Tuesday, April 27, 2010

ASA Staffing Index Continues to Improve; Temp Hiring is A Leading Indicator of Future Job Growth

"Staffing employment in April is 19% higher than in the same month last year, according to the ASA Staffing Index released today. The index for April is 86, up from 83 for March, suggesting that staffing employment has increased almost 4% over the past month. With the exception of the payroll period that included the Easter holiday, staffing employment has shown steady growth over the past 10 weeks."

MP: The chart above is based on the ASA's weekly staffing index, which reached an 18-week high during the week of April 12, and has increased by 19.4% over the last year. This most recent weekly gain marks the ninth week in-a-row of double digit increases from the same week in the previous year.

Temporary help employment tracked by ASA is considered to be an accurate leading indicator of employment trends. According to the ASA, temporary job increases typically lead gains in broader employment growth by three months when the economy is emerging from a recession, and the continuing strength in temporary hiring signals future employment growth for the U.S. economy.

Homeownership Falls to Ten-Year Low, That's Good

According to data released yesterday by the Census Bureau, the U.S. homeownership rate fell to 67.1% in the first quarter of 2010, the lowest rate since the first quarter of 2000, exactly ten years ago (see chart above). Compared to the peak of 69.2% in the second quarter of 2004, the homeownership rate has fallen by more than two full percentage points in the last six years.

Many economists and analysts would agree that the mortgage market meltdown, housing bubble and global financial crisis resulted from the political obsession in America to increase homeownership with easy credit and government housing policies. Even the House of Representative’s
Committee on Oversight and Government Reform concluded last summer that:
The housing bubble that burst in 2007 and led to a financial crisis can be traced back to federal government intervention in the U.S. housing market intended to help provide homeownership opportunities for more Americans. This intervention began with two government-backed corporations, Fannie Mae and Freddie Mac, which privatized their profits but socialized their risks, creating powerful incentives for them to act recklessly and exposing taxpayers to tremendous losses. Government intervention also created “affordable” but dangerous lending policies which encouraged lower down payments, looser underwriting standards and higher leverage. Finally, government intervention created a nexus of vested interests – politicians, lenders and lobbyists – who profited from the “affordable” housing market and acted to kill reforms. In the short run, this government intervention was successful in its stated goal – raising the national homeownership rate. However, the ultimate effect was to create a mortgage tsunami that wrought devastation on the American people and economy.
Bottom Line: Our political infatuation with homeownership turned thousands of good renters into bad homeowners and consequently turned the “American Dream” into an “American Nightmare” for many Americans. The fact that many homeowners are now returning to once again being good renters is a sign of progress, and the significant decrease in the U.S. homeownership rate to a ten-year low should be considered a very positive trend.

Las Vegas Housing Market Rebounds: Home Sales Increase 19th Month, Prices Rise, Foreclosures Fall

Highlights from the DQNews report on Las Vegas home sales in March:

1. A total of 4,328 new and resale houses and condos closed escrow in the Las Vegas metro area last month, up 31.9 percent from February and up 12.7 percent from a year earlier.

2. March’s sales total was the highest for that month since March 2006, when 8,486 homes sold, and it was 0.8 percent lower than the average March sales tally back to 1994. Last month marked the 19th in a row in which total sales rose on a year-over-year basis.

3. The number of houses and condos that resold (excludes new homes) in March rose to 4,334, up 30.9 percent from February and up 12.3 percent from a year earlier to the highest point since 4,721 resales in March 2006. Resales have risen on a year-over-year basis for 23 straight months.

4. Foreclosure resales – homes that had been foreclosed on in the prior 12 months – fell to 55.5 percent of all resales in March, down from 59.6 percent in February and down from 73.1 percent a year ago.

5. The median price paid for all new and resale houses and condos sold in the Las Vegas metro area in March was $130,000, up 3.0 percent from $126,197 in February but down 10.3 percent from $144,900 a year earlier (see chart above). The year-over-year decline was the smallest since October 2007, when the median dropped 9.2 percent from a year earlier, to $279,790.

6. For the first quarter of this year (January through March), foreclosures totaled 5,611, down 26.4 percent from the prior quarter and down 36.3 percent from a year ago.

Case-Shiller: Annual Returns for Housing Prices Are Positive for the First Time Since December 2006

The S&P/Case-Shiller Home Price Indices for February 2010 were released today. Highlights include:

1. The 10-City Composite Home Price Index (seasonally adjusted) has increased nine consecutive months for the first time since the spring of 2006, almost four years ago, and it reached its highest level since December 2008, 14 months ago (see top chart above).

2. Based on the percentage increase from the same month in the previous year, the annual rates of returns for both home price indexes improved in February, marking the 13th consecutive monthly improvement for the seasonally adjusted Composite-10 Index and the 11th monthly improvement for the Composite-20 Index. For the first time since December 2006, the annual rates of returns are
positive for the seasonally-adjusted indexes: 1.48% for the Composite-10 Index compared to last February and 0.70% for the Composite-20. For the unadjusted home price indexes, the annual returns are 1.4% and 0.60%.

3. The city with the biggest annual decline in the Case-Shiller index was Las Vegas, with a -14.6% decrease from last February, but it was the smallest year-over-year decline since November 2007.

"Markets" in Everything: Free Classes at Yale

Open Yale Courses provides free and open access to a selection of introductory courses taught by distinguished teachers and scholars at Yale University. The aim of the project is to expand access to educational materials for all who wish to learn.

Here's an example of a class: Financial Markets with Professor Robert Shiller.

Quiz on Current Events from Pew Research

Test your News IQ at Pew Research with 12 questions on current events. I featured a previous edition of the quiz back in February - a few questions are the same.

