Archive for February, 2012

17
Feb
12

IRS: Beware of the ‘dirty dozen’ tax scams

NEW YORK (CNNMoney) — As the tax season kicks off this year, the IRS is keeping an eye out for scam artists who steal identities, lie about charitable donations and hide income in offshore accounts, among other abuses.

The IRS released its annual list of “dirty dozen” tax scams on Thursday, outlining the most common ways taxpayers are cheating the system.

“Scam artists will tempt people in-person, on-line and by e-mail with misleading promises about lost refunds and free money,” said IRS commissioner Doug Shulman. “Don’t be fooled by these scams.”

Here are the 12 scams to be most wary of this year:

1. Identity theft

A growing number of identity thieves are using other taxpayer’s personal information to file fraudulent tax returns and claim undeserved refunds, the IRS warns.

In 2011, the agency stopped more than $1.4 billion in refunds from getting into the wrong hands, and it plans to weed out more identity thieves this year.

If you believe someone stole your personal information for tax purposes, call the IRS Identity Protection Specialized Unit at 1-800-908-4490.

2. Phishing

Scammers can steal your personal information from e-mails, phone calls, text messages or social media like your Facebook page. Some fake websites are also set up to dupe potential victims into giving out their information.

They tried to deduct what?!

If you see anything suspicious or receive a message from someone claiming to be from the IRS, don’t open any attachments or click on links included in the e-mail. Instead, forward the message to the IRS at phishing@irs.gov.

3. Sketchy tax preparers

With about 60% of taxpayers expected to use professionals to prepare and submit their taxes this year, be careful about who you entrust with personal information.

There are many preparers out there who will take a portion of a client’s refunds, charge more than they should for services and lure taxpayers to their offices by promising unattainable refunds.

Federal courts have issued hundreds of injunctions ordering tax professionals engaging in these scams to stop preparing returns, and the Department of Justice has issued many complaints against preparers as well.

This year, all paid preparers are required to have a Preparer Tax Identification Number (PTIN) so customers can verify that they are legitimate. Be wary if your preparer doesn’t sign the return or put their PTIN on it, doesn’t give you a copy of your return, promises unusually large refunds, charges a percentage of the refund amount as a fee, adds forms to the return you’ve never filed before, or encourages you to include false information on your return, the IRS says.

4. Hiding income offshore

Taxpayers who have an offshore bank account, brokerage account, credit card or even an offshore insurance plan, are urged to come forward voluntarily in order to limit the possibility of criminal prosecution.

As part of its ongoing crackdown on hidden offshore accounts, the agency announced another initiative this year that gives taxpayers a reduction in penalties — and no jail time — if they fess up to any undisclosed overseas accounts. Since starting the crackdown in 2009, about 30,000 individuals have come forward and voluntarily disclosed their offshore accounts.

5. No such thing as “Free Money”

Flyers and advertisements have been showing up in community churches claiming that taxpayers can file returns with little or no documentation and receive big amounts of money, the IRS said. These ads typically target low-income individuals and the elderly and often promise non-existent Social Security refunds or rebates.

Inevitably these returns get rejected by the IRS. But by the time that happens, the scam artists have already disappeared with the victims’ money.

The IRS warned that intentionally filing incorrect returns can result in a $5,000 penalty.

6. Inflating income and expenses

Claiming income you didn’t actually earn or expenses you didn’t pay to boost credits and refunds is another common scheme taxpayers attempt. If the IRS catches you in the act, you could end up repaying the extra money you claimed, along with interest and penalties — and, in some cases, you could even be subject to prosecution.

7. Filing false forms

Some scam artists are filing fraudulent forms with their returns that contain fabricated information in order to get fatter refunds.

Same-sex spouses lose big on taxes

“Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns,” the IRS said. “If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.”

8. Picking a bone with the IRS

There are even people who charge money in exchange for advice on how to argue with the IRS in order to avoid paying taxes. The agency has a list of legal positions that have been “thrown out of court” and cannot be used against the IRS, including the argument that filing a tax return is voluntary and that the IRS must prepare a return for anyone who fails to file. So pick your fights carefully this tax season.

9. Falsely claiming zero wages

In an attempt to lower the amount of taxes they owe, some taxpayers file phony wage-related information returns instead of the required returns. This is typically done by filing Form 4852 (a substitute W-2 form) or a “corrected” Form 1099 to fraudulently lower a person’s taxable income to zero.

