Saturday, July 25, 2009

Increase in Minimum Wage = Decrease in Hours

HUNTSVILLE (WATE) -- The federal minimum wage has gone up to $7.25 an hour and in a county that already has Tennessee's highest unemployment rate, a grocery store has to make some changes.

Scenic Foods sits just off of Highway 63 in Scott County. It's the kind of store where you can get a little bit of everything, including a down home feel. But owner Bruce Posey isn't exactly happy about the 70 cent minimum wage increase. "It is hard on a small business to absorb this."

Starting Monday, the 12 part time employees making minimum wage will have their hours cut. "If we don't cut hours, it could add as much as $400 to $500 per week to the pay roll," Posey explains.

MP:
As I pointed out recently, increases in the minimum wage are guaranteed to have adverse effects on employees that will NOT necessarily be reflected in increases in the teenage unemployment rate. In the case above, none of the minimum wage workers at Scenic Foods have lost their jobs because of the minimum wage hike, but they have all had their hours reduced. These workers and thousands of others like them whose hours have been cut, will still be counted as being employed by the BLS, and the teenage unemployment rate won't necessarily change.

Bottom Line: The demand curve for unskilled workers, like all other demand curves, slopes downward. At higher wages, the number of hours demanded for unskilled labor decreases. Period. Unskilled workers are harmed by increases in the minimum wage, even those who manage to keep their jobs like the employees at Scenic Foods.

Markets in Everything: NOT. U.S. Postal Service: Largest Drop in Mail Volume in 234 Years

WASHINGTON POST -- Combine the impact of new technologies with the gut punch of the recession, and in the past year alone, the Postal Service has seen the single largest drop-off in mail volume in its 234-year history, greater even than the decline from 1929 to 1933 during the Great Depression. That downward trend is only accelerating. The Postal Service projects a decline of about 10 billion pieces of mail in each of the next two years, going from a high of 213 billion pieces of mail in 2006 to 170 billion projected for 2010 (see chart above, click to enlarge).

The situation is so dire that the Postal Service, which is projecting a $6 billion shortfall by the end of September despite a recent postage rate increase, will go to Congress this month to seek emergency relief, looking to cut home mail delivery from six days a week to five. Already, the Postal Service has cut hours at hundreds of post offices across the country, including 56 of the Washington area's 386 outlets. It has consolidated routes, dropping 158 delivery routes locally, offered workers early retirement and imposed hiring and salary freezes. Still, said Postmaster General John E. Potter, the service is in "acute financial crisis."

Markets In Everything: Communist Cuba's Black Market Goes to the Web; Cuba's Craigslist/Ebay

From sex toys to old Chevys, Revolico.com takes communist Cuba's black market to the web.

HAVANA On this Communist-run island, the black market is a vast, irrepressible force, an underground river of unlicensed services, goods pilfered from government stores and coveted items carried in from abroad. Cuban authorities go to great lengths to curtail it; they cannot.

Over the years, buying and selling en la calle — in the street — has been practiced by generations of Cubans forced to make ends meet in a state-controlled economy where official wages are woefully inadequate and most forms of private commerce are banned.

But Cuba’s informal economy is an imperfect marketplace. Without advertising, it relies heavily on word-of-mouth, and its commercial activity tends to flourish in small circles — among neighbors, coworkers and other trusted acquaintances.

Then came Revolico.com. Its name essentially translates as “disarray,” and while Havana residents jokingly call it “the Cuban eBay,” the site is really closer to Craigslist. For Cubans who make a living through the black market, it's a godsend.


Growth in the ECRI Index Hits Fresh Five-Year High

NEW YORK, July 24 (Reuters) - A gauge of future U.S.economic growth edged higher in the latest week, while its measure of annual growth continued to stride at five-year highs, feeding hopes that a smooth recovery is due this year, a research group said on Friday.

The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to 118.4 in the week to July 17 from 118.1 the previous week. The index's annualized growth rate jumped to a fresh five-year high of 7.7% from 7% one week ago. It was the index's highest yearly growth rate reading since the week ended May 7, 2004, when it stood at 7.8% (see chart above).

"With WLI growth climbing to a new five-year high, it is reaffirming that the end of recession is at hand and that the U.S. economy is poised for recovery in short order," said Lakshman Achuthan, managing director at ECRI.

Friday, July 24, 2009

Venezuela to Import Coffee For 1st Time Ever!!

Caracas, July 22 - Venezuela, a traditional coffee exporter that boasts one of the best cups of java in South America, may have to import coffee for the first time ever this year or face shortages, industry experts said. Producers say rising costs and prices fixed by the government have caused production to fall and illegal exports to rise. The government says poor climate and speculation by growers and roasters is to blame.

Venezuela is known to produce some of the best quality Arabica coffee anywhere and, unlike many countries in the region, traditionally consumed most of it itself. But more recently large quantities of coffee have been smuggled across the border to Colombia, where prices have been more than double the fixed 470 Bolivares ($218) per bag that producers are paid in Venezuela.

MP: This story provides yet another example of how central planning and price controls always fail. The laws of supply and demand are not optional. Artificially fix a price below (above) the market-clearing price and you create a guaranteed shortage (surplus). Period.


