The gloomy outlook takes its toll

Tweet

What Are We To Do by LIN SEE-YAN

About one-half of European Financial Stability Fund already committed or utilized

WITH every passing day, the shelf-life of eurozone's rescue package is getting shorter. On July 21, eurozone leaders agreed to a second Greek bailout (see Greek Bailout Mark II: It's a Default in this column on July 30, following the first, Greece is Bankrupt on July 2). European parliaments have yet to complete ratification to expand the 440 billion euros bailout fund (European Financial Stability Fund or EFSF). Already, talk has shifted to expanding the EFSF in the light of escalation of the crisis.

Frankly, the fund is just not large enough to halt the contagion. It's a matter of market confidence really the larger, the better. About one-half of the fund is already committed or utilised with more demands coming on. Greece will miss the deficit targets for this year and next despite austerity, showing the drastic steps taken to avert bankruptcy are not enough. The crisis is boiling over. Eurozone ministers have since delayed the release of 8 billion euros cash scheduled for Oct 13, threatening to revisit the deal where private bondholders may be asked to take a higher “haircut”. This has rattled markets and raised fears of an imminent messy default. Estimates are that with a 60% haircut (21% now) for private bondholders, Greek banks would suffer another 27 billion euros write-down, wiping out their capital. Inevitably, the fall-out will have much wider repercussions.

The contagion

The world economy once again stands on a knife's edge. As finance leaders gathered at end-September, they all want to look forward. But markets and investors are forcing them to peer down the precipice into the abyss as growth in advanced economies slackened sharply and emerging nations grappled with inflation in the face of a fast deteriorating eurozone debt crisis, wondering how to make the needed adjustments to restore confidence. Continuing uncertainty and worries about the global economic outlook fuelled a rush into safe assets. The eurozone is seen to be on the brink of recession. Its prospects have been hit by sharp falls in consumer and business confidence as well as fiscal austerity measures across the continent and pessimism about US growth. Germany's slowdown is worrisome because of its role as Europe's powerhouse.

Gathering pessimism came to a head as global equities tumbled on Sept 22 as the Federal Reserve's (Fed) gloomy outlook (“there were significant downside risks to the economic outlook”) caused investors to sell stocks in a widespread flight to safety. UK's FTSE (All World) Index fell by as much as 23% from its May high, signifying a bear market as it fell through the 20% threshold. US and UK stocks were not yet in bear territory but German and French equities have since been there. The sell-off was mooted by a big move into government bonds. Benchmark German 10-year bond yields hit an all-time low of 1.65%, while US Treasuries fell to 1.77%, the lowest level since 1946. On a day reminiscent of 2008, Asian stocks and currencies tumbled reflecting foreign capital repatriation, with the Indonesian stock market plunging 9%, the Australian dollar falling below US dollar parity, and the Hong Kong Hang Seng index settling at its lowest point since July '09.



Amid market tumult, investors were left wondering what to do in October. The 3rd quarter had been painful and volatile. The Dow finished the quarter down 12.1%; the S&P's 500 fell 14%. Many had hoped for a 2nd half rebound after spring's “soft-patch”, only to be confronted with worries of a possible double-dip recession. There is also a new fear: weakness in emerging market economies, especially China. During the 3rd quarter, markets were tossed to and fro on a daily (even hourly) basis, reflecting developments in Europe and United States. In August and September, the Dow industrials rose or fell by more than 1% on each of 29 days; on another 15 days, the daily moves were more than 2%. The last time the market saw this was in March/April '09. The “fear index” (Vix volatility index) reflecting market instability was up 160% over the 3rd quarter, finishing at 40% (normal 15%-20%) on end September.

The problem is Europe

The damage was worse in Europe. The main German and French stock indices both lost more than 25% of their value in the 3rd quarter, the largest quarterly loss since 2002. Asian stocks also took a pounding, experiencing double-digit losses. The Hong Kong Hang Seng index lost 21%. Even gold usually the refuge suffered a collapse in September from its record high in August. The safety was in US Treasuries, German bunds and UK gilts. Yields didn't matter for now it's just preservation of capital. As I see it, the sovereign risk crisis is compounded by much weaker growth among the “core” nations, and increasing market stress. In the United States, it has just managed to avoid recession, with little buffer to insulate itself from any fallout from an European event. Complications can also come from a busting bubble in the Chinese property market, rattling Chinese banks with ripple effects on world markets.

