Tuesday, June 08, 2010

What Illinois Can Learn from Texas About Wal-Mart

After opening its first Chicago store on the city's west side in 2006, Wal-Mart has unsuccessfuly attempted to open a second store on Chicago's south side in one of two locations - Pullman and Chathman - which would bring groceries, clothing, retail merchandise, and jobs to a part of the city that is desperate for all of those.  What's standing in the way of economic development, life, hope and jobs for the south side neighborhoods of Chicago?  Organized labor and their political Democratic enablers. 

A recent study reportedly shows that the west side Chicago Wal-Mart created about 300 jobs, but contibuted to a job loss of about 300 from businesses on the west side that closed after Wal-Mart opened in 2006.  But the Chicago Sun-Times presents some pretty devastating criticism in an editoral titled "Anti-Wal-Mart study just doesn't add up":

"Too bad the researchers didn't count the jobs at the new businesses that opened after Wal-Mart's arrival on the West Side. There are roughly 22, according to the local alderman, Emma Mitts, including Menards, Food 4 Less, Aldi, two bank branches, CVS and Burlington Coat Factory. That information wasn't available, the researchers say.

Too bad they also didn't factor in other reasons, unrelated to Wal-Mart, nearby businesses closed. Nor did they compare West Side business closure rates with rates in other similar communities. Again, that information wasn't available. Without this key data, this research is only a starting point -- and nothing close to a definite statement about Wal-Mart's economic impact."

It's worth noting that those lost [approximately 300] jobs paid low wages, an average of $9.02 an hour in 2008, according to the study. That compares with the Chicago Wal-Mart's reported full-time average wage of $11.77."

MP: Even if there was no net gain in jobs from the Chicago Wal-Mart, the cost savings to area shoppers could have been significant from having access to Wal-Mart - an estimated $2,500 annual savings per household in 2006 according to this study.  Additionaly, the state of Illinois experienced significant job losses in general in the three years following the opening of the Chicago Wal-Mart in 2006 (see chart above).  In fact, the number of jobs in Illinois was the same in January of this year as in January of 100, so it's hard to blame Illinois's (and presumably Chicago's) stagnant economy on Wal-Mart.    

And it could certainly be correlation and not causality, but it's interesting to note that one of the states that has seen the most robust job growth over the last decade or more - Texas (see chart above) - has also been one of the states where Wal-Mart has expanded the most, suggesting that more Wal-Mart stores can be consistent with more, not fewer, jobs.  Especially in "right-to-work" states like Texas, where organized labor has less political clout to stop new Wal-Marts, like they do in Illinois.   

See this Dallas News article about Wal-Mart in Texas, where it employs 144,470 workers and had $35 billion of sales in 2009 - to put that amount in perspective, it's more than the Gross State Product of entire states like Vermont, Wyoming, North Dakota, Montana, Alaska, or South Dakota.

Intrade Election Odds > 90%

1. Carley Fiorina: 96%

2. Meg Whitman: 90.1%

3. Sharron Angle: 92.9%

Larry Summers Redux and "Fulfilling the Potential of Women in Science Through Social Engineering"

From John Tierney's column in yesterday's NY Times "Daring to Discuss Women in Science":

"[Former Harvard President Larry Summers] acknowledged that there were many talented female scientists and discussed ways to eliminate the social barriers they faced. Yet even if all these social factors were eliminated, he hypothesized, the science faculty composition at an elite school like Harvard might still be skewed by a biological factor: the greater variability observed among men in intelligence test scores and various traits. Men and women might, on average, have equal mathematical ability, but there could still be disproportionately more men with very low or very high scores.

These extremes often don’t matter much because relatively few people are involved, leaving the bulk of men and women clustered around the middle. But a tenured physicist at a leading university, Dr. Summers suggested, might well need skills and traits found in only one person in 10,000: the top 0.01 percent of the population, a tiny group that would presumably include more men because it’s at the extreme right tail of the distribution curve."

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

Actually, there is persistent statistical evidence both that: a) boys outperform girls on the SAT math test (there is a difference in means), and b) there is significant "right tail disparity" on the SAT math test, i.e. boys are overrepresented for math scores on the high end (there is a difference in variability).  

The top graph above (data here) shows the persistent male-female SAT math test gap over time.  The 35-point gap in math test scores in 2009 (average score of 534 for boys and 499 for girls) is basically unchanged from the 36-point test score gaps in 1973 (525 vs. 489) and 1974 (524 vs. 488).  In other words, the male-female SAT math score gap has persisted for decades for a large sample size of more than 30 million American high school students who have taken the SAT since 1972. 

The bottom graph shows the "right tail disparity" for the 2009 math SAT test (data here).   For example, for perfect scores on the math SAT of 800, males (6,928) outnumbered females (3,124) by a ratio of 2.22 to 1. That is, 69% of test-takers who got perfect math scores were males vs. 31% of perfect scores by females. Or we could also say that there were 222 high school boys who got perfect SAT math scores for every 100 high school girls.

The graph further shows that boys outperformed girls at all 23 math test scores between 580-800 (10 point intervals, with male-female ratios above 1.0), and then for math test scores between 200 points and 570, girls outnumbered boys (male-female ratio below 1.0). Adjusting for the fact that 107,000 more girls (n=818,760) than boys (n=711,368) took the SAT in 2009 makes this evidence even stronger, since 0.974% of boys scored 800 on the SAT math test (6,928 out of 711,368) vs. 0.386% of girls (3,124 out of 818,760), for a ratio of 2.52 to 1 in favor of boys for perfect math test scores of 800, even greater than the 2:22 to 1 ratio for unadjusted scores.

Bottom Line: Based on math SAT scores, boys score significantly higher on average compared to girls by 30+ points, this gender gap in favor of boys is persistent over four decades, boys are significantly overrepresented for math test scores on the high end, and boys outnumber girls by a ratio of more than 2:1 for perfect 800 scores. 

