours they need or want a job but have given up looking for work,” said Heidi Shierholz, a senior economist at the Economic Policy Institute (EPI) in Washington. The tough labor market is forcing college graduates to settle for jobs that do not require a degree, a trend economists refer to as cyclical downgrading.

Lauren Hughes, a double major in theater and English, is heading in that direction. After graduating from Hillsdale College in Hillsdale, Michigan, she will work as a waitress in her home town of Huntley, Illinois. But she hopes it will be only for a few months. Hughes will make about $4.95 an hour, but with tips she figures she can take home between $45 and $110 a day—money she will save for a job hunt in New York’s theaters in the fall. Hughes is also looking at secretarial work, copy editing, and teaching as a back stop. “I am not very optimistic,” she said.

Emily Savage is looking to go the same route after a frustrating search for jobs in the fields of conservation biology, genetics, and molecular biology. “It’s kind of disappointing. I am probably going to get a job that’s not in my field to survive for the next six months and apply to grad school,” said the Penn State University biology major. “A minimum wage job might be my only option.”

Dobson, who did two tours in Iraq between 2003 and 2006, is not far behind. He and his wife moved in with his parents when he enrolled in college after four years of active duty in the Army. He has tried jobs that give veterans preference. “I need to get back into the workforce. My plan is to find any employment that is possible, whether it is at Applebee’s or Lowe’s, whoever is hiring,” he said.

A study by the EPI found that 52 percent of employed college graduates under the age of 24 were working in jobs that did not require a degree last year. That was up from 47 percent in 2007.

In the fight for jobs, the young graduates are also up against a large group of older Americans forced to work beyond their retirement age to rebuild nest eggs shattered during the recession. The share of Americans aged 65 years and older with either a job or looking for one is at a 51-year high.

LIFETIME OF LOW WAGES

The combination of unemployment and menial jobs puts young workers on course for a life of low wages and earnings. “For the young who are getting out of school, studies show a lot of their earnings growth comes in the first 10 years after they get out of school,” said Keith Hall, a senior research fellow at George Mason University’s Mercatus Center.

According to the EPI, young college graduates with full-time jobs earned an average hourly wage of $16.60 last year, roughly $34,500 a year. That is down 7.6 percent from 2007. Benefits are also a problem. Between 2000 and 2011, the share of young graduates whose jobs provide for retirement plans dropped to 27.2 percent from 41.5 percent, EPI said. The trend is troubling given that most students are graduating from college with huge debts.

Dobson is fortunate. The government took care of his tuition costs through the Post-9/11 GI-Bill, which provides financial support to service personnel. But Kalivas and Savage are not so lucky. Each owes about $30,000 in student debt. According to the New York Federal Reserve Bank, the share of 25-year-olds with student loan debt has risen to more than 40 percent from about 25 percent in 2004. The non-profit Institute for College Access & Success says students who graduated last year had average debts of $26,600.

“The next generation will find it hard to buy their first home or finance other large purchases,” said Julia Coronado, chief North America economist at BNP Paribas in New York.

Kalivas, the would-be financial analyst, will take a break from her job search for a month after graduating. “A lot of companies have been telling us to look for positions opening up in the second and third quarter. They are starting to advertise some positions,” said Kalivas. “I am going to move back with my parents, unfortunately, but I do plan on getting out as quickly as possible,” she said, with a laugh.

Japan's Inflation Time Bomb, Worldwide Fallout Confirmed

2013-05-14T14:52:00.003-04:00

As I noted in a previous article, Japan, whose economy has been floundering since the 1990s, has begun an unprecedented foray into liquidity pumping in a "Hail Mary" attempt to revive its economy. Anyone with a modicum of understanding of economics, however, understands that central banks can't "pump" or "print" a country into prosperity. Here in America, this is exemplified by the deep recession following the bursting of the late 90s tech bubble and the ongoing depression and jobless "recovery" that has followed the bursting of the mid-2000s housing bubble. But central bankers are alchemists with great hubris, and the Bank of Japan will try to "pump to prosperity".

Liquidity pumping does indeed temporarily juice an economy (the late 90s were "boom times" for America), and BOJ's experiment in hyper-pumping will lead to a fleeting period of false prosperity in Japan. But this will come at a terrible price: hyperinflation. I use the term "hyperinflation" loosely, and I'm not referring to inflation in the billions of percent, as it was in Zimbabwe several years ago. But I am talking inflation on a scale that hasn't been seen in the developed world since WWII.

Japan's historic inflation will be problematic for us, as we've been relying on the Japanese to buy more of our debt now that China has begun to buy less of it. The Eurozone, whose economies have been imploding one after another since 2008, faces the same problem, as evidenced by the following chart:

Of course, central banks around the world have denied the prospect of high Japanese inflation as a result of BOJ's hyper-pumping strategy. They claim that Japan will be able to soak up with a magic sponge the tremendous amount of excess liquidity the strategy will create. As the following chart from Goldman Sachs--who provides decent research in addition to being the most evil publicly-traded company on Wall Street--shows, however, inflation is already ramping up in Japan, the trendline steepening with every BOJ easing:

Notice that Japan's inflation trendline has gone from a 30 degree angle to a 60 degree angle in a very short period of time. It's important to note that a former key adviser to George Soros has gone on record saying that the Japan's historic liquidity pumping will send the country to default, which will force Japan to reduce its holdings of American and European debt, which will increase inflationary pressures here and in the Eurozone, as I have argued.

Obama Admin More Nixonian Than Nixon's

2013-05-13T21:59:00.001-04:00

The Obama administration, which claims a "commitment to creating an unprecedented level of openness in Government" is in fact less transparent and more "nixonian" than Richard Nixon's administration was. The evidence just keeps piling up:

Today, we learned that the Justice Department has secretly obtained 2 months of telephone records of reporters and editors for The Associated Press.
A few days ago, we learned that the IRS has been targeting conservative groups for audit.
The Bengazi cover-up is ongoing.
Last fall, the Justice Department decided to not pursue criminal charges against money laundering mega-bank HSBC.
Last summer, the Labor Department attempted to force the press to use government-issued computers when reporting federal affairs.
In 2012, it was revealed that the administration has an enemies list.
The Fast and Furious scandal unfolded in 2012.
Also in 2012, it was revealed that the Obama administration has not been following its legal obligation to address Freedom of Information Act requests.
Obama quietly signed of the über-controversial NDAA on New Years Eve 2011.
The Solyndra scandal unfolded in 2011.
In winter 2011, Obama issued an executive order unilaterally authorizing war in Libya.
In 2011, the Justice Department attempted to force a New York Times reporter to reveal his confidential sources.
In 2009, Obama sought to block the release of photographs depicting detainee abuse in American military prisons.
In 2009, the Justice Department decided not to pursue criminal charges against voter intimidating New Black Panthers members.