US and European stocks tumbled when markets opened in the new 4th quarter, with S&P's 500 entering the bear market as Europe postponed a vital tranche drawing to debt-stricken Greece. Wall Street fell about 2% on Oct 3, extending decline to a 13-month low as investors feared the crisis would lead the United States into a new recession. With this drop, the benchmark S&P's 500 had fallen past 20% putting it in bear territory. In Europe, banking stocks dived as investors slashed their exposure on worries authorities are unable to contain the debt crisis. The Stoxx Europe 600 index tumbled 2.8%, hitting its lowest since Oct '08; Stoxx Europe 600 banks finished 4.3% lower. Euro-zone's problem is one of market confidence rather than solvency. In Asia, most regional markets in the 3rd quarter suffered their biggest falls since the Lehman's collapse in '08, with Tokyo losing 11% and Hong Kong 21%. Since then, Korea dropped 3.6%, Hong Kong another 3.4%, India's Sensex 1.8%, the Nikkei, 1.1% and Australia, 0.6%. Italy's latest downgrade a 3-notch cut by Moody's to A2 with continued negative outlook reflected as much euro-zone's inability to spur market confidence, as it does Italy's failure to promote growth. Without a comprehensive response to the crisis, the risk of a downward spiral remains. In the past days, European stocks posted hefty gains as policymakers were reported to be prepared to help recapitalise European banks, estimated at 100-200 billion euros. Priority remains with Spain and Italy which are basically solvent, but lacks credibility. The prospect of the IMF coming-in alongside EFSF to buy Spanish and Italian bonds boosted sentiment.

Default by Greece?

Greece will miss the targets set just two months ago. The 2012 approved budget predicts a deficit of 8.5% of GDP for '11, well short of the 7.6% target. For '12, the deficit is set at 6.8%, short of the target of 6.5% reflecting the sluggish economy. Its 8.5% target remains a challenge in the current environment. GDP is expected to fall by 5.5% in '11 pushing unemployment to 16%, and a further GDP shrinkage of 2%-2% is in prospect. The '11 shortfall meant Greece would need another 2 billion euros just to bridge the gap. Greece is now off-track, reflecting disappointing revenues and missed targets. On Sept 21, it acted to raise taxes, speed-up public lay-offs, and cut some pensions. Ongoing austerity measures are already deeply unpopular.

My mentor and teacher at Harvard (Marty Feldstein) believes the only way out is for Greece to default and write down its debt by at least 50%. This strategy of default and devalue is standard fare for nations in Greece's shoes. But this hasn't happened because “Greece is trapped in the single currency.” So why are the political leaders trying to postpone the inevitable? He offered two sensible reasons: (i) banks and other financial institutions in Germany and France have large exposures to Greek debt, and time is needed to build capital; and (ii) default would induce sovereign defaults in other countries and runs on their banks. The EFSF is just not large enough to bail out Italy and Spain. Europe's politicians hope to buy enough time (2 years) for Spain and Italy to prove they are financially viable. As I see it, both these nations don't have another two years to prove their worth. The markets will decide the fate of Greece (and possibly Spain and Italy), not the other way around.

The shadow of recession

International Monetary Fund's September forecast pointed to growth in emerging economies exceeding 6% in '11 and '12, but with the advanced nations sliding to below 2%. On current trends, the latter prediction is perhaps closer to 1%. I think the outlook for the eurozone is deteriorating fast: at best, they are already in the throes of a severe slowdown; at worst, a relapse into recession. The European Commission recently stated growth is at a virtual standstill, with eurozone GDP rising by 0.2% in 3Q'11 and 0.1% in 4Q'11. Pain will be most intense in the south (no growth in Italy in '11 and '12) where the pressure of austerity is greatest. But the “core” economies are also hurting. IMF estimated German growth would slow down from 2.7% in '11 to 1.3% in '12. The short-term outlook is even worse. According to Markit Economics, eurozone's factory activity fell to a 25-month low of 48.5 (a reading below 50 indicates contraction). Indications are economic conditions will deteriorate. Germany's index fell in September with overall activity just above 50 the worst performance in two years. France's index stood at 48.2; Italy, 48.3 both in contraction territory. Eurozone contractions reflected lacklustre domestic demand and falling export sales. More sluggish growth will make it harder to achieve fiscal targets. Rising risk of recession will damage efforts to deal with the crisis.