Update: P.J. O'Rourke summarizes it pretty well: "You can't get good Chinese takeout in China and Cuban cigars are rationed in Cuba. That's all you need to know about communism." (HT: Tim Worstall)

Emerging Markets Bull Market Rally

The chart above (click to enlarge) shows year-t0-date (YTD) returns for the stock markets of the emerging markets, according to MSCI Barra (data here). In contrast, the YTD return for the USA Index is 8.76%.

Cartoon of the Day

~Michael Ramirez (HT: Tom Sullivan)

Bank of Canada: "THE RECESSION IS OVER"

hammertime.gif

CBCNEWS.CA -- The recession is over, the Bank of Canada said in its quarterly Monetary Policy Report released Thursday. After shrinking since the last quarter of 2008, the Canadian economy will grow by an annualized rate of 1.3% in the current quarter, the bank said.

"We are on track for the recovery both in Canada and globally," Bank of Canada governor Mark Carney told reporters.

The return to growth after three quarters of decline signals the end of the recession, defined as two consecutive quarters of shrinkage.

Growth will accelerate through late 2009 and by the first half of 2010, the Canadian economy will be booming along with 4% growth. But that will begin to taper off to less than 3% by the last half of 2011, the bank said.

Obama Presidental Approval Rating Below Carter


USA Today/Gallup has an interesting interactive website for tracking presidential approval ratings back to Truman, and you can do comparisons of two or more presidents. The chart above compares approval ratings for Obama and Jimmy Carter, showing that Obama is below Carter during his first six months in office. Does this mean anything? Maybe not, read the whole article below the interactive graph.

HT:
Drudge Report

Downward Sloping Demand for Unskilled Workers: Employers WILL Respond to Minimum Wage Hikes

Today the federally-mandated minimum wage increases to $7.25 per hour, a 10.7% increase from the previous $6.55 per hour. What effect will the higher wage have on employment and compensation for unskilled workers? That's a controversial issue.

About a year ago,
Angry Bear wrote: We have a long record to compare the teenage unemployment rate and the minimum wage (see graph above). If you look at the two series you see a very inconsistent record. Sometimes a rise in the minimum wage is followed by a drop in the teenage unemployment rate and sometimes it is followed by a rise in the teenage unemployment rate. Essentially, the correlation between the teenage unemployment rate and changes in the minimum wage is zero, strongly implying that there is no causal relationship.

MP: Let's assume that there is no correlation between: a) changes in the minimum wage and b) the teenage unemployment rate. That is not the same thing as saying that "the minimum wage has no negative effect on teenage employment." Here's why:

Even if the same number of teenage and unskilled workers are employed after a hike in the minimum wage, reflected in NO change in the teen jobless rate (and this is probably not accurate), there are many other adjustments that employers could and will make to offset the monetary increase in hourly labor costs:

1. Fewer Hours - unskilled workers might still be employed, but at a reduced number of hours (the BLS counts workers as "employed" even if they work 1 hour per week, so reduced hours wouldn't show up in unemployment rates). Full-time workers now become part-time workers. Overtime hours could be eliminated. Full-time restaurant workers now are forced to work a split-shift (e.g. 11 a.m. - 2 p.m. and 5 p.m. - 8 p.m.). Therefore, we would expect a negative relationship between increases in the minimum wage and HOURS WORKED, even if there was no change in either employment levels or the unemployment rate for unskilled workers.

2. Reduced Benefits - employers can easily adjust "total compensation" for unskilled workers and offset higher monetary wages by: a) no longer providing free or discount uniforms and forcing employees to now pay for uniforms, b) no longer providing free or discount food at restaurants, c) reducing or eliminating "employee discounts" on the employer's merchandise, d) eliminating paid holidays, e) eliminating scholarship programs, f) eliminating group discounts available through large companies like McDonald's, g) eliminating employer sponsored or subsidized health care benefits, h) eliminating bonuses, i) eliminating company-sponsored holiday parties, etc.

For example, see the list of benefits here for hourly McDonald's workers in Canada (I couldn't find a comparable list for the U.S., but I assume the benefits would be pretty similar here), and you'll see that there are at least ten non-monetary benefits offered to even unskilled minimum wage workers at McDonald's that could be adjusted in the face of higher monetary wage costs resulting from legislated minimum wage increases.

Bottom Line: Demand curves slope downward, and the market for unskilled workers is no exception. Employers WILL respond to increases in the minimum wage, in many ways that will NOT show up in the teenage unemployment rate, but still to the DISADVANTAGE of unskilled workers. The most likely outcome from an increase in the minimum wage to $7.25 per hour will probably be some combination of both increased unemployment for unskilled workers and reductions in compensation.

As Jeff Jacoby reminds us:

The laws of supply and demand are not optional. They weren’t enacted by Congress and Congress can’t override them. Minimum-wage laws don’t make low- and unskilled Americans more productive, more experienced, or more desirable. They merely make them more expensive - and more likely, therefore, to be unemployed.


