Friday, April 25, 2014

How Casinos Might Help Catskills Employment, By County

As a result of last November’s election, there will be one or two casinos, almost certainly as parts of large resorts, opening in the Catskills later this decade.  What effect could they have on jobs and joblessness in the New York counties of Sullivan, Ulster, and Orange, if they are built in those locations? 

Each month, the Bureau of Labor Statistics releases county employment and unemployment data, which is not seasonally adjusted.  The most recent month available is February, typically a neutral month for employment.  It shows the following for the three counties:

As you can see, Sullivan is not only the smallest of the three, but has the highest unemployment rate. 

If there were one casino resort built, how might the numbers look?   We can use the following assumptions:

  • The number of jobs created at the resort, which would include a hotel as well as a large casino and many other amenities, would be the industry standard of one position per hotel guest room.
  • The number of guest rooms would be 1,110, matching the EPR Properties proposal for a resort on the site of the Concord Resort Hotel in Kiamesha Lake.
  • Jobs elsewhere in the county would break even, with existing business decline offset by new opportunities created.
  • 25% of resort jobs would be filled by new arrivals moving into the county.
  • 75% of resort jobs would be filled by county residents, including new arrivals.
  • All jobs formerly held by resort employees would be backfilled by otherwise unemployed people living in the county.
  • Each new arrival would bring in one other adult, half of whom would join the labor force.

When we implement all of these, we get the following for each possible county, also based on February 2014 data:

As you can see, the effects differ.  Sullivan, if such a casino were located there, might have a decrease in unemployment from 9.2% to 7.8%, while it would mean less to the more populous Ulster and Orange.

What happens if any of the counties above were to get two such resorts?  Using the same assumptions as before, we get this:

The results here are even more dramatic.  If two large casino resorts were put in Sullivan County, and the suppositions above proved accurate, unemployment there would drop almost 30%, whereas Orange, if that county were chosen to get two, would see their jobless rate improve less than 10%.

We can, of course, question the above assumptions.  They could, however, prove more positive as well as more negative, as resort visitors could want more goods and services than expected from other providers, and temporary construction jobs, not considered above, could prove significant.  In all, while we can expect casino resorts to be greatly beneficial for jobs wherever they are built, the county they would help most would be Sullivan.  Accordingly, the committee working to get not only one but two there is truly working to better it.          

Friday, April 18, 2014

Five Reasons Interest Rates Aren’t Going Anywhere This Decade

Five weeks ago, I took a look at new Fed chair Janet Yellen.  I said that she cared more about jobs than about curbing inflation, which was a good thing, since American work opportunities have stayed scarce while annual price increases have been low since George H. W. Bush was president.  Still, we’re seeing some renewed inflation fears, leading to speculation that interest rates might be raised to prevent it.  Is that reasonably possible?  No, it isn’t, for five reasons.

First, on Wednesday we had some more words from Yellen.  When she addressed the Economic Club of New York, she mentioned full employment, saying that it was “for the first time since the crisis, in the medium-term outlooks of many forecasters,” but the end to chronic joblessness was projected “to be more than two years away.”  That means that she seems to believe the jobs crisis will end, and that it will take some time.  Combine those two ideas, and it seems she will wait for a large employment improvement.  That means staying the course, which as of yesterday was a 0.25% federal funds rate, a 0.75% federal discount rate, and the result of a 3.25% Wall Street Journal prime rate.  With other developed countries even lower – prime rates in Canada, Japan, and the Euro zone are now 3%, 1.475% and a rather stunning 0.25% respectively – if the jobs crisis is permanent, there will be little change.

