From Beijing in north China to the southern manufacturing province of Guangdong, the main concern of workers is not finding jobs, but securing higher pay. In fact, companies say they are struggling to find and retain staff. For the government, this is a significant argument against launching large-scale economic stimulus, as there is no need for a major spending boost to create jobs. The central bank’s move to cut interest rates this week shows that Beijing is worried about slowing growth. But officials stress that there will no repeat of the massive stimulus package unveiled in late 2008 during the global financial crisis. While Europe and the US struggle with rising unemployment, China’s labour problem is the opposite: it experienced a record shortfall of workers in the first quarter. The human resources ministry says that for every 108 employees sought by companies, only 100 people were looking for jobs – equating to a nationwide deficit of nearly 1m workers. The reason China’s job market is tightening when the economy is slowing is simple: demographics. The government introduced its one-child policy just over three decades ago to limit explosive population growth. Since then birth rates have declined steadily, with the proportion of the working-age population expanding at a slower rate in recent years. UBS estimates that China’s workforce will peak in about 2015, and then start to shrink.
Former Pentagon Analyst Says China Can Shut Down All The Telecom Gear It Sold To The US
F. Michael Maloof, G2 Bulletin - Jun. 8, 2012 - Chinese companies apparently have a covert capability to remotely access communications technology sold to the United States and other Western countries and could "disable a country's telecommunications infrastructure before a military engagement," according to former and current intelligence sources. The Chinese also have the ability to exploit networks "to enable China to continue to steal technology and trade secrets," according to the open source intelligence company Lignet, which is comprised of former U.S. intelligence analysts. The issue centers on the Chinese firm Huawei Technologies Co. Ltd., which U.S. intelligence sources say has direct links to the Chinese government and the People's Liberation Army, or PLA. These sources assert that Huawei and other Chinese telecommunications firms such as ZTE Corp. have "electronic backdoors" to telecommunications technology sold to the U.S. and other countries. Revelation of China's electronic backdoor capability into U.S. and Western telecommunications networks comes on the heels of recent WND/G2Bulletin revelations that China has been manufacturing counterfeit components that have made their way into sensitive U.S. weapons systems. The problem of fake Chinese electronic components, which were installed by defense contractors without prior testing and are operating in U.S. military systems, is far more widespread than originally thought. These parts don't just come directly from China but also from suppliers in Britain and Canada who redirect Chinese products to U.S. defense contractors. These counterfeit components have been found in sensitive U.S. missile systems meant to thwart the potential of a Chinese missile attack, in night vision devices and in various military aircraft. "We do not want a $12 million defense interceptor's reliability compromised by a $2 counterfeit part," Gen. Patrick O'Reilly, director of the U.S. Missile Defense Agency said. Huawei, suspected of exploiting electronic telecommunications backdoors, continues to sell communications technology in the U.S. and other countries despite a supposed ban on the company that was supposed to keep it from bidding on cellular networks and government contracts, a current intelligence source said. The electronic backdoor capability reportedly could allow the Chinese government through Huawei and ZTE to access information traveling through telecommunications networks or even sabotage electronic devices, Lignet said. With this capability, China would be in a position to sabotage critical U.S. weapons systems and sensitive cyber sites and could include intelligence or systems used by defense contractors doing work on behalf of the U.S. government.
