1. News & Issues
Send to a Friend via Email
You can opt-out at any time. Please refer to our privacy policy for contact information.
Kimberly Amadeo

Kimberly's US Economy Blog


Follow me on:

Which States Have the Best Economies?

Monday June 2, 2014

office meeting


With the economy in a slow mode, it makes sense that a reader would ask: "Where can I find information on which states have the best economies and job markets?"

There's not a one-size-fits-all answer to that question. For example, many of the states with the fastest-growing economies did so for reasons that might not get you a job. Texas grew a hearty 4.8% in 2012, double that of the U.S. overall. However, it did so thanks to oil drilling and immigration from Mexico. North Dakota grew 13.4%, a result of its boom in shale oil extraction. West Virginia grew 2.44% due to demand for coal. Those states' growth will be the biggest help to those with mining skills.  (Source: USA Today, Top States With Fastest Growing Economies, June 15, 2013)

Montana has the best economy to start a business. That's because its  Bakken oil fields have created a desperate need of small service businesses. Vermont is second, thanks to its rich (literally!) resources of venture capital startup funds. These businesses focus on technology, biotech and life science startups. New Mexico is third, attracting many technology and biotech companies supported by both the Sandia and Los Alamos National Laboratories. The growth in those states helps those with entrepreneurial skills. (Source: Kauffman Foundation, Best States for New Businesses, June 18, 2013)

How It Affects You

You might want to think about moving to one of the states on the list, even if you aren't an entrepreneur or have oil drilling skills. The companies that are doing well will need all skill levels. It will also be a good environment to improve your skills and become more entrepreneurial, yourself.


Want to Really Cut Government Spending? Bring Back the Draft

Monday June 2, 2014

LBJ congratulating a soldier

As the midterm elections come around, I'm sure one of the big topics will be cutting the budget. Would someone please tell me why any debate about cutting the $17 trillion debt focuses on either:  a) Social Security, b) Obamacare, or c) Foreign Aid. Am I the only one who sees the elephant in the room -- defense spending?" That was based on my post about the budget, Congress Agreed on a Budget This Week, and 70% Is for Defense

I received many insightful responses, but this one made a really interesting point. Basically, reinstate the draft, so we all will have a reason to care about America's defense spending. Here's why:

The military establishment became an "independent" entity when we ended the draft (which was popular then because of the VietNam war). But since then our elected representatives have been at the mercy of the war mongers (companies making money off these wars) because the public has no skin in the game any longer, so don't pay attention. Then, since 9/11 we've doubled our military. We run higher budgets now than we did during the Cold War. It's hard to "come down" from a "high" but we (like other addicts) have to change our habits.

In case you're wondering, I'm not critical of the troops who, largely, are well meaning or unable to get a job. Did you know we pay the military more now than 90% of the working people? We have to pay well because service is voluntary and dangerous. No, I'm opposed to the war mongers (Congress who takes pay-offs from corporations to produce war material) and businesses paying bribes to continue to make absurd profits (with a great deal of "waste, fraud and abuse" - the name of a recent report). These are who use this to get rich while sending other people's kids to war (certainly not theirs). And the last war we "won" was WWII so you'd think someone would say "hey, let's re-assess", wouldn't you?. And while they are at it, consider what we haven't done with the money we've spent on war. Education comes to mind. Our educational system ranks 26-31 among developed nations.

Anyway, just so you don't think I don't like those serving. Just wish there were equally good jobs where they didn't have to kill or be killed..

The greatest menace to freedom is inert people. (Louis Brandeis, 1927)
No one loves armed missionaries.  (Maximilien Robespierre)
If the good people don't go into politics, the scoundrels surely will. (Judge Levi S. Udall).
Patriotism is often the cry extolled when morally questionable acts are advocated by those in power.  (Bradley Manning, 8/21/13)

I think Jacqueline makes a good point. The last time we had a draft was during the Vietnam War. I remember all the protests, and it eventually ended the war. That's because everyone was impacted. All young men had to register for the draft, and it really brought it all home -- literally. Today, all young men AND women would have to register. That means everyone would be personally involved. People would pay a lot more to what the President, Congress and the Defense Department was doing.

Do you agree with Jacqueline? What do you think? Leave your answer in the comment section below, or click on one of these links:

Military Spending In Depth


Photo: LBJ thanking a soldier in Vietnam. Credit: Yoichi Okamoto/LBJ Library Getty Images


America Is Not Really a Free Market Economy: Why That Could Be the Jobs Solution

Thursday May 22, 2014


The U.S. is generally considered the world's premier free market economy. That's because the U.S. Constitution guarantees many elements that create a free market: ownership of private property, a competition market, and unregulated prices, to name just three.  However, the Constitution also allows the Federal government to step in to "promote the general welfare." This goal has led to what many call "the socialist welfare state." What many people don't consider is how command economy characteristics also pop up in national defense, industry subsidies and corporate bailouts. The U.S. is a mixed economy, and is better for it.

