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Regurgitating The Obvious

We’ve seen our share of officially-sanctioned buffoonery from the Supervisors over the years, unconsciously comic performances from County Ag Advisor Glen McGourty, (former) Supervisor Nelson Redding, County School Superintendent Paul Tichinin, Supervisor Tom Lucier, the state's “Economic Development” chearleader Wayne Schell — all them good for major yucks. But last Monday, just when we thought the local stupid bar couldn’t be any lower, we got Eureka-based labor market analyst Dennis Mullins of the State Employment Development Department.

Mullins resembles County School Superintendent Paul Tichinin, which means a mix of Howdy Doody and Beaver Cleaver. Brace yourselves for pure idiocy.

Take this exchange between Supervisor Dan Hamburg and Mullins:

Supervisor Hamburg, who seemed to know the expert witness, began familiarly with questions he and everyone else over the age of twelve knows the answers to.

“Dennis, just a little bit on methodology for coming up with these unemployment rates. How do you deal with discouraged workers? How do you deal with people who are working part time, people who can't find a full-time job, people who are working more than one part-time job, people who in some cases to try to pull together a full-time income? Is this just a standard Department of Labor methodology? Or do you try to look at any of those factors that are complicated?”

Mullins: "There are about six unemployment insurance rate methods, or, um rates, basically. The idea is that this is the, it's called the UI-4, um, that rate measures, based on a number of different factors, we do household surveys, we do industry surveys, we gather that information, when we do household surveys, we ask folks, Are you able and available and seeking work? if they say they are then we count them in the workforce; if they say, No I'm disabled or No, I'm retired, or No I'm not, I can't work right now, then we don't count them. So it’s a pretty straightforward process. People say they are interested in working then we count them and we, and they're measured in this labor force data that, nationally, we don't do, uh, the rates that measure discouraged workers at the county level in California, it’s done on a national basis. I have seen where when they do the, nationally, at one point, um, probably six months ago I looked at the national rates and at one point they were saying that, if you looked at, at the unemployment rate and you looked at discouraged workers plus, uh, those working part-time for economic reasons, you know, meaning they can't find full-time work, then that would, that would come close to doubling the unemployment rate, so we are saying that one in 10 here in Mendocino County are unemployed, that's the estimate, um, and if you double that estimate, that would be two in 10, that would certainly be less, less than 20%. Does that make sense?”

(Two in ten is 20%.)

Hamburg: “Yeah, it does. [!?] And I have always — obviously there is political advantage to understating the unemployment rate. I mean, nobody wants to say that the true unemployment rate is 16% because that sounds really horrible and you know I just always — I think unemployment numbers are very skewed because nobody wants to state the true case.”

Mullins: “But the data, the data is based on, at one time the unemployment rate was based on about 49 different factors, I’m not sure what it's boiled down to now, but we ask those questions and we say Are you able to work, if they say yes then we, Are you seeking work, and they say yes then they are counted; if they say no I can't because I'm unemployed [?!] or I can't because I'm disabled or whatever, then you know they are counted not in the workforce. But it's pretty straightforward, I was as skeptical as I'm kind of hearing you say at one time, but after working in the business for ten years I am less skeptical now, um, we use, um, uh, and what, what kind of removed some of that skepticism for me is that there are a lot of folks interested, interested in making this data as accurate as possible so—”

Hamburg: “So I really didn't understand that: how do you account for discouraged workers?”

Mullins: “Okay.”

Hamburg: “Just by surveying and data?”

Mullins: “Well. Right. I think that what they've done, because we don't do it for the county, individual counties are not done that way. They do it at the federal level or the national level and I'm not, so I'm not sure about all of their methodology, um, one of the factors in that is that folks aren’t, are working part-time for economic reasons, those folks are, um, you know, they are part of the survey and so that would increase the percentage because of those folks, you know, if it, and so then the, as part of the survey they ask them additional questions and if folks say No, you know, I was in the labor force, I’m capable of working, but I've given up then they, you know, they develop some, they develop some estimates for those folks in the remainder of the population.”

Hamburg: “And you are saying that when we talk about the national unemployment rate, currently, I don't know, it's somewhere between 8 and 9%, you are saying that those workers are included?”

Mullins: “No.”

Hamburg: “They are no longer seeking employment because they, they just had tried for long enough and they just can't find a job.”

Mullins: “Well the national rate—”

Hamburg: “So they are included? Or they aren’t included?”