Thursday, July 23, 2009

Florida Home Sales Increase for 10th Straight Month; June Median Home Price Highest in 2009

ORLANDO, Fla. – July 23, 2009Florida’s existing home sales rose in June – the 10th consecutive month that sales activity showed gains in the year-to-year comparison, according to the latest housing data released by the Florida Association of Realtors (FAR). Statewide sales in June also increased over the previous month’s sales level in both the existing home and existing condominium markets. And, for the second month in a row, the statewide median sales price for existing homes was higher than the previous month’s statewide median.

Existing home sales rose 28% last month with a total of 15,850 homes sold statewide compared to 12,339 homes sold in June 2008, according to FAR. Statewide existing home sales in June increased 13.8% over May’s statewide activity.

Florida’s median sales price for existing homes last month was $148,000; a year ago, it was $205,300 for a 28% decrease. However, the statewide existing home median price in June increased 2.49% over May’s median price; it also was higher than the statewide median price reported each month since the start of 2009.

MP: Sure looks like there's a solid recovery going on in Florida's real estate market.

They're Mad and Not Going to Take it Anymore

Every Chicago resident living south of Madison Street should be in an uproar! Many of our neighborhoods are suffering in well documented food deserts and increasing violence, yet we are slamming our doors to the one food retailer who is ready, willing and able to invest hundreds of millions of dollars in our poorest neighborhoods without asking for any financial incentives?

My constituents want a Walmart in our community - they spoke loud and clear in the last Aldermanic election when the unions worked tirelessly and spent hundreds of thousands of dollars to try to defeat me. Less than 14% of Chicagoans are members of organized labor -- why are we allowing a few to stall the quality of life and good health of so many Chicagoans? What a price so many will have to pay, for a long time.

If you are as mad as I am, call your Alderman and let him or her know that we're tired of others dictating what we can and can't have in our communities, and we're not going to take it anymore. We simply can no longer afford the cost.

~Chicago Alderman Howard Brookins, 21st ward, where a proposed Wal-Mart store would provide 400 new jobs.

MP: How many jobs and how many grocery stores are unions currently providing in the 21st ward? I think the answer would be "none" for both.

Business Owners Welcome Min Wage Increase; But They Don't Really Need a Law to Pay Higher Wages

BUSINESS FOR A FAIR MINIMUM WAGE (July 21, 2009, Boston, MA) -- Business owners across the nation are welcoming the July 24 increase in the federal minimum wage from $6.55 to $7.25 per hour. National business leaders and small business owners in states where workers are getting a raise say the increase will boost consumer buying power and promote economic recovery.

Nearly 1,000 business owners and executives including Costco CEO Jim Sinegal, U.S. Women’s Chamber of Commerce CEO Margot Dorfman, ABC Home CEO and 2009 Home Fashion Products Association Retailer of the Year Paulette Cole, Addus Healthcare CEO Mark Heaney, Credo Mobile President Michael Kieschnick, Business Alliance for Local Living Economies Co-Founder Doug Hammond, and small business owners from all 50 states -- have signed a statement supporting the minimum wage increase. As the Business For a Fair Minimum Wage statement points out, “Higher wages benefit business by increasing consumer purchasing power, reducing costly employee turnover, raising productivity, and improving product quality, customer satisfaction and company reputation.”

The statement supporting the minimum wage increase and a List of Signatories By State is available at http://www.businessforafairminimumwage.org/signatories.

HT: NY Times Economix

MP: Seems like the obvious challenge for these business owners (which NY Times blogger Catherine Rampell points out), some of whom probably pay employees the minimum wage: If you support higher wages for unskilled workers, why did you wait until federal law forced you to pay $7.25 per hour, and why didn't you voluntarily pay that higher wage a year ago, two years ago, or five years ago?

Housing Market: No Longer The Weakest Link

According to today's report from the National Association of Realtors:

Existing-home sales rose for the third consecutive month with inventory easing and home prices declining less sharply in June.

Highlights of the report include:

1. Following a $8,100 increase in May, the median home price increased in June by another $7,100. Median home prices have increased in 4 out of the last five months, following a string of 7 consecutive monthly price declines starting last July.

2. There have been three consecutive monthly sales increases of 110,000 (April), 60,000 (May) and 170,000 (June) for the first time in more than a year.

3. Total housing inventory in June fell 0.7% to 3.82 million existing homes available for sale, which represents a 9.4-month supply at the current sales pace, down from a 9.8-month supply in May and down from last June's inventory of 11 months. The 9.4-month supply is the lowest level in at least a year.

WSJ Article: "Economists React."

Bottom Line: When you simultaneously have increasing unit sales, rising median home prices, and declining inventory levels, you've got all of the ingredients necessary for a real estate market rebound.

100 Things Your Kids May Never Know About

Here is a list of the 100 Things Your Kids May Never Know About, including:

Having to manually unlock a car door, writing a check, that there was a time before "reality TV," using a road atlas to get from A to B, doing bank business only when the bank is open, etc.

