California's unemployment rate ticked down for the second month in a row, now at 12.4%, but I'm not about to change the name of this monthly post.
The state's payroll report was very poor in the private sector. Take away the Census, and we have no change to private payrolls. It's really been about 6 months of moving sideways, there is no sustained positive momentum. I think that will finally change next month, and it better because the Census jobs are temporary and local government cuts will be hitting soon.
San Diego, Orange County, and San Jose are the three regions in the state that have firmly established a trend of positive job growth. San Francisco finally had a solid monthly report, after a disapointing start to the year, and should be poised to join San Jose in a more consistent recovery mode. The East Bay continues to lag in the Bay Area.
Unemployment rates are coming down in the Valley now that the agricultural season has ramped up, but remain depressingly high. Much like the overall statewide picture, the private, non-farm sectors remain very flat. Retail, construction and hospitality are not picking up as much as we normally see in May, similar to the weak holiday season.
Friday, June 18, 2010
Wednesday, June 16, 2010
Tracy gives $2.75 million in public money to Macy's
The city of Tracy continues to be an economic development "innovator." They started last year by giving $500 publically funded gift cards to people who bought cars in Tracy to protect their local dealerships from the wave of closures. Elk Grove copied the idea, and I believe some other cities did as well.
Now they have taken the concept of subsidizing retail to the next level. Some quotes from the Tracy Press.
The insanity of California local government is that the proposal is rational. After all, city governments can receive sales tax but not income tax and are limited in property tax. Thus, they have a strong incentive to promote sprawling retail development which takes revenue from their neighbors, while encouraging people - described by many in local government as those undesirables who demand government services - to live somewhere else. Thus, in California, subsidizing a retail store could conceivably "pay for itself", whereas investing in the quality of life for residents is just cost. The proposal also seems quite popular with the locals, who consider good shopping options part of "quality of life."
I am increasingly convinced that it would be wise for California to take away the right to sales tax from local governments, perhaps in exchange for for locally generated income and property taxes.
From a regional economic development perspective, these kind of maneuvers are useless and self-destructive. Thus, I disagree with the Mayor's comment that suggests this move is part of the Central Valley's recovery. It does nothing to help the Valley, at best, it just helps Tracy at the expense of the neighbors.
Finally, I should add that I doubt that this will "pay for itself" as claimed. From another article, it looks like they are just applying 1% tax to the stores' expected $20 million in annual sales. That's $200,000 in sales tax per year which will add up to $2.75 million in 20 years if you assume some inflation. And if you assume that none of those sales are diverted from other retailers in town. And if you assume no other retailers (or Macy's) would have ever filled this market void without the subsidy.
Now they have taken the concept of subsidizing retail to the next level. Some quotes from the Tracy Press.
The West Valley Mall will soon welcome a Macy’s department store following a unanimous City Council vote earlier tonight.All five council members in a special session approved giving $2.75 million in city money to the department chain so it can renovate a 100,000-square-foot space vacated by Gottschalks in June 2009...Unanimous, enthusiastic support.The plan put forward by city staff and approved at tonight’s meeting envisions that sales tax receipts from Macy’s will pay back Tracy’s investment within 20 years...
Council members were unanimous in their enthusiasm as well as their vote, and all praised the deal.“I think this is definitely something that needs to be done,” said Councilman Steve Abercrombie.Mayor Brent Ives said it’s a decision that shows the city is serious about economic development.“If the Central Valley’s going to recover, it’s going to start here in Tracy,” Ives said. “I just didn’t think it would happen during the worst economy in decades.”
The insanity of California local government is that the proposal is rational. After all, city governments can receive sales tax but not income tax and are limited in property tax. Thus, they have a strong incentive to promote sprawling retail development which takes revenue from their neighbors, while encouraging people - described by many in local government as those undesirables who demand government services - to live somewhere else. Thus, in California, subsidizing a retail store could conceivably "pay for itself", whereas investing in the quality of life for residents is just cost. The proposal also seems quite popular with the locals, who consider good shopping options part of "quality of life."
I am increasingly convinced that it would be wise for California to take away the right to sales tax from local governments, perhaps in exchange for for locally generated income and property taxes.
From a regional economic development perspective, these kind of maneuvers are useless and self-destructive. Thus, I disagree with the Mayor's comment that suggests this move is part of the Central Valley's recovery. It does nothing to help the Valley, at best, it just helps Tracy at the expense of the neighbors.
Finally, I should add that I doubt that this will "pay for itself" as claimed. From another article, it looks like they are just applying 1% tax to the stores' expected $20 million in annual sales. That's $200,000 in sales tax per year which will add up to $2.75 million in 20 years if you assume some inflation. And if you assume that none of those sales are diverted from other retailers in town. And if you assume no other retailers (or Macy's) would have ever filled this market void without the subsidy.
