Tuesday, June 23, 2009

Both the Mean and Variance of SAT Math Test Scores is Higher For Males Than for Females

The table above (click to enlarge) shows mean test scores and standard deviations for the SAT exam on the three different sections (reading, math and writing), broken down by gender (data available here, see Table 2) for the more than 1.5 million college-bound seniors who took the SAT in 2008.

Difference-of-means tests that I have calculated (not reported here) reveal that the mean male test scores are significantly higher than the mean female test scores for both reading and mathematics (at the 1% level of significance), and the mean female test scores for writing are significantly higher than male test scores (at the 1% level). Confirming the results of previous research, additional statistical tests confirm that the variability of male test scores is significantly greater than the variability of female test scores, for both the mathematics and reading exams.

SAT test score distributions are displayed in the table below (click to enlarge), and show the following:

For math test scores above 750, males outnumber females by almost 2 to 1, and for test scores between 700-740, the ratio is about 1.6 males for every female. For the 650-690 range, males outnumber females by a factor of 1.38 to 1, and for the 600-640 range the ratio is 1:15 males to every female. For all of the other ranges except the bottom one, females outnumber males. Overall, female SAT test takers (812,764) outnumbered males (704,226) by 1.15 to 1.
The difference between male and female test scores for the math section of the SAT has persisted over time, see chart below (data here, page 3).

Although the gap between male and female test scores has declined over time, and in 2008 was the smallest (33 points) since 1971 (see chart below). However, given the large sample size, even a difference in mean test scores of one point would still be statistically significant, so the gap would almost have to completely disappear before the average male and female scores would be statistically equivalent.

Rising Grades, Falling Test Scores for HS Seniors

Click to enlarge.
Between 1998 and 2008, the percentage of college-bound high school seniors with a GPA equal to letter grades of A+, A or A- increased from 38% to 42%, while the average SAT scores for that group decreased by 15 points from 565 to 550 for the Reading section, and by 19 points from 578 to 569 for the Math section (data here from The College Board, Table 17).

Existing Home Sales, Median Prices Increase in May

WASHINGTON (Dow Jones) -- Existing-home sales improved again in May, but falling prices and bloated supply promise to make a housing sector recovery slow.

MP: That's one way to look at it. Here are some alternative views:

1. The April to May increases in median home prices (3.84%) and mean home prices (3.26%) were the largest monthly price increases in more than a year (data here).

2. The monthly May increase in both median home prices (3.84%) and homes sold (2.36%) was only the second time in at least a year that both prices and unit sales increased in the same month.

3. The back-to-back increase in home sales in both April and May is the first time in at least a year of two consecutive monthly increases.

4. The most recent two-month increase in sales of 4.84% is the largest since April 2004 (source).

5. The 9.6 months supply of inventory in May is below last year's May level of 10.9 months by more than five weeks, and is at the second-lowest level in the last year.


According to Brian Wesbury and Bob Stein:

The data today are consistent with our outlook that the economy is recovering from a panic. Home sales, building activity, and the rate of decline in home prices all seem to be bottoming or have already formed a bottom. In fact, the level of existing home sales in May was the highest since October 2008.

Economic Reports and Releases via NBER

Great economic data and free services are available from the National Bureau of Economic Research, where you can register to receive free e-mail notifications of more than 100 different economic releases. You can also access all of the hundreds of current and archived economic reports, and view the release schedule for each report.

Richmond Fed Index Rally Suggests Econ Recovery

Manufacturing activity in the central Atlantic region advanced somewhat faster in June, according to the Richmond Fed’s latest survey. The seasonally adjusted manufacturing index — our broadest measure of manufacturing activity — jumped to 6 from May’s reading of 4 (see chart above). Looking at the main components of activity, new orders expanded further, while factory shipments grew at a slightly slower rate and employment exhibited more moderate weakness. Other indicators were mostly positive. Backlogs increased for the first time since August 2007, while vendor delivery times stabilized and capacity utilization edged higher. In addition, manufacturers reported somewhat quicker growth in finished goods inventories.

MP: Signalling the end of the 2001 recession, the Richmond Fed Manufacturing Index was above zero by early 2002 when the U.S. economy was officially in economic recovery (see chart above). The Richmond Fed index has increased 61 points since the end of 2008, and has now been in positive territory for two consecutive months for the first time since the summer of 2007, suggesting that the recession has ended in the Richmond Fed region (MD, VA, WV, NC, SC and DC).

There have been a lot of somewhat-sensationalized descriptions by the media of the current recession ("Worst economic crisis since the Great Depression
®, "Great Depression II™," etc.), and I'm wondering how the media will describe the pending economic recovery? We'll probably be more likely to hear descriptions like "The Slowest/Weakest Most Sluggish Economic Recovery Since ______" than descriptions like "The Greatest/Fastest/Strongest Economic Recovery Since _____."

ECRI: Recession Will Be Over By End of Summer; WLI Registers Largest Three-Month Gain in History

NEW YORK, June 19 (Reuters) - A gauge of future U.S. economic growth rose along with its yearly growth rate, reaffirming hope that yearly growth will turn positive in the summer months, a research group said on Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index (WLI) rose to a 36-week high of 117.1 for the week ending June 12, from an upwardly revised 116.2 the previous week (see chart above). In recent weeks, the group has forecast that the U.S. recession will end sometime during this summer, as its yearly economic growth reading rebounds from late-2008 lows.

The index's annualized growth rate spiked to an 85-week high of minus 0.6 percent from the prior week's revised rate of minus 3.5 percent (MP: And compares favorably to the year-end growth rate reading of -28.1%, see data here).


"With WLI annualized growth rocketing up almost 30 percentage points in six months (MP: from -28.1% in December), it's virtually pounding the table about the recession ending this summer," said Lakshman Achuthan, managing director at ECRI.

