Mish's Global Economic Trend Analysis

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Sarkozy Calls for "Profound" EU Overhaul Led by France and Germany; Farage "Earthquake" Posted: 21 May 2014 10:36 PM PDT In a last minute push to win votes in the European parliament elections, former French president Nicolas Sarkozy Calls for "Profound" EU Overhaul led by France and Germany. In a clear bid to rally voters to his centre-right UMP party, which is under threat of losing in France to the anti-EU National Front, Mr Sarkozy broke a two-year virtual silence on political issues to issue a ringing defence of the need for the union to preserve peace in Europe and beyond. Those who want Europe to break up "forget the lessons of history and will lead us to the abyss", he wrote in a long article published in Le Point magazine and the german newspaper Die Welt on Thursday. "France and Europe are inseparable geographically, historically, culturally and, now, politically. Europe should be vibrantly saluted and supported." Addressing the key issue of immigration, the focus of much anti-EU rhetoric, Mr Sarkozy said zero immigration was an illusion. But he said if action was not taken rapidly to control the inflow from outside the EU, "our social contract will explode". He said there should be an immediate suspension of the Schengen agreement on open borders within most EU countries, to be replaced by a "Schengen 2" which countries could join only if they properly imposed a common immigration policy. Mr Sarkozy's intervention came as polls showed the FN, led by Marine Le Pen, leading the European election race in France with as much as 25 per cent of the vote, ahead of the UMP. Mr Sarkozy called for "a great Franco-German economic zone at the heart of the euro" that would lead the single currency. He said there should no longer be equal powers within the eurozone for smaller members such as Malta, Cyprus and Luxembourg. "There is no alternative to drastically diminishing the extent of (the EU's) competences," Mr Sarkozy wrote, saying it should retain power only over industry, agriculture, trade, competition, energy and research. Power "Only" Over Industry, Agriculture, Trade, Competition, Energy and Research Excuse me for asking but other than immigration, what is left? Better yet, what drastic cuts in EU power is Sarkozy proposing? More questions abound. Why should the EU control, agriculture when France is the primary beneficiary? Then again, that question has an obvious answer. "Profound" Overhaul Nonsense Sarkozy is in fantasyland if he thinks Malta, Cyprus, Luxembourg etc, will vote to cede power to France and Germany. To change the treaty, every nation will have to sign it. Even if nations did cede power to Germany and France, what is it France and Germany agree on other than the need to agree? Not budgets, not stimulus, not a banking union, not retirement age, not work hours, and not the role of the ECB. Farage "Earthquake" The Financial Times reports Mainstream parties braced for Farage phenomenon Nigel Farage has predicted "an earthquake", and by the time polling stations close at 10pm on Thursday night, his UK Independence party may have achieved what had once seemed incredible – it might have won a nationwide election. The party once described by David Cameron as comprising "fruitcakes, loonies and closet racists" believes that it can win Britain's European parliamentary elections, setting off aftershocks in Westminster and Brussels. Despite weeks of hostile media coverage, Mr Farage predicts that his party will emerge victorious when the ballot boxes are emptied, while building its base in a series of local elections across the country. Mr Farage insisted on Wednesday that Ukip could build on these contests and win its first seats at Westminster at the next election, despite the unfavourable first-past-the-post voting system. These elections should be fun. Results will be in shortly. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Is There a Shortage of Skilled Workers? My Own Personal Experiences Posted: 21 May 2014 10:35 AM PDT Given all the media hype about the severe shortage of skills in the US and the need for more education and training, inquiring minds may be interested in alternative views. I offer my own personal experiences at the end of the discussion. For now, please consider a viewpoint on the alleged shortage of STEM (science, technology, engineering, math) workers by the National Review: What STEM Shortage? The idea that we need to allow in more workers with science, technology, engineering, and math ("STEM") background is an article of faith among American business and political elite. But in a new report, my Center for Immigration Studies colleague Karen Zeigler and I analyze the latest government data and find what other researchers have found: The country has well more than twice as many workers with STEM degrees as there are STEM jobs. Also consistent with other research, we find only modest levels of wage growth for such workers for more than a decade. Both employment and wage data indicate that such workers are not in short supply. In an article entitled "The Science and Engineering Shortage Is a Myth" for the March issue of The Atlantic, demographer Michael Teitelbaum of Harvard Law School summarizes the literature on STEM. "No one has been able to find any evidence indicating current widespread labor market shortages or hiring difficulties in science and engineering occupations that require bachelor's degrees or higher," he points out. Teitelbaum is one of the nation's leading experts on STEM employment, former vice president of the Sloan Foundation (a philanthropic institution essentially devoted to STEM education), and author of Falling Behind? Boom, Bust, and the Global Race for Scientific Talent, just published by Princeton University Press. In looking at the latest government data available, my co-author and I found the following: In 2012, there were more than twice as many people with STEM degrees (immigrants and native-born) as there were STEM jobs — 5.3 million STEM