HT: Ryan Stinson

Richmond Fed Index Reaches All-Time High in April

"Manufacturing activity in the central Atlantic region expanded for the third straight month, according to the Richmond Fed's latest survey. All broad indicators — shipments, new orders and employment — landed in positive territory, with manufacturers noting their first increase in worker numbers since October 2009. Other indicators were also positive. Backlogs increased for the first time since August 2009 and capacity utilization hit an all-time high reading since the inception of the measure. Vendor lead-time grew at a considerably quicker rate — the highest reading since August 2004, indicating slower delivery times, and inventories increased at a somewhat quicker pace.

In April the seasonally adjusted composite index of manufacturing activity — our broadest measure of manufacturing — jumped 24 points to 30 from March's reading of 6 (see chart above). Among the index's components, shipments moved up 25 points to 30, new orders leaped 31 points to finish at 41, and the jobs index advanced 13 points to end at 13.

MP: The Richmond Fed Manufacturing index reading of 30 in April was the highest-ever index level in the history of the series back to 1994. The 85-point increase from -55 in December of 2008 to 30 in April 2010 is probably one of the strongest signs to date of a V-shaped economic recovery.

Great WSJ Website for Economic Graphs and Data


Monday, April 26, 2010

From the Mall to the Docks, Signs of Rebound; Port of Portland Shipping Volume Up by 30% vs. 2009

From yesterday's NY Times:
The docks are humming again at this sprawling Pacific port, with clouds of golden dust billowing off the piles of grain spilling into the bellies of giant tankers. “Things are looking up,” said Dan Broadie, a longshoreman. No longer killing time at the union hall while waiting for work, instead he is guiding a mechanized spout pouring 44,000 tons of wheat into the Arion SB, bound for the Philippines.

At malls from New Jersey to California, shoppers are snapping up electronics and furniture, as fears of joblessness yield to exuberance over rising stock prices. Tractor trailers and railroad cars haul swelling quantities of goods through transportation corridors, generating paychecks for truckers and repair crews.

Global trade holds promise. At the Port of Portland — a major shipping point for commodities harvested as far east as the Great Plains — the tonnage of goods swelled by 42 percent during the first three months of the year compared with a year earlier (see chart above,
data here). Minerals like soda ash — an important industrial ingredient to make glass and detergent — increased by 93 percent.

Activity here and at ports along the Pacific coast is generating business through related industries. Rail freight traffic was up nearly 8 percent in March from a year earlier, according to the Association of American Railroads. That has bolstered revenue for Greenbrier, a Portland-based maker of rail cars that was hard hit during the recession.
MP: Other highlights from the Port of Portland from its March cargo statistics include: a) a 29.9% increase in grain tonnage for the first quarter this year compared to last year, and the first time since early 2008 of three consecutive months of tonnage above 400,000 short tons; b) a 93.2% increase in bulk mineral shipments for the first three months of 2010 compared to 2009 and c) a 16-month high for the overall shipment volume (3-month moving average basis), the highest level since November 2008.

NABE: Business Recovery Gaining Momentum

“The National Association for Business Economics' April 2010 Industry Survey confirms that the U.S. recovery from the Great Recession continues, with business conditions improving,” said William Strauss, Federal Reserve Bank of Chicago.

“Industry demand moved higher compared to results in the January 2010 report, pointing to stronger growth in 2010. While input costs have been increasing, prices have also been moving higher, allowing profits to continue to rise. After more than two years of job losses, job creation increased in the first quarter of 2010, suggesting a better outlook for hiring over the next six months. Little of the improvement to date in job growth can be attributed to the stimulus bill enacted in February 2009. Capital spending remained steady. Tight credit conditions continued to negatively impact business conditions.”

See highlights here.

Thatcher's Last Stand Against Socialism

From Margaret Thatcher's last House of Commons Speech on November 22, 1990, where she addresses income inequality and a single currency.

Taxing Tennessee

Sunday, April 25, 2010

Forget the Jobless Recovery, We Might Be Headed for a Worker Shortage

From today's NY Times article "Rays of Hope for Job Hunters":
For the first time in two years, many job seekers may have reason to feel hopeful. Employers are beginning to hire again — or at least think about it. The shift is most apparent in job postings, which have begun to surge. Indeed.com, which collects job listings from thousands of sources, reported a 19 percent increase in postings in March, versus the same month last year.

The number of
postings rose in 10 of 12 industry categories. (The only category that declined was health care, one of the few bright spots during the recession.) The industries that showed the biggest uptick in March openings were retail, up 42 percent; hospitality, 33 percent; and media and newspapers, 30 percent.

The current outlook is a contrast to the deep gloom of 2008 and 2009. Companies’ profit reports, recent retail sales, manufacturing and other data are generally improving. At some point, businesses will have more work than workers, and will need to hire.

Tamara Erickson, an author and work-force consultant, said the recession masked a long-term trend that will intensify: a worker shortage caused by the continuing retirement of baby boomers. Her advice to job seekers? “Cheer up,” she said. “The real possibility of finding a job that you’ll like is increasing every day.”

How Kennedy Tax Cuts Changed Pro Boxing

From The Atlantic article "How Taxes Changed Boxing":

"The 1950s was the era of the 90 percent top marginal tax rate, and by the end of that decade live gate receipts for top championship fights were supplemented by the proceeds from closed circuit telecasts to movie theaters. A second fight in one tax year would yield very little additional income, hardly worth the risk of losing the title. And so, the three fights between Floyd Patterson and Ingemar Johansson stretched over three years (1959-1961); the two between Patterson and Sonny Liston over two years (1962-1963), as was also true for the two bouts between Liston and Cassius Clay (Muhammad Ali) (1964-1965).

Then, the Tax Reform Act of 1964 cut the top marginal tax rate to 70 percent effective in 1965. The result: two heavyweight title fights in 1965, and five in 1966."

MP: A few lessons: 1) If you tax something, you get less of it, and 2) if you cut tax rates, you might get more tax revenues.

