As chief executive of a country emerging from a brutal recession, President Barack Obama faces a host of pressing issues. But two long-term problems have morphed into crises and have come to a head lately -- immigration and joblessness. What's not always so obvious is how closely linked the two issues have become.

In a July 1 speech, the President took the immigration problem by the horns, calling the much maligned Arizona immigration law "ill conceived," and he reminded Americans that they live in a country of immigrants.

Polls, however reveal that a majority of Americans are on the other side of the President and support the bill, which requires police to question the immigration status of people they stop or arrest for other reasons.

Touching a Nerve

Beaten down from a long, hard economic downturn that has robbed many of their livelihood, the public is sending clear signals that during tough economic times like this, America can't afford so many illegal immigrants.

Indeed, a recent TIPP poll released July 12 showed that 51% of Americans are in favor of the Arizona's immigration law. Before that, a Quinnipiac University poll released in June also showed that 51% of American voters approved the Arizona law, and 48% say they want their state to pass a similar law. Rasmussen Reports found 61% people in favor of passing such a law in their state.

Arizona's new approach to immigration clearly touched a nerve when it was signed by Governor Jan Brewer in April. Civil and human rights organizations have condemned the law, saying it will lead to racial profiling. Cities from Seattle to Boston have called for a boycott of Arizona and urged citizens not to travel to the state. Conventions and conferences were canceled or moved to locations outside of Arizona. And the U.S. Department of Justice filed a lawsuit seeking an injunction to stop the law from taking effect on July 29.

It's a Pocketbook Issue

Still, no matter what happens next, for now, the American public favors a crackdown on illegal immigrants. People in the border states are particularly fed up with the increase in drug-related crimes.

However, the rest of America has another reason for the rise in such sentiment, which is their pocketbook. Raghavan Mayur, president of TechnoMetrica Market Intelligence, which conducts the TIPP polls, says the link between the 8 million jobs lost during the Great Recession and the hostile attitude toward immigrants cannot be ignored.

TIPP, which is a polling partner of Investors' Business Daily and Christian Science Monitor, found anti-immigrant attitudes to be especially prevalent among households that are job-sensitive, that is, where "at least one member is looking for work or is concerned that a member might be laid off, or both," according to Mayur. Among these households, 50% say American wages have gone down or have been undercut because of both legal and illegal immigration, compared with only 31% of homes that haven't been affected by unemployment.

Picking up on popular sentiment, politicians have been quick to draw the link between the two. "There are 15 million unemployed workers in America and 8 million illegal immigrants in the labor force. We could cut unemployment in half simply by reclaiming the jobs taken by illegal workers," says Rep. Lamar Smith (R-Texas).

Bigger Impact on Low-Income, Less-Educated Workers

A June poll from the Pew Research Center underscores TIPP's findings. In this poll, 50% say immigrants are a burden on the U.S. because "they take our jobs, housing and health care," an increase of 10 percentage points of respondents holding this view since November 2009.

A closer look at the Pew data reveals that the fears are highest among lower-income groups. In both political parties, anti-immigrant sentiment is stronger among those with no college experience than among those with.

Andrew Sum, a professor of economics and director of the Center for Labor Market Studies at Northeastern University, says these fears aren't unfounded, especially among the lower-income groups. Sum says his research shows it's not true that new immigrants take only the jobs that Americans don't want. In fact, his studies find that illegal immigrants lead to a high level of job displacement among men under 25, and especially for young adults with no postsecondary education.

"Illegal immigrants compete with younger workers with less schooling," says Sum. "And if you and I live in an area with a large share of immigrants, your young adults will see an above-average share of jobs displaced by illegal immigrants. It's not a surprise that it's led to a toxic situation."

Want to Work on a Farm?

To be sure, some farmers say America has no option but to rely on the immigrant workforce to harvest fruits and vegetables. According to the Labor Department, 70% of farm workers are born abroad.

The United Farm Workers union points to statistics that show half of farm workers are illegal. It says that's because Americans aren't willing to take jobs on farms because of the tough working conditions and low wages. To showcase the situation, the union has started a website called www.takeourjobs.org and urged all unemployed Americans to apply for a job.

The UFW's point is that immigrants don't steal farm workers' jobs because no American want them. Since it launched on June 24, the site has received 8,485 inquiries, says Maria Machuca, communications director at the union. Of those, only three have pursued and taken a job.

Fixing One Problem Will Ease the Other

President Obama is aware of the shortcomings and arguments on both sides. "Because [undocumented workers] live in the shadows, they're vulnerable to unscrupulous businesses who pay them less than the minimum wage or violate worker safety rules -- thereby putting companies who follow those rules, and Americans who rightly demand the minimum wage or overtime, at an unfair [dis]advantage," says the President. "Into this breach, states like Arizona have decided to take matters into their own hands. Given the levels of frustration across the country, this is understandable."