Second, Yellen said, also Wednesday, that “as the labor market slack diminishes, it will exert less of a drag on inflation,” which she acknowledged had been under 2% for some time.  It has actually been 18 months since inflation worked out to more than 2% per year, and ten months before that since it was over 3%.  Although the official unemployment rate has dropped substantially over the past nine months, annual inflation for them, working backwards, has been 1.5%, 1.1%, 1.6%, 1.5%, 1.5%, 1.2%, 1.0%, 1.2%, and 1.5%.  Given that food and energy costs have fluctuated as usual since July, we couldn’t expect any more of a steady state, and it has been ten years since monthly inflation has had nine consecutive months in such a narrow range.  If the labor market, including its prodigious latent demand, stays loose, there is no reason to believe that further unemployment rate reductions will cause prices to jump, and interest rates will not significantly rise. 

Third, the federal government now owes about $17.58 trillion, mostly financed through the sale of bonds.  At 2% interest, debt servicing costs about $350 billion per year.  Triple that, to rates actually much lower than were in effect for decades, and we would pay over a trillion in interest, which would be more than defense costs, Social Security payouts, or Medicare and Medicaid combined.  Our public sector is addicted to low interest rates, and that is reason enough for extreme pressure to keep them that way.

Fourth, the jobs crisis keeps demand for goods and services low.  Inflation happens when willingness to buy products exceeds their supply, and, with so many people having minimal money to spend, the latter is healthier than the former.  As a result, business borrowing will remain lukewarm, allowing the supply of funds to stay ahead of it. 

Fifth, we have now gone more than four years without a recession.  There is no reason to think that will continue indefinitely.  The jobs crisis, making Americans feel as if they are in a cyclical downturn, does not mean the real thing won’t happen.

So there we are.  If you are called upon to place bets, through borrowing or investment decisions, do not be scared that it will suddenly be 1980 again, or even 2008.  A lot of things could happen during the rest of the decade.  Ukraine may fall completely under Russian influence, a cure or solid prevention for cancer may materialize, Google Glass devices could outnumber regular spectacles, and a Tea Partier could be elected president.  The Cubs could even win the World Series.  But one thing will stay the same through at least 2020 – American interest rates will remain low.

Friday, April 11, 2014

Telecommuting and Round-The-Clock Contact – We Do Need Limitations

This week, I heard a story on BBC News Hour (yes, even here in the Catskills), which brought up an issue with work that has gone on for decades in one form or another.  The story was about the intrusion of job responsibilities into personal time, helped along by technology such as iPhones and of course email.  The story pointed out that more people are getting pulled into responding to communications during off-hours, and that some employees, and employers, were starting to take a stand against it.

We’ve heard that sort of thing before.  It has its roots in age-old workplace pressure to put in extra time, and it gathered steam with widespread telecommuting in the 1990s, before text messages but with email from anywhere well established.  Since cubicle jobs seemingly did not require people to be in the office, the idea spread that they might as well save the commute and work from home.  Those doing it swore that it improved their productivity, and for a few years telecommuting received almost totally positive business press. 

After a while – a short time at some progressive companies and much longer at others – the bloom went off the work-from-home rose.  Companies discovered that many were, in fact, doing poor work or no work when they telecommuted.  It proved more valuable for people to maintain better contact with their peers by being physically present.  Managers were faced with evidence that not all of their employees put in equal efforts, and some who did not accept that ended telecommuting privileges completely.  The logical flaw in working from home, that people who had trouble getting their work done in settings designed to facilitate that did not become focused jammers when surrounded by their own personally chosen distractions, became exposed.  When I worked in AT&T management throughout the 1990s, the company, not known then for responding quickly to change, got the worst of it, as the least disciplined and conscientious workers seemed to ask to telecommute the most.  Some abuses I saw included being told by one person’s spouse at 2:00pm that the employee was taking a “late lunch,” another making sounds consistent with an aerobic workout at 9:45am, another telling me not to call them when they were working from home, and several refusing to alter their schedules when events clearly indicated they should be physically present.  Some supervisors seemed to assign incoming work only to people in the office, and in general, telecommuters were treated as roughly midway between those onsite and those off for the day.  As a result of similar experiences elsewhere, it has been a long time since commentary about working at home has been exclusively glowing – more representative is the recent Dilbert strip in which the title character almost succeeded in getting his boss to allow him to work from home with no deliverables, after which he said, to himself, that he fell just short of getting a year’s vacation.