Saturday, April 24, 2010

Mean/Median Confusion

Updated: Columbia University Business School Professor Ray Fisman writes in this Slate.com article:

"It's a sad statistical reality: Half of us are below average."

To be more precise, it should be "half of us are below the median."

HT: Chris Douglass

Thanks to Steve in his comment for providing information about
Fisman's background.

"Great Housing Market Bust is Over"

New home sales increased in March by 23.8% compared to the same month last year, the largest annual increase in new home sales since the month of July 2005, according to data released yesterday by the Census Bureau (see chart above).

As a result of the increased sales activity for new homes at the same time that the supply is at a 39-year low, the inventory measure "months supply of new homes at the current sales rate" fell to the lowest level since December 2006, signalling that the balance between supply and demand of new homes is back to a more normal, pre-crisis level (see graph below).

MP: Friday's new data on new home sales through March point to a housing market that is past the bottom and in a new period of recovery. See Scott Grannis' recent post on existing home sales, where Scott concludes that "The resulting picture becomes quite clear: the great housing market bust is over, and a new growth cycle is underway."

Friday, April 23, 2010

"The Model Has Changed" aka Creative Destruction: Netflix (+100%) vs. Blockbuster (-60%)

SACRAMENTO BEE -- First, people decided they didn't want to drive to the movie theater. These days they aren't too keen on driving to the video store, either. In a sign of the times, Netflix saw its stock price top $100 a share Thursday after posting blowout earnings – the same week that another Blockbuster outlet closed, this one on 29th and K streets in Sacramento. Blockbuster and Hollywood Video are closing local outlets as nationally, both companies feel the heat from game changers like Netflix and Redbox, which rents movies for $1 a night out of vending machines in supermarkets.

Brick and mortar video stores are under pressure from the online world, just like record stores and booksellers before them. We want to rent DVDs quickly by mail or pick them up at the supermarket. And that's if we bother handling a physical disc at all. Increasingly, we just stream movies on laptops and smart phones or download them right to our PlayStations or Xboxes, so we can watch them on our flat-panel TVs.

"The model has changed," said Maithu Bai, owner of Awesome Video, an independent video rental store on Freeport Boulevard. "It's not just here; it's across the nation. In these times, people want something new."

MP: The chart above shows that since last September, Netflix stock has more than doubled while Blockbuster's stock has declined by more than 50%.

Environmentalism As Religion

Excellent Wall Street Journal article by Emory University economics professor Paul H. Rubin:

"Many observers have made the point that environmentalism is eerily close to a religious belief system. Consider some of the ways in which environmental behaviors echo religious behaviors and thus provide meaningful rituals for Greens:

• There is a holy day—Earth Day.

• There are food taboos. Instead of eating fish on Friday, or avoiding pork, Greens now eat organic foods and many are moving towards eating only locally grown foods.

• There is no prayer, but there are self-sacrificing rituals that are not particularly useful, such as recycling. Recycling paper to save trees, for example, makes no sense since the effect will be to reduce the number of trees planted in the long run.

• Belief systems are embraced with no logical basis. For example, environmentalists almost universally believe in the dangers of global warming but also reject the best solution to the problem, which is nuclear power. These two beliefs co-exist based on faith, not reason.

• There are no temples, but there are sacred structures. As I walk around the Emory campus, I am continually confronted with recycling bins, and instead of one trash can I am faced with several for different sorts of trash. Universities are centers of the environmental religion, and such structures are increasingly common. While people have worshipped many things, we may be the first to build shrines to garbage.

• Environmentalism is a proselytizing religion. Skeptics are not merely people unconvinced by the evidence: They are treated as evil sinners. I probably would not write this article if I did not have tenure."

Consumer Lending Reaches Record High in March; Business Lending Increases for Second Week

Update: Thanks to Barry Rithhokz for pointing out that there was a one-time accounting change that led to the jump.

Consumer lending jumped by more than $83 billion in March to $901.6 billion, the highest level in history, according to data recently released by the Federal Reserve (see chart above).

Business lending increased the last week of March and the first week of April, the first two back-to-back weekly increases since December 2008, see chart below (data here).

Update on the Inflation Debate

Brian Wesbury and Scott Grannis remain concerned about inflation, citing the recent Producer Price report from the BLS. I remain an inflation skeptic based on the two charts above, which show that the 10-15% producer price inflation in the 1970s (bottom chart) was accompanied by much, much higher money growth (top chart). The core ingredient of inflation (producer or consumer) is money growth, and there just doesn't seem to be enough M2 money growth to generate 1970s-era inflation.

Economic Growth + Trade = Cleaner Environment

Thoughts on Earth Day from the American Enterprise Institute:

Steven Hayward: One thing that should be clear from the experience of the last 40 years is that the most significant environmental problems are in the developing world, and that economic growth is the key—not the enemy—of environmental improvement. For example, not a single American or European city ranks among the World Bank’s top 50 most polluted cities in the world.

Kenneth Green: If you care about the environment, you should observe this special day with a joyful spree of consumption, especially buying goods from people in poor countries. By engaging in trade with other countries, we help them grow wealthier, helping them to afford environmental protection, while we help ourselves by gaining access to goods and services that it might be impossible, or ruinously expensive, for us to manufacture ourselves.

The sooner people grow wealthy, the sooner the environment will benefit. Now, get shopping!

We Seem Incapable of Grasping Masonomics

Arnold Kling: At MIT and other bastions of mainstream economics, most economists are to the left of center but to the right of the academic community as a whole. These economists are known for saying, in effect, "Markets fail. Use government." Masonomics (George Mason economists) says, "Markets fail. Use markets."

