Saturday, August 08, 2009

The Great Mancession Continues

The recession might be winding down, but the "mancession" continues. The chart above shows the difference between monthly unemployment rates for men and women, and the unprecedented gap isn't getting better. For July, the unemployment rate for all men was 10.5%, a decrease of .10% from the 10.6% rate in June, whereas the jobless rate for women fell by .20% to 8.1% in July from 8.3% in June, and the male-female jobless rate gap increased to 2.4% in July from 2.3% in June (see graph above, data here).

The male unemployment rate has exceeded the female jobless rate for each of the last 32 months, going back to December 2006, and is the second longest consecutive monthly period of male unemployment exceeding female unemployment in BLS history (back to WWII). The only longer period of a positive male-female jobless rate gap was the 45 month period from June 1990 to February 1994, but the gap in that period was mostly below 1%, and the gap during the "Great Mancession" has been above 1% and even above 2% for much of the current period.

Originally posted at Carpe Diem.

Lesson From a Parrot: Buy and Hold Blue Chips

SKY NEWS -- A five-year-old female parrot called Strawberry has proved to be smarter than human investors in a stock investment contest. The parrot from Papua New Guinea finished third in the six-week challenge, said Paxnet, an online stock market information provider. Strawberry competed with 10 stock investors in South Korea.

Human investors picked any stocks they wanted but the parrot, using its beak, made random choices from balls representing 30 blue chips, including Samsung Electronics. "The outcome of our contest was amazing. Strawberry stood third with her investment return standing at 13.7%," Paxnet general manager Chung Yeon-Dae said.

Human investors averaged a 4.6% loss, with only 2 beating the parrot - one by 64.4% and one by 21.4%. The human investors mostly chose to trade shares of small and medium-sized firms. They each made an average of 190 trades over the 6 weeks. Organizers gave the parrot 7 chances to pick shares over the same period. "Our experiment proved that making long-term investments in blue chips is safe and effective," Chung said.

Originally posted at Carpe Diem.

Adjusted Jobless Claims Suggest Recession is Over

With July employment data now available, the graph above of Initial Jobless Claims as a Percent of the Labor Force (1974-2009) has been updated to reflect the July labor force of 154,504,000 and the July average for initial unemployment claims (574,900 for the 4-week moving weekly average). This measure of initial jobless claims, adjusted for the size of the U.S. labor force, shows that jobless claims peaked during this recession above the levels of the last two recessions (1990-1991 and 2001), but were never anywhere close the levels of the previous three recessions in the mid-1970s and early 1980s (see chart above). In other words, this recession was worse than the last two, but not nearly as severe as the previous three, using this adjusted measure of jobless claims.

Additionally, the sharp .05% reduction in adjusted jobless claims from the March 2009 high of 0.4226% to 0.3721% in July follows the same pattern of .05% reductions in adjusted claims at the end of the 2001 recession (a .052% reduction from .3318% in October 2001 to February 2002) and at the end of the 1990-1991 recession (a .058% reduction from .3915% in March 1991 to .3327% in July 1991).

See related post by
Scott Grannis here, who reports that this type of reduction in job losses as a percent of the workforce suggest that the recession ended in June.

Originally posted at Carpe Diem.

Markets In Everything: Expensive Pet Products

Super Dog House with Plasma TV and Spa - $410,825

From 25% to 90% in 160 Days; Intrade Odds of Positive Economic Growth in the Third Quarter

Back in early March, the Intrade odds of positive economic growth in the U.S. for the third quarter was only 25%. Those odds of positive real GDP growth in Q3 have recently risen to 90%, as many economic indicators now point to an economic recovery and positive growth this quarter (July, Aug., Sept.), see chart above (Intrade link here).

Originally posted at Carpe Diem.

Friday, August 07, 2009

Reality Check: Trucks Are The Most Popular "Cash for Clunker" Vehicle and Some Only Get 14 mpg!

NEW YORK ( -- What are people trading their clunkers in for? It depends on who you ask. The government's results showed small cars as the top choice for shoppers looking for Cash for Clunker deals. But an independent analysis by disputed those results, and showed that two full-size trucks and a small crossover SUV were actually among the top-ten buys.

The discrepancy is a result of the methods used. uses traditional sales measurements, tallying sales by make and model. The government uses a more arcane measurement method that subdivides models according to engine and transmission types, counting them as separate models.

Sales of truck models would tend to be heavily diluted using the government's method because practically each version counts as a different vehicle. The difference in tallying methods would not affect the overall totals of trucks, as opposed to cars purchased under the program, only the sales rankings of individual models.

Sales of GM's Silverado truck, under the government's counting method, were divided among five different versions. So were the Ford F-150s. If the different versions of these trucks were considered the same vehicle, as auto sales are normally reported, sales of these trucks would look much heftier.