So what does telecommuting, still around but generally much better judged, have to do with extra hours and the subject of the BBC piece?  All three are about the boundaries of ordinary office-related jobs.  In a way, the newest problem is the worst, as workers are now sensing expectations that they in effect should telecommute around the clock.  What is wrong with all the off-hour contact?

First, it is inefficient.  Studies have shown that for office jobs, work over 40 weekly hours has diminishing returns, even to the extent of those who put in 20 extra ones doing the equivalent of not 60 but 48.  Second, transition time between tasks, for thinking work, can take as long as 20 to 30 minutes, and changing from personal task to job-related ones is no better.  Third, new and more accessible communications channels have created a Parkinson’s Law-like situation.  That rule states that work expands to fill the time available for its completion, and it is a serious problem and subject of many books and articles;  when cell phones are always carried and text messages are available, people are known to be electronically accessible, which leads to non-urgent and unnecessary communications.  Fourth, many employees, especially those with relatively little demanding their time outside of work, welcome the opportunity to look dedicated;  the belts adorned with pagers and phones two decades ago have given way to conspicuous texting and talking at hours that might seem, to some, impressive.

What is happening here, though, is more akin to the beginning of the Industrial Revolution.  We then did not know how many hours a human being could put in at a factory, and those who managed those going from the likes of 3am to 10pm six or seven days a week found out it wasn’t that many as they had hoped.  Now, the presence of modern wireless phones and the lack of physical exertion of cubicle work are fooling a lot into thinking people can be available for much more time than before.  They cannot.  When combined with the lack of jobs, making more office workers available, it would be beneficial if employers did consign round-the-clock contact to history, where most have already put unbridled telecommuting.  Technology is a fine servant, but makes a very poor master – within the decade we will discover that again. 



Friday, April 4, 2014

March AJSN: America Now “Only” 19.7 Million Jobs Short

This morning’s data from the Bureau of Labor Statistics show improvement.  It is small, but broad-based to an extent we don’t see too often.  While the headline number, the seasonally-adjusted employment rate, stayed the same, almost everything else of overall national significance got better.  The count of net jobs added, 192,000, more than covered population increase.  The number of long-term jobless, those out for 27 weeks or more, went from 3.8 million in February to 3.7 million.  Labor force participation improved from 63.0% to 63.2%, and the share of the population working rose from 58.8% to 58.9%.  Almost every one of the federal marginally attached categories – all, in fact, except those out for ill health or disability – shrank.   The result is a lower American Job Shortage Number, as follows:


Compared with a year before, the AJSN is now 1.2 million lower.  Although, compared with March 2013, over 1.6 million more Americans report not wanting a job at all, and 2.7 million additional are off the grid, almost 1.3 million more have work, and the other secondary categories have generally improved.  

With almost everything getting better, why, you ask, did the AJSN not improve more than 544,000?  It’s not seasonality – February and March are similar for employment.  The reason is that the improvements were small.  Last month was not a banner one for jobs, but in the right direction.    

So how much better shape are we actually in?  Some of the improvement didn’t really happen, as bad February weather made that month’s numbers look worse than they actually were, with problems not only with people working but with reporting.  Two measures also did not get better at all – unadjusted unemployment stayed at 6.8%, and the count of those working part-time for economic reasons, or wanting full-time employment but not finding it, rose from 7.2 million to 7.4 million. 

However, even though the previous set of employment statistics were poorer quality than usual, its numbers were nothing depressing.  And here in March, we have real improvement, small though it may be.  Will slow and steady win the American jobs race?  That depends on something very much unknown – just how long the turtle can keep plodding forward.