Keep in mind that the above list isn't comprehensive. Will Obama "outnixon" Nixon in impeachment, too?

Leonard Pitts: Everyone On Right A "Gun Nut"

2013-05-12T22:56:00.004-04:00

Syndicated liberal columnist Leonard Pitts wrote a doozy of a column today, even for him. In less than 500 words, Pitts amazingly managed to lump libertarians, Tea Party members, social conservatives, 2nd Amendment advocates, and anarchist extremists into a monolithic group...of "gun nuts". And, he managed to insult war veterans to boot!

It should’ve been the shot heard around the world. Chances are, you didn’t hear it.

An ominous sort of history was made last week near Austin, Texas, but it seems to have largely escaped notice. There was some media coverage, yes, but less than, say, Lindsay Lohan’s latest stint in rehab, certainly less than you’d think for something whose ramifications will likely shadow us for years.

On May 2nd, you see, a group called Defense Distributed, led by law student and self-described anarchist Cody Wilson, accomplished what was apparently the first successful firing of a gun “printed” entirely by a 3-D printer. According to Forbes reporter Andy Greenberg, who witnessed the test, the gun is made almost entirely of plastic, the only metal in it being the nail that served as a firing pin and the bullet it fired.

A 3-D printer, for the benefit of those who remember when the mimeograph machine was the cutting edge of duplication technology, is a device which can download computer blueprints and use them to manufacture complex physical objects right on your desktop.

The one Defense Distributed used is said to have cost $8000. Amazon has one listed for $1,299.

So we now have technology, largely unregulated, with the potential to turn every desktop into an armory. Forbes reports that, in just two days, 100,00 blueprints were downloaded.

Hold that thought as you ponder another recent headline. It seems one Adam Kokesh, an Iraq War veteran and activist, is organizing an armed march on Washington for Independence Day. Participants— he claims 2,500 so far — with loaded rifles slung across their backs plan to march into the nation’s capital to protest the “tyranny” of the federal government.

Huh? What does Adam Kokesh, a libertarian extremist, have to do with 3D-printed guns? Kokesh planned his march months before Homeland Security unilaterally banned 3D-printed gun technology. Furthermore, he doesn't represent the average person who disagrees with the ban, much less everyone who disagrees with it. And what does Kokesh's status as an Iraq war vet have to do with anything? Isn't pointing out that he's a vet of an unpopular war the equivalent of unnecessarily calling the president Barack HUSSEIN Obama?

While D.C. residents are allowed to have registered firearms on their property, they are not allowed to carry them in public. Police Chief Cathy Lanier has said marchers will be met at the border and if they break that law, “we’ll take action.”

Kokesh, apparently delusional, promises to turn back peacefully if confronted, but says it is his hope the city will suspend the law for him and even provide his group a police escort.

You will not be surprised to learn that, by “tyranny,” Kokesh means the duly elected (not a hanging chad in sight) president of the United States going about his job. Thing is, if you don’t like the way he does his job, you get a chance every four years to make a change. People in North Korea would doubtless love to live under that kind of “tyranny.”
Because it isn’t.

Kokesh’s march is just the latest product of the great American panic machine, the mechanism by which the extreme right works itself into spasms of apoplectic terror over threats that don’t exist.

“We’re going to be under sharia law!”
Except, we’re not.
“We’ve become a socialist country!”
Except we haven’t.
“There’s a War on Christmas!”
Except there isn’t.
“They’re trying to take our guns away!”

Again, Kokesh is a libertarian extremist. He doesn't fear sharia law, and he certainly doesn't fear a supposed "War on Christmas." What does social conservatism have to do with 3D-printed gun technology anyway?

Except that it is now theoretically possible for a mental patient to manufacture his own gun in the comfort of his aluminum foil-lined basement. That’s a sobering development with far reaching implications barely considered, much less addressed, by lawmakers though this technology has existed for over a decade. Since Wilson’s test, there’s been a flurry of calls for legislation. On Friday, the federal government ordered Wilson to remove the blueprints from his website. All of which is the very epitome of locking the garage after the Hyundai has been hot-wired.

It’s a pity some of the energy that has gone into fighting imaginary tyranny did not go into pondering this real and eminently predictable threat. But, then, we are unserious people in a very serious age.

And therein lies the danger of the panic machine. We spend so much time fighting threats that do not exist, we are left ill-prepared for the ones that do.

In Mr. Pitts's world, everyone on the right side of the political spectrum is one and the same, everyone right side of the political spectrum advocates 3D-printed gun technology, and everyone who advocates 3D-printed gun technology is a tin foil hat-wearing militant. Therefore, according to Pitts, everyone on the right is a tin foil hat-wearing militant. Hard to believe that this guy has been a nationally-syndicated columnist for years. But then again, newspapers are a dying industry...

ead more here: http://www.miamiherald.com/2013/05/11/3391536/on-guns-and-the-great-american.html#storylink=cpy

ECOMINOES Radio Live @ 3ET

2013-05-10T14:12:00.000-04:00

Didn't have a show last week, so I have a ton of material at my disposal for today's show. Going to cover the stories of the week as well as the top stories from last week. Don't miss the excitement! Listen live here, and don't forget to check out the archives.

The 3D Gun/Cannabis Ban Parallel

2013-05-10T13:10:00.001-04:00

Homeland Security has unilaterally banned 3D-printed guns and the technology used to create them, which comes at no surprise given the federal government's intention of ensuring that the state remains better armed than the populace. But the ban brings to light another issue: the expansion of the list of federal victimless crimes by possession.

Guns, like cannabis and "drug paraphernalia", are objects that are innocuous in and of themselves. Also like cannabis, guns are typically used in a responsible manner, and, when misused, harm a very small percentage of the population. There are over 100 million gun owners and nearly 300 million guns in the United States, yet this country sees less than 1 million gun-related crimes and less than 10,000 gun-related homicides annually.