The Fed's latest assessment is for the US economy to falter needs to be taken seriously. Citing anaemic employment, depressed confidence and financial risks from Europe, its chief urged Congress not to cut spending too quickly in the short-term even as they grapple with fiscal consolidation over the medium-term. The IMF expects the United States to grow by 1.5% in '11 (less than 1% in 1H'11) and 1.8% in '12. The short-term outlook isn't looking better. Indeed, the business cycle monitoring group ECRI concluded last week that the US economy is tipping into a new recession. Latest data are mixed after a dismal August. US manufacturing managed to keep expanding and employment strengthened in September but the tone has not been sufficiently robust to dispel fears of another downturn. Sure, United States was not in recession in 3Q'11 but the lack of new orders remains of concern. While even sluggish job growth is welcome, the government's belt-tightening is likely to prove a significant drag on the economy. The Fed's commitment to ensure recovery continues will re-assure. But if Europe falters badly, there is little the Fed can do.

Housing ignored

Over the past 35 years, housing had added value to the GDP. Empirically, in the two years following most recessions, housing adds about 0.5%point to US GDP growth. So far, the contribution has been negative. This is so because: (i) home prices dropped 2.5% this year; since its '05 peak, home prices have fallen 31.6%; (ii) United States lost US$7 trillion (close to one-half of GDP) in the value of homes they own: homeowners equity has since fallen to 38.6% of home values; (iii) home-starts are at an all time low and still falling. The housing bust weighs heavily on consumers making them more reluctant to spend. Innovative ways to unleash housing are needed.

Looks like the world remains in a bad shape. It is also a dangerous place with growing uncertainty, high volatility and increasing social unrest. Europe in particular is in a high risk gamble. I worry European politicians may learn the hard way in trying to outsmart the markets.

> Former banker, Dr Lin is a Harvard educated economist and a British Chartered Scientist who now spends time writing, teaching & promoting the public interest. Feedback is most welcome; email: starbizweek@thestar.com.my

Related articles

• European choice: Greek bailout Mark II - it's a default ! (right-waystan.blogspot.com)
• US no longer 'AAA', Eurozone the next? (right-waystan.blogspot.com)

Bleed the Foreigner!

Harold James

Tweet

PRINCETON – Today, the world is threatened with a repeat of the 2008 financial meltdown – but on an even more cataclysmic scale. This time, the epicenter is in Europe, rather than the United States. And this time, the financial mechanisms involved are not highly complex structured financial products, but one of the oldest financial instruments in the world: government bonds.

While governments and central banks race frantically to find a solution, there is a profound psychological dynamic at work that stands in the way of an orderly debt workout: our aversion to recognizing obligations to strangers.

The impulse simply to cut the Gordian knot of debt by defaulting on it is much stronger when creditors are remote and unknown. In 2007-2008, it was homeowners who could not keep up with payments; now it is governments.

But, in both cases, the lender was distant and anonymous. American mortgages were no longer held at the local bank, but had been repackaged in esoteric financial instruments and sold around the world; likewise, Greek government debt is in large part owed to foreigners.

Because Spain and France defaulted so much in the early modern period, and because Greece, from the moment of its political birth in 1830, was a chronic or serial defaulter, some assume that national temperament somehow imbues countries with a proclivity to default. But that search for long historical continuity is facile, for it misses one of the key determinants of debt sustainability: the identity of the state’s creditor.

This variable makes an enormous difference in terms of whether debt will be regularly and promptly serviced. The frequent and spectacular early modern bankruptcies of the French and Spanish monarchies concerned for the most part debt owed to foreigners.

The sixteenth-century Habsburgs borrowed – at very high interest rates – from Florentine, Genovese, and Augsburg merchants. Ancien régime France developed a similar pattern, borrowing in Amsterdam or Geneva in order to fight wars against Spain in the sixteenth and seventeen centuries, and against Britain in the eighteenth.

The Netherlands and Britain, however followed a different path. They depended much less on foreign creditors than on domestic lenders. The Dutch model was exported to Britain in 1688, along with the political revolution that deposed the Catholic James II and put the Dutch Protestant William of Orange on the English throne.