MP: The Ford F-150 (pictured above) gets only
about 14 mpg. and the Chevy Silverado gets the same 14 mpg.

Originally posted at Carpe Diem.

For Acceptance to Med School, Color Counts; A Lot

The chart above shows the acceptance rates for whites, Asians and blacks to U.S. medical schools from 2005-2007, based on different combinations of undergraduate grade point averages (GPA) and scores on the Medical College Admission Test (MCAT), using data from the Association of American Medical Colleges (full data available here).

In all cases above, being black significantly increases the chances of being accepted to medical school compared to being Asian or white, when all three groups of applicants have the same GPA and test scores. In some cases, e.g. having a GPA between 2.80-2.99 and an MCAT score between 27-29, being black increases the chances of being accepted by a factor of 6.35 vs. being Asian and a factor of 4.17 vs. being white.
(Note: There were not enough Hispanic applicants to include their acceptance rates in the table.)

Originally posted at Carpe Diem.

15 Years Later, The Healthcare Issues Are the Same

Bellow are some excerpts from the excellent article: "Health Care Reform: A Free Market Perspective," co-authored fifteen years ago (1994) by Harvard's Dean of the Medical School, Dr. Jeffrey Flier (MD), and featured yesterday on Greg Mankiw's blog:

Introduction: Problems with inflation of medical costs and increased numbers of uninsured individuals have resulted in widespread calls for reform of the U.S. health care system.
Proposed reforms have generally emphasized increased regulation of the medical and insurance industries, but disputes over the cost and consequences of these proposal has so far prevented legislation from being passed. This paper is presented from an alternative perspective that views the current symptoms on cost and access as the results of decades of flawed public policy, rather than government inaction (bold added). We trace the origins of dysfunctional health care markets in prior public policy, and outline an approach to healing the health care system based on a new dedication to free market principles and individual choice.

Licensure, supported as a means to ensure physician competence and prevent fraud, has been an effective means for the profession to restrict its numbers and limit competition from alternative, often lower cost providers. Certification might work equally well, while authorizing increased services from an array or non-MD practitioners.

The health policy community has paid insufficient attention to the role of past policies in accelerating costs and diminishing access to insurance and has been too quick to recommend solutions based on optimistic projections of new regulatory efforts. Reform and aid to those in need based on free market principals are unique in recognizing the values of diversity and the desirability of choice in the highly personal realm of medical decision making. Freed of perverse incentives and regulatory obstacles, including those that would be exacerbated by much of the recently proposed reform legislation, markets in medicine, as in other areas, will outperform politics in making desirable health care available to Americans.

MP: I especially liked the section on licensure, a very refreshing viewpoint, especially coming from an MD. And speaking of allowing increased services from non-MD practitioners, I became aware yesterday that there is a movement in the field of dentistry to allow lower-cost dental hygienists to offer increased dental services like filling cavities. I think the
American Dental Hygienists' Association is pushing for increased services for hygienists, but they are up against a very powerful trade group: the American Dental Association, which I think is resisting the change. I'll find out more and post about this later. If anybody has information about this issue, please let me know.

Originally posted at Carpe Diem.

Private, Charity Clinics Offer Healthcare Solution

As a follow-up to my recent post on The Shriners Hospital for Children, which provides free medical care for children, and is an example of a privately-funded, non-government, charitable solution to rising health care costs, there was an excellent commentary in Tuesday's Atlanta Journal-Constitution "Charity Clinics Can Be Reform Model," by Ross Mason, president of the board of directors of Georgia Free Clinic Network. Excerpts below:

At charity clinics throughout Georgia, patients with no health insurance or who don’t qualify for government programs jam telephone lines to obtain an appointment. If the clinic doesn’t take appointments, patients line up at the doors and wait for hours for a chance to see a doctor, nurse or dentist.

In 2008, Georgia’s 100-plus charity clinics, such as Athens’ Mercy Health Center, cared for more than 175,000 patients. This year, some clinics are seeing as much as a 300 percent increase in patients due to the state’s record unemployment rate. Still, many get turned away.

Community-based clinics use volunteers to provide care and charge little to nothing for patients who have no other means of accessing health care. Georgia’s charity clinics provide between $200 million and $400 million annually in uncompensated care, according to a 2005 state auditor’s report. That amount will likely be even greater this year because of the rising number of unemployed.

Washington politicians should recognize the important and mostly invisible role these clinics play and examine how they save taxpayer money. In 2008, the nation’s 1,200 charity clinics served 4 million patients. That’s 4 million patients, often without the ability to pay, who didn’t use the government as a source for their health care. These facts should prompt President Barack Obama to give charity clinics a seat at the table to help devise a health care strategy for the 21st century.

Until we find solutions to get more Americans covered by health insurance, the federal government needs to encourage the creation and stabilization of additional charity clinics run by the private sector and staffed by physicians, nurses and dentists who donate their time. It’s a cost-effective solution that fits into our new president’s challenge to return to a spirit of giving.


