Dr. Norm Matloff writes

I strongly encourage you to contact CNBC regarding the terribly one-sided show they ran today, on which I just sent out a posting to my e-newsletter.[Below]  You can e-mail them at powerlunch@cnbc.com

The discussants on the show took it for granted that employers must be hiring H-1Bs because the H-1Bs are better, when we all know that it’s because they are cheaper.  Two congressionally-commissioned reports, plus a number of academic studies have shown this.

And the hiring of H-1Bs for cheap labor is done by nearly ALL employers, not just the body shops.

Only a tiny fraction of the H-1Bs are “the best and the brightest.”  You can see this right away from the salaries.  The median H-1B salary for software developers is around $60K, whereas the top talents make well over $100K.

Dr. Norm Matloff writes:

A reader brought to my attention today’s panel discussion on the Power Lunch program on CNBC, viewable here.

The discussion concerned Sen. Grassley’s request to Microsoft that the firm give American workers retention priority over H-1Bs in layoff decisions, as well as the recent enactment of the Grassley/Sanders restrictions on hiring of H-1Bs by TARP recipients.

All six discussants took it for granted that employers hire H-1Bs because they are of superior quality.  Even though one of the six seemed to be supportive of Grassley, as the discussant’s techie brother had been laid off, even this one did not question the notion that the H-1Bs
“must” be better (“five times more productive,” one said) than the Americans.

It did not occur to a single one of these discussants, nor to host Bill Griffeth, that price might be a factor, i.e. that employers hire the H-1Bs simply because they are cheaper.  It boggles the mind that a major business channel, CNBC, could show ignorance of such a fundamental
principle.  Griffeth in fact has run news items on H-1B as cheap labor  in the past, so he at least knows that there are people who assert that H-1B is about cheap labor.  Odd that he didn’t speak up.

My colleague, UCD economics professor Giovanni Peri, actually showed the same ignorance.
He’s a great guy, and will be quite successful I believe, but it’s even odder to see such an attitude from him than from a bunch of business journalists.  See here.

Clearly, ideology can be blinding.

Norm

One of the frustrating things about the Mortgage Meltdown is how little basic factual information, such as where it actually happened, has been conveyed to the public. That embargo is finally starting to break down.

Brad Heath reports in USToday in “Most Foreclosures Pack into a Few Counties:”

More than half of the nation’s foreclosures last year took place in 35 counties, a sign that the financial crisis devastating the national economy may have begun with collapsing home loans in only a few corners of the country.

Those counties, spread over a dozen states, accounted for more than 1.5 million foreclosure actions last year, a USA TODAY analysis of figures compiled by the real estate listing firm RealtyTrac shows — more than were recorded in the entire United States just two years earlier. They were the epicenter of a wave of foreclosures that have left leading banks teetering and magnified the nation’s economic problems. …

In other parts of the country, the foreclosure wave was barely a ripple — at least until it started swamping major banks that had invested heavily in mortgages. Banking giant Wachovia Corp., for example, was hammered after California and Florida customers of one mortgage firm it bought began defaulting at high rates. The risks of such lending were spread so broadly among financial institutions that, when the loans went bad, it drove the national credit crisis, says Christopher Mayer, who studies real estate at Columbia Business School.

A few of the 35 counties leading the foreclosure boom are in already-distressed areas around Detroit and Cleveland. But most are clustered in places such as Southern California, Las Vegas, Phoenix, South Florida and Washington, where home values shot up dramatically in the first half of the decade, then began to crumble. …

The worst-hit counties are home to about 20% of U.S. households, but accounted for just over 50% of the nation’s foreclosure actions last year, driving most of the national increase. And even among those places, a few stand out: Eight counties in Arizona, California, Florida and Nevada were the source of about a quarter of the nation’s foreclosures last year. In more than 650 other counties — about a fifth of the nation — the number of foreclosure actions actually dropped since 2006.