10. Exaggerating charitable donations

It can be tempting to overvalue the items you give to charity when reporting them on a return — especially for non-cash donations such as furniture or artwork — but the IRS is keeping an eye out for suspiciously high-valued donations this year.

The agency is also looking out for taxpayers who abuse charitable deductions by temporarily donating money or items to tax-exempt organizations, just to shield the money from getting taxed.

11. Disguising corporate ownership

It’s time to fess up to that business you own. The IRS is currently working with state authorities to identify corporations and other entities that are hiding ownership of a business.

Often these businesses are hidden because the true owner uses a third party with its own employer identification number, whose businesses or financial services can be used for the underreporting of income, fictitious deductions, money laundering, financial crimes and even terrorist financing.

12. Misuse of trusts

Beware of anyone that tries to convince you to transfer money into a trust in order to reduce your taxable income, deductions for personal expenses and/or estate taxes. The IRS has seen an increase in the number of taxpayers improperly using trusts — especially private annuity trusts and foreign trusts — to skip out on tax liabilities.

The $13,000 adoption tax credit is back!

“While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes,” the IRS said. “Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.” To top of page

15
Feb
12

Firms turn to riskier financing

Zalmi Duchman, CEO of TheFreshDiet.com, turned to merchant cash advance providers when several banks denied him small business loans.

Zalmi Duchman, CEO of TheFreshDiet.com, turned to merchant cash advance providers when several banks denied him small business loans.

New York (CNNMoney) — Banks denying small businesses loans keep demanding what they can’t have – collateral – and the disconnect is forcing firms to look elsewhere.

Small businesses are caught up in the collateral crisis, as banks continue to focus on healthy credit scores and tangible assets like property, two of the hardest hit casualties of the recession.

“A lot of the traditional collateral that entrepreneurs used to have disappeared,” said Ami Kassar, a financing consultant and CEO of MultiFunding.

It’s a quandary long in the making. The landscape of U.S. small firms has changed from manufacturers to service companies, yet banks keep demanding collateral like equipment and land. The chasm has produced a breeding place for others, according to FOCUS investment banker John Slater.

Small biz loan demand up, Federal Reserve says

“Banks have backed away from making loans at a time when what many businesses have of value is cash flow and not physical assets,” said Slater. “That’s created a market opportunity for the cash advance industry.”

Those in the trade, such as AmeriMerchant and RapidAdvance, offer quick money with a hefty fee. Typical clients are restaurants and small shops, which take out advances that range between $5,000 and $200,000. A business owner who takes out a $70,000 advance will have to pay back $100,000. Lenders ensure repayment by immediately taking a fixed portion, close to 15%, of a sale every time a customer swipes a credit card at the shop.

Advances commonly take six months to repay and carry annualized interest rates of 104% to 177% if paid evenly every month, according to a 2009 industry analysis by consulting firm First Annapolis. Marc Abbey, an expert and managing partner at the firm, said figures are similar today.

Despite complaints that such terms amount to predatory lending, the industry is supported by some small businesses that revel in how easily advances are made. Financing firms require little paperwork and no collateral or guarantees.

It’s a merchant cash advance that kept open The Killarney, an Irish pub in Vermont that feeds those coming down from the snowy Okemo Mountain Resort. During the restaurant’s first year in 2005, owner Mark Verespy exhausted a $285,000 Small Business Administration loan to buy the place and burned through a $50,000 line of credit. He needed more, but the bank denied him.

Verespy’s kitchen equipment was not enough.

“They were looking for my parents to put their house up and all kinds of stuff that were just not an option,” said Verespy.

Instead he turned to Merchant Cash & Capital, which analyzed the pub’s cash flow and quickly handed over $30,000. Verespy has returned to the company a dozen times since.

“It’s not inexpensive,” he said. “But the good side is, if I need funding I can generally get it in less than a week. If I had to wait for the bank to get a loan, I’d probably be out of business.”

Doctors: Why we can’t stay afloat

Large financial institutions that have long sat on the sidelines are starting to listen.

In September, American Express (AXP, Fortune 500) began offering a similar option it calls “express merchant financing.” Raja Sengupta, an executive who oversees the program, said it’s different from merchant cash advance, because it’s only offered to existing business clients who show a strong enough flow of customers using American Express credit cards.