MP: The WLI has increased nine weeks in a row - the last time that happened was almost 20 years ago - and the index has increased in 13 out of the last 14 weeks (data here). The index of future economic activity is now at a 9-month high of 117.1, the highest level since October 3 of last year (see chart above). Further, the 12-point, three-month increase in the WLI from the early March low of 105.1 is the largest three-month gain in the history of the WLI back to 1967.

Canadian Oil Sands: More Oil Than Saudi Arabia?

Canada's oil sands hold an estimated 170 billion barrels of oil that can be recovered with existing technology and as much as 1.7 trillion barrels -- more than five times the size of Saudi Arabia's reserves -- that could be produced with the use of new methods that are being developed.

As the only non-OPEC source with the capability for large production growth during the next several years, oil sands have the potential to reduce the Organization of Petroleum Exporting Countries' revenues, weakening the cartel and those members that often undertake policies hostile to U.S. interests.

By getting more of their oil from Canada, refineries in the Midwest are moving from being at the back of the crude oil supply line to the front. With these secure supplies, Midwest refineries are not as vulnerable to supply disruptions from overseas producers or hurricanes in the Gulf of Mexico.

So who would object to Canadian oil sands?

Eenvironmental groups like the Natural Resources Defense Council and the Sierra Club are trying to shut down Canadian oil sands production and block the expansion of refineries here in the U.S.

If the environmental groups truly cared about achieving results in their battle against global warming, they would better focus their energy on the construction of scores of power plants in rapidly developing economies like China and India that account for most of the increase in the world's carbon emissions. These developments pose the real global environmental danger, not the Canadian oil sands.

~From my editorial in today's Detroit News

Monday, June 22, 2009

Canada's Wait Times Exceed Benchmarks

From Canada's Wait Time Alliance for Timely Access to Health Care's 2009 annual report "Unfinished Business: Report Card on Wait Times in Canada":

Five years ago the governments of Canada resolved to improve wait times for health care by committing nearly $6 billion to the cause. Although there are signs of improvement, the lack of uniform and timely information on wait times is just one symptom of the ‘unfinished business’relating to wait times in Canada. What’s going on?

■ Based on the UK's National Health Service target of 18-weeks from initial referral by a family physician to start of treatment, a majority of Canadian patients had wait times that exceeded the 18-week target. Access is particularly poor for: ophthalmology (adult strabismus), obstetrics and gynecology, gastroenterology, plastic surgery and orthopedics.

■ The median wait for radical (curative) cancer care was 46 days or nearly 7 weeks and the majority of these treatments exceeded the Canadian Association of Radiation Oncology benchmark for curative cancer treatment of 4 weeks (2 weeks for the consult wait and 2 weeks for treatment). This is troublesome given the clear link between a delay in radiation therapy and a chance of cure.

■ The study found that the median wait time from the time the patient presented at the Emergency Department to the time the patient was discharged (i.e., the patient did not need to be admitted to an inpatient bed) was almost 6 hours, while the average wait was nearly 9 hours, both much longer than the benchmark of 4 hours.

Moreover, the median wait time for patients requiring an inpatient bed-that is, from the time the patient presented at the ED to the time they were admitted to an inpatient bed-was
19 hours (average is 23.5 hours or nearly one full day), which is substantially higher than the established thresholds (e.g., more than three times the 6 hour guideline for high-level acuity patients). The longer wait for patients to be admitted is often due to the inability to find an available hospital inpatient bed.

Chart of the Day:TIPS Derived Inflation Expectation


Update: Both charts above and the comments below have been updated, based on using 10-year constant maturity yields for both Treasury series (thanks to Michael Pond for suggesting this).

The top chart shows the weekly, bond market-based 10-year TIPS-derived expected inflation back to 2003, calculated as the difference between 10-year regular, nominal Treasury yields and 10-year Treasury inflation-indexed yields, both on a constant maturity basis (St. Louis Fed data here for 10-year TIPS and here for regular 10-year Treasuries; see the bottom chart for those yields separately.

After an unusual period in late 2008 resulting in a narrowing spread when the TIPS 10-year yields were unusually high and approaching 3%, and regular Treasury yields were unusually low and approaching 2%, the Treasury market seems to have stabilized, and the bond market's 10-year expectation of inflation is back around 2.5%, consistent with the inflationary expectations from 2003-2007.

Canada's Health Care System: Poor Value

The beginning of May marks the end of income tax season in Canada. Over one-half of the personal income taxes Canadians just paid in aggregate are required to cover the cost of our taxpayerfunded health care program. Given this level of expenditure, you might expect that Canadians receive world-class access to health care. But the evidence demonstrates that this is not so.

Consider Canada’s waiting lists, which are among the longest in the developed world.

■ In 2007, waiting lists for access to health care in Canada reached a new all-time high of 18.3 weeks from general practitioner referral to treatment by a specialist. Despite substantial increases in both health spending and federal cash transfers to the provinces for health care over the last decade or so, this wait time is 54% longer than the overall median wait time of 11.9 weeks back in 1997.

■ Canadians were more likely to experience waiting times of more than six months for elective surgery than Australians, Germans, the Dutch, and New Zealanders, but slightly less likely than patients in the United Kingdom;

■ Canadians were least likely among the six nations to wait less than one month for elective surgery;

■ Canadians were most likely to wait six days or longer to see a doctor when ill, and were least likely among the six universal access nations surveyed to receive an appointment the same
day or the next day; and,


■ Canadians were least likely to wait less than one hour and most likely to wait two hours or more for access to an emergency room among the six universal access nations surveyed

That is hardly the sort of access you might expect from the developed world’s third most expensive universal access health insurance system.