Because of the Arizona law, the president might have been forced to deal with the immigration issue earlier in his term than he probably wanted to. And he has taken on the issue at a time when the state of the economy has made Americans ever more nervous about immigrants stealing their jobs and working for less pay.

The bottom line is that turning the tide in unemployment is even more important when viewed through the prism of illegal immigration. Indeed, even though it isn't as obvious, a U.S. economy with more jobs could help defuse an increasingly volatile immigration issue.

Editor's Note: This is the third part of "The Jobless Effect" series. Also see:

"Is the Real Unemployment Rate 16.5%, 22$ or. . .?"

"Unemployment Is Fueling Independent Voters' Anger"

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Raghavan Mayur, president at TechnoMetrica Market Intelligence, follows unemployment data closely. So, when his survey for May revealed that 28% of the 1,000-odd households surveyed reported that at least one member was looking for a full-time job, he was flummoxed.

"Our numbers are always very accurate, so I was surprised at the discrepancy with the government's numbers," says Mayur, whose firm owns the TIPP polling unit, a polling partner for Investors' Business Daily and Christian Science Monitor. After all, the headline number shows the U.S. unemployment rate today is 9.5%, with a total of 14.6 million jobless people.

However, Mayur's polls continued to find much worse figures. The June poll turned up 27.8% of households with at least one member who's unemployed and looking for a job, while the latest poll conducted in the second week of July showed 28.6% in that situation. That translates to an unemployment rate of over 22%, says Mayur, who has started questioning the accuracy of the Labor Department's jobless numbers.

Even Austan Goolsbee Has Been Skeptical

Mayur isn't alone in harboring such doubts, nor is he the first to wonder about inaccuracies. For years, many economists have pointed to evidence that the government data undercounts the unemployed. Economist Helen Ginsburg, co-founder of advocacy group National Jobs For All Coalition, and John Williams of the newsletter Shadow Government Statistics have been questioning these numbers for years.

In fact, Austan Goolsbee, who is now part of the White House Council of Economic Advisers, wrote in a 2003 New York Times piece titled "The Unemployment Myth," that the government had "cooked the books" by not correctly counting all the people it should, thereby keeping the unemployment rate artificially low. At the time, Goolsbee was a professor at the University of Chicago. When asked whether Goolsbee still believes the government undercounts unemployment, a White House spokeswoman said Goolsbee wasn't available to comment.

Such undercounting of unemployment can be an enormously dangerous exercise today. It could lead to some lawmakers underestimate the gravity of the labor market's problems and base their policymaking on a far-less-grim picture than actually exists. Economically, and socially, that would make a bad situation much worse for America.

"The implications of such undercounting is that policymakers aren't going to be thinking as big as they should be," says Ginsburg, also a professor emeritus of economics at Brooklyn College. "It also means that [consumer] demand is not going to be there, because the income from people who are employed isn't going to be there."

Indeed, it will add additional stress to an already strained economy. Businesses that might start ramping up after seeing the jobless number drop could set themselves up for disappointment when customers don't appear or orders don't flow in.

College Grads Serving Fries

Plus, having a job today is quite different from what it was just a few years ago: Many Americans have had their hours cut and are working for less pay. A Pew Research survey found more than half of all adults in the labor force had either lost a job or suffered a reduction in income because of the recession.

Ginsburg says the biggest source of undercounting comes from people who can't find a full-time job that they're qualified to do, for instance recent college graduates who take part-time jobs at fast-food joints or retail stores. Today, the Labor Department estimates that 8.6 million people are in this category.

The federal government counts such people as employed. However, polls show that these folks actually consider themselves "unemployed" and "looking for a job," and probably accounted for a large chunk of TechnoMetrica's respondents.

Jobless Workers Who Disappear

Another major source of undercounting is the unemployed who've given up looking for jobs. The Bureau of Labor Statistics headline number counts as unemployed only people who have actively looked for a job in the previous four weeks. About 2.6 million people had pursued jobs in the past 12 months but, discouraged by the lack of opportunity, had stopped looking altogether.

"Isn't it interesting that if you stopped looking for a job, you evaporate as a jobless person and are just not counted," says Gerald Celente, director of Trends Research Institute in Kingston, N.Y. Celente believes this kind of undercounting has suited the government politically. "It's what government does: Downplay disasters and amplify success."

According to the Pew Research Center, a large number of people are out of jobs for a longer period during this economic downturn. The typical unemployed worker today has been out of work for nearly six months. That's almost double the previous post-World War II peak for this measure, which was 12.3 weeks in 1982-83.

Indeed, if all of the truly unemployed were counted, the rate would be significantly higher. The BLS, in a data point titled "U-6," says it counted the total unemployment rate in June at 16.5%.

Misreading Americans' Anxiety

However, John Williams, founder of Shadow Government Statistics, says when accounting for the long-term unemployed, the jobless rate runs up to as much as 22% currently. Williams's newsletter, which analyzes flaws in government economic data, points out that such a rate isn't that far from the 25% it hit during the Great Depression.

Both Celente and Ginsburg believe lawmakers' not-dire-enough view of unemployment is one reason why they didn't extend federal unemployment benefits. Of course, party politics is another deterrent. Ginsburg says the Administration's decision to tackle the health care reform over unemployment reflects its lack of priority.

By taking his eye off one of the most fundamental issues affecting the country, President Obama has seen his popularity sink. The most recent Public Policy Polling survey says 45% of voters approve of the job he's doing, while 52% disapprove -- the first time Obama's disapproval ratings have exceeded 50% in this survey.

It's obvious that Americans view unemployment more urgently than either lawmakers or the president. And if pollsters like Mayur or economists like Ginsburg and Williams are right, it will take longer to fix this hole because it's already bigger than Washington thinks.


Editor's Note: This is the first part of "The Jobless Effect" series. Also see:

"Unemployment Is Fueling Independent Voters' Anger"

"Illegal Immigration and Unemployment: A Toxic Mix"

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Wells Fargo is one of the nation's largest banks, but it's had a questionable record with lending to the black and Hispanic community.

As former Wells Fargo loan officer Beth Jacobson told The New York Times in June 2009, Wells Fargo singled out blacks in Baltimore and suburban Maryland for high-interest subprime mortgages. Jacobson and another former Wells Fargo loan officer said in an affidavit that the bank's employees referred to blacks as "mud people" and to subprime lending as "ghetto loans."

"We just went right after them," Jacobson, who is white, told The Times. "Wells Fargo mortgage had an emerging-markets unit that specifically targeted black churches, because it figured church leaders had a lot of influence and could convince congregants to take out subprime loans."

Racial Steering in City After City

These kinds of subprime loans, often with high interest rates but nearly nonexistent qualifying requirements, generated extremely lucrative fees and income for all banks. However, when greedy bankers started writing an enormous amount of such loans to people who couldn't pay them back, the practice backfired badly, fueling the housing market collapse and leading ultimately to the financial crisis in 2008.

The kind of racial steering is prohibited under the Federal Fair Housing Act. However, Wells Fargo repeated it in city after city, as law enforcers, watchdog groups and its own employees have recounted. The cities of Baltimore, Chicago and Memphis sued the bank for targeting blacks and Hispanics for high-cost subprime loans.

Illinois Attorney General Lisa Madigan, in her lawsuit against the bank last year, cited marked disparities in Wells Fargo's lending data. According to an analysis of Chicago-area data, in 2005 about 45% of Wells Fargo's African-American borrowers and 23% of Latino borrowers received a high-cost mortgage. That same year, only about 11% of the bank's white borrowers received high-cost mortgages.

Madigan says the trend continued in 2006, with about 58.5% of Wells Fargo's African-American borrowers and 35% of its Latino borrowers in the Chicago area receiving high-cost mortgages, compared with only 16% of white borrowers. Likewise, in 2007, 49% of Wells Fargo's African-American borrowers and 25% of Latino borrowers were sold high-cost loans in the Chicago area, compared with only 15% of white borrowers.

"Less Sophisticated"

Memphis' suit against the bank brought four former Wells Fargo employees to talk about the bank's racial bias in its lending practices. National Public Radio recounted in a piece how Camille Thomas, a loan processor at Wells Fargo who has since left the bank, said the general view was that African Americans were "less sophisticated and intelligent and could be manipulated more easily into a subprime loan than white customers."

In Des Moines, Iowa, research by two watchdog groups found that minority homeowners were three times more likely to receive high-cost subprime mortgage loans from Wells Fargo than white homeowners. The Iowa Citizens for Community Improvement and National People's Action compiled data showing 46% of African-American and 35% of Latino homeowners in the Des Moines area received a high-cost, subprime loan from Wells Fargo, compared to 20% white borrowers.

The National Association for the Advancement of Colored People, which had sued Wells Fargo for its racial practices, dropped its lawsuit in April, 2010. As part of an agreement, Wells Fargo will allow the NAACP to review its lending practices. The NAACP did not seek monetary damages in its suit, but said it sought to change behavior in the mortgage-lending industry.

Such unwelcome scrutiny from the NAACP and law-enforcement agencies around the country likely helped hasten Wells Fargo's exit from the subprime business.

However, in a statement Wells Fargo said: "The decision to close Wells Fargo Financial's 638 store network is based on economics, not litigation. With distribution advantages gained through the company's integration with Wachovia, the expense of maintaining a separate network of Wells Fargo Financial stores is no longer economically viable, particularly given that less than 2% of all Wells Fargo's real estate loans were originated in Wells Fargo Financial stores in the first quarter of 2010."