Originally posted at Carpe Diem.

Markets In Everything: iPhone Check Deposit App

San Antonio Express News -- Need to deposit a check into your USAA Federal Savings Bank account? USAA has an app for that. The San Antonio-based company is testing the feature for its iPhone application among its employees and plans to release it to the public soon.

With the application, USAA members simply sign the back of any check and then use their iPhone camera to take a picture of the check's front side and back side. They enter some information into the application — including the amount and where it's to be deposited — and then the funds are credited to the designated account.

Most checks will get immediate availability of funds. USAA uses an algorithm that reads details on a check to make sure it's not phony.

Originally posted at Carpe Diem.


WSJ -- The consequences of misunderstanding the texting lingo can be mortifying. Cassandra McSparin, 23, of Jim Thorpe, Pa., knew a woman whose friend’s mother had died. The woman texted her friend: “I’m so sorry to hear about your mother passing away. LOL. Let me know if there’s anything I can do.” It turns out she thought LOL meant “Lots of love.”


Associated Press -- An emergency call center in the basement of the county jail in Waterloo, Iowa, became the first in the country to accept text messages sent to "911," starting Wednesday. Call centers around the country are looking at following in its footsteps, as phone calls are now just one of many things phones can do.

Black Hawk County police chief Thomas Jennings said 911 texting should be of particular help to the county's deaf and hard-of-hearing residents, who have had to rely on more cumbersome methods to reach 911. There have also been several cases around the country of kidnap victims summoning help by surreptitiously texting friends or relatives, who then called 911. With direct texting to 911, they should be able to get help faster.


Originally posted at Carpe Diem.

Cartoon of the Day

Cartoon by Mallard Filmore, thanks to Tim Wise.

Originally posted at Carpe Diem

7th Monthly Increase in Used Vehicle Price Index

MANHEIM CONSULTING -- Wholesale used vehicle prices (seasonally-adjusted basis) rose for the seventh consecutive month in July. The Manheim Used Vehicle Value Index for July was 115.4, an increase of 5.0% from a year ago.

Although cash for clunkers (C4C) and the resulting revitalization of new vehicle sales stole all of the headlines in July, used vehicle retail activity remained solid and higher residuals and recovery rates boosted the earnings of lenders and lessors. And, despite having to pay higher prices for inventory, dealers have seen an improvement in used vehicle retail gross margins.

From a previous Manheim Consulting report:

Some analysts have suggested that the rapid rise in wholesale used vehicle pricing is a precursor to an improvement in new vehicle sales and may even point to a recovery in the overall economy.

MP: The 1.3-point July increase in the Manheim Used Vehicle Value Index marked the seventh consecutive monthly increase (every month this year), following decreases in 10 out of the previous 14 months (from October 2007 to December 2008). The year-to-year increases in May (1.49%), June (5.84%) and July (5%) for the index follow 17 consecutive months of consecutive year-to-year decreases (Nov. 2007 to April 2009). Further, the July 2009 reading of 115.4 was the highest since September 2007, so the index is now back to a pre-recession level.

Originally posted at Carpe Diem.

Thursday, August 06, 2009

Health Care Conflation and Market Solutions

Wikipedia: Conflation occurs when the identities of two or more individuals, concepts, or places, sharing some characteristics of one another, become confused until there seems to be only a single identity — the differences appear to become lost.

In all of the ongoing debates on health care, medical costs, the uninsured, etc., it seems that we have conflated two very separate issues: a) routine health care that is generally low cost and affordable, and b) serious, catastrophic health problems, which could be potentially very costly.

Routine health care is conveniently provided by retail health clinics at affordable prices at more than 1,000 locations around the country in stores like Target, Wal-Mart, Publix, Meijers, Walgreens, etc. that are open 7 days a week. As I have written about before on CD, these competitively-priced clinics provide sports, camp and school physicals for only $29. Further, Wal-Mart and its many competitors provide generic prescriptions for $4 per month. For these types of prescription costs, and routine "health care," I don't think anybody would argue that the costs are unaffordable, and it would be hard to argue that increased government intervention could possible make these routine services more affordable.

But what about very expensive, catastrophic, and/or life-threatening illnesses that might require expensive medication? We certainly can't rely on Target and Wal-Mart for serious medical problems like spinal cord injury rehabilitation, burn care, cleft lip and palate care, medical and rehabilitative services for congenital deformities, problems resulting from orthopaedic injuries, and diseases of the musculoskeletal system. And what if children have these medical problems, they certainly don't have the financial resources to pay for these expensive medical procedures. Does that not then justify government intervention and government insurance for these extremely expensive, catastrophic medical treatments, some of which are for life-threatening illnesses?

