Unemployment and the American Family

The Bureau of Labor Statistics released its annual report looking at how unemployment in the United States has impacted the American family unit in 2013.

Interestingly, if you look at the data a little more closely, you'll find that the BLS divides employment into two categories; full-time meaning that a family member works at a job for at least 35 hours per week and those who work less than full-time hours.  While 80 percent of families have at least one family member employed, only 72.2 percent of families have at least one worker employed at a full time job.

1.) Of the 80.4 million families in the United States, 80 percent or 64.318 million families had at least one employed family member.  By race and in order from greatest to least, the percentage of families with at least one employed family member are:

Asian: 88.8 percent

Hispanic: 85.1 percent

White: 80.1 percent

Black: 75.7 percent

In total, 20 percent of families had no family member employed during 2013, the same level as in 2012 showing that job growth is just keeping up to growth in the number of families.  Among white families, 19.9 percent had no family member employed during 2013 compared to black families where 24.3 percent had no family member employed during 2013, 11.2 percent for Asian families and 14.9 percent for Hispanic families.  Interestingly, if you look at the data a little more closely, you'll find that the BLS divides employment into two categories; full-time meaning that a family member works at a job or jobs for at least 35 hours per week and those who work less than full-time hours.  While 80 percent of all families have at least one family member employed, only 72.2 percent of families have at least one worker employed at a full-time job, the same level seen in 2012.  Among white families, 72.5 percent had at least one family member employed full-time compared to only 66.3 percent of black families, 82.8 percent for Asian families and 76.9 percent of Hispanic families.

2.) The proportion of all families, regardless of race, with an unemployed family member decreased to 9.6 percent in 2013 from 10.5 percent in 2012.  By race, the proportion of families with an unemployed family member are:

Asian: 7.8 percent

White: 8.5 percent

Hispanic: 12.9 percent

Black: 16.0 percent

If we go back two years to 2011, 11.5 percent of families had an unemployed family member, down from 12.4 percent in 2010 where 18.9 percent of black families had an unemployed family member.

3.) The number of families with at least one unemployed member decreased from 8.4 million in 2012 to 7.7 million in 2013.  If we go back to 2010 and 2011, respectively, 9.7 million and 9.0 million families had at least one unemployed member so we can see that there has been substantial improvement compared to the dark days that followed the Great Recession.

4.) In 2013, only 73.3 percent of families that were headed by women with no spouse present had an employed family member compared to 81.5 percent of married-couple families and 81.7 percent of families headed by men with no spouse present.  Among married-couple families with children, 96.3 percent had an employed parent during 2013.  Among married-couple families with children, both parents worked in 59.1 percent of the cases.

5.) The labor force participation rate for mothers with children under the age of 18 was 69.9 percent in 2013, down from 70.8 percent in 2010.  The labor force participation rate for mothers with children under the age of 6 was 63.9 percent compared to 74.7 percent for those whose youngest child was between 6 and 17 years of age.  Interestingly, the unemployment rate of married mothers was only 4.8 percent compared to 12.0 percent for mothers with a status other than married.

While we are on the topic, let's close with a look at the labor force participation rate for both women and men:

The labor force participation rate for women peaked in 2000 at 60.3 percent and has since fallen to 57.2 percent, a drop of 5.1 percent.

Here's the same graph for men:

The labor force participation rate for men peaked in October 1949 at 87.4 percent and has since fallen to its current level of 69.9 percent, a drop of 20 percent.  It is the workers that have given up on finding a job that have been the saving grace of the monthly headline unemployment picture and the reason why the employment picture for America families doesn't look as bad as it should or could.

These statistics verify what Main Street America is experiencing.  While there have been gains in employment, there are still a substantial number of American families that are experiencing unemployment and, of even more concern, underemployment.  The economy is creating jobs; they just aren't the jobs that people need to get ahead.

Ukraine - What Will the West Inherit?