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In recent weeks there have been at least two bank deals where private equity firms bought stakes in failing banks, bypassing special rules created by the FDIC to prevent such actions. The two firms, Thomas H. Lee and another owned by billionaire Gerald Ford, bought stakes in weak banks before they were seized by the federal banking regulator.

"This signals that private equity firms are showing their desperation in their dealings with the FDIC," says Linus Wilson, an assistant professor of Finance at the University of Louisiana at Lafayette, who has followed the bank bailouts closely.

Failed banks are an attractive acquisition target for private equity investors. Not only can these firms buy banks at a cheap price, but the investments also have a great deal of upside. That's because when a bank fails, the FDIC will assume a bulk of the losses from bad loans and assets in a portfolio of the failed bank. But the FDIC urges that private equity firms limit their involvement to "passive" investments and that they keep their investments below certain thresholds to avoid becoming a bank holding company, which would then require them to adhere to strict banking regulations.

Amassing a War Chest

But private equity investors are now hinting that they aren't willing to wait any longer for the FDIC to assume a failed banks losses. Instead, they would prefer to make significant investments now and possibly even get out instead of waiting to see if the FDIC will assume the losses. As a result, some private equity firms are now amassing large war chests to make such acquisitions. They are now starting to strike deals directly with the U.S. Treasury, which has invested large amounts of TARP money in regional banks, some of which have been greatly weakened by bad loans.

For instance, Ford Financial Fund four weeks ago announced it is buying community bank Pacific Capital Bancorp (PCBC) $500 million. For the deal to go through, the U.S. Treasury is expected to convert its $181 million of TARP investment in the California bank to $36 million of common stock, an 80% discount.

Another deal this month was announced Monday when private equity investors Thomas H. Lee Partners and Warburg Pincus said they would jointly invest $278 million in Sterling Financial (STSA). The Spokane (Wash.) bank has entered into a definitive exchange agreement with the U.S. Treasury, which has agreed to take a 75% haircut on its $303 million TARP investment in the bank, converting it to $76 million of common equity.

Indeed, the deals also show willingness on the part of the U.S. Treasury to be more practical and salvage as much as possible of its TARP investments. After all, if the FDIC decides to fail these banks, Treasury's investments go down to zero.

"The steep discount that the Treasury is willing to absorb from such transactions indicates its willingness to assist in the recapitalization of regional banks using private equity investments," says Juan Lopez, associate analyst at Moody's Investors Service. "Without conversion and additional capital, institutions such as Pacific Capital and Sterling would risk becoming under-capitalized. This could lead to more severe regulatory enforcement action, and possibly receivership, resulting in a complete loss of the Treasury's TARP investment," says Lopez.

Shaking Up Unstable Banking System

The FDIC, on the other hand, is a bank regulator and has signaled that it wants to be careful about not shaking up the already unstable banking system with private equity investors. The FDIC released rules last year that specifically target private equity investors, forcing them to hold on to their acquisitions for a minimum of three years, and also to maintain a Tier One leverage capital ratio of at least 10%, a higher requirement than the 5% it allows regular banks. (The ratio reflects the amount of capital held by a bank in relation to its total assets.)

In a statement, FDIC Chairman Sheila Bair said, the rules strike "a thoughtful balance to attract non-traditional investors in insured depository institutions while maintaining the necessary safeguards to ensure that these investors approach banking in a way that is transparent, long term and prudent."

Still, Wilson of the University of Louisiana points out that there aren't that many private equity deals that have taken place among failed banks either. "Private equity buyers might feel that there is a bias against them," says Wilson.

Indeed, of the 238 banks that failed in the last three years, most of them have been merged into healthier regional banks. Barely a handful of failed banks, including BankUnited of Florida and IndyMac were bought by private equity investors.

For private equity investors, that has been a big loss in opportunity. The Thomas Lee and Ford deals are signaling that private equity buyers aren't willing to sit around keeping their powder dry and waiting for the FDIC. Over 700 banks are in the FDIC's "problem list" and these deals might just be the beginning of more in the future. Several regional banks might be weak enough that they are ripe to be acquired cheaply by private equity firms for upside gains, once the economy picks up steam.

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As struggling banks get acquired or fail, the U.S. Treasury is shouldering a growing burden: Its investments in TARP are turning out to be a bust, leading to huge losses. And there are signs of more trouble ahead.

Example: When Canada's Toronto Dominion Bank (TD) bought a South Carolina bank earlier this month, it came with a hefty price tag for the U.S. Treasury Department -- a 60% loss in its TARP investment. T

Turns out, this is only one among several hits that the Treasury and the U.S. taxpayer have taken recently. In fact the string of losses in TARP, the Troubled Asset Relief Program, isn't only large, it's gathering momentum.

