Hotel el Convento, Old San Juan, Puerto Rico

- by New Deal democrat

Last week I showed you this courtyard:

It is an interior courtyard and restaurant from the Hotel el Convento in Old San Juan, Puerto Rico:


The hotel began it's existence as a Carmelite convent. Construction began in 1646 and was inaugurated as the Monastery of Our Lady Carmen of San Jose in 1651. It remained a convent until 1903.

Here is a shot of part of the lobby:


and here is a sample room. You can open the spanish style shutters to the tropical air:


I also showed you this photo from the rooftop jacuzzi, from which you are eye to eye with the promenade decks of the huge cruise ships which pull into the harbor:

To the left of the chaise lounges in this shot is a terrace where you can sit as long as you like, or enjoy an evening snack or morning continental breakfast. If you look at the exterior shot of the hotel, above, this terrace is immediately to the left of the words "El Convento" over the doors:


As you enjoy a cup or three of spanish-style coffee, or juice and fruit in the morning, you look out to this little park and neighborhood:


and just across the street your view is the Cathedral of St. John the Baptist (the exterior shot of the hotel above was taken from the cathedral steps):

and here is "the nun's steps" on another exterior side of the hotel:


Most people stay at the modern hotels on the ocean in the Condado, a few miles away from Old San Juan, but the old part of the city itself is non-stop beautiful colonial spanish architecture, and is very walkable. You should reward yourself for being alive by spending at least a couple of nights sometime at the Hotel el Convento.

Welcome to Brad DeLong Readers

We are pleased to be linked. Hope you enjoy the stay.

Weekly Indicators: Hurray for Jobs! edition

- by New Deal democrat

The Big Number for the week had to be the 290,000 jobs added in April. February and March were also revised higher. Since bottoming in December (exactly as I said it would), the economy has added almost 600,000 jobs -- unless you want to go with the household survey, by which measure it has added 1.6 million jobs! Most other data were similarly strong, except for a tepid ISM non manufacturing report, and the showing that people spent more than they earned in April. Wages are not holding even with inflation so far this year.

The high frequency weekly data continued to show a strengthening recovery:

▪ The International Council of Shopping Centers (ICSC) reported same store sales up only +0.4% vs. a year ago, and down -0.4% from last week.

They expect same-store sales for the entire month of April to be flat to slightly lower.

Shoppertrak reported retail sales increased 4.2% last week YoY and up 3.8% WoW.

Both yearly and weekly sales increased last week as retailers experienced theannual spike in consumer activity as Mother’s Day approaches. Showing additional retail strength, ShopperTrak estimates April sales were positive as compared to the same period last year despite only containing three shopping days for Easter due to the 2010 calendar shift – as opposed to April 2009 which contained most of the holiday’s spending.

“Right now our data continues to point to some recovery in retail as April was positive despite losing some solid shopping days due to the retail calendar shift,” said Bill Martin, co-founder of ShopperTrak. “Looking ahead we anticipate sales will slow a bit following Mother’s Day but will grow again toward the end of May as Memorial Day and graduations draw near.”

The Department of Energy reported that the price of gasoline went up four cents to $2.90 per gallon. Gasoline demand for the week was up by almost 4 million barrels vs. a year ago. Inventory still is high and climbing. This is the second bullish report in a row, but gasoline is only 10 cents under the psychological $3/gallon mark where I suspect there will be a significant bite. On the other hand, with the turmoil in Europe, Oil slid to ~$75 a barrel by noon Friday.

The BLS reported that last week's initial jobless claims totaled 444,000. The 4 week moving average was reduce to 459,000. This series remains in a downtrend, albeit a more muted downtrend than last year.

The American Staffing Association's weekly report showed that

During the week of April 19–25, 2010, temporary and contract employment increased 0.82%, raising the index one point to a value of 87

This was the 11th straight week of increases in temporary hires. Increases in temporary staffing are a leading indicator, so this bodes well for the jobs report.

Railfax recorded yet another strong week. Baseline, cyclical, and total – are continuing to increase, and continuing to increase at a rate faster than last year. cyclical traffic conintues its strong rise, only about 10% off its peak now. Intermodal traffic, which is a proxy of imports/exports, also remains substantially ahead of last year. Crushed stone and lumber, Railfax’s “recession watch” traffic, increased yet again, and crushed stone in particular is increasing strongly.