Indeed, the Glorious Revolution enabled a revolution in finance. In particular, recognition of the rights of parliament – of a representative assembly – ensured that the agents of the creditor classes would have permanent control of the budgetary process.

They could thus guarantee – also on behalf of other creditors – that the state’s finances were solid, and that debts would be repaid. Constitutional monarchy limited the scope for wasteful spending on luxurious court life (as well as on military adventure) – the hallmark of early modern autocratic monarchy.



In short, the financial revolution of the modern world was built on a political order – which anteceded a full transition to universal democracy – in which the creditors formed the political class. That model was transferred to many other countries, and became the bedrock on which modern financial stability was built.

In the post-1945 period, government finance in rich industrial countries was also overwhelmingly national at first, and the assumptions of 1688 still held. Then something happened. With the liberalization of global financial markets that began in the 1970’s, foreign sources of credit became available. In the mid-1980’s, the US became a net debtor, relying increasingly on foreigners to finance its debt.

Europeans, too, followed this path. Part of the promise of the new push to European integration in the 1980’s was that it would make borrowing easier. In the 1990’s, the main attraction of monetary union for Italian and Spanish politicians was that the new currency would bring down interest rates and make foreign money available for cheap financing of government debt.

Until the late 1990’s and the advent of monetary union, most government debt in the European Union was domestically held: in 1998, foreigners held only one-fifth of sovereign debt.

That share climbed rapidly in the aftermath of the euro’s introduction. In 2008, on the eve of the financial crisis, three-quarters of Portuguese debt, half of Spanish and Greek debt, and more than 40% of Italian debt was held by foreigners.

When the foreign share of debt grows, so do the political incentives to impose the costs of that debt on foreigners. In the 1930’s, during and after the Great Depression, a strong feeling that the creditors were illegitimate and unethical bloodsuckers accompanied widespread default. Even US President Franklin Roosevelt jovially slapped his thigh when Reichsbank President Hjalmar Schacht told him that Nazi Germany would default on its external loans, including those owed to American banks, exclaiming, “Serves the Wall Street bankers right!” In Europe today, impatient Greeks have doubtless derived some encouragement from excoriations of bankers’ foolishness by German Chancellor Angela Merkel and French President Nicolas Sarkozy.

The economists’ commonplace that a monetary union demands a fiscal union is only part of a much deeper truth about debt and obligation: debt is rarely sustainable if there is not some sense of communal or collective responsibility. That is the mechanism that reduces the incentives to expropriate the creditor, and makes debt secure and cheap.

At the end of the day, a collective, burden-sharing Europe is the only way out of the current crisis. But that requires substantially greater centralization of political accountability and control than Europeans seem able to achieve today. And that is why many of them could be paying much more for credit tomorrow.

Harold James is Professor of History and International Affairs at Princeton University and Professor of History at the European University Institute, Florence. He is the author of The Creation and Destruction of Value: The Globalization Cycle.

Related articles

• Europe on the Brink (theatlantic.com)
• Euro fallout is bad news for world economy (right-waystan.blogspot.com)

Tweet

Steve Jobs' Legacy To Democracy

 

Nicole Kekeh, Contributor

With Steve Jobs’ passing after a long battle with cancer, tributes have poured from across the globe, and countless viewpoints have been offered on what his legacy shall be.

A visionary. A designer. A perfectionist. An exacting CEO. An entrepreneur. The man who redefined the Digital Age. The man who understood what politicians didn’t.”

Even before the iPhone and the iPad, Jobs freed up graphic designers, editors, film-makers from the shackles of pre- and post-production, by adding new tools to their trade. Jobs leveled the playing field in the media industry. With the iTunes, he revolutionized multi-media, music and content-sharing. He was the drive behind many start-ups, including his own. He pushed the envelope of Internet communication, social media and networking, as no one had ever done before him.

Image via Wikipedia

 Jobs was that, and more. As President Barack Obama and Russian counterpart Dmitry Medvedev said, Jobs has “changed the world.”



Apple Inc. under Jobs’ leadership had another profound legacy. Its commitment to diversity. It was plain obvious when you walked into any Apple store. Diversity of gender, of race, of sexual orientation, of disability.