~Nadeem Esmail of the Fraser Institute

HT: NCPA

Buy American = Fewer American Jobs, Not More

Cartoon by Henry Payne.
When Congress inserted “Buy America” protectionist provisions that required some goods (such as steel, cement, and textiles) financed by the stimulus bill to be made in America, our government invited a trade war with our economic partners. Now Canada and China are imposing their own protectionist regulations, potentially destroying well-paid American jobs in the export sector. Other countries may follow suit.

The tragic losers of “Buy America” are free trade agreements and potential job growth in the American economy. Seductively, “Buy America” promises workers they can have it all: cheap goods from China, oil from Canada, as well as protection from global competition. But real life just doesn’t work that way. In reality, “Buy America” is shorthand for fewer jobs as other countries retaliate.

Trillions of international dollars pass through America each year not because we are isolated, but because we are the hub of the world. Terrorists twice attacked the World Trade Center because the building symbolized international trade. They destroyed a building and murdered thousands of innocent Americans, but they failed to vanquish world trade. Sadly, politicians who erect barriers to trade are hostile not only to trade but to our country and to our jobs.

~Diana Furchtgott-Roth

The Uninsured and Static vs. Dynamic Assumptions

Although 70% of insured Americans rate their health care arrangements good or excellent, radical reform of health care is supposedly necessary because there are 45.7 million uninsured. That number is, however, a "snapshot" of a nation in which more than 20 million working Americans change jobs every year. Many of them are briefly uninsured between jobs. If all the uninsured were assembled for a group photograph, and six months later the then-uninsured were assembled for another photograph, about half the people in the photos would be different.

~George Will

MP: Many of those discussing the "problems" of income, wealth or wage inequality often must be troubled because they are making the underlying assumption that individuals and households in the U.S. are permanently stuck in a certain income or wealth quintile (bottom or top) or income percent (top or bottom 10%), without acknowledging the dynamic movements up and down the income and wealth quintiles over time. Those who are troubled by the 45.7 million insured Americans are probably making a similar flawed, underlying assumption about the uninsured: that those individuals or households insured in a certain year remained permanently insured, and those individuals or households who are uninsured in a certain year remain permanently uninsured with no possibility of ever getting insurance without government intervention, with no interaction between the two groups.

As George Will reminds us, the "uninsured" are often temporarily, not permanently uninsured, and the composition of the 45.7 million uninsured changes all the time, i.e. it's not like a private club closed to new members.

The unrealistic assumption of static group compositions over time (for income, wealth, or the uninsured, wages, etc.), and a rejection of the more realistic assumption of dynamic group changes, generally and inevitably leads to one policy conclusion: government intervention. Or at the very least, the assumption of static group compositions strengthens the case for government intervention and the assumption of dynamic group compositions weakens the case for government intervention.

Sunday, June 21, 2009

Wal-Mart Creates 3,000 New Jobs So Far in June

Logan, Utah: 350 new jobs (average wage $10.98 per hour)

Conway, SC: 400 new jobs ($11.29 per hour)

Miamisburg, OH: 200 new jobs ($11.34 per hour)

Weaverville, NC: 350 new jobs ($11.30 per hour)

Durham, SC: 530 new jobs ($11.30 per hour)

Charlotte, NC: 300 new jobs ($11.30 per hour)

Jefferson City, MO: 350 new jobs ($11.27 per hour)

Metairie, LA: 300 new jobs ($11 per hour)

Carlyle, IL: 50 new jobs ($11.70 per hour)

Phoenix, AZ: 120 new jobs ($11.17 per hour)

Cocoa, FL: 220 new jobs

Markets in Everything: Direct Donor-Student Loans

NY TIMES -- Unithrive, which made its debut last month, matches alumni lenders and cash-strapped Harvard students, who post photographs and biographical information and can request up to $2,000. The loans are interest-free and payable within five years of graduation.

The nonprofit site is the brainchild of three recent Harvard graduates, who hope it can help ease the crisis in paying for college, especially if it is one day rolled out to other colleges that cannot afford to be as generous as their alma mater, which already awards scholarships to all students with demonstrated need.

The appeal of direct donor-to-student loans, Unithrive’s founders say, is that alumni will have a personal connection to current students: those requesting loans list hometowns, majors and classes they have taken. Alumni can lend to students with whom they feel a bond. They are promised updates 3 times a year from students they support - not unlike the letters that sponsors of poor children in Africa receive through the Christian Children’s Fund.

Happy Father's Day; Welcome The "Lipstick Economy" And Major Jobless Rate and Degree Gaps


As the top chart above shows, the male-female jobless rate gap of 2.5% is truly unprecedented. During and following the last two recessions of 1990-1991 and 2001, the male unemployment rate was about 1% higher than the female unemployment rate. But there has never been any recession in U.S. history, or any time during even a non-recessionary period, when the male unemployment rate was this much (2.5%) higher than the female jobless rate.

As the bottom chart above shows, 1981 was the last year that men received more college degrees than women, and the female-male "degree gap" has increased in every year since, and is projected by the Department of Education to increase further through 2017 when women will receive 158 college degrees (at all levels) for every 100 degrees received by men.

On this Father's Day, we should maybe recognize that we are witnessing what might possibly be a permanent structural change in the labor market and higher education, which will have profound and lasting implications for family roles, career choices, divorce settlements and child custody decisions by family courts, public policy, etc.

For example, just thinking out loud here, would it be possible in the future that a college-educated, professional woman working full-time would pay alimony to her unemployed ex-husband who hasn't found employment since the Great Mancession of 2008, and he might also get primary custody of the children and be paid child support?


Inflation Smackdown: Laffer vs. Blinder

Arthur Laffer in the WSJ on June 11, "Get Ready for Inflation and Higher Interest Rates":

As bad as the fiscal picture is, panic-driven monetary policies portend to have even more dire consequences. We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s.

