Which is Worse: 467,000 Jobs Lost, or 7 Failed Banks?

In case anyone was too busy to notice, the Labor Department announced yesterday that US non farm payrolls shrunk by 467,000 in the month of June. Needless to say, these numbers, which will likely be revised further downwards next month, are a direct blow to the Economic Cheerleaders we are fond of mocking on this site. We bid farewell, at least until next month, to all "second derivative" arguments.

In other news, the FDIC apparently decided that, due to the 4th of July holiday, it would would shift it's customary bank seizure day from Friday to Thursday. Likely, when the mobile bank seizure squad learned that it's docket would consist of seven financial institutions this week alone, it's member cringed at the thought that such activity might interfere with whatever plans they had made. Below is the list of those financial institutions that did not live to see the 233rd anniversary of US independence:

Founders Bank, Worth, IL
Millennium State Bank of Texas, Dallas, TX
The First National Bank of Danville, Danville, IL
The Elizabeth State Bank, Elizabeth, IL
Rock River Bank, Oregon, IL
The First State Bank of Winchester, Winchester, IL
The John Warner Bank, Clinton, IL



If the question above were put to a vote, we suspect that the jobs number would win; 467,000 would undoubtedly cast a vote the way of the jobs, plus, each of the 467,000 has adversely affected at least two other individuals, whose fear of losing their own job has just been amplified. Ultimately though, we will admit the irrelevancy of the question we just posed. What is relevant though, is the fact the underlying logic behind the claim that "Prosperity is just around the corner" has been dealt a severe blow, and will likely test the imaginations of those people who stand to benefit from the propagation of this false theory. It shall be interesting, we think. Sphere: Related Content

Rate of Job Losses Slows, But For How Long?

This morning, the Department of Labor, Bureau of Labor Statistics, in a preliminary estimate, reported that US nonfarm payroll employment fell by 345,000 in the month of May. This report marked the most substantial departure from the rapidly accelerating decline in payrolls that has transpired in each month since the collapse of Lehman Brothers. Economists and analysts, understandably focused on the deciphering of trends, will be sure to note that while the US economy is still losing jobs, it is no longer losing jobs at an increasing rate. (Calculus geeks might note that while the second derivative "flatlined" several months ago, this month's data marks the first time that the anticipated change in the first derivative has occurred). Considering this positive development, we find it ironic that the major job loss inflection points have been marked by the bankruptcy of a major US corporation. We wonder then, to what degree will the collapse of GM continue to affect the labor markets?

There are numerous and obvious distinguishing factors between the Lehman Brothers and GM bankruptcies:

• The Government is holding GM's hand through the bankruptcy process.
• GM will restructure, and emerge as a leaner entity.
• The Lehman collapse put the entire financial system at risk.
• The Lehman collapse caused the failure of a multi-billion dollar Money Market Fund
• and the list goes on (further than we care to take it)

Due to the obvious differentiating factors between these two embarassing chapters in US corporate history, it at least appears that the immediate and severe fallout witnessed in the Lehman debacle will not repeat itself in the wake of GM's failure.

We are sure that, somewhere, an economist has attempted to calculate the overral effect that the GM bankruptcy will have on the labor market. While such an analysis might be useful from an academic perspective, we are of the opinion that the downsizing of GM will bring with it a multitude of incalculable shock waves. The two that come to mind are 1) How will the bankruptcy affect the general attitudes of prospective car buyers? and 2) Will car dealers anticipate a subsequent round of dealership closings, and how will they respond to this perceived threat? These are both highly unknown variables that will largely determine the labor market fallout that results from the downsizing/bankruptcy of GM. We will not pretend to be able to calculate the impact.

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Does the US Need More Wal-Mart Jobs?

Reuters reported this morning that Wal-Mart will hire an additional 22,000 individuals to staff its voluminous stores. Certainly, in this time of mounting job losses, a job at Wal-Mart is better than nothing as everyone has bills to pay. However, on a broader level, we are disturbed by what this announcement "means" for the country. Apparently, the deepest recession since the Great Depression has not been enough to derail Wal-Mart's growth. What then, could ever stop the discount retailer?

Obviously, those folks who view Wal-Mart as a net contributor to the US economy will cite the addition of 22,000 jobs as proof that the Company is a benevolent sort of Giant, offering regular Americans the chance to earn an honest living. The evidence however, suggests that Wal-Mart compensates it's associates so meagerly that they are forced to seek the refuge of Government assistance just to make ends meet. A Government inquiry into Wal-Mart's labor practices, the results of which are contained in the report below, concluded the following:

• In 2001, Wal-Mart Sales Clerk's earned on average $13,861 per year.
• In 2001, the federal poverty line for a family of three was $14,630.
• A 200 employee Wal-Mart store costs taxpayers an average of $420,750 per year.

Assuming that Wal-Mart's announcement of 22,000 new jobs corresponds with an opening of roughly 100 new stores(this is generous, and assumes that 9% of the jobs created will be white collar, higher paying positions), we could confidently say that Wal-Mart today was really announcing a cost to the federal taxpayers of $42,075,000. This figure doesn't even include the state and county level tax incentives that are so often used to lure Wal-Mart into a particular area.

Does the US need more Wal-Mart jobs? We would say no.

Wal-Mart's Labor Record

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