FLOYD NORRIS

In Europe, Auto Sales Are Still Low, But They Are Rising

European auto sales figures for March, reported today, show that slightly more new cars were sold in the euro zone during the most recent 12 months than had been sold a year earlier. The increase was a tiny one, just 0.4 percent.

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Credit Source: European Automobile Manufacturers Association

Monthly figures have been rising for some time, but this was the first year-over-year rise since early 2010, and another sign that economic growth is returning to Europe.

Some of the largest gains were in countries that have experienced severe recessions. Sales in Greece, Portugal, Spain and Ireland were all at least 10 percent higher than they had been during the previous 12 months.

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Credit Source: European Automobile Manufacturers Association

To some extent, however, that merely reflects how low sales had fallen. Even with the the gain, sales in Portugal during the 12 months through March were 43 percent lower than in the full year 2007, and sales in Greece, Spain and Ireland were down by more than half. For the euro area as a whole, the decline was 26 percent. Read more…

Help for the Big Guys

Even those among us who are doing the best can use a little help now and then.

For the year 2011, the Internal Revenue Service reports, there were 30,604 tax returns filed that showed adjusted gross income of at least $5 million. Of those, 117, or 0.38 percent, reported that the income included unemployment compensation.

That ratio turns out to be the lowest in three years. In 2010, 143, or 0.50 percent, of the 28,791 returns showing income of at least $5 million included unemployment compensation. In 2009, the figures were 92, or 0.40 percent, of 23,026 returns; in 2008, 99, or 0.28 percent, of 34,870 returns.

The number of returns showing income of at least $5 million remained well below the record of 46,484 set in 2007. That year, there were so few high-income returns with unemployment compensation that the government did not reveal the numbers, for fear of identifying specific taxpayers.

How, you might ask, could anyone making that much money qualify for unemployment compensation?

One answer is that most or all of the income might be from investments. Another is that even wealthy Wall Streeters can get laid off. (It would be interesting to know how many of the 99 in 2008 worked for Lehman Brothers.) And, of course, many of these returns were filed jointly. One spouse could have been laid off even as the other did very well.

Over all, the number of 2011 tax returns that included unemployment compensation fell 12 percent from 2010, to 13.2 million. In 2007, before the Great Recession, the figure was 7.6 million.

After Six Years, a Full (Private-Sector) Recovery

Today’s job reports for March finds there were 116,087,000 private-sector jobs. That figure is 110,000 higher than the 115,977,000 employed in January 2008, the previous peak.

That is by far the longest it has ever taken (at least since the government began releasing monthly figures in 1939) for private-sector employment to recover fully from a recession. The old record was 54 months, or 4.5 years, after jobs peaked in 2000 and the 2001 recession began.

Total jobs have still not recovered, because government employment continues to fall. In March, the government total was flat, as an increase in state and local jobs was offset by a decline in federal employment, but the 12-month change was still negative.

So over all, we need another 437,000 jobs to get back to the January 2008 peak. That seems likely to be in June, assuming current trends continue.

Of course, getting back to the old level would hardly be a great victory, because the population has been growing. But it would be a start.

The Many Classes of Google Stock

The price of Google shares is going to be cut in half on Thursday.

That is not because the company is worth less than it was. It is because an unusual stock split will take effect.

Owners of Google Class A shares — ticker symbol GOOG through Wednesday — will get an equal number of new Class C shares. Those Class C shares will get the GOOG symbol, while the Class A shares will trade under the symbol GOOGL.

Why bother? The new Class C shares have no voting rights. The Class A shares have one vote each, but collectively those votes are dwarfed by the 10-votes-per-share Class B shares. Those shares, which do not trade in the public market, are owned by Google insiders, who will also get Class C shares in the distribution.

As originally proposed by the company, the move would have made it easy for Google’s founders, Larry Page and Sergey Brin, and the chairman, Eric E. Schmidt, to cash in a large part of their holdings without giving up their voting control. But that ability has been limited after the company settled a class action suit filed by angry (Class A) shareholders, and reached agreements with the three top officials to limit their sales.

In essence, for every share of Class C they sell, they must also convert one Class B share into Class A. Presumably they will sell that share as well. So their voting rights will fall as they would have under the old structure, when they would have converted Class B shares into Class A shares before selling them. Read more…

Shrinking Governments: Good or Bad?

One accomplishment — well, to the Tea Party it would seem to be an accomplishment — of the Obama administration is the recession in government hiring.

The jobs report for February found that governments — state, local and federal — had 21,851,000 civilian employees, on a seasonally adjusted basis. That was down 32,000, or 0.15 percent, from a year earlier.

This marks the 56th consecutive month, going back to July 2009, that government employment was down on a year-over-year basis, excluding the temporary jobs added for the 2010 census. If you count them, the string is 43 months, going back to August 2010, when most of the temporary workers had lost their jobs.

There has been no other period since they started counting the figures in 1939 that government employment has been so weak for so long. This string is now more than twice as long as the 26-month one in the early 1980’s during the double-dip recessions and the Reagan administration cutbacks. There was also a 50-month string of declines that ended in 1947, caused by the downsizing of the government after World War II ended.

