Economy Sheds Employment Numbers

For the very few left in the back seat saying Are we there yet? regarding a recession, this morning the government released a bleak jobs report. In the Times' report, Economy lost 63,000 Jobs in February, an economist said, "I haven't seen a job report this recessionary since the last recession."

The private sector lost 101,000 jobs last month, the biggest drop-off in five years. Retail, construction and factory jobs were hit hardest.

...Wages grew more slowly, further depressing the outlook for consumer spending over the next few months. Among rank-and-file workers — more than 80 percent of the work force — average pay grew just 0.3 percent to $17.20 an hour. Wages are effectively running flat when adjusted for inflation.

News travels fast. The dollar has already dropped against the Euro even more, creeping to $1.5459 per euro.

For people in the restaurant biz, it's a mixed bag. I was at Gotham Bar & Grill for lunch the other day (business meeting, not on my weakened dime), and it was dead. I'm sure, however, they are busy for dinner. The Chinatown hand pulled noodle shop under the Manhattan Bridge, however, was packed for lunch yesterday. Uniqlo, the Japanese clothing retaliler on Broadway, was dead. The streets of Lower Manhattan? Filled with European tourists. I'd be interested to see how this will pan out in the city. The true test will be how long the wait is tonight at Lombardi's. I'll keep you posted.

US to China- My Dollars Are Your Dollars...

In honor of The Atlantic.com now free, I thought I'd bring you a recent James Fallows article, The $1.4 Trillion Question. It's an article about China, and that age old story about the Chinese buying our debt so we can live beyond our means. The article is intriguing, though, because it questions just who, exactly, is getting hustled, and how like all good hustles, it can't last forever.

Through the quarter-century in which China has been opening to world trade, Chinese leaders have deliberately held down living standards for their own people and propped them up in the United States. This is the real meaning of the vast trade surplus—$1.4 trillion and counting, going up by about $1 billion per day—that the Chinese government has mostly parked in U.S. Treasury notes. In effect, every person in the (rich) United States has over the past 10 years or so borrowed about $4,000 from someone in the (poor) People’s Republic of China. Like so many imbalances in economics, this one can’t go on indefinitely, and therefore won’t. But the way it ends—suddenly versus gradually, for predictable reasons versus during a panic—will make an enormous difference to the U.S. and Chinese economies over the next few years, to say nothing of bystanders in Europe and elsewhere.

My favorite part is how is breaks down the process by which dollars go from the US, to China, and back-- personified in an Oral B toothbrush purchased at a CVS. The flow of currency is fascinating, and Fallows does a great job of keeping it that way.

While the article is long (4 web pages, so longer than Kiplinger's but shorter than the Sunday NY Times Magazine...), it is easy to understand. When it comes to currency policy and politics, easy to understand is good by me.

1881 US Silver Dollar photo by Lone Primate via flickr

Dear Foreign Investors- We're on Sale!

In today's NY Times there is a great article-- Overseas Investors Buy Aggressively in U.S.

For much of the world, the United States is now on sale at discount prices. With credit tight, unemployment growing and worries mounting about a potential recession, American business and government leaders are courting foreign money to keep the economy growing. Foreign investors are buying aggressively, taking advantage of American duress and a weak dollar to snap up what many see as bargains, while making inroads to the world’s largest market.

We're talking huge sums here, last year alone was $414 billion, or a quarter of "all announced deals". Frankly, I think it's globalizations karmic retribution that's kicking us in the pants right now, and thank god because clearly our economy needs money from somewhere. After years of American companies snapping up factories, labor, and land in currency depressed nations, the world is returning the favor. And in economic irony- NAFTA, that trade agreement that allowed the US to bum rush Canadian and Mexican markets with it's big bad dollar and superpower-like economy, is now luring foreign investors into our market. If they own our companies, they enjoy the same open trade borders.

I wrote about sovereign welath funds a while ago, and certainly there is a ton of this foreign government investment vehicle in the mix, but it is not the majority of the money. The article refers to it as a trickle. Still, the nationality of foreign investors can ruffle some Buy American feathers. In an attached multi media graphic, the top spenders in announced mergers and acquisitions last year were (in descending order) Canada, Britain, Australia, Spain, Germany. The UAE follows, then Saudi Arabia, with China ranked 14- all of whom invested significantly less than the top three. The bruhaha about these three countries may be that in 2000 they were not even on the charts.

