Job Growth

NEW YORK (CNNMoney.com) -- Employers trimmed fewer jobs in August than they did the prior month, but the unemployment rate jumped to a 26-year high, the government reported Friday.

There was a net loss of 216,000 jobs in the month, according to the Labor Department. That was the fewest jobs lost since August 2008 and lower than a revised loss of 276,000 jobs in July. Economists surveyed by Briefing.com predicted a loss of 230,000 jobs in August.

But even with the lower level of losses in August, 6.9 million jobs have been cut from payrolls since the start of 2008.

The unemployment rate, which in July fell for the first time in 15 months, turned higher again, jumping to 9.7% from 9.4% in July. This is the highest the unemployment rate has been since June 1983. Economists forecast that the jobless rate hit 9.5% in August.

0:00/3:47Recession lessons we'll forget

The unemployment rate is based on a survey of households while the payroll estimate comes from a survey of employers. That can explain why unemployment rose even though there were fewer job cuts.

But the July drop in unemployment was due more to people without jobs no longer looking for work than it was due to hiring. Relatively few people got discouraged and left the labor force in August.

"When you're losing 200,000 jobs a month, the unemployment rate can't help to go up unless you have a lot of people just giving up," said Tig Gilliam, CEO of Adecco Group North America, a unit of the world's largest employment staffing firm.

Summer jobs tough to find

Bernard Baumohl, chief global economist for the Economic Outlook Group, said part of the reason for the high unemployment rate is the difficulty teenagers had finding summer jobs this year. The unemployment rate among teenagers was 25.5%, a record high.

"I'm less concerned with the unemployment rate increase because the summer tends to play a lot of havoc with these numbers," Baumohl said.

Gilliam said he's encouraged because job losses among temporary workers fell to 6,500 from 7,900 the month before. Losses in that segment of the job market, seen as a barometer of employers' hiring plans, had been averaging about 46,000 a month from the start of 2008 through June of this year.

"We expect to see the temporary workers number go positive in September or the next few months. That will set us up for overall job gains in early 2010," he said.

Gilliam said he sees far more clients filling openings and making hiring plans for a few months from now. But he predicts only modest job gains ahead.

Friday's report also showed that there were 9.1 million workers limited to part-time jobs because they couldn't find full-time positions, up 278,000 from the month before.

That number of so-called underemployed workers had been falling over the past two months, leading to hopes that employers who had been cutting their staff's hours were at least bringing people back on full time.

Many economists think that adding hours for employees is an important precursor to actual hiring. So the increase in involuntary part-time workers may be viewed as disappointing.

Still, Baumohl said the importance of the decline in job losses should not be underestimated. He said the only way to turn around the labor market is for those losses to slow down first.

"We do have to look at the momentum, and the momentum was positive," he said. "The labor market is in the process of turning around, but it is going to be agonizingly slow. Most Americans won't detect it anytime soon."

Job losses continue to be widespread

Despite automakers ramping up production to meet demand for fuel-efficient vehicles sparked by the Cash for Clunkers program, auto plants and auto parts makers lost nearly 15,000 jobs in August.

There was a 5,000 job increase at auto dealers though, ending a string of 21 months of job losses in that industry. Manufacturers outside the auto sector lost an additional 50,000 jobs, however.

The construction sector shed another 65,000 jobs as well. That loss came despite signs that building starts and home sales have been improving in recent months and increased spending on public works projects tied to the government's economic stimulus package.

Have you suffered a setback because of the economy? What are you doing to overcome it and get back on track? If you've been confronted with some challenge during this recession but are fighting back, send an email to realstories@cnnmoney.com and you could be profiled in an upcoming segment on CNN. For the CNNMoney.com Comment Policy, click here.  

Discouraged jobless abandon work searchJob Growth

House to vote on extending unemployment benefits

NEW YORK (CNNMoney.com) -- Jobless Americans in high-unemployment states would see their benefits extended for another 13 weeks under legislation to be considered by Congress next Wednesday.

The House measure would lengthen benefits for the more than 300,000 people who live in states with unemployment rates greater than 8.5% and who are set to run out of compensation by the end of this month, a Democratic aide said. The legislation would also help another 1 million people who are scheduled to lose benefits by the end of the year.