TARP Takes Hits on Its Investments

To wit: The recent acquisition of Pacific Capital Bancorp (PCBC) by Texas billionaire Gerald Ford means a $145 million, or 80%, loss in the U.S. Treasury's $181 million TARP investment in the Santa Barbara, California-based bank. And private equity firm Thomas Lee's investment in Spokane, Washington-based Sterling Financial meant a 75% haircut in the $303 million Treasury investment.

These losses showcase how poorly many of the Treasury Department's TARP investments have fared. Still, on May 21, the Treasury Department grabbed headlines when it notified Congress that the cost of TARP has decreased by $11.4 billion to $105.4 billion. While that is no small achievement -- given that less than a year ago, the estimated cost topped $340 billion -- it hides the stream of investment losses that the Treasury is taking almost weekly from several of its TARP recipients, costing taxpayers dearly.

Just days before, on May 17, the Treasury took a 60% hit to its $347 million TARP investment in a South Carolina bank named The South Financial Group (TSFG), which was awarded the cash in December 2008. At the time, H. Lynn Harton, CEO of South Financial said: "The Treasury Department's investment is a vote of confidence in TSFG and enhances our ability to support economic growth in the communities we serve."

In fact, the "vote of confidence" investment turned out to be a bust. The Treasury Department is getting just $130.6 million in cash in return for its $347 million TARP investment. Canada's Toronto Dominion Bank, part of TD Bank Financial Group (TD), is acquiring South Financial Group's outstanding shares for a mere $61 million.

Losses in Failed Banks Are Mounting

As we are seeing, the story of the TARP losses is being repeated over and over again. Just this month, the Treasury Department lost all of its $84.8 million TARP investment in Midwest Bank & Trust of Illinois. The 23-branch bank was seized by the Federal Deposit Insurance Corporation in mid-May. That was on top of a $2.3 billion loss when CIT Group (CIT) filed for bankruptcy last year, the $298 million loss at failed bank UCBH Holdings and an additional $4.1 million in Pacific Coast National Bancorp.

There are signs of more trouble ahead. More and more banks that took TARP funds are under so much stress that they aren't paying dividends to the U.S. Treasury. The failed Midwest bank was just one of 104 TARP recipients that hadn't paid dividends, according to Neil Barofsky, the special inspector general of TARP. Barofsky says that as of March, unpaid dividends totaled $188.9 million.

Besides, it's anyone's guess how many banks that took TARP funds are part of the recently updated FDIC "Problem List" of 775 banks at the end of the first quarter of 2010, an increase from 702 in the previous quarter.

Don't Hold Your Breath

Barofsky also said that it's quite unlikely that the Treasury will get back all of the $84.8 billion that it handed out to the auto companies and their financial arms or that it will see much of the $50 billion that's earmarked for home loan modifications.

Still, Treasury officials like to point out that the primary objective of the Troubled Asset Relief Program has been achieved.

"TARP has succeeded in achieving its intended goal of stabilizing the economy and putting America back on track for future growth," said Herb Allison, Treasury's Assistant Secretary for Financial Stability. "Not only have we averted an economic catastrophe, we're in a stronger position sooner than anyone predicted."

To be sure, TARP has played a big role in stabilizing the financial system. However, much of the calming seems to have taken place in the larger banks, while the smaller banks are still reeling from the economic recession and bad loans. And it's still up for debate whether the TARP investments in hundreds of banks achieved much. After all, TARP funds were later handed out to spur lending and shore up capital.

Lending Picture Still Dismal

However, as federal regulators' numbers show, lending has hardly picked up and banks continue to weaken as an increased number slide into failure. At last count, the FDIC had seized 238 banks since 2008, and 73 of the failures occurred just since the beginning of the year.

Indeed, in the most recent widely watched survey of bank loan officers, the Federal Reserve found that overall lending standards were unchanged in the first quarter since the same time last year. What's more, terms on loans to households and businesses, especially from small to mid-size banks, continued to tighten.

While it's true that an economic catastrophe has been averted, as the U.S. Treasury's Allison claims, as the Fed data shows, it's certainly up for debate whether TARP has been successful in achieving its many goals as the losses mount.

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The U.S. Senate threw cold water on American's hopes of a respite from high ATM fees.

On Tuesday evening, lawmakers blocked Senator Tom Harkin's attempt to get a vote on an amendment to the financial reform bill that would cap ATM fees at 50 cents. Harkin, a Democrat from Iowa, first introduced the measure on May 4, but has thus far been unable to gain the consent he needs for a vote.

