NY Boatbuilder Heads for the Wind

The East Basin of Mamaroneck Harbor offers sailboats a well-
protected nook in which to set anchor away from the ocean swells and wind waves found in the open waters off the Northeast Coast.  


But while this inlet protects its residents from the torrents of Mother Nature, it cannot shelter inhabitants against the economic
winds of change that often originate 25 miles south in the turbulent
canyons of Manhattan’s financial world.  


On the shore of this bay, just in from the cluster of boats anchored
in its calm waters, is the headquarters of Derecktor Shipyards. It is a family owned builder of yachts and workboats with three facilities on the East Coast – its original location in the village of Mamaroneck, one in Bridgeport Connecticut, and another in Florida.  


This boat builder is currently navigating a financial storm.  


Six years ago, Derecktor Shipyards gambled big.  It jumped headfirst into a market few American boat builders dare enter – mega yachts for the world’s super rich.  But the entry into this niche industry hasn’t paid off.  Despite the launch of one high-profile mega yacht, additional orders haven’t materialized.

Small School Expands Despite Storm of Criticism For Industry

After ascending to the sixth floor in a narrow and dimly lit elevator, students are welcomed to their Flatiron neighborhood-based school, the Manhattan Institute, by its freshly painted off-white walls. Ed Schwartz, the owner and founder of this for-profit school that offers technical courses in medical care, takes pride in the little things – like the school’s bright indoor facade.   

And so he confronts those who criticize his school about its details.  Even if those critiques occur on internet forums.  “The school is freshly painted every three months,” Schwartz stated defiantly in response to a critical post on the internet review site Yelp.

It is with this audacious outlook that Schwartz recently steered the Manhattan Institute into the center of a storm of criticism from a growing and potent group of opponents whose analyses extend beyond internet review websites. 

Last fall, after a significant accreditation investment of over $100,000, this school – which took in $1.5 million in 2011 – began to offer classes to recipients of federal student aid from the US Department of Education. 

This money, called Title IV funds, comes in the form of either loans or grants.  It is what has propelled the profits of large publically traded colleges – like the University of Phoenix – over the past decade.

But that has also raised the ire of policymakers and created the storm of critiques.       

Mayor Bloomberg’s Office of Adult Education, for example, has warned potential students that debt loads from Title IV loans can become insurmountable because job prospects for graduates from some for-profits are often weak.

In New York Subway cars, the Mayor’s Office of Adult Education posted large placard signs featuring New Yorkers’ anecdotal accounts of their less than ideal experiences at for-profit schools. 

“(Students) have access to a first-rate adult education and training system with hundreds of free and low-cost classes throughout the City,” said Tara Colton, the executive director of the agency in a press release. 

But Ed Schwartz isn’t worried about this campaign. He states that his school, which has been operating since 1989, offers students reputed programs that are cheaper than his for-profit competitors.

“I have the advantage of a lower price, because I don’t have to have shareholders making money,” Schwartz said. 

Since it’s start, the Manhattan Institute offered technical degrees in various medical professions that assist doctors and nurses, such as medical billing, medical assisting, and certified nursing assisting.  These programs were short – all less than one year – and students paid their tuition in cash.  Today, however, now that the Manhattan Institute is accredited, 80 percent of students in its nine-month long medical assisting program pay at least some of their tuition with Title IV student aid funds.

Medical assisting is a profession that consists of aiding doctors with both patient care and administrative duties.  This field is in particularly high demand due to retiring baby boomers that increasingly need more medical care as they age.

Students enrolled in the Manhattan Institute’s other programs do not receive help from the federal government because Title IV funds do not apply to short one or two month long programs. 

The payoff Ed Schwarz will receive for this shift in his financing model is significant.

“Getting Title IV I knew I could double my income because now instead of charging 5,000 dollars I can charge 12,000,” said Schwartz referring to the cost of his medical assisting program.  But, in addition to profiting, Schwartz also asserts that the Manhattan Institute is filling a demand for students in an economy that increasingly needs more medical professionals.