The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10. It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless.

Banks now have huge amounts of excess reserves, enabling them to make lots of net new loans. At present, banks are doing just what we would expect them to do. They are making new loans and increasing overall bank liabilities (i.e., money). The 12-month growth rate of M1 is now in the 15% range, and close to its highest level in the past half century.


Alan Blinder counters in today's NY Times article "Why Inflation Isn’t the Danger:"

The mountain of reserves on banks’ balance sheets has, in turn, filled the inflation hawks with apprehension. But their concerns are misplaced. To understand why, start with the basic economics of banking, money and inflation. In normal times, banks don’t want excess reserves, which yield them no profit. So they quickly lend out any idle funds they receive. Under such conditions, Fed expansions of bank reserves lead to expansions of credit and the money supply and, if there is too much of that, to higher inflation.

In abnormal times like these, however, providing frightened banks with the reserves they demand will fuel neither money nor credit growth — and is therefore not inflationary.


MP: The chart above shows the significant growth in both the monetary base and excess reserves over the last year. According to Laffer, banks are lending out the excess reserves, which will be inflationary, and according to Blinder, banks are holding onto the excess reserves, which will not fuel inflation.

Who's correct? The graph below of the Total Loans and Leases of all commercial banks suggests that Blinder is more correct, at least for now. Total bank loans peaked in late 2008 and have actually been gradually declining since last October, falling by almost $200 billion from the peak. And the graph above shows that excess reserves at banks have increased lately, which is consistent with the recent decline in bank loans. As the Fed has expanded the monetary base and bank reserves, banks have been holding a majority of those increased reserves as excess reserves, and they are NOT lending them out.


Blinder also argues that the bond market does not seem too worried about future inflation:

The market’s implied forecast of future inflation is indicated by the difference between the nominal interest rates on regular Treasury debt and the corresponding real interest rates on Treasury Inflation Protected Securities, or TIPS. These estimates change daily. But on Friday, the five-year expected inflation rate was about 1.6% and the 10-year expected rate was about 1.9%. Notice that the latter matches the Fed’s inflation target rate of just under 2%. I don’t think that’s a coincidence.


MP: The chart below shows the recent history of 10-year Treasury yields from both regular and inflation-indexed notes and illustrates Blinder's point of inflationary expectations of about 2%, based on the difference in yields between regular 10-year Treasuries of 4% and 10-year inflation-indexed Treasuries of about 2%.

Bottom Line: Both the bond market data showing contained expectations of inflation at around 2%, and the commercial banking data showing declining loan volume, seem to support Blinder's position more than Laffer's. I'm leaning toward Blinder's position for now. Inflation is not any kind of "clear and present danger," at least not yet.


Vehicle Profiling, Vehicle Discrimination?

I took this picture this afternoon about a mile from my office, at the parking lot of UAW Local 599 in Flint, on the edge of Buick City, which employed 28,000 GM workers in the 1980s and was demolished in 2002.

1. First of all, is that really legal in the U.S. to engage in such blatant "vehicle discrimination/vehicle profiling" based on a car's national origin? Is there really much difference between a sign that says "No Mexicans allowed on our property" and the sign above that essentially says "No cars built by Mexicans allowed on our property"?

2. Second, what about cars built by the Canadian UAW brothers and sisters 60 miles away in Windsor, Ontario, and at other locations in Canada? Those wouldn't technically qualify as "American-Union Made Automobiles," would they?

Below is a
list of vehicles from the UAW website ("Support union jobs in the U.S. and Canada") that are built by the CAW (Canadian Auto Workers); would Local 599 really tow these union-made vehicles from Canada?

Buick Lacrosse
Chevrolet Camaro
Chevrolet Impala
Chrysler 300
Dodge Challenger
Dodge Charger
Ford Crown Victoria
Lincoln Town Car
Mercury Grand Marquis
Chevrolet Equinox
Ford Edge
Ford Flex
Lincoln MKT
Lincoln MKX
Pontiac Torrent

3. Also listed on the UAW website are these 2009 model vehicles built in the U.S. for foreign automakers by UAW workers, would they be "American-Union Made Automobiles" or not?

Mazda6
Mitsubishi Eclipse
Mitsubishi Eclipse Spyder
Mitsubishi Galant
Toyota Corolla
Mazda B-Series
Toyota Tacoma
Mitsubishi Endeavor

4. For the Ford F-Series Pickup Truck, some 2009 models are assembled in Venezuela and Brazil, so some of those can't qualify as "American-Union Made" can they?

5. Some of the GMC Sierras and Chevy Silverados are assembled in Canada and some in the U.S. Are only those assembled in the U.S. allowed in the Local 599 parking lot?

6. What about the Volkswagen Routan, a rebadged variant of the Chrysler RT platform, built by the CAW?

7. What about the Chevrolet Aveo (built in S. Korea) or a Cadillac Catera (built in Germany from 1997-2001)? Would Local 599 really tow a Chevy or Cadillac out of its parking lot?

Ontario Sends Cancer Patients to Buffalo, Detroit

WINDSOR STAR -- Between April 2007 and April of this year, 55 Ontario patients have been referred to Roswell Park in Buffalo, NY to receive IL-2 treatments for stage IV melanoma, and four patients were sent to the Harper University Hospital and the Karmanos Cancer Center in Detroit, Michigan.

The story is about a 30-year old Canadian man with melanoma who lives in Windsor, Ontario and has been approved for IL-2 treatments in the U.S. by Canadian authorities, but is being forced to drive four hours to Buffalo instead of across the Detroit River for treatment in Detroit. Reason? Cost savings.

Is this really the kind of government-run health care system we want in the U.S.? Where will we send cancer patients if we adopt a Canadian-style health care system?