Wednesday, June 9, 2010
Congratulations California Voters
California voters showed good judgement in rejecting Propositions 16 and 17, despite expensive and deceptive campaigns by PG&E and Mercury Insurance, the companies that stood to profit from these initiatives.
I predict California voters will show similar wisdom in the fall and vote down the Water Bond despite what is sure to be an expensive and deceptive campaign by water agencies, much like we have seen from PG&E for Proposition 16.
I predict California voters will show similar wisdom in the fall and vote down the Water Bond despite what is sure to be an expensive and deceptive campaign by water agencies, much like we have seen from PG&E for Proposition 16.
Monday, June 7, 2010
Uncertainty and the latest Wanger Decision
According to my brief review and the commentary of others, it seems uncertainty was critical in Judge Wanger's recent decision in favor of water exporters and against Delta pumping restrictions from the salmon and smelt biological opinions.
The key uncertainties seem to be related to science. Judge Wanger acknowledged economic losses to both the farming and fishing communities, but he determined that there was uncertainty as to whether increased pumping this month would substantially harm the endangered fish. Following that logic, I think we should also wonder about the certainty of gains to the "human environment" from increased pumping.
As noted by others, the Judge seemed to accept serious accusations of not just economic damage, but social ills such as domestic violance and poor school performance were blamed on the biological opinions with little more than anecdotal evidence to back them up. There is at least as much uncertainty, if not more, about whether - and how much - the biological opinions are responsible for these problems. Most importantly, where is the definitive proof that an injunction against the biops will actually help these long-standing local issues? Consider the following:
1. The west side is the poorest place in California with the highest unemployment, and high rates of social problems even when water deliveries are high. In fact, there is lots of long-run evidence that large supplies of irrigation water are positively correlated with higher unemployment, poverty, etc.
2. There are lots of "other stressors" on the region's economy related to the recession and other factors. Construction in the area is down more than 90%, and food processing plants in the area closed due to planting decisions unrelated to water. In addition, most of the reductions in water deliveries in 2009 were due to drought, not endangered species protections.
3. Although there is no doubt that specific agricultural operations endure financial losses when water is restricted, there is a lot of uncerainty about how much it impacted the regional agriculture industry, other farmers may have profited from Westlands woes. In addition, how much of the income that was lost normally flows out of the community through non-local farm owners and migrant workers. One could argue that the construction and food processing closures may have much higher local impacts per dollar of output. In addition, how much of the local unemployment was driven by unemployed construction and service workers crowding back into the agricultural labor market?
4. What are the hard facts on increased crime and education problems, and how can they be definitively linked to water supplies? As one data point, California Department of Education shows school test scores in Mendota in 2009 are substantially higher than in 2006 under full water deliveries.
There are even more sources of uncertainty, but I'll stop there.
Just as a scientist may not be able to definitively say that reduced pumping in a given period will help fish stocks recover, I am confident that no social scientist could definitively say that increased water pumping will substantially help the serious economic and social woes that have long plagued the area around Westlands and that have increased substantially since the CVP started delivering water to the area.
It will be interesting to see if this decision is appealed.
Disclosure: I submitted a declaration in support of Earth Justice and the Natural Resource Defense Council's defense of the biological opinions, just as I did in May 2009. In 2009, Westlands asked Richard Howitt of UC-Davis to challenge my declaration and Judge Wanger referenced this heavily in his 2009 decision. This year - after much back and forth debate on the economic effects of water shortages - I am told that Westlands did not submit a declaration from Dr. Howitt or challenge my declaration with other experts, and the Judge has now acknowledged off-setting economic harms. Obviously, it wasn't enough to change the outcome of the case, but at least it moves the issue more squarely onto the scientific and legal questions where it should be.
The key uncertainties seem to be related to science. Judge Wanger acknowledged economic losses to both the farming and fishing communities, but he determined that there was uncertainty as to whether increased pumping this month would substantially harm the endangered fish. Following that logic, I think we should also wonder about the certainty of gains to the "human environment" from increased pumping.
As noted by others, the Judge seemed to accept serious accusations of not just economic damage, but social ills such as domestic violance and poor school performance were blamed on the biological opinions with little more than anecdotal evidence to back them up. There is at least as much uncertainty, if not more, about whether - and how much - the biological opinions are responsible for these problems. Most importantly, where is the definitive proof that an injunction against the biops will actually help these long-standing local issues? Consider the following:
1. The west side is the poorest place in California with the highest unemployment, and high rates of social problems even when water deliveries are high. In fact, there is lots of long-run evidence that large supplies of irrigation water are positively correlated with higher unemployment, poverty, etc.