For many, it is a complicated pill to swallow.

Five million Americans now work for foreign companies set up in the United States, Mr. Kimmitt said, and those jobs pay 30 percent more than similar work at domestic companies. Nearly a third of such jobs are in manufacturing, which explains why Rust Belt states have been wooing foreign investment.

“We’ve lost 400,000 manufacturing jobs,” said Michigan’s governor, Jennifer M. Granholm, a Democrat, who has traveled three times to Europe and twice to Japan in pursuit of investment since taking office in 2003. “I’ve got to get jobs for our people.”

Some labor unions see the acceleration of foreign takeovers as the latest indignity wrought by globalization.

“It’s the culmination of a series of fool’s errands,” said Leo W. Gerard, international president of the United Steelworkers. “We’ve hollowed out our industrial base and run up this massive trade deficit, and now the countries that have built the deficits are coming back to buy up our assets. It’s like spitting in your face.”

Given the state of our economy, this level of foreign investment will only rise. The fact is, we need the money, and it's a prudent long term investment for them. They're buying blue chip companies in a blue chip market at a seriously steep discount. And honestly, it doesn't bother me. What does bother me are the economic and political forces that tanked our economy to begin with. And for that, the US has nobody to blame but itself.

NASA photo by TopTechWriter.US' via flickr

Jay-Z + Greenspan = Bling

In a huh moment, the Wall Street Journal reported yesterday that Jay-Z's new video, Blue Magic, featured the hip hop mogul "flashing stacks of 500-euro bills".

Of course, the ensuing maelstrom is that Jay-Z is the straw that broke the camel's back- as in now we know there's a recession a coming. I hate crap like this, like lamenting that even a rap star is dissing the dollar, as though Jay-Z has become the lowest common denominator in financial literacy. Let's be real here, yes I love his music, but the man is also a smart businessman. He's bringing the Nets to Brooklyn for basketball god's sake. And not for nothing, but a stack of fifty grand in US dead presidents vs. $72,000 in US currency for the same stack of 500-euro? Can't knock the hustle.

The Falling Dollar Fallout

With all the brouhaha over the dollar's freefall, it's not always easy to parse out what, exactly, that means. Today at CNN/Money they have a succint article on the winners and losers of the falling dollar. One currency expert is quoted as saying he expects the dollar to go as high as $1.45 to the euro by the end of the year, so despite Friday's record low many expect the skid to continue.

Speaking of things falling, I recently did a post on laddering your savings with CDs, and just a few weeks ago the interest rate on a 9 month CD with ING was 5.25%. Today it sits at 4.90%, and there's no reason to think it won't slip further. Thankfully, I have most of M and my emergency fund locked in at the higher rate, but I'm not looking forward to re-investing. If I wasn't unemployed, I'd move practically all of our money into 6, 9 and 12 month CDs (all currently 4.90% at ING). Again, there are no minimums to open CDs at many online banks, so I say you carpe diem while the carpe is still good. With the housing market, credit markets, and stock markets all riding one helluva roller coaster, the plain vanilla savings account is still your safety net. Unfortunately, it just become less profitable.

The Dollar is Falling, The Dollar is Falling!

Yesterday's NY Times reported that the dollar continues its swan dive against the Euro, resting at $1.40 per 1 Euro. In fact, the greenback pretty much sucks against all major currencies. Our friends to the north, the Canadian ones, are now even stevens with us. That's right, one US dollar equals one Canadian dollar. Now you know times are tough.

Forget the trip to Spain, forget the supposedly cheap trip to visit friends in Montreal, I'd pretty much have to go to the Third World to afford to travel. But enough about me, back to Bernanke. The Fed's unexpected half point rate cut sent markets scrambling to correct. American tourists aren't the only ones fretting. A strong Euro makes it more expensive for EU companies to do business globally;

"For example, big importers and refiners of crude can expect a shot in the arm, maybe even enabling them to hire more people. But manufacturing employees who get laid off because sales ebb on the back of a strong euro cannot simply go into the energy business."

One of the benefits to a strong Euro here in the city, aside from having to sidestep every middle class European tourist and their mother logjamming the sidewalk, is their investment dollars on our square footage. On NPR this morning, Brian Lehrer spoke with Jonathan Miller about his study linking foreign exchange rates to NYC housing inventory. Between Europeans pied a terring Uptown and Israelis bankrolling blocks in Brooklyn, the dollar falling might not be so bad after all.