Jonah Goldberg: Washington's solution to Wall Street's problems is to get Washington deeply, deeply involved in Wall Street. So involved that the savvier capitalists will recognize -- once again -- that the safest bets are not to be found in the vicissitudes of a fickle marketplace, but in gaming the system run from Washington. The "reform" coming down the pike will put bureaucrats in charge of investors.

We are fond of saying that the answer to free-speech problems is more free speech. But we seem incapable of grasping that sometimes -- and only sometimes -- the solution to capitalism's problems is more capitalism.

Thursday, April 22, 2010

Most Dangerous Jobs in America

Most dangerous jobs for work-related deaths, along with the percentage of males working in those occupations:

1. Highest Fatality Rate (Deaths per 100,000 workers): "Farming, forestry and fishing" is #1 with 29.4 deaths per 100,000 workers in 2008, occupation is 79.5% male; followed by mining at #2, with 18 deaths per 100,000 workers, occupation is 98% male.

2. Highest Number of Fatalities: Construction, 969 deaths in 2008, occupation is 97.4% male; followed by transportation with 762 deaths in 2008, occupation is 84.7% male.

Update: 92.74% of all work-related deaths in 2008 were men (4,703 male deaths vs. 368 for women), which is ratio of almost 13 male occupational deaths for every one female death.

Rail Freight Traffic Continues to Gain Momentum

"The Association of American Railroads said today that signs of recovery in U.S. freight rail traffic continue to gain momentum, with carload volume last week reaching its highest level since the week ended December 6, 2008. U.S. railroads originated 296,599 carloads during the week ended April 17, 2010, up 16.1 percent from the comparable week in 2009. However, volume was still down 11.6 percent from the same week in 2008. In order to offer a complete picture of the progress in rail traffic, AAR now reports 2010 weekly rail traffic with comparison weeks in both 2009 and 2008.

Intermodal traffic totaled 209,903 trailers and containers, up 14.6 percent from last year but down 6.3 percent compared with 2008. Compared with the same week in 2009, container volume increased 16.7 percent while trailer volume gained 4 percent. Compared with the same week in 2008, container volume was up 1.6 percent while trailer volume fell 35.3 percent.

Eighteen of 19 carload commodity groups were up from last year, led by a 177.5 percent jump in loadings of metallic ores. Other notable increases included 68.8 percent for metals, 49 percent for motor vehicles and equipment, 46.4 percent for nonmetallic minerals and 34.5 percent for primary forest products. Grain was up 12.2 percent, and coal gained 9.6 percent. The only commodity registering a decline was pulp, paper and allied products, off 6.7 percent."

Cartoons of the Day

Michael Ramirez. (HT: Mike Carlson)

Japan's Exports Rise 43%; Barclays Economist Says No Chance of Double-Dip, Strong Growth Ahead

TOKYO — "Japan's exports rose for a fourth straight month in March as a recovering global economy drove demand for the nation's cars and gadgets. Exports jumped 43.5 percent from a year earlier the government said Thursday.

The figures offer more evidence that robust growth, particularly in Asia, is feeding a turnaround in the world's second-biggest economy, offsetting weak demand and falling prices at home. Shipments rose worldwide, with those to Asia up almost 53 percent.

Exports to the U.S. grew 30 percent, and those to the European Union rose 27 percent, the finance ministry said. Overseas shipments of vehicles more than doubled, while electrical machinery exports were up 43 percent.

Global demand fueled Japan's economy to expand at an annualized pace of 3.8 percent in the October-December period and likely led to another strong showing in the first quarter.

"The possibility that the economy will experience a double-dip recession in 2010 now appears extremely unlikely. Instead, the focus has shifted to how broadly the recovery will expand," said Kyohei Morita, chief Japan economist at Barclays Capital."

Wednesday, April 21, 2010

Intrade Odds Above 50% for Reps to Control House

Intrade odds for the Republicans to control the House of Representatives after 2010 Congressional Elections: 50.3%.

Paulson Now Turns Bullish on Housing and Economy

MARKETWATCH -- "John Paulson, the hedge fund manager famous for betting against mortgage securities, is now bullish on the U.S. housing market and the economy.

During a conference call with investors Wednesday, Paulson said he was concerned earlier this year about a potential double-dip recession. "I'm not concerned about that at all today," he said. It's more likely there could be a V-shaped recovery, Paulson continued.

House prices have stabilized and could climb 8% to 10% nationwide in 2011, Paulson said. Corporate earnings are coming in ahead of expectations, the stock market is stronger and there's a "vibrant" credit market. With the "final leg" of a rising housing market, "the outlook for 2011 could be very strong," Paulson said."

HT: Mike LaFaive

The Unsustainable Unionacracy of California

From "The Beholden State: How public-sector unions broke California," by Steve Malanga in the City Journal:

"The public sector unions’ political triumphs have molded a California in which government workers thrive at the expense of a struggling private sector. The state’s public school teachers are the highest-paid in the nation. Its prison guards can easily earn six-figure salaries. State workers routinely retire at 55 with pensions higher than their base pay for most of their working life. Meanwhile, what was once the most prosperous state now suffers from an unemployment rate far steeper than the nation’s and a flood of firms and jobs escaping high taxes and stifling regulations (see nearby chart). This toxic combination—high public-sector employee costs and sagging economic fortunes—has produced recurring budget crises in Sacramento and in virtually every municipality in the state."

"How public employees became members of the elite class in a declining California offers a cautionary tale to the rest of the country, where the same process is happening in slower motion. The story starts half a century ago, when California public workers won bargaining rights and quickly learned how to elect their own bosses—that is, sympathetic politicians who would grant them outsize pay and benefits in exchange for their support. Over time, the unions have turned the state’s politics completely in their favor. The result: unaffordable benefits for civil servants; fiscal chaos in Sacramento and in cities and towns across the state; and angry taxpayers finally confronting the unionized masters of California’s unsustainable government."