There's no reason to believe that 3D-printed guns would be used for harm at a rate higher than that of guns manufactured by licensed firearm companies. Therefore, it would seem that Washington would have ulterior motives for banning them and the technology used to create them, just like it has ulterior motives for banning marijuana. In addition to limiting the public's relative firepower, the federal government has likely been pressured by business interests to prevent the populace from manufacturing its own firearms.

Anyone with a modicum of understanding of federal marijuana prohibition knows that Washington continues to ban the possession of the innocuous cannabis plant at the behest of "Big Pharma". It would therefore stand to reason that the federal government has banned the possession of the innocuous 3D printed gun and the technology used to manufacture it at the behest of "Big Firearm". After all, the American firearm industry, like the American pharmaceutical industry, is worth several tens of billions of dollars and has a very power lobbying presence in Washington.

Fortunately, circumventing this ban will be as easy as circumventing Uncle Sam's prohibition of pot. 3D-printed firearm technology--and thus 3D-printed guns--will remain as ready-accessible as marijuana and the tools used to consume it. In fact, in less than a day, you could locate and download the software, pick up the printer and media from the local office supply store, and print yourself an illegal firearm. Washington's ban of the innocuous 3-D printed gun will as prove futile as its ban of the innocuous cannabis plant.

Uncle Sam Is Reading Your Emails

2013-05-09T13:15:00.000-04:00

On its official blog, the ACLU reported yesterday that the group has received a series of government documents suggesting that some federal agencies--including the FBI and the criminal investigative arm of the IRS--read Americans’ emails without a warrant. In response, the ACLU is urging citizens to press Congress to reform the Electronic Communications Privacy Act of 1986, the law that enables the government to violate our 4th Amendment protections:

New documents from the FBI and U.S. Attorneys’ offices paint a troubling picture of the government’s email surveillance practices. Not only does the FBI claim it can read emails and other electronic communications without a warrant—even after a federal appeals court ruled that doing so violates the Fourth Amendment—but the documents strongly suggest that different U.S. Attorneys’ offices around the country are applying conflicting standards to access communications content (you can see the documents here).

Last month, in response to a Freedom of Information Act request, the ACLU received IRS documents indicating that the agency’s criminal investigative arm doesn’t always get a warrant to read Americans’ emails. Today we are releasing these additional documents from other federal law enforcement agencies, reinforcing the urgent need for Congress to protect our privacy by updating the laws that cover electronic communications.

The FBI and Electronic Communications: Where’s the Warrant?

The documents we received from the FBI don’t flat out tell us whether FBI agents always get warrants, but they strongly suggest that they don’t.

In 2010, the Sixth Circuit Court of Appeals decided in United States v. Warshak that the government must obtain a probable cause warrant before compelling email providers to turn over messages to law enforcement. But that decision only applies in the four states covered by the Sixth Circuit, so we filed our FOIA request to find out whether the FBI and other agencies are taking advantage of a loophole in the outdated Electronic Communications Privacy Act (ECPA) that allows access to some electronic communications without a warrant. Distressingly, the FBI appears to think the Fourth Amendment’s warrant requirement doesn’t always apply.

The FBI provided the ACLU with excerpts from two versions of its Domestic Investigations and Operations Guide (DIOG), from 2008 and 2012. One of the Guides is from before Warshak was decided and the other one is from after, but they say the same thing: FBI agents only need a warrant for emails or other electronic communications that are unopened and less than 180 days old. The 2012 Guide contains no mention of Warshak, and no suggestion that the Fourth Amendment might require a warrant for all emails. In fact, the 2012 Guide states:

In enacting the ECPA, Congress concluded that customers may not retain a “reasonable expectation of privacy” in information sent to network providers. . . [I]f the contents of an unopened message are kept beyond six months or stored on behalf of the customer after the e-mail has been received or opened, it should be treated the same as a business record in the hands of a third party, such as an accountant or attorney. In that case, the government may subpoena the records from the third party without running afoul of either the Fourth or Fifth Amendment.
Versions of the Guide from 2008 and 2011 are available on the FBI website, but the 2012 edition has not previously been made public. We would have thought that by 2012, the FBI would have updated its policy to require a warrant for all private electronic communications. Our FOIA request was the FBI’s chance to produce any policy documents, manuals, or other guidance stating that a warrant is always required, but they failed to do so. Instead, the documents we received strongly suggest that the FBI doesn’t always get a warrant.

In fact, confirmation that the FBI is reading some emails without a warrant can be found in a recent opinion issued by a federal magistrate judge in Texas. Most of the opinion concerns whether the FBI is allowed to surreptitiously infect a computer with spyware (the judge refused to grant the FBI a warrant to do so). But tucked inside the opinion is this revelation: “the Government also sought and obtained an order under 18 U.S.C. § 2703 directing the Internet service provider to turn over all records related to the counterfeit email account, including the contents of stored communications.” Amazingly, as recently as March of this year, the FBI went after emails without a warrant. This is an affront to the Fourth Amendment.

A Patchwork of Policies

In addition to the FBI documents, the ACLU also received records from six U.S. Attorneys’ offices (in California, Florida, Illinois, Michigan, and New York), and from the Justice Department’s Criminal Division, which provides legal advice to federal prosecutors and law enforcement agencies. The Criminal Division withheld far more documents than it released. The U.S. Attorneys’ office documents reveal some information, but paint a confusing picture of federal policy. We received two paragraphs from the U.S. Attorney for the Southern District of New York—part of an unidentified document stating that law enforcement can obtain “opened electronic communications or extremely old unopened email” without a warrant. Perplexingly, the agency has not released the cover page or other contextual information from this document, so we don’t know whether it reflects the current policy of that office.

Excerpts from an October 2012 document released by the U.S. Attorney for the Northern District of Illinois show that at least one part of the government understands that the Fourth Amendment protects private electronic communications. The document, a chart titled “Procedures for Obtaining Certain Forms of Electronic Surveillance and Related Evidence,” contains entries setting out the procedures for obtaining text messages, voicemails, and emails stored by internet service providers, as well as stored communications on Facebook and “private tweets” on Twitter. The document says a warrant is required for each of these forms of communication. It even explains that “The Sixth Circuit in Warshak held that the non-warrant methods of obtaining stored emails to be [sic] unconstitutional.” Again, because the document lacks a cover page or other explanatory information we don’t know whether it constitutes binding policy for prosecutors or how broadly it applies. This lack of context is frustrating, but at least the document gets the law right.