2. There are lots of "other stressors" on the region's economy related to the recession and other factors. Construction in the area is down more than 90%, and food processing plants in the area closed due to planting decisions unrelated to water. In addition, most of the reductions in water deliveries in 2009 were due to drought, not endangered species protections.
3. Although there is no doubt that specific agricultural operations endure financial losses when water is restricted, there is a lot of uncerainty about how much it impacted the regional agriculture industry, other farmers may have profited from Westlands woes. In addition, how much of the income that was lost normally flows out of the community through non-local farm owners and migrant workers. One could argue that the construction and food processing closures may have much higher local impacts per dollar of output. In addition, how much of the local unemployment was driven by unemployed construction and service workers crowding back into the agricultural labor market?
4. What are the hard facts on increased crime and education problems, and how can they be definitively linked to water supplies? As one data point, California Department of Education shows school test scores in Mendota in 2009 are substantially higher than in 2006 under full water deliveries.
There are even more sources of uncertainty, but I'll stop there.
Just as a scientist may not be able to definitively say that reduced pumping in a given period will help fish stocks recover, I am confident that no social scientist could definitively say that increased water pumping will substantially help the serious economic and social woes that have long plagued the area around Westlands and that have increased substantially since the CVP started delivering water to the area.
It will be interesting to see if this decision is appealed.
Disclosure: I submitted a declaration in support of Earth Justice and the Natural Resource Defense Council's defense of the biological opinions, just as I did in May 2009. In 2009, Westlands asked Richard Howitt of UC-Davis to challenge my declaration and Judge Wanger referenced this heavily in his 2009 decision. This year - after much back and forth debate on the economic effects of water shortages - I am told that Westlands did not submit a declaration from Dr. Howitt or challenge my declaration with other experts, and the Judge has now acknowledged off-setting economic harms. Obviously, it wasn't enough to change the outcome of the case, but at least it moves the issue more squarely onto the scientific and legal questions where it should be.
Thursday, June 3, 2010
89% of Elk Grove Teachers Approve Concessions
These sort of negotiations between teachers and school districts are on-going around the Valley right now. All of them are unique, so they can't be directly compared.
I was expecting the Elk Grove Teachers vote would be a close one, and was suprised by the 89% approval. Lodi teachers voted down a different set of contract concessions by a 4 to 1 margin in April and my understanding is there will be a much larger level of lay-offs and much larger class sizes in Lodi Schools (which includes much of North Stockton).
From the Sac Bee:
I was expecting the Elk Grove Teachers vote would be a close one, and was suprised by the 89% approval. Lodi teachers voted down a different set of contract concessions by a 4 to 1 margin in April and my understanding is there will be a much larger level of lay-offs and much larger class sizes in Lodi Schools (which includes much of North Stockton).
From the Sac Bee:
Elk Grove Unified School District teachers gave overwhelming approval Tuesday night to a two-year contract that included a pay cut, nine furlough days, an increase in their medical co-pay and the suspension of an annual bonus from lottery funds.
There was 89 percent approval for the contract, said Tom Gardner, president of the Elk Grove Education Association.
In return, the district agreed to cap class sizes in kindergarten through third grade at 24 and save 210 teacher and librarian jobs.
Monday, May 31, 2010
Do Stockton Police Care About Their City?
The billboards the Stockton Police Union has started putting up around the city are upsetting. They are bad for the city, and I don't think they help the police officers' cause in the long-run.
Their generous contracts are killing the city's budget, it is an indisputable fact. The city's tax revenues are a function of the city's economy, yet the police union insists that their salaries are well above the average of a group of comparison cities with much higher income. And don't get me started on their pensions.
I can understand the Police Union being upset about being asked to make serious concessions and they have the right to question them and make alternative proposals. However, as public servants, I expect that the well-being of the city is also something they consider.
Apparantly not? Otherwise, they would not be hanging these destructive and deceptive billboards around the city. Complete with blood spatter. Wonderful.
Last week, the FBI released statistics that showed crime in Stockton was down 14% in 2009, a greater decrease than the 5% avg. decline nationwide. Ordinarily, I would be giving the police kudos for their contribution to the decline, but that is difficult when they are exploiting the City's high crime rate for their personal profit.
My turn for stimulus cash
After all the grouching I have done about homebuyer tax credits, I must admit that I have finally hit the stimulus windfall.
My AC isn't working and needs to be replaced - and until the end of this year there is a $1500 federal tax credit from the stimulus bill if I replace it.
Am I receiving a windfall because it happened to break this year rather than next year? Yes. Is it actuallly stimulating any economic activity or energy savings? Maybe.