Ukraine has a long history of economic difficulties.  The process of transition from communism to a democracy and from a centrally planned economy to a free market economy has been most difficult for Ukraine, even when compared to its former Soviet republic partners.  In a question and answer session with the world's media in early March, Vladimir Putin hinted at the difficulties facing Ukraine in this comment:

"In my opinion, this revolutionary situation has been brewing for a long time, since the first days of Ukraine’s independence.  The ordinary Ukrainian citizen, the ordinary guy suffered during the rule of Nicholas II, during the reign of Kuchma, and Yushchenko, and Yanukovych. Nothing or almost nothing has changed for the better. Corruption has reached dimensions that are unheard of here in Russia. Accumulation of wealth and social stratification – problems that are also acute in this country – are much worse in Ukraine, radically worse. Out there, they are beyond anything we can imagine. Generally, people wanted change, but one should not support illegal change." (my bold)

Let's look at a few examples of what is wrong with Ukraine's economy and the impact on the overall economic situation.

First, let's look at inflation:

Notice the extreme level of inflation at in the mid-1990s?  Here's a closeup showing what happened to inflation over the period between 1990 and 1997, just after the Soviet Union collapsed, compared to inflation in the United States over the same timeframe:

When the Soviet system collapsed, fixed prices on goods and services ended, energy subsidies ended and, as a result, economic output shrank.  In response, the government ran a massive budget deficit of 13 percent of GDP in 1994 alone which was covered by borrowing funds totalling 12 percent of GDP from Ukraine's central bank.  It is this borrowing that led to hyperinflation.  How bad was inflation during the early 1990s?  The price of a cheeseburger in December 1992 was 0.99 kupons.  This had risen 100 fold to 101.52 kupons one year later.  Hyperinflation decimated the savings of individual Ukrainians.  During September 1993, monthly inflation was 80 percent, rising to 66 percent in October and to 91 percent in December.  Here is a chart showing the quarterly changes in Ukraine's consumer price index and official exchange rate for the period between 1993 and 1996:

In response, in September 1996, Ukraine replaced its currency; 100,000 kupons became 1 hryvna, the currency that is still in use today.  The hryvna has hardly been a resounding success; by the end of 1998, the hryvna had depreciated by 75 percent when measured against the United States dollar.   It appears that Ukraine's struggle with inflation is not over yet, although with any good fortune, it will not rise to levels experienced in the early 1990s or in the mid-2000s as shown on this graph:

According to Ukraine's appointed Prime Minister Yatsenyuk, inflation in 2014 is expected to range between 12 to 14 percent, largely related to the decline in the value of the hryvna.

Second, let's look at what has happened to the value of Ukraine's currency since 2002:

Throughout the period between 2002 and late 2008, the conversion rate for the hryvna was quite steady, ranging between 4.4 and 5.3 to the United States dollar.  When the world's economy looked like it was going to implode in 2008, the value of the hryvna dropped sharply to around 8 to the U.S. dollar, a decline of 75 percent.

Now, here's a chart that shows what has happened to the hryvna over the past year:

Over the past year alone, Ukraine's currency has dropped to as low as 13 to the U.S. dollar, currently sitting just over 11 to the U.S. dollar, largely related to the ongoing unrest in the nation.  This is a loss of 38 percent of its value over a single year.  Obviously, this is going to have a very strong impact on the prices of imported goods and the country is likely to see prices rise by something in the neighbourhood of 30 percent annually just as it did when the currency fell in value in late 2008 as you observed on the charts above.

Lastly, here is a chart that shows what has happened to the yield on two year Ukrainian bonds since February 2011:

Currently, two year bonds are yielding 20 percent, up from 10.75 percent in May 2013.  You will notice that back in October 2012, Ukraine's 2 year bonds yielded a whopping 26 percent!

To close, let's look at how Ukraine's economy has fared since 1992 compared to its former Soviet peers:

In large part, as Vladimir Putin so aptly put it, Ukraine has an ongoing problem with corruption and, might I add, mismanagement.  During the first half of the 2000s, Ukraine relied on its exports to Russia, whose economy was relatively strong based on high oil prices, to stabilize its own economy.  When the financial crisis of 2008 erupted, Ukraine's economy was very hard hit and its GDP fell by 15 percent in 2009 alone.  As Putin noted, another big problem with corruption and the uneven accumulation of wealth is the size of Ukraine's shadow economy; as a percentage of GDP, it is the third largest in the former Soviet states as shown on this chart from the IMF:

By way of comparison, using the same methodology, Canada's shadow economy is about 11.7 percent of  GDP, compared to 10.5 percent for the United States and 13.1 for Great Britain.