One of those is Saher Aziz who attended the Manhattan Institute last year in the medical billing program.  As a citizen of Canada, and already a professional in that field there, she took the course to learn the idiosyncrasies of the complex American billing system.  Aziz said the school trained her sufficiently but did not provide the same quality of education she received in Canada.

“The school was not that bad.  But it was not that good either,” Aziz said

Her main complaint, however, didn’t have to do with the curriculum.  She explained that the job placement service at the school was not useful.  The Manhattan Institute’s job counselor could not find her a job and, after starting her search in December, she’s still looking for work today. 

This issue of gainful employment, as its known, is another point of contention directed at for-profit schools.  

Last June, the US Department of Education attached strings to their Title IV funds.  These new rules stated, for example, that at least 35 percent of a school’s graduates must have been paying off their student loans at the end of a year for the school to continue to be connected to the federal loan pipeline.

If students in the Manhattan Institute’s medical assisting program face similar employment challenges to what Saher Aziz confronted, then Ed Schwartz may run into the bite of these new federal regulations. 

But at this point, the school maintains a solid record.  Neither the Better Business Bureau nor the Mayor’s Office of Adult Education has received complaints in the past three years about the way Schwartz conducts his school.   

William Tierney, a professor who studies the higher education industry at the University of Southern California, believes the new federal regulations will cause the for-profit industry to contract – and he thinks that’s a good thing. 

Tierney argues that some who operate for-profit schools are unsavory characters.   “The industry will contract as the crooks are driven out; but those with staying power and good business practices are likely to survive,” Tierney said.

Although Ed Schwartz is generally skeptical of the Federal Government’s motives, he agrees that the Department of Education should tighten regulations on some parts of his industry, particularly the marketing expenditures of big schools.  Too much money is spent on television commercials, he argues.

“Every commercial break I see three or four commercials for those schools.  It’s like, boom, boom, boom.  And this is why we have such a bad name,” he said. 

In the end, despite Ed Schwartz’s assertive business mentality, he admits that the Title IV funding model is not all greener pastures. Although the Manhattan Institute is earning increased revenues, the accreditation process was a significant investment.  Also, Schwartz wonders whether his new regulator, the US Department of Education, will place new, more onerous, rules on his school.   

Because of this uncertainty, he has decided to put any further expansion plans on hold. 

“I was much happier when I was just being governed by the State of New York,” he said somberly. “If I got rid of my accreditors, and went back to the way I was before, I’d be more at peace.”

Greece’s Challenge and our Exposure to it: A Primer

The United States’ tepid economic recovery is being weighed down by the financial crisis in Europe.  That was the message to the Senate Banking Committee last week at a hearing about what the European debt crisis means for Americans. 

Although the movement of the Dow Jones Industrial Index gets much of the attention as it tips up or down with each bit of news coming from across the pond – the effect on Americans extends beyond the price movements of our domestic equities. 

“The financial stresses in Europe are undoubtedly spilling over to the United States by restraining our exports, weighing on business and consumer confidence, and adding to pressures on U.S. financial markets,” said Steven Kamin, director of the Division of International Finance at the Federal Reserve, in front the committee.

The current center of gravity for this mess is Greece.  It has been mired in a tumultuous two-year (and counting) financial saga over worries that it won’t be able to pay its bills.  These come in the form of sovereign bonds bought by banks and individuals.  The problem is; these purchasers also buy and sell assets in other countries.

Many market watchers are worried that if Greece doesn’t pay up, spurned investors around the globe might reduce their total volume of investments.  This would increase the cost of borrowing for other countries and companies and, some argue, could send the global economy into a tailspin. 

That concern, by itself, is dragging down our economy now.  So when will this all be resolved? 