Without the tax credit, I may have opted for a costly repair job rather than replacement. And I had to bump up to a slightly more energy efficient system than I might have otherwise chosen to get the credit. I probably would have made these choices without the tax credit incentive, but the presence of the tax credit made replacing with an energy efficient unit the easy choice.
What do I plan to do with my $1500 rebate? I will get it on next year's tax refund, so it isn't exactly timely stimulus, but I suspect I will pay down debt.
My AC isn't working and needs to be replaced - and until the end of this year there is a $1500 federal tax credit from the stimulus bill if I replace it.
Am I receiving a windfall because it happened to break this year rather than next year? Yes. Is it actuallly stimulating any economic activity or energy savings? Maybe.
Without the tax credit, I may have opted for a costly repair job rather than replacement. And I had to bump up to a slightly more energy efficient system than I might have otherwise chosen to get the credit. I probably would have made these choices without the tax credit incentive, but the presence of the tax credit made replacing with an energy efficient unit the easy choice.
What do I plan to do with my $1500 rebate? I will get it on next year's tax refund, so it isn't exactly timely stimulus, but I suspect I will pay down debt.
Saturday, May 29, 2010
Pulling our kids out of California public schools
This post is a little personal, but it does speak to a serious issue with the Valley and larger California economy - the quality of public schools. The problems are much more than funding, although current budget cuts are making the problems worse.
My wife and I just made a difficult decision to move our children to private school, our youngest will move next year and our oldest will stick with her public school through 8th grade and move when she starts high school. This was a very tough decision as we have always felt strongly about community, public schools and my wife is a former public school teacher and is the daughter of public school teachers. Finding the extra cash for tuition isn't going to be easy either.
I will not name the schools my kids currently attend, but it is a generally well-regarded school district. Based on our conversations with folks, the problems we have encountered are fairly typical of California schools. There are a number of issues, but the most important for us have been low standards and off-loading due to overly rigid enforcement of class size limits.
Low Standards. I am amazed at how easy it is to earn an A+. More than grading standards, the curriculum and reading lists are very weak. We really feel California standards are a solid year behind what we left in Maryland, and almost 2 years behind what our kids were actually doing because they do much less to differentiate instruction and assignments here. Our kids basically repeated 6th and 3rd grade and were bored to death. Most of my daughter's 7th grade reading assignments are things she read in 5th grade in Maryland.
Off-loading the new kids. Perhaps our experience has been exceptionally bad, but I have heard from others about how virtually all newcomers to California school districts are "off-loaded" to other schools. This is an absolutely terrible thing to do to new children and families when they move to a community, and it seems to be a common "welcome to California" experience.
Two years ago, my oldest daughter went through a nightmare experience being off-loaded to a school that was an hour bus ride away because she put the 6th grade class 1 student over the limit in the teacher's union contract. It was a nightmare, and we ended up pulling her out and home-schooling her for 6th grade.
Now it is my youngest daughter's turn. Due to the budget cuts, teacher layoffs, and increasing class size; we learned two weeks ago that our 3rd grader was being off-loaded for 4th grade. This was the final disapointment that made us decide to opt for private school.
Small classes are desirable, but not everything. Elementary class sizes are small in California, but I feel like too much has been given up to acheive those class sizes.
There have been other disapointments with the schools (virtually no art, music, foreign language before high school; little differentiated instruction, disgusting lunches; no lockers; too many videos in class, etc., etc.), but I will stop rambling. We love everything about our move to California, except for the schools.
Improving public education is a major economic challenge for the state. It is more than just workforce development, it is also a critical quality-of-life issue if we are going to attract and retain high-skill employers and employees who care a lot about the education of their own kids.
My wife and I just made a difficult decision to move our children to private school, our youngest will move next year and our oldest will stick with her public school through 8th grade and move when she starts high school. This was a very tough decision as we have always felt strongly about community, public schools and my wife is a former public school teacher and is the daughter of public school teachers. Finding the extra cash for tuition isn't going to be easy either.
I will not name the schools my kids currently attend, but it is a generally well-regarded school district. Based on our conversations with folks, the problems we have encountered are fairly typical of California schools. There are a number of issues, but the most important for us have been low standards and off-loading due to overly rigid enforcement of class size limits.
Low Standards. I am amazed at how easy it is to earn an A+. More than grading standards, the curriculum and reading lists are very weak. We really feel California standards are a solid year behind what we left in Maryland, and almost 2 years behind what our kids were actually doing because they do much less to differentiate instruction and assignments here. Our kids basically repeated 6th and 3rd grade and were bored to death. Most of my daughter's 7th grade reading assignments are things she read in 5th grade in Maryland.