America Runs on Small Business

Data below are based on the article "America Runs on Small Business" by Mike Clough:

1. In 2007, there were 27.2 million businesses in the United States, according to the Small Business Administration's Office of Advocacy. Census data show that there were 6.0 million firms with employees and 20.4 million without employees in 2005. Small firms with fewer than 500 employees represent 99.94% of the 27.2 million businesses (including both employers and nonemployers), as the most recent data show there were slightly more than 17,000 large businesses (500+ employees) in 2005.

2. Of the 6.022 million U.S. firms with employees in 2006, here are the breakdowns by firm size (number of employees) as a percent of the total number of firms (data here):

Firms with fewer than 500 employees (6.004 million): 99.70% of all firms

Firms with 500+ employees (18,071): 0.30% of total

Firms with fewer than 100 employees (5.91m): 98.2% of total

Firms with fewer than 20 employees (5.37m): 89.3%

Firms with fewer than 10 employees (4.73m): 78.56%

Firms with fewer than 5 employees (3.67m): 61% of all firms.

3. From the article "America Runs On Small Business":

According to Census Bureau data on high-patent industries, 98% of the companies patenting telecommunications technology employ fewer than 500 people. In the software publishing industry, 97% of the companies patenting software employ fewer than 500 people. In aerospace products and parts manufacturing, the percentage is 92%. In pharmaceuticals and medical manufacturing, it is 90%. In semiconductor machinery manufacturing, 87% of the companies that patent technology employ fewer than 500 people.

HT: Jeff Perry

Filings for Initial Unemployment Claims (Four-week Average) Fall to Six-Month Low, Lowest Since Jan.

WASHINGTON -- The number of U.S. workers filing new claims for state jobless benefits began climbing back up last week, confirming that the dramatic declines reported earlier this month weren't necessarily signs of an economic revival. Initial claims for jobless benefits rose by 30,000 to 554,000 on a seasonally adjusted basis in the week ended July 18, the Labor Department said Thursday.

The four-week average of new claims, which aims to smooth volatility in the data, fell by 19,000 to 566,000, the lowest level since Jan. 24. The tally of continuing claims -- those drawn by workers for more than one week -- fell by 88,000 during the week ended July 11 to 6,225,000, the lowest level since April 11.

MP: The good news is that the four-week average of new claims fell to a six-month low (see chart above), so there could be an economic revivial after all.

Wednesday, July 22, 2009

Car Scalping? Camaros Selling Above Sticker Price

AOL Autos -- Do you want a 2010 Chevrolet Camaro? You'd better be prepared to offer the dealer more money than the MSRP requires, and you'd better be willing to wait. Various reports have indicated that General Motors can't build the reborn bow tie pony car fast enough to quench public demand. The Camaro was originally built from 1967 to 2002; the 2010 model marks the brand's rebirth.

Dealers have already booked about 25,000 orders for the Camaro, yet only half have been delivered to date. Analysts reportedly told Bloomberg that dealers are getting $500 over sticker on average, too, and at least one dealer is guessing that he won't have a Camaro to sell in stock for at least a year.

MP: If selling a ticket to a concert or sporting event at a price above face value is "ticket scalping" and potentially either illegal or unethical, why isn't selling a Camaro above sticker price considered to be "car scalping," and potentially either illegal and/or unethical? In other words, is there really any significant difference between a concert ticket and a car that would make any material difference when one or both sell above the stated "face value" or "sticker price?"

Update: NoWhining's comment is exactly correct and worth reprinting here: "MP's intent wasn't to discourage the right of car dealers and car buyers to set the price that each is willing to accept for the transaction to take place. The post pointed to the hypocrisy of decrying Ticket Scalpers as being unethical for freely exchanging something they own and therefore have the right to sell, at a price that a buyer wishes to freely give allowing a transaction to take place. Same principle."

And see related CD post here on "coin scalping."

1982 PBS Documentary Featuring Walter Williams




Watch the first part above of Walter Williams' PBS documentary Good Intentions based on his book, The State Against Blacks (1982). The documentary was very controversial at the time it was released and led to many animosities and even threats of murder.

In Good Intentions, Dr. Williams examines the failure of the war on poverty and the devastating effect of well meaning government policies on blacks asserting that the state harms people in the U.S. more than it helps them. He shows how government anti-poverty programs have often locked people into poverty making the points that:

- being forced to attend 3rd rate public schools leave students unprepared for working life
- minimum wages prevent young people from obtaining jobs at an early age
- licensing and labor laws have had the effect of restricting entrance of blacks into the skilled trades and unions
- the welfare system creates perverse incentives for the poor to make bad choices they otherwise would not

Watch Part 2 here.

Watch Part 3 here.

HT: Drew Suder

Congressional Hearing Smackdown: Representative Ron Paul Unloads on Chairman Ben Bernanke


Detroit Update: No Major Grocery Stores, Bankrupt School System, $11,000 Average Priced Homes

1. DETROIT (CNNMoney.com) -- Detroit is one of America's largest cities, but there isn't a single grocery chain store within the city limits. Spurned by national retailers, Detroit's nearly 1 million residents instead rely on independent stores run by local entrepreneurs for their most basic needs. But for those entrepreneurs, staying in business can be a struggle.