Tierney also discusses new pending, federal legislation called “Fulfilling the potential of women in academic science and engineering,” which  if passed would empower the White House science adviser to oversee regular “workshops to enhance gender equity, and increase awareness of gender bias.”  Given the huge gender differences in the math SAT (both in mean and variance), isn't it possible that men are overrepresented in science and engineering because they have greater aptitude in those areas? If that's the case, no amount of federal legislation, short of mandated quotas, will result in the perfect gender parity outcomes that the gender activists seem determined to achieve.

Maybe the legislation should more accurately be called "Fulfilling the potential of women in academic science and through social engineering?

The Bullish Case for U.S. Economy, U.S. Equities

BlackRock Vice-Chairman Bob Doll in today's WSJ:

"There is no question that we face formidable, long-term structural problems that make U.S. stocks less attractive for many investors. But I believe that the spirit of innovation and entrepreneurship that has defined America in past crises will prevail again and propel our markets forward. As such, overweight positions in U.S. equities are more than warranted.

Though housing is weak and debt and deficit levels are rising, compared to the rest of the world the U.S. is in reasonably good shape. Our economic fundamentals are sound: Manufacturing levels are up and interest rates and inflation are low. The broader economy's recovery is also finally translating into meaningful employment improvements—recent employment reports show increases in average hourly earnings and hours worked—and I believe this trend will continue.

When the markets faltered in 2008 and revenue growth stalled, U.S. companies moved decisively to cut costs—unlike their European and Japanese counterparts. Now that recovery has taken hold, businesses are replenishing inventories and rehiring, corporations are expanding exports, and American consumers are responding better than most expected.
Potential risks—trade complications, escalating credit contagion, overly aggressive financial regulation, and tax increases—clearly remain. But for the moment, our nation seems poised to remain a City Upon a Hill."

The Left Flunks Economics 101

From today's WSJ: "Are You Smarter Than a Fifth Grader? Liberals and Democrats do badly on questions of basic economics."

The questions were:

1) Restrictions on housing development make housing less affordable (unenlightened answer: disagree).

2) Mandatory licensing of professional services increases the prices of those services (unenlightened answer: disagree).

3) Overall, the standard of living is higher today than it was 30 years ago (unenlightened answer: disagree).

4) Rent control leads to housing shortages (unenlightened answer: disagree).

5) A company with the largest market share is a monopoly (unenlightened answer: agree).

6) Third World workers working for American companies overseas are being exploited (unenlightened answer: agree).

7) Free trade leads to unemployment (unenlightened answer: agree).

8) Minimum wage laws raise unemployment (unenlightened answer: disagree).

How did the six ideological groups do overall? From best to worst, average number of incorrect responses (out of 8):

Very conservative: 1.30 out of 8
Libertarian: 1.38
Conservative: 1.67
Moderate: 3.67
Liberal: 4.69
Progressive/very liberal: 5.26

HT: Matt B, The Plaid Pundit

Monday, June 07, 2010

Interesting Fact of the Day

"Among the 19 students who got a perfect score on the ACT science test in the past two decades, 18 were boys."

~John Tierney in today's NY Times

Q: Does that mean that Larry Summers can get his job back as president of Harvard University? After all, according to Tierney, Dr. Summers merely suggested that a tenured physicist or mathematicians at a top university "might well need skills and traits found in only one person in 10,000: the top 0.01% of the population, a tiny group that would presumably include more men because it’s at the extreme right tail of the distribution curve." 

In other words, if male professors greatly outnumber female professors in the math or physics department at Harvard or Yale, it might be because boys outnumber girls by 18:1 for perfect scores on the ACT science exam.  Stated differently, why should we expect perfect gender equity in the math or physics departments at Harvard or Yale, when boys get almost 95% of the perfect scores on the ACT science exam?   

Economic Freedom = 20 Years of Life Expectancy

Life expectancy is almost 20 years longer (79.12 year) in countries with the most economic freedom (Hong Kong, Singapore, New Zealand, Chile, Switzerland, U.S.) than the life expectancy (59.4 years) in those countries with the least economic freedom (Zimbabwe, Myanmar, Angola, Chad, Congo), according to the Economic Freedom of the World 2009 Report from Cato.

Harvard Study: Pork Crowds Out Private Activity

From a study by three Harvard Business School professors titled "Do Powerful Politicians Cause Corporate Downsizing?":

"We show that becoming a powerful Senate or House committee chair results in a significant increase in federal funds flowing to the ascending chairman’s state. Thus, a congressman’s ascension to a powerful committee chair creates a positive shock to his or her state’s share of federal funds that is virtually independent of the state’s economic conditions.

We focus specifically on the 232 instances over the last 42 years where the senator or representative of a particular state ascends to the chairmanship of a powerful congressional committee. During the year that follows the appointment, the state experiences an increase of 40-50 percent in their share of federal earmark spending, and a 9-10 percent increase in total state-level government transfers. The funding increase persists throughout the chair’s tenure and is gradually reversed upon his departure. Because these spending shocks are sufficiently numerous, are spread out across time and different locations, and are economically meaningful, they provide us with significant power to examine the impact of fiscal policy on the private sector."

MP: Wouldn't you think that those increases in federal earmark spending and state-level government transfers would have overwhelmingly positive effects on state economies? Not necessarily, which is why the answer to the question in the paper's title is YES

"We find that fiscal spending shocks appear to significantly dampen corporate sector investment activity. Specifically, we find statistically and economically significant evidence that firms respond to government spending shocks by: i) reducing investments in new capital, ii) reducing investments in R&D, and iii) paying out more to shareholders in the face of this reduced investment opportunity set. Further, we find that when the spending shocks reverse (through a relinquishing of chairmanship), most all of these behaviors reverse. Finally, we also find some evidence that firms scale back their employment, and experience a decline in sales growth.  Our findings demonstrate that new considerations may limit the stimulative capabilities of government spending."