But median prices were so high and median incomes so low in those eight counties that they probably accounted for half or more of the dollars defaulted. Lucy and Herlitz estimate that 87% of the home appreciation in America happened in the four Sand States between 2000 and 2006, so it’s likely that a similar fraction of the downturn in home values happened there.

Nevada had the worst 2008 foreclosure rate at 7.3%, followed by Arizona at 4.5%, Florida at 4.5%, California at 4.0%, Colorado 2.4%, Michigan 2.4%, Ohio 2.4%, George 2.2%, and Illinois 1.9%.

In the four expensive states at the top of the list, people were betting on immigration-driven population growth to continue to drive up housing prices indefinitely. But the immigrants turned out to be unable to pay for expensive houses and their influx lowered property values in neighborhoods where they congregated, and made homes unaffordably expensive where they didn’t.

Cool graphics here and here.

A lot of people tell me that we shouldn’t pay much attention to the causes of the Mortgage Meltdown because that was just the trigger for the global financial crash and something else would have caused it eventually. Okay, but, in fact, something else didn’t actually set it off, so let’s at least try to figure out what did.

When a Lockheed-built plane would crash, my dad would get a call in the middle of the night and he’d be on the 8 am flight for Italy or Miami or Fiji or wherever to traipse around in a wheat field or a swamp or a jungle for weeks picking up shards of metal (and bone). They’d lay out the metal they found inside an aircraft hanger in the shape of the airplane, like a giant jigsaw puzzle. Eventually, they’d figure out why all those people died.

Of course, that didn’t stop planes from crashing. But, the more they learned from crashes, the less often they crashed.

By the way, one thing that should be borne in mind in thinking about the high foreclosure rates in new exurbs compared to in old cities is that part of this is an inevitable function of the newness of an exurb. Compare a brand new development in an exurb 80 miles outside of San Francisco that opened up in 2005 to Russian Hill in San Francisco.

Why is there a much higher percentage of defaults in the new development? First, because practically everybody in the new development has a mortgage. Nobody has lived there long enough to pay off their mortgage because it didn’t exist 30 years ago. Some families in Russian Hill paid off their mortgage after Great-Great-Great-Grandfather Jeremiah (whose portrait in oil glowers down upon the drawing room) cornered the sasparilla market in 1859.

Second, if the development didn’t open until 2005, that meant everybody bought in at the top of the bubble, whereas Russian Hill is full of people who bought in in 1987 or 1998 and thus have reasonable mortgages.

After you take all that into account, you’ll still see big differences in default rates, due to the fact that people buying into exurbs on the distant margin of metropolitan areas tended to be only marginally creditworthy, typically coming from the stressed second quartile of the population. The highest default rates in LA County, for example, are way out in the high desert, where people worried about their kids slipping into the underclass tried to buy into a little more house than they could afford to get into a little better school district. But, due to easy credit, so did everybody else (and many turned to renting their speculative houses to people who couldn’t even qualify for a zero down liar loan due, perhaps due to excessive neck tattoos or whatever), so it all came crashing down.

The weakness in U.S. labor markets has gathered extraordinary momentum, wiping away millions of jobs over the past four months alone, the Labor Department reported Friday. (Read the full BLS report: PDF)

The survey of U.S. business payrolls found a job loss of 651,000 j in February, the fourth month in a row where job losses were near or above 600,000. Unemployment rose to 8.1%, up from 7.6% in January and from what now seems an unattainably low 4.8% in February of 2008.

The other employment survey - of households rather than business establishments - shows a February job decline of 351,000 - or nearly half the payroll figure. Over the last twelve months, however, the two survey are remarkably close - with the payroll survey indicating 4.141 million jobs lost and the household variant reporting a loss of 4.245 million.

February saw a continuation of the reverse-displacement trend, with Hispanic jobs shrinking at a far faster clip than non- Hispanic jobs:

• - Total employment: -351,000 (-0.25 percent)
• - Non-Hispanic employment: -235,000 (-0.19 percent)
• - Hispanic employment: -116,000 (-0.59 percent)

Over the past 12 months Hispanic employment declined by 717,000, or 3.5%, while the number of non-Hispanics working in the U.S. shrank by 4.2 million, or 2.9%.