Tuesday, April 20, 2010

CA Defaults Drop 40.2% in 2010:QI from Last Year

"Lending institutions started formal foreclosure proceedings on fewer California homes last quarter. It is unclear how much of the drop can be attributed to shifts in market conditions, and how much is because of changing policies, a real estate information service reported.

A total of 81,054 Notices of Default were recorded at county recorder offices during the January-to-March period. That was down 4.2% from 84,568 for the prior quarter, and down 40.2% from 135,431 in first-quarter 2009, according to San Diego-based MDA DataQuick."

25 Reasons the Bull Market Recovery is Real

James Altucher in today's NY Post "Rally Believing It":

Advanced Degrees: 139 Women for Every 100 Men

The graph above is based on college degree data that were released today by the Census Bureau, showing college degrees for the age group 25-29 years old. According to the press release:

"The U.S. Census Bureau reported today more women than men are expected to occupy professions such as doctors, lawyers and college professors as they represent approximately 58 percent of young adults, age 25 to 29, who hold an advanced degree."

In other words, 139 women in the 25-29 year old group hold an advanced degree for every 100 men in that age group, and women dominate men for all advanced degrees: Master's, Professional (MD, DDS and JD), and Doctor's (Ph.D.).

Note: These are actual numbers based on actual data and empirical evidence about gender differences, in contrast to Equal Pay Day.

Ceterius Paribus, Equal Pay Day Falls in January

Today is Equal Pay Day, the date that is supposed to symbolize how far into 2010 the average woman would have to work to earn the same income that the average man earned in 2009—see Christina Sommers’s excellent article in The American, “The Equal Pay Day Reality Check.” Here's the Presidential Proclamation, and here's the statement from Secretary of Labor Hilda Solis, and here's an editorial from Diana Furchgott-Roth.

According to the Bureau of Labor Statistics’s (BLS) most recent annual report, “
Highlights of Women’s Earnings in 2008,” women who worked full-time in 2008 had median earnings of $638 per week, or about 80 percent of the $798 median weekly earnings for men working full-time.

But for single workers who have never been married, the BLS reports that women made 94.2 percent as much money as their male counterparts in 2008. Equal Pay Day would fall on January 22 for these single females, almost three months earlier than the official, unadjusted Equal Pay Day of April 20 for all women. For a separate BLS category of single workers, those with “no children under 18 years old and whose marital status includes never married, divorced, separated and widowed,” women earned 95.6 percent as much as their male counterparts in 2008. Equal Pay Day for that group of single female workers would fall even earlier, on January 19, only a few weeks into the year.

While the Equal Pay Day advocates emphasize gender discrimination as the most important source of wage differentials, the reality is that most of the wage gap can be explained by life choices that involve family considerations, work hours, and career choices. The BLS data highlighted above show that simply controlling for marriage and children explains more than 70 percent of the unadjusted wage gap. Other factors could easily account for the rest.

Some other issues to consider on Equal Pay Day:

1. On average, men work 5.6 more hours per week than women—the equivalent of seven additional weeks of full-time work per year (see chart above). That would put “Equal Work Day” at the end of February, symbolizing how far the average women would have to work into 2010 to equal the same number of hours that the average man worked in 2009.

2. The unemployment rate for men has been greater than the jobless rate for women for the last 40 months, and job losses during the depth of the last recession were four times greater for men.

3. There were 1,277 male occupational fatalities in 2008 for every 100 female work-related deaths, a ratio of almost 13:1.

An important question then for women on Equal Pay Day: Would perfect labor market equality really be worth it if it meant working 280 more hours per year, having a much greater chance of being unemployed during recessions, and being significantly more exposed to work-related injury and death?

Cross-posted today on the
Enterprise blog.

Economic Deja Vu?

I've featured this Time Magazine article before, but thought it might be worth a re-visit:
If America’s economic landscape seems suddenly alien and hostile to many citizens, there is good reason: they have never seen anything like it. Nothing in memory has prepared consumers for such turbulent, epochal change, the sort of upheaval that happens once in 50 years. Even the economists do not have a name for the present condition, though one has described it as "suspended animation" and "never-never land."

The outward sign of the change is an economy that stubbornly refuses to recover from the recession. In a normal rebound, Americans would be witnessing a flurry of hiring, new investment and lending, and buoyant growth. But the U.S. economy remains almost comatose a full year and a half after the recession officially ended. Unemployment is still high; real wages are declining. At a TIME economic forum last week, forecasters predicted that U.S. growth would amount to only 1.8% this year and 2.6% for 1993, about half the speed of a normal recovery. The current slump already ranks as the longest period of sustained weakness since the Great Depression.

That was the last time the economy staggered under as many "structural" burdens, as opposed to the familiar "cyclical" problems that create temporary recessions once or twice a decade. The structural faults, many of them legacies of the 1980s, represent once-in-a-lifetime dislocations that will take years to work out. Among them: the job drought, the debt hangover, the defense-industry contraction, the savings and loan collapse, the real estate depression, the health-care cost explosion and the runaway federal deficit. "This is a sick economy that won't respond to traditional remedies," said Norman Robertson, chief economist at Pittsburgh's Mellon Bank. "There's going to be a lot of trauma before it's over."
MP: Sound familiar? It could easily have been written to describe the current situation, but it was actually written at the end of September 1992, a full 18 months after the 1990-1991 recession had ended in March 1991. More importantly, it was written in the early stages of the longest (120 month) and strongest economic expansion in the history of the U.S. economy that lasted until March 2001. Maybe media "gloom and doom" is a good leading indicator of future economic expansion. Hopefully it's "déjà vu" all over again.

Monday, April 19, 2010

Leading Economic Index Rises 12th Straight Month

LA Times -- The index of U.S. leading indicators rose in March by the most in 10 months, a sign the economy will keep growing into the second half of the year. The 1.4 percent increase in the New York-based Conference Board's measure of the outlook for three to six months was more than anticipated and followed a revised 0.4 percent gain in February.