Finally, Daily treasury receipts continue their surge ahead of last year. As of May 5, 2010, for the last 20 reporting days, $129.8B in withheld taxes had been collected vs. $121.0B last year, a gain of $8.8B or +7.4%. So far, May 2010 is also running ahead of May 2009, $34.4B vs. $30.4B. April ended with Tax receipts up 4% vs. a year ago, $139.4B vs. $133.8B in 2009.

This week was a big win for the bulls on the economy, regardless of what the stock market may do.

P.S. Over the weekend, I'll reveal the location of the courtyard and jacuzzi I showed you last week!

Blow Out Jobs Report

From the BLS:

Nonfarm payroll employment rose by 290,000 in April, the unemployment rate edged up to 9.9 percent, and the labor force increased sharply, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in manufacturing, professional and business services, health care, and leisure and hospitality. Federal government employment also rose, reflecting continued hiring of temporary workers for Census 2010.

This is an all around great report.

First, census hiring accounted for 66,000 jobs. That means overall job growth was over 200,000 -- a very good number.

We also learned the unemployment rate increased because more people are re-entering the workforce. People don't do that unless they see improvement of sorts. So the unemployment rate increase is actually a good sign.

Let's look closely at the data:

Total private hiring was up 231,00.
Good producing hiring was up 65,000
Private service producing jobs were up 166,000.

Here's some more good news:

The change in total nonfarm payroll employment for February was revised from -14,000 to +39,000, and the change for March was revised from 162,000 to 230,000.

That means this is the second month in a row when job growth was over 200,000.

Here's a chart of establishment jobs growth from the report:


That is one good looking chart.

Simply put, this is one hell of a good report

Yesterday's Market

Despite the way yesterday felt to many, the reality is yesterday's trade wasn't really that complicated. For the time period marked (a) we have a standard, disciplined, sell-off. Points b is where the fun kicks in. There were stories of a "fat finger" situation where somebody typed in billion instead of million on a Proctor and Gamble trade. This led to a computer trading feeding frenzy:

The glitch that sent markets tumbling Thursday was years in the making, driven by the rise of computers that transformed stock trading more in the last 20 years than in the previous 200.

The old system of floor traders matching buyers and sellers has been replaced by machines that process trades automatically, speeding the flow of buy and sell orders but also sometimes facilitating the kind of unexplained volatility that roiled markets Thursday.

“We have a market that responds in milliseconds, but the humans monitoring respond in minutes, and unfortunately billions of dollars of damage can occur in the meantime,” said James Angel, a professor of finance at the McDonough School of Business at Georgetown University.

In recent years, what is known as high-frequency trading — rapid automated buying and selling — has taken off and now accounts for 50 to 75 percent of daily trading volume. At the same time, new electronic exchanges have taken over much of the volume that used to be handled by the New York Stock Exchange.

At (b) we have a major drop in the market on extreme volume. But notice that prices rebounded quickly at point c. Basically, the market made a round-trip through a crash in a period of about half an hour.

Speaking from a personal level, when I saw this happening, all I could think was "selling panic" which is the end move in a big move down. Obviously someone else was too -- the parties that purchased at point c.

As a result of all the market volatility, safe assets caught a major bid.

Gold gapped higher at the open (a), then rode the EMAs higher for the rest of the day (b). Also notice the higher volume (c) throughout the day.

The Treasury market also continues its massive rally (a) on very high volume (b). Also note the EMA picture remains very bullish with the shorter EMAs moving higher and prices above the 200 day EMA. I still consider this trade an anomily in the market -- that is, a short term abberation to a longer term trend.

The dollar is still catching safety bid at the euros expense. The primary uptrend (a) is still intact. Prices have gapped higher (b) on very strong volume (d). This might be an exhaustion gap -- a gap that occurs at the end of a long upward trend on high volume. If this is an exhaustion gap, we'll know soon enough as they tend to close very quickly. Also note the EMA picture is bullish -- all the EMAs are moving higher, the shorter EMAs are above the longer EMAs and prices are above all the EMAs.

More on the market in the AM

What a day, what a day.

Full recap in the AM

Emerging European Markets

There are two basic trends in the GUR chart -- an upward sloping trend line (a) and a broadening pattern, delineated by lines b and c.


Looking a bit deeper into the broadening top, we see the down, up, down within the triangle. Most importantly, we see the 200 day EMA has proved to be technically very important, providing support. Note that prices are currently right at this important technical level.