At Apple stores in New York and Washington, I have been helped by legally-blind Apple staff, through every step of a purchase, from selecting the product I was interested in to scanning the bar code and forwarding the invoice to my mail inbox. Once I pressed a young woman, who must have been legally-blind and was assisted by her dog, on what technology made it possible for her to perform so effectively. She answered that Apple, as a company, had always lived up to its commitment to disabled people. Whatever the technology, voice-recognition, screen-touch, disabled people were counted in at Apple, trained and assisted, to perform.

We take it for granted and, yet, I have not yet seen staff  with disability, at a sports shoe store or at an eye glasses store. It is always a thrill to walk into an Apple store, and get to talk with the “Apple geniuses.”

There is one thing, though, that Steve Jobs did not have a chance to do: to oversee the opening of an Apple Store in Africa––at least, based on Apple’s own list of its stores worldwide.

There are no Apple stores in Cairo, in Kenya or in Johannesburg. Just to be clear. That does not mean that there are no Apple products in Africa. Any visitor to any city in Africa would have had a chance to see a range of Apple devices, from iPods to iPhones to iPads and Macs, all purchased in London, New York or Dubai. The rapidly emerging consumer class in Africa, who can afford Apple products, do so with the same hype, enthusiasm and love, as any consumer in New York, Tokyo or Beijing.

In an interview on Public Radio The World, Harvard Professor Calestous Juma recounts his first encounter with an Apple computer in the mid-1980s, and how he put it to use to “set up a desktop publishing house for $5,000, down from the normal cost of $50, 000.”

Steve Jobs, Juma says, revolutionized publishing houses in Africa.”

I have often thought of how fantastic it would be to walk into an Apple store in Cairo, Cape Town, Jo’Burg or Nairobi and to get helped by an “Apple genius” from Kibera or Soweto. Think of it. How revolutionary. How democratic.

For that dream, and for all that he has, indeed, given Apple’s fans, Steve Jobs will be greatly missed.

Newscribe : get free news in real time  

Related post:

Internet Mourns Steve Jobs' Death: From garage to world power, Life and times!

Why 'Occupy Wall Street'? Job growth fails to dent US unemployment rate!

Tweet

Why 'Occupy Wall Street'?

 

Steve Denning, Contributor

RADICAL MANAGEMENT: Rethinking leadership and innovation

Image by AFP/Getty Images via @daylife

For people wondering why the ‘Occupy Wall Street’ movement is spreading across the country, an article earlier this year in  Bloomberg by Danielle Kucera and Christine Harper sheds some light. It discusses the continuing disconnect between the amount of pay in finance and the value generated to society:

Wall Street traders still earn much more than brain surgeons. An oil trader with 10 years in the business is likely to earn at least $1 million this year, while a neurosurgeon with similar time on the job makes less than $600,000, recruiters estimated.

After a decade of deal-making, merger bankers take home about $2 million, more than 10 times what a similarly seasoned cancer researcher gets.

“I don’t think it’s healthy for the economy to be this skewed,” said Stephen Rose, a professor at Georgetown University’s Center on Education and the Workforce. “I believe there’s some sort of connection between value added to the economy and pay. Everyone is losing sight of any fundamentals.”

Yet many bankers think they’re not paid enough

For those in middle class finding it difficult to make ends meet or for recent college graduates struggling to find a decent job, the pay numbers are truly eye-popping.

In the first three quarters of 2010, eight of Wall Street’s largest banks set aside about $130 billion for compensation and benefits, enough to pay each worker more than $121,000 for nine months of work. That’s up from the same period four years earlier — before the crisis — when the lenders set aside a total of $113 billion, or enough to pay an average $114,400 to each worker.

Calculated in dollars, average pay per employee has risen at Bank of America Corp. [BAC] Citigroup Inc. [C], Credit Suisse Group AG [CSGN] and UBS AG [UBS]and declined at Deutsche Bank AG [DBK], Goldman Sachs Group Inc. [GS], JPMorgan Chase [JPM] and Morgan Stanley [MS] since the same period in 2006.

“The bottom line is all the people in investment  banking understand that they work harder and are under more stress,” said Jeanne Branthover, a managing director at Wall Street recruitment firm Boyden Global Executive Search. “Many don’t think they’re paid enough.”

What is the basis for these financial rewards?

John Cassidy, writing in The New Yorker in an article entitled What Good Is Wall Street? asked a banker how he and his co-workers felt about making loads of money when much of the country was struggling.