Twin Cities Home Sales Increase in May

According to a recent report from the Minneapolis Area Association of Realtors:

The number of traditional home sales is growing. Only 43% of the pending sales in May were lender-mediated, compared to 59.4% in January. This decrease in lender-mediated market share brought the overall median price up $12,000 from last month to $165,000 in May. Despite the month-over-month increase, that’s still a 19.5% drop from May 2008.

MP: From May 2007 to May 2008 both unit pending sales and median prices were falling in the Twin Cities (see chart above), suggesting that the real estate market there was in decline and hadn't yet hit bottom. Over the last year, median home prices have fallen by another 19.5%, to levels not seen since 2001, and unit sales are finally starting to rebound, increasing by 17.3% from last May. In May, both pending sales and median prices increased from April, suggesting that the TwinCities real estate market might have finally reached bottom and in now coming back.

Capitalism: Still The Most Productive Economic Engine Ever; Our Future Growth Depends On It

A few years from now, strange as it may sound, we might all find that we are hungry for more capitalism, not less. An economic crisis slows growth, and when countries need growth, they turn to markets. After the Mexican and East Asian currency crises—which were far more painful in those countries than the current downturn has been in America—we saw the pace of market-oriented reform speed up.

If, in the years ahead, the American consumer remains reluctant to spend, if federal and state governments groan under their debt loads, if government-owned companies remain expensive burdens, then private-sector activity will become the only path to create jobs. The simple truth is that with all its flaws, capitalism remains the most productive economic engine we have yet invented. Like Churchill's line about democracy, it is the worst of all economic systems, except for the others.

Its chief vindication today has come halfway across the world, in countries like China and India, which have been able to grow and pull hundreds of millions of people out of poverty by supporting markets and free trade. Last month India held elections during the worst of this crisis. Its powerful left-wing parties campaigned against liberalization and got their worst drubbing at the polls in 40 years.

Capitalism means growth, but also instability. The system is dynamic and inherently prone to crashes that cause great damage along the way. For about 90 years, we have been trying to regulate the system to stabilize it while still preserving its energy. We are at the start of another set of these efforts. In undertaking them, it is important to keep in mind what exactly went wrong. What we are experiencing is not a crisis of capitalism. It is a crisis of finance, of democracy, of globalization and ultimately of ethics.

Finance has a history of messing up, from the Dutch tulip bubble in 1637 to now. The proximate causes of these busts have been varied, but follow a strikingly similar path. In calm times, political stability, economic growth and technological innovation all encourage an atmosphere of easy money and new forms of credit. Cheap credit causes greed, miscalculation and eventually ruin.


~From "The Capitalist Manifesto: Greed Is Good (To a point)" in the current issue of Newsweek

Saturday, June 20, 2009

Creative Capitalism Filling a Gap with Retail Clinics

In times of economic crisis, the ability of the free market to solve problems may come into question. But in one vital corner of the economy, a little creative capitalism is helping fill a gap.

Enter the retail health clinic. In the past decade, more and more pharmacies like CVS and Walgreens, supermarkets such as Kroger and Publix and big-box stores like Wal-Mart have made space for clinics that treat minor ailments, administer vaccines and examine kids who need medical forms to enroll in camp. In those nine years, storefront clinics have logged at least 3.4 million visits. Today there are about 1,200 such clinics, pulling in some $550 million in annual revenue, by one estimate.


~Time Magazine article "Getting Well While You Shop"


MP: While politicians and bureaucrats in Washington dream up the next grandiose government health care reform to address rising healthcare costs and the 44 million uninsured, the most effective, affordable and convenient healthcare solutions might be right around the corner at your local pharmacy or supermarket.

We have a food stamp program to provide food for America's poor, what about "retail healthcare stamps" to provide basic healthcare services for low-income groups?


Cleveland Fed's Median CPI Inflation vs. BLS

Greg Mankiw has an interesting post on the difference between standard CPI inflation reported by the BLS and an alternative measure of inflation calculated by the Cleveland Federal Reserve based on the median CPI. Professor Mankiw points out that:

The average of any data set can be thrown off by a few extreme outliers; the median is a more robust statistic to estimate the central tendency in the data.

Right now, the two measures of inflation are diverging substantially. The standard CPI shows deflation over the past year, but that average is due to a few anomalous sectors, such as energy. If you look at the median CPI, which shows what a more typical price is doing, the inflation rate does not look very unusual (see chart above).

MP: The
BLS reported on Wednesday that annual standard CPI inflation (deflation) from May 2008 to May 2009 was -1.30% (see chart), mostly because of a -27.3% decrease in the energy prices and a -14.3% decrease in transportation prices from a year ago (when gas was almost $4 per gallon and oil was about $125 per barrel).

In contrast, the
Cleveland Fed reported on the same day that its adjusted, Median CPI increased by +2.4% year-to-year through May 2009 (see chart).

The Cleveland Fed has been studying and reporting median CPI for a long time, here is a paper from 1991 on "
Median Price Changes: An Alternative Approach to Measuring Current Monetary Inflation."

Here's an
interactive graphing feature from the Cleveland Fed for creating charts of inflation.

Larry Summers Vindicated? Global Study Shows Greater Male Variability in Math, Reading Scores

Table 1.
(Note: All results displayed in both tables are statistically significant at the 5% level or higher.)

Table 2.

The tables above show selected statistics from the paper Global Sex Differences in Test Score Variability (see summary here), published by two economists, one from the London School of Economics and the other from the Helsinki School of Economics. Analyzing standardized test scores in reading and mathematics from the OECD’s "Program for International Student Assessment" (PISA), a survey of 15-year olds in 41 industrialized countries, the authors found that:

Our analysis of international test score data shows a higher variance in boys' than girls' results on mathematics and reading tests in most OECD countries. Higher variability among boys is a salient feature of reading and mathematics test performance across the world. In almost all comparisons, the age 15 boy-girl variance difference in test scores is present. This difference in variance is higher in countries that have higher levels of test score performance.