Off-loading the new kids. Perhaps our experience has been exceptionally bad, but I have heard from others about how virtually all newcomers to California school districts are "off-loaded" to other schools. This is an absolutely terrible thing to do to new children and families when they move to a community, and it seems to be a common "welcome to California" experience.
Two years ago, my oldest daughter went through a nightmare experience being off-loaded to a school that was an hour bus ride away because she put the 6th grade class 1 student over the limit in the teacher's union contract. It was a nightmare, and we ended up pulling her out and home-schooling her for 6th grade.
Now it is my youngest daughter's turn. Due to the budget cuts, teacher layoffs, and increasing class size; we learned two weeks ago that our 3rd grader was being off-loaded for 4th grade. This was the final disapointment that made us decide to opt for private school.
Small classes are desirable, but not everything. Elementary class sizes are small in California, but I feel like too much has been given up to acheive those class sizes.
There have been other disapointments with the schools (virtually no art, music, foreign language before high school; little differentiated instruction, disgusting lunches; no lockers; too many videos in class, etc., etc.), but I will stop rambling. We love everything about our move to California, except for the schools.
Improving public education is a major economic challenge for the state. It is more than just workforce development, it is also a critical quality-of-life issue if we are going to attract and retain high-skill employers and employees who care a lot about the education of their own kids.
Sunday, May 23, 2010
Farm Bureau Federation Dishonestly Plugs AgJobs Program
Sunday's Sacramento Bee contains a trio of articles on immigration, including an essay by Paul Wenger, President of the California Farm Bureau Federation, entitled "Pass AgJobs Plan to Allow Seasonal Workers."
The article is incredible, because it leaves out the controversial, key piece of the AgJobs proposal. The "innovation" in the AgJobs program is to allocate 1.35 million green cards to the agriculture industry. Immigrants who can document five consecutive years of agriculture work would be eligible for permanent, resident status. That's a large and unprecedented, government granted "retention bonus" to ensure a steady supply of farm labor and keep wages low. It basically legalizes a 5-year revolving door, where roughly 250,000 to 300,000 low-skill immigrants come to the U.S. each year under the program, work farm jobs for 5-years, then will move out of agriculture when they get their green card. It's a very bold and controversial proposal.
Amazingly, Wenger's lengthy article doesn't even mention the green cards, or the blue cards workers in the program hold during their five year's of agricultural work. He describes AgJobs as a guest worker program where the farm workers will head home after the harvest - not as a permanent residency program where they are earning green cards. Some quotes...
AgJOBS is a major change to immigration law that deserves serious debate. It's proponents in the agriculture industry should describe it honestly.
I want to help hardworking farm workers in the Valley, so it is tempting to support AgJOBS for their sake. But the real problem for the Valley's larger economic development is the chronically low-wages of its largest and most profitable industry, agriculture. In many ways, AgJOBS simply legalizes the status quo of our current low-wage, revolving door farm labor market. It is good for illegal-immigrant farmworkers and farmers, but I don't think it is good for economic development in general and it is very unfair to currently legal workers (farm and non-farm) and non-farm industries (not to mention it's eerie resemblance to indentured service.)
AgJOBS is a proposal that has been around for years, and UC-Davis Professor David Martin had this to say about it in an essay from the year 2000...
The article is incredible, because it leaves out the controversial, key piece of the AgJobs proposal. The "innovation" in the AgJobs program is to allocate 1.35 million green cards to the agriculture industry. Immigrants who can document five consecutive years of agriculture work would be eligible for permanent, resident status. That's a large and unprecedented, government granted "retention bonus" to ensure a steady supply of farm labor and keep wages low. It basically legalizes a 5-year revolving door, where roughly 250,000 to 300,000 low-skill immigrants come to the U.S. each year under the program, work farm jobs for 5-years, then will move out of agriculture when they get their green card. It's a very bold and controversial proposal.
Amazingly, Wenger's lengthy article doesn't even mention the green cards, or the blue cards workers in the program hold during their five year's of agricultural work. He describes AgJobs as a guest worker program where the farm workers will head home after the harvest - not as a permanent residency program where they are earning green cards. Some quotes...
We need a system that allows people from other countries to enter the United States - legally - while farm jobs are available, and to return to their home countries once the harvest season ends.
Fortunately, we have a solution to offer. It's a bill that goes by the acronym AgJOBS, re-introduced by Sen. Dianne Feinstein last year. The Agricultural Job Opportunities, Benefits and Security Act would reform existing temporary-worker programs for agriculture, to provide the sort of flexibility that would allow farmers in California and throughout the country to be assured that the people they hire have entered the country legally.
AgJOBS is a major change to immigration law that deserves serious debate. It's proponents in the agriculture industry should describe it honestly.