The short-term EMA picture is turning negative. All the shorter EMAs are moving lower, the 10 day EMA has moved through the 50 day EMA and the 20 day EMA is about to move lower. Also note the volume spike at the 200 day EMA.




a.) Momentum is decreasing but

b.) We haven't seen a huge flight from the security.

Yesterday's Market

Given all of the international developments that have been happening over the last few months,today I will look at these international markets to see what they are telling us. We'll start with China, where the central bank has been raising reserve requirements in an attempt to slow down the economy.



The above chart is a simple three year line chart that shows the SPYs and FXIs. Notice the extreme close correlation between the markets. Also note the FXIs have topped twice this year before the SPYs, leading the US downward. The reason for this is the inter-related nature of all the world's economies now.


Above is a two year chart which shows the Chinese market has broken an important long-term trend line. It's important to remember that breaking a trend does not mean a reversal -- that is, a complete change in direction. It usually means the direction will change. But most importantly, it does tell us that something is different -- we need to be on the lookout for different events and occurrences in the market.



The yearly chart shows two primary uptrends at (a) and (c) -- both of which have been broken. Recently, prices have found upside resistance at line (b). Moreover, notice there is little actual, clear, long-term direction to the market.


a.) Momentum is clearly dropping but,

b.) Money is not flowing out of the market is a big way right now.

ADP Report Show Modest Gain

From ADP:

Nonfarm private employment increased 32,000 from March to April 2010 on a seasonally adjusted basis, according to the ADP National Employment Report^®. The estimated change in employment from February to March 2010 was revised up, from a decline of 23,000 to an increase of 19,000.

In addition, the revised estimate of the monthly change in employment from January to February 2010 shows a modest increase of 3,000. Thus, employment has increased for three straight months, albeit only modestly. The slow pace of improvement from February through April is consistent with the pause in the decline of initial unemployment claims that occurred during the winter months.

Click on the above images for a larger image.

A few points.

1.) All the recent revisions have been upward. That implies that the estimating model used is still too bearish for the underlying economy.

2.) There has been modest growth in manufacturing jobs. The strong manufacturing numbers we've been seeing for some time are starting to translate into job growth.

3.) The primary drag has been in construction jobs. Don't expect this trend to change anytime soon. In addition, consider the post on unemployment and educational achievement for more insight into the issue.

A Look At the Copper Market

At point (a), prices sold off before reaching a new high. This is an early indication that a trend change is possible.

At point (b), prices sold-off, printing a very strong downward bar (c) after running into resistance at an EMA.

Prices consolidated a (d), but couldn't stage a rally.

Over the last three days, we've seen some very strong downward bars (e).



This is a weekly chart, so the last bar (a) could change by Friday. But as it stands today, prices have moved through long-term support and are resting at an EMA. That is a very important development.

ISM Employment and Nonfarm Payrolls April 2010

- by New Deal democrat

With this morning's release of the ISM Non manufacturing index, I wanted to update post I wrote a couple of months ago looking at the correlation between both the ISM Manufacturing and Non manufacturing indexes and nonfarm payrolls.

Last September when I was putting together a "Leading Index" exclusively for employment, I included the ISM Manufacturing index, which had always signaled growth in jobs whenever it crossed 53 (the iindex is a diffusion index, subtracting negative from positive responses, with neutral being at 50. Above 50 is expansion, below is contraction). Here is the graph I created at that time, with the trough in employment for each recession normed at 100, and the ISM Manufacturing index normed to cross that 100 jobs reading at 53:



The ISM's Non manfuacturing index, however, proved to be important in calculating when the jobs number actually turned from negative to positive in this Recovery, even though it is only 13 years old. So in March I refined the jobs leading indicator to include the following:

(1) the ISM manufacturing index be above 50 and ISM non manufacturing business activity above 48 as an initial signal; and
(2) both indexes be above 52 and average 53 or higher as a final signal, which gives one or two months' lead time to job growth. That signal was triggered for one month in October (accurately) and again for February.

With the ISM manufacturing index in April reading 60.4, and this morning's ISM non manufacturing index reading 55.4, the average at 57.9 is well into the job growth range.

[As an aside, the Non manufacturing index itself generally went sideways in April, signalling continued growth, but growth neither accelerating nor decelerating. Notably, new orders grew at a slower rate (a negative), but supplier deliveries slowed down further (a positive). The employment index declined very slightly from 49.8 tp 49.5, essentially a neutral reading.]