Ukraine's new leadership has its work cut out for it.  The same could be said for any developed nation or non-governmental organization (i.e. IMF, World Bank etcetera) that is seriously considering throwing a monetary lifeline to the nation.  A two decade history of lurching from one economic crisis to the next seems to be the norm for Ukraine and it looks like it will be a hard cycle to break.

The United States, Russia and Ukraine - The Pot and the Kettle

Updated August 2014

When Ukraine and the Soviet Union/Russia parted ways in the early 1990s, Ukraine inherited the world's third largest inventory of nuclear weapons.  A state that had less than 50 million citizens had the following:

1.) 1900 strategic nuclear warheads

2.) 2500 tactical nuclear weapons

These included 130 SS-19 and 46 SS-24 intercontinental ballistic missiles and 25 Tu95 and 19 Tu-160 strategic bombers with air-launched cruise missiles.  Ukraine asserted administrative control over the nuclear weapons in may of 1992 but it took until May of 1993 for Ukraine's Supreme Council, the Verkhovna Rada, to act toward denuclearization.  In mid-1993, discussions began regarding the concept of a trilateral disarmament treaty with Ukraine between Russia and the United States.  In November 1993, the Verkhovna Rada voted to ratify the Strategic Arms Reduction Treaty (START 1) but stipulated that any agreement must include security guarantees, compensation for nuclear weapons already returned to Russia, financial assistance for dismantlement of the weapons and an acknowledgement that only 36 percent of the launchers and 42 percent of the warheads in Ukrainian territory were subject to elimination.  This provoked both the United States and Russia.

In mid-January 1994, a trilateral deal, the Budapest Memorandum on Security Assurances, was reached which provided security and financial assistance to Ukraine in return for signing the Treaty on the Non-Proliferation of Nuclear Weapons and START.

By May 21, 1996, all nuclear warheads had been transferred to Russia and by January 2002, all strategic bombers on Ukrainian territory had been dismantled, converted or transferred to Russian hands.  Under the Cooperative Threat Reduction (Nunn-Lugar) Program, Ukraine received over $500 million in American financial assistance.

Now, let's look at the text of the Budapest Memorandum on Security Assurances, signed by the Presidents of the United States, Ukraine and Russia and the Prime Minister of Great Britain on December 5, 1994:

        Memorandum on Security Assurances in Connection with Ukraine’s Accession to the Treaty on the Non-Proliferation of Nuclear Weapons

     Ukraine, the Russian Federation, the United Kingdom of Great Britain and Northern Ireland and the United States of America,

 Welcoming the accession of Ukraine to the Treaty on the Non-Proliferation of Nuclear Weapons as a non-nuclear-weapon State,

     Taking into account the commitment of Ukraine to eliminate all nuclear weapons from its territory within a specified period of time,

     Noting the changes in the world-wide security situation, including the end of the cold war, which have brought about conditions for deep reductions in nuclear forces,

     Confirm the following:

1. The Russian Federation, the United Kingdom of Great Britain and Northern Ireland and the United States of America reaffirm their commitment to Ukraine, in accordance with the principles of the Final Act of the Conference on Security and Cooperation in Europe, to respect the independence and sovereignty and the existing borders of Ukraine;

2. The Russian Federation, the United Kingdom of Great Britain and Northern Ireland and the United States of America reaffirm their obligation to refrain from the threat or use of force against the territorial integrity or political independence of Ukraine, and that none of their weapons will ever be used against Ukraine except in self-defence or otherwise in accordance with the Charter of the United Nations; (my bold)

3. The Russian Federation, the United Kingdom of Great Britain and Northern Ireland and the United States of America reaffirm their commitment to Ukraine, in accordance with the principles of the Final Act of the Conference on Security and Cooperation in Europe, to refrain from economic coercion designed to subordinate to their own interest the exercise by Ukraine of the rights inherent in its sovereignty and thus to secure advantages of any kind;

4. The Russian Federation, the United Kingdom of Great Britain and Northern Ireland and the United States of America reaffirm their commitment to seek immediate United Nations Security Council action to provide assistance to Ukraine, as a non-nuclear-weapon State party to the Treaty on the Non-Proliferation of Nuclear Weapons, if Ukraine should become a victim of an act of aggression or an object of a threat of aggression in which nuclear weapons are used; (my bold)

5. The Russian Federation, the United Kingdom of Great Britain and Northern Ireland and the United States of America reaffirm, in the case of Ukraine, their commitment not to use nuclear weapons against any non-nuclear- weapon State party to the Treaty on the Non-Proliferation of Nuclear Weapons, except in the case of an attack on themselves, their territories or dependent territories, their armed forces, or their allies, by such a State in association or alliance with a nuclear-weapon State;

6. Ukraine, the Russian Federation, the United Kingdom of Great Britain and Northern Ireland and the United States of America will consult in the event a situation arises that raises a question concerning these commitments. (my bold)

     

This Memorandum will become applicable upon signature.

    

Signed in four copies having equal validity in the Ukrainian, English and Russian languages.

                                               

                                                For Ukraine:

                                               (Signed)  Leonid D. KUCHMA

                                               For the Russian Federation:

                                               (Signed)  Boris N. YELTSIN

                                               For the United Kingdom of Great

                                               Britain and Northern Ireland:

                                               (Signed)  John MAJOR

                                               For the United States:

                                               (Signed)  William J. CLINTON

Note that the signatories promise that they will "...refrain from the threat or use of force against the territorial integrity or political independence of Ukraine, and that none of their weapons will ever be used against Ukraine except in self-defence or otherwise in accordance with the Charter of the United Nations"?  That's the key phrase.  This is why, in part, Vladimir Putin is using the mantra that Russia is merely protecting its people and investments in Ukraine as he states here:

"...When we see this we understand what worries the citizens of Ukraine, both Russian and Ukrainian, and the Russian-speaking population in the eastern and southern regions of Ukraine. It is this uncontrolled crime that worries them. Therefore, if we see such uncontrolled crime spreading to the eastern regions of the country, and if the people ask us for help, while we already have the official request from the legitimate President, we retain the right to use all available means to protect those people. We believe this would be absolutely legitimate. This is our last resort..."

 The Budapest Memorandum agrees that:

1.) there is no obligation to defend Ukraine by any signatory.

2.) there is an obligation to appeal to the United Nations Security Council should Ukraine become a victim of an act of aggression the object of a threat of aggression in which nuclear weapons are used.

3.) the signatories will consult each other in the even that a situation arises that raises a question about the commitments made in the Memorandum.  This obligation has been met even though the parties disagree with their stance on Ukraine.

The Budapest Memorandum quite clearly states one thing; the United States has no obligation to act in the Ukraine, they are not an ally and they are not a NATO nation.

I think if we look at one particular response that Mr. Putin gave during his interview with media representatives in early March 2014 when he was questioned about the response of the G8 to Russia's actions we will get a sense of how it will be particularly difficult to resolve the Ukraine dilemma:

"What do we pay attention to? We are often told our actions are illegitimate, but when I ask, “Do you think everything you do is legitimate?” they say “yes”. Then, I have to recall the actions of the United States in Afghanistan, Iraq and Libya, where they either acted without any UN sanctions or completely distorted the content of such resolutions, as was the case with Libya. There, as you may know, the resolution only spoke of closing the airspace for government aircraft, while it all ended with bomb attacks and special forces land operations.

Our partners, especially in the United States, always clearly formulate their own geopolitical and state interests and follow them with persistence. Then, using the principle “You’re either with us or against us” they draw the whole world in. And those who do not join in get ‘beaten’ until they do.

Our approach is different. We proceed from the conviction that we always act legitimately. I have personally always been an advocate of acting in compliance with international law." (my bold)

The old adage about the pot and the kettle and which is blacker comes to mind, doesn't it?