The Economic Crisis and the US Online Job Market

President Obama is asking the Cabinet to cut $100 million over the next 90 days.  RealClearPolitics has a video of reporters taking the administration to task for hailing the $100 million dollar cut as significant after dismissing criticism of an $8 billion appropriations bill several weeks ago.  Gibbs mentions how $100 million is a lot of money and to folks like you and me (assuming billionares don’t read J’s Notes) it most certainly is.  $8 billion is a heck of a lot more, though, and pales in comparrison to the $787 billion bailout.  Both of those are paltry compared to Obama’s proposed 2010 budget.  The Heritage Foundation has a handy graphic to put it all in perspective:

It is disengenious to try and tell the American people that you are saving them millions when taking them and their children and grandchildren to fiscal task for TRILLIONS.

That’s like saying “buy $3.69 trillion dollars worth of government, save 0.00271%!  The more you buy the more you save!”  Obama’s 2010 budget is nearly $12,300 for every man, woman and child in America, while his budget cut saves each and every single American an amazing $0.33.  Thanks!

(Graphic via Tertium Quids)

Consumerist is reporting that Borders may have to deliver some bad news in the near future and is speculating that the book chain may be going under.

That’s unfortunate because I’m quite fond of Borders.  A combination of working there for three years (opening the Fredericksburg store as a temporary employee in August 1997, working my way up to Asssitant Manager and then leaving for a Washington DC job in January 2001) and the fact that it really does have a great selection of titles that you just can not find at any other bookstore.

I know that even during my time at Borders there were quite a few bumps and questions about the company’s long term solubility.  I guess it’s all finally catching up.  Even Barnes and Noble is seeing a drop in sales (though not as bad as expected).  Here’s hoping it’s all worry for nothing and the company can turn it around, but that may be a lot of wishful thinking.

DJ McGuire points us to a New Republic article by Joshua Kurlantzick that says the economic downturn might spell the end of China’s Communist government:

For years, the Beijing regime has stayed in power using a basic bargain with its citizens: Tolerate our authoritarian rule and we’ll make you rich. And for years, this seemed to work, leading many China-watchers (myself included) to conclude that Beijing was rising into great-power status. But as the financial crisis shows, that bargain rests on weak foundations. And if Beijing breaks its end of the deal, its people, already holding rising numbers of protests, may well break theirs.

I have always felt that China was going to capitalize itself into Democracy and was one good recession or depression away from changing governments.  Kurlantzick is right in that China’s regime has been built on the promise of riches to the public.  But if the government can no longer guarantee those riches or proves to be an impediment on them, then those in financial power may seek new leadership.

The question is, will they just switch leadership or switch systems entirely?  And if they switch systems, is Democracy the system of choice or perhaps something less appealing to the masses?

A basic understanding of economics would easily explain Exxon’s recent news:

Higher consumption leads to higher profits.

Class dismissed.

Forget the mortgage crisis that is based on 3% of American’s being irresponsbible and defaulting on their loans.  The one that might have a greater impact is the coming Credit Card Meltdown:

Some more troubling details from the Red Tape Chronicles:

• Outstanding credit card debt has grown by more than 75 percent since 1999.
• More than 50 percent of Capital One’s cards are “low-limit” cards, which Innovest said are designed as fee traps — consumers with low limits are more likely to surpass those limits and face penalty charges. (CEO Fairbank maintains that low-limit cards are simply a smart way to manage risk)
• Risky borrowers with low credit scores — subprime borrowers — account for roughly 30% of outstanding credit-card debt.

The good news? The credit card market is tiny compared to the housing market, so a “subprime credit card meltdown” wouldn’t have the same effect as our current housing dilemma.

Capital One’s in trouble.  But they’re surely not alone.  And if credit card companies need to make up the money they are losing elsewhere, you can surely expect fees and rates to jump up across the board to make up for losses, so even those with good credit records may have to pay for those with bad.

A subprime lending primer from November, 2007 that’s still relevant today.  The rest of the site is pretty informative too.