Some 26 states and the District of Columbia fall into this category. Workers in other states could qualify if their state is expected to hit an 8.5% unemployment rate soon or meets other criteria. The national unemployment rate hit 9.7% in August, the highest in 26 years.

Pressure has been building on Capitol Hill to extend unemployment benefits as the jobless rate continues to rise and openings remain scarce. Although Congress has twice voted to extend benefits over the past year, an estimated 400,000 people are expected to lose their checks by the end of this month and 1.4 million will by the end of the year, according to the National Employment Law Project.

"Now is not the moment to pull the plug on America's jobless workers or to deal a body blow to the nation's nascent economic recovery," said Beth Shulman, the group's chair, in testimony before the Senate Finance Committee on Tuesday.

The cost of the additional benefits would be offset by extending for one year an employer-paid federal unemployment tax that has been in place for the past three decades, and by requiring that reporting on newly hired employees include a start date, which would reduce unemployment insurance overpayments.

The measure is expected to pass in the Democrat-controlled House, though it could face a challenge in the Senate. Senate Republicans could not be reached for comment Thursday, but Sen. Jim DeMint, R-S.C., last month told Fox News that he would vote in favor of extending benefits.

"Yes," DeMint said. "Yeah, we'll definitely support it."

Can't find jobs

Extending unemployment benefits is critical because the jobless can't find new positions in this recession, experts said. A record 50.7% of the unemployed fail to find work within six months of receiving benefits, according to the National Employment Law Project. There are now more than six potential workers for each opening, up from 1.7 in December 2007.

In most states, the unemployed receive 26 weeks of state-funded benefits. Depending on where they live, they could get federally funded extensions for a total of 79 weeks.

Governors of 22 states appealed to Congressional leaders this week to quickly pass extended benefits.

"Employment lags behind economic recovery, and we cannot forget that help for unemployed workers and their families remains a critical need," said Gov. Jennifer Granholm of Michigan, which has the highest jobless rate in the country. 

Unemployed short on opportunities, benefitsRecovery won’t improve unemployment

The hypocrisy of the Fed

NEW YORK (CNNMoney.com) -- Are there any mirrors in the headquarters of the Federal Reserve? If so, I think it's time for Ben Bernanke and his colleagues to look into one.

The Fed, according to a Wall Street Journal report Friday, is said to be considering a plan that would allow regulators to closely monitor and even change the pay practices at financial firms in order to make sure that these companies aren't encouraging excessive risk-taking.

Considering that the mess that we find ourselves in is partly due to big banks and insurance firms failing to recognize the many subprime warning signs in order to satisfy Wall Street's myopic focus on quarterly profits, reining in bonuses and other compensation tied to stock performance may not sound like a bad idea.

But riddle me this Bat-readers: Isn't it more than a tad hypocritical for the Fed to be trying to tell banks that too much risk is a bad thing?

After all, the Fed has kept its key overnight bank lending rate near 0% since December and has shown no indication that it will raise this rate anytime soon.

And the Fed has pumped trillions of dollars into the financial system through a variety of programs in order to try and get banks to loan more again. The business of lending is inherently risky. So what kind of message is the Fed trying to send here?

"It makes absolutely no sense at all. It is completely counterintuitive," said Haag Sherman, managing director with Salient Partners, an investment firm in Houston. "The government wants to impose more regulations and put shackles on compensation but in the next breath everybody is screaming about banks not lending."

It's hypocritical plain and simple. Isn't all this cheap money designed to push banks to take on more risks? The Fed wants to slap banks on the wrist for paying its employees too much because that might encourage them to get reckless. But at the same time, the Fed is tempting banks to lapse into bad habits with what may be an overly accommodative monetary policy.

This is the equivalent of your doctor telling you that he wants to approve every meal you eat for the next few months so you don't gain a lot of weight -- while handing you coupons for McDonald's and Krispy Kreme on your way out of the office.

Now of course, many big financial firms are guilty of helping to bring about the financial crisis as the promise of fantabulous bonuses undoubtedly caused them to put on blinders and ignore risk.

"There was no acknowledgment that the derivatives they were writing had a risk. The biggest issue with compensation at financial firms is that it was like paying people before the roulette wheel stopped spinning," said Barry Ritholtz, CEO and director of equity research at research firm Fusion IQ in New York.

But there is a lot of blame to go around.

Consumers got suckered into thinking that the American dream wasn't just owning a home but owning a home with as little money down as possible so they could quickly flip it and buy another one. Greedy mortgage brokers and appraisers helped indulge this.

But many believe the the root cause of the housing bubble is that interest rates were extremely low for an extended period of time. And that's mainly the Fed's fault. During the 2001 recession, the Fed slashed interest rates, bringing them down to 1% by June 2003. And it held them at 1% for a year.

0:00/2:19Bair: Compensation needs reform

With that in mind, why should the Fed have the power to dictate compensation packages -- especially since it may be in the process of making the same mistake all over again by signaling it's going to keep rates at zero for a while.

"The Fed was a major cause of this downturn. So why reward them with more authority? And now they're saying don't take risks but by the way, here's a whole lot of easy money," Ritholtz said.

Don't get me wrong. I'm not suggesting that bank CEOs, other senior executives and traders should be rewarded for failure. And if the government has a major stake in a financial institution, I think regulators should be more active in protecting the interest of taxpayers.

I have no problem if the government wanted to, for example, tell new AIG (AIG, Fortune 500) CEO Robert Benmosche that he can't make as much as he did when he ran MetLife (MET, Fortune 500) or use AIG's corporate jet for personal purposes. (What was Benmosche thinking? Did all the stories about AIG bonus rage not reach his villa in Croatia? Thank heavens the board turned him down.)

Regulators should also be allowed to look more closely at and crack down on excessive compensation at the likes of Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500) as long as they remain tethered to TARP. That's the price these institutions pay for needing what the government euphemistically describes as "exceptional assistance," and you and I would call a bailout.

But the Fed's plan is supposedly going to apply to the more than 5,000 banks that it regulates. That's not fair to the many banks that didn't screw up and were in a strong enough financial position to turn down the government's "rescue" plan.

Plus, this looks like more of a power grab by the Fed than anything else. The Fed appears to want to run an end-around on Congress and avoid legislative scrutiny.

Ritholtz argued that other agencies, such as the SEC and FDIC, should be the ones that have more authority over scrutinizing compensation packages at banks. He thinks the Fed should stick to its primary role as a monetary policy maker.

Sherman goes one step further. He doesn't think the government should have any role in dictating pay. He said that should be up to investors in the financial firms.

"To me, the most sensible thing is to give shareholders more say and give them more transparency about compensation in proxy statements," he said.

Of course, it's not that simple. And it's actually going to take action from Washington to give shareholders that power. The House passed a so-called "say on pay" bill earlier this summer but the Senate has yet to vote on its own version.

Hopefully, shareholders will have more of a say soon. They deserve it more than the Fed.

Talkback: Should the Fed or other government agencies have the power to limit executive compensation? Share your comments below. 

Federal Reserve moves to regulate banks’ payBailed-out banks: Meet the pay czar

Madoff beach house sells big

NEW YORK (Fortune) -- It looks like Fed chief Ben Bernanke is right in saying the recession is ending: Today, Tiffany's & Co. advertised a $115,000 diamond and platinum bracelet in its page three New York Times spot -- and convicted swindler Bernie Madoff's Montauk beach house sold for more than its $8.75 million list price.

The real estate agent handling the property won't disclose the buyer -- nor the exact price -- but says contracts have been signed. "It did go for over the list price," Joan Hegner, a broker with Corcoran Group, told Fortune. There were between five and 10 offers on the property, and more than 28 showings since it went on the market in late August, she added.

0:00/3:44Selling Madoff's Montauk home

The house, nestled on a beach in Montauk -- a town at the farthest reaches of Long Island known for its surfing and fishing -- is a relatively modest getaway for a family as wealthy as the Madoffs. Completed in 1982, it featured a Formica kitchen and small bedrooms.

Locals were skeptical that Corcoran -- enlisted by a U.S. Marshal-picked management company -- could even get the asking price.

But the property, which boasts sweeping ocean views, was built closer to the beach than would be permitted under today's strict zoning regulations. And it offered the added bonus of the trophy value of nabbing the vacation home of the biggest swindler in history.

Anticipating multiple bids on the property, the U.S. Marshal service planned a kind of silent auction. But according to Hegner, there was no bidding war. The mystery buyer's bid stood out as "the best and highest." 

Madoff’s homes, belongings for saleMadoff arrives at N.C. prison

Job Growth

NEW YORK (CNNMoney.com) -- Employers trimmed fewer jobs in August than they did the prior month, but the unemployment rate jumped to a 26-year high, the government reported Friday.

There was a net loss of 216,000 jobs in the month, according to the Labor Department. That was the fewest jobs lost since August 2008 and lower than a revised loss of 276,000 jobs in July. Economists surveyed by Briefing.com predicted a loss of 230,000 jobs in August.

But even with the lower level of losses in August, 6.9 million jobs have been cut from payrolls since the start of 2008.

The unemployment rate, which in July fell for the first time in 15 months, turned higher again, jumping to 9.7% from 9.4% in July. This is the highest the unemployment rate has been since June 1983. Economists forecast that the jobless rate hit 9.5% in August.

0:00/3:47Recession lessons we'll forget

The unemployment rate is based on a survey of households while the payroll estimate comes from a survey of employers. That can explain why unemployment rose even though there were fewer job cuts.

But the July drop in unemployment was due more to people without jobs no longer looking for work than it was due to hiring. Relatively few people got discouraged and left the labor force in August.

"When you're losing 200,000 jobs a month, the unemployment rate can't help to go up unless you have a lot of people just giving up," said Tig Gilliam, CEO of Adecco Group North America, a unit of the world's largest employment staffing firm.

Summer jobs tough to find

Bernard Baumohl, chief global economist for the Economic Outlook Group, said part of the reason for the high unemployment rate is the difficulty teenagers had finding summer jobs this year. The unemployment rate among teenagers was 25.5%, a record high.

"I'm less concerned with the unemployment rate increase because the summer tends to play a lot of havoc with these numbers," Baumohl said.

Gilliam said he's encouraged because job losses among temporary workers fell to 6,500 from 7,900 the month before. Losses in that segment of the job market, seen as a barometer of employers' hiring plans, had been averaging about 46,000 a month from the start of 2008 through June of this year.

"We expect to see the temporary workers number go positive in September or the next few months. That will set us up for overall job gains in early 2010," he said.

Gilliam said he sees far more clients filling openings and making hiring plans for a few months from now. But he predicts only modest job gains ahead.

Friday's report also showed that there were 9.1 million workers limited to part-time jobs because they couldn't find full-time positions, up 278,000 from the month before.

That number of so-called underemployed workers had been falling over the past two months, leading to hopes that employers who had been cutting their staff's hours were at least bringing people back on full time.

Many economists think that adding hours for employees is an important precursor to actual hiring. So the increase in involuntary part-time workers may be viewed as disappointing.

Still, Baumohl said the importance of the decline in job losses should not be underestimated. He said the only way to turn around the labor market is for those losses to slow down first.

"We do have to look at the momentum, and the momentum was positive," he said. "The labor market is in the process of turning around, but it is going to be agonizingly slow. Most Americans won't detect it anytime soon."

Job losses continue to be widespread

Despite automakers ramping up production to meet demand for fuel-efficient vehicles sparked by the Cash for Clunkers program, auto plants and auto parts makers lost nearly 15,000 jobs in August.

There was a 5,000 job increase at auto dealers though, ending a string of 21 months of job losses in that industry. Manufacturers outside the auto sector lost an additional 50,000 jobs, however.

The construction sector shed another 65,000 jobs as well. That loss came despite signs that building starts and home sales have been improving in recent months and increased spending on public works projects tied to the government's economic stimulus package.

Have you suffered a setback because of the economy? What are you doing to overcome it and get back on track? If you've been confronted with some challenge during this recession but are fighting back, send an email to realstories@cnnmoney.com and you could be profiled in an upcoming segment on CNN. For the CNNMoney.com Comment Policy, click here.  

Job growthDiscouraged jobless abandon work search

Showdown over Philadelphia budget crisis

NEW YORK (CNNMoney.com) -- Hard times are hitting the people of Philadelphia, one way or another.

The best-case scenario:Philadelphians will pay 14.3% more in sales taxes for the next five years. This is on top of earlier cuts that already reduced library hours, tree trimming, snow plowing and collection of tires and bulk items.

At worst, they'll lose their libraries, courts, playgrounds and senior centers. Residents will have nearly 1,050 fewer police officers and firefighters to protect them, and they'll have to hold onto their garbage for two weeks.

What ultimately happens hinges on whether the Pennsylvania Legislature approves the city's request to hike its sales tax by 1 percentage point and defer pension payments for two years. Mayor Michael Nutter has said he'll send out 3,000 layoff notices and order the shutdowns to begin Oct. 2 if lawmakers don't give him an answer by Friday.

"We deeply regret to inform you that due to the lack of State budget authority, the City of Philadelphia may no longer have the funds to provide a full range of critical services, severely impacting our residents, businesses and visitors," according to a message posted on the city's Web site. Nutter declined a request for comment.

The drama playing out in Philadelphia could be repeated in cities across America as the recession takes its toll on municipal tax revenues. While the national economic picture may be brightening a bit, cities and states face many tough choices in the years ahead.

More than nine out of 10 cities are slashing spending this year as the recession wreaks havoc on their sales and income tax revenue, a recent National League of Cities study found. And the future looks even worse.

"Cities are offering services and paying salaries they can't afford at the moment," said Larry Eichel, project director for Pew Charitable Trusts' Philadelphia Research Initiative, a think tank focused on city issues. "Cities like New York, Chicago and Boston are all looking at big deficits for next year."

Tough choices

To be sure, there are places suffering more than the City of Brotherly Love. But Philadelphia's leaders have had to make some difficult decisions over the past year.

The trouble first surfaced in November, when Nutter announced the city was facing a $108 million deficit for the fiscal year, which ended June 30. Officials had to slice into the $4 billion budget, requiring non-union city workers to take furlough days, suspending scheduled business and wage tax cuts, removing equipment from some fire stations, reducing police overtime and cutting 800 mostly-vacant positions.

The city closed another $1.4 billion hole in its five-year spending plan this spring in part by raising fees and eliminating another 250 positions. But the key to balancing the budget was raising the sales tax rate to 8% and deferring pension payments.

These last two moves, however, require approval from Harrisburg lawmakers. While they are expected to grant Philadelphia's request, an official vote has been delayed as the legislature battles over the still-unpassed fiscal 2010 budget.

A vote this week is possible, but may be delayed further.

Philadelphia can't wait

Nutter, however, says the city can't wait any longer. Notices of the imminent closings started going up in buildings and on agency Web sites last week. Residents are receiving automated calls that their garbage will only be picked up every other week.

While the most draconian moves may never actually happen, the delay in Harrisburg has already cost the city nearly $20 million in anticipated sales tax revenue.

As a result, Philadelphia has had to push back the start of its police cadet class, reduce maintenance on city property, cut the hours of its 311 info line and devote fewer resources to the licenses and inspections department, which is already overwhelmed, officials said. And in mid-July, the city started delaying payments to vendors, resuming only after it received a $275 million short-term bank loan earlier this month.

"We are providing services, though not at the level we would like," said City Councilwoman Marian Tasco, the majority leader who chairs the finance committee. "When you have less personnel, you have less ability to provide the services you need."

Tasco's staffers, for instance, recently called the city's duplicating office to copy a community resource booklet only to be told it didn't have enough paper. They ended up copying a smaller number in-house since they are also have a limited paper supply.

Even if Harrisburg approves the city's request soon, Philadelphia and its residents will have to deal with a tight budget for the time being, officials said.

"Everybody understands there has to be some sacrifices in this economy," said Controller Alan Butkovitz. "It's a cycle we see periodically." 

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Cybercrime: A secret underground economy

NEW YORK (CNNMoney.com) -- If the word 'cybercrime' conjures up images of computer geeks trying to crash computers from their mothers' basements, think again.

Cybercrime has become a rapidly growing underground business built by savvy criminals, who buy and sell valuable stolen financial information from millions of unsuspecting Internet users every year in an on online black market.

"Most cybercriminals are very, very interested in financial gain by compromising customer accounts," said FBI special agent Austin Berglas, who supervises the Bureau's New York Internet crimes squad. "Believe it or not, there are people who fall victim to their scams, and we see it every day."

Because cybercriminals are so skilled at hacking into thousands of computers every day, the crime is potentially a billion-dollar business. If every stolen credit card and bank account had been wiped clean last year, that would have netted cybercriminals some $8 billion, according to data from Symantec, maker of the Norton antivirus software.

As a result of the lucrative payout, more and more online criminals are entering the game. In fact, the number of new Internet security threats rose nearly three-fold last year to 1.7 million.

Those cyber attacks mostly come from malware, or malicious software, that hands control of your computer, and anything on it or entered into it, over to the bad guys without you even knowing it. The most common forms of malware include keystroke logging, spyware, viruses, worms and Trojan horses.

How the deed is done. Once your information has been stolen, cybercriminals go onto an invitation-only Internet Relay Chat (like a chat group) to do commerce with other online criminals. Cybercriminals will often set up a hacker channel for a matter of days, do business, and then take it down to avoid detection. When active, hacker IRCs can get upwards of 90,000 cybercriminals talking to one another at a given time, according to Dave Cole, senior director of product management at Symantec.

Online criminals use the IRCs to sell or trade your credit card or bank account information. Credit cards are some of the cheapest commodities sold on the Internet Black Market, averaging about 98 cents each when sold in bulk. A full identity goes for just $10.

Credit cards and bank account information made up 51% of the goods advertised on the underground economy last year, up from 38% in 2007. Credit cards are most popular because they're the cheapest stolen commodity. Cards with expiration dates, CVV2 numbers and names go for more than ones with numbers only, but there is no honor in the underground online crime world -- oftentimes hackers will sell the same credit card information to multiple users, and many have already been canceled.

As a result, buyers and sellers on IRC channels will often give the information to a trusted third party for a fee. The third party will test the card information, often by charging a very nominal amount or by posing as a charity, and then verify the goods to the buyer.

After the information is purchased by a secondary criminal, that person can use a machine to print out a fake credit card with your information. But many use yet another tertiary person to wire stolen money into an overseas bank account.

That third person in the chain is usually called a "mule," who often doesn't even know he or she is part of an underground organized crime scheme. Many mules respond to the "make money from home" schemes, where stolen money is sent to their accounts, and they subsequently wire that money to an overseas account for a 10% to 15% fee.

Other mules are given phony ATM cards and are asked to retrieve cash for a small fee. But there is substantial risk involved -- law enforcement usually comes knocking on mules' doors first.

To catch a thief. The FBI is working undercover in many of these IRC channels in an effort to thwart the cybercriminals. And in many cases, captured criminals agree to work for the government in exchange for reduced sentences.

"After we make an arrest for someone cashing out at ATM machines, I'll tell them they can go to jail for 10 years or they can come work for Team America," said Berglas.

The strategy doesn't always work. Albert Gonzalez, the infamous TJ Maxx (TJX, Fortune 500) thief who stole 45 million credit card numbers and private information of 450,000 customers in 2007, was an FBI informant. He helped bring down a massive credit card theft scheme, but double-crossed the FBI, using insider information to help fellow criminals evade detection and carry out the TJ Maxx theft.

Security software also helps, but it far from solves the problem. To avoid detection, many cybercriminals will send out just a handful of viruses before modifying the code and sending it out again.

"The truth is that 'fingerprint' security technology is no longer effective," said Rowan Trollope, senior vice president of product development at Symantec. "The bad guys that got involved are organized professionals, and they figured out how to get around our technology."

Though Trollope said the new version of Norton's antivirus software helps address the problem by scanning for files' reputations, he said that Internet consumers also need know how how to keep their identities safe online.

"We do products really well, but the next step is education," said Trollope. "We can't keep the Internet safe with antivirus software alone." 

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