“A lot of people don’t care about it or think about it,” he replied. “They say, it’s a market, it’s still open, and I’ll sell my labor for as much as I can until nobody wants to buy it.” But you, I asked, what do you think? “I tend to think we do create value,” he said. “It’s not a productive value in a very visible sense, like finding a cure for cancer. We’re middlemen. We bring together two sides of a deal. That’s not a very elevated thing, but I can’t think of any elevated economy that doesn’t need middlemen.”

The [banker] is right: Wall Street bankers create some economic value. But do they create enough of it to justify the rewards they reap? In the first nine months of 2010, the big six banks cleared more than thirty-five billion dollars in profits.

It wasn’t always this way

It hasn’t always been this way. Cassidy notes that from around 1940 to 1980 things were different.

Economic historians refer to [this as] a period of “financial repression,” during which regulators and policymakers, reflecting public suspicion of Wall Street, restrained the growth of the banking sector. They placed limits on interest rates, prohibited deposit-taking institutions from issuing securities, and, by preventing financial institutions from merging with one another, kept most of them relatively small. During this period, major financial crises were conspicuously absent, while capital investment, productivity, and wages grew at rates that lifted tens of millions of working Americans into the middle class.

Banking of course wasn’t the only factor. This was a period when oligopolies were in charge of the marketplace and could charge pretty much what they wanted, even for products that weren’t particularly good. So they could afford to offer life-time employment with good salaries.

Since the early nineteen-eighties, by contrast, financial blowups have proliferated and living standards have stagnated. Is this coincidence?

For a long time, economists and policymakers have accepted the financial industry’s appraisal of its own worth, ignoring the market failures and other pathologies that plague it. Even after all that has happened, there is a tendency in Congress and the White House to defer to Wall Street because what happens there, befuddling as it may be to outsiders, is essential to the country’s prosperity. Finally, dissidents are questioning this narrative. “There was a presumption that financial innovation is socially valuable,” [a critic] said to me. “The first thing I discovered was that it wasn’t backed by any empirical evidence. There’s almost none.”

True, but banking wasn’t the only factor. This was also a period in which the big companies that used to be in charge of the marketplace, found themselves struggling to cope with global competition and the new power of the customer and could no longer offer life-time employment at high salaries.

One might have hoped that the banks would have provided an element of stability in a turbulent period. As it turned out, the net effect of the financial sector has been to aggravate the instability.

Slum lords in pin-striped suits

The case for bankers, if any, rests on the argument that their activities grow the economic pie. However, most of the income comes from extracting rents in a zero-sum game. Cassidy quotes Gerald Epstein, an economist at the University of Massachusetts:

These types of things don’t add to the pie. They redistribute it—often from taxpayers to banks and other financial institutions.

Cassidy’s overall take? He cites with approval Lord Adair Turner, the chairman of Britain’s top financial watchdog, the Financial Services Authority, who has described much of what happens on Wall Street and in other financial centers as “socially useless activity”:

Many people in the City and on Wall Street are the financial equivalent of slumlords or toll collectors in pin-striped suits. If they retired to their beach houses en masse, the rest of the economy would be fine, or perhaps even healthier.

_________________
Steve Denning’s most recent book is: The Leader’s Guide to Radical Management (Jossey-Bass, 2010).

Follow Steve Denning on Twitter @stevedenning

And join the Jossey-Bass online conference webinar”: Sep 22-Oct 20, 2011. My session is on Thursday October 13 at noon ET. To register, go here and use discount code 

Newscribe : get free news in real time 

Job growth fails to dent US unemployment rate

Economy created 103,000 new jobs in September, but unemployment remained high at 9.1 per cent.

Al Jazeera and agencies

Frustrated with the ailing economy, protesters have staged #Occupy rallies in over 500 American cities [Getty]

The US economy created 103,000 jobs in September, the labour department has reported, a much stronger figure than expected but not enough to lower the unemployment rate.

Economists had expected Friday's report to say that the economy only replaced 60,000 jobs in September.
The private sector accounted for all of the the gains, which were boosted in part by the return of 45,000 telecommunications workers who had been on strike in August.

"Job gains occurred in professional and business services, health care, and construction. Government employment continued to trend down," the labour department said.

Meanwhile, the unemployment rate was still stagnant at 9.1 per cent for the third straight month in September.