Earlier today I wrote about the bailout at Bearing Drift but forgot to mention one point that the news has reminded me of: in order for the government to fund this bailout it’s going to have to make money.  When the government makes money out of thin air, all money loses value.  Thus inflation.  Thus a record jump in oil prices.  Thus Main Street suffers.

Oil has dropped below $114 a barrel thanks in part to a rising dollar:

Oil prices are “getting more and more pressure from dollar strength and it doesn’t seem reversible for now,” said Serge Laureau, commodities strategist at Saxo Bank in Copenhagen, quoted by Dow Jones Newswires.

The dollar struck a five-month high point against the euro on Friday on fading prospects of an interest rate rise by the European Central Bank, dealers said.

A strong dollar makes goods priced in the US unit more expensive for holders of weaker currencies.

This comes at the same time as an announced exploration resumption in Iraq, but that couldn’t possibly be a factor for the drop in oil since it’ll take, what, years for that to lead to gas in the pumps, right?

Interesting to see and probably better visualizes thing than my Oil Vs. Dollar graph.

What can you buy for five dollars? takes you on a world wide tour of $5 items.

From Measuring Worth, the “real” price of gasoline:

Gasoline cost 27 cents a gallon in 1949 compared to around $4.00 today.* How has the relative cost of buying gas changed over the last 59 years? Presented here are two tables computing the annual “real” cost using our five indicators, one in 2007 dollars, the current number used for real GDP, and the other in 1949 dollars. While the two tables show the same trends, they do give a different perspective.

Using the 2007 table and the CPI and the GDP deflator, we see that gasoline was quite expensive in 1980 and 1981 and the cheapest in 1998 and 1999. Today, the real price using these two measures is higher than the period at the beginning of the 1980s.

By looking at the share of the Consumer Bundle and GDP per capita, the story is a bit different. In 1981, a gallon of gas took as much out of what the average consumer spent as $4.00 does in 2007. And as a share of GDP per capita, gas was even more expensive in those earlier days with it at over $4.50 in 1980 and more expensive in the earlier years.

The other table tells the story in a different way. Let us look at relative cost to an unskilled worker to fill up using 1949 dollars. That year the 27 cents it cost for a gallon of gas, took a certain share of the worker’s wage. The interesting question is, has the cost as a share or percent of the worker’s wage increased or decreased over time? The table shows that for the wage rate and price of gasoline in other years, this cost has fallen. Since wages have increased faster than the price of gasoline, by 2007 an unskilled worker spends only two-thirds as much, as a percent of wage, for a gallon of gasoline than the 1949 worker. The table shows that the $2.85 a worker paid in 2007 would be comparable to only 20 cents (in 1949 prices “share” of the wage.

When we use the GDP per capita, the cost has fallen faster. Looking at the table shows that a gallon of gasoline costs around 11 cents a gallon (in 1949 prices) if measured as a “share” of the GDP per capita. This is because in 1949, 27 cents was .015% of per capita GDP, while in 2007, $2.85 was .006%.

Finally, comparing its cost as a share of GDP, we see that in 1949 prices, it is about 6 cents. This means that a gallon gasoline was a four and a half times larger share of output in 1949 than it is today.

* The nominal price of gasoline can be found at found at http://www.eia.doe.gov/emeu/aer/petro.html and http://tonto.eia.doe.gov/dnav/pet/pet_pri_gnd_dcus_nus_a.htm For the tables used here, I used the price of a gallon of leaded regular from 1949 to 1976, the average of the price of leaded regular and unleaded regular from 1977 to 1990 and the price of unleaded regular from 1991 to 2007.

Very rough overlay of graphs showing the value of the dollar (in black and numbers on left) to the real price per barrel of oil (in red and numbers on right). Cyan is nominal value per barrel of oil.  For personal reference more than anything else.

(Sources: Dollar graph from here. Oil graph from somewhere else, I don’t remember. Bad, Jason!)