Zalmi Duchman, CEO of TheFreshDiet.com, turned to American Express after three banks denied him loans and found the financing terms of his credit card processor unfavorable.

Duchman was looking for quick money to finance an ad campaign for his food operation in Miami Beach.

100 Best Companies to Work For

His credit card processor offered $1 million if he would pay back $1.15 million by giving up 8% of every customer’s Visa and Mastercard payment.

“When I looked at it, I said, ‘It’s loan shark money,’ ” said Duchman.

American Express offered him $750,000 at a 6% annualized interest rate. He said 10% of every payment customers make with an American Express card goes to pay down the $795,000 bill. Unlike a bank loan, however, the full amount must be paid back by year’s end or American Express will claim all of every future credit card receipt.

Still, he happily accepts the cost and risk.

“I have to give American Express props for entering this business,” Duchman said. “They’re doing what the banks and SBA aren’t doing, and that’s giving out money. It’s hard to demonize them.”

Are you a U.S. small business owner who has taken a merchant cash advance? Email Jose Pagliery and share your story. Click here for the CNNMoney.com comment policy. To top of page

13
Feb
12

New job? get a head start now

About 40% of executives who change jobs or get promoted fail in the first 18 months. One way to avoid that is to lay some crucial groundwork before your first day.

By Anne Fisher, contributor

FORTUNE — Dear Annie: I’m starting a new job in about two weeks as head of a somewhat troubled division at my current employer’s biggest competitor. It’s a larger role than I’ve had so far in my career, and I’m pretty excited about it, but it comes with some significant challenges, since the business I’ll be running has been hit hard by the recession and the European debt crisis, revenues and earnings are down, and morale is in the tank.

The CEO who hired me said everyone there is expecting me to “hit the ground running.” I’ve got some ideas about what needs to be done right away, which I talked about in interviews (and which presumably got me hired). But on the theory that there’s no such thing as too much information, I’d appreciate any thoughts from you and your readers about what works, and what doesn’t, in this kind of situation. –Parachuting In

Dear P.I.: It’s fortunate that you have two weeks before your official start date because, according to executive coach George Bradt, you’ll need every minute of that to get off to the strongest possible start. “The best way to build your team, take charge, and get great results fast is to create time by starting earlier than anyone thought you would,” he says. “This one idea can make or break a new leader’s transition.”

Bradt is basing that partly on his own decades of experience as a senior manager at Unilever (UN), Procter & Gamble (PG), and Coca-Cola (KO), and partly on his work with 600 job-changing managers since 2002 as principal of PrimeGenesis, the executive coaching firm he started in 2002. Bradt is also co-author of a new book you might want to check out, The New Leader’s 100-Day Action Plan (Third Edition).

His mission is to lower the failure rate among executives newly hired or promoted into big jobs, which research shows has stood at about 40% for at least 15 years now.

“New leaders who miss the opportunity to get a head start, before their official start date, often find out later that organizational or market momentum was working against them even before they showed up for their first full day at the office,” Bradt says. Gulp. Borrowing a term from the product-development world, Bradt calls the time before you’re officially on board the “fuzzy front end.” Here are four ways to make the most of it:

1. Meet with critical stakeholders as soon as possible. “Identify the people in the company who can have the most impact on your success in the new job,” Bradt advises. “These include your direct reports, critical support people, peers, potential allies, and even the person who wanted your job but didn’t get it.” Call or visit each of these folks, even just for a quick chat or a cup of coffee. It sounds simple but, Bradt says, “It always makes a huge difference. It’s a game changer.”

2. Have a plan for listening and gathering information. “Different stakeholders will have different views of the same situation,” Bradt notes. Asking for their perceptions and suggestions “is not a search for the One Truth. Rather, it’s an exercise in understanding people’s views, both on what’s going well and what’s not and why, so that you can work effectively with each of them. Come into these conversations with an open mind and actively listen.”

While you’re at this, try to find out about what Bradt calls “shadow metrics” in the organization you’re joining, meaning key measures of how things are going that may not be evident at first glance: “What are the key measures of success along the way? How are they tracked, and how can you get access to them?”

