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Professor Mark J. Perry's Blog for Economics and Finance
Check out the unusal, moving jigsaw puzzle, drag the pieces together to make the picture above...
The list of items to bring to college is going to be a little longer for freshmen who enter the University of Minnesota's Carlson School of Management next fall. They're going to need to bring a passport.
One issue contributing to the UAW's strike against GM is that negotiations reached an impasse regarding the future of the "jobs bank," or what the Wall Street Journal calls "GM's Anti-Jobs Bank, the company's euphemism for a post-employment limbo in which GM pays laid off members of the United Auto Workers not to work." As the WSJ points out today, it's "Nice nonwork, if you can get it."
India is now outsourcing outsourcing, the New York Times reports today in World Busines:
DETROIT, MICHIGAN--The United Auto Workers launched a national strike today against General Motors Corp. after 10 days of marathon bargaining failed to produce a new labor pact for the automaker's 73,000 hourly U.S. workers.
From the front page today's WSJ, an article about the oversupply of lawyers, "Job Market Wanes for U.S. Lawyers; Law Schools Proliferate:"
WALL STREET JOURNAL---With the Canadian dollar surging against the U.S. greenback, Robert Katzman is dealing with situations they don't teach in Economics 101.
The rise is a boon for Canadians looking to buy American real estate, stocks or just about anything for sale at the Mall of America in Bloomington, Minn., which has seen a 15% uptick in the number of Canadian customers this year. But it isn't good news for Canadian hotels or tourist destinations, or exporters of everything from beer and maple syrup to lumber and wheat.
The result has injected a touch of national giddiness into Canada's traditional reserve as a slew of opportunities present themselves, from real-estate deals south of the border to substantial breaks on college tuition for parents sending their kids to school in the States.
UPDATE FROM NY TIMES: On either side of the border, a buck is now a buck, or as Canadians call it on their side, a loonie. Coupled with high prices and high taxes for many things in Canada, the strength of the Canadian dollar is driving Canadians into the United States to shop for shoes, school supplies, gasoline, used cars and second homes.
MP: Compared to January of 2002, when the exchange rate was 1.6143 Canadian dollars per USD, everything in the U.S. is now on sale at a 38% discount for Canadians. The U.S. economy is now like a giant Wal-Mart for Canadians, with "everyday low prices."
1. LOS ANGELES (MarketWatch) -- Minneapolis-St. Paul is where it's at when it comes to business, much more so than any other of the nation's major urban areas. The Twin Cities ranked at the top of a MarketWatch study on the nation's best metro centers for business, winning by a wide margin. Minneapolis-St. Paul got 329 points, 38 points ahead of second-place Denver.
The Twin Cities region has a high concentration of massive and diverse Fortune 1000 and S&P 500 companies. It also has a significant number of Forbes 400 private companies. Further, Minneapolis-St. Paul has a healthy array of up-and-coming companies on the Russell 2000 index. And it has more small businesses per capita than just about any other city.
2. Wall Street Journal -- There are 19 Fortune 500 companies with headquarters in the Twin Cities, including Best Buy Co., 3M Co. and Supervalu Inc., which have been attracting young professionals looking to begin a career. Average salary last year was $44,980 in the Twin Cities, almost $5,000 more than the national average according to the U.S. Bureau of Labor Statistics."For the past two decades, these economic prospects made the Cities one of the fastest growing metropolitan areas in the Midwest," says University of Minnesota geography professor John Adams. Adding to the growing population is an influx of African and southeast-Asian immigrants.
According to Edmunds, the average automotive manufacturer incentive in the U.S. was $2,362 per vehicle sold in August 2007, down $159, or 6.3%, from July 2007, and up $51, or 2.2%, from August 2006.
According to a report released by the BEA for Gross Domestic Product by State in 2006:
New Zealand, Australia, U.K., Sweden and Norway have all adopted inflation targets, which have apparently contributed to either currency stabilization (UK, Sweden and Norway) or currency appreciation (Australia and New Zealand). The U.S. stands alone in the chart above, as the one country with a depreciating currency over the last 6 years, and also the one country among the group without an inflation target.