Manufacturers are ratcheting up production and factory workers are putting in longer hours as companies rebuild inventories and ship more goods overseas. Further improvement in the job market will help sustain the economy's recovery from the worst recession since the 1930s.

"The economy really seems to be gaining momentum, with better-than-expected data coming from a wider variety of sources," said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. "The sectors that were doing well appear to be doing even better and those that were struggling appear to be seeing signs of renewed activity."

MP: The Leading Economic Index has now increased in each month since last April, which is the first 12-consecutive month increase since mid-2004, almost six years ago. The unadjusted 1.5 point increase in the index from 108.1 in February to 109.6 in March was the largest monthly increase in the history of the index back to 1970, and on a percentage basis, the 1.4% increase was the highest in six years, since March of 2004.

Saturday, April 17, 2010

America's Comeback Story: Welcome to the Economic Expansion; U.S. Destined to Stay on Top

Daniel Gross in Newsweek on how America pulled itself back from the brink—and why it's destined to stay on top:

"The long-term decline of the U.S. economy has been greatly exaggerated. America is coming back stronger, better, and faster than nearly anyone expected—and faster than most of its international rivals.

The Dow Jones industrial average, hovering near 11,000, is up 70 percent in the past 13 months, and auto sales in the first quarter were up 16 percent from 2009. The economy added 162,000 jobs in March, including 17,000 in manufacturing. The dollar has gained strength, and the U.S. is back to its familiar position of lapping Europe and Japan in growth. Among large economies, only China, India, and Brazil are growing more rapidly than the U.S.—and they're doing so off a much smaller base. If the U.S. economy grows at a 3.6 percent rate this year, as Macroeconomic Advisers projects, it'll create $513 billion in new economic activity—equal to the GDP of Indonesia.

The last two expansions have been 120 months and 92 months, respectively. If the U.S. continues to adapt as it has, and if it produces a few more game changers like Google and Apple, there's no reason that the expansion that started in July 2009, against all the odds and predictions, can't last just as long."

Med School Grads Haven't Increased Since 1980; Nurses Can Help, But the AMA Protects Its Turf

Physicians in the U.S. made an average of about $200,000 in 1996, which was between 2 and 5 times as much as doctors made in European countries and Japan (see chart above). The median physician salary in the U.S. is now closer to $275,000 (data here). How do we explain the significantly higher physician salaries in the U.S. compared to other countries? Here's one possible explanation:

The supply of medical school graduates has remained basically flat for the last 30 years (data here). At the same time, the demand for physicians' services has increased over time because of a population that is both increasing and aging. So we've now got more people with more serious end-of-life medical problems demanding more medical care from a limited supply of physicians - and that's a sure prescription for rising MD salaries.

Why hasn't the supply of physicians increased to meet the rising demand for medical services, the way the supply of web designers or software programmers has increased to meet the rising demand for those professions? As Dennis Cauchon wrote in
USA Today in 2005 about the doctor shortage:

"The marketplace doesn't determine how many doctors the nation has, as it does for engineers, pilots and other professions. The number of doctors is a political decision, heavily influenced by doctors themselves. Congress controls the supply of physicians by how much federal funding it provides for medical residencies — the graduate training required of all doctors."

And we're now going to provide health care to an additional 20-30 million Americans under health care reform when the number of new physicians this year is about the same as the graduating class of 1980? Just wondering, did Congress ever consider the reality reflected in the graph above that there has been no increase in the supply of physicians for the last 30 years when they passed health care reform to extend coverage to millions of uninsured?

Here's one solution from Steve Chapman, who suggests that we can "
Nurse Our Way Out of the Doctor Shortage":

"Thanks to health care reform, millions of previously uninsured Americans will have policies enabling them to go to the doctor when necessary without financial fear. But it's a bit like giving everyone a plane ticket to fly tomorrow. If the planes are all full, you won't be going anywhere.

There are not a lot of doctors sitting in their offices like the Maytag repairman, playing solitaire and wishing a patient would drop by. Most of them manage to stay plenty busy. Nor is there a tidal wave of young physicians about to roll in to quench this new thirst for medical care.

Regardless, there seems to be no doubt that it will get harder to find someone to treat you, it may cost more and you'll spend two hours in the waiting room instead of one.

Or maybe not. What people with medical problems need is medical care, but you don't always need a physician to get treatment. You might also see a different sort of trained professional — say, a nurse practitioner, physician's assistant, nurse or physical therapist."

MP: Unfortunately, the medical cartel is not keen on competition from nurses, and according to this news report:

"The medical establishment is fighting to protect turf. The American Medical Association, which supported the national health care overhaul, says a doctor shortage is no reason to put nurses in charge and endanger patients."

Markets In Everything: $5,000 Taxi Ride

British actor John Cleese of Monty Python fame opted for a daylong cab ride halfway across Europe after the dust plume from an Icelandic volcano left him stranded. Cleese paid $5,100 for a Mercedes taxi Friday from the Norwegian capital, Oslo, to Brussels (see map above, thanks to pkd).

Friday, April 16, 2010

World Stock Market Value Reaches 20-Month High in March, $20 Trillion of Value Regained

According to data from the World Federation of Exchanges, world stock market valuation reached a 20-month high of $49.1 trillion in March, the highest level since July 2008. Compared to last March, world markets have gained 55.4% in value, led by strong annual, triple-digit gains from Brazil (102%), India (125%), Turkey (131%), and Japan (104%).

From the February 2009 bottom of $28.6 trillion, world stock market capitalization has gained more than $20 trillion, and has increased by 72%. From the all-time December 2007 high of about $61 trillion, the world stock markets lost about $30 trillion in value in 14 months through February 2009, and $20 trillion of that loss has been regained through March of this year. Although world stock market value is still down $10 trillion from the peak, it should be noted that there is $29 trillion more of stock market wealth today ($49 trillion), than in 2002 ($20 trillion).