jobs vs. 12.1 million people with STEM degrees. Only one-third of natives who have a STEM degree and have a job work in a STEM occupation. There are 1.5 million native-born Americans with engineering degrees not working as engineers, as well as half a million with technology degrees, 400,000 with math degrees, and 2.6 million with science degrees working outside their field. In addition, there are 1.2 million natives with STEM degrees who are not working. Meanwhile, less than half of immigrants with STEM degrees work in STEM jobs. In particular, just 23 percent of all immigrants with engineering degrees work as engineers. Of the 700,000 immigrant STEM workers allowed into the country between 2007 and 2012, only one-third got a STEM job, about one-third got a non-STEM job, and about one-third are not working. My Own Personal Experiences  I worked 20 years in mainframe computer programming after graduating from the University of Illinois with a degree in civil engineering. I have been through more bank mergers than one could imagine. I was an assistant vice president at Harris Bank when Bank of Montreal bought them out. I did not like the cultural change so I left and became an independent consultant. My first contract was at Chase. That job ended when Chase and Chemical merged. Soon thereafter, I was at First National Bank of Chicago which became First Chicago, then First USA, then Bank One, now Chase. I was there though Bank One. I was on a project at US Bank in Minneapolis involving a merger or sale of a Piper Jeffrey trading system. 911 hit at the end of the US Bank contract. I was out of a job for over three years. In that timeframe, Countrywide Financial put out an ad only mainframe geeks could possibly understand. The job required IMS, CICS, COBOL, DB2, and Assembly Language experience. They also wanted banking and credit card experience. There are an extremely limited people in the country who can genuinely profess proficiency in that skill set. To this day, I wonder if the job even existed because I could not get an interview. I never worked in programming again. I am often accused of not knowing what it is like to be desperately in need of a job. Believe me, I do know. I started my blog out of desperation, hoping someone would discover me and hire me as a writer. It never came to that. Even the Motley Fool turned me down for an opening they had. After all, I had no experience and no related degree. Calculated Risk, who I met on Silicon Investor created the first template for my blog. Barry Ritholtz at the Big Picture promoted me early and often, and John Succo convinced Todd Harrison at Minyanville to take me on as a "professor" (an honorary term for frequent contributors). So here I am, with thanks to numerous others who influenced me along the way. I picked up debt deflation ideas from Australian economist Steve Keen. Michael Pettis at China Financial Markets taught me nearly everything I know about trade, and Pater Tenebrarum at the Acting Man blog taught me nearly everything I know about Austrian economics. I met Pater under a different name on Silicon Investor in 2001. Shortage of Skills? There are hundreds-of-thousands of skilled programmers, engineers, chemists, lawyers, etc., out of work or working in jobs that make no use of their college degree. That does not stop the Obama administration, the education industry, and even the Fed from promoting education and training as the solution to what ails us. Please consider a few snips from a speech made today by William Dudley, President of the New York Fed: What Kind of Jobs Have Been Created During the Recovery? Firms often change the way they utilize workers and the mix of skills they employ during recessions and recoveries.  The weakening demand during recessions forces firms to look for new ways to be more efficient to cope with hard times.  These adjustments do not affect all workers equally.  Indeed, it's what we typically think of as middle-skilled workers—for example, construction workers, machine operators and administrative support personnel—that are hardest hit during recessions.  Further, a feature of the Great Recession and indeed the prior two recessions, is that the middle-skill jobs that were lost don't all come back during the recoveries that follow.  Instead, job opportunities have tended to shift toward higher- and lower-skilled workers. As we'll show, these same trends have played out in our region.  While there's been a good number of both higher-skill and lower-skill jobs created in the region during the recovery, opportunities for middle-skilled workers have continued to shrink. I believe it is important for us to highlight these job trends and to understand their implications for our region.  There have been significant and long-lasting changes to the nature of work.  As a result, many middle-skilled workers displaced during the recession are likely to find that their old jobs will never come back.  Furthermore, workers are increasingly facing higher skill requirements in order to land a good job.  These dynamics in the labor market present a host of challenges for the region to address.  However one thing is clear: workers will need more education, training and skills to take full advantage of the types of job opportunities being created in our region, as well as across the nation.  So, it's important that we work together to find ways to help people in our region adapt to these changes. The idea that a "middle-skilled" person can go back to school at age 40, take a few classes and become a java programmer, an engineer, or a chef, and land a meaningful job in that field is nothing but hope-filled hype. Perhaps 1 out of 100 make some use of their training. The rest just end up deeper in debt. Fed-induced boom-bust cycles that benefit the already wealthy at the expense of everyone else, and debt-overhang, including student debt that exceeds $1 trillion, are the major problems today, not the alleged shortage of skills. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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