Well, wait a minute. There currently is a private solution - the
25 Shriners Hospitals for Children around the country that provide free health care for these catastrophic illnesses and conditions. From The Shriners Hospital for Children website:

Every year, the Shriners Hospitals for Children provides care for thousands of kids with orthopaedic conditions, burns, spinal cord injuries, and cleft lip and palate, in a family-centered environment at no charge. It's how Shriners Hospitals has been helping kids defy the odds since 1922.

Bottom Line: There are private, market-based solutions to both routine health care and for even catastrophic, life-threatening conditions.

Exhibit A: Target and Wal-Mart retail health clinics

Exhibit B: The Shriners Hospitals for Children

Originally posted at Carpe Diem.

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

A few days ago, the New York Fed released its latest "Probability of U.S. Recession Predicted by Treasury Spread," with data through July 2009, and the Fed's recession probability forecast through July 2010 (see chart above, click to enlarge). The NY Fed's model uses the spread between 10-year and 3-month Treasury rates (3.38% spread in June, the second 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 July 2009, the recession probability is only 0.97% and by July 2010 the recession probability is only .09%, the second lowest level since May 2005.

Further, the Treasury spread has been above 2% for the last 17 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).

Originally posted at Carpe Diem.

And Just To Make It Interesting......

NEW YORK (Dow Jones) --Twitter Inc., the fast-growing microblogging service, was inaccessible Thursday morning, struck by a "denial-of-service" attack, the company said on its status blog. "We are defending against a denial-of-service attack, and will update status again shortly," the company said in a post shortly before 11 a.m.

In an update to the blog post, Twitter said the site is back online, but that the company is "continuing to defend against and recover from this attack." The site will remain slow for users attempting to access it while Twitter attempts to recover. Denial-of-service attacks are a common weapon employed by cyber criminals (see cartoon above) to disrupt the working of Web sites. Perpetrators enlist millions of computers to attempt to access a particular site. The site cannot handle the massive increase in traffic, and is rendered inaccessible.

While disruptive and hard to trace, this type of cyber attack is considered by experts to be a relatively unsophisticated technique. The attack itself doesn't attempt to infiltrate the internal operations of a company's computer infrastructure. It simply renders its Web site inactive.

The attack on Twitter represents the latest in a string of denial-of-service attacks against several high-profile Web sites. In early July, a number of U.S. government Web sites, as well as the Web site of the New York Stock Exchange and several South Korean sites, were the target of similar actions.

Originally posted at Carpe Diem.

Markets in Everything: Email From the Grave

The Last Messages Club sends your personal thoughts and essential data by email to your friends and loved ones after you die.
  • Leave messages for your loved ones
  • Manage your Digital Will
  • Make things easier for those you leave behind
  • Reveal some information not possible before
  • Send a birthday wish or anniversary message
  • Or many, many other possible things only you would know

    Originally posted at Carpe Diem.

Why Can't Health Insurance Be More Like Automobile Insurance?

If insurance paid for every oil change and engine failure, we'd have an autocare crisis, too.

~Zach Krajacic, writing in today's
Christian Science Monitor

Originally posted at Carpe Diem.

UK Surgery 'Tourists' Avoid NHS Queues

UK Press Association -- Four out of 10 Britons going abroad for surgery do so to avoid NHS waiting lists at home, a survey has revealed. This was the top reason for seeking treatment, including dentistry and eye laser surgery, while 30% went overseas because it was cheaper.

Originally posted at Carpe Diem.

Jobless Claims Fall -103,500 in 4 Months; It's Looking A Lot Like The End of a Recession

WASHINGTON/WSJ -- The number of U.S. workers filing new claims for state jobless benefits fell last week, providing another glimmer of hope that the economy may be on the road to recovery. Initial claims for jobless benefits fell by 38,000 to 550,000 on a seasonally adjusted basis in the week ended Aug. 1, the Labor Department said in its weekly report Thursday. The four-week average of new claims, which aims to smooth volatility in the data, fell by 4,750 to 555,250, the lowest level since Jan. 24 (see top chart above).

MP: The bottom chart above shows the drop of -94,000 jobless claims (4-week moving average) in the six month period between October 2001 and March 2002 that signalled the end of the last recession. Compare that drop in jobless claims in 2001 to the -103,500 decline over the last four months and it's sure looking a lot like the end of the current recession.

Originally posted at Carpe Diem.

Wednesday, August 05, 2009

Las Vegas Home Sales Increase 15th Straight Month -- Las Vegas region June home sales climbed to the highest level for any month since December 2006 as more than two-thirds of all buyers in the resale market continued to snap up foreclosures. The median sale price held steady, marking the second month in a row in which it didn't erode on a month-to-month basis, as it had for 16 consecutive months prior to May.

A total of 5,519 new and resale houses and condos closed escrow in the Las Vegas-Paradise metro area (Clark County) last month, up 21.7% from May and up 44.1% from a year ago (see chart above). It was the highest sales total for any month since 5,780 homes sold in December 2006, and the highest for any June since 8,110 homes sold in June 2006.

June marked the 15th consecutive month in which sales of existing single-family detached houses rose on a year-over-year basis. The 4,042 single-family house resales last month were the highest for any June since 4,846 sold in June 2005. Resale condos have seen an annual sales gain for 12 straight months.

The median price paid for all new and resale houses and condos sold in the Las Vegas metro area last month was $135,000, unchanged from May but down 41.3% from $230,000 a year ago (see chart above).
Originally posted at Carpe Diem.

Phoenix Home Sales Increase 12th Straight Month -- Sales of existing houses and condos in the Phoenix area rose in June to the highest level for that month in four years, with the non-foreclosure market continuing to account for a greater portion of sales. The modest shift away from lower-cost lender repossessions enabled the overall median sale price to edge higher than the prior month for the second month in a row.

A total of 10,731 new and resale houses and condos closed escrow in the combined Maricopa-Pinal counties metropolitan area in June, up 12.2% from May and up 40.4% from a year ago (see chart above). Total home sales have risen on a year-over-year basis for six consecutive months. However, sales of existing (not new) houses and condos combined have risen on a year-over-year basis for 12 consecutive months, and the June resale total of 9,720 was the highest for any month since March 2006.

The median price paid last month for all new and resale houses and condos combined was $130,000, up 0.4 percent from May but down 36.6 percent from a year ago. The tiny month-to-month gain was the second in a row. May’s 3.5 percent increase over April’s median marked the first such month-to-month rise since the overall median rose 1 percent, to $256,000, in March 2007.

Originally posted at Carpe Diem.

States Favor Democrats By A Factor of 10:1

The road back to power for the Republican party looks long and steep judging by the latest polling data from Gallup. In the first six months of 2009, only four states solidly supported the Republicans (with an advantage of ten percentage points or more over the Democrats in polls). Just one other state, Alabama, leans Republican (between five and nine percentage points in favour of the party). Contrast that with the nearly 40 states that favor the Democrats (see map above).

The Economist.

Originally posted at Carpe Diem.

India's Benchmark BSE Index Up By Almost 100%

MUMBAI -- Institutional buying in heavyweights and select blue chips in the last hour of trade helped Indian shares reverse early losses and end slightly higher Wednesday. The Bombay Stock Exchange's benchmark Sensitive Index ended up 0.5% at 15,903.83. The 30-stock index traded between a low of 15,695.11 and a high of 15,973.10 in a volatile session.

MP: India's benchmark BSE Index is now just below 16,000, the highest level since May 2008 (see chart above), and now almost double the level of early March when India's benchmark index approached 8,000.

Originally posted at Carpe Diem.

The Chicago Area Jobs Map

Members of the Chicago City Council, take a look at the map above. What do you see? You see 44 dots. Every dot is a Wal-Mart in the Chicago area. Every dot is a place where people go to work and draw a paycheck. Every dot produces sales tax revenue. Every dot caters to people who want to buy shoes and socks and TVs and tires and whatever else draws them to Wal-Mart. If we widened this map to take in all of Illinois, there would be 148 dots. If we widened it again to take in all of the U.S., there would be 3,514 dots.

So, aldermen. How's that campaign going to protect Chicagoans from the scourge of working for Wal-Mart?

Construction of the store would create 200 jobs. The store, once it was running, would provide nearly 500 jobs. But the City Council wants none of that, so all the Chicagoans who like to shop at Wal-Mart and all the Chicagoans who would like to work at Wal-Mart have to go to one of those dots on the map. They're all in the suburbs, save the one Wal-Mart that has been allowed to open in Chicago.

Organized labor doesn't like Wal-Mart because Wal-Mart doesn't have union jobs. It just has jobs (with an average hourly wage of $12.05 in Chicago). The aldermen, of course, already have jobs. They get paid $110,556 a year and they figure that as long as they keep the labor unions off their backs, they'll keep making $110,556 a year.

Who says the City Council doesn't generate jobs? If you're one of the 50 aldermen, your unemployment rate is 0 percent. But the unemployment rate for the rest of Chicago is above 10 percent. One in 10 Chicagoans is out of work. Many of the aldermen think that if you're a constituent and you're unemployed you can just go look somewhere else. You want to get a paycheck from Wal-Mart? Go take a hike to one of those dots on the map. Go take a hike to those clueless suburbs.

~Excerpts from today's
Chicago Tribune staff editorial

Bloomberg U.S. Financial Conditions Index Reaches A 21-Month High; The Recession Is Over

I'm not sure why the Bloomberg U.S. Financial Conditions Index doesn't receive more attention. It's updated daily by Bloomberg, and assesses the relative strength/weakness of the U.S. money market, bond market and equity market, and is considered a useful gauge of bank lending conditions and the overall availability of credit (see Bloomberg video below from September 25, 2008). The Financial Conditions Index went above -1.00 on Monday for the first time since October 31, 2007 and is now at a 21-month high (see chart above).