California Real Estate Market Past the Bottom?

DQNews -- "An estimated 37,295 new and resale houses and condos were sold statewide last month. That was up 32.7 percent from 28,111 in February, and up 3.0 percent from 36,215 in March 2009. The median price paid for a home last month was $255,000, up 2.4 percent from $249,000 in February, and up 14.3 percent from $223,000 in March a year ago. The year-over-year increase was the fifth in a row, following 27 months of year-over-year declines. The median peaked at $484,000 in early 2007 and hit a post-boom low of $221,000 last April."

MP: The five monthly increases in year-over-year median home prices in California starting last November, along with continued increases in year-over-year home sales, would suggest that a bottom could have been reached last year for the California real estate market.

LA Port Exports Reach 19-Month High in March

LA TIMES -- "The ports of Los Angeles and Long Beach, which together make up the nation's busiest shipping container complex, showed gains in cargo traffic for the fourth straight month in March, boosting trade-related employment in Southern California.

In Los Angeles, the largest U.S. port, exports jumped 15.8% compared with March 2009, driven by such items as scrap paper, scrap metal, agricultural products and finished manufactured goods (see chart above). Long Beach's exports also rose strongly, 10.9%, as both ports benefited from the weakness of the U.S. dollar against other major world currencies. The exchange rates made U.S. goods more attractive and affordable overseas."

MP: Outbound (export) containers leaving the LA Port have increased in 10 out of the last 13 months, and reached a 19-month high in March of 161,817 TEUs, almost 55% above the January 2009 bottom (data here), see chart above. March exports were the fourth highest monthly shipping volume in the port history.

Weekly U.S. Rail Freight Traffic Rises Sharply Again

WASHINGTON, D.C. - April 15, 2010 - "The Association of American Railroads today reported that freight traffic on U.S. railroads was once again up sharply for the week ended April 10, 2010 compared with the same period a year ago. U.S. railroads originated 288,495 carloads during the week, up 16.4 percent from the comparable week in 2009, with all 19 carload commodity groups showing increases from last year. Intermodal traffic totaled 203,549 trailers and containers, up 14.2 percent from last year.

Among the 19 carload commodity groups, particularly strong gains were reported in shipments of metals (108.6 percent); metallic ores (97.6 percent); primary forest products (54.4 percent); scrap (54 percent); motor vehicles (35.5 percent), and chemicals (26 percent).

Combined North American rail volume for the first 14 weeks of 2010 on 13 reporting U.S., Canadian and Mexican railroads totaled 5,074,684 carloads, up 6.2 percent from last year, and 3,533,673 trailers and containers, up 9.3 percent from last year."

Thursday, April 15, 2010

April Empire State Index Close to 4-Year High

The Empire State Manufacturing Survey indicates that conditions for New York State manufacturers improved at a rapid pace in April. The general business conditions index rose 9 points, to 31.9 (see chart above). The new orders and shipments indexes advanced as well, and the inventories index climbed to a record high. The prices paid index moved up 12 points to 41.8, its highest level in considerably more than a year, while the prices received index held fairly steady at a level just above zero. Employment indexes rose to high levels, suggesting that employment levels are continuing to improve. Future indexes conveyed an ongoing sense of optimism about the six-month outlook.

Future indexes again conveyed a high level of optimism about the next six months. The future general business conditions index rose slightly, to 55.7, adhering to its relatively high levels of the past several months (see chart).

MP: The readings of 31.9 in April and 33.4 last October are the first times the Empire Index has been above 33.0 since March 2006. The index has now been positive for the last nine months, following 15 straight months of negative readings.

The Cost of Tax Preparation = Oklahoma's GSP

Updated: Americans will spend about 4 billion hours this year filling out individual income tax forms. At the average hourly private industry compensation cost of $27.42, that time is worth about $110 billion, equivalent to almost the entire annual Gross State Product (GSP) of Kansas. Add to that the $30 billion the IRS estimates Americans will spend out-of-pocket on tax preparation (tax software programs, tax preparers, accountants etc.), and it's equal to the $139 billion annual output of the state of Oklahoma.

Tax Rates Might Start Low, But Never Stay Low

The highest marginal income tax rate in 1913 was only 7% (IRS data here), but it only took Congress five years to raise the highest rate to 77% in 1918, and eventually to rates above 90% in the 1940s and 1950s (see chart above).

As I wrote today on the
Enterprise Blog:

As we now consider imposing a European-style value-added tax (VAT) on Americans, we should remember the lesson of U.S. income tax rates—they started low but then rose quickly as income taxes became an attractive source of new revenue for spending-hungry politicians. As today’s Wall Street Journal editorial points out, the lesson from Europe’s record of VATs is very clear: the rates might start low initially, but “they rarely stay that way.”

Industrial Production Growth Highest Since 2005

Industrial production increased in March by 4.0% compared to last year, the largest annual gain since June 2005, almost five years ago, according to today's Federal Reserve report (see chart above). This was the third month in a row of positive output growth, and is consistent with post-recession economic recoveries following the last ten recessions (see graph below).

Wednesday, April 14, 2010

Annual M2 Growth Below 2% for the Last 4 Weeks

Money supply (M2) data through March are presented in the graph above, showing annual growth rates. Comparing M2 growth during the 2008-2009 period to the 2001-2002 shows comparable patterns, with a much greater deceleration in money growth over the last quarter or so than what happened in the 2003-2004 period. There were some periods during 2006-2008 when inflation was in the 4-5% range, but those periods were short and inflation was not sustained. Given the growth in M2 over the last few years, that would probably be the worst case scenario over the next 2-3 years, and the recent deceleration in M2 growth might prevent that from happening.