Manheim Used Vehicle Index At Record High

From today's report from Manheim Consulting:

"Wholesale used vehicle prices rose again in May. The Manheim Used Vehicle Value Index for May was a record 121.0, which represented a 10.9% increase from a year ago (see chart above). May's strength was driven, in large part, by vehicles in the lower and middle price tiers, but prices for late-model vehicles also remained strong as they were helped by low levels of new vehicle inventory."

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 Manheim Used Vehicle Index has now risen for six straight months, has risen every month since January 2009 except for one (October 2009).  From close to an all-time low of 98 in December 2008, the index is now at the highest-ever level in the history of the gauge of wholesale used vehicle prices going back to 1995.  It's one more V-shaped indicator of an economic rebound.

The Higher Education Bubble: It's About to Burst

The Housing Bubble:
The Higher Education Bubble:

The top chart above shows the housing bubble in the U.S., using monthly median new home prices (Census data here) and the monthly Consumer Price Index (CPI, data here), back to 1978, where both series are adjusted to equal a value of 100 in January 1978.  The bottom chart illustrates a much, much bigger bubble than the real estate bubble - the "higher education bubble" - based on an annual comparison of the CPI, median new home prices and the CPI for "College Tuition and Fees" (data here).  Note that the housing bubble resulted from about a 4-time increase in home prices between 1978 and 2006, and college tuition has now increased by more than twice that amount since 1978 - it's gone up by more than a factor of ten times.  The college tuition bubble makes the housing price bubble seem pretty lame by comparison. 

According to Glenn Reynolds, writing in the Washington Examiner, "Higher education's bubble is about to burst":

"It's a story of an industry that may sound familiar.  The buyers think what they're buying will appreciate in value, making them rich in the future. The product grows more and more elaborate, and more and more expensive, but the expense is offset by cheap credit provided by sellers eager to encourage buyers to buy.

Buyers see that everyone else is taking on mounds of debt, and so are more comfortable when they do so themselves; besides, for a generation, the value of what they're buying has gone up steadily. What could go wrong? Everything continues smoothly until, at some point, it doesn't.

Yes, this sounds like the housing bubble, but I'm afraid it's also sounding a lot like a still-inflating higher education bubble. And despite (or because of) the fact that my day job involves higher education, I think it's better for us to face up to what's going on before the bubble bursts messily."

Read more here.

Sunday, June 06, 2010

"The Lottery" Film

Click arrow above to watch the trailer, and from yesterday's WSJ, an interview with the 27-year-old filmmaker, "Storming the School Barricades": A new documentary that could change the national debate about public education."

BP, The Tax Man and The LA Fishermen; BP Has Paid 18,000 Claims So Far, Promises to Continue

LA TIMES - "BP's request for tax records poses a problem for some residents of fishing communities in southeastern Louisiana — the nonconformists who haven't kept records or reported their cash income (like marina-owner Michael Turgeau pictured above who is usually paid in cash, "Man, I wish I'd done a better job of record-keeping."). The first step for a commercial fisherman or coastal business seeking compensation for losses suffered in the oil spill seems simple enough: Submit copies of a commercial fishing license, proof of residence and tax statements.

But the request for tax records poses a serious challenge to some residents of close-knit fishing communities on the swampy edges of southeastern Louisiana, which for generations have harbored self-reliant nonconformists who don't pay much heed to everyday rules and regulations. In other words, they often get paid in cash — and don't always report it.

BP officials said that more than 25,000 claims had been submitted and that more than 12,000 payments totaling about $36 million had been sent to people facing financial ruin."

Update from AP on claims paid by BP: An official for BP says the oil giant has paid 18,000 claims along the Gulf Coast totaling more than $48 million. Darryl Willis is the BP vice president overseeing the claims process. He said Sunday in Florida's Escambia County that the company has received 37,000 claims so far. He says the unpaid claims are still being processed and that none have been denied. He says "we'll pay until we're done paying."

Inside Look At Bernard Madoff's Life Behind Bars

"From the day Bernard Lawrence Madoff, prisoner No. 61727-054, arrived at the softer of Butner, North Carolina's two medium-security facilities in handcuffs and shackles, his over-the-collar hair shorn close, his rich man’s paunch diminished, he was a celebrity, even if his admirers were now murderers and sex offenders.

Yet even in this crowd, Madoff stands out. Every inmate remembers the day he arrived. “It was like the president was visiting,” a visitor to Butner that day told me. News helicopters buzzed overhead, and the administration locked down part of the prison, confining some inmates to their units, while an aging con man with high blood pressure shuffled through processing, where other inmates fitted him for a uniform and offered a brief orientation: “Man, chill out and go with the flow, ” was the advice of one former drug dealer.

Quickly, the flow came to Madoff. From the moment he alighted, he had “groupies,” according to several inmates."

("F*** my victims," Madoff is reported to have said to fellow prisoners.)

Read more the New York Magazine's profile of Bernard Madoff's new life behind bars. 

HT: Steve Bartin

Cuba Has Shortages of Just About Everything.... Except Condoms. Cubans Get Creative w/Condoms

Boats are illegal in Cuba (I wonder why?), so Cuban fisherman use condoms as floats. 
"On this island of shortages and scarcities, the latex condom has uses that stretch far beyond the bedroom. At baseball games, rock concerts and other entertainment events, Cubans blow them up and bat them around the crowd like beach balls. When parents can’t afford birthday party balloons or can’t find them, they unfurl a few “Vigor” brand prophylactics and start puffing. The latex is so strong and supple that kids can even draw faces on them.