Although the employment subindexes are not leading but concurrent, they can serve as an important confirmation of growth or contraction in jobs. In the below graph, the ISM Manufacturing employment index is in green, Non manufacturing in blue, and Nonfarm payrolls monthly gain or loss, in thousands, in red (not including this morning's data):




It's pretty easy to see that the ISM employment subindexes indicate job growth at least as strong as the average growth in employment during the last economic expansion. That becomes even more apparent when we edit the above graph to average the ISM Manfucturing and Non manufacturing employment indexes into one line (blue below - does not include this month):



Here's a chart of the improvement in both employment indexes for the last six months, Manufacturing on the left, Non manufacturing in the middle, the combined average on the right:

Month Mfg Nonmfg avg
2009-11-01 49.6 41.7 45.6
2009-12-01 50.2 43.6 46.9
2010-01-01 53.3 44.6 49.0
2010-02-01 56.1 48.6 52.3
2010-03-01 55.1 49.8 52.4
2010-04-01 58.5 49.5 54.0

Because nonfarm payroll data is "noisy," this doesn't translate into a specific number for Friday, but it certainly adds to the evidence that job growth will average a somewhat stronger number than most are anticipating.

Yesterday's Market

Yesterday was a very interesting market situation. Remember that over the last few weeks we've seen the Treasury market rally in reaction to the Greek situation. That situation continued yesterday. But, we are starting to see some cracks in the equity markets.


The short term EMAs (10 and 20 day EMAs) have moved lower, indicating the short term trend is now lower (a). Prices have moved through through support levels (b) and are resting right on top of the 50 day EMA. Also note that the support level (b) was established on a higher volume day, indicating it should be given more weight in analysis.


The same analysis of the SPYs applies to the QQQQs


The EMA picture on the IWMs is a little less severe with the 20 day EMA still moving horizontally.

Let's move to the Treasury market -- especially the long-end of the curve:


First, there is a clear uptrend (a) in place which is confirmed by the shorter (10, 20 and 50) EMAs. The 10 and 20 day EMAs have crossed over the 50 day EMA. Prices yesterday gapped higher (c) on strong volume over the 200 day EMA. Technically that is one hell of a bullish move. The one negative to this rally -- and it is a pretty big negative -- is the steep angle of the line. Steep angle rallies typically don't last long. All of this price action is in the face of next week's auction which should be very large.

There are two other important issues here:


The dollar continues to rally, making yearly highs on strong volume. This indicates that US assets are still the world's safety bid. What is interesting is there are countries with far higher interest rates (Australia is at 4.5%). That means other issues are driving the dollar trade such as good economic numbers relative to the other industrialized countries. The stronger dollar


... is putting downward pressure on some commodities. Industrial metals are dropping because of the dollar and indications from China that they are slowing down their economy. Prices have broken a longer-term uptrend (a). The EMAs are turning bearish -- the 10, 20 and 50 day EMAs are moving lower, the 10 day EMA has moved through the 50 day EMA and the 20 day is about to, and prices are below the shorter EMAs. Prices are currently using the 200 day EMA as technical support. Lower commodity prices have good and bad points. The good is lower inflation. The bad is copper has a "PhD in economics", largely because it is used in literally everything. China's attempts to cool its economy could have important short-term ramifications for the world.

Yes, Virginia, The Blogsphere Is Full of Hacks and Whores

Just as I predicted, there is harping on Friday's GDP report. Why? Inventories grew -- and that is bad. In fact -- when we back out inventories we learn that growth only increased 1.63%, indicating growth is still weak. There is but one, academically accepted way to characterize this statement: BULLSHIT.

First, why is inventory restocking bad -- or better yet -- less than admirable economic growth? No one has yet to actually say why it is bad, or somehow less than valuable to the economy. All we learn is inventory stocking contributed to growth and that is somehow bad. But that is pure crap: inventory restocking is a valid way to grow the economy. Think about it this way. Best Buy purchases 1000 LCD TVs for sale, based on past sales, projections etc.... Except, sales slow down in a big way -- a way not contemplated in their projections. That means Best Buy has a ton of LCD TVs it has to sell but can't, meaning BB will not order any more TVs for awhile. But after some time, consumers start to buy TVs again so BB's inventory drops to the point where they need to buy more TVs. More importantly, BB looks out on the horizon and thinks, "it looks like people are going to continue buying TVs. We'd better buy more." That means the TV factory starts to make TVs, leading to more output, which leads to more wages, which leads to increasing demand .... you get the idea.