I want to help hardworking farm workers in the Valley, so it is tempting to support AgJOBS for their sake. But the real problem for the Valley's larger economic development is the chronically low-wages of its largest and most profitable industry, agriculture. In many ways, AgJOBS simply legalizes the status quo of our current low-wage, revolving door farm labor market. It is good for illegal-immigrant farmworkers and farmers, but I don't think it is good for economic development in general and it is very unfair to currently legal workers (farm and non-farm) and non-farm industries (not to mention it's eerie resemblance to indentured service.)
AgJOBS is a proposal that has been around for years, and UC-Davis Professor David Martin had this to say about it in an essay from the year 2000...
... the solution to farm worker problems is not a guest worker program that leaves the farm labor system unchanged. Even most farmers concede that history would likely repeat itself if illegal immigration were to be controlled and there were no new guest worker program. Wages would rise, there would be a rapid adoption of labor-saving machinery and better ways to manage now more expensive workers, and some crops might migrate to lower-wage countries.
Government policy should push agriculture toward a sustainable 21st century future, not permit it to revert to a 20th century "Harvest of Shame" past.
Friday, May 21, 2010
Unemployment Friday
Another month of moving sideways in the California job market. Unemployment remains at it's all-time high at 12.6%. California non-farm employment is up to 14,200, however federal government employment increased by 13,600 - primarily temp jobs through the Census. The state has been lagging about a quarter behind the U.S. recovery, and if that pattern holds we should finally start seeing solid job gains in California in the next 2 months.
In the Valley, April is the month when unemployment moves down with seasonal patterns and we saw normal seasonal decreases across the board. I think we can finally say we have seen the worst of the sky-high unemployment rates. Outside of a surprisingly low decrease of 200 durable goods manufacturing jobs in Stockton, the NUMMI impacts are not readily apparant in the data.
NUMMI was very apparant in the East Bay with a direct loss of 4500 transportation equipment manufacturing job. The impact was large enough to offset some modest growth in other areas so that the East Bay lost more than 2,000 jobs on a seasonally adjusted basis. San Francisco has yet to see job growth.
The South Bay continues to be the only area in Northern California that is showing clear job growth, mainly due to the recovery of the technology sector.
In the Valley, April is the month when unemployment moves down with seasonal patterns and we saw normal seasonal decreases across the board. I think we can finally say we have seen the worst of the sky-high unemployment rates. Outside of a surprisingly low decrease of 200 durable goods manufacturing jobs in Stockton, the NUMMI impacts are not readily apparant in the data.
NUMMI was very apparant in the East Bay with a direct loss of 4500 transportation equipment manufacturing job. The impact was large enough to offset some modest growth in other areas so that the East Bay lost more than 2,000 jobs on a seasonally adjusted basis. San Francisco has yet to see job growth.
The South Bay continues to be the only area in Northern California that is showing clear job growth, mainly due to the recovery of the technology sector.
Tuesday, May 18, 2010
Homebuyers rush to claim state tax credits
It's been at least a month since I have ranted about what a bad economic stimulus policy this new state homebuyer tax credit is. It mostly moves home sales around a few months in time, while granting windfalls to the people who are benefiting most from the trough in the real estate cycle.
From Jim Wasserman's report in the Sac Bee, exactly as I predicted in this March post:
From Jim Wasserman's report in the Sac Bee, exactly as I predicted in this March post:
Some first-time buyers delayed scheduled April escrow closings until May to qualify.
"We had Realtors in the field say that was happening," said Appleton-Young (California Association of Realtors chief economist).
That might be a small, partial explanation for a fall in closed escrows from March to April, said Bob Bronswick, president and chief operating officer of Coldwell Banker Residential Brokerage in Sacramento and Lake Tahoe. He said some buyers managed to snag both the state credit and an $8,000 first-time federal credit that expired April 30.
Monday, May 17, 2010
Written by National Geographic or ACWA?
Earlier today, I was given a copy of Water for Tomorrow magazine.
Since I talked to National Geographic reporters a few times last fall/winter and was quoted in their recent article on California water, I was interested and excited to see them producing "a custom publication" on water and very surprised to learn it was being distributed free. I was impressed with National Geographic, especially because they had independent fact checkers contact me twice and make me confirm the information I had provided them on water, unemployment, and jobs. That's expensive, so the free distribution and the call outs on the cover struck me as odd. Here is a close up of the bottom part of the cover...
I am curious about the National Geographic Society's role in the "partnership." It doesn't appear to involve actual journalists, the use of their fact checking department, or even much in the way of photos. I could find no reference to Onward Publishing or Water for Tomorrow in National Geographics extensive websites. It has lots of beautiful photography like National Geographic, but most of the photo credits were to DWR.