3. Craft your message. How are you going to present your ideas — the ones you believe got you hired — on where the business needs to go from here? “Part of preparing to lead is thinking through the messages you want to send, right down to details like whether your office setup will be informal and open-door or more formal and structured,” Bradt says. People will be watching closely and talking to each other about you, he adds: “Everything communicates, and not always what you intended, so be careful.”

4. Start making a hundred-day plan. The knowledge you gather before you officially start “should help you begin to put things in context and decide what you want or need to do on your first day, during your first week, and in your first three months,” says Bradt. “It’s important not so much to learn everything there is to know before you show up, which would be impossible anyway, but to have a plan in place to learn more.”

Granted, this is a lot of work. “People tend to resist doing all this because there’s usually a time squeeze involved in changing jobs, where your old employer wants you to stay as long as possible, and your new one wants to rush your start date,” Bradt notes.

“It’s also very common to want to take at least a short vacation to rest and recharge between jobs,” he adds. But tempting as it might be to sit on a beach and unwind for a few days, if you really want to start strong, you just haven’t got time.

Talkback: What helped you most in starting a new management job? If you’ve ever had a new boss come in from outside the company, what did he or she do well at the start, and what do you wish had gone differently? Leave a comment below.

10
Feb
12

Opinion: Nostalgia for factory jobs that won’t come back

updated 8:46 AM EST, Fri February 17, 2012
President Obama visits a Master Lock factory. Jeffrey Bergstand says manufacturing's heyday is over in the United States.
President Obama visits a Master Lock factory. Jeffrey Bergstand says manufacturing’s heyday is over in the United States.

STORY HIGHLIGHTS
  • Jeffrey Bergstrand: Theme of economic talk is desire to return to our factory roots
  • President Obama is stressing revival of manufacturing as a route to greater prosperity
  • Bergstrand says the nostalgia is understandable but naive
  • He says the golden days of U.S. manufacturing in the 1950-1970 era are gone

Editor’s note: Jeffrey Bergstrand, professor of finance at the University of Notre Dame, is an expert on international trade.

(CNN) — If there is a central public sentiment about economics prevailing in America right now, it seems to be this: We want to go back to our manufacturing roots.

The heyday of manufacturing, the block-long plants that produce not just tangible goods, but big, heavy ones like cars, gave us economic stability once; it can do it again.

On Wednesday, President Obama spoke at the Master Lock factory in Milwaukee and said, “What’s happening in Detroit can happen in other industries. What happens in Cleveland and Pittsburgh and Raleigh and Milwaukee, that’s what we’ve got to be shooting for, is to create opportunities for hardworking Americans to get in there and start making stuff again and sending it all over the world — products stamped with three proud words: Made in America.”

But as with most nostalgic visions, this one doesn’t reflect economic realities.

Jeffrey Bergstrand

Jeffrey Bergstrand

First, it’s understandable why we have a romantic association with manufacturing. “Factory nostalgia” is economically legitimate, because it harkens back to the period of the greatest growth in the U.S. economy in history, basically 1950 to 1973.

During that period, there was growth not just in production, but in real household incomes, which is something we have seen little of for the last 40 years. This gave rise to a burgeoning, powerful middle class, and more than that, a sense that all of America shared in the economic boom, with the assembly line tethering us like an anchor to shared prosperity.

Compare this image to the more recent service-based economy. The source of the common bond — the assembly line — is gone. Instead, people are tied to their own education, their own human capital. Because of that, they’re more stand-alone. And so since 1973, we face this widening inequality, partly because our incomes are more tied to individuals, and individuals are different. There’s a huge variance across their abilities and educations, and incomes are tied directly to those things. And this situation creates the political tension we face in America; consequently, we long for manufacturing because we associate that with the strength of the middle class.

But can we go back to the assembly line? To answer that, there is another important factor to keep in mind. The enormous growth from 1950-73 wasn’t entirely of our own making. It was partly due to our own initiative and education, but we also must remember that in 1950, Japan, Germany, Britain and France were all leveled because of World War II. We had no competition.

Today, not only are all those countries competing against us, but so are China, India and other countries in South America and Africa — countries with very large and growing populations. It’s not the same game, and in that sense, we’re naïve to think we can repeat the ’50s and ’60s if we just pull our bootstraps up. The world was much different then.