Sex differences in means are easier to characterize: It is evident from the PISA data that boys do better in mathematics, and girls do better in reading. This has a compositional effect on the variance differences as well. The higher boy-girl variance ratio in mathematics comes about because of an increased prevalence of boys in the upper part of the distribution, but the higher variance in reading is due to a greater preponderance of boys in the bottom part of the test score distribution. Because literacy and numeracy skills have been shown to be important determinants of later success in life (for instance, in terms of earning higher wages or getting better jobs), these differing variances have important economic and social implications
.

We therefore confirm that 15-year-old boys do show more variability than girls in educational performance, with specifics that differ according to whether mathematics or reading are being studied and tested. These results imply that gender differences in the variance of test scores are an international phenomenon and that they emerge in different institutional settings.

MP:

1. The results above show that for both the U.S. (Table 1) and the global group of 41 countries (Table 2), the mean math test scores for 15-year boys are significantly higher than the average score for girls, but the reverse is true for reading test scores: girls score significantly higher than boys on average in reading.

2. For both the U.S. and the 41 countries in the global group, the variability of boys' test scores for both reading and mathematics is significantly greater than the variability of girls' test scores (at the 1% level in all cases), suggesting that there are more boys in the upper and lower tails of the test score distributions.

3. Looking at the top 5% and the bottom 5% of test scores, we can see that boys are overrepresented in almost every case:

a. In the bottom 5% of reading scores, there are 245 boys for every 100 girls in the U.S. (220 boys for every 100 girls for the world group), and in the top 5% of reading scores there are 167 girls for every 100 boys (172 girls for the global group).

b. In the bottom 5% of math scores, there are 121 boys for every 100 girls in the U.S. (94 for the global group), and in the top 5% there are 172 boys for every 100 girls (170 girls for the world group).

In other words, the results indicate that boys' test scores are significantly more variable than girls' test scores, resulting in boys being significantly overrepresented in both the bottom 5% and the top 5% of students in the U.S., and these outcomes are a global phenomenon.

Bottom Line: Can Larry Summers get his job back as president of Harvard, for saying basically the same thing?

"It does appear that on many, many different human attributes- height, weight, propensity for criminality, overall IQ, mathematical ability, scientific ability - there is relatively clear evidence that whatever the difference in means - which can be debated - there is a difference in the standard deviation, and variability of a male and a female population."?

See related CD posts here, here and here?


All The President's Women and Women's Groups

Men are bearing the brunt of the current economic crisis (the "man-cession") because they predominate in manufacturing and construction, the hardest-hit sectors, which have lost more than 3 million jobs since December 2007. Women, by contrast, are a majority in recession-resistant fields such as education and health care, which gained 588,000 jobs during the same period.

Last November, President-elect Obama addressed the devastation in the construction and manufacturing industries by proposing an ambitious New Deal-like program to rebuild the nation's infrastructure. He called for a two-year "shovel ready" stimulus program to modernize roads, bridges, schools, electrical grids, public transportation, and dams and made reinvigorating the hardest-hit sectors of the economy the goal of the legislation that would become the recovery act.

Women's groups were appalled. Grids? Dams? Opinion pieces immediately appeared in major newspapers with titles like "Where are the New Jobs for Women?" and "The Macho Stimulus Plan." A group of "notable feminist economists" circulated a petition that quickly garnered more than 600 signatures, calling on the president-elect to add projects in health, child care, education. At the same time, more than 1,000 feminist historians signed an open letter urging Obama not to favor a "heavily male-dominated field" like construction: "We need to rebuild not only concrete and steel bridges but also human bridges." As soon as these groups became aware of each other, they formed an anti-stimulus plan action group called WEAVE-- Women's Equality Adds Value to the Economy.

What did President-elect Obama do when the National Organization for Women (NOW), the Feminist Majority, the Institute for Women's Policy Research, and the National Women's Law Center soon joined the battle against the supposedly sexist bailout of men's jobs? Our incoming president did what many sensible men do when confronted by a chorus of female complaint: He changed his plan. He added health, education, and other human infrastructure components to the proposal.

~ From Christina Hoff Sommers' (resident scholar at the American Enterprise Institute) article "No Country for Burly Men: How Feminist Groups Skewed the Obama Stimulus Plan Towards Women's Jobs," just published in the Weekly Standard

Thursday, June 18, 2009

First Monthly Travel Increase Since October 2007

The Federal Highway Administration reported today that travel on all roads and streets increased by by +0.6% (1.4 billion vehicle miles) in April 2009 compared to April 2008. This was the first monthly percentage increase compared to the same month in the previous year since October 2007, and follows 17 consecutive monthly percentage decreases (see graph above).


Does this increased driving suggest consumers are feeling more confident? Another green shoot/mustard seed? Possibly.

Comments welcome.

HT: John Thacker

Ronald Reagan on Socialized Medicine: 1961


Southern California Real Estate Market Rebounds: Unit Sales and Median Prices Both Increase in May

DQNews.com -- Southern California home sales rose for the 11th consecutive month in May as sales of $500,000-plus homes started to come back. The median price paid increased slightly from the prior month for the first time since July 2007, the result of a shift in market activity where sales of deeply discounted foreclosures waned and mid- to high-end purchases rose, a real estate information service reported.