Mullins: “Well, this is the basic unemployment rate, um, the, um, does that?, when you look at this number here, or, it shows the, the national rate is 7.7%, that's unadjusted, not adjusted for seasonality and so, um, that number is the basic rate if you added in, you know, if you looked at it on, as a higher percentage to account for discouraged workers then those folks not working for economic reasons then that number would go up. The number fluctuates, you know, all the way from a small percentage to, um, something in the neighborhood of doubling the unemployment rate, I have seen it where it actually doubled and I've seen where it's far less than that.”

Hamburg: “Thank you.”

Supervisor John McCowen tried to sum up: “So I guess the basic truth is that the official unemployment rates typically do not account for the discouraged workers who have given up seeking employment?”

Mullins: “Right. If, if they, if they say they are not looking for work then we are not going to count them, it makes little sense to count them as part of the workforce because—”

Hamburg: “Well, at the same time it is an indication of the health of the economy which is basically what, when you look at the unemployment rate what we are really doing is taking a snapshot on the health of the economy and if we leave out a significant number of people for whom the economy is so bleak that they have given up looking for work it seems like your snapshot is blurred.”

McCowen: “And so — I think we’ve kind of established that.”

Hamburg: “I think we’ve beat this to death.”

No, Dan. It was stillborn.

* * *

Then there was this discussion about self-employed people.

Mullins: “The thing about this time is that, you know, Mendocino peaked basically in 2005-2006 and then the recession was in 2008 and so by 2009 among self-employed or, or, or, you know, people with no paid employees, Mendocino declined from 8,086 to 8,080. So in terms of firms, these folks, these folks are surviving. Doing okay. And there's not a lot of self-employed folks that have left jobs, I mean, you know, they are still in business, still operating, they have, you know, over that time period, they have lost in the neighborhood of $50 million in terms of receipts and so it’s a considerable downturn in the economy in terms of, you know, going from $337 million or $337,348,000 to $287,566,000 is a substantial drop in receipts. This is basically IRS data, data, self, self reporting, self-reported data so in terms of being in business and hanging in there self-employed folks are still there, still hanging in.

McCowen pointed out the obvious flaw in Mr. Mullins conclusion: “Although, there could have been some turnover there where any number of firms may have gone out of business but they have been replaced by others.”

Mullins: “Right.”

McCowen: “So it's —”

Mullins: “It’s the net.”

McCowen: “Right.”

* * *

Mr. Mullins had some insights regarding various categories of jobs, especially manufacturing, which in Mendocino County once meant sawmill jobs).

Mullins: “The movement between 2005 and 2011, the movement three years before the recession and three years after, you can see on the right-hand side of that graph is the two industry sectors that grew. Health services grew marginally and professional and business services grew somewhat higher, everything else, you know, because of the recession, everything else is on the negative side, manufacturing is the big loser there, something in the neighborhood of, um, I think it was 900 jobs. Manufacturing is very important to the county because making goods here locally and exporting them outside the county and then importing that capital back into the county is, you know, it's something that we need to pay particular attention to, we need to be looking at anything and everything that we can do to make manufacturers successful if we, if we, if that that means pre-permitting or setting up incubators or setting up, or making sure that the zoning is right and we take all those steps we need to look very very carefully at what will make them successful. It may mean convening employer groups or firms together and saying what does it take, you know, what do you need from us as a government agency, what can we do to make you successful? And the idea is, that, and part of it is that this idea that it's an export industry, and, uh, the multiplier effect of bringing those dollars back into the county is substantial.”

McCowen, pretending to understand: “And those manufacturing jobs, if we could bring them back would tend to be some of the most significant in value added to the overall economy?”

Mullins: “Exactly. Manufacturers typically pay more than service industry jobs, so in terms of the economic well-being of many of the residents then it is important, manufacturing jobs are, you know, it's a tough loss to see manufacturing decline like that, um, the decline in Mendocino is relative to, say, Humboldt, which is a similar county in terms of a history of wood products manufacturing, Mendocino is, proportionally, is declined less than Humboldt, Humboldt has lost even more jobs, Humboldt lost 5,000 manufacturing jobs between 1990 and 2010, you know, I mean, the number is staggering.”

Hamburg: “Dennis, looking at that professional and business services sector, you have a kind of estimate of what percentage of those jobs pay, you know, I think in the service economy a lot of low-wage jobs, so it is a low-wage job sector? Some of it obviously isn't. But what proportion of that sector, say, involves incomes of less than $12 an hour?”