Consumer Advocates Have Not Given Up Hope

According to Harkin, the national average per ATM transaction is $2.50, even though it can go up to $5. "The most shocking part of this fee is that, on average, the real cost of processing a transaction today is only 36 cents or less. Where does the rest of the money go? It is going to the big banks, the big card networks and independent machine owners," he says.

Disheartened consumer advocates hope that the soon-to-be-created Consumer Financial Protection Agency will play the role of protecting consumers from all high banking fees.

"New laws will definitely provide strong protection against the unfair practice of charging consumers high fees to use ATM machines, which when combined with the bank fee and fees from the ATM provider can be as high as $5 to withdraw just $20," says Ed Mierzwinski, consumer program director of the consumer advocate U.S. Public Interest Research Group. "The cost of an ATM transaction is closer to 50 cents and banks were making a 900% profit."

A Temporary Victory for ATM Operators

Though the measure to cap ATM fees to 50 cents is highly popular with consumers, ATM business operators say it will hurt small businesses and actually end up benefiting big banks.

Carl Myers, the co-founder of ATM ServNet of Cedarville, Ohio says that, if passed, the amendment would be devastating to the roughly 2,000 ATM owners and operators across the country, not to mention his own business which installs and repairs ATMs at convenience stores. Convenience stores will also see reduced sales if the ATM machines in their stores start to disappear, he says.

"There will be thousands of people who will be rendered jobless - from the ATM operators to stores," says Myers.

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Just last year, the stigma associated with luxury was so great that some high-end hotels were changing their names. The four-diamond Ballantyne Resort in North Carolina renamed itself the Ballantyne Hotel and Lodge, dropping "resort" from its name.

Back then, Congress was attacking financial executives for enjoying visits to resorts even while their firms were taking billions of dollars from taxpayers.

No more. Today, the winds are changing -- quite dramatically. People are traveling and spending money again, and hotels are hiring. That's a reflection of higher economic activity, and it could be a harbinger of better times to come. After all, corporate executives are seeing enough demand that they're comfortable with opening up the spigot of employee travel. It also means consumers are getting more comfortable with spending on vacations again.

"The Business Traveler Is Back"

According to the latest jobs report, the leisure and hospitality industry hired 45,000 new workers in April, contributing to the 290,000 net new jobs added last month, the highest one-month gain in four years, according to the U.S. Department of Labor.

"The recovery is playing out better than most people expected, including ourselves," says Frits van Paasschen, CEO of Starwood Hotels & Resorts Worldwide (HOT), the largest global operator of luxury hotels, including the St. Regis and W Hotel brands.

Starwood's W Hotels saw occupancies return to near pre-financial-crisis levels, with gains of 28% in the first quarter in its top cities like New York. At its Phoenician resort in Scottsdale, Ariz., occupancies were up more than 30% in the first quarter. "The business traveler is back, and leisure travelers are rewarding themselves with vacations to our one-of-a-kind properties," says Paasschen.

Indeed, these early signs of recovery have taken many in the industry by surprise. The hospitality sector made some of the deepest cuts during the recession, and few hoped for a comeback so soon. Hotels have been operating with fewer hands -- over 400,000 hotel employees were laid off in the last couple of years because hotels slashed costs to stay afloat as corporations cut meetings and training at hotels. PricewaterhouseCoopers in an outlook report said room occupancy will likely go up, but that the luxury and upscale segments will continue to see declines.

As Demand Recovers, Wage Increases Are Likely

However, many hotel operators are seeing the high-end market bouncing back more quickly. Laurence Geller, CEO of Strategic Hotels and Resorts (BEE), in a conference call with analysts, pointed out that guests' spending rose at the Four Seasons Punta Mita, which the company views as the leading indicator of luxury spending in its portfolio of hotels.

"Over the 10-day Christmas and New Year period, average rates were up 18%, to $1,428. Per occupied nonroom spend was up 20%, increasing to $1,250," he said.

As demand for rooms bounces back, wages will likely increase too. At Strategic Hotels and Resorts, which owns an interest in 11 hotels, staffing has been reduced by 27% from 2007. Geller says the company now has a rehiring plan in place that will be triggered when the hotels reach certain levels of occupancy.

"We expect that in 2010 there will probably be a fair amount of pressure on wages and benefits because for the most part, our operators haven't given raises or bonuses in 2008 or 2009," says John Murray, president and chief operating officer of the Hospitality Properties Trust (HPT), which owns and operates InterContinental and Hyatt hotels, among others. "You can only go on like that for so long and expect your staff to greet the hotel guests with a smile."

"More Than a Lagging Indicator"?

Indeed, as signs of improvements in jobs and wages come in, some analysts expect the industry to have a trickle-down effect on the rest of the economy, as well as corporate and consumer sentiment. In fact, some even say that data about rising jobs have the potential to influence behavior, even though the conventional wisdom is that jobs are a lagging indicator of economic recovery: First comes demand, then come jobs.