The Cuban government sells the Chinesemade rubbers three-for-a-penny at pharmacies and snack bars, cheap enough for anyone to afford. The island has shortages of just about everything else though, thanks to five decades of US sanctions and a ruinous state-run economy. It should come as no surprise, then, that enterprising Cubans have found all sorts of recreational and industrial applications for their condoms that have nothing to do with birth control."

Including being used for fishing (see photo above), read more here.

Advances in Sportsmanship and Self-Esteem?

From Canada's NATIONAL POST:
In yet another nod to the protection of fledgling self-esteem, a Canadian children’s soccer league in Ottawa has introduced a rule that says any team that wins a game by more than five points will lose by default. The league has 3,000 children enrolled ranging in age from four to 18 years old.

One father, Bruce Cappon, called the rule ludicrous: “I couldn’t find anywhere in the world, even in a communist country, where that rule is enforced.  Everybody wants a close game, nobody wants blowouts, but we don’t want to go by those farcical rules that they come up with. Heaven forbid when these kids get into the real world. They won’t be prepared to deal with the competition out there.”
HT: J-Walk Blog

Saturday, June 05, 2010

Clothing Inflation Gender Gap

The chart above shows the CPI for Men's Apparel (data here) and Women's Apparel (data here) from January 1978 to April 2010. Men's clothing has appreciated by 1.06% per year since 1978, which is more than double the annual rate of appreciation for women's clothing (0.52%).  Compared to 1978, men today are paying 40% more on average for their clothing, and women are paying only 20% more.  According to the selective concern among the "gender activists" about gender imbalances, any gender outcomes that favor men can be traced to overt or "unexamined" sex discrimination. 

Q: What are we then to make of these gender imbalances in favor of women for clothing prices?  Is this an outcome of price discrimination because women are more "ruthless" in their shopping habits for clothing, male demand for clothing is more "price insensitive," and therefore men (women) pay higher (lower) prices. 


Company Website: Can You Spot the IT Guy?

Link to company website.

10 Big Companies With BIG Hiring Plans

From The Street: 10 big companies that have announced big plans to hire:

1. Boeing: The airplane maker plans to build a new facility in South Carolina and hire as many as 150 employees for the new site. There are more than 400 open positions on the company's Web site. If the Boeing NewGen Tanker is selected as the U.S. Air Force's next aerial refueling aircraft, the company could add as many as 7,500 jobs in Kansas.

2. JPMorgan Chase: CEO Jamie Dimon said in a statement the company plans to add almost 9,000 jobs in the U.S. The company's Web site lists more than 5,000 job openings.

3. Intel will aim to add more college graduates as part of the Invest in America Alliance. There are more than 700 open positions in the U.S. on Intel's career Web site.

4. Nationwide Financial Services said it plans to fill approximately 1,400 open positions across the country. This is an increase from last year at this time, when there were 600 open positions at the company.

5. Ford is shifting some work typically done by suppliers in Mexico to the U.S. The carmaker plans to spend $135 million to design and produce hybrid-electric vehicles. Ford plans to hire more than 50 engineers and add 170 more jobs transmission plants in Michigan.

6. IBM announaced plans to open a new technology service center in Columbia, Mo. The opening of this new service center would create as many as 800 technical jobs. Job hunters can also find almost 2,000 open positions posted on IBM's Web site in a wide range of categories, including technical, management, research and sales.

7. Google hired more than 800 people during the first quarter, bringing the company's headcount to 20,621, up from 19,835 in December. And the search giant doesn't plan to stop. Google has announced plans to bring on 2,000 more employees this year.

8. General Motors. Since last July, the company has restored or created more than 9,100 jobs in the U.S. and Canada. GM's career Web site has more than 100 jobs listed, but the company plans to create or retain 1,600 jobs by adding new plants in New York, Ohio, Indiana and Michigan. These factories will build fuel-efficient cars and trucks.

9. GE recently announced plans to add 1,300 jobs in Michigan during the next five years. The company recently opened a new facility in Wayne County, Mich., and hired 220 people for the site. There are more than 2,000 job openings on the company's career site. As a member of the Invest in America Alliance, GE has also committed to doubling the number of recent graduates it hires this year.

10. Morgan Stanley plans to add at least 50 employees in Charlotte, N.C. Spokesman Along with the 50 open jobs in Charlotte, Morgan Stanley's Web site lists more than 1,000 open positions nationwide, as well as almost a 1,000 open jobs outside the U.S. Most of the positions are in accounting, operations and wealth management.

HT: Steve Bartin

April International Air Freight Volume Up by 25.2%

Despite a 2.4% decrease in passenger demand for internationl travel in April due to cancellations following the eruption of  the volcano in Iceland, international freight traffic increased by 25.2% compared to April of last year, following a 28.1% improvement in March.  Details here.  

May Adjusted Jobless Claims Fall to 21-Month Low

I haven't featured this pair of charts for awhile, showing: a) jobless claims vs. the labor force and b) jobless claims as a share of  the labor force, both updated through May (BLS data here and here).

The top chart shows why unadjusted jobless claims are meaningless: the size of the U.S. labor force has almost doubled over the last 42 years, from 77.57 million in 1968 to the current level of more than 154 million.  The bottom chart shows jobless claims adjusted for the size of the U.S. labor force.  Jobless claims averaged 455,250 in May, which is 0.2948% of the May labor force of 154,393,000, and represents a 21-month low (lowest since August 2008). Jobless claims as a percent of the labor force have declined in 13 out of the last 14 months, starting last April. 

This measure of initial jobless claims, adjusted for the increasing size of the U.S. labor force over time, 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 to the levels of the previous three recessions in the mid-1970s and early 1980s, and about the same as the 1969-1970 recession. The sharp reduction in adjusted jobless claims from the March 2009 high of 0.415% follows the same pattern of sharp reductions at the end of each of the last six recessions.  Call it an upside-down V-shaped recovery. 