The six U.S. Attorneys’ offices also told us in this email that since Warshak, they have not authorized a request to a court for access to the contents of electronic communications without a warrant. But according to the recent Texas magistrate judge’s opinion, one U.S. Attorney’s office apparently authorized such a request this year. Even with today’s documents, the government’s actual position is far from clear.

Time for Reform

If nothing else, these records show that federal policy around access to the contents of our electronic communications is in a state of chaos. The FBI, the Executive Office for U.S. Attorneys, and DOJ Criminal Division should clarify whether they believe warrants are required across the board when accessing people’s email. It has been clear since 1877 that the government needs a warrant to read letters sent via postal mail. The government should formally amend its policies to require law enforcement agents to obtain warrants when seeking the contents of all emails too.

Get Involved

More importantly, Congress also needs to reform ECPA to make clear that a warrant is required for access to all electronic communications. Reform legislation is making its way through the Senate now, and the documents released by the U.S. Attorney in Illinois illustrate that the law can be fixed without harming law enforcement goals. If you agree that your email and other electronic communications should be private, you can urge Congress to take action here.

The Solution To The Broken American Hiring Paradigm

2013-05-07T23:31:00.000-04:00

In my last article, I described the broken American hiring paradigm: company leaders delegating the all-important task of staffing to people who are far disconnected from the company goal-setting process. Today, I offer a revolutionary--yet feasible--solution to this problem.

As I argued in the previous article, congruence with company goals is a far better measure of candidate value than years of experience in a particular role. Under the current American hiring paradigm, however, most company recruiters rely on years of experience as a baseline for candidate value. They do this because they have no choice but to use experience as a baseline: 1) they aren't part of the company goal-setting process, and 2) even if they were included in such discussions, they often lack the unique attributes and personality of a business leader.

A company is only as good as its employees, and business leaders should therefore take a greater role in the staffing process. However, busy executives will always have to delegate the unglamorous--yet monumentally-important--tasks of candidate aggregation and initial applicant screening. What if, instead of delegating these tasks to "HR professionals", company leaders delegated them to real businesspeople, recruiters who could participate in the company goal-setting process and approach hiring from a business mindset? This country has an abundant supply of underutilized, readily-available talented businesspeople who would salivate at such an opportunity.

Competent businesspeople have the intuition and grasp of human psychology of "HR professionals" as well as something that the majority of HR professionals can never have: the ability to select candidates based on congruence with company goals. Furthermore, they can quickly learn the nuances of--and tools utilized in--the recruitment process. And, long-term unemployed or underemployed competent businesspeople already know the recruiting process like the backs of their hands.

Company leaders might be hesitant to employ businesspeople as recruiters out of fear of that these "nontraditional" HR hires will move on to bigger, better things when the economy improves. This is the old "overqualified" argument, an argument that became invalid in 2008. A job is sacred in this "new normal" economy, and any competent businessperson who has experienced the suffering that is long-term unemployment/underemployment--as I have--would cherish the opportunity.

The American Hiring Paradigm Is Broken

2013-05-05T22:10:00.002-04:00

Central banking has made a mess of the economy, and increasingly onerous jobs-killing federal legislation has impeded hiring and thus has impeded economic recovery. But the Fed and Washington aren't the only culprits in the nation's continued economic malaise. The American hiring paradigm is also to blame.

As a perennial job seeker, I frequently respond to job posts. I've noticed that--with the exception of small numbers of listings posted by entrepreneurs--listings by American companies almost always outline desired amounts of applicant experience as opposed to what's far more important: congruence with company goals. Lou Adler, entrepreneur and best-selling author, best summarized this phenomenon in an article he recently published on LinkedIn:

“Successful candidate will develop a new approach for reducing water usage by 50%,” is a lot better than saying “Must have 5-10 years of environmental engineering background including 3-5 years of wastewater management."

Indeed. Before the economy crashed, I was able to grow a local Spanish-language newspaper into a regional Spanish-language entertainment magazine published throughout 2 states. My company enjoyed such robust growth primarily because I staffed it with great people who contributed to specific company goals. I found these great employees not by seeking applicants with X years of experience in Y roles, but rather by seeking applicants who made the best case that they could contribute to the objectives I outlined. With this approach to talent acquisition, sifting through resumes was easy: I just looked for accomplishments.

As both an employer and a job-seeker, I can say with certainty that the common American approach to talent acquisition--valuing years of experience over capability--creates tremendous opportunity costs for the company, and therefore retards economic recovery. (This is evidenced by the automatic rejection of the long-term unemployed.) This unfortunate approach to hiring is almost certainly a function of the increasing trend of management delegating the all-important task of staffing to people who are not only far disconnected from the development of company goals, but aren't businesspeople at all. These people--call them recruiters or HR professionals or whatever you wish--use years of experience as a baseline for applicant value because they have little frame of reference as to who could best contribute to company goals. And they can never have this frame of reference because 1) they aren't part of the company goal-setting process and, 2) even if they were included in such discussions, they often lack the unique attributes and personality of a business leader. As Adler puts it, "only a thinker can determine what to look for in a thinker."

The solution to this problem is simple: American company leaders should play a greater part in the hiring process. This begins with creating jobs listings outlining specific company goals and ends with taking the lead in determining which applicant(s) could best contribute to achieving said goals.

Obviously, company leaders can't be tasked with filling low-level positions. But when it comes to filling positions that directly affect the company's bottom line, they should absolutely take charge.

Apologies For No Live ECOMINOES Radio Today

2013-05-03T16:41:00.002-04:00

Due to some crossed wires, there was no live show this afternoon. If you tuned in, you heard an archive of one of the first episodes, back when the show wasn't quite as polished. For this, I apologize. I was particularly looking forward to picking apart the April jobs report, but such as life. I hope you'll tune in next week from 3-5 ET on KineticHifi, where I'll cover new top stories as well as the top stories from this week. In the meantime, don't forget to catch up with the new episodes in the archives.

April Employment Increase: Nothing But Menial Jobs

2013-05-03T14:26:00.000-04:00

Readers of this blog know that government-provided employment data aren't to be trusted. The BLS is notorious for crushing down the labor force participation rate in order to make it appear that the unemployment rate is falling, and the agency's survey methodology is fundamentally-flawed. But even if you take the government's word on unemployment as the "Gospel truth", a 50,000-150,000 monthly net increase in jobs--as we've been seeing for years--is woefully insufficient. At this rate of increase--with the unemployment rate dropping by a tenth of a percent each month--, it would take until 2017 to get back to the lower end of the "full employment" range. And that's IF the economy has no additional difficulties and WITH the crushed-down participation rate.