2. DETROIT (WSJ) -- Detroit's public-school system, beset by massive deficits and widespread corruption, is on the brink of following local icons GM and Chrysler into bankruptcy court.

Even after millions of dollars in budget cuts in the spring, including 29 school closings and thousands of layoffs, the district started the fiscal year this month with a $259 million deficit. To meet payroll and pension obligations, the district has had to seek advances on state funding and other stopgap measures.

DPS's enrollment -- which largely determines its allotment of state funding -- is about half what it was in 2001, as suburban districts and charter schools have siphoned off tens of thousands of students. By this fall, DPS will have 172 schools open and more than 100 vacant. Meanwhile, the high-school-graduation rate is 58%; coupled with the enrollment losses, only about one-quarter of students who start high school in the district graduate from it in four years, according to outside estimates.

3. According to the Michigan Board of Realtors, the average price home in Detroit through June of this year fell to $11,268, a 42% drop from last year's average price of $19,448 during the same period.

Emerging Markets Rally, MSCI Index Is Close to a 10-Month High

The MSCI Barra Emerging Markets Index ended yesterday at close to a 10-month high of 810.463, the highest closing value for the Emerging Market Index since the 823.694 close on September 26, 2008 (see chart above, click to enlarge). From the early March 2 low of 475.080 the MSCI Emerging Markets Index has increased by 70.5%.

Tuesday, July 21, 2009

World Stock Mkt. Rally, MSCI Index Hits 8 Mo. High

The MSCI Barra World Stock Market Index reached a new 8-month high today of 1,004.783 points, closing at the highest level since November 4, 2008 (see chart above). From its early March low, the World Stock Market Index has increased 46%. Leading the world stock market rally are the emerging markets, which are up by more than 60% since early March.

Bidding Wars Break Out On Low-Priced FL Homes

FORT LAUDERDALE, Fla. – July 21, 2009Bidding wars are returning to South Florida’s housing market, as investors and first-time buyers compete for homes and condominiums listed at $200,000 or less. The race for properties is reminiscent of the boom years from 2000 to 2005, when multiple offers on all types of dwellings helped push prices to record highs.

Back then, a dearth of properties for sale had buyers rushing to scoop up anything they could find, for fear that prices would keep rising. Now, frustrated with a bloated inventory of foreclosed homes in disrepair, buyers go to great lengths when they spot a house or condo in pristine condition.

“When they find a good listing, people are pouncing,” said Terry Story, a real estate agent for Coldwell Banker in Broward and Palm Beach counties.

Agents say the heated competition has been building in recent months, a result of low mortgage rates and the $8,000 tax credit for first-time buyers that expires Nov. 30. Steady sales increases during the past year gradually have worked off the inventory of available homes. Real estate agents are convinced that the overall market has hit bottom or is close to one.

Median Home Prices in Houston Hit Record High

HOUSTON — (July 21, 2009)Sales of single-family homes for the greater Houston area continued to improve in June, with the highest volume recorded since August 2008 and the highest median price in history. This comes despite a year-over-year decline in overall property sales of 15.0 percent and 13.5 percent for single-family homes, according to new monthly data compiled by the Houston Association of REALTORS® (HAR).

At $164,500, the June single-family home median price – the figure at which half of the homes sold for more and half sold for less – rose 2.8% from one year earlier to reach an all-time high. The average price of a single-family home in Houston dipped 2.4% last month to $221,783 compared to June 2008. That represents the highest average price since August 2008.


Foreclosure property sales showed further decline, as they have each month this year, making up 16.8% of all single-family home sales in the Houston area in June. That compares to 34% percent in January, 28% in February, 24.5% in March, 23.6% in April and 19.9% in May. The median price of June foreclosure sales reported in the Multiple Listing Service fell 3% from $90,000 to $87,000 on a year-over-year basis.

Houston Chronicle story here, "Houston's median home price hit an all-time high last month, as the market was boosted by seasonal buying, low interest rates and a tax incentive to spur sales."

Why America Shouldn't Buy "Buy American"



Is your iPod unpatriotic?

Its 451 parts are made in dozens of nations, and creating the little doodads employs thousands of foreigners. Final assembly is done in China—a country that right-wingers and left-wingers alike fear is an economic threat to the U.S.

As the recession worsens, maybe patriotic Americans should be smashing foreign-made iPods in protest. Or at least hiring bikini-clad American women to do the job, which is exactly what Reason.tv did. Our patriotic, sledgehammer-wielding bikini bandits headed to California’s Venice Beach to smash some foreign-made iPods to make a political statement about saving American jobs.

Watch the video and find out more
here at Reason.tv.

See related CD post "iPod Teardown: Who Really Makes It?" from June 2007.


Despite Troubles In the U.S., GM Thrives Abroad; Sales in China Increase by 38%

National Public Radio -- General Motors, once the world's largest automaker, has had a rough few months. In June, the company filed for bankruptcy. Last week, as part of a massive restructuring plan, 60 percent of the company's ownership shifted to U.S. taxpayers.