A total of 20,775 new and resale houses and condos closed escrow in San Diego, Orange, Los Angeles, Ventura, Riverside and San Bernardino counties last month. That was up 1.3% from 20,514 in April and up 22.8% from 16,917 a year ago. Sales have now increased year-over-year for 11 consecutive months. May’s sales were the highest for that month since May 2006, when 30,303 homes sold, but were 21.2% below the average May sales total since 1988, when DataQuick’s statistics begin.

The median price paid for all new and resale houses and condos sold in the six-county Southland last month was $249,000, up 0.8% from $247,000 in April but down 32.7% from $370,000 a year ago. The median price hadn’t risen from one month to the next since July 2007, when it increased 0.6% from $502,000 to $505,000.

"We appear to be in the early stages of the market gradually tilting back toward a more normal balance of sales across the home price spectrum. As more sellers get realistic, more buyers get off the fence and more lenders offer reasonable terms for high-end purchase financing, we’ll see a more normal share of sales in the more established, higher-cost areas that have been nearly comatose,” said John Walsh, MDA DataQuick president.

MP: Although the increases were small, the fact that both unit home sales and median home prices increased in May suggests that the Southern California real estate market has reached a bottom and is on the road to recovery.

Southern California Home Prices Rise Slightly in May, First Monthly Increase Since July 2007


LA TIMES (front page of today's Business Section) -- Southern California's median home price rose slightly in May for the first time in nearly two years. But the increase was more reflective of a change in the types of homes sold than an end to falling values, a real estate research firm reported Wednesday. The $249,000 median price in May was up less than 1% from April's $247,000 figure, and marked the fifth-straight month the median has held at roughly $250,000, according to San Diego-based MDA DataQuick.

The modest rise reflects increasing purchases at the high end of the housing market, where sales have been virtually frozen. For much of the last year, most home sales have occurred in the low end of the housing market, with banks unloading foreclosed properties at deep discounts, dragging the median price down. Now, more expensive properties are selling, which raises the median, through a market paradox: many of those homes sold after owners cut prices to lure buyers. Still, stirring sales activity at the high end is a sign that the market is crawling toward equilibrium.


The April-to-May Southern California median price increase was the first month-to-month gain since July 2007, when it moved from $502,000 to $505,000, which was the market's peak.

HT: Benjamin

71-Point Increase in Philly Fed Forecast Index Suggests Economic Recovery Is Now Underway

The Philadelphia Fed reports today that the Six-Month Forecast Indicators Show Continued Improvement:

Broad indicators of future activity showed significant improvement this month. The future general activity index remained positive for the sixth consecutive month and increased markedly from 47.5 in May to 60.1, its highest reading since September 2003 (see chart above). The index has now increased 71 points since its trough in December.

The indexes for future new orders and shipments each improved 12 points this month.
For the second consecutive month the percentage of firms expecting employment to increase over the next six months exceeded the percentage expecting declines (21 percent versus 8 percent). The future employment index improved three points. The future workweek index increased 24 points.

MP: Notice in the chart above that in 2001 the 60-point increase in the forecast index signalled the end of the 2001 recession. Hopefully the recent 71-point increase in the future activity index since December 2008 is signalling the end of the current recession.

According to the Philadelphia Fed, "Most of the survey’s broad indicators of future activity showed continued improvement, suggesting that the region’s manufacturing executives are becoming more optimistic that a recovery in business will occur over the next six months."

Wolfram Alpha

Watch a 13-minute introduction video to Wolfram Alpha featuring Stephen Wolfram.

Jobless Claims Fall to Lowest Level in Four Months

The Department of Labor just released its Unemployment Insurance Weekly Claims Report, reporting that the four-week moving average (which smoothes out the volatility) of initial unemployment claims fell this week to 615,750, the lowest level since February 7, more than four months ago (see chart above). From the April 4 peak of 658,750 claims, the four-week moving average has declined in 8 out of the last 10 weeks, and is now 43,000 claims below the peak. With every week of new data, it's looking more and more certain that April 4 was the peak for jobless claims, and the labor market will continue to gradually improve as move forward.

Wednesday, June 17, 2009

Almost 4 Of 10 Uninsured Households Make > $50k Per Year. What's Wrong With Being Self-Insured?

According to this Census Bureau report "Income, Poverty, and Health Insurance Coverage in the United States: 2007" (most recent data available), there were 45.6 million uninsured Americans in 2007. The chart above shows the household income levels of those 45.6 million uninsured Americans.

There are 9.1 million uninsured Americans living in households making $75,000 per year or more, and this represents about 20% of the total number of uninsured. There are 8.5 million Americans without health insurance in households making between $50,000 and $75,000, representing 31.8% of the uninsured. With those two groups combined, 38.6% of Americans without health insurance (17.6 million people) lived in households with $50,000 or more of household income in 2007.

According to The Kaiser Family Foundation, the average annual total premium cost was $4,479 ($373 per month) for single coverage and $12,106 for family coverage ($1,008 per month).

Q: With $50,000 or more in household income, wouldn't many or most of those 17.6 million uninsured households be without insurance voluntarily? That is, couldn't most of those households afford health insurance?

Alternatively, with those income levels (especially the 9 million with income above $75,000), couldn't many of those households choose to forego health insurance in favor of being "self-insured," at least for routine health procedures? Given the widespread availability of more than a thousand convenient and affordable retail health clinics around the country at Wal-Marts, Meijers, CVSs and Walgreens, these households could easily be on the "pay-as-you-go" model of self-insurance for health care.

Foreign Investment in U.S Businesses Increased to $260B in 2008, Mostly in Manufacturing

According to data released earlier this month by the BEA, foreign investors pumped $260.4 billion into the U.S. economy in 2008 to acquire U.S. businesses ($242.8 billion) or to establish new U.S. businesses ($17.6 billion), the highest level of foreign investment in eight years, and a 3% increase from 2007. This investment activity in the U.S. by foreign investors represents almost a 5X increase since 2002, when FDI was only $54.5 billion (see chart above, click to enlarge).