In case you missed it -- the above scenario is GOOD. The reverse -- when BB can't sell TVs so they stop ordering, so wages drop, so people stop working is BAD. Thanks for playing and here's your sign.

Secondly, let's look at ALL the GDP data, shall we?

GDP+ increased 3.2% -- a good rate.
PCEs -- personal consumption contributed 2.55 of that growth
Gross private domestic investment contributed 1.67 of the 3.2.
Net imports and government expenditures at the state and local level subtracted from growth.

Funny --- there was no mention of the above areas of growth in the "inventories accounted for all the growth" crapola out there.

In other words -- there were plenty of other areas of growth.

So -- what does this mean?

1.) The phrase "think tank" is now an oxymoron, much like jumbo shrimp. Anyone who works at a "think tank" has an agenda, around which he/she attempts to bend the facts. This occurs on both sides of the political isle in equal proportion. People who work at "think tanks" are either whores (they sell their intellectual abilities to the highest bidder), hacks (they are paid to say certain things at all times in order to promote a particular ideology) or politicians (meaning they have an agenda to obtain a political result). Some people fall into all three, meaning they earn the coveted "hat trick of intellectual whoredom." Either way, remember that when a "think tank" spokesman is moving their lips they are lying and if you offered them a higher salary they would tell you the sky is purple, the Astros are contenders and Bob Dylan can carry a tune with perfection.

2.) Once again, the blogoshere has demonstrated it has become "foxified." Facts and data are irrelevant, knowledge of the subject you are writing on is not necessary, getting attention to assuage an insecure ego dominates and spin is everything.

ISM, Auto sales, Factory Orders show V-shaped Manufacturing Recovery intact

- by New Deal democrat

This has been a "Bifurcated Recovery", where the industrial and manufacturing sector of the economy rebounds sharply, while that part of the economy most identified with Joe Sixpack - most especially income - rebounds very slowly.

Yesterday and this morning's data confirmed that manufacturing continues to be in a V-shaped recovery. The ISM manufacturing index came in at 60.4 showing fast expansion in the manufacturing sector.

Almost all of its components likewise showed increasingly strong expansion. Inventories continue to shrink, at a faster rate. New Orders are growing very fast at 65.7. Supplier deliveries are falling further behind (a good sign).
And most on point, employment at 58.5 showing not just growth, but faster growth. For manufacturing, this is like the V-shaped recoveries of the 1970s and 1982-3, and not at all like the weak recoveries in 1992 and 2002.

Likewise, auto sales were reported at 11.2 vehicles on an annualized basis, holding on to two-thirds of their strong advance from February to March.

(courtesy Calculated Risk)

Recall that in February annualized sales were 10.3m (as Toyota's sales fell dramatically). March's 11.8m annualized sales were fueled by the resulting Toyota incentives. In April Toyota dropped most incentives, making April the first "clean" auto report since January.

Spencer at Angry Bear contends that, as gas prices go up as a share of disposable income, car sales go down. Thus, this was a good number, as it means that gasoline prices have not yet caused a reversal of the improving trend in car sales.

This morning new factory orders blew out to the upside:

New orders received by U.S. factories jumped … 1.3 percent after an upwardly revised 1.3 percent gain in February, initially reported as a 0.6 percent rise, the Commerce Department said….
When transportation orders were stripped out, orders surged 3.1 percent, the biggest gain in almost five years. Excluding defense, factory orders were up 1.3 percent.
Non-defense capital goods orders excluding aircraft, viewed as an indicator of business confidence, leaped 4.5 percent, the steepest increase since December 2007.

You don't have to believe me, but how about Warren Buffett? Berkshire Hathaway owns a variety of "meat and potatoes" companies, from furniture to utility to railroads. Thus Warren Buffet has a unique perch from which to view the economy.

Here's what he said yesterday:

Based on the performance of his companies, he said there has been a 'big pick-up' in manufacturing this year, although it's not as productive as it was three years ago. He believes the retail market in the US has not picked up as much yet as manufacturing, but the sale of luxury goods is improving.
Overall, he pointed out the US economy has picked up and is set for a rapid 'V-shaped' recovery:
'There was a lot of strength in March and April. It won't be translated into huge changes in unemployment soon, but the economy is starting to move.'