Indeed, during this recession especially, many economists expect companies to be extremely hesitant to take on more workers unless the companies are convinced of long-term demand and economic expansion. But others disagree.

"There are rare occasions, such as today, when we should think of the unemployment rate as much more than a lagging indicator. It has the potential to influence future economic behaviors and outlooks," said Mohamed El-Erian, CEO of the influential investment firm Pacific Investment Management Co. (Pimco), in an article published last year.

For now, hotels are hopeful of prospects for higher wages and jobs for the rest of the year.

Says Murray of InterContinental and Hyatt hotels operator Hospitality Properties: "Typically for our hotels, the second and third quarters are the strongest quarters anyway, so that should help. As the economy is lifting and we're heading into the stronger parts of the year for us, that should all dovetail nicely."

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With about one in 10 people out of work, few Americans don't know someone who hasn't lost a job. So, it should come as no surprise that only 33% of Americans believe that the economic stimulus package Congress passed last year has helped create jobs, according to a recent Pew Research Center poll.

And yet, the White House in its latest quarterly report, released April 14, said the package, called the American Recovery and Reinvestment Act, has created or saved between 1.1 million and 1.4 million jobs.

President Obama said earlier this year that "the Recovery Act is on track to save or create another 1.5 million jobs in 2010." That would be in addition to the 1.1 million to 1.4 million already created or saved.

However, as the Pew poll shows, House Republican leader John Boehner of Ohio echoes most Americans' sentiments in a report his office prepared recently: "When Democrats rushed their massive 1,100-page, 'stimulus' through Congress in 2009, they promised that unemployment would not exceed 8% and that job creation would begin 'almost immediately.' But nearly one year later, more than three million more Americans have lost their jobs, unemployment is near 10 percent, and the deficit is set to hit a record $1.6 trillion."

Big Changes From a Year Ago

In this case, both sides are right. No doubt, millions of Americans lost jobs last year, but analysis done by several independent economists show that the recession would have been much deeper and a jobs recovery would have taken even longer without the government's involvement. The job market is now stirring to life, adding 162,000 positions in March, the largest increase in three years. And economists polled by Thomson Reuters expect an additional 175,000 jobs to be added in April, when the government's widely watched monthly jobs report is released on May 7.

Around this time last year, hardly any economist would have dared predict that new jobs would be added to the payrolls so soon. "A year ago, it looked like we were in free-fall with no idea how far we would drop," says Nigel Gault, chief U.S. economist at IHS Global Insight, a financial analysis firm. "The fact that we're seeing jobs being created is clearly good news."

According to IHS, 2.07 million jobs were saved by the government's stimulus program since it was passed last year.
"Most of the impact was really jobs saved, rather jobs created," says Gault. "When spending died and output died last year, the government essentially stepped in as a spender of last resort and propped up economic activity. That prevented the hole from becoming deeper, essentially cushioning the depth of the recession."

A Million Fewer Jobs Without the Stimulus?

However, businesses on Main Street find it hard to believe that hiring has come back. "To truly start the engine of job creation, the government has to ensure that small and middle-size businesses have access to capital," says Lynn Tilton, CEO of private equity firm Patriarch Partners, which is a buyer of small businesses.

Still, other independent groups have found numbers that echo IHS's. In its research, Macroeconomic Advisers found that since the stimulus bill was passed last year, about 1.4 million jobs were saved or created, and Moody's Economy.com estimates that 1.9 million jobs would have been created or saved by the first quarter of 2010.

Economy.com Chief Economist Mark Zandi, who was an economic adviser to Republican presidential candidate John McCain, said in testimony six months ago before the Joint Economic Committee: "Although the exact number of additional jobs that would have been lost without the fiscal stimulus will never be known, it is clear that the number is significant. The research of Moody's Economy.com suggests that a million fewer jobs would exist today, while the unemployment rate would already have risen well into double digits."

Toxic Politics

Despite all the independent analysis, the public distrust continues, seemingly fueled by errors in how the government has counted jobs it has saved or created. Several media reports found employment numbers in different states faulty, which led to questions over the reliability of stimulus data.

At the same time, finger-pointing has continued, leading to a toxic political climate that doesn't help create a positive sentiment toward anything that's done in Washington. Democrats were quick to point out that several Republicans who voted against the stimulus bill were later found posing for photographs and taking credit for it by handing over large checks of stimulus money to local communities. And at least 100 Congress members who voted against the bill also applied for stimulus funds for their constituencies.

Still, throughout the recession, President Obama has continued to grease the gears in hopes of generating more jobs. In March, he signed the Hiring Incentives to Restore Employment Act -- the "jobs bill," which provides incentives to employers for hiring new workers. Among other things, it gives employers a tax credit for their 6.2% Social Security payroll contribution and another credit for hiring new employees and then retaining them for at least 52 weeks. As recent surveys and data show, these actions seem to have jump-started the creation of some jobs, at least for now.