The recent strength of the Financial Conditions Index provides yet another piece of evidence that the recession is over, and further confirms Larry Kudlow's suggestion that we are in a "new bull market heralding a new economic recovery."

Bloomberg video from September 25, 2008:

Humanoid Robot Reaches The Pinnacle Of Sophistication, It Can Now Play Frogger

In the video above, the ASIMO robot is demonstrating an important aspect of robot intelligence: the ability to navigate around a dynamically changing environment. It’s not likely that ASIMO will find itself in a situation where it needs to avoid stepping on whirling pink blades of death, but at some point (soon, please) we’ll have ASIMOs walking around our homes, and they’ll need to be able to not accidentally crush our toes/children/pets/Roombas.


Bumper Sticker Being Promoted by Mini Dealers

Leading Economic Indicator: Hot Waitress Index

In New York, we have our own economic indicators, often based on the degree to which people are being thwarted by the lack of opportunity. An old standby is the Overeducated Cabbie Index. The Squeegee Man Apparition Index is another good one. There’s also the Speed at Which Contractors Return Calls Index: within 24 hours, you’re in a recession; if they call you without prompting, that’s a depression.

The indicator I prefer is the Hot Waitress Index: The hotter the waitresses, the weaker the economy. In flush times, there is a robust market for hotness. Selling everything from condos to premium vodka is enhanced by proximity to pretty young people (of both sexes) who get paid for providing this service. That leaves more-punishing work, like waiting tables, to those with less striking genetic gifts. But not anymore.

To be actually useful, of course, the Hot Waitress Index must be a leading indicator, and there is good reason to believe that it is. Employment is generally thought to lag behind economic recovery, which is to say that jobless rates remain elevated, and even climb, after a recession has technically ended. But hotness occupies a privileged place in the employment picture. As a commodity that’s fairly cheap, historically effective as a marketing tool, and available on a freelance basis, hotness will likely be back in demand long before your average Michigan autoworker is. Or the rest of us, for that matter.

~New York Magazine

HT: Tyler Cowen

Tuesday, August 04, 2009

Real Estate Rebound: REITs Roar Back to 9 Mo. High

After falling more than 700 points from a level of 1058.79 last September to 345.82 points in early March (see graph above), the MSCI U.S. REIT Index (real estate investment trusts) has rebounded by almost 82% and closed today at 628.38, the highest close in more than 9 months (since early November).

HT: The Kudlow Report

See Forbes article on REITs here.

Cash For Clunkers Might Actually Increase Fuel Consumption and Damage the Environment

Official statement from the Alliance of Automobile Manufacturers"

And while the Cash for Clunkers program has provided much needed economic stimulus to the auto industry, it has also yielded significant energy security and environmental benefits.

Amongst Alliance members Ford reports a 9 MPG increase from trade-in vehicle to new vehicle purchase; GM reports a 54% increase in small car sales since the CARS program was launched; 57%of Mazdas sold so far under the program were highly fuel-efficient Mazda 3’s; Toyota’s top two CARS models – Corolla and Prius – average 39.5 MPG, and accounted for nearly 40% of Toyota’s CARS sales mix. About 70% of their trade-ins have been vans, trucks and SUVs; and Volkswagen reports over 60% of its CARS sales are clean diesel Jetta TDI's which get an EPA combined 34 MPGs.

NHTSA estimates that the average fuel economy improvement for transactions under the CARS program is 9.6 MPG. This amounts to an annual fuel savings of 58 million gallons of gasoline or an average gasoline savings of $580 a year for each new vehicle owner. That equates to an approximate 575,000 ton reduction in carbon dioxide emissions greatly enhancing energy security and reducing greenhouse gases.

MP: There's a major problem with some of the figures quoted above: The fuel savings and environmental benefits are based on a false, STATIC analysis, and NOT a more realistic DYNAMIC analysis. In other words, the fuel savings and emissions reductions are based on the false assumption that there will be NO change in driving behavior when a driver's fuel efficiency improves significantly.

Based on more realistic assumptions (e.g. the Law of Demand), we can expect that increased fuel efficiency will result in an INCREASE in driving. Therefore, the overall net effect on fuel consumption and environmental improvements would be uncertain. That is, if fuel efficiency improves by 20% due to a Cash for Clunkers trade-in, but the driver increases miles driven by 25% because of increased miles-per-gallon (and because he/she is driving a brand new car), he or she would INCREASE spending on fuel, not decrease it. Likewise, there would be an increase in emissions from the increased driving, not a decrease in emissions.

For example, the chart above shows the relationship between fuel efficiency (miles-per-gallon) and vehicle-miles traveled per household from 1983 to 2001, using data (here and here) from the Energy Information Administration. As fuel efficiency increased by 20.4% from 14.2 m.p.g. in 1983 to 17.1 m.p.g. in 2001, the vehicle-miles traveled per household increased by 37.5% over the same period, from 16,800 miles to 23,100. Result? Overall spending on fuel INCREASED. There would certainly be other important factors (fuel costs, disposable income, etc.), but we can be fairly certain that increases in fuel efficiency would contribute to MORE driving, not LESS (or the same).

See Jeff Jacoby's related April 2009 article The Fuel-Efficiency Paradox, where he writes:

Improvements in fuel economy effectively make fuel less expensive, and when costs fall, demand tends to rise. As driving has grown cheaper in recent decades, people have done more of it - choosing to drive to work instead of taking the bus, for example, or buying a second car, or moving to a house with a longer commute, or sending the kids to college with cars of their own. Between 1983 and 2001, data from the Energy Information Administration show, the number of annual vehicle-miles driven by the average American household rose from 16,800 vehicle-miles to more than 23,000 (see chart above).

(Thanks to Dallas Walton for the idea to write this post.)

Update: Worse, cash for clunkers might cause more driving, since new cars are more fun to drive, and more fuel-efficient cars are less costly to operate. Plus, it takes energy to scrap old vehicles and produce new ones, so the net effect of the program might even increase the use of fossil fuel.

~Harvard professor Jeffrey Miron, writing for CNN.

U.K. Patients Forced to Live in Agony

UK TELEGRAPH -- The Government's drug rationing watchdog says "therapeutic" injections of steroids, such as cortisone, which are used to reduce inflammation, should no longer be offered to patients suffering from persistent lower back pain when the cause is not known. Instead the National Institute of Health and Clinical Excellence (NICE) is ordering doctors to offer patients remedies like acupuncture and osteopathy.

Specialists fear tens of thousands of people, mainly the elderly and frail, will be left to suffer excruciating levels of pain or pay as much as £500 ($835) each for private treatment. The NHS currently issues more than 60,000 treatments of steroid injections every year. NICE said in its guidance it wants to cut this to just 3,000 treatments a year, a move which would save the NHS £33 ($55) million.


MP: Another example of the significant rationing that always results from government health care.

Pending Home Sales Increase 5 Months in a Row

WASHINGTON (AP) -- Pending U.S. home sales rose in June for the fifth straight month, another encouraging sign of life for the embattled U.S. housing market, the National Association of Realtors reported Tuesday. For June, the Realtors group said its pending home sales index rose 3.6% to 94.6, from an upwardly revised reading of 91.3 in May, and the index is 6.7% percent above June 2008 when it was 88.7. The last time there were five consecutive monthly gains was July 2003. The results were far better than analysts expected. Economists surveyed by Thomson Reuters expected the index to come in at 91.2.
“It appears home sales are on a sounder footing and inventory is gradually being absorbed,” said Lawrence Yun, the Realtors group's chief economist.

Covering Risks vs. Distributing Largesse

Politicians are already one of the main reasons why medical insurance is so expensive. Insurance is designed to cover risks but politicians are in the business of distributing largesse, especially with somebody else's money. Nothing is easier for politicians than to mandate things that insurance companies must cover, without the slightest regard for how such additional coverage will raise the cost of insurance.

If insurance covered only those things that most people are most concerned about-- the high cost of a major medical expense-- the price would be much lower than it is today, with politicians piling on mandate after mandate.

~Thomas Sowell

Monday, August 03, 2009

"Progressive" White Elites and Organized Labor Are Keeping Poor, Blacks "Locked Up On the Plantation"

If there’s ever an illustration of how “progressive” elites and organized labor are keeping the very people they supposedly care about locked up on the plantation, it’s their consuming opposition to a new Wal-Mart store on the South Side (of Chicago).

The impoverished, unemployed, blacks, seniors, teens—they’ve all been getting a good frigging by the organized campaign by white liberals and powerful unions to block the construction of only the city’s second Wal-Mart, at 83rd Street and Stewart Avenue.

The rousing success of the city’s first Wal-Mart at 4650 W North Ave. providing jobs and shopping for a West Side neighborhood in great need of them hasn’t dissuaded the elites in the least from blocking something that people want and need. More evidence of progressive, white elitism behind the opposition is provided by a new survey conducted for the retailer that found that 76.7% of the 75,347 city residents surveyed want the new store.

Progressives will portray themselves as guardians of those pleading for the Wal-Mart. Progressives say they are only are trying to “protect” those poor people from low wages, insufficient benefits and part-time work. Progressives have decided that for “those people” no jobs are better than jobs that they want and need. Progressives will cite their opposition to Wal-Mart as evidence of their compassion and, well, progressiveness.