For African-Americans, the unemployment rate is 16.7 per cent - the highest it has been in 27 years and double the rate of unemployed whites.

Al Jazeera's Patty Culhane, reporting from Washington, explained that the number of unemployed and under-employed Americans is in the millions.

"There are still 14 million Americans who aren't working today, even though they'd love to have a job," she said.

"Beyond that, there are something like six million that have been unemployed for more than six months. That is a unique feature of this recession - how long people are staying out of work."

She said there are another nine million Americans "who are working part-time jobs because, quite frankly, that's the only job they can find".

Growing frustration

With the underlying data still dire, Friday's news is unlikely to dampen President Barack Obama's calls for congress to pass a $447bn jobs bill- which he says could create 1.9mn new jobs.

In depth coverage of US financial crisis protests

He said on Thursday said that America's growing #Occupy protest movement reflected people's frustration with the American financial system and the country's declining economy.

"I think people are frustrated, and the protesters are giving voice to a more broad-based frustration about how our financial system works," he said at the White House.

Republicans, who oppose Obama's jobs bill, said the latest jobs figures were another indication of Obama's mismanagement of the economy.

"There were far too few jobs created this month, which shows the need to spend less time making campaign style speeches and more time trying to work together to identify policies that we both can agree will create an environment for job creation," Eric Cantor, the House of Representatives majority, leader said.

Al Jazeera's Culhane said that Obama is playing "campaign politics" by "going all around the country saying blame the republicans".

But, she points out, "no US president in recent history has ever won a second term with unemployment anything close to this high".

 Newscribe : get free news in real time

Wall Street protest grows to "occupy" Washington against corporate greed

Tweet

An Occupy Wall Street protester marches up Broadway in New York City, October 5, 2011. Protesters, who have staged demonstrations about the power of the financial industry and other issues and who have camped in Zuccotti Park near Wall street for nearly three weeks were joined by hundreds of Union members in a march and demonstration through lower Manhattan. [Photo/Agencies]

* Protests in New York number at least 5,000 * Regular American workers bolster protest numbers

NEW YORK - Anti-Wall Street demonstrations swelled on Wednesday, as nurses, transit workers and other union members joined a rally at the heart of New York's financial district to complain about unfairness in the US economy.

College students walked out of classes in solidarity with the Occupy Wall Street movement, which has grown in less than three weeks from a ragged group in downtown Manhattan to protesters of all ages demonstrating from Seattle to Tampa.

The protesters object to the Wall Street bailout in 2008, which they say left banks enjoying huge profits while average Americans suffered under high unemployment and job insecurity with little help from the federal government.

By late afternoon the crowd in New York numbered at least 5,000 and was growing. Union members made up a good portion of the demonstration, which was more than twice as large as the largest previous crowd last weekend of about 2,000.

Protesters carried signs reading "Jobs Not Cuts" and "Stop Corporate Greed" and chanted "Wall Street is our street" and "All day, all week, occupy Wall Street."

"Our workers are excited about this movement. The country has been turned upside down. We are fighting for families and children," said United Federation of Teachers President Michael Mulgrew.

Along with the swelling numbers in New York and smaller protests springing up in other US cities, there were signs the protesters are winning broader support.

US Representative Louise Slaughter, a New York Democrat, endorsed the movement.

"The gap between the haves and have nots continues to widen in the wake of the 2008 recession, precipitated by the banking industry. Yet we are told we cannot afford to raise taxes on millionaires and billionaires," she said in a statement. "I'm so proud to see the Occupy Wall Street movement standing up to this rampant corporate greed."

The American Federation of State County and Municipal Employees, Communications Workers of America and the Amalgamated Transit Union joined the New York march, as did the nation's largest union of nurses, National Nurses United.

Students on college campuses added their voices. At the University of Massachusetts at Amherst, students walked out of their classrooms at noon, holding signs reading "Eat the Elite" and "We Can Do Better than Capitalism."

The protests began in New York on Sept 17 and have spread to Los Angeles, Baltimore, Philadelphia, Tampa, St. Louis and elsewhere. A protest in planned in Washington on Thursday.

The protests have been largely peaceful, although last Saturday in New York, more than 700 people were arrested when demonstrators blocked traffic on the Brooklyn Bridge.

