Posts Tagged ‘economy’

June 2012: Jobs Fizzle

Monday, July 16th, 2012

80,000 was the number. 200,000 is what we need for this to feel like a recovery. And 8.2 is the number that keeps hanging on.  The nation’s unemployment rate was unchanged at 8.2% (that’s 13 million unemployed workers) for the second consecutive month, the Labor Department said Friday.   Businesses added just 84,000 jobs, while governments cut 4,000. Monthly job growth averaged 226,000 in the first quarter but slowed dramatically to an average 75,000 a month in the second quarter.

In response, the Dow Jones industrial average fell 124.20 points to close at 12,772.47, wiping out the Dow’s gain for the week, and Treasuries rose as investors moved their money into lower-risk assets. And the Presidential campaigns took the opportunity to issue a number of extrapolations and the usual host of inaccuracies and overreaches. The Democrats claimed that the unemployment rate has been trending down since hitting 10.10% in October 2009; what they forget to point out is that that’s because of the large numbers of discouraged workers – almost 1 million — who’ve stopped looking for jobs. The Republicans, on the other hand, said that the jobs report proves that the Obama administration’s policies haven’t worked, forgetting that the US was hemorrhaging 700,000 jobs a month when Obama took office. According to Politifact, Obama’s record is 22 consecutive months of private-sector job growth, beginning in Feb. 2010, during which the number of jobs grew by almost 3.16 million, or about 143,000 per month.

Putting the candidates aside, the reasons for the anemic job numbers have started to sound like a bad drinking-game song being played by the pundits as they make the circuit of the talk shows: The warm weather drew construction and manufacturing activity into January and February, but dampened spring hiring; the manufacturing sector contracted for the first time in three years in June;  retail sales were weak, Corporate profits fell in the first quarter of 2012,  the first decline since 2008, according to the Commerce Department; the European Central Bank cut interest rates – a sign of nervousness about their prospects; the end-of-year fiscal cliff sent ripples through the public and private sectors with its specter of higher taxes and reduced government spending; a lame-duck Congress couldn’t pass a Jobs Bill; Republican governors made draconian cuts and instituted public-worker layoffs at the state level; and the Administration didn’t put a big enough stimulus in place which is creating an undertow. Take your pick.

So, are there any bright spots? A few.  Friday’s report showed ticks upward in average hourly earnings (to $23.50, from $23.44 in May) and the length of the typical private sector workweek (34.5 hours, from 34.4). Also, a curious fact is that the number of teens in the workforce spiked by 140,000 to 4,528,000, or 3.2% of the entire U.S. workforce:  So why are teens making out so well in this first month of summer while everyone else, well, isn’t? The Daily Kos reports from 5 May 2012:  President Obama’s Jobs program, which is lining up commitments from the private sector and from government to create summer jobs and internships for young people, has announced commitments for 90,000 paying jobs, up from the 70,000 previously announced in January.

Charles Krauthammer Gives ObamaCare Two Thumbs Down

Thursday, August 6th, 2009

Conservative Washington Post columnist Charles Krauthammer thinks ObamaCare is a fantasy that the president will not be able to deliver.

According to Krauthammer, President Obama promised healthcare reform claiming that medical costs are ruining the economy.  Now, the Congressional Budget Office has said that the Democrats’ healthcare plan will increase costs by more than $1 trillion.

“In response, the president retreated to a demand that any bill he sign be revenue neutral,” Krauthammer said.  “But that’s a classic misdirection:  If the fierce urgency of healthcare reform is to radically reduce costs that are producing bobama-care-tlnudget-destroying deficits, revenue neutrality (by definition) leaves us on precisely the same path to insolvency that Obama himself declares unsustainable.”

Democratic Senator Max Baucus of Montana, chairman of the Senate Finance Committee, said that the president was “unhelpful” for ruling out taxing employer-provided insurance plans to help pay for coverage.  The House’s conservative Blue Dog Democrats are wincing at what they see as skyrocketing healthcare reform costs.

Krauthammer contends that “The president is therefore understandably eager to make this a contest between progressive Democrats and reactionary Republicans.  He seized on Republican Senator Jim DeMint’s comment that stopping Obama on healthcare would break his presidency to protest, with perfect disingenuousness, that ‘this isn’t about me.  This isn’t about politics.'”

Considering that the Clinton administration is considered successful by many despite its inability to pass healthcare reform, Krauthammer’s opinion may be overly negative if current efforts fail.  Plus, characterizing a cause that 74 percent of Americans support as a personal whim of the president seems unfair.  Also, 30 states have the same form of a public option for health insurance and studies show that residents support it overwhelmingly.  The issue is really about how to pay for it and here, the president will have to level with the American people about the real cost.

Medical Office Buildings a Sound Investment, Despite Recession

Thursday, July 23rd, 2009

In an environment where flat is the new up in the world of commercial real estate, medical office buildings are performing better than other properties.  In May, Industry Insights published two papers written by the Houston-based investment firm, Cain Brothers, which stated that this is a good time for health systems to sell real estate assets to raise needed cash.kaiser-_office_interior1-copy

Make no mistake, medical office building values are showing some slippage.  “We’re seeing values go down, but nowhere near what is going on with traditional office buildings,” said Tom Dalcolma, a partner in Street Sotheby’s Medical Realty Advisors.