When people think of a command or centrally planned economy, they usually call to mind Russia, China, Cuba, North Korea, or Iran. However, most modern economies are really mixed, allowing government central planning in areas that are deemed of vital importance to the economy's growth. For example, the U.S. spends more on defense ($756.4 billion in FY 2015)  than any other budget area except Social Security ($896 billion). It's more than Medicare ($529 billion), Medicaid ($331 billion) or the interest payment on the debt ($251 billion). It's even more than the amount allocated for government bailouts of banks ($700 billion) during the 2008 financial crisis.

Thanks to globalization, even command economies have adopted characteristics of a free market economy. That's because they are impacted by free market pricing throughout the world, and must respond in a flexible fashion.

So, the question that should be asked this election season should not be "Are we heading toward a socialist state?" We already have aspects of that, and most people enjoy being protected financially after they retire. The question should be, instead, "What are our priorities as a nation?" A command economy is great at mobilizing economic resources quickly, as the U.S. did during World War II. In fact, that's what ended the Great Depression.

Now, I'm not suggesting we start another war to boost economic growth. In fact, today's defense spending is not very effective at creating jobs, since so much is spent on technology instead. However, we should consider shifting our priorities so we can put the millions of unemployed back to work.  That means shifting defense spending (8,555 jobs/billion) toward public works construction (19,795 jobs/billion).  This would provide the benefits of a command economy, by mobilizing quickly to solve the nation's #1 problem. Putting people quickly back to work will create the demand needed to let free market forces do the rest. Read More...

7 Years Ago Today -- "Experts Predict Return to Growth in ‘08"

Wednesday May 14, 2014

falling dollars

Here's why you can't trust the forecasts of economists, polls or even  futurists. I came across this blog post I wrote on May 21, 2007. How very, very wrong they were:

In a report released today (May 14, 2007), 48 economists polled by the National Association of Business Economics (NABE) said that the economy would remain sluggish through 2007, thanks to the downturn in the housing market. They agreed with NAR's forecast that the housing market will not improve until next year. They also saw non-core inflation remaining above the critical 2% point. This would keep the Fed from lowering rates until next year, at the earliest....if it does lower rates at all. (Source: NABE Outlook)

I happened to disagree with them, as my post said:

As I said in this blog last November, the housing downturn will have an impact on the economy overall. (See Downturn In Real Estate Could Threaten US Economy) Therefore, your best bet is to be financially conservative this year, and put off big purchases until next year, when the economy starts to pick up again.

However, hindsight is 20/20. Everyone thought that the downturn would be mild and short, at worse. Even though we all know that past performance is no guarantee of future success, we all react emotionally.

What's the solution? Start with a diversified portfolio. Then, adjust your asset allocation according to where we are in the business cycle. For more, see Stock Market Tips: How to Profit From the Business Cycle

47% Are Forced Into Unplanned, Early Retirement

Thursday May 8, 2014

$1 nest egg

The latest retirement survey from the Employee Benefit Research Institute (EBRI) reported that nearly half (47%) of current retirees were forced an early retirement that they didn't plan. Of these, more than half can't work because of health problems or disabilities (55%).  Another 23% had to quit to take care of their spouse or other family members.

In fact, healthcare is the second largest expense in most retirees' budgets. Furthermore, a whopping 12 million older Americans will need long-term care by 2020. Most people don't realize this expense is not covered by Medicare.

Surprisingly, only 20% were forced into retirement due to changes at their companies, such as downsizing or closure. You'd think that would be the main reason, thanks to the financial crisis. However, it's possible that many people claimed disabilities to receive benefits that would supplement their income.

This is up significantly from 2007, when only 37% of workers were forced into retirement. At that time, 28% couldn't work because of health problems, downsizing (28%), caring for family member (25%) or were told they had obsolete skills .

Only 7% of retirees were able to retire early because of good planning. Of these, nearly a third did so because they were able to afford an earlier retirement, while roughly 1 in 5 simply wanted to do something else.