The BEA reported that:

Among major industries, there was a substantial increase in outlays in manufacturing, which accounted for the majority of the spending by investors in 2008. Outlays were also large in information and in finance. Outlays in real estate fell sharply. Outlays increased from investors in Europe, Latin America and Other Western Hemisphere and in the Asia and Pacific region. As in previous years, the largest share of outlays was from European investors. Outlays by investors from Canada and the Middle East fell.

In 2008, U.S. businesses that were newly acquired or established by foreign direct investors had 368,500 employees, compared with 496,600 employees in 2007. Employment at newly acquired or established firms was largest in manufacturing (146,600) followed by finance (except depository institutions) and insurance (95,700).

Bottom Line: Americans might have lost confidence in their economy over the last few years, but foreign investors apparently haven't, and in fact, are increasingly bullish about the U.S. economy and its businesses. Despite subprime mortgage problems, a housing slump, a recession compared frequently to the Great Depression, an auto sector on government life support, and a manufacturing industry in serious decline, foreigners invested more than a quarter trillion dollars in the U.S. in 2008, mostly in the ailing American manufacturing sector.

Map: Drink-Driving Limits Around the World

Click to enlarge.
The Economist.

Want Health Insurance? Go Out and Buy It. If You Can Afford A Cell Phone, You Can Afford Insurance



Reason.tv’s Nick Gillespie knows how to get coverage to at least half of the 45 million Americans who need it. Call it the "Gillespie Plan": If you want health insurance, go out and buy it. Click on the Reason.tv video above (from October 2008 before the election, but still relevant today).

Related, from today's Investor's Business Daily:

"Many Americans are uninsured by choice," wrote Dr. David Gratzer in his book "The Cure: How Capitalism Can Save American Health Care." Gratzer cited a study of the "non-poor uninsured" from the California HealthCare Foundation. "Why the lack of insurance (among people who own homes and computers)?" Gratzer asks. "One clue is that 60% reported being in excellent health or very good health."

The uninsured are not always the same people, and many are without coverage only for a relatively short time. Devon Herrick, senior fellow with the National Center for Policy Analysis, notes that "Being uninsured is a transitory state, since most uninsured Americans are only without coverage for a short time."

Bottom Line: If you can afford a cell phone or cable TV, you can afford basic health insurance. In Michigan, you can get basic health insurance through Blue Cross Blue Shield starting at $47.14 per month for those 18-30 years old (about the cost of a basic cell phone plan), and starting at $168.13 per month for another plan for individuals under 65 and families (not too much more than a cable TV plan with premium channels, and about the same as two cells phones at the monthly average of $77).

Countrywide REOs Back to Early 2007 Levels

The Countrywide Foreclosure Blog reports that there are currently 7,017 foreclosed homes being offered for sale on the Bank of America/Countrywide website, down from the peak of 21,500 last November, and back to levels of April 2007 (see chart above, click to enlarge).

Below are charts for the individual states that had some of the worst foreclosure problems (CA, AZ, FL and NV), showing significantly reduced levels of lender-owned (REO) properties in June 2009. In all cases except Nevada, the REO levels are at two-year lows and Nevada foreclosures are close to a two-year low.

Comment: This is just one company - although Countrywide was (or still is) the largest mortgage company in the U.S. and financed 20% of home mortgages in 2006 - but doesn't this suggest that the real estate markets are slowly healing and recovering, and gradually returning to normal as the foreclosed properties are sold?





Tuesday, June 16, 2009

Min. Wage Hike = Summer Camp Job Killer

ALBEMARLE, N.C. -- The minimum wage is set to rise in North Carolina next month but the effects are already being felt at summer camps around the state. The wage hike’s strain on some already tight budgets could mean fewer counselors to look after the children.

Some camps have already cut field trips to save money. And now they must try to get by with fewer counselors.

HT: Frank Stephenson

Largest L.A. 3-Month Shipping Increase Since 2006

The Port of Los Angeles reported today on May shipping volume, measured in TEUs (Twenty-foot Equivalent Units, a standardized industry measurement used when counting cargo containers of varying lengths), noting the following:

May 2009 imports are greater than April 2009 due to lower warehouse inventory levels, showing some signs of improvement.

May 2009 exports are the highest for the year and greater than April 2009 due to stronger exports of raw materials.

Higher volumes May 2009 vs. May 2008 from China Shipping.

MP: Also, the three consecutive month shipping volume increases in March, April and May 2009 marks the first three month-in-a-row increase in almost three years, since the middle of 2006; and the 161,000 TEU increase over those three months is the largest three-month increase since early 2006 (see shaded areas above).

Shipping Index Rises For Third Straight Month

BUSINESS WEEK -- In yet another sign that some key players are acting as if recession is on the run, more offshore manufacturers are shipping goods into the consumer-driven U.S. market, global-trade tracker Panjiva reports. The May trade data mark the third consecutive monthly rise in the number of shippers moving such goods, the first such Trifecta since the firm began following this metric in July 2007.

Panjiva, a three-year-old statistics analysis firm based in New York and Boston, keeps track of manufacturer shipments around the globe for customers such as Home Depot.

“Increasingly, it feels that the worst is behind us,” says Josh Green, chief executive officer of the trade-tracking firm. Waxing cautious, however, he adds “Still, we have a long way to get back to the pre-crisis level of global trade.”

Nonetheless, the data, released today (June 16), suggest that global trade has hit bottom and is taking the first steps toward recovery. Some 131,688 suppliers were active in May, up 2% from the number in April. The rises in shipper tallies give the Panjiva analysts heart, since such totals have been sliding since at least July 2007, when they counted 161,905 shippers moving goods into the U.S.


See related CD post above.