A Real Capital Analytics study performed in May found that three percent of commercial office buildings were in bankruptcy, foreclosure or some form of distress.  Only one percent of medical office buildings were in similar straits.  Medical office building sales volume fell 20 percent over the past 12 months, compared with 51 percent for other office buildings.  The report concludes:  “Medical office properties have proven to be a safe haven, and this niche has little trouble.”

Interest in medical office buildings is growing because investors recognize that healthcare spending is not being impacted as harshly as the rest of the economy.  As minor medical procedures move from hospitals to offices, the demand for new facilities is increasing.  There were 600 million outpatient visits last year.  And that will only increase as the population swells by 45 million during the next 10 years.

Recession Forces Physicians to Rethink Retirement

Tuesday, June 16th, 2009

The recession and its impact on investment portfolios, as well as declining Medicare and Medicaid reimbursements, are making physicians rethink their retirement dates.

Some physicians have seen their stock markets portfolios fall by as much as 50 percent.  In today’s economy, selling practices might not bring the anticipated profit, according to William Jessee, M.D., president and CEO of the Medical Group Management Association.  “I look at my 401(k) and think ‘Okay, I just turned 62, and 70 is starting to look like a better retirement field,'” Dr. Jessee said.20071003_nest_egg_18

A 2007 survey of 1,200 physicians found that 48 percent aged 50 to 65 were planning to retire, find non-clinical jobs, work part-time, close their practices to new patients and/or substantially reduce their patient load.  Since the survey was conducted, Americans’ retirement funds have lost as much as $2 trillion.

“It has not been entertaining watching all my hard-earned money disappear,” according to Jeffrey Sankoff, 41, a Denver physician.  “But I’ve got about 10 to 15 years before I need to worry because my 401(k) will just sit there and eventually recover and grow.  Those physicians closer to retirement age – hopefully their portfolio is balanced in such as way that this catastrophe won’t have as big of an impact as it’s had on me.”

The silver lining in these deferred retirements is that they could prevent a physician shortage, a result of medical schools capping their enrollments at 16,000 students per year because they believed that managed care would create a glut.  It is estimated the shortage could be as much as 250,000 physicians in the next 10 years.

I’ve Got One Word for You – “Healthcare”

Tuesday, April 7th, 2009

If Benjamin Braddock graduated from340x1 college today, the clueless Mr. Robinson would likely tell him to go into healthcare – not plastics — as he advised the befuddled young man in the classic 1967 movie “The Graduate”.

Although the economy is shedding jobs at an alarming rate, the healthcare industry added 371,600 jobs during 2008.  That momentum has not slowed, despite the fiscal crisis and recession.  While the economy lost 1.9 million jobs during the fourth quarter of 2008, healthcare added 93,200 jobs.  Hospitals hired 11,900 new workers in December, bringing the nation’s total hospital workforce up to approximately 4.71 million.  Physicians’ offices hired 5,600 more staff, bringing that workforce up to nearly 2.3 million employees.

Ambulatory-care centers saw 1,100 jobs vanish during December, a 0.2 percent loss.  Still, that fast-growing sector grew to 521,700 jobs during all of 2008, a 1.7 percent increase compared with the previous year.

“The only major private industry sector that continued to add a significant number of jobs was healthcare”, notes Keith Hall, commissioner of the Bureau of Labor Statistics.

According to a new Ernst & Young study on business risk, the global war for talent will be top of the mind for CEOs.  Nowhere will this be more evident than in healthcare.  There remains a chronic shortage of surgeons and family-practice doctors.  Part of this is because U.S. medical schools held enrollment to 16,000 students a year from 1980 to 2005, fearing a glut of doctors under managed care.  Perhaps the hiring by hospitals is a correction to 25 years of no-growth within certain specialties and the continuing dearth of nurses.

In Recessionary Times, Private Capital Drives Healthcare Development

Monday, April 6th, 2009

The recession has put the health care industry’s importance to our economy in sharp relief. It accounted for 17 percent of GDP and added 371,600 jobs last year.  Even when the economy lost 651,000 jobs during February, healthcare added 27,000 new positions.pj-am329_pjnurs_200805061826111

In terms of the construction of new facilities during 2009, healthcare development is expected to fall by five or eight percent.  Yet, the drivers that historically have made the healthcare market so strong – obsolescence, new technologies and demographics – are still very much in place.

The collapse of the $330 billion auction rate securities market which let healthcare systems borrow money long term while paying short-term interest rates – cut off a principal source of capital for new development.  Hospitals have investment portfolios tied to Wall Street, another source of capital that is being cut off.  Endowments are drying up as even the most dependable philanthropists see their fortunes shrink.  Access to long-term debt vehicles, such as variable-rate demand bonds backed by letters of credit, is available only to healthcare systems that are A-rated or even better.  Even when a provider has superior credit, interest rates to borrow money may be as high as six to 6.5 percent.  For some hospitals and healthcare providers, the cost of credit – if they can get it – is too expensive.

To fill the gap, healthcare providers are considering private sources that have the capital necessary to finance projects.  The upside of private capital is that it can be committed over the long term to help hospitals and providers fulfill their strategic expansion plans without the same balance sheet implications – something hospitals are focused on in order to maintain a good standing with the ratings agencies.

In a 0 percent federal rate environment when 30-year fixed-rate mortgages have come down to 5.29 percent, capital is competitive with traditional hospital financing, compared with other cycles.