Hispanic unemployment skyrocketed to 10.9% in February, up from 9.7% the prior month. White unemployment all rose, albeit by a more modest 0.4 percentage points, reaching 7.3% in February.

While poring over the details one small glimmer of hope sprang out to us: Labor force participation rates reversed a three-month long decline, rising (slightly) for both Hispanics and non-Hispanics. In normal times this would signal increased confidence among job seekers. In today’s funk it may be seen as a sign of desperation - jobless workers looking for jobs they know aren’t there. We are eternal optimists.

The ratio of Hispanic to non-Hispanic job growth since the January 2001, expressed as an index that we call VDAWDI (the V-Dare.com American Worker Displacement Index), fell by 0.4% percent in February. Since the job market fell out of bed in September, the Hispanic job growth index is down by 4.2%; the non-Hispanic index is down by 2.0%; and VDAWDI (the ratio of Hispanic to non-Hispanic job growth) is off by 2.2%.

The recent collapse is alarmingly apparent in the graphic:

From January 2001 through February 2009 Hispanic employment increased by 3.97 million, or 22.1 percent, while non-Hispanic employment nudged up by 1.31 million, or 0.99 percent.

Bottom line: The worst job collapse since the Great Depression hasn’t erased eight-years of American worker displacement. Not yet, anyway.

Mexicanization continues apace, as shown by numbers from the Census.

Roughly one-fourth of the nation’s kindergartners are Hispanic, evidence of an accelerating trend that now will see minority children become the majority by 2023.

Census data released Thursday also showed that Hispanics make up about one-fifth of all K-12 students. Hispanics’ growth and changes in the youth population are certain to influence political debate, from jobs and immigration to the No Child Left Behind education, for years.

The ethnic shifts in school enrollment are most evident in the West. States such as Arizona, California and Nevada are seeing an influx of Hispanics due to immigration and higher birth rates.

Minority students in that region exceed non-Hispanic whites at the pre-college grade levels, with about 37 percent of the students Hispanic. Hispanics make up 54 percent of the students in New Mexico, 47 percent in California, 44 percent in Texas and 40 percent in Arizona.

In 2007, more than 40 percent of all students in K-12 were minorities — Hispanics, blacks, Asian-Americans and others. That’s double the percentage of three decades ago. [Hispanic enrollment in schools, colleges rising, By Hope Yen, AP,March 6, 2009]

Also of interest from the Census is its annual Facts for Features: Cinco de Mayo. It’s a list of statistics to make the job of journalists even easier when they write the requisite yearly puff piece on the Mexican holiday coming up in May.

Here are a couple of stats from the Cinco de Mayo blurb…

29.2 million

Number of U.S. residents of Mexican origin in 2007. These residents constituted 10 percent of the nation’s total population and 64 percent of the Hispanic population

18.25 million

Number of people of Mexican origin who lived either in California (10.97 million) or Texas (7.28 million). People of Mexican origin made up more than one-quarter of the residents of these two states.

As I wrote in U.S. Census Bureau Presents Diversity Propaganda As Impartial Information, the agency has lost track of its mission of the collection and presentation of demographic facts. If there is an unpleasant fact about an ethnic group, it is often disguised by appearing with no comparison information with other groups. One example is this item about more Hispanics going to college.

Hispanics Become More Prevalent on College Campuses

Hispanic students comprised 12 percent of full-time college students (both undergraduate and graduate students) in 2007, up from 10 percent in 2006, according to U.S. Census Bureau tables released today. Hispanics comprise 15 percent of the nation’s total population.

That’s nice that more Hispanics are going to college, but Inquiring Minds Want To Know how many graduate. The Census doesn’t go there. (However, 2006 government figures noted that 57 percent of white students get their degree versus 44 percent of Hispanics.)