However, the news isn't all doom and gloom for the U.S. auto giant. Many of the company's international operations are posting strong gains. In China, GM's second-largest market, sales jumped to 814,442 units in the first half of 2009 from 590,132 during the same period in 2008 — an increase of 38% (see chart above). And in Latin America, seven countries set GM sales records in 2008.

MP: In the first half of 2008, GM sold almost three times (2.7X) as many cars in the U.S. (1,589,000) as in China (590,132), and this year vehicle sales are almost the same in both countries: 947,518 in the U.S. (data here for U.S.) compared to 814,442 in China.

For GM's sake, let's hope they don't start a "Buy China" campaign, or start erecting signs saying "Parking of U.S. vehicles strictly prohibited and will be towed at owner's expense."

Markets in Everything: EKGs, MRIs on a Blackberry

Medical data delivered to the Palm of your hand, Anytime... Anywhere....


The mVisum Medical Communication System is a communication tool that allows medical professionals to securely receive, review and respond to patient data recorded at the point of care. Information is transmitted via secure HIPAA compliant internet serversthen transmitted through mobile technology to the required physicians’handheld smartphone.


Sent data can include: EKGs, DICOM Images, Cine Loops, X-Rays, CT Scans, and MRIs.

Traditional information such as vital signs and other textual informationcan also be included in the delivered message thus providing a complete picture of patient condition.

Chicago Fed Index Increases for 5th Straight Month


CHICAGO FED -- The Chicago Fed National Activity Index shows that economic activity improved in June - the index was –1.80 in June, up from –2.30 in May. The three-month moving average, CFNAI-MA3, was –2.12 in June, up from –2.65 in the previous month (see top chart above).

June’s CFNAI-MA3 suggests that growth in national economic activity was well below its historical trend. The increase in the index was primarily due to the production and income category of indicators. This category made a smaller negative contribution to the index in June, –0.32, compared with its contribution in May, –0.70. The smaller negative contribution was driven by the fact that total industrial production decreased 0.4 percent in June after declining 1.2 percent in May.

MP: The Chicago Fed National Activity Index (CFNAI-MA3) has increased in each of the last five months, the first five consecutive monthly increase since the end of the 2001 recession, see bottom chart above.

Now Here Is a Real Housing Crisis; And It Probably Won't Be Getting Better Anytime Soon

Forbidden to buy and sell houses, Cubans rely on informal exchange to look for a better location or something in a better condition. The bureaucratic machinery to manage these bartered trades is complicated, so many pay a "stimulus" to the bureaucrats at the Housing Institute to help the process move more quickly. There are specialists in finding each family what they need, called "exchangers," and it's an occupation at the edges of the law.

The illusion that Raul Castro would allow a real estate market has been vanishing after a year of the mandate. The Cuban leaders know that if they authorize it, citizens will redistribute themselves in a short time. Those who have convertible money will move to the best neighborhoods and those who earn only Cuban pesos will live on the periphery. The fact that there are not rich areas and poor areas is not because, as some believe, we've achieved social justice, but rather the inability to buy and sell houses. What they haven't been able to face is the people's creativity, which disguises the frequent acts of buying and selling as simple exchanges.

~Yoani Sanchez, Cuban blogger

Update: See related NY Times article "With a Whisper, Cuba’s Housing Market Booms" (January 28, 2008), thanks to Colin for the pointer

Monday, July 20, 2009

Traffic Volume Increases For Second Straight Month, For the First Time in Two Years

The Federal Highway Administration reported today that travel on all roads and streets increased by by +0.1% (0.2 billion vehicle miles) in May 2009 compared to May 2008. This was the second consecutive monthly percentage increase in traffic volume compared to the same month in the previous year, following 17 consecutive monthly percentage decreases (see graph above) starting back in November 2007. Further, the monthly increases in both April and May is the first time in almost two years that traffic volume has increased two months in a row.

Green shoot? Mustard seed?

Leading Economic Index Signals End of Recession

NEW YORK (AP) -- More plans to build homes, higher stock prices and fewer people filing first-time claims for jobless aid sent a private-sector forecast of U.S. economic activity higher than expected in June. It was the third straight monthly increase for the New York-based Conference Board's index of leading economic indicators, and another sign pointing toward the recession ending later this year.

The index is meant to project economic activity in the next three to six months. If these conditions continue, "expect a slow recovery this autumn," said Conference Board economist Ken Goldstein.

The Conference Board's leading indicators index bottomed in March after peaking in July 2007 (see chart above). The decline accelerated last fall after investment bank Lehman Brothers collapsed and credit markets froze.

"We're now getting data which points to stabilization," said Josh Shapiro, chief U.S. economist at research firm MFR Inc. "The overall signal they're sending is the slide in economic activity is poised to end. The jury is still very much out in terms of what happens after that."

MP: The three consecutive increases in the second quarter (April, May and June) of 2009 is the first time in four years of three straight monthly increases in the Index of Leading Economic Indicators. And the 3.06% three-month increase in the Leading Index from March (97.9) to June (100.9) 2009 is the largest percentage increase for a three-month period since the 3.44% increase from October 2001 to January 2002 at the tail end of the 2001 recession. There was a similar 2.65% three-month increase from April to July of 1991 that signalled the end of the 1990-1991 recession. It sure looks like the Leading Economic Index is suggesting that the recession is over.