It’s all too condescending and patronizing. It all sounds too much like racists who once said they know what’s “best for our colored.” It’s beyond shameful.

From "
Progressives Declare -No Jobs- are Good Enough For South-Side Residents" in the Chicago Daily Observer

John Stossel's 20/20 Special on Health Care

Most or All of The Pay Gap Disappears After Controlling for Marriage and Having Children

The Department of Labor recently released its annual study Highlights of Women’s Earnings in 2008 (HT: Christina Sommers) and opens the report with the following statement:

In 2008, women who were full-time wage and salary workers had median weekly earnings of $638, or about 80% of the $798 median for their male counterparts. In 1979, the first year for which comparable earnings data are available, women earned about 62% as much as men. After a gradual rise in the 1980s and 1990s, the women’s-to-men’s earnings ratio peaked at 81% in 2005 and 2006.

MP: Doesn't the BLS' use of the term "male counterparts" (Webster definition: "one remarkably similar to another") imply an "apples to apples" comparison between male and females workers, as if all relevant explanatory factors have been controlled for, i.e. the ceteris paribus condition has been imposed?

For example, buried in the BLS report are these two interesting facts:

1. In Table 1, it is reported that for those workers who have never been married, women make 94.2% of their "male counterparts."

2. In Table 8, it is reported that for single workers with no children under 18 years old (marital status includes never married, divorced, separated and widowed), women make 95.6% of their "male counterparts."

In these two examples, I would argue that the term "male counterparts" is much more valid than the BLS' use of the term in the opening statement of its report when it is referring to all workers.

Since marriage and having children affect male and female earnings differently, men and women workers can't really be considered "counterparts" in a statistical sense, and any unadjusted comparisons would be comparing apples to oranges. In fact, some research has concluded that the factors of age, marriage and motherhood explain all of the male-female pay gap.

For example, in a 2005 NBER working paper "What Do Wage Differentials Tell Us about Labor Market Discrimination?" by June O'Neill (Professor of economics at Baruch College CUNY, and former Director of the Congressional Budget Office), she conducts an empirical investigation using Census data and concludes that:

"There is no gender gap in wages among men and women with similar family roles. Comparing the wage gap between women and men ages 35-43 who have never married and never had a child, we find a small observed gap in favor of women, which becomes insignificant after accounting for differences in skills and job and workplace characteristics.

This observation is an important one because it suggests that the factors underlying the gender gap in pay primarily reflect choices made by men and women given their different societal roles, rather than labor market discrimination against women due to their sex."

Sunday, August 02, 2009

Markets In Everything: College Textbook Rental

Students frequently rent DVDs to watch in their dorm rooms, but soon they may start checking out something much heavier and pricier: textbooks.

Saying they offer an alternative to the textbook industry's bloated prices, a growing number of companies are renting new and used titles at reduced prices. Among them are Chegg, BookRenter and the Follett Higher Education Group, which will test drive a rental service at campus bookstores this fall. They join a number of colleges that have already started their own on-campus programs.

From the
Inside Higher Ed article "Rent, Read and Return"

"Markets" In Everything: Free, Virtual Education

WASHINGTON (AFP)They don't offer degrees but then they don't charge tuition either. Colleges and universities across the United States are offering free courses online on virtually every subject imaginable, including videotaped lectures by some of their most distinguished professors.

HT: Philip Miller

U.S. Home Construction Stocks Rebound

The chart above (click to enlarge) shows returns over the last six months for the iShares Dow Jones US Home Construction Index (ITB) vs. the Dow Jones Industrial Average (source). Compared to the overall market return (DJIA) of about 15% over the last six months, the Dow Jones US Home Construction ETF (holdings include Pulte Homes, Toll Brothers, KB Home and other home builder companies) is up by 40%. Home construction stocks are showing positive signs of recovery, with returns over the last six months more than twice the overall market return.

Incentives Matter. Or Not?

Don Boudreaux argues below that if teachers don't respond positively to monetary incentives (merit pay), then they likewise shouldn't respond negatively to pay cuts, and we can therefore save millions and billions of dollars by cutting teachers' salaries?

If teachers do not respond positively to the prospect of higher monetary rewards, they are unlikely to respond negatively to the prospect of lower monetary rewards. Alternatively, if the problem with merit pay is that measuring teacher performance is simply too difficult, then we can conclude that Fairfax teachers now are as likely to be doing a truly lousy job at educating children as they are to be doing an excellent job at this task. (Indeed, if performance can’t be monitored, then chances are the teachers are doing a lousy job. After all, why put forth effort if worthwhile results of your effort – or lack thereof – are undetectable?)

Either way, cutting teachers’ pay is unlikely to reduce the quality of education supplied in the County schools. If teachers aren’t motivated by money, then they’ll work just as diligently at lower pay as they will at higher pay; if cutting pay will, in fact, cause some teachers to quit, their replacements are likely to perform no worse than them.