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If Service Jobs Fail, Then We're In Trouble
The Wall Street Journal recently published an article entitled U.S. Consumers Trade Down as Economic Angst Grows, which says that Americans are saving money by choosing less expensive brands and models of products. Wholesalers and retailers are cutting back offerings of designer brands for the less expensive "plain Jane" products.
The article concentrates on products, but has almost nothing to say about services. If Americans just cut back on designer brands, job losses should be moderate. If America cuts back on services, unemployment will spike upwards. Even though establishment employment went down by 438,000 jobs from December 2007, there is a net increase in service jobs.
Construction and manufacturing were the big losers, off more than 500,000 jobs since December 2007. Retail trade and temporary help services were the big losers in services, which were down more than 300,000 jobs. Telecommunications, finance, and real estate were down as well.
Declining industries lost 990,500 jobs, so that a net decrease of 438,000 jobs includes an increase of 552.5 thousand other jobs, all of them service jobs.
For example, new government service jobs replaced 81,500 of the 990,500 jobs — not including 44,500 new jobs in public education and 68,500 new jobs in private educational services. Government taxing, borrowing and spending is helping moderate job losses.
Despite the general decline of employment, jobs in leisure and hospitality went up 88,800 thousand from December 2007 to June 2008. Restaurants are the biggest employer in leisure and hospitality with 9.8 million jobs and nearly 78,000 new jobs since December 2007.
Cooking can be a do-it-yourself service, even though we go out more and more with restaurant jobs up 740,000 since 2005. Eating out and paying others to cook helps moderate job losses.
Other jobs in leisure pursuits are trending up faster than the national average and replacing manufacturing jobs. Combine spectator sports, amusement parks, golf and country clubs, fitness centers and gambling where jobs are up to 1.85 million nationwide.
The economic angst mentioned in the Wall Street Journal has not spread to health care services, which continue to increase, up 194,000 jobs since December 2007. Health care and social service jobs have increased every year since 1990.
Maybe the Wall Street Journal is right and more people are opting for less expensive brands, but it is trivial matter compared to America's growing reliance on services jobs. Government, restaurant, leisure and health care jobs go up in good times and bad.
If any of them start to fall, then it's time to worry.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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HSBC Direct Extends 3.50% APY to 9/15/08
HSBC Direct is extending the promotional 3.50% APY rate on their online savings account until September 15, 2008.
The promo, announced in June, was intended to end on August 15.
Here's the text of the email they sent to account owners Tuesday:
Customers like you have told us how much they love our big fat rate. And as far as our customers are concerned, we can’t give them too much of a good thing. So that’s exactly what we’re going to do.
- You’ll keep earning 3.50% APY* on all balances in your Online Savings Account.
- That’s 9x the national savings average.±
- Deposit more now to take full advantage of our great rate extension.
Now’s the time to watch your savings grow. So deposit more today.
The 3.50% rate puts HSBC at the top of online savings accounts, tied with FNBO Direct and Goldwater Bank.
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How to Prepare For Once-in-a-While Expenses
Everyone has those once-in-a-while expenses that require some planning and preparation in order to pay: car insurance (once or twice a year), yearly dues or memberships, and even taxes.
They're a bit odd because they're not recurring monthly bills, so you're not always thinking about them, but when they hit, they can hit pretty hard.
Here's the easiest way to prepare for those once-in-a-while expenses: automatically set aside money to pay those bills once a month.
By setting up a new online savings account or an ING subaccount, you're establishing a fund solely for these once-in-a-while expenses. Rather than having these bills take a big chunk out of your checking account once or twice a year (which itself requires creatively moving money around), the money is coming from a separate location.
But you still need to feed these accounts — and the easiest way to do it is to make your big once-in-a-while expense a bunch of little monthly expenses.
Got a $1200 car insurance bill you know comes every January 1? Set your new account to automatically transfer $100 from your main checking every month. That way, when the bill lands at your door, you've already paid for it.
You may find it works better to have one account for each once-in-a-while bill or to have a once-in-a-while slush fund, where you transfer the total amount of those bills (divided by 12) each month.
Whichever way you choose, the point is the same: by automatically setting aside the money for these bills, it's like you've already paid for them.
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How to Get Free Movie Rentals at Redbox
One of my favorite ways to get movies is through Redbox, the DVD-rental kiosk found in many supermarkets, McDonalds and other places near you.
Their prices — $1/day with returns before 9 PM — are perfect for casual movie watchers who watch movies the night they get them and don't want to be in a monthly subscription with Netflix or Blockbuster.
The selection is great: new movies from a number of genres sure to please any member of the family.
But the best part? You can rent movies for free — over and over and over again.
Redbox offer promo codes for free one-night rentals, and I've been using the same promo code over and over and over to get multiple free rentals.
In order to get the free rentals, here's what you need to do:
1. Find your local Redbox (look here)
2. Double check they have the movie you want in stock (do it here)
3. Head over to the Redbox, and select "Rent with a Promo Code"
4. Enter the code "Breakroom" and choose your movie
5. Swipe your credit/debit card (in case you decide to keep the movie for more than one night) and get the movie
6. Head home and enjoy!You won't be charged for the movie as long as you return the DVD before 9 PM the next day.
Here's the trick to multiple free movies. In order to use this promo code over and over and over again, you need to use a different debit or credit card every time.
The Redbox doesn't know you're the same customer if you're using a different card, so you've got as many free movies as you have debit or credit cards.
Once you run out of cards to use, don't run away from Redbox — thank them for their great offering by sticking around as a customer. I've been using them for a year now and I've had no complaints.
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Why IndyMac's Failure Matters to You (Even if You Don't Have Money There)
All savers should pay attention to what happens with the recent IndyMac Bancorp default.
IndyMac Bancorp is different than other recent defaults because IndyMac is a bank that offers checking accounts, which are money by definition of the Federal Reserve Bank and by common understanding of depositors and everyone else. Bear-Stearns, remember, was not a bank.
It is good that accounts are insured by the Federal Deposit Insurance Corporation up to $100,000, but that is not the only protection for depositors. Failure to guarantee every dollar of every checking account has potentially severe and dangerous consequences for savers and the economy.
Failure to pay on a bank default introduces risk for those who are holding money as deposits. Every business and individual needs somewhere to hold money that is risk free.
If businesses and individuals realize there is risk to holding checking accounts, they will change their financial habits in unpredictable and unmanageable ways that will make it much harder to manage the U.S. economy.
Businesses can hold accounts abroad. Individuals can horde cash and so on.
As a bank offering checking accounts for depositors, IndyMac only had to hold around fifteen cents on each dollar of deposits as reserves to pay on their customer's checks. In the normal course of business that is adequate because those writing checks will about equal those making deposits.
In the normal course of business, their borrowers will be paying monthly principal and interest to further assure they have reserves to pay on their checking account customers.
There in lies the problem. The banks were careless and made many risky and foolish mortgage loans. The loans were made with the other eighty five cents on the dollar of depositors' money; loans made without the knowledge or approval of depositors.
Notice how different that is from someone who buys a stock or a bond by their own decision and using their own money.
Our Federal Reserve Bank and other bank regulators have the full ability and authority to regulate and supervise loan practices and review their financial condition. They failed to do so.
Our Federal Reserve Bank has full ability and authority to protect every dollar of the IndyMac accounts in addition to deposit insurance. They can provide the reserves in case of default. They determine and manage total bank reserves. Now they must do so. Pay close attention here.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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Savers, Have You Considered Junior College?
In the process of saving for college, families sometimes forget saving on college. There are few bargains left, but allow me to suggest the junior college. It could be the last of America's educational bargains.
In the year ending June 2006, there were 713,000 associates degrees granted in the United States. There were less than 500,000 a year until after 1990, when growth in the AA degree began to pick up. Associates degrees are now growing faster than Baccalaureate degrees, although the BA degree has almost 1.5 million degrees.
Less known are the many certificate programs at Junior colleges that run one year or less. There were 229,000 certificates awarded for the year ending June 2006. There another 183,600 awards granted in specialty programs that run between 1 up to 4 years.
Combined, there are well over a million people leaving junior colleges with degrees and certificates.
In addition to the many technical and allied health programs, junior colleges have a whole slate of English, math and social science courses that fulfill two full years of requirements at four-year colleges. A state's four-year college accepts their state's junior college credits.
Another advantage comes because junior colleges are usually sprinkled around a state at many locations and so they are convenient to attend without changes in address or work schedules.
There is also reason to believe the quality of instruction continues to rise because there is a growing surplus of qualified faculty with masters and doctorate degrees. Many of these people have work experience and want to get into teaching.
More and more junior colleges are hiring from the same pool of faculty as the four year colleges, and this is especially true in large metropolitan areas where the surplus is likely to be even bigger.
In Virginia in 2007, the average tuition and required fees for a full time student at the 4 year colleges was $7,083. At the many junior colleges, it was $2,524 — a savings of $4,559 a year with a full time course load.