How Currency Manipulation Creates American Jobs

Updated chart based on a previous CD post:

The chart above shows (data here) that more than 53.2% of all U.S. imported goods are: a) industrial supplies (chemicals, commodities, raw materials, etc.), and b) capital goods (machinery, equipment, parts, tools, etc.) which are being purchased by AMERICAN COMPANIES as inputs for production in the United States. Being able to purchase Chinese and other foreign inputs at the lowest possible price makes American companies MORE competitive, sell MORE of their products, and hire MORE American workers. Therefore, to the extent that American companies buy their inputs from China, one could argue that China's currency "manipulation" of appreciating the U.S. dollar helps American companies and actually SAVES and CREATES jobs in America.   

Friday, June 04, 2010

Jobs Machine: Wal-Mart Plans to Add 500,000 Jobs

Reuters -- "Internationally, where business units account for about one-quarter of Wal Mart's total sales, "we need to continue to set an impressive pace of growth and have a constant emphasis on returns," Chief Executive Mike Duke said.

As part of that growth, Wal-Mart will add 500,000 jobs to a base of 2.2 million. Wal-Mart's international business is growing at a much faster clip than in the United States. The company already has 4,110 stores in 14 countries besides the United States and is eyeing an entry into Russia."

Temporary Help Workers, Overtime Hours, Manufacturing Employment Increase in May

It's not all bad, here are some highlights from today's BLS employment report:

1) The number of temporary help workers increased by 31,000 in May to 2,086,000 employees (not counting temporary Census workers), the highest level in 18 months ago, since November 2008 (see graph above). The number of temporary workers increased in May for the 8th straight month, following 23 straight months of declines, and it marks the first time since 1999 of eight consecutive monthly increases. The 361,600 increase in temporary jobs since last October is the largest 8-month increase since this data series started in 1990.

2) Average manufacturing overtime hours increased to 4.1 hours in May (from 3.9 hours in April), reaching the highest level since 4.2 hours in November 2007, thirty months ago (see graph). Manufacturing overtime hours have increased or stayed the same in 13 out of the last 14 months, and overtime activity in the manufacturing sector has now returned to its pre-recession levels of 2007, reflecting continued expansion in U.S. factory output.

3)  Along with the increase in manufacturing overtime to pre-recession levels, the increase of 29,000 in manufacturing jobs in May is another sign that the manufacturing sector is expanding and continuing on a healthy path to recovery. Year-to-date, manufacturing employment has increased by 126,000 jobs, which is the first record of 5 consecutive monthly gains in factory jobs since 2006, and the largest 5-month increase in manufacturing employment since early 1998 - more than 12 years ago.

Rail Traffic Reaches 18-Month High in May

The Association of American Railroads (AAR) reported yesterday that intermodal volume on U.S. freight railroads for the week ended May 29, 2010, reached its highest level since November 2008. Intermodal traffic was up 35.5% from last year and 10.3% from 2008. Unlike 2008 and 2009, Week 21 of 2010 did not include the Memorial Day holiday.  Highlights include:

1. Compared with the same week in 2009, container volume increased 37.5% while trailer volume rose 25.2%. In comparison to 2008, container volume was up 19.4 percent while trailer volume fell 23.3 percent.

2. U.S. railroads also originated 286,665 carloads during the week ended May 29, up 21.9% from the comparable week in 2009, but down 8.9% from 2008.

3. All 19 carload commodities increased from the comparable week in 2009 and three groups posted increases over 2008 levels. Farm products excluding grain posted the most significant increase, up 41.1 percent over 2008.

4. For the first 21 weeks of 2010, the cumulative volume of carloads for U.S. railroads was up 7.2% from 2009, but down 13.5% from 2008, and the volume of trailers and containers was up 11.5% percent from 2009, but down 7.3% from 2008.

5. Combined North American rail volume for the first 21 weeks of 2010 on U.S., Canadian and Mexican railroads was up 10.2% from last year, and trailers and containers increased by 11.9% from last year.

Thursday, June 03, 2010

Residual Bearishness: Flashback

Sound familiar?

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 change, the sort of upheaval that happens once in 50 years.

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. Unemployment is still high; real wages are declining. The current slump already ranks as the longest period of sustained weakness since the Great Depression.

The 1930s 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 represent once-in-a-lifetime dislocations that will take years to work out. Among them: the job drought, the debt hangover, the banking 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 Mellon Bank. "There's going to be a lot of trauma before it's over."


For A Double-Dip, You'll Have to Go for Ice Cream

"The concern about a double dip is largely a function of what I'd call residual bearishness. Stung by excessive optimism in 2007, the econo-pundit community remains in a reflexive, dour crouch. Since this recovery began in the spring of 2009, it has been widely disbelieved and dismissed. Fretting about the double dip is as much about where we've been as where we are.

If you want a double dip this summer, you'll have to go to Carvel or Baskin-Robbins." 

~Daniel Gross in Slate.com

The Pickup Truck Indicator: Recovery is Real

From CNBC:

Vehicle sales at AutoNation (America's largest auto retailer with 200 locations nationwide) were up by 22% in May compared to last year, but pickup truck sales were up by 50% year-over-year in May. That's a huge sign of strength for American small businesses, according to AutoNation Chairman and CEO Mike Jackson:

"I've always said, when you want to know when this economy is going to turn, just watch the pickup sales.  All those sales are small businesses and entrepreneurs, and when they see the prospect for better business, they're going to go out and finally buy a new pickup truck. So this is a key indicator of what's going on in the U.S. economy.  This is small business America saying that the worst is over, I see opportunities in the future, I feel confident enough to go out and buy a new truck.    

Pickup trucks are bought by small business entrepreneurs who have their finger on the pulse of the U.S. economy. It's an expression of confidence in future of economy. They don't buy until they see the prospects for business are brighter."