Water for Tomorrow is a quick read, and I invite people knowledgeable about these issues to click the link above and read it for yourself. Here is another tidbit that I found interesting from the interview with PBS host Huell Howser in the inaugural issue...
Since I talked to National Geographic reporters a few times last fall/winter and was quoted in their recent article on California water, I was interested and excited to see them producing "a custom publication" on water and very surprised to learn it was being distributed free. I was impressed with National Geographic, especially because they had independent fact checkers contact me twice and make me confirm the information I had provided them on water, unemployment, and jobs. That's expensive, so the free distribution and the call outs on the cover struck me as odd. Here is a close up of the bottom part of the cover...
I started reading, the articles read like they were written by DWR and ACWA, not National Geographic. National Geographic magazine had used me as a source about water and unemployment, so I found this excerpt in "Water for Tomorrow" interesting ...
Fallowed farmlands also translate into unemployment. According to Richard Howitt, agricultural economist at the University of California at Davis, the Central Valley’s local economy has already lost tens of thousands of farm and support jobs.
This is presented much differently than in National Geographic. I won't get into the details here, there are plenty of other posts on this blog about that.
After reading the Paul Rodriguez interview on the inside back cover, I flipped to the back cover and saw the ACWA logo. Aaha! mystery solved. I flipped back to the Table of Contents and saw in fine print ...
After reading the Paul Rodriguez interview on the inside back cover, I flipped to the back cover and saw the ACWA logo. Aaha! mystery solved. I flipped back to the Table of Contents and saw in fine print ...
Water for Tomorrow is published exclusively for ACWA by: Onward Publishing, Inc. in partnership with National Geographic.
The magazine was copyrighted to ACWA with all rights reserved. None of the articles listed authors. Wendy Murphy, editor-in-chief, is a VP at Onward Publishing whose website says Onward "has a proven expertise in creating and strengthening world class brand images".
I am curious about the National Geographic Society's role in the "partnership." It doesn't appear to involve actual journalists, the use of their fact checking department, or even much in the way of photos. I could find no reference to Onward Publishing or Water for Tomorrow in National Geographics extensive websites. It has lots of beautiful photography like National Geographic, but most of the photo credits were to DWR.
Water for Tomorrow is a quick read, and I invite people knowledgeable about these issues to click the link above and read it for yourself. Here is another tidbit that I found interesting from the interview with PBS host Huell Howser in the inaugural issue...
Q: How did you go about making the PBS series “California’s Water”?
A. We started with a roadmap from ACWA and then followed the story wherever it
took us.
I am very interested in readers' opinion about this style of publishing, especially if you are a journalist, part of a non-profit education foundation (like the National Geographic Society), or ACWA. Please leave a comment (you can be anonymous).
Update, 5:00 PM, May 19: Many, many views but no comments. It seems that I'm too old-fashioned. I need to get with the times and create some "partnerships."
Tuesday, May 11, 2010
Are Mortgage Delinquencies an Economic Stimulus for the Valley?
With over 18% of mortgages in San Joaquin County over 90 days delinquent, it is safe to say there are a lot of people not making monthly payments for their housing right now. Mark Zandi of Economy.com compares this effect on a nationwide level to a mini-tax cut that is helping to support consumer spending.
Presumably, the effect is even larger in the Valley. Here are some very crude back of the envelope calculations using San Joaquin County as an example.
I estimate that there are at least 15,000 households in San Joaquin County in this category at the moment and it could be as high as 25,000. The average mortgage payment is a little over $2000 per month, so we are looking at $30-50 million per month in missed mortgage payments, let's call it $500 million per year. Total personal income in the county is about $20 billion per year, and disposable, after-tax income is probably around $15-16 billion. So, the skipped mortgage payments are equivalent to boosting local disposable income 3%.
The rental value of those housing units (what these households will probably pay on the other side of eventual foreclosure or loan modification) is probably about half the mortgage payments, let's call it $1000 per month. So one could argue that the end of the foreclosure crisis will drain $250 million per year out of local spendable income. Add it to the growing list of reasons it is going to be a long slow recovery.
Of course, if that rent is paid to local landlords that $250 million becomes income to someone else in town, but presumably income to a household with greater wealth and lower propensity to consume the extra income (and it may be servicing debt on their rental property too.)
I have no doubt this has helped cushion the recession locally, a lot of the local real estate losses are being endured by mortgage investors far, far away. As horrible as this recession has been in the Valley, it really could have been much worse. I am much less convinced that there will be a big drag on the recovery when more people in the Valley start paying for housing again, but it is something to ponder and debate.
One thing is for sure. The Valley Economy is not boring.