Mullins: “Generally not. [?] These are, these are just average wages in Mendocino County, all jobs divided by the entire salaries then, um, professional and business services would be about 30% higher on average in income.”

Hamburg: “Higher income jobs. So where are all those service sector jobs that are low wage? What were they?”

Mullins: “They are in those categories there, leisure and hospitality.”

Hamburg: “Okay, so that's low-wage tourism sector.”

Mullins: “Eating and dining establishments, yeah.”

Hamburg: “What about financial activities?”

Mullins: “Financial activities are not there, not there. Financial activity is higher, in terms of jobs. Other services, because those, that's those, those are in private households, that’s lower, uh, the other one is trades.”

Hamburg: “Is trade where all the retail clerking jobs that are low-wage?”

Mullins: “Yes. Exactly. And customer service folks. Information is one of the higher paying.”

Mr. Mullins then presented a chart making the amazing point that when manufacturing goes down unemployment goes up. "So you can see a substantial decline there in, um, manufacturing employment and there is kind of a correlation with unemployment rates. And you can also see that in terms of this recession in terms of this economic downturn, you can see that we have been there before back in the early 90s was the Savings and Loan, when unemployment in Mendocino was 12.4% so part of it is just economic cycles we go through, you know, scandals we go through, housing busts, it’s a normal kind of process based on the economy.”

Just normal capitalism! — scandals, busts, depressions, desperation, stupidity…

Hamburg: “Excuse me, as an economist — are you an economist?”

Mullins: “Um, just, um, I took an economy class in college.”

Hamburg: “Well, how do you look at it, you are describing a lot of booms and busts, is it like on a 10 year cycle now?”

Mullins: “About seven.”

Hamburg: “Seven-year cycle?”

Mullins: “And the cycles are getting shorter.”

Hamburg: “Doesn't that make investors kind of quake?”

Mullins: “Yes, I'm sure we all agree.” [Laughs.]

* * *

Hamburg: “What is the difference between regional median household income and regional median family income? There is a $10,000 difference for Mendocino County. Excuse me, $8,000 difference.”

Mullins: “It's just families are related. Households are just people living in the same household, they are not related so, you know, it's different folks looking at different data, and they want it in different formats and the median family is just a different format than the median household, the difference in the, in median family is that it’s likely that they have multiple wage earners because they're related.”

Hamburg: “Okay. I still can’t quite grasp it. I had another question but I'll ask you later.”

Mullins then displayed a chart entitled, “Trends/summary” which said, “Mendocino's population is growing at a slower rate and adding fewer residents than most surrounding counties. Median age is slightly higher. K-12 enrollment is forecasted to start a downward trend through 2020. Large 50-69 population cohort will increase health services demand for next 10-20 years. Health services is one of two Mendocino industry sectors that increased employment levels between 2005 and 2011. Census data may support anecdotal information that younger residents move out of the county. Census 2000: 2,147 workers commuted into Mendocino, 2,236 commuted out. Roughly half commuted in from Lake, half commuted out to Sonoma. Local unemployment rates follow state trends, the March rate 11.5% matched the statewide rate and ranked 20th among 58 counties. The historical gap has closed between Mendocino and the state. Average weekly wage and per capita income is somewhat average when compared to region, but poverty rate among 65 and older is highest. Industry employment distribution is more diversified when compared to other rural counties. Firms with no employees were relatively stable between 2006 and 2009 (8,080, however receipts were down almost $50 million.”

Mullins went on to point out that since Mendo’s population is getting older, more jobs are left vacant because most people understand a major contraction is underway during which the whole ship may sink.

Mullins: “It would be good to have a four-year school here. … For some reason it just seems to me like this is a beautiful area, it seems like it's close by the Bay Area and there is a need for training and skilled workers in the Bay Area, people are already commuting, you know, well over a thousand people commuted just to Sonoma County alone out of Mendocino County based on the 2000 census data, so, um looking at replacement jobs, the idea that there will be demand, um, I think it's enough information to go forward with the idea that a higher education, I mean, there should be a facility here in Mendocino County and I would be surprised if it wouldn't attract students.”

McCowen: “The problem might be the state budget at the present time.”

Mullins: “The finances is the challenge. So what are the best minds in Mendocino County at this point, what can we come up with? You know, the idea would be to put together a plan and start working on it and try to make it happen.”