The Boom in the Midst of a Malaise

It’s Friday afternoon and the sidewalks at Main Street and Roosevelt Avenue in Flushing, Queens are saturated with bargain hunters.  Awning-draped storefronts and their street vendor competitors vie for shoppers’ attention while commuters, arriving on the 7 train, veer off the walkway to maneuver around the slower-footed traffic here at New York City’s third-busiest pedestrian intersection.  

 
The small retailers at the center of the cacophony of commerce form the spine of this largely Asian immigrant community that has seen job growth and new businesses throughout the Great Recession and its aftermath.

 
While much of Queens flounders with low investment this neighborhood’s retail economy is the force behind its steady expansion. 

 
“Unlike some other areas we don't have vacant store fronts,” said Grace Meng, Flushing’s representative in the New York State Assembly.  She adds, “I think it is because we have a lot of small businesses and many of them are first generation immigrants who really work hard.”

 
According to a report from the New York State Comptroller Flushing experienced continuous job gains from 2005 through the end of 2010.  This was the result of a decade of new businesses and entrepreneurs setting up shop.  In 2009 there were almost 40 percent more companies operating here than 10 years before.

 
While some of this growth is attributable to the entrance of large retailers, such as Target, Old Navy, and Best Buy, this community – where 90 percent of companies have fewer than 10 workers – continues to depend on the energies of its more diminutive enterprises.

 

Will Baby Boomers Fix Unemployment?

Maybe the recent drop in the job market’s participation rate wasn’t entirely due to discouraged workers giving up on finding a job.
 
Earlier this month the Bureau of Labor Statistics (BLS) released a lower unemployment figure and the component data showed that it was a result of both an increase in jobs and a decrease in the number of potential workers.  When examining these numbers I assumed the decrease was due to frustrated job seekers putting their searches on hold.
 
But according to a recent Bloomberg article some of the drop in the overall size is of the workforce is because baby-boomers are starting to hang up their business suits for good.
 
Think of all those 50 and 60-somethings.  As they retire opportunities arise for the jobless. And, because their numbers are large and their unemployment rate relatively low, many additional jobs will become available as more hit the 65-year milestone.
 
There’s one caveat that is important to note, however.  A retirement decision is often contingent on the performance of an investment portfolio.  The stock market, although still showing volatility, rebounded well from its low in 2009.  But if a future shock – like a unexpected European sovereign default – causes equity prices to plunge potential retirees may decide to stay in their occupations well past their 65th birthday.
 

IRS Is Getting In The Way

The federal government allows job seekers to deduct from their taxes costs incurred while looking for work, according to a recent press release from the IRS. 

Travel expenses or fees to employment agencies can amount to a significant chunk of cash for the unemployed, particularly at a time when every extra dollar becomes increasingly valuable. Fortunately a tax write-off can lesson the burden of these costs and, for some, keep these job placement avenues available.

But, as always, there’s a catch. You have to be seeking employment in the same field as your previous occupation.

The problem is that in today’s shifting economy many of the more than 13 million unemployed workers come from shrinking sectors where new job openings are often accompanied by crowds of other applicants.  As jobs in manufacturing contract, for example, the best option for those unemployed workers is often to find a new career in a different field.

But by taxing funds used toward finding a job outside of one's established trade, the federal government is, in effect, providing a disincentive for workers to move toward the most dynamic and efficient businesses.

Job Gains But Fewer Workers

The Bureau of Labor Statistics (BLS) released its November employment report on Friday revealing a seemingly promising drop in unemployment as job seeker rolls reduced by 594,000.  This new data generated a jobless rate of 8.6 percent, down four-tenths of a point from last month and 1.2 percent year-to-year. 

But fewer unemployed workers doesn’t necessarily mean more people have jobs.

Further into the report the BLS stated, “the number of unemployed persons, at 13.3 million, was down by 594,000 in November. The labor force, which is the sum of the unemployed and employed, was down by a little more than half that amount.”

So over half of the workers accounting for the drop in the official unemployment rate didn’t find jobs.  Instead they stopped looking for work.