Further, there’s a very important caveat to people who respond that we should just close our borders and make everything here. As an economic policy, that belief will only serve to hurt standards of living here and globally. There is a large body of evidence that shows that economic growth comes from three things: good geography, sound institutions and strong trade partnerships with the rest of the world. So, going back to closing the borders will only hurt us in the long run.

Despite the recent, well-publicized successes in U.S. auto manufacturing, what is happening in the American economy is not the reversal of a trend toward declining manufacturing. Rather, it’s a slowing down of the rate of loss of manufacturing, or almost a stabilization of the decline of manufacturing in this country.

For the last 25 – 30 years, companies moved manufacturing to China where labor costs were considerably less and there existed an enormous consumer market. But the subsequent rapid per capita income growth in China has meant a rise in the relative price of their labor, so the cost differential is being alleviated. This cost differential is being further narrowed by China once again allowing its currency to gain in value compared to the U.S. dollar.

Once that differential diminishes, the rate of manufacturing decline has to slow.

However, this does not signal that “in-sourcing” or “re-shoring” is on the rise in America. Low-technology manufacturing is not anything we will ever get back to permanently. It’s just too costly to produce here, and even if China becomes less attractive, there’s still Latin America, and much of Asia and Africa. Going forward for decades, we simply don’t have a comparative advantage in producing low-technology manufactured goods.

But we can retain manufacturing strength in the high-technology goods, as long as we commit to providing the level of education that employees will need to meet the labor demand.

There are those high-tech jobs such as the assembly of iPhones and iPads that require proximity to component suppliers — the chipmakers, the semiconductors, the circuitry — which can and probably will continue to be performed in countries with less-skilled workforces. However, there are many tasks associated with such complex products — research and development, for example — that don’t require proximity to these suppliers and those provide jobs that America can gain. If manufacturing is to have a reinvigorated future in America, this is where the growth will be seen.

But education is the key to the U.S. being able to take advantage of this opportunity One of the biggest issues that I hear from managers and executives is that they need to hire workers, but can’t find those who have the educational skills to be productive. This condition alone will lead to a permanently higher unemployment rate.

We may not, in the foreseeable future, get down to 5% unemployment because of the significant number of people who lack the skills for high-tech manufacturing jobs and the current underemployment and long duration of unemployment that is depreciating our workers’ skills. As a country, we face the risk that we will lose out in our ability to compete in manufacturing to Europe, Japan and others.

So the nostalgia for our industrial past should be turned into a vision for a better way to educate our children. On a number of indices, we are in the bottom half of the richest 30 countries in terms of primary and secondary education performance for skills in math and reading comprehension. Forty years ago, we were right near the top.

Some people are losing out on their opportunities for a better economic future even by age 4. We simply must return to our commitment to invest in human capital.

Follow @CNN Opinion on Twitter

03
Feb
12

Trouble found in air marshal report

A long-awaited report on alleged misconduct within the Federal Air Marshal Service concludes that while supervisors do not engage in “widespread” discrimination and retaliation against rank-and-file air marshals, the agency is far from trouble-free.

The report, from Department of Homeland Security’s Office of the Inspector General and obtained by CNN, paints an unflattering picture of the agency, saying air marshals share the widespread “perception” that they are being mistreated, and adding that investigators “heard too many negative and conflicting accounts” of misconduct to dismiss them.

“Federal air marshals repeatedly portrayed their supervisors as vindictive, aggressive, and guilty of favoritism,” the report says.

A “substantial percentage” of air marshals surveyed believe they are victims of discrimination or unfavorable treatment. And many fear retaliation if they report violations of laws or regulations, the report says. “There is a great deal of tension, mistrust and dislike.”

At the same time, the report says, rank-and-file air marshals share in the blame. Air marshals with grievances sometimes take their bosses’ actions out of context, fail to disclose the whole story, and misinterpret management decisions as harassment, the report says.

Importantly, the report says, the divisiveness and tension on the ground “do not appear to have compromised” the agency’s mission” in the sky.

The 21-month investigation was triggered by a January 2010 CNN report about air marshals based at the Orlando, Florida, field office.

An air marshal there alleged that supervisors created a “Jeopardy”-style game board and labeled it with terms such as “pickle smokers,” “our gang” and “creatures,” which, he said, alluded to gay men, African-Americans and lesbians. The names ridiculed air marshals who had fallen out of favor, and targeted them for retaliation, he said.