In short, the V-shaped manufacturing recovery is continuing.

Yesterday's Market

Let's start with the dollar today



Despite a clear uptrend, momentum (a) and the A/D line are decreasing. This is a very interesting divergence, because it indicates the dollar is about to correct. But


the EMAs show the short, medium and long-term trend (10, 20, 50 and 200 day EMAs) are all rising. In addition, the shorter EMAs are above the longer EMAs -- the most bullish orientation possible. S0 -- why the divergence between momentum, accumulation and the overall trend?

Part of the answer is fundamental. The US economy has been printing strong economic numbers across the board. The makes the dollar more valuable. But more importantly, of the three major industrialized currencies (yen, euro and dollar) the dollar's economy is performing the best. Japan is still dealing possible deflation and very high debt levels and the Greek situation which is very euro negative. Consider these charts:


The yen is currently below the 200 day EMA and therefore is in a bear market. All the EMAs are moving lower, indicating the short, intermediate and long-term trend is down. The shorter EMAs are below the longer EMAs -- the most bearish orientation possible. However, this orientation is still fluctuating around the 200 day EMA, indicating it is in the beginning phases.


The euro is clearly in a bear market -- in fact, this bear market pattern is a near perfect example of a bear market -- and is eerily reminiscent of the dollar's chart a few years ago. Notice all the EMAs are moving lower, the shorter EMAs are above the longer EMAs and prices are below the EMAs. About the only good thing about this chart is the volume increase starting in February that could be an indication of a selling climax.

In other words, the dollar is the beneficiary of bad Japanese and European news.

Finally, there is this point:


The dollar is near a short-term high and


Is near the 200 week EMA on the weekly chart.

A strong dollar has incredibly important policy implications. First, it means inflation is lower, giving the Federal Reserve more room to play with on interest rate policy. Secondly, it keeps commodity prices in check. On the negative side, it makes (at some point relative to the other country's currency) US goods prohibitively expensive for the export market.

But perhaps the most important point is this: traders still consider the US currency a safe haven in times on uncertainty.

Educational Achievement and Unemployment

Consider the following charts, which show the unemployment rate and median usual weekly earnings for various groups based on educational achievement:

For high school drop-outs, the unemployment rate never reaches 5% -- a statistical level economists argue is "full employment. Even during periods of economic expansion the rate of unemployment is high. Simply put, high school drop-outs face a difficult time even in good times. When bad times come, this demographic group experiences extreme difficulty.

Let's take a look at weekly wages for high school drop-outs:

The "median usual weekly earnings" of high school drop outs is currently $450, or $23,400/year -- not much money.

The unemployment rate for high school graduates does hit full employment, but only after the expansion is underway. They did fairly well during the 2001 recession, with unemployment rates barely above 5%. But they have been hit hard by the latest recession with unemployment rates of ~10%


The "median usualy weekly earnings" of this group is right around $625, or $32,500/year. This is OK, but still places them at or near the "one bad week and they're in serious economic trouble" camp.

The "some college or associates degree" had done well until this recession. Notice this group has always been near "full employment" of 5% until 2009 when their unemployment rate hit 8%.

The median usual weekly age for this group is around $725, giving them an median usual annual income of $37,700.

The unemployment rate for people who have college degrees and higher has always been below full employment. Even during the Great Recession this number has maxed out at 5% -- full employment.


Finally, this group has better earning power, with median usual weekly earnings (second quintile) of about $1025, or a median usual annual income of $53,300.

The data's results are very clear.

1.) Lower levels of education achievement mean a higher rate of unemployment even in good economic times, and low earning potential.

2.) The higher the educational achievement, the less susceptible to economic events one becomes.

3.) Higher educational achievement means higher earnings.

Let's look a bit deeper into the job loss data. Below are two charts -- the first is total construction employment and the second is total manufacturing employment.


Both of these areas -- which typically attract lower educational attainment employees -- have been hit very hard in the latest recession. Construction has lost ~2 million employees and manufacturing has lost ~ 2.5 million. Neither of these areas is coming back soon. The US is very overbuilt and manufacturing is moving towards higher and higher rates of automation. This means the US has two choices: educate the unemployed so they can find better paying jobs or create jobs that these people can fill (or a combination of both).