Early retirement is a big shock to most workers, since 73% don't plan to retire until age 65 or later. That's is not because they love their jobs so much, but instead really don't see that they have a choice. According to EBRI, these workers are not confident about their financial security, are less likely to have pensions, and are women. (Source: EBRI 2013 Retirement Confidence Survey)

How It Affects You

Most people put off retirement planning. Most just assume it will take too much time and energy. Others are worried that it will just be too depressing, and in fact prove that they'll never be able to retire. Then there's others who don't even know how to get started.

However, even without putting pencil to paper, you can safeguard yourself against the four main reasons that people retire early:

  1. Health - Safeguard your health. (See Top Ten Things to Do for a Healthy Life)
  2. Caring for others - Look into long-term care insurance for them. (See LongTerm Care Insurance)
  3. Downsizing - Look into your own career planning. (See How to Survive a Layoff)
  4. Obsolete skills - Make sure your skills are up-to-date. (See How to Acquire New Skills)


10 Reasons Why the U.S. Economy Won't Collapse

Sunday May 4, 2014

us economy collapse

Frequently, I receive emails from readers and friends asking if the U.S. economy or the U.S. dollar are going to collapse. I don't know why they've suddenly become concerned. Not one of them sent me a similar email the week of September 17, 2008 when the U.S. economy almost DID collapse.

Things have gotten slower in 2014, but last year the U.S. economy is poised had one of its best years since 2007. The stock market set new records, housing prices were headed in the right direction, GDP was be in the healthy 2-3% growth zone. Although this year is a little shakier, that's a far cry from a collapse. Maybe all the gloom-and-doomers who make money by selling gold (which is dropping), guns and canned food -- not to mention their own books on how to survive -- are worried because things ARE ACTUALLY OK.

Anyway, here's 10 reasons why the U.S. economy, and the dollar, won't collapse: Read More...

288,000 Jobs Created in April

Friday May 2, 2014

auto manufacturing

The economy bounced back in April, creating 288,000 jobs, well beyond the 150,000 minimum needed for healthy economic growth. Job gains were across the board except for one glaring exception. Information technology lost 3,000 jobs, after losing 1,000 in March and 11,000 in February. This sector is critical to American competitiveness. For more, see Silicon Valley

These sectors did the best: retail (34,500 jobs),  construction (32,000 jobs), hotels and restaurants (28,000 jobs), health care (27,900 jobs).

The auto industry added 5,200 jobs, boosting manufacturing to gain 12,000 positions. Transportation/warehousing added 11,300, while temporary help added jobs at the same rate as last month (24,000). Surprisingly, the government added 15,000 jobs. It had added 21,000 jobs in February thanks to the end of sequestration.   (Source: BLS, Employment Situation Summary, May 2 2014)

The unemployment rate dropped to 6.3%, mainly because 800,000 people left the labor force. Even so, the economy is still much higher than the natural 4% unemployment rate.

Find out how the number of people in the labor force affect the unemployment rate in How the Unemployment Rate Is Measured.

How It Affects You

The economy is improving, but most of the gains are still in low-wage retail, temp help and restaurant sectors. That's why the ongoing push to increase the U.S. minimum wage is so popular. Find out the pros and cons of boosting the minimum wage, how it's different from a living wage and how it compares to the U.S. poverty level.


3 Years Ago Today: Osama Bin Laden Death Can't Help Economy -- or Can It?

Friday May 2, 2014

bin laden

Three years ago today, Osama bin Laden was eliminated in 40 minutes by a special ops force of two helicopters carrying Navy Seals.  The CIA had found him in a $1 million security compound built 5 years ago just for that purpose.  For ten years, Bin Laden eluded the U.S. military forces that invaded Afghanistan in the War on Terror.  Although costs estimates weren't given, it's clear that the special ops that achieved the War on Terror's primary objective cost much, much less than the $1.3 trillion spent on the War on Terror (supplementary budget alone!), including the wars in Afghanistan and Iraq.

Warren Buffett, Chairman of Berkshire Hathaway, said Osama bin Laden's death won't reduce risk to the insurance industry, or for that matter affect the economy much at all.  In an interview with Fox News, Buffett said that costs associated with terrorism will continue despite the elimination of the head of al-Qaeda. He applauded Congress for finally making the budget deficit a top priority -- something that will help the economy in the long run.

But, in a strange way, Osama bin Laden's death and the budget deficit are related. Here's how. Two-thirds of the budget ( $3.9 trillion for FY 2015) comes from three areas: Defense-related security ($756.4 billion), Social Security ($896 billion) and Medicare/Medicaid ($862 billion).  Deficit spending has created a $17 trillion debt that depresses the dollar,  inflates oil, gas and food costs, and decreases the government's ability to address other issues, like providing solutions to unemployment.

Perhaps it's time to do a cost/benefit analysis on military spending.  Perhaps less should be  spent on weapons, research, and development (8.8% of the budget) and more on intelligence (.3%). Use the savings to reduce the deficit, or boost the economy and reduce unemployment.

By the way, Buffet believes the economy is on a slow, but steady, mend. In fact, he added, natural disasters, such as Hurricane Katrina and Japan's earthquake, have a greater economic impact than terrorism. Perhaps the Sage of Omaha would agree that a War on Global Warming, which the UN says causes increased natural disasters would be a better use of Federal funds than a War on Terror.


The World's Richest Man Is (No Longer) Mexican

Thursday May 1, 2014

Carlos Helu

Carlos Slim Helu, a Mexican telecom tycoon, became the world's richest man in 2007. He retained that title until 2013, when Microsoft founder Bill Gates regained that position. Helu's net worth is now $70.4 billion, up from $67.8 billion in 2007. He became the world's richest man thanks to the rocketing share prices of three of his companies: América Móvil, Telmex and Grupo Financiero Inbursa. His position could be threatened by Mexico's new policies of deregulating the telecommunications industry. For more, see Mexico's Economy.

Bill Gates beat Helu with $77.3 billion.  Warren Buffett is third with $53.4 billion, while Spanish retailer Armancio Ortega is the fourth, with $66.1 billion, while (Source: Forbes Billionaires List, March 2014)

How It Affects You

Although this is strictly symbolic, it could be another indication of how emerging market economies are becoming stronger and more credible. The U.S. economy, while still the largest, is losing its edge thanks to less investment in technological training and the current account deficit. The huge growth in emerging market stock prices initially propelled Mr. Helu into the top spot, but this in itself is an indication of the growing confidence in these markets after the 1998 LTCM hedge fund crisis. Last year's emerging market scare is probably what hurt his position in 2013. Read More...

3 Reasons Why You Won't Even Need a Job by 2040

Saturday April 26, 2014

3d printer

Mahatma Gandhi could have been explaining why today's economy is so sluggish when he said,

..if all countries adopted the system of mass production, there would not be a big enough market for their products. Mass production must then come to a stop."

Economist Jeremy Rifkin quoted Gandhi to illustrate how this is happening in The Zero Marginal Cost Society: The Internet Of Things, The Collaborative Commons, and The Eclipse of Capitalism. Rifkin describes how mass production evolved during the First Industrial Revolution to manage the factory production of goods that could be transported by railroad. Goods were sold via catalog, while orders were communicated and delivered by postal service and the telegraph. These were all innovations in distribution, energy and communication that changed the foundations of society.

Mass production became even more important during the Second Industrial Revolution to manage high-cost oil production to power automobile transportation. Products could be advertised via radio and TV and sold in shopping malls. These innovations created another paradigm shift in society.

However, better productivity meant machines replaced workers, which is one reason why the 6.7% unemployment rate persists seven years after the 2008 financial crisis. Lower income means demand is falling off, which means businesses must slash costs to maintain profit margins. It's dawning slowly on many that we are never getting back to normal, if by that you mean 2007-levels of economic growth.

Rifkin explains how this is the but the symptom of a deeper shift brought about by three separate innovations. They are converging to push us into the Third Industrial Revolution, which he calls the Collaborative Commons. This revolution is making, not just capitalism, but socialism, communism and most other economic-isms obsolete -- as well as the philosophical underpinnings that makes them seem sensible.

Here's the three innovations, and the shifts they're creating:

  1. Affordable 3-D Printing - Shifts production from centralized factories to do-it-yourself.  You can either buy a printer for $1,500, or custom order what you want from home-based "manufacturers." Funding for these small businesses comes from crowd-sourcing instead of banks. Marketing is via social networks.
  2. The Internet of Things - Everything will have sensors and be connected. Big Data from the sensors will be analyzed to cut the cost of producing one more thing (the marginal cost of the title) to zero.
  3. Home-based renewable energy production - Costs for solar and wind powered energy equipment is dropping so fast that it will cost the same as a cell phone in 15 years. In 25 years, the bulk of energy produced will come from renewable sources.

This will enable us, as Gandhi also said, to "...be free to live a more committed life in fellowship with others." Rifkin foresees a decentralized society where income is not dependent on wages paid by the owners. Instead, we are free to buy and sell directly to each other via the internet, without intermediaries. He points out many examples of where it's happening already: Coursera in education, Etsy in marketing, AirBnB in hoteling. There are obstacles, which he also points out, but it makes sense. In addition, it's so well-researched, it's more like a reference book that you can come back to again and again.


©2014 About.com. All rights reserved.