HT: Mike LaFaive

International Evidence: Life Expectancy and GDP

The Gapminder graph above (click to enlarge, or access larger version available here) shows some cross-sectional statistical evidence of the strong link between: a) GDP per capita and b) Life Expectancy for countries around the world, to follow my CD post from yesterday about the time series evidence for the U.S.

In the graph above, high-income countries (approximately $20,000 to $50,000 in real, per capita GDP) have life expectancies at birth of about 80 years, which is about 25 years longer than the average life expectancy of about 55 years for the low-income countries (less than $2,000 in per capita GDP). As a rough estimate, a country’s life expectancy at birth increases by about one additional year for every $1,500 increase in real GDP per capita.

See more here at the Enterprise Blog

ISM Non-Manufacturing Back to 2007 Levels

From today's Non-Manufacturing ISM Report On Business:

"ISM's Non-Manufacturing Business Activity Index in May registered 61.1 percent, an increase of 0.8 percentage point when compared to the 60.3 percent registered in April (see chart above). Sixteen out of 18 industries reported increased business activity, and one industry reported decreased activity for the month of May. One industry reported no change from April.

The industries reporting growth of business activity in May — listed in order — are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Management of Companies & Support Services; Accommodation & Food Services; Agriculture, Forestry, Fishing & Hunting; Mining; Wholesale Trade; Construction; Transportation & Warehousing; Information; Retail Trade; Professional, Scientific & Technical Services; Other Services; Public Administration; Utilities; and Finance & Insurance. The only industry reporting decreased business activity in May is Health Care & Social Assistance."

MP: The ISM Business Activity Index for non-manufacturing industries has now been in expansion (index > 50) in 9 out of the last ten months, and for six straight months, both for the first time since 2007, before the recession started.  The last time the Business Activity Index was above 61 or higher was February 2006, more than four years ago.  These recent improvements in the ISM Business Activity index provide more evidence of an ongoing, V-shaped economic recovery. 
Note: The overall ISM Non-Manufacturing Composite Index (NMINMI (started in January 2008), and that reading still signals expansion (above 50).   And as Brian Wesbury points out, the Business Index is more closely related to real GDP growth than the overall NMI.

Fifth Month of Double-Digit Auto Sales Increase in May for the First Time in 26 Years, Since 1984

DETROIT NEWS -- "Auto sales rose in May after sunny Memorial Day weekend deals helped consumers shake off economic worries revived by sharp swings on Wall Street. Compared with last May, when Chrysler LLC was bankrupt and consumer demand had plunged, last month's sales were 19.1% higher at 1.1 million cars and light trucks (see chart above). Led by Chrysler, Detroit's automakers reported double-digit gains in May, padded by large sales to fleet customers."

MP: GM sales increased by 17.5% in May, Ford sales by 22% and Chrysler by 32.7%, versus May 2009 (data here).  For all automakers, the cumulative year-to-date sales through May are up by 17.2% this year vs. last year (see chart).  May also marks the fifth straight month of double-digit sales gains compared to the same month in the previous year for the first time in 26 years (since 1984, data here). 

May Monster Employment Index Rises 14% vs. 2009

From today's Monster Employment Report for May 2010:

1. The Monster Employment Index rose one point in May to 134 as employers continue to step-up hiring activity.

2. Year-over-year growth rate climbed for the fourth consecutive month in May, and the Monster Employment Index is now 14% (16 points) above the May 2009 index of 118. 

3. Online demand rose in 12 of the 20 industries monitored by the Index and remained flat in four. Healthcare and social assistance industry saw the strongest rise in online job demand in May.

4. Manufacturing and transportation industries continue 3-month growth trend.

5. Online job demand rose in May in 15 of the 28 major metro markets monitored by the Monster Index, with Orlando registering the largest monthly gain.  Compared to May last year, all metro areas have experienced employment gains. 

Wednesday, June 02, 2010

Waiting for "Superman" Trailer

"Guggenheim's documentary focuses on aspiring students and their parents, mostly minorities, together struggling against the odds to get admitted into urban charter schools. Lacking the money for private schools, or move to the suburbs where the schools are better -- although not always good -- having only neighborhood high schools that are "drop out factories," these Americans have very few options. For many their only option is finding a decent charter school. But the odds for these young students to get selected in the lottery for a charter school is often worse than for students applying to Yale University.

And the film has villains. The clearly marked, cleared attacked villain that stands in the doorway to reforming our failing system of public education. The two major teacher unions! The two major teachers unions that together are the largest contributors to the Democratic Party; the Democratic Party that refuses to support legislation to require teachers to perform better and the Democratic Party that refuses to support legislation for the more innovative, less bureaucratic, effective charter schools.

What "Waiting for Superman" drives home is to improve our education system requires improving our teachers. Requires demanding our teachers get deep in the trenches, be allowed to be flexible and innovative, persist, and to be held accountable. This the teacher unions and the Democratic Party will not accept, even for the sake of our children."

From a movie review by Stewart Nusbaumer.

Life Expectancy in the U.S. vs. Real GDP per Capita

Does it seem like there might possibly be a statistically significant relationship between: a) life expectancy in the U.S. and b) annual real GDP per capita between 1929 and 2007?

ASA Staffing Index Growth Accelerates

"The ASA Staffing Index estimates weekly changes in the number of people employed in temporary and contract work. ASA developed the index to provide a current measure of staffing industry employment trends."

The most recent ASA Staffing Index for the week of May 17 reached 90, the highest level since October 2008.  So far this year, the index of temporary help hiring has only declined in one week, and has stayed the same or improved in all other weeks.  Compared to the same week last year, the Staffing Index has improved 25% in the most recent week, which provides more evidence of ongoing increases in temporary and contract work. 

In  previous economic slowdowns, the temporary employment sector is among the first to recover, and signals future broad-based employment improvements throughout the economy in all sectors.  The acceleration of growth in the ASA Staffing Index should be a leading indicator of an ongoing sustained, V-shaped economic recovery through the rest of the year.   