All told, borrowers who aren't making mortgage payments are probably skipping roughly $100 billion annually, an amount equal to 1 percent of consumer spending, according to Mark Zandi, chief economist at Moody's Economy.com. Zandi likens the money to "a form of stimulus, a little tax cut."
Not all of that "tax cut" is being spent on iPads, vacations, and lattes. "Presumably these homeowners know they're going to have to start paying again" to live somewhere, says Zandi. He suggests that falling delinquencies on credit cards and auto loans may be a sign that homeowners are using mortgage money to pay down other debt.
Presumably, the effect is even larger in the Valley. Here are some very crude back of the envelope calculations using San Joaquin County as an example.
I estimate that there are at least 15,000 households in San Joaquin County in this category at the moment and it could be as high as 25,000. The average mortgage payment is a little over $2000 per month, so we are looking at $30-50 million per month in missed mortgage payments, let's call it $500 million per year. Total personal income in the county is about $20 billion per year, and disposable, after-tax income is probably around $15-16 billion. So, the skipped mortgage payments are equivalent to boosting local disposable income 3%.
The rental value of those housing units (what these households will probably pay on the other side of eventual foreclosure or loan modification) is probably about half the mortgage payments, let's call it $1000 per month. So one could argue that the end of the foreclosure crisis will drain $250 million per year out of local spendable income. Add it to the growing list of reasons it is going to be a long slow recovery.
Of course, if that rent is paid to local landlords that $250 million becomes income to someone else in town, but presumably income to a household with greater wealth and lower propensity to consume the extra income (and it may be servicing debt on their rental property too.)
I have no doubt this has helped cushion the recession locally, a lot of the local real estate losses are being endured by mortgage investors far, far away. As horrible as this recession has been in the Valley, it really could have been much worse. I am much less convinced that there will be a big drag on the recovery when more people in the Valley start paying for housing again, but it is something to ponder and debate.
One thing is for sure. The Valley Economy is not boring.
Sunday, May 9, 2010
Will Placerville Increase Sales Tax to Subsidize Water?
It is hard to think of two common government policies in the Valley that I dislike more than subsidized water and funding local governments with sales tax.
Subsidized water encourages inefficient use of a scarce natural resource, and local government sales tax dependence is part of the reason our local govts seem to hate people - they demand costly services - and love shopping centers with big parking lots - revenue from people who use costly services in other communities! (I say leave the sales tax to the state, and give local govts more access to property and income taxes.)
So I found this story about sales tax in the Sac Bee very disapointing. The article is not about water, it is about how Placerville's strategic location is ideal for extracting sales tax from visitors. They achieve high sales tax revenue without the auto malls, big box stores, and sprawling malls favored by most other cities. Then, it goes on to describe a proposal for Placerville to combine two of my least favorite policies in a single package. Of course, it's popular and it makes complete sense for them to pursue this strategy given the incentives they face.
Subsidized water encourages inefficient use of a scarce natural resource, and local government sales tax dependence is part of the reason our local govts seem to hate people - they demand costly services - and love shopping centers with big parking lots - revenue from people who use costly services in other communities! (I say leave the sales tax to the state, and give local govts more access to property and income taxes.)
So I found this story about sales tax in the Sac Bee very disapointing. The article is not about water, it is about how Placerville's strategic location is ideal for extracting sales tax from visitors. They achieve high sales tax revenue without the auto malls, big box stores, and sprawling malls favored by most other cities. Then, it goes on to describe a proposal for Placerville to combine two of my least favorite policies in a single package. Of course, it's popular and it makes complete sense for them to pursue this strategy given the incentives they face.
The state median (per capita sales tax for local govt) was $129 in 2008, the last year for which comparisons were available. Placerville's revenue was $313 per capita that year...Despite its high tax ranking, Placerville is considering a quarter-percent hike in its sales tax rate to 8.75 percent...
The idea is not to reverse the dollar losses, but to cope with recent hikes in water and wastewater treatment fees. By raising sales tax – much of which is paid by visitors – water and wastewater fees could be cut by 10 percent and 33 percent, respectively, Warren said.
"It's becoming a very popular alternative," Warren said. (Dave Warren is Placerville's finance Director)
Saturday, May 8, 2010
Our Loss is Westlands' Gain
According to this announcement from the Law School, Pacific McGeorge alum and faculty member (and former Assistant Secretary of Interior and Superior Court Judge) Craig Manson will be joining Westlands' high-profile legal team this summer, joining Pacific McGeorge alum Tom Birmingham.
I figure it's only a matter of time before Westlands goes to Pacific for their economics expertise too.
I figure it's only a matter of time before Westlands goes to Pacific for their economics expertise too.
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