CEO Carmel Angelo: “A couple of years ago we did an economic development workshop for this board in 2010. There wasn't a lot of follow-up after that and [Deputy CEO] Mr. [Steve] Dunnicliff and I were thinking about this year doing something on job creation. We were not certain that that would be the direction that would be best within the county and for this board and so Steve suggested Mr. Mullins. I'd like to thank you Mr. Mullins for the presentation. There wasn't a slide here in this presentation that I think we couldn't have spent hours on. [!] I think the data is provocative in thought. I agree with the data around the labor. I think the two slides on poverty of all ages and poverty age 65 and older in Mendocino County being the highest rate is very very concerning. So when you look at all this data and you put it together my hope is that this data will serve as a platform for this board as you move forward in developing policy. With that and the amount of time that probably we could have scheduled for this and looking at this as a first step, again thank you Mr. Mullins, if this board would like we can schedule a workshop, or a second session later in the summer or possibly in the fall. … So if you would like we can schedule a follow-up session this summer. And possibly get more data and also some recommendations from other areas regarding our poverty rate and some of the things that are happening here locally."

McCowen: “I certainly support a future workshop or presentation on economic development to go more in depth on some of the questions that Mr. Mullins raised about what could we be doing to provide assistance.”

Pinches said he thinks the government should simply butt out. (Given the level of ignorance on display last Tuesday we’d have to agree.) “It’s been my experience that the more government stays out of business, the better business does.” (Unfortunately, business doesn’t do well in Mendo either way.)

McCowen concluded that there are things the County has done and could do to encourage business.

* * *

Lame Duck Supervisor Kendall Smith will be leaving the Board at the end of the year, having chosen not to run again since being forced by DA David Eyster to return $3300 in travel reimbursement for non-existent travel back in 2004. Smith the Inevitable now seems to be positioning herself for some kind of junket-laden bureaucratic job with one or another government association that she’s glommed onto in recent years. So last week she had one final bogus travel request, basically the same request that got turned down last year 3-2. (Only Hamburg agreed that Smith should get travel money to attend.)

Smith: “Just one follow-up or comment or question I have for the board. As you know we are a member of NACO [National Association of Counties] and the NACO conference is coming up in July [in Pittsburg, PA!] and we did not attend in last year, in 2011....."

Long babble short, she wants to go and she wants the taxpayers to pay her way. Smith's last free lunch will be on a future agenda where, we trust, she will again be denied, 3-2.

* * *

The next day, after a reasonably rosy, sort of balanced Third Quarter budget report (summarized in Off the Record last week), Deputy CEO Kyle Knopp was asked by local financial gadfly John Sakowicz, to explain why the County is borrowing money from JP Morgan Chase, now under FBI investigation for “predatory and possibly illegal trading activities.”

Knopp: “When the County issued its debt back in the year 2000-2001 the County negotiated an agreement where it received money up front and basically at the beginning of the year until every year that the payments were made on the COP debt they would front the money at the beginning of the fiscal year even though the payments for the debt would be at the end of the year so J.P. Morgan would basically hold onto that cash and be able to make investments and in return for that the county received a lump sum back in the year 2000, 2001 for whatever purpose the board at that point of time decided to use it for, that's a situation that we have no control over with one of the complicating factors of the arrangement because basically J.P. Morgan Chase was guaranteed in this agreement a set amount of money and so we had to compensate them for that for that loss, essentially our saving money they caused them to lose money, it added a little bit of cost, about $45,000 for the transaction and it took a significant amount of time to weed through and at this point in time we are not aware and have not been advised by bond counsel or anybody that we are in any sort of legal situation regarding a business arrangement with J.P. Morgan Chase so it was a challenge, it is not common to see this sort of activity on a COP transaction however the debt committee and our financial advisors were able to work through the situation that we at first thought was a real deal killer for the transaction.”

Pinches: “I thought, Kyle, you made a side deal with J.P. Morgan that we were going to make our payments over the next 10 years out of marijuana.”

Everybody laughed except Pinches. Knopp (smiling slyly, put his finger over his lips as if he was in on the joke): “Shhhhh.”

McCowen: “We will—”

Hamburg: “That’s not legal. I think we should call the question.”

McCowen: “We will vote by the button.”

The budget report was accepted unanimously.

McCowen (speaking to Ms. Nadel): “Your Honor [it had recently been announced that County Counsel Nadel had been appointed Superior Court Judge], would you like to strike that last statement from the record?”

Nadel: “No. I would like to strike him” (pointing at Pinches).

More laughter from everybody but Pinches.

Pinches: “Hey, if I am going to be accused of being a large marijuana dealer then I might as well play the part!”

McCowen: “That will be a youtube moment, Supervisor.”

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