The Fastest Growing Class of U.S. Millionaires: Government Workers Making 2X Private Workers

From "The Millionaire Cop Next Door" in Forbes:

"Who are America's fastest-growing class of millionaires? They are police officers, firefighters, teachers and federal bureaucrats who, unless things change drastically, will be paid something near their full salaries every year--until death--after retiring in their mid-50s. That is equivalent to a retirement sum worth millions of dollars.

If you further ask the question: How much salary would it take to live, save and build a $2 million stash over a 30-year career, the answer would be: somewhere close to $75,000 more than the nominal salary, if you include all the tax bites associated with earning, saving and investing money.

In other words, if a police officer, firefighter, teacher or federal bureaucrat is making $75,000 a year, she is effectively making twice that amount. Implied in her annual pension payout is that she diligently saved half of her annual salary--after taxes--in order to save, invest and build--again, after taxes--the $2 million pot.

So when you hear that government workers now make, on average, 30% more than private sector workers, you are not getting the full story. Government workers make more than twice as much as private sector workers, on average, when you include the net present value of their pensions."

HT: Steve Bartin

Port of Portland Shipping Up By 45% This Year

The Port of Portland recently released shipping statistics for April, which include the following highlights:

1. Total tonnage for April was 1,155,121 short tons, which was 55% above the shipping volume from April a year ago (see chart above).

2. Year-to-date tonnage this year is up by 45% compared to last year.

3. Grain tonnage this year during the first four months is 24.8% higher than 2009.

4. Auto shipments are up by 9.6% year-to-date compared to last year, and for the month of April up by 64% compared to last year.

5. Mineral bulk shipments are up by 122.5% year-to-date vs. 2009.  

6. On a three-month moving average basis, total tonnage was the highest in April since November 2008, 17 months ago.  

MP: Another V-shaped sign of an economic recovery in progress. 

Tuesday, June 01, 2010

The Rational Optimist: How Prosperity Evolves

In his new book "The Rational Optimist: How Prosperity Evolves," zoologist and science writer Matt Ridley systematically builds a case through copious data and countless studies that “the vast majority of people are much better fed, much better sheltered, much better entertained, much better protected against disease and much more likely to live to old age than their ancestors have ever been. The availability of almost everything a person could want or need has been going rapidly upwards for 200 years and erratically upwards for 10,000 years before that: years of lifespan, mouthfuls of clean water, lungfuls of clean air, hours of privacy, means of traveling faster than you can run, ways of communicating farther than you can shout,” and with more access to “calories, watts, lumen-hours, square feet, gigabytes, megahertz, light-years, nanometers, bushels per acre, miles per gallon, food miles, air miles, and of course dollars than any that went before.”

Book review from the Scientific American.

Teenagers: Silent Victims of Minimum Wage Laws

The New York Times has a long article today in its Business Section about the dismal job market for teenagers this summer, here are some excerpts from "Job Outlook for Teenagers Worsens":

"This year is shaping up to be even worse than last for the millions of high school and college students looking for summer jobs. With so many people competing for so few jobs, unemployed youth “are the silent victims of the economy,” said Adele McKeon, a career specialist with the Boston Private Industry Council who counsels students on matters like workplace etiquette, professionalism and résumé writing.

Getting the first job “is an accomplishment, and it’s independence, Ms. McKeon said. If you don’t have it, where are you going to learn that stuff?”

The unemployment rate for the 16-to-24 age group reached a record 19.6 percent in April, double the national average. For those job seekers, said Heidi Shierholz, an economist at the Economic Policy Institute, “This is the worst year, definitely since the early ’80s recession and very likely since the Great Depression.”

MP: Not once in the 1,300 word article does the writer discuss the devastating effects on teenage employment of the 41% increase in the minimum wage from $5.15 per hour in early 2007 to $7.25 by the summer of 2009.  Thanks to Jeff at the Added-Value Blog for pointing this out.  Here's my re-write:

This year is shaping up to be even worse than last for the millions of high school and college students looking for summer jobs. With so many people competing for so few jobs, unemployed youth “are the silent victims of the economy minimum wage legislation” said Mark Perry, professor of economics at the Flint campus of the University of Michigan.

Getting that first job “is an accomplishment, and it’s independence. If you don’t have it, where are you going to learn that stuff?” said a career specialist.  According to Perry, "With a 41% increase in the minimum wage between 2007 and 2009 from $5.15 to $7.25 per hour, the chances of getting that first job, along with valuable experience, on-the-job training and independence will now be more difficult than ever before. 

Especially during an economic downturn, unskilled workers have a potentially powerful weapon and advantage that can give them a competitive edge over skilled workers in a weak labor market - low wages. But between 2007 and 2009, politicians took away the competitive advantage of unskilled workers at the time they needed it most, by boosting the minimum wage for unskilled workers by 41%, and essentially pricing them right out of the worst economy and labor market since the early 1980s."

The unemployment rate for the 16-to-19 age group reached 25.4 percent in April, 15.5 points higher than the national average of 9.9% (see chart above). For those job seekers, said Heidi Shierholz, an economist at the Economic Policy Institute, “This is the worst year, definitely since the early ’80s recession and very likely since the Great Depression, in large part due to the increase in the minimum wage increases in 2007 (13.6%), 2008 (12%), and 2009 (10.7%)." 

As researchers at Northeastern University, who issued a report in April on youth unemployment, put it, “The summer job outlook does not appear to be very bright in the absence of a massive new summer jobs intervention, or a repeal of the minimum wage legislation.

The poor numbers this year are not solely a symptom of the continued weak economy, but have been made far worse by the recent hikes in the minimum wage. For generations, government data shows, at least half of all teenagers were in the labor force in June, July and August. Starting this decade, though, the number of employed teenagers began to drop, and by 2009, less than a third of teenagers had jobs. This year, the number could fall below 30 percent, and teenagers have the minimum wage to thank for the worst job prospects in a generation for their age group.