The good news (if you want people to be working) or bad news (if you hate the government) is that this string may finally be nearing an end. The number of government workers rose 13,000 in February. The current figure is only 9,000 under the number for March 2013, so a comparable increase this month would produce a year-over-year increase.

Of course, there are caveats. Some of the decline is because of reductions in employment at the United States Postal Service. But federal government employment outside the post office has been down, on a year-over-year basis, each month for more than two years. State and local government employment was weak during the Great Recession, but has begun to recover.

Governments now employ 15.9 percent of all Americans who have jobs. That is the lowest proportion since 2001.

How to Choose an Auditor

One unfortunate fact about the auditing business is that those who depend on the audit — investors, lenders and customers — are not the ones who choose the audit firm. At the places where an audit is most needed, the people choosing the auditor may be the ones who have the most to fear from a good audit.

According to charges filed Thursday against former executives at Dewey & LeBoeuf, Joel Sanders, then the firm’s chief financial officer, sent an email in June 2009 to Frank Canellas, the firm’s finance director, pointing out that the audit partner in charge of Dewey’s audit had left the firm.

“Can you find another clueless partner for next year?” he asked.

“That’s the plan,” replied Mr. Canellas. “Worked perfect this year.”

Mr. Sanders was among the former officials indicted by a grand jury in New York. Mr. Canellas was not indicted, but was charged in a parallel civil action filed by the Securities and Exchange Commission.

The indictment says Mr. Sanders and the other official earlier “discussed new fraudulent entries that could be made to the firm’s accounting records” that would make it appear it was not in violation of loan covenants.

The S.E.C. suit says Dewey officials “expressed occasional concern that the auditor would detect their fraudulent accounting practices, but they took a certain degree of comfort in what they viewed to be the ineptitude of the auditors.”

Ernst & Young was Dewey’s auditor.

This hardly reflects well on Ernst, but there may be one bright spot. Perhaps the audit firm’s management understood the partner’s shortcomings. The S.E.C. suit says the audit partner who left in 2009 had been fired “for reasons unrelated to the audit work.” But his replacement seems to have failed to spot the frauds as well. Ernst gave the firm a clean opinion each year through 2010. It had not certified the 2011 statements before Dewey filed for bankruptcy in 2012.

A spokeswoman for Ernst declined to comment.

The Auditing Roadblock: It’s Not Just China

The Public Company Accounting Oversight Board is out with a list of 58 international audit firms that it has been unable to inspect for at least four years. Those firms all audited companies registered in the United States, and — under American law — must be inspected by the board. The board has tried to arrange joint inspections with regulators from other countries, but a variety of impediments have arisen.

China, which is forever talking about cooperation but somehow never actually providing much of it, leads the list. There are eight Chinese firms and another eight based in Hong Kong. In some cases, the board says, it has been able to inspect Hong Kong firms, either because they did not audit mainland companies or because no objections were raised even though they did. In others, the Chinese authorities intervened to prevent inspections.

But for sheer numbers, Europe is the biggest scope of the problem. Forty of the audit firms are based in the European Union, where each country can decide for itself if it wants to be cooperative, and some are distinctly more eager than others to do so. Read more…

Taking Their Investments Elsewhere

The Treasury on Tuesday released its estimates of international capital flows into and out of the United States, and they indicate that foreigners were net sellers of $40.2 billion of American stocks in 2013. That is hardly a large amount, but it is the first year since 1992 that they were net sellers.

Historically, foreigners have been considered to be contrary indicators in almost every stock market around the world, on the theory that they are less familiar with the market than are local investors, and more likely to buy at the top, after prices have been bid up to levels that could be unsustainable, and to sell at the bottom, after the local investors have fled, sending prices down.

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Source: United States Treasury, via Haver Analytics.Credit

The two years with the largest inflows of foreign money into American stocks were 2000 and 2007 — both years that the market hit historic peaks and began large declines. That would seem to confirm the theory. Read more…

Job Growth Slumps. Employment Surges.

More people have gone to work during the past three months than at any time in decades.

Those same three months have seen fewer jobs created than during any similar stretch in more than a year.

Both of those statements are true, or at least can be supported by Labor Department surveys. It is just that the surveys disagree.

According to the household survey, in January 1,717,000 more people were working than were working in October, adjusted for a small change due to changes in population estimates that are made each January. That is an average monthly gain of 572,000.

The Bureau of Labor Statistics has a series that adjusts for such changes going back to 1990. During that period, the largest three-month change was a gain of 1,449,000 in the three months through October 1994. Read more…

A High-Water Mark for Women, in Retrospect

During the worst part of the credit crisis, women had more paid jobs than men for the first time, the Labor Department now says.

The new numbers show that in June 2009, 65,499,000 jobs in the United States were held by women — 50.02 percent of the total — while 65,455,000 were held by men.

The percentage of jobs held by women peaked at 50.1 percent in December of that year, and then began to decline as more men found work. By last month, the share for women was down to 49.4 percent.

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Source: Bureau of Labor Statistics, via Haver Analytics. Note: Chart is not zero-based.Credit

The new calculations resulted from a conclusion that six states — California, Massachusetts, Missouri, Nebraska, Texas, and Washington – had improperly not been counting some workers in the reports to the government based on unemployment insurance premiums paid. Read more…