Saturday, April 24, 2010

Mean/Median Confusion

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