CARACAS, Venezuela (AP) — President Hugo Chavez threatened on Monday to take over any private schools refusing to submit to the oversight of his socialist government, a move some Venezuelans fear will impose leftist ideology in the classroom.
All Venezuelan schools, both public and private, must submit to state inspectors enforcing the new educational system. Those that refuse will be closed and nationalized, Chavez said.
Education based on capitalist ideology has corrupted children's values, he said. "We want to create our own ideology collectively — creative, diverse."
A new curriculum will be phased in during this school year, and new textbooks are being developed to help educate "the new citizen," added Chavez's brother and education minister Adan Chavez in their televised ceremony on the first day of classes.
MP: Venezuela already ranks #135 out of #141 for Economic Freedom in 2007, according to the Cato Institute, are they trying to lower their ranking with educational "reforms"?
Related Quote: "Every politically controlled educational system will inculcate the doctrine of state supremacy sooner or later. . . . Once that doctrine has been accepted, it becomes an almost superhuman task to break the stranglehold of the political power over the life of the citizen. It has had his body, property and mind in its clutches from infancy. An octopus would sooner release its prey."
--Isabel Paterson, The God of the Machine (1943)
(Thanks to Larry Reed.)
TORONTO (AP) — The Canadian dollar reached parity with the U.S. dollar today for the first time since November 1976 (see chart below, click to enlarge).
1. World stock markets react positively today to Fed rate cut yesterday to 4.75%, see chart above of one-day returns in local currency, click to enlarge. Note that the World Index (except for US) rose by 2.75% today, similar to the 2.92% increase yesterday in the S&P500.
ADDENDUM: The world stock market capitalization is about $58 trillion according to Global Financial Data, and there was a 3.2% dollar increase in world stock markets after the Fed rate cut according to MSCI Barra, meaning that the world stock market capitalization increased almost $2 trillion ($1.86 trillion), the day after the rate cut.
2. According to Fed Funds futures contracts on the CBOT:
a. There is an 80% chance of an additional .25% rate cut at the next FOMC meeting on October 30-31.
b. There is a 100% chance of a .25% rate cut by December (FOMC meets December 11), and a 68% chance of a rate cut of .50% by December.
According to the NY Times, these are the Top 5 Reasons ethanol imposes high costs on the economy:
Not all Canadian health care is long lines and lack of innovation. We found one place where providers offer easy access to cutting-edge life-saving technology, such as CT scans. And patients rarely wait.
"Washington might have a love affair with ethanol for political reasons, but increasing ethanol production will only lead to higher taxes, higher prices for both food and fuel, and damage to the environment, making us all worse off in the process. Congress needs to say no to the ethanol hustlers and end its political addiction to corn."
Greg Mankiw reports about how a group of UC Davis women faculty circulated a petition and pressured UC regents into rescinding an invitation to Larry Summers, the controversial former president of Harvard University, to speak at a recent board dinner in Sacramento.
1. Caribbean Call Centers Booming: "In a global search for low-cost customer service, AOL considered call centers in India and other hotspots - then settled on the tiny island of St. Lucia.
Note: Typical wage in Jamaica, one of the leaders of Caribbean "nearshoring," with about 14,000 employees in the sector: $2.75 to $3.20 an hour.
2. Outsourcing Britain's elderly to India: "First jobs were outsourced from Britain to India. Next it was healthcare, with hundreds of Britons travelling to leading hospitals in Indian cities for surgical operations and other medical procedures. Now another aspect of healthcare may be outsourced to India — that of looking after some of Britain's elderly or disabled.
The reason is the same — costs are much lower in India."
(Thanks to Sanil Kori)
1. NEW DELHI - Rising salaries for Indian software professionals will add to margin pressures at technology outsourcing companies in India, according to a survey released on Tuesday that showed wages rose an average of 18.7% this year.
According to a recent Zagat Survey, restaurants in London, Paris and Tokyo are about twice as expensive on average as New York and Los Angeles (see chart above), read about it here.
From The Economist: "More species are under threat than ever before according to the World Conservation Union (see chart above). Its “Red List” gives warning that 16,306 species are now under threat of extinction, nearly 200 more than in 2005. This number has risen steadily since the first report in 1996."
(Thanks to Drew Suder.)
On 20/20 tomorrow (Friday, Sept 14) night at 10 p.m. EST, John Stossel presents: "Whose Body Is It, Anyway?! Sick in America." American Health Care in Critical Condition: The Case for Putting Individuals, Not Employers or Government, in Control of Health Care.
Greg Mankiw reports today on the Fed's s "secret rate cut" to 5%, via Robert Barro. The graph above reflects the "effective daily Fed Funds rate" from the Federal Reserve and confirms what Barro is saying.
The farm legislation proceeding through Congress symbolizes much of what's wrong with Washington. It's government by inertia. We do today what we did yesterday, because politicians draw their power from distributing benefits and various interest groups feel entitled to receive them -- even if they serve no defensible public purpose. Our extravagant farm programs capture the absurdity as well as any other.
Bad News 3: UAW membership has declined by 126,000 since 2003, as workers have early retirements or lump-sum buyouts.
Good News 1: The American Association of College Nursing estimates the U.S. currently has 126,000 nursing vacancies. By 2014, the U.S. will require 1.2 million new and replacement nurses, as many of the nation's 2.9 million nurses retire and aging baby boomers need increasing amounts of care.
Good News 2: In Michigan, health care is the only industry in demand across the state, says Andy Levin, the deputy director of the state's department of labor and economic growth. Michigan projects a shortage of 18,000 nurses by 2015. "Every hospital in Michigan needs nurses, and every school has a nursing waiting list," he says. "The health-care industry is a growth sector we want to foster."
Solution: Last year, Ford began offering a buyout package that covers schooling, following an internal 2005 study that showed many of its younger workers would leave if given a chance to attend college. Under this plan, Ford agrees to pay former workers half of their annual pay for four years -- typically $25,000 to $30,000 annually -- plus health-care benefits and up to $15,000 each year for school. Workers surrender retiree health benefits but retain whatever Ford pensions they've earned.
Ford says 40% of its former workers who are going to school are studying in medical fields -- more than half specializing in nursing, followed by radiology, dental hygiene and pharmacology. "Health care is where the jobs are," says Marty Mulloy, Ford's head of labor relations, who helped develop Ford's education buyout plan and is handling this summer's UAW contract talks.
Good News 3: Former auto workers say they are drawn to health care because the jobs pay well and are less vulnerable to being outsourced. Registered nurses currently have an annual mean salary of nearly $60,000, the Bureau of Labor Statistics says. Dental hygienists earn about $62,000. By comparison, auto-manufacturing jobs currently pay about $54,000.
Conclusion 1: The Big Three have almost $100 billion in health care obligations, and some of that money will be spent in the future to employ the autoworkers who have left the auto industry and gone into health care. In other words, Ford's buyout packages will help train the nurses and other medical professionals necessary to provide essentially unlimited lifetime health care for 721,000 current and retired UAW workers. The very industry (health care) that could eventually bankrupt GM and Ford, is nevertheless currently providing many jobs for former UAW workers.
Conclusion 2: Many UAW workers will be better off in the medical field than in the auto industry, and could have greater job stability and higher wages.
In an article about low voter turnout in today's Baltimore Sun, I'm described as "an economist, blogger and every civics teacher's worst nightmare."
MOSCOW, Russia: With the hiss of an espresso machine and a note in Russian explaining the meaning of tall, grande and vente, Starbucks opened its first coffee shop in Russia on Thursday in a mall outside Moscow.