Archive for May, 2009

California will be Bankrupt on July 29th

California will be bankrupt in two months! Obama and Geithner have already said they will not bailout California so we are in trouble. Here are the details from California’s Controller

Starting July 29, California won’t have enough cash to pay its bills, state Controller John Chiang told the governor and legislative leaders today.

The state will be in the red by $317.1 million that day, Chiang wrote them in a three-page letter.

“Two days later, on July 31, our cash deficit increases to a negative $1.02 billion,” he added.

He pleaded with them to pass a balanced budget by June 15 to make it easier for the state to borrow money to cover the cash crunch.

Click here to read the letter.

The controller’s office has also prepared a graphic outlining California‘s cash outlook from July 2009 through June 2010, available here.


The State of Manufacturing

Robert Reich has a nice piece about the state of manufacturing. The main cause of manufacturing jobs losses worldwide:

Want to blame something? Blame new knowledge. Knowledge created the electronic gadgets and software that can now do almost any routine task.

His solution:

The biggest challenge we face over the long term — beyond the current depression — isn’t how to bring manufacturing back. It’s how to improve the earnings of America’s expanding army of low-wage workers who are doing personal service jobs in hotels, hospitals, big-box retail stores, restaurant chains, and all the other businesses that need bodies but not high skills.

Recession to end in 2009

Hopefully, we economists are better at predicting the end of the recession than the beginning of it:

The panel of 45 economists said it expects economic growth will rebound in the second half of 2009. However, the group still expects to see a decline in second-quarter economic activity.

The panel forecast a total of 4.5 million jobs lost in 2009, pushing the unemployment rate to 9.8%. Modest gains in 2010 will reduce the rate to 9.3% by year’s end, the report predicted.

Taxes and Choices for California

California’s taxation levels have increased to 10.5 percent, raising California to the sixth-highest in the nation in 2008.

Because of a dire budget situation, California must cut education. California is exploring shortening the school year, this would amount to furloughs for teachers since they would take days off without pay. The other option is increasing class sizes, this means laying teachers off.

The fact that California has the sixth-highest tax level in the nation and the 48th lowest spending level in education is an embarrassment. What do you think the lesser of the two evils is, shorter school year with furloughs or larger classrooms with layoffs?

Changes for Teaching Economics

Greg Mankiw’s article in tomorrow’s NY Times points out some changes we need to make when teaching economics.

California’s Unemployment Rate Drops

This was quite a shock to me, a positive one though! It’s probably a one-time dip since the State of California will be laying off many as they try to fix the $25 billion budget:

California’s unemployment rate dipped slightly to 11 percent last month, although the state lost 63,700 jobs, the federal government reported today.

The Bureau of Labor Statistics said California unemployment fell two-tenths of a point even though the state’s job loss was the highest in the country.

At 11 percent, California had the fifth-highest unemployment rate in the country. Michigan’s was first, at 12.9 percent.

Unemployment rates for Sacramento and other metropolitan areas were due to be released later today.

Weekly Employment Numbers

Calculated Risk does a great job summarizing the weekly employment numbers:

The DOL reports on weekly unemployment insurance claims:

In the week ending May 16, the advance figure for seasonally adjusted initial claims was 631,000, a decrease of 12,000 from the previous week’s revised figure of 643,000. The 4-week moving average was 628,500, a decrease of 3,500 from the previous week’s revised average of 632,000.

The advance number for seasonally adjusted insured unemployment during the week ending May 9 was 6,662,000, an increase of 75,000 from the preceding week’s revised level of 6,587,000.

Weekly Unemployment Claims Click on graph for larger image in new window.

The first graph shows weekly claims and continued claims since 1971.

The four-week moving average is at 628,500, off 30,250 from the peak 6 weeks ago.

Continued claims are now at 6.66 million – an all time record.

Typically the four-week average peaks near the end of a recession. There is a reasonable chance that claims have peaked for this cycle, but it is still too early to be sure, and if so, continued claims should peak soon.

The level of initial claims (631 thousand) is still very high, indicating significant weakness in the job market.