But the raw jobs numbers don't tell the full story anyway. Who cares if 50,000 or 150,000 or even 1,000,000 jobs are created each month if the jobs are menial and don't provide full employment for the segments of the population that need it the most? And make no mistake: we've been seeing little but a monthly increase in low-paying, dead end jobs for years. The April jobs report showed more of the same.

The overwhelming majority of jobs created last month were in leisure and hospitality (waiters, bartenders, hotel employees, etc.) and temp jobs. Industries that actually produce something, whether it be information or physical goods, actually lost jobs:

There was a net decrease in jobs for Americans of prime working age, i.e. there was a net decrease in "career" jobs. But there was a net increase in jobs for Americans of prime restaurant worker and Walmart greeter age:

In fact, the number of jobs for Americans of prime working age (i.e. career age) has been flat since the economy collapsed:

So what's this I hear about a positive jobs report?

Long-Term Unemployment Can Make One Better Employee

2013-05-02T13:09:00.001-04:00

While it's important the analyze and share empirical data behind the ongoing economic depression and jobless recovery, it's also important to chronicle the impact the country's economic malaise has been having on our society. In a series simply titled "Unemployment Stories", Gawker has been compiling the web's most thoughtful, best-written personal accounts of the nation's long-term jobless. Having personally experienced the mounting challenges associated with long-term unemployment/underemployment and having communicated extensively with several friends who have also experienced them, I have a deep understanding of what displaced workers feel. As such, I can say with confidence that this individual's particularly well-written account of his long-term unemployment experience is the best representation of what millions of Americans have been experiencing since 2008.

It's essential to understand that this account demonstrates the enormous personal growth and character building that comes with such great hardship. It's integral to understand that this account exemplifies the oft-unrecognized attributes of the long-term unemployed and underemployed: they're better people because of their great hardships. As I noted in a previous article, the overwhelming majority of employers won't consider hiring a long-term unemployed/underemployed person, likely because they see the long-term jobless as "damaged goods". As this individual, who represents millions of Americans, makes crystal-clear in his concluding paragraph, however, the long-term unemployed have the potential of being BETTER employees because of the considerable personal growth and character building they acquire vis-a-vis their protracted suffering.

Note: I've omitted the introductory paragraphs because they relate to the person's employment history and educational background, which are immaterial. I've also added bold and italics to the salient points of the concluding paragraph, as they directly relate to the personal growth and character building to which I'm referring.

So what happens after months and months and years and years like this? You live in your head. Your mind often goes through a self deprecating loop of "if I had only done this instead of that". You become filled with disgust, despair, and depression. You feel hopeless and useless and worthless. And each day that follows with no results from your efforts makes you feel even more so. You withdraw. You hide. You make excuses.

I rarely see my friends anymore because a lot of them don't really understand the emotional, financial and physical toll this has taken on me. Although they will listen and try to understand, they really don't want to hear it -it makes them ill-at-ease and they don't even want to think about it. I make excuses too and beg off seeing them because I can't afford to do almost anything they want to do and I'm uncomfortable and embarrassed to have them pay for me-yet one more time. The ones who really do understand will commiserate with me-at least for that fleeting moment-but then the moment's gone, and they go back to their lives and forget, and I go back to mine, into that deep black hole where I feel tormented; the one from which I fear I'll never be able to escape.

So I've become uncomfortable with the people who love me and wish to help me because suddenly, they've become one of the ‘haves' and I've become one of the ‘have nots'. I feel angry and resentful and envious and sad and scared and worthless and alone and inadequate...

Or there are the people who want to be encouraging and say "but you're so creative, so talented I'm sure you'll find something.'' and while I know they believe that, and on my good days I know it's true, it certainly doesn't feel that way when I'm living thru this hell day after day, week after week, month after month, year after year.

So for now, I live for my weekends; a time when I'm not totally alone and trapped with my loop of negative thoughts. There are other people around for a distraction or I'll put on the television, search the internet, or sleep. But even though a weekend is a "vacation from my life", and I relish them, the moment I step out my door everything around me is a reminder of my circumstances-because just leaving the house costs money. Money I don't have and shouldn't be spending.

Then Monday inevitably rolls around again, and I often end up under the covers, wishing I didn't have to face all of this yet one more time. But I know I don't have much choice if I want to change my circumstances. I'm supposed to maintain and project a ‘positive attitude', to be ‘happy'. To have a smile on my face and be jovial. Really? Well, yes. When I go out to face the world, like it or not, if I want to have opportunities I need to project confidence, competence, and conciliation. So, on top of all that I am dealing with, no matter how I'm really feeling, I have to become an actor as well!

The preceding paragraphs perfectly describe the immense suffering associated with long-term unemployment and underemployment. Now, the takeaway from all of this:

Through all the trials and tribulations of the last three years of my life, I still believe that my saving grace will be my resilience. As many people have reminded me, throughout my life, whenever I've had an obstacle to overcome, no matter how badly I've felt, each and every time when I was knocked down I always got up and kept trying, reinventing myself, and seeing that if this time the ‘spaghetti would stick to the wall'.

Resilience and adaptability: marketable attributes developed through long-term unemployment and underemployment. Hiring managers and company decision makers should take note.

The New, Bigger Housing Bubble In 4 Charts

2013-04-30T23:04:00.000-04:00

Bernanke's "solution" to the country's economic woes, a new, even larger asset bubble, is becoming evident in several sectors of the economy, from equities to real estate. The following charts suggest that the bubble the Fed is inflating in the housing market will eclipse the last one, which was big enough to plunge the country into an economic depression when it burst.

First, the year-over-year increase in home prices since 2008 has been steeper than the YoY increase was during the last housing bubble:

Second, the inversely proportional decrease in mortgage standards and increase in demand for mortgages has been starker than it was during the last bubble:

Third, apartment and condo starts have been skyrocketing at a rate far eclipsing that of the last bubble:

Fourth, investors are throwing cheap, Fed-provided money at housing at a rate far exceeding that of the last bubble:

Hold on to your seats, ladies and gentlemen. When this bubble bursts, we're in for a heck of a ride.