Collapse At Hand - Paul Craig Roberts - June 5, 2012 - ... Eventually, inflation would erode the dollar’s purchasing power and use as the reserve currency, and the US government’s credit worthiness would waste away. However, the Fed, the politicians, and the financial gangsters would prefer a crisis later rather than sooner. Passing the sinking ship on to the next watch is preferable to going down with the ship oneself. As long as interest rate swaps can be used to boost Treasury bond prices, and as long as naked shorts of bullion can be used to keep silver and gold from rising in price, the false image of the US as a safe haven for investors can be perpetuated. However, the $230,000,000,000,000 in derivative bets by US banks might bring its own surprises. JPMorgan Chase has had to admit that its recently announced derivative loss of $2 billion is more than that. How much more remains to be seen. According to the Comptroller of the Currency http://www.occ.treas.gov/topics/capital-markets/financial-markets/trading/derivatives/dq411.pdf the five largest banks hold 95.7% of all derivatives. The five banks holding $226 trillion in derivative bets are highly leveraged gamblers. For example, JPMorgan Chase has total assets of $1.8 trillion but holds $70 trillion in derivative bets, a ratio of $39 in derivative bets for every dollar of assets. Such a bank doesn’t have to lose very many bets before it is busted. Assets, of course, are not risk-based capital. According to the Comptroller of the Currency report, as of December 31, 2011, JPMorgan Chase held $70.2 trillion in derivatives and only $136 billion in risk-based capital. In other words, the bank’s derivative bets are 516 times larger than the capital that covers the bets. It is difficult to imagine a more reckless and unstable position for a bank to place itself in, but Goldman Sachs takes the cake. That bank’s $44 trillion in derivative bets is covered by only $19 billion in risk-based capital, resulting in bets 2,295 times larger than the capital that covers them. Bets on interest rates comprise 81% of all derivatives. These are the derivatives that support high US Treasury bond prices despite massive increases in US debt and its monetization. US banks’ derivative bets of $230 trillion, concentrated in five banks, are 15.3 times larger than the US GDP. A failed political system that allows unregulated banks to place uncovered bets 15 times larger than the US economy is a system that is headed for catastrophic failure. As the word spreads of the fantastic lack of judgment in the American political and financial systems, the catastrophe in waiting will become a reality. Everyone wants a solution, so I will provide one. The US government should simply cancel the $230 trillion in derivative bets, declaring them null and void. As no real assets are involved, merely gambling on notional values, the only major effect of closing out or netting all the swaps (mostly over-the-counter contracts between counter-parties) would be to take $230 trillion of leveraged risk out of the financial system. The financial gangsters who want to continue enjoying betting gains while the public underwrites their losses would scream and yell about the sanctity of contracts. However, a government that can murder its own citizens or throw them into dungeons without due process can abolish all the contracts it wants in the name of national security. And most certainly, unlike the war on terror, purging the financial system of the gambling derivatives would vastly improve national security.
CEOs Losing Optimism as Job Slowdown Imperils U.S. Growth - Bloomberg - Chris Burritt - Jun 8, 2012 - U.S. chief executive officers are turning more pessimistic about a second-half recovery as rising unemployment and Europe’s debt turmoil threaten domestic growth prospects. CEOs from General Motors Co. (GM) to Hewlett-Packard Co. (HPQ) to Manpower Inc. say they are concerned about the health of the U.S. economy. While economists predict a continuing expansion this year and next, executives see a mounting number of obstacles that could clip growth. U.S. employers added the fewest number of workers to their payrolls in a year last month....
Initial Claims Beat Expectations, With Prior Revised Higher, As Whopping 105 Thousand Lose Extended Benefits - Zero Hedge - Tyler Durden - June 7, 2012 - While it is a number which nobody will care about today, especially if it is better than expected, initial claims printed at 377K on expectations of 378K, the first beat of expectations in 5 weeks. Of course, the claims number next week will be revised to over 380K. Why? Because, as now happens every single week, last week's initial claims number was revised higher from 383K to 389K. As a reminder, last week this number was expected to print at 370K. So only a 19K miss when all is said and done. But at least the mainstream media has its bullish for general consumption headline: "Initial Claims drop by 12,000" even as market participants realize this is still QE-promoting. Continuing claims printed at 3,293K, missing expectations of 3,250K, and down from an upward, of course, revised 3,259K. But the most disturbing observation is that in one week alone, a whopping 104,600 people hit the 99-week cliff, and stopped collecting extended unemployment benefits, the most since December 2011, as those on EUCs dropped by -45,808 while those on Extended benefits dropped by a astounding -58,829. As a reminder, Zero Hedge first noted that shortly 700,000 people will no longer be collecting any unemployment benefits. Here is to hoping those off the dole, are at least collecting disability in the USSA as otherwise these are tens of billions in lost purchasing power.
Lawmakers to probe suspicious jobs data at Obama's Labor Dept. - Examiner.com - Jim Kouri - June 4, 2012 - In response to complaints by lawmakers and some news organizations, the U.S. House of Representatives' Committee on Oversight and Government Reform will hold a hearing on June 6 to examine the influence of Department of Labor staff, who are political appointees from the Obama Administration, statistics released to the media and public. The Committee, chaired by Rep. Darryl Issa (R-CA), will probe the Bureau of Labor Statistics processes for collecting and disseminating employment data, including unemployment figures and data regarding jobs created.
Among issues to be considered at the hearing is an April 10, 2012 order, which changes long-standing policy and requires news organizations that report on pre-released Labor Department data to use government-owned computer systems and software. The new policy has been strongly opposed by the Sunshine in Government Initiative, a coalition of media organizations that includes mainstream news organizations and the Online News Association.
Minimum Wage For Restaurant Servers Remains Stagnant For 20 Years Under Industry Lobbying - The Huffington Post - Dave Jamieson - June 2, 2012 - .... Williams, 50, has worked mostly at upscale bistros in Atlanta, Ga., earning $2.13 an hour before tips. It's the most frustrating element of a job she largely enjoys, she says. That miniscule wage is usually swallowed up by taxes, leaving her to live on her tips, which can fluctuate from week to week. She hasn't had health care coverage for years. The restaurants she has worked in haven't offered affordable plans, and she doesn't have the money to pay out of pocket for it. She simply hopes she doesn't get sick.
As for retirement? "I can't even think about retirement," says Williams. "I'd go into shock." Her restaurants haven't offered savings plans, either, leaving her with little beyond a modest 401(k) nest egg from a long-ago foray into the corporate world. The federal government raised the minimum wage to $7.25 per hour in 2009. Some states have raised theirs above that amount, to as much as $9.04, in Washington state. But since 1966, a sub-section of the minimum wage has existed for people who work for gratuities, known as the "tipped minimum wage," which Congress last bumped to $2.13 per hour in 1991. Some states have increased the tipped minimum wage on their own as well -- and Washington, like six other states, has no tipped minimum wage at all, so servers earn a full $9.04 before gratuities. About half of all states, however, continue to allow restaurants to pay servers $2.13, provided they make up the difference if the server doesn't reach the standard minimum wage after tips. The cost of living, meanwhile, has continued to climb. "As far as income goes, I made more 20 years ago than I do now, effectively," says Williams, who has a bachelor's degree but prefers to work in restaurants. "My affluent friends, their jaws drop when I tell them." Under this system, gratuities aren't really gratuities. They constitute the vast majority of a server's salary. Instead of giving a server a bonus for good service, diners are essentially subsidizing many servers' legally guaranteed wages.
And as the tipped minimum wage has remained the same, diners have been subsidizing a growing portion of that guaranteed wage over the years. Servers, meanwhile, are increasingly relying on customers to keep them on pace with inflation. Being paid a mere $2.13 an hour before tips might not be a big deal for a server at a four-star restaurant in Manhattan, where tips are generous and workers can earn a better-than-decent living. But for a career server working at, say, a pancake house in rural Kansas, an extra couple of bucks an hour could make a huge difference.
If Williams' pre-tip wage in Georgia were closer to $5 an hour, for example, like it is in many states, that would translate into an extra $6,000 per year, making it a lot easier to cover basic expenses. Maybe she would even be able to afford health insurance.... The NRA, for its part, says that the industry's growth is no reason to hike the tipped minimum wage. The group says that most servers already earn well above the federal minimum wage of $7.25, and that raising the tipped minimum wage could hurt kitchen employees and others who don't work for tips. "Even in a challenging economy, the restaurant industry has continued to be one of the country’s leading job creators," Katie Niebaum, a spokeswoman for the group, says in an email. "Legislation increasing the required minimum employer-paid wage for tipped employees would force employers to redirect payroll dollars away from employees who do not earn tips, and give them to tipped employees who are usually earning far in excess of the minimum wage."
2012 Long-Term Budget Outlook
Wilbur Ross: Why the U.S. is headed towards Recession - Reuters - June 7, 2012
Charles Biderman: Rick Davis of The Consumer Metrics Institute "We Are In The First Quarter Of The Next Recession" - June 8, 2012