Despite the negative sentiment, doing nothing isn't an option. The U.S. needs policies that help nurture these early signs of job creation. Washington's job isn't done until far more Americans get back to work.

Editor's Note: This is the last installment of our six-part special report: Restarting America's Job Machine.

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This is the fourth in a series of stories that takes a closer look at the U.S. jobs picture.

Debra McKinley of Homewood, Ill., just landed a job as a senior administrative assistant at Northern Trust (NTRS), a financial services company in Chicago.

McKinley is naturally pumped about going back to work on May 10, after over a year of looking for a job. She knows what to expect, having previously worked for 21 years at a large law firm as an administrative assistant. But this time round, she feels more confident about taking on new challenges and is positive that she'll move up the management track.

McKinley's confidence stems from a free six-month vocational training program that she signed up for with Able Career Institute, a nonprofit counseling, placement and training service based in Chicago that receives public and private financing. "The interviewing skills really helped me shepherd my own interview with poise," says McKinley, who's also learning other skills that are typically offered in a management course. She was able to take the course as part of a grant Able received under the American Recovery Reinvestment Act, better known as the stimulus bill.

You've Already Paid, So Take Advantage

Indeed, training programs such as McKinley's, college courses and retraining for people who have lost jobs are being offered for free at many institutes and community colleges that have received similar government grants. Today, more than ever, federal programs fund hundreds of courses. That's because the government is desperate to help people find jobs, especially if the industry they previously worked in is shrinking, their jobs have gone overseas or are becoming obsolete.

"Many people are eligible for these free programs," says Margo Brewer, senior education director at Able Career Institute, which also provides training to jobless individuals through the Workforce Investment Act. "It's important that people access the programs, since they've already paid for them in taxes and will continue to pay in future."

Indeed, the stimulus bill has set aside millions of dollars to retrain the American work force. For instance, if you live in Michigan and lost your job in the auto industry, the state's No Worker Left Behind plan can give you up to $5,000 per year for tuition.

Workers like electricians or mechanics elsewhere who might have worked at an apparel plant or appliance factory that closed down because the work was shipped overseas can use those skills at new jobs with some extra training. For instance, technicians can learn how to weatherize buildings and homes to help businesses and households save on energy bills. Under Trade Adjustment Assistance, which was expanded in the stimulus bill, these workers can get as much as 2.5 years of unemployment checks and 26 weeks of remedial education.

White-Collar Workers Can Get Help, Too

Education programs are available to all income groups. On April 28, Wayne State University of Detroit announced that it's offering a Executive & Professional Development reemployment program to 350 displaced, white-collar workers. It will be available to them for free and is specifically designed for displaced white-collar workers in management, administration, engineering, design, technology and other professional occupations. It will be funded by a grant from the Michigan Works Agency.

"The program consists of a mix of coaching, clinics and courses available for the participants, including leadership and employee development and entrepreneurship," says Ahmad Ezzeddine, associate vice president for educational outreach and international programs at Wayne State. On average, such programs would have cost a participant between $1,500 to $3,000.

Overall, the stimulus bill provides for as much as $1.7 billion for adult employment services, including education and training. Last year, President Obama also announced an initiative to grant $12 billion of aid to community colleges, which should be passed on to students in the form of affordable education.

"One-Stop Career Center"

Most educators and labor experts say the best way to find about these programs is by visiting a local county workforce agency. These offices administer each state's employment and workforce information services, and keep information on the training centers and colleges that the Department of Labor has approved to offer the programs. In 2009, 37 million job-seekers sought assistance through state workforce agencies, a 40% increase from the previous year.

"The workforce agency is a one-stop career center that can guide people who want to acquire new skills to training centers," says Pamela Tate, president and CEO of the Council for Adult and Experiential Learning, a national nonprofit organization.

With so many workers out of a job, the number of people who are going back to colleges for additional degrees or retraining has shot up. Enrollment at community colleges jumped 27% last year, according to the American Association of Community Colleges.

Some educators say all these trends show how fast the labor markets are shifting and that people should consider updating their skills even during good times.

"There's a tremendous amount of change going in the job market generally worldwide with big impacts coming from information technology, corporate mergers, globalization," says Charles R. Hickox, dean of Continuing Education & Outreach at Eastern Kentucky University. "People have to start thinking of their skills and knowledge and how to keep enhancing them with lifelong education." In today's world, that's the surest way to lifelong employment.

Editor's Note: This is the fourth installment of our six-part special report: Restarting America's Job Machine.

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This is the second in a series of stories that takes a closer look at the U.S. jobs picture.

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