The forecast for this summer is so dire that high school students took to the streets this year in Washington, Boston and New York to push lawmakers to come up with money for summer youth jobs programs as Congress did last year, allocating $1.2 billion for a program for low-income youths. repeal the minimum wage law that students refer to as the "teenage job killer."

Update from Don Boudreaux: "Suppose Uncle Sam orders you (The New York Times) to raise by 41 percent the price you charge for subscriptions to your newspaper. Would you be surprised to find a subsequent fall in the number of subscribers? If you assigned a reporter to investigate the reasons for this decline in subscriptions, would you be impressed if that reporter files a story offering several possible explanations for the fall in subscriptions without, however, once mentioning the mandated 41 percent price hike?

Petroleum Inputs to the Sea: Natural Seeps is #1

There is an estimated 256,000 tons of petroleum entering North American waters every year, and 1,268,000 tons entering the marine environment worldwide.  Here are the sources of the "Petroleum Inputs to the Sea," according to "Oil in the Sea III: Inputs, Fates, and Effects":

1. Natural Seeps.  Natural seepage of crude oil from geologic formations below the seafloor to the marine environment off North America is estimated to exceed 160,000 tons (47,000,000 gallons), and 600,000 tons (180,000,000 gallons) globally, each year. Natural processes are therefore, responsible for 62.5 percent of the petroleum entering North American waters (see chart above), and over 45 percent of the petroleum entering the marine environment worldwide.

2. Petroleum Extraction. Activities associated with oil and gas exploration or production introduce, on average, an estimated 3,000 tons (880,000 gallons) of petroleum to North American waters, and 38,000 tons (11,000,000 gallons) worldwide, each year. Releases due to these activities, therefore, make up roughly 1.2 percent of the total petroleum input to North American waters (see chart) and 3 percent of the total worldwide.

3. Petroleum Transportation. The transportation (including refining and distribution activities) of crude oil or refined products results in the release, on average, of an estimated 9,100 tons (2,700,000 gallons) of petroleum to North American waters, and 150,000 tons (44,000,000 gallons) worldwide, each year. Releases due to the transportation of petroleum, therefore, make up roughly 3.5 percent of the total petroleum input to North American waters (see chart) and about 12 percent worldwide.

4. Petroleum Consumption.  Releases that occur during the consumption of petroleum, whether by individual car and boat owners, non-tank vessels, or runoff from increasingly paved urban areas, contribute the vast majority of petroleum introduced to the environment through human activity. On average, an estimated 84,000 tons (25,000,000 gallons) of petroleum are input to North American waters, and 480,000 tons (140,000,000 gallons) are input worldwide, each year from these diffuse sources.  Releases from petroleum consumption make up roughly 33% of the total petroleum entering North American waters (see chart) and 38% of the petroleum entering the marine environment worldwide. 

MP: By far, the largest source of petroleum in the world's oceans is natural seepage (62.5% for North America), and the smallest source is from "petroleum extraction" (1.2% for North America).  Although the percentage for "petroleum extraction" will be much higher this year due to the Deepwater Horizon oil spill, it's probably good to put this all in perspective, and consider that the transportation and consumption of petroleum contribute much higher amounts of environmental damage in a typical year than oil drilling, by factors of three times greater for oil transportation and 27 times greater for oil consumption.   

Thomas Sowell on "The Real Public Service"

"It was Thomas Edison who brought us electricity, not the Sierra Club. It was the Wright brothers who got us off the ground, not the Federal Aviation Administration. It was Henry Ford who ended the isolation of millions of Americans by making the automobile affordable, not Ralph Nader.

Those who have helped the poor the most have not been those who have gone around loudly expressing "compassion" for the poor, but those who found ways to make industry more productive and distribution more efficient, so that the poor of today can afford things that the affluent of yesterday could only dream about."

~Thomas Sowell

Markets in Everything: Gourmet Food Trucks

CHICAGO TRIBUNE -- "In the last couple of years, a gourmet food truck craze has swept cities from Los Angeles and Austin, Texas, to New York and Minneapolis. High-end chefs and talented amateurs have hopped in mobile kitchens to serve kimchi tacos, grilled cheese sandwiches and Latin-Asian chow to foodies who follow them on Twitter and line up in convivial droves.

But while Chicago is home to some of the nation's most innovative restaurants, its food truck scene has largely been left in the dust. Only "pre-prepared and packaged foods" — like the kind sold from silver lunch wagons — can be offered on the street, not the freshly made delicacies fueling the trend.

Determined to change that, Chicago-area chef  Matt Maroni has drafted a city ordinance that Ald. Scott Waguespack (32nd) plans to introduce in the City Council this month."

HT: Matt Bixler

ISM Factory Index Signals Continued Expansion

June 1 (Bloomberg) -- "Manufacturing in the U.S. expanded in May for a 10th month as factories continued to help propel the economic recovery. The Institute for Supply Management’s manufacturing gauge fell to 59.7, higher than forecast, from 60.4 in April, which was the highest level in almost six years. Readings greater than 50 point to expansion(see chart above)."

MP: The last time of ten consecutive monthly readings above 50 (indicating expansion) was the ten month period immediately preceding the last recession from February to November 2007.  The ISM index has been above a level of 55 in each month this year (January to May), which is the first time since 2004 of five consecutive months that the ISM Index has been above 55.  

Markets in Everything: Internet Dating Outsourcing

Washington Post -- "Hartshorn is a hired gun, ghostwriting correspondence on behalf of single men unwilling, too busy or too inept to do it themselves. His online dating is done on commission for Virtual Dating Assistants, one of the first full-scale Internet-dating outsourcing companies. For $600, Virtual Dating Assