Broader Unemployment Rate Hits 14.8%

March 6, 2009, 10:52 am

Broader Unemployment Rate Hits 14.8%

If a half-percentage-point increase in unemployment rate isn’t ugly enough for you, there’s more from your government statisticians: almost a full percentage point jump in a broader measure of unemployment.

The Labor Department reported today that its most comprehensive measure of joblessness hit 14.8% in February, from 13.9% in January. That’s just about 1 out of 7 Americans who are either unemployed and looking for a job, want a job but stopped looking, or part-timers who want full-time jobs.

We’ve already blown through the prior high point of the data series, which the Bureau of Labor Statisticsstarted in 1994. An even broader (since discontinued) series hit 15% in late 1982, and we’re likely to fly right through that one next month.

The 8.1% official unemployment rate, up from 7.6% in January, only counts people who are available for work and actively looked for a job in the prior four weeks. The 14.8% figure (known as the “U-6” by the BLS) includes everyone in the 8.1% figure, plus people who say they want a job and looked for work recently, along with people working part-time because they couldn’t get a full-time schedule.

How high can the U-6 go? Just looking at forecasts for the main unemployment rate, the broader measure would hit 17% by the end of next year. Some economists say 18% to 20% — 1 out of 5 peopleunemployed in some way — wouldn’t be terribly surprising. If employers aren’t hiring, job hunters would be more likely to give up hope and stop looking even if they do want jobs. After the 2001 recession, employers took roughly two years to resume meaningful hiring and competition was stiff for the jobs available. Anyone searching for a job during this recession is already aware of that grim reality. –Sudeep Reddy

SOURCE: http://blogs.wsj.com/economics/2009/03/06/broader-unemployment-rate-hits-148/

Demand down for foreign worker visas

By Malika Zouhali-Worrall, CNNMoney.com contributing writer

Last Updated: March 5, 2009: 3:41 PM ET

NEW YORK (CNNMoney.com) -- Kevin Chou has had his fair share of visa woes. For the past two years running, his Silicon Valley social networking start-up, Watercooler, has applied for an H-1B work visa for the same Canadian employee. Both times, the petition lost out in the government's annual visa lottery, which selected only 85,000 from a pool of more than 120,000 hopefuls.

"We've flushed $10,000 down the drain on H-1Bs," says a disenchanted Chou, who last year was unable to offer a job to a highly-skilled software engineer from India because he was worried that engineer would face the same problem. The candidate ended up taking a position at Google (GOOG, Fortune 500).

Watercooler's story is not atypical for small businesses, which usually have fewer resources to throw at the application process and no foreign offices in which to temporarily place talented candidates awaiting visa approval. As a result, many are disproportionately affected by the cap on H-1Bs. But this year, analysts say, could be different.

Immigration experts expect H-1B applications for 2009 to be at their lowest levels in years. Some even suggest that after April 1, the first day on which applications may be filed, it could take a week or more to fill the quota of 85,000 visas. (65,000 visa spots are open to all applicants, while an additional 20,000 are earmarked for those with graduate degrees from U.S. universities.) In past years, it's taken as little as 48 hours for the queue to fill up.

A combination of factors are behind this year's reduced demand, including the slowing economy, new restrictions on H-1B hiring at some firms, and the accounting scandal that has weakened massive Indian outsourcing firm Satyam Computer Services. The end result: Smaller firms have the best chance they've had in years to score an H-1B.

"If you're lucky enough to be in hiring mode, this is the year to apply," says Greg Siskind, an immigration attorney and blogger, who notes that the number of work visa applications always dips during a recession. Other attorneys say they're filing half as many applications as they did last year, as their clients cut costs or downsize.

That's good news for small business owners such as Aleksandar Ivanovic, CEO of Milwaukee software firm Webcom. He's not in the habit of applying for H-1Bs, but last year he decided that a talented intern of Nigerian citizenship was worth the investment of $5,000 for filing and attorney fees. The petition failed.

"It's frustrating because it's not easy to find bright kids," says Ivanovic. His company has unusually high standards when it comes to recruiting, even for internships; he requires at least a 3.9 GPA. This particular candidate was the only one who made it through a tough application process in 2007. Ivanovic hired him - the intern's student visa allows him to accept limited employment for training purposes. A more recent internship recruitment effort at Webcom drew close to a hundred applicants, but none of them made it through.

That's why Ivanovic is petitioning for an H-1B again this year for the same Nigerian intern, whom Ivanovic says has exceptional math and Boolean logic skills that Webcom hasn't found in any other candidates. Ivanovic would like to keep the staffer after his student visa runs out. He's happy that his chances of scoring the H-1B have dramatically improved.

It's not just the slowing economy that's depressing H-1B visa demand. A protectionist provision in the recently passed federal stimulus program has made it harder for financial institutions receiving federal funds to apply for H-1B visas for the next two years.

While individual U.S banks haven't been big H-1B petitioners in the past, their combined impact is significant. According to the National Foundation for American Policy, a nonpartisan immigration research think tank in Arlington, Va., twelve of the banks that have received funding from the government's Troubled Asset Relief Program (TARP) submitted a combined total of more than 900 H-1B petitions in 2007. That's a minuscule percentage of the more than 1.2 million workers the banks employed, but it's a noticeable chunk of the H-1B application pool.

Then there's Satyam, the Indian software firm currently under investigation for massive accounting fraud. In 2008, Satyam was the third-largest petitioner for H-1B visas, submitting a total of nearly 2,000 petitions, according to the U.S. Citizenship and Immigration Services.

Following the recent scandal, analysts such as Sam Udani of Immigration Daily, an immigration news Web site, expect the company to file far fewer applications this year. Satyam recently told the New York Times that it is withdrawing many Indian employees from the U.S. and sending them back to India.

"If you apply for an H-1B this year, there's close to a 100% chance that you'll get it," Udani says.

Watercooler's Chou says he has no choice but to try again this year. His foreign employee has remained with the company for the past two years on a special TN1 work visa for Canadians, but it costs $2,000 for the company to renew each year, with no guarantee that the next year's renewal will be granted.

Finding an American employee to replace his Canadian staffer wouldn't be easy, Chou says. Part of a seven-person software engineering team, she started at Watercooler within months of the company's launch and has deep institutional knowledge to draw on - plus fluency in LAMP (Linux, Apache, MySQL, PHP) and the application development platforms that underpin social networking sites Facebook and MySpace.

"Finding that type of skill set is not easy. It's very specialized," says Chou. He estimates that finding and training a replacement would take at least six months and amount to more than $50,000 in expenses.

This year's better H-1B odds give Chou hope, but after losing out the past two years, he's not holding his breath. "It's still a $5,000 bet," he says. 

First Published: March 5, 2009: 6:38 AM ET

Obama’s Scary Hoover-Style Tax Hikes

March 2nd, 2009 5:17 PM Eastern

Obama’s Scary Hoover-Style Tax Hikes

By Phil Kerpen
Director of Policy, Americans for Prosperity

The composition of the tax hikes in the 2010 budget is frighteningly similar to the Revenue Act of 1932, the much-maligned Hoover tax hikes that put the “Great” in Great Depression by putting an enormous tax burden on millions of Americans, largely through excise taxes. These taxes, raised even further by FDR, were justified by the promise that the funds would be returned in the form of relief programs, which is to say that some portion of the tax revenue, after administrative costs in Washington, would go back to the states with strings attached, often to further political rather than economic objectives.

As the table below shows, the Obama budget blueprint, like the 1932 act, is split mainly between broad excise taxes and income tax hikes on high income earners. Unfortunately, there were no 10-years projections back then, so I had to use one year numbers, but it’s still an interesting comparison.

Courtesy Phil Kerpen

The 2010 budget assumes, probably correctly, that the only way to generate a big revenue increase in the face of severe economic weakness is to use a tax mechanism–the excise tax–that is collected in relatively small increments across millions of transactions made by Americans of all income levels. That is a direct lesson of 1932, when the income tax on the rich–then the only people who paid income taxes–was raised to capture as much revenue as possible before high-income earners fled the country or stopped working. Then, as now, that amount was about 0.3 percent of GDP.

Excise taxes did most of the revenue work in the 1932 act, including excises on everything from trucks, tires, jewelry, chewing gum, and soft drinks to gasoline and electricity. Those last two are especially interesting in light of the carbon cap-and-trade proposal in the 2010 budget, which is a de facto excise tax on those items as well as every other energy technology that relies on the most affordable energy sources: natural gas, oil, and coal.

Despite President Obama’s promise that “If your family earns less than $250,000 a year, you will not see your taxes increase a single dime. I repeat: not one single dime,” his new budget raises 45 percent of its revenue from energy taxes that will be paid by everyone who fills a gas tank, pays an electric bill, or buys anything that was grown, shipped, or manufactured.

While the overall tax hike is smaller than 1932 (0.9 percent of GDP versus 1.6 percent of GDP) and the excise/energy component is only half the size (0.4 percent of GDP versus 0.8 percent of GDP) there is every reason to believe that the bite of the cap-and-trade tax will increase considerably beyond the initial projections, making this plan even more resemble 1932.

The cap-and-trade provisions are designed to get much, much more expensive over time, making the total impact hard to quantify but likely to be as or more expensive than the 1932 Revenue Act. In fact, Obama’s version of cap-and-trade is much more expensive than last year’s already outrageous Lieberman-Warner bill, mandating emissions cuts of 83 percent versus 63 percent in last year’s version.

I didn’t include the death tax in the chart, because there was no revenue estimate for it in 1932, but that’s another eerie parallel. In 1932 the rate was hiked from 20 percent to 45 percent, and in 2010, under Obama’s proposal (which is hidden in a footnote in the budget) it will go from zero under current law to that same 45 percent rate.

If we continue down a path of repeating the policies of the 1930s we risk a repeat of the same results. Let’s hope Congress has the good sense to say no to these Hoover-style tax hikes.

Phil Kerpen is director of policy for Americans for Prosperity.