Libertarian Talk Radio: It's A Matter Of Differentiation

2013-04-29T13:29:00.000-04:00

I recently wrote about how libertarianism is growing and how conservatives, terrestrial talk radio's bread-and-butter demographic, are becoming more libertarian. In the article, I argued that there's a growing under-served demand for libertarian terrestrial talk radio. Today, I'd like to add to that argument from another perspective, that of differentiation.

Fox News, the only television news provider gearing to those on the right side of the political spectrum, enjoys strong ratings for the simple fact that it's the only conservative news alternative. (Fox Business is a business news--not "news news" network.) As you can see in the following graphic, most television news clusters around the left side of the political spectrum. Fox News, on the other hand, enjoys a monopoly on the right.

The same principal applies to political talk show hosts on terrestrial radio. As you can see in this graphic, most hosts cluster around the social conservative/neoconservative side of the conservative political spectrum. There's only one prominent host on the libertarian side of the spectrum, Dennis Miller, and his show doesn't get particularly good ratings. (Just my opinion, but, while Dennis is a great comedian, he seems directionless as a talk show host.)

The previous 2 graphics, combined with the nation's changing political landscape, suggest that it's time for program directors to put more libertarians on the air.

ECOMINOES Radio @ 3 ET

2013-04-26T14:14:00.001-04:00

If you have web access and a pair of speakers, don't forget to listen to me live at 3 ET. In case you didn't realize it, you can stream the show through your smartphone and listen on your car stereo. And, as always, don't forget to check out past shows from the archives. Enjoy!

Congress Has Long History Of Exempting Itself

2013-04-26T10:30:00.003-04:00

Congressional members' recent bipartisan attempt to exempt themselves from Obamacare is infuriating, but it's not surprising. Congress Critters of both the Republican and Democrat variety have a long history of weaseling themselves out of laws they pass on everyone else.

According to a recent AP story, even with the Congressional Accountability Act of 1995 requiring Congress to abide by most laws it passes, federal lawmakers are still exempt from a number of fundamental federal laws that would require accountability. The list includes:

— The Freedom of Information Act
— Investigatory subpoenas to obtain information for safety and health probes
— Protections against retaliation for whistleblowers

The phrase "throw the bums out" is often tossed around. Problem is, with America's bogus left/right paradigm, the bums who leave Congress are inexorably replaced by new ones.

Libertarian Talk Radio: If You Build It, Ratings Will Come

2013-04-25T21:57:00.000-04:00

Terrestrial talk radio's key demographic, conservatives, are becoming more libertarian. However, there are few libertarian hosts in terrestrial talk radio. Program directors would be wise to air more of them.

According to Gallup, an increasing number of Americans describe themselves as "conservative", terrestrial talk radio's bread-and-butter political ideology:

However, a decreasing number of conservatives identify with "traditional values":

On the other hand, also according to Gallup, an increasing number of Americans consider themselves "libertarian":

And, today, nearly 60% of Americans share some libertarian views:

However, there are only a handful of libertarian hosts in terrestrial talk radio. This suggests there is a growing under-served demand.

Unfortunately, program directors might be hesitant to consider more libertarian talk radio programming. The current handful of libertarian hosts' shows have relatively-low ratings, and, now that Neal Boortz has retired, the most popular libertarian in talk radio barely cracks the top 10:

However, current libertarian hosts' relatively-low ratings are likely a function of poor show quality, not lack of demand for libertarian programming. The number of liberty-minded Americans is rapidly growing, and libertarians are a passionate bunch who love to debate. Talk radio is an ideal format for us. Unfortunately, we're mostly relegated to Internet radio at present. If program directors put some quality libertarians on the air, ratings would follow.

Shameless plug: My Internet-based talk show airs live Fridays from 3 to 5 ET on KineticHifi. Past shows can be heard here.

Fed Liquidity Pumping Good For Wealthy, Bad For Rest

2013-04-23T21:37:00.001-04:00

The premise is simple: the wealthy have a disproportionate amount of their net worth in investments, and the Fed has been propping up the stock market and inflating an asset bubble. Therefore, the inflation-driven economic recovery has been robust for the richest 7% while weak to non-existent for everyone else. And never forget, wealth and exposure to inflation are inversely-proportional. In other words, those with less money spend a greater percentage of their incomes on essentials--food, gas, etc.--whose prices have been rising as a result of the asset bubble. From Pew Research:

During the first two years of the nation’s economic recovery, the mean net worth of households in the upper 7% of the wealth distribution rose by an estimated 28%, while the mean net worth of households in the lower 93% dropped by 4%, according to a Pew Research Center analysis of newly released Census Bureau data.

From 2009 to 2011, the mean wealth of the 8 million households in the more affluent group rose to an estimated $3,173,895 from an estimated $2,476,244, while the mean wealth of the 111 million households in the less affluent group fell to an estimated $133,817 from an estimated $139,896.

These wide variances were driven by the fact that the stock and bond market rallied during the 2009 to 2011 period while the housing market remained flat.

Affluent households typically have their assets concentrated in stocks and other financial holdings, while less affluent households typically have their wealth more heavily concentrated in the value of their home.

From the end of the recession in 2009 through 2011 (the last year for which Census Bureau wealth data are available), the 8 million households in the U.S. with a net worth above $836,033 saw their aggregate wealth rise by an estimated $5.6 trillion, while the 111 million households with a net worth at or below that level saw their aggregate wealth decline by an estimated $0.6 trillion.¹

Because of these differences, wealth inequality increased during the first two years of the recovery. The upper 7% of households saw their aggregate share of the nation’s overall household wealth pie rise to 63% in 2011, up from 56% in 2009. On an individual household basis, the mean wealth of households in this more affluent group was almost 24 times that of those in the less affluent group in 2011. At the start of the recovery in 2009, that ratio had been less than 18-to-1.

(The focus in this report on the upper 7% of households rather than some other share of high wealth households reflects the limits of the tabulations published by the Census Bureau. The boundaries of its wealth categories dictated the split of households analyzed in this report.)

Overall, the wealth of America’s households rose by $5 trillion, or 14%, during this period, from $35.2 trillion in 2009 to $40.2 trillion in 2011.² Household wealth is the sum of all assets, such as a home, car, real property, a 401(k), stocks and other financial holdings, minus the sum of all debts, such as a mortgage, car loan, credit card debt and student loans.

During the period under study, the S&P 500 rose by 34% (and has since risen by an additional 26%), while the S&P/Case-Shiller home price index fell by 5%, continuing a steep slide that began with the crash of the housing market in 2006. (Housing prices have slowly started to rebound in the past year but remain 29% below their 2006 peak.)