Most states have similar or bigger disparities. If we figure a savings of $4,559 from the beginning of the first two years at 4 percent interest until the end of a four year degree, the savings is $10,853.36. Even at two percent interest is the savings is $9,771.91.
For savers who want a four year degree, think junior college.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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How Tax Cuts and Consumption Affect America's Jobs
It has been common in politics to hear that tax cuts in the higher income tax brackets will be good for the economy because the wealthy and the well-to-do will be able to save and provide funds for capital investment spending and jobs.
Americans must have jobs. Large scale unemployment in an urban society guarantees untenable social, economic and political conditions. It is total spending that generates jobs, which includes the investment spending generated by our savings, but also consumption spending including government spending.
In the last two posts I quoted from Alan Greenspan, who told us there are not enough investment opportunities for our savings since the year 2000. Creating hedge funds or other speculative financial investments does not create many jobs: mostly financial advisors and lawyers.
Since financial investment speculation does not create enough jobs, America must rely more on consumption spending to keep ourselves employed.
The consumption spending America needs the most is for domestic services. Consumption spending that goes for luxury products imported from abroad creates foreign jobs, but not American jobs.
The growing importance of consumption spending for creating jobs makes credit card spending a necessity. Given the wages and taxes for millions of Americans, keeping up spending requires credit card borrowing. For those of us who save and read savings blogs, it is sobering that so much of our savings supports credit card spending.
It would be better if it helped pay for long-lived physical assets, but at least we can have an interest return knowing our savings support jobs and the economy.
The growing importance of consumption spending brings us back to the politics and tax cuts I mentioned above. If America is going to have enough jobs, the well-to-do must see to it that all of their income goes back into the spending stream.
They can only save if it helps create jobs, otherwise they must consume.
Washingtonian Magazine published an article over a year ago describing the proper things to buy for the well-to-do lifestyle. They included landscaping, flowers, dog walkers, sports tickets, club memberships, personal trainers, spa memberships, dining out and charity events. For those with kids, include coaches' fees, soccer camp, piano lessons, college consultants and live in nannies.
Perhaps the editors at Washingtonian were celebrating conspicuous consumption or encouraging the wealthy to do their duty and create jobs. That I cannot tell, but tax cuts to the wealthy pose a threat to jobs and economic growth unless they go into consumption. Like it or not; that's a fact.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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Using Prosper to Diversify in a Down Market
Everywhere you go, you hear that the stock market is tanking — and analysts are discussing what you should do to keep more of your money.
While my philosophy of index investing says to buy more when stock prices are low, I came across a guy using an additional method to get returns on his money: peer-to-peer lending at Prosper.com.
We've talked a little bit about Prosper before, but if you're new to it, the site allows users to make and borrow loans from other individuals at agreed-upon interest rates.
So if you've got some extra cash, you can bid on loans as part of or as the entire amount that a borrower is looking for. With interest rates as high as 35%, it's an attractive alternative to watching your money tank in the stock market.
Have you considered loaning out money at Prosper? Share your experiences with us in a comment.
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E-Trade Complete Savings Account Up to 3.30% APY
E-Trade has upped the APY on their Complete Savings Account to 3.30%, putting it in the top 5 of online savings accounts.
The move follows WTDirect and HSBC's upward revision of their online savings accounts (to 3.26% and 3.50% APY, respectively).
E-Trade's account has a $1 minimum to open and no minimum to avoid fees.
The rate was previously 3.15%.
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Milton Friedman vs. Your Wife: Who Gives Better Financial Advice?
Freakonomics author Steven Levitt posts today about the best personal finance advice he ever received:
When I was a first-year assistant professor at the University of Chicago, my friend and department chair, Jose Scheinkman, relayed the advice Milton Friedman had given him 20 years earlier, “Don’t save too much.”
The logic was simple: An academic’s salary rises steadily over time, as do outside opportunities — like writing popular economics books! The right reason to save is so you can even out your consumption. When times are good, you should save, and when times are bad, borrow.
Most likely, I would never be as poor again as I was starting out. That meant I should have been borrowing, not saving. I didn’t follow the advice as fully as I should have, partly because my wife insisted we save — she is not quite as good an economist as Milton Friedman.
Of course, most of us would agree that saving is important all of the time, but especially when you are starting out.
The best comment to support that, posted by donw, channels another pretty smart guy:
Your wife (and Albert Einstein) - COMPOUND INTEREST!
The earlier you start, the more you'll have.
Plus, your wife always wins every argument anyway.
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