Median CPI Annual Inflation Falls for the 18th Straight Month to a New Record Low of 0.6%

According to the Cleveland Fed's report today, the median CPI has increased by 0.60% in March over the last year, the 18th consecutive monthly drop in the median CPI annual inflation rate, and the lowest year-to-year inflation rate in the history of the Cleveland Fed's series back to 1984 (see chart above). In contrast, the regular CPI has increased by 2.3% over the last year (March 2009 to March 2010).

Historically, the median CPI has been 50% more accurate at gauging future inflation than the traditional CPI (based on the
Cleveland Fed's research), and the median CPI is certainly not now showing any signs of inflationary pressures. In fact, a stronger case could be made for deflation right now than inflation, according to the median CPI.

Brian Wesbury and Scott Grannis disagree, and see inflationary pressures building.

So. California Home Sales Increase for 21st Month

DQ News -- "A total of 20,476 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 33.3 percent from 15,359 in February, and up 5.0 percent from 19,506 in March 2009. The median price paid for a Southland home was $285,000 last month, up 3.6 percent from $275,000 in February, and up 14.0 percent from $250,000 for March 2009. Last month was the 21st in a row with a year-over-year sales increase."

MP: For Southern California, there are now increases in both: a) unit home sales for 21 consecutive months, and b) median home prices, from the previous month, and from the same month in the previous year. Both are positive indicators of a real estate market in recovery.

Twitter Adds 300,000 Users Per Day

That's like adding a new city every day with a population equivalent to Pittsburgh. Link.

It's Time To Say Yes to Chicago Wal-Mart, Jobs

Chicago Sun-Times editorial "Far South Side Needs Wal-Mart."

Treasury Spread Shows No Signs of Inflation

The spread between nominal 10-year treasuries (data) and 10-year TIPS (data) has increased slightly over the last few months, to the current level of 233 basis points as of April 9. But the current spread is still below the 250 basis point average during 2004, 2005, 2006, 2007 and the first half of 2008. This market-based indicator of expected inflation is a little higher than the 1.9% consensus of the WSJ forecasters. At least by this Treasury bond-market derived estimate of future inflation, there don't appear to be any inflationary pressures building.

Pent-up Consumer Demand Is Unleashed - Retail Sales Register Highest Yearly Increase in Four Years

WSJ -- "U.S. retail sales surged in March, topping expectations and giving a strong sign consumers are growing more confident the economy is improving. Retail sales leaped by 1.6% last month, the Commerce Department said today. Economists surveyed by Dow Jones Newswires had forecast a 1.3% increase. The gain was the biggest in four months.

Robust car sales drove much of the better-than-expected increase in retail sales. Yet excluding the automotive sector, other retailers were strong as well. Clothing stores, for instance, saw sales jump by 2.3%. The report Wednesday was another suggestion that a pent-up demand from the recession is being unleashed within the recovering U.S. economy."

MP: On a year-to-year basis, retail sales increased 7.6% in March, the highest annual gain since January 2006, more than four years ago.

U.S. Trade Volume Increases 20% from Last April

International trade data from yesterday's trade BEA report show that total U.S. trade (exports + imports) has increased 20% from the April 2009 low of $271.7 billion to $326 billion in February, the highest volume since December 2008. From their 2009 lows, imports have increased by 22.6% and exports by 17.7%.

Tuesday, April 13, 2010

Why So Few? Women Choose Different Disciplines

One summary of the report "Why So Few?" from Susan Pinker is:

"Women avoid going into STEM careers (science, technology, engineering and math) because hidden cultural signals have persuaded them that women don't have what it takes to succeed in those fields. The few women who do buck these stereotypes then tend to abandon their career plans due to implicit gender biases and university science programs that make women feel unwelcome. Hence, a ratio of women in physical science and math that won't budge past 20 percent, and the title of the report, 'Why So Few?'"

Susan writes further that:

"There's good evidence that on average, women choose different disciplines than men do--or in different proportions--and they do so with their eyes and options open. What about Margaret Chan, the head of the World Health Organization and arguably the world's most powerful public health official, or all the other talented women who go into biology, medicine, dentistry, ecology, pharmacology, neuroscience, or veterinary science, all science programs that were mostly male forty years ago, but are now dominated by women on every university campus? Do the women really choose these fields over physics and engineering because they've been convinced by subliminal forces that their math skills are sub-par?"

Another V-Shaped Sign of Recovery: OECD Index

The OECD released updated data yesterday for its Composite Leading Indicators Index for 29 member countries. The Leading Indicators Index has increased in each of the last 12 months, and reached the highest level in February (103.57) since May of 1979, more than 30 years ago (see chart above, data here). It sure looks to me like another V-shaped sign of worldwide economic recovery - add this to the growing list.

Update on Recession Ending in July 2009

I posed a question on this recent CD post asking why the St. Louis Fed graphs are showing the recession ending in July 2009. Max commented and provided the answer. In the Notes section below each graph you can click on "US recession dates" where it says:

"The NBER has not yet determined the end of the recession that began in December 2007. The date 2009-07-01 has been substituted in graphs as an estimate. This estimate is based on a statistical model for dating business cycle turning points developed by Marcelle Chauvet and Jeremy Piger (A Comparison of the Real-Time Performance of Business Cycle Dating Methods, Journal of Business and Economic Statistics, 2008, 26, 42-49). For more information, see

The graph above shows the Chauvet and Piger recession probabilities back to January 2010 (data here). By July 2009, the recession probability had decreased to 15%, from 77.3% in June 2009, and that huge drop signalled the end of the last recession. Since August of last year, the recession probabilities have been in single-digits and falling, to only 2.8% for January 2010 (most recent month).

My UM-Flint colleague Chris Douglas also points out that the Minneapolis Fed is also using July 2009 as its estimate of the end of the recession.