The different performance of financial asset and housing markets from 2009 to 2011 explains virtually all of the variances in the trajectories of wealth holdings among affluent and less affluent households during this period. Among households with net worth of $500,000 or more, 65% of their wealth comes from financial holdings, such as stocks, bonds and 401(k) accounts, and 17% comes from their home. Among households with net worth of less than $500,000, just 33% of their wealth comes from financial assets and 50% comes from their home.

The Census Bureau data also indicate that among less affluent households, fewer directly owned stocks and mutual fund shares in 2011 (13%) than in 2009 (16%), meaning a smaller share enjoyed the fruits of the stock market rally. Likewise, fewer had individual retirement accounts (IRAs) or Keogh accounts (22% in 2011 versus 24% in 2009) and the same share had 401(k) or Thrift Savings Plan accounts (39% in both years). Among affluent households, there was also a decline in the share directly owning stock and mutual fund shares during this period (59% in 2011 versus 62% in 2009), but a slight increase in the share with IRAs or Keogh accounts (70% versus 68%) and a larger increase in the share with 401(k) or Thrift Savings Plan accounts (65% versus 61%).

Overall, net worth per household in the U.S. in 2011 made up nearly all the ground it had lost since 2005—$338,950 versus $340,252 in 2005, the latest pre-recession data published by the Census Bureau. (Total household wealth doubtless rose for a period after 2005 before falling precipitously during the Great Recession of 2007-2009 and rebounding since then. However, no household wealth data are available from the Census Bureau for the years between 2005 and 2009, so it is not possible to pinpoint when, or at what level, the peak in wealth per household occurred.)

Looking at the period from 2005 to 2009, Census Bureau data show that mean net worth declined by 12% for households as a whole but remained unchanged for households with a net worth of $500,000 and over. Households in that top wealth category had a mean of $1,590,075 in wealth in 2005, $1,585,441 in 2009 and $1,920,956 in 2011.³

Economy Creating Lost Generation

2013-04-21T21:20:00.001-04:00

I don't seek out bad economic data; bad economic data find me. I gather data from numerous reputable sources, and, sometimes, reputable sources send them to me. One of these reputable sources is John Lounsbury, Founding Partner and Managing Editor at Econintersect LLC. This morning, John sent me the following article about the lost generation that the current economic depression has been creating. As a side note, I wrote about the subject in one of the first articles I published on ECOMINOES.

The inordinate growth of student loans – and its effect on the economy – is killing consumption (autos) and the housing sector. This is no short term dynamic, but will effect the economy for decades.

The USA is a consumer driven economy. A study released this week authored by Meta Brown and Sydnee Caldwell stated:

As a result of tighter underwriting standards, higher delinquency rates, and lower credit scores, consumers with educational debt may have more limited access to housing and auto debt and, as a result, more limited options in the housing and vehicle markets, despite their comparatively high earning potential.

Both these factors—lowered expectations of future earnings and more limited access to credit—may have broad implications for the ongoing recovery of the housing and vehicle markets, and of U.S. consumer spending more generally. While highly skilled young workers have traditionally provided a vital influx of new, affluent consumers to U.S. housing and auto markets, unprecedented student debt may dampen their influence in today’s marketplace.
Some believe the lack of jobs is causing a higher than normal attendance in schools – but historical data from the BLS shows attendance appears moderating.

And there seems little correlation between the ability of the young to get jobs and enrollment in colleges / universities.

The student loan growth phenomenon seems to be directly related to cost inflation of education outstripping the general rate of inflation by significant multiples. The following table is from a study by Jordan Bowersox and Jonathan Breazeale.

Yearly Cost of Colleges / Universities

This study appears to correlate well with the associated BLS education cost index.

It is interesting to this author that economists talk about the economic drag by the baby boomers on the economy, but yet ignore the built in drag of higher education on the economy. The young are historically higher consumers than the old – yet the cost of education is weakening the ability of the young to consume.

It's important to note that ever-expensive higher education not leading to good-paying jobs not only prevents younger people from contributing to the economy as consumers; it impedes their ability to achieve life milestones that contribute to the economy: getting married, having children, etc.

The Definitive War On Drugs Infographic

2013-04-20T21:01:00.000-04:00

Perhaps it's time to rethink the War On Drugs? Presenting the economic and human costs of the longest, bloodiest war in U.S. history.

ECOMINOES Radio At 3:30 ET Today

2013-04-19T14:44:00.002-04:00

Due to unforeseen circumstances, this week's show will start at 3:30 ET instead of the usual 3:00. It will be worth the extra wait. Listen live at the appropriate time to find out why. And never forget that past shows are available in the archive.

Employers Foolish To Automatically Reject Long-Term Unemployed

2013-04-19T13:58:00.002-04:00

I know from personal experience the steep uphill battle that is long-term unemployment/underemployment (to be called "unemployment" from here on). Challenges mount and intensify. One of the more difficult of these challenges is employment-status discrimination. More often than not, employers refuse to consider applicants who have been long-term unemployed, regardless of their qualifications. As a result, securing work in a terrible job market is nearly impossible for those who need it the most.

I say "impossible" without the slightest hint of hyperbole. As 1 of 7 people in my peer group who has experienced long-term unemployment, I have a plethora of anecdotal evidence suggesting that callback rates significantly decrease as time spent unemployed increases. But don't take it from my experience or the experience of my peers. Take it from 2 economists who study employment for a living, as chronicled by the Atlantic in an aptly grim article:

Close your eyes and picture the scariest thing you can think of. Maybe it's a giant spider or a giant Stay Puft marshmallow man or something that's not even giant at all. Well, whatever it is, I guarantee it's not nearly as scary as the real scariest thing in the world. That's long-term unemployment.

There are two labor markets nowadays. There's the market for people who have been out of work for less than six months, and the market for people who have been out of work longer. The former is working pretty normally, and the latter is horribly dysfunctional. That was the conclusion of recent research I highlighted a few months ago by Rand Ghayad, a visiting scholar at the Boston Fed and a PhD candidate in economics at Northeastern University, and William Dickens, a professor of economics at Northeastern University, that looked at Beveridge curves for different ages, industries, and education levels to see who the recovery is leaving behind.