But the Office of the Inspector General says it “found no evidence” that the board resulted in unfair treatment of air marshals.

The report says the game board was created by three people — a supervisor, an air marshal and a civilian training officer. The air marshal said the “Jeopardy” board was used to make fun of the training staff, not others. And he provided “relatively innocuous explanations” for the terms used on the boards, the Office of the Inspector General said.

But a training staff member, who was not involved in the board’s creation, gave a different explanation. He said the training staff “used the game board to make fun of federal air marshals they disliked, including African-Americans, gays and lesbians, and others who had filed complaints against the office,” the report says.

All three people responsible for creating the board have left the agency, it says.

Though the game-board disclosure triggered the inspector general’s investigation, the scope of the investigation expanded as air marshals stepped forward with other allegations about their bosses. More than 300 people were interviewed, and investigators visited Air Marshal Service offices in Orlando and Tampa in Florida; Charlotte, North Carolina; Cincinnati; Minneapolis; and Dallas.

The degree of animosity varied at different field offices, according to the report, which called the animosity at Orlando “unsettling.”

“We conducted numerous interviews at offsite locations because interviewees did not want to be seen talking to us,” the report says.

It says the inspector general’s office received numerous individual allegations of misconduct, but did not investigate them, leaving open the true extent of the mismanagement.

“Determining whether one employee retaliated or discriminated against another is a complex matter” that would require a court to determine, the report says.

A Federal Air Marshal Service spokeswoman contacted by CNN late Thursday reiterated that the report found no evidence of widespread discrimination or retaliation. Employees’ perceptions of discrimination stem from poor communication with the work force, she said.

“While the (agency) faces organizational challenges, the (inspector general’s office) notes that these challenges do not interfere with the mission of the agency,” Kimberley Thompson wrote in an e-mail statement. “Through working groups, listening sessions, and advisory councils, (Federal Air Marshal Service) leadership has demonstrated its commitment to improving communications within the workforce.”

She added the Transportation Security Administration “took a proactive approach to the issues raised and has developed and implemented solutions ahead of the conclusion of the investigation.”

But Tom Devine of the Government Accountability Project, a nonprofit whistle-blower organization, called the report “a significant vindication for air marshal whistle-blowers.”

“It confirms a perceived pattern of retaliation against air marshals who challenged security breaches by Federal Air Marshal Service management,” he said.

The inspector general’s report puts a spotlight on common complaints that many air marshals have against their supervisors, and vice versa. Many air marshals “harbor strong feelings” that former U.S. Secret Service employees, who flooded the top ranks of the agency following the September 11th terrorist attacks, created their own “elite culture” within the agency that was not held accountable. Conversely, supervisors “did not hide their view” that the government, in its haste to create the agency, hired unqualified people, the report says.

The government investigators said they identified factors that contributed to the allegations of a hostile work environment. There was limited transparency to management decisions, it said, and there is limited interaction between managers on the ground and the officers, whose job requires extensive travel.

The report said the TSA and the Federal Air Marshal Service are committed to addressing the factors that led to the investigation and the problems that air marshals say still exist.

The inspector general recommended the TSA “create and implement an action plan” to address workplace issues. “The plan should include training for supervisors on communication and conflict management that is tailored to the unique Federal Air Marshal Service mission,” the report stated.

03
Feb
12

Optimism over jobs outlook

Companies are saying the job market is getting better. Workers are saying it’s already kicked into high gear.

Friday’s jobs report showed a gain of 243,000 jobs. But a separate survey of households used to determine the unemployment rate shows much, much stronger job gains.

The number of people saying they were employed increased by 631,000 in January alone. That’s the biggest one-month gain since just before the Great Recession started in late 2007.

And the three-month and six-month increases are similarly impressive — 1.1 million more say they have jobs compared to October, and nearly 2 million more people say they’re working since July’s reading.

That is the best six-month job gain since August 2005, when the unemployment rate was a healthy 4.9%. January’s unemployment rate is still a painfully high 8.3%. But the unemployment rate has fallen from 9.1% in the last six months on the strength of the increasing number of those saying they have found work.

Finding a job in 2012

So the spike in Americans saying they’re working could be an early sign of much stronger-than-expected economic growth ahead.