Do As I Say/Legislate, Not As I Do

WALL STREET JOURNAL -- Last Tuesday, the Senate health committee voted 12-11 in favor of a two-page amendment courtesy of Republican Tom Coburn that would require all Members and their staffs to enroll in any new government-run health plan. Yet all Democrats -- with the exceptions of acting chairman Chris Dodd, Barbara Mikulski and Ted Kennedy via proxy -- voted nay.

In other words, Sherrod Brown and Sheldon Whitehouse won't themselves join a plan that "will offer benefits that are as good as those available through private insurance plans -- or better," as the Ohio and Rhode Island liberals put it in a recent op-ed. And even a self-described socialist like Vermont's Bernie Sanders, who supports a government-only system, wouldn't sign himself up.

Of course, they also qualify now for generous Congressional coverage. Most Americans won't have the same choice.

Quote of the Day II: Government is Not Compassion

The single most damaging error of the modern age is the misperception of government as an agency of compassion. As a replacement for the "divine right of kings," this misperception has, for those in power, been an astonishing success. For the rest of mankind, it has frequently been a disaster beyond imagining.

Government is nothing more than structured, widespread coercion, and the idea that it can implement compassion for us by force is simply a vile and cunning lie. It is cunning because people are primed and willing, even desperate, to believe it. It is vile because government allows, facilitates, and encourages mass murder, widespread torture, needless famine, and every form of tyranny. No other tool than coercive government does this.

~Glen Allport (Thanks to an anonymous commenter.)

Taxes, Trade and Healthcare: Europe vs. USA

1. WALL STREET JOURNAL -- On present trends, most of Europe will soon have lower income tax rates than most of America. And now the European Union is stealing another competitive march on Washington, this time on a free trade deal with the world's 13th largest economy, fast-growing South Korea. Last week Brussels and Seoul finished the outline of a new trade agreement, and the two sides will now write up the technical language to codify it. As for the pending U.S.-Korea trade agreement, Congress has done . . . nothing.

2. AMERICAN THINKER -- Ironically, as we're moving toward having our government completely control health care, countries with government-run health care are moving in the opposite direction. Almost every European country has introduced market reforms to reduce health costs and increase the availability and quality of care. The United Kingdom has proposed a pilot program giving patients money to purchase health care. Why is this being done? According to Alan Johnson, Secretary for Health, personal health budgets "will give more power to patients and drive up the quality of care" (The Guardian, 1/17/09). It's a lesson we all should learn before considering how to improve our health care system.

Quote of the Day: Mark Twain

Don't go around saying the world owes you a living. The world owes you nothing. It was here first.

~Mark Twain


Sunday, July 19, 2009

NY Fed Model: No Chance of Recession in 2010, Economic Recovery Is Probably Already Underway

A few weeks ago, the New York Fed just released its latest "Probability of U.S. Recession Predicted by Treasury Spread," with data through June 2009, and the Fed's recession probability forecast through June 2010 (see chart above, click to enlarge). The NY Fed's model uses the spread between 10-year and 3-month Treasury rates (3.54% spread in June, the highest since May 2004) to calculate the probability of a recession in the United States twelve months ahead.

The
Fed's data show that the recession probability peaked during the October 2007 to April 2008 period at around 35-40%, and has been declining since then in almost every month (see chart above and chart below). For June 2009, the recession probability is only 1.27% and by June 2010 the recession probability is only .06%, the lowest level since May 2005.

Further, the Treasury spread has been above 2% for the last 15 months, a pattern consistent with the economic recoveries following the last six recessions (see chart above). The pattern of the recession probability index so far this year (going below double-digits and declining monthly) is very similar to the pattern starting in March 2002 that signalled the end of the 2001 recession (see chart below).


Bottom Line: Looking forward to next year, the probability that the recession will continue into 2010 is close to zero. Further, the New York Fed's Treasury spread model suggests that an economic recovery is probably already underway.

Did Global Warming Cause the Global Slowdown?

Hot Climates May Create Sluggish Economies

NATIONAL PUBLIC RADIO -- New research suggests that higher temperatures can have a damaging effect on the economies of poor countries. The study, by economists at the Massachusetts Institute of Technology, found that in years with higher temperatures, poor countries experienced significantly slower economic growth.

Ben Olken, an associate professor of economics at MIT, and his colleagues wanted to examine the temperature connection more closely. They decided that instead of comparing one country to another, they would look within countries. Did a hot year mean slower economic growth? The answer appears to be yes. They found that for poor countries, an increase in annual average temperature by 1 degree centigrade corresponded to a 1.1% drop in per-capita gross domestic product.

It's "a huge effect," Olken says. The difference between a country that's in recession and one that is buzzing along amounts to a 3% shift in GDP. "So, 1 degree explaining a 1.1% shift is a huge effect of temperature."