Okay, so what is a Beveridge curve? Well, it just shows the relationship between job openings and unemployment. There should be a pretty stable relationship between the two, assuming the labor market isn't broken. The more openings there are, the less unemployment there should be. If that isn't true, if the Beveridge curve "shifts up" as more openings don't translate into less unemployment, then it might be a sign of "structural" unemployment. That is, the unemployed just might not have the right skills. Now, what Ghayad and Dickens found is that the Beveridge curves look normal across all ages, industries, and education levels, as long as you haven't been out of work for more than six months. But the curves shift up for everybody if you've been unemployed longer than six months. In other words, it doesn't matter whether you're young or old, a blue-collar or white-collar worker, or a high school or college grad; all that matters is how long you've been out of work.

Help Wanted -- If You've Been Out of Work for Less than Six Months

But just how bad is it for the long-term unemployed? Ghayad ran a follow-up field experiment to find out. In a new working paper, he sent out 4800 fictitious resumes to 600 job openings, with 3600 of them for fake unemployed people. Among those 3600, he varied how long they'd been out of work, how often they'd switched jobs, and whether they had any industry experience. Everything else was kept constant. The mocked-up resumes were all male, all had randomly-selected (and racially ambiguous) names, and all had similar education backgrounds. The question was which of them would get callbacks.

It turns out long-term unemployment is much scarier than you could possibly imagine.

The results are equal parts unsurprising and terrifying. Employers prefer applicants who haven't been out of work for very long, applicants who have industry experience, and applicants who haven't moved between jobs that much. But how long you've been out of work trumps those other factors. As you can see in the chart below from Ghayad's paper, people with relevant experience (red) who had been out of work for six months or longer got called back less than people without relevant experience (blue) who'd been out of work shorter.

Look at that again. As long as you've been out of work for less than six months, you can get called back even if you don't have experience. But after you've been out of work for six months, it doesn't matter what experience you have. Quite literally. There's only a 2.12 percentage point difference in callback rates for the long-term unemployed with or without industry experience. That's compared to a 7.13 and 8.95 percentage point difference for the short-and-medium-term unemployed. This is what screening out the long-term unemployed looks like. In other words, the first thing employers look at is how long you've been out of work, and that's the only thing they look at if it's been six months or longer.

This penalty for long-term unemployment is unlike any other. As you can see in the chart below, job churn is another red flag for employers, but not nearly to the same extent. Applicants who'd gone through five to six jobs but had relevant experience were still more likely to get called back than those who'd gone through three to four jobs but didn't. And they had about as good a chance as those who'd only held one or two jobs but weren't experienced. In other words, there is no job-switching cliff like there is an unemployment cliff.

Long-term unemployment is a terrifying trap. Once you've been out of work for six months, there's little you can do to find work. Employers put you at the back of the jobs line, regardless of how strong the rest of your resume is. After all, they usually don't even look at it.

Let's be clear. Ghayad's field study shows employers discriminate against the long-term unemployed. All of the fake resumes he sent out were basically identical. But firms ignored the ones from people who'd been out of work for six months or longer -- even when they had better credentials. Employers look at how long you've been unemployed as a better proxy for skills than anything else on your resume. In other words, more jobs-training probably won't help the long-term unemployed all that much. Even a stronger economy will only help them years in the future, rather than many years in the future.

Common sense dictates that, by automatically rejecting long-term unemployed applicants when they are better qualified, employers are creating tremendous opportunity costs for themselves and the economy. Even if the experience of long-term unemployment "wears" on a person, an equilibrium must exist between credentials and time spent unemployed.

Furthermore, the assumption that long-term unemployment erodes applicant value may be fundamentally-flawed. No study has been conducted on the matter, but all 7 people in my peer group who experienced long-term unemployment have taken advantage of the free time to either "brush-up" on skills or acquire new ones. (All 7 of us have also done contract work, hence we've been unemployed/underemployed.) Far more importantly, long-term unemployment has given us something of great value that applicants who have never experienced it cannot have: unique personal growth. We are better, stronger people because of our jobless experiences. And, because we never want to experience unemployment again, we have an extra incentive to do a good job. Employers would be wise to consider these factors before automatically discarding us.

Boston Bombing Not An Attack On Prosperity

2013-04-17T23:09:00.000-04:00

As of this writing, 48 hours after the Boston Marathon bombing, no suspect has been apprehended, but a person of interest has been identified, a Middle Eastern man or white man. Other than providing scant new information regarding the hunt for the perpetrator(s), the media spent much the day airing "feel good" stories about America, implicitly suggesting that those who wish to harm us hate us because of the "unique opportunities"--especially of the economic kind--we enjoy as Americans. The opening paragraph of the AP's lead story from this afternoon exemplifies this motif:

The United States proclaims itself the world's foremost economic and military superpower - the mightiest nation on Earth, "land of opportunity" for those who want to work hard and prosper. But as Monday's bombings at the Boston Marathon illustrate, the reality is that, from sea to shining sea, this is a nation of "soft targets," full of opportunities for those who want to do it harm.

Whether the perpetrator turns out to be an Islamic extremist or a white militant, neither is the profile of someone who wishes harm innocent Americans out of a hatred for prosperity, as the media have suggested.

For starters, this country a far cry from the "Land of Opportunity" it used be. In its 2013 World Freedom Index--the most cited study on the matter--, the Fraser Institute ranked the United States as only the 8th freest country in the world in terms of economic opportunity, having fallen steadily from the top spot since the late 1990s. The Heritage Foundation and the Cato Institute also show the U.S. falling to near the bottom of the first decile of their most recent indices of economic freedom. Not only is economic opportunity in this country strangled ever harder by the strengthening hands of government, it's also been severely limited by our protracted economic depression. No one--including an Islamic extremist or white militant--has reason to hate prosperity that doesn't exist.

Even if the United States were the economic superpower it used to be, Islamic extremists and white militants don't create chaos out of wealth envy. Scholars of Islamic terrorism have identified 3 common motivations for hating America: foreign policy, apostasy, and the view of Americans as imperialists. On the other hand, experts on the matter rarely cite wealth envy as a motivation. White militants typically hate America because of a perceived view of limitation of freedom, including economic freedom. Someone with the profile of Timothy McVeigh cares not about income inequality, but he does strongly believe that the government significantly impedes his "pursuit of happiness".

The Boston Marathon bombings took place on April 15, Patriot's Day and tax day. The significances of the date are oxymoronic, but neither are a celebration of prosperity. And even if they were, they wouldn't be the reason an Islamic extremist or a white militant would choose to attack on that day.