Typically economists pay more attention to the jobs number produced by the survey of employers than to the households survey. But the employer survey can miss hiring by very small businesses, start-ups and self-employed workers.

Mark Zandi, chief economist at Moody’s Analytics, says the household survey serves as a better sign of where the economy is heading at turning points like when it’s going into recession and when it’s ready to take off.

He said one reason job growth has been so disappointing since the official end of the recession in June 2009 is that there has been weaker than expected new business start-ups during that period.

He and other economists said this employment reading, and other data showing a pick-up in demand for credit by small businesses, makes them hopeful we’re finally getting that long-overdue business creation.

The jump in those saying they found work “probably represents people finally feeling good enough, and credit is flowing freely enough, to start businesses,” Zandi said. “That augers very, very well.”

Dr. Charles W. Hodges, professor of finance at University of West Georgia, said that despite a persistent problem with home foreclosures, other economic signs point to a strengthening recovery.

To get a better feel of current economic activity, it’s better to look at jobless claims, state tax collections or to talk with your neighbors, he told the Associated Press.

“Are they getting jobs, being laid off and are their children getting jobs?” Hodges said.

He said construction is important to the economy but monthly foreclosure figures are not a good predictor. He said overall economic indicators are looking better.

“Take a look at the tax collections in Georgia,” Hodges said. “They are increasing significantly, telling us that economic activity is going up.”

 

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03
Feb
12

Zakaria: Democracy takes time

February 3rd, 2012
12:07 AM ET

Editor’s Note: Make sure to tune in Sunday at 10a.m. or 1p.m. EST for Fareed Zakaria GPS on CNN.

By Fareed Zakaria, CNN

Dozens of Egyptians were killed in a soccer stadium brawl this past week. This was the deadliest outbreak of violence since Hosni Mubarak was ousted one year ago. The violence didn’t stop at the stadium and it begs the question: What has Egypt gained since its revolution? Take a step back and ask: What has the Arab Spring achieved in the last year? Has people power failed the people? What in the world is going on?

In Egypt, the military might be more entrenched than before. Meanwhile a quarter of the seats in parliament have gone to a group of ultra conservative Islamists. Only 2% have gone to women. Or consider Libya. It’s veering towards anarchy. The local militias that helped topple Moammar Gadhafi have reneged on a pledge to give up their arms.

Look at Tunisia. You’ll remember that a fruit vendor there sparked the Arab Spring by setting himself on fire. Well, now there are reports of many more such incidents of self-immolation. From Tunisia, to Egypt, to Libya, democracy has unleashed turmoil and long-suppressed expressions of Islamic fundamentalism.Perhaps, some will say, the Arab world didn’t fully understand what it was getting into. Perhaps, others will argue, after years of living under tyranny, Arabs just don’t know how to rule themselves.

I say, let’s look at some history. Democracy has never been easy. Consider what so many democratic revolutions looked like – a year or two after they started. Take America: After the revolutionary war, the country was in economic, political, and social turmoil. By 1779, inflation was at close to 400%. Per-capita income had halved between 1774 and 1790. Remember the armed Shays’ Rebellion of 1786? It was seen by many as evidence that people power would go awry and upend the union.

Or consider France. After the onset of the French Revolution things got really bad. The symbol of the revolution became not libertéégalité, fraternité but the guillotine.

Or look at India, the world’s largest democracy. It welcomed freedom in 1947 after centuries of foreign rule. And yet the ensuing months brought with it mass riots over Partition, the deaths of millions of Hindus and Muslims. Five months after freedom, the father of the nation, Mahatma Gandhi, was assassinated. In Indonesia, in the 1990s, a year after Suharto fell, a hapless man, BJ Habibie became president amidst economic collapse and rising Islamic radicalism. His presidency lasted exactly 17 months.

Now we remember the Eastern European revolutions of 1989. But those are really the exceptions that prove a much more messy rule. The process of becoming democratic has always been chaotic. Mistakes are made. Lives are lost. And in the most dire moments, people have always doubted that there would be a good outcome. We need to keep that in mind when we assess the Arab Spring.

Democracy might be messy. It’s certainly complicated. It takes a while to consolidate. But for the first time in perhaps a millennium, the Arab people are taking charge of their own affairs. So let’s cut them some slack. It’s only been a year.

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