Markets In Everything: Photos of Frost on a MN Window in Jan. When It's 30 Degrees Below Zero

Here's the window of an old house in South Minneapolis at dawn in January 2009 when it was 35 degrees below zero:
Here are some close-up photos of the frost on the window highlighting the natural beauty of early morning sunlight streaming through the frost, captured from inside the house with a standard digital camera using the zoom feature, by Minneapolis photographer and musician Marcus Wise:



For more information go to the Dew Divine website.

Should The Official Poverty Guidelines Be Revised?


According to the U.S. Census Bureau:

Poverty thresholds were originally derived in 1963-1964, using: a) U.S. Department of Agriculture food budgets designed for families under economic stress, and b) Data about what portion of their income families spent on food. Poverty thresholds are updated annually for inflation using the Consumer Price Index for All Urban Consumers (CPI-U).

On the Adam Smith Institute blog, Tim Worstall writes:

There's a technical point that needs to be made about U.S. poverty figures. To remind you, the U.S. measures poverty entirely differently from every other nation: they took the necessary food budget in the early 1960s, tripled it and said that this was the poverty level (everyone else is using 60% of median household income) and they've simply updated it for inflation ever since.

What they haven't done is update it for the changes in portions of spending on different goods and services. We can thus say that the position of the U.S. poor, those on or below this poverty level (which, just to remind everyone again, is before the impact of poverty alleviation measures, everyone else counts after whatever we do to reduce poverty), is rather better than the simple stated figures suggest. For food has declined massively in price and thus that inflation adjusted standard goes further than it used to.

MP: The top chart above shows graphically that when the official U.S. poverty guidelines were established in 1963, total spending on food (at home and away from home) as a share of disposable income was 16%, almost double the 9.6% level in 2008 (data here). And for food consumed at home, the share of income spent on food in 1963 (12.5%) was more than double the share of income for food at home in 2008 (5.6%).


In that case, both the number of Americans officially below the poverty level and the percent of Americans living in poverty (see graph below) are overstated, since the official poverty thresholds apparently do not take into account the significant increases over time in food affordability.

Perhaps we have won the "War on Poverty," but not through massive government spending on welfare programs, but through technological improvements and increases in farm productivity leading to lower food prices?


Campus Hostility Towards Political Diversity at UO

The University of Oregon (UO), where I study journalism, invested millions annually in a diversity program that explicitly included "political affiliation" as a component. Yet, out of the 111 registered Oregon voters in the departments of journalism, law, political science, economics, and sociology, there were only two registered Republicans.

A number of conservative students told me they felt Republican ideas were frequently caricatured and rarely presented fairly. Did the dearth of conservative professors on campus and apparent marginalization of ideas on the right belie the university's commitment to providing a marketplace of ideas?

In my column, published in the campus newspaper The Oregon Daily Emerald June 1, I suggested that such a disparity hurt UO. I argued that the lifeblood of higher education was subjecting students to diverse viewpoints and the university needed to work on attracting more conservative professors.

I also suggested that students working on right-leaning ideas may have difficulty finding faculty mentors. I couldn't imagine, for instance, that journalism that supported the Iraq war or gun rights would be met with much enthusiasm.

What I didn't realize is that journalism that examined the dominance of liberal ideas on campus would be addressed with hostility.

~From the Christian Science Monitor commentary, "Nearly All My Professors Are Democrats. Isn't That A Problem?"

From the original article in the UO student newspaper:

There needs to be movement - along with intellectual consistency - on the issue of political diversity by faculty and administrators. If queried, most professors would likely agree that a university with only 2-percent Democrats would be inadequate. However, when the discrepancy is in their favor, they appear uninspired to act.

As a student, I want a campus full of professors not only from different ethnic and racial backgrounds, but different political backgrounds as well. I want Democrats, Republicans, Libertarians, Marxists, Independents and anyone with a halfway decent idea that doesn't incorporate hate. That's what true diversity means to me. I want that more than free football tickets, a new basketball arena or pretty much anything else a University could offer. In exchange for paying $20,000 in tuition a year, I think I deserve it. Don't you?


HT: Mike Munger

Volatility, Financial Conditions Returning to Normal

From Wikipedia,

VIX is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility of S&P 500 index options. A high value corresponds to a more volatile market and therefore more costly options, which can be used to defray risk from volatility. If investors see high risks of a change in prices, they will require a greater premium to insure against such a change by selling options. Often referred to as the fear index, it represents one measure of the market's expectation of volatility over the next 30 day period.

MP: The chart above displays the daily history of the VIX back to July 1, 2008 (data here), showing that the index of market volatility fell below 25% on Friday for the first time since early September 2008, and reached a fresh 10-month low.

The chart below shows the Bloomberg U.S. Financial Conditions Index, which "combines yield spreads and indices from the Money Markets, Equity Markets, and Bond Markets into a normalized index. The values of this index are z-scores, which represent the number of standard deviations that current financial conditions lie above or below the average of the 1992-June 2008 period."

The chart below displays the Financial Conditions Index daily from May 1, 2008 through Friday (July 17, 2009), and shows that the index is approaching the same levels as May 2008. Based on this measure, financial conditions in the U.S. were at their worst and bottomed in October 2008, and have been improving steadily for the last 9 months. We're now getting back the same financial conditions that prevailed more than a year ago.