In San Francisco on Wednesday, a crowd of several hundred marched in a loop around the financial district, chanting "They got bailed out, we got sold out" and "Join our ranks, stop the banks." Union nurses had a large presence at the protest.

"This is the beginning of a movement," said Sidney Gillette, a nurse at Children's Hospital in Oakland.

In Boston, protesters have set up a makeshift camp in the financial district. Retired teacher Frank Mello said he joined the movement to "demonstrate that we are stronger when we are united and Wall Street is as powerful as we allow them to be."

In Chicago, where dozens of protesters have gathered at the heart of the financial district every day, banging drums and holding up signs, office worker Tom McClurg, 52, said Wednesday was the first day he had joined the group.

"I'm hoping it's going to raise awareness here of people's opposition to domination by financial interest of their elected representatives," he said, adding, "I think there are a million times more people not here who are sympathetic."
Camped out in Zuccotti Park in downtown Manhattan, the New York protesters have sometimes been dismissed by Wall Street passersby or cast in the mainstream media as naive students and mischief makers without realistic goals. Members of the group have vowed to stay through the winter.

Protesters to "occupy" Washington against corporate greed

 (Xinhua)

WASHINGTON, Oct. 5 (Xinhua) -- As ranks of protesters grew in New York in the "Occupy Wall Street" demonstration, protesters are also converging in U.S. capital Washington D.C. for a planned " Occupy D.C." rally on Thursday, which is to take place at Freedom Plaza on Pennsylvania Avenue.

Organizers told Xinhua that the rally is aimed at raising awareness of the American people in fixing the political system corrupted by corporate greed, and concentrating attention on people's needs.

Lisa Simeone, a spokesperson with the October 2011 movement, which is central in organizing the rally, said the protest has been in the making for about a year, and was scheduled to coincide with the start of the Afghanistan War. After the "Occupy Wall Street" movement in the U.S. city of New York took place, they decided to join the many occupations that's been going on around the country.

"Our main focus is that we are against corporatism and militarism," said Simeone in a telephone interview on Wednesday with Xinhua. She said that protesters want money out of politics, tax the rich and corporations, as well as cut military spending, end the wars and bring the troops home.

"People come to the rally for a lot of reasons," Jeremy Ryan, an activist participating in the rally told Xinhua in an earlier interview, noting many come because they are angry that big corporations are having too much influence on Washington politics.

"The over-arching theme" of the rally, said Simeone, is "human needs, jobs, homes, education, health care, not corporate greed."

Just like the New York demonstrations, which has been going on for weeks, the Washington rally is not likely to last only one day. Simeone said that they look at the rally as a beginning, not the end, and they will "occupy" Freedom Plaza, possibly for weeks to come.

"This isn't the be all and end-all resistance in this country," she said, noting that they want to create both philosophical and physical space for people to "realize they have to take this country back."

Simeone said that she doesn't know how long the occupation will go on or what the next steps will be.

"I do know whenever it ends, we are not going to stop acts of civil disobedience, and various acts of civil resistance and organization. That will be done in the myriad of ways around the country, and again, this is not the end, but only the beginning."

TROUBLE FOR BOTH DEMOCRAT, GOP

Simeone said that the rally is neither pro-Democrat nor pro- Republican. In fact, she said that the rally is "against both major political parties," noting the Democrats and Republicans are "equally corrupt," and "equally in the pocket of corporations and Wall Street and the military-industry" complex.

As the general election is approaching in the coming year, such sentiment could spell trouble for both the Democrats and the Republicans. Some might argue the Democrats could take a harder hit as the "occupy" movement took place mainly in "Blue States."

Simeone, however, said while many who participate in the rallies identify themselves as left-leaning, "there are many people in this movement who are from the right, or who identify as libertarian on economics or who have sons and daughters in Afghanistan or Iraq and have always been Republican or conservatives all their lives."

"They agree that the wars have to end, and they agree we have to get money out of politics," said Simeone, and she believes the movement has the potential to bring in a lot of people from all over the political spectrum.

According to the organizers, about 5,000 people have signed online pledges to come to the rally, but Simeone would not make a prediction on how many would show up. In keeping with the "occupy" rallies' tradition, the D.C. rally is also going to be fun, with musicians, poets and art activities, as well as classes and shops.

"This is also about building community with each other," said Simeone.

 Newscribe : get free news in real time