One of the great puzzles of our current economic troubles is how come construction employment has held up so well. The answer is simple. There is such a shortage of skilled tradesmen that a slow down just means that some of them finally get to work a 40 hour week. That means they are making less money then they where before, but they are still employed.

From EC&M Web….

According to survey respondents, contractors are devising a variety of strategies to overcome the shortfalls. Almost half the respondents reported a weekly work schedule of more than 40 hours. Two-thirds reported working their crews five days every week, and some schedules of 70 or more hours per week were reported.

The corollary to this that most of construction done recently is crap. There was not enough good people to do all the work being done even if the all the constructions companies had wanted to do good work. When people get done being outrage by all the obvious financial fraud that paid for boom, they are going to find that things were not done to any higher ethical standard on the bricks and motor end.

For those who care....

A surprise warning on earnings by Darden Restaurants Inc. suggests that sit-down restaurants will continue struggling through the fall after a dismal summer.

On Tuesday, the parent of Olive Garden and Red Lobster said its earnings for the fiscal first quarter ended Aug. 24 would be below Wall Street’s expectations, and lowered its profit forecast for the year ending May 31.

From CNN Money….. (H/T Naked Capitalism)

Among the nightmares lurking around the corner for the already battered housing and credit markets would be a meltdown at mortgage financing giants Fannie Mae and Freddie Mac.

Although few are predicting an imminent need for a bailout just yet, credit rating agency Standard & Poor’s recently placed an estimated price tag on this worst case scenario — $420 billion to $1.1 trillion of taxpayer’s money.

This dwarfs how much it cost to help banks during the savings and loan crisis of the late 1980’s and early 1990’s. That cost taxpayers about $250 billion in today’s dollars.

That is just Standard & Poor’s worst case scenario of course. But even if you cut that figure in half we are talking about some serious money. And other people want cash as well. From CNBC…..

Lobbyists for the U.S. automakers—General Motors, Ford Motor and Chrysler—briefed White House officials, as well as U.S. Rep. John Dingell and other Michigan Democrats, on a possible bailout and plan to unveil the proposal after Labor Day, according to the report.

The plan is for the government to lend some $25 billion to the automakers in the first year at an interest rate of 4.5 percent, or about one-third what the companies are currently paying to borrow, the report said.

Under the proposal, the government would have the option of deferring any payment at all for up to five years, the article said.

Who can argue against this? Iraq gets reconstruction money. Banks get bailed out. Why not the Big Three? But somebody has to loan the money to the Federal Government so that it can do all this rescuing and saving the world type stuff. The Chinese are doing a great job of providing us with free money. Current 30 year treasury rates are 4.57. The Inflation rate has been running at over 5% the last couple of months. At those rates the Chinese are paying us to take their cash.

But their capacity to do this is not infinite.

The plant manager resigned. Very likely he was given some incentive to resign. Here’s a tip for detecting a sudden departure before it’s been announced: everyone who knows about it is having a good day. If they told you they were having a bad day you might ask why and they would have to think Click Here to continue reading.

From The Telegraph…..

The latest data from the Bank of Spain shows that the country’s banks have increased their ECB borrowing to a record €49.6bn (£39bn). A number have been issuing mortgage securities for the sole purpose of drawing funds from Frankfurt.

h/t The Naked Capitalist

Read this and weep. H/T Calculated Risk

From Naked Capitalism…..

Of the GSEs’ $5.2 trillion in debt (their own corporate bonds plus MBS), $1.3 trillion is in the hands of foreign investors and central banks. The speed with which the powers that be cobbled together a support program was seen in some circles as an admission of the importance of reassuring our friendly overseas credit suppliers.

If that was the motivation, it isn’t working. As we and others noted, spreads on GSE debt have risen to 215 basis points over Treasuries, only a tad shy of the pre-Bear crisis level of 238 basis points. And remember, they have reached this stratospheric levels despite the Paulson rescue package, despite an alphabet soup of new Fed facilities that accept GSE paper as collateral (as the discount window did) now in place (although there were raspberries all around for the bailout bill, due to its failure to make any changes in the operation, management, or policies of the GSEs and its lack of specificity as to triggers and what mechanism would be used).

And the reason? A big factor is that foreign central banks are exiting GSE debt and have pulled back significantly from purchases of new paper. This vote of no confidence appears likely to force the Administration’s hand and lead it to take more concrete measures to prop up Freddie’s and Fannie’s balance sheets. They are not about to risk a spike in mortgage rates and further trouble in the housing markets with elections approaching.

From a New York Times profile of Roubini….

The dismal science, it seems, is an optimistic profession. Many economists, Roubini among them, argue that some of the optimism is built into the very machinery, the mathematics, of modern economic theory. Econometric models typically rely on the assumption that the near future is likely to be similar to the recent past, and thus it is rare that the models anticipate breaks in the economy. And if the models can’t foresee a relatively minor break like a recession, they have even more trouble modeling and predicting a major rupture like a full-blown financial crisis. Only a handful of 20th-century economists have even bothered to study financial panics. (The most notable example is probably the late economist Hyman Minksy, of whom Roubini is an avid reader.) “These are things most economists barely understand,” Roubini told me. “We’re in uncharted territory where standard economic theory isn’t helpful.”

I am not a big fan of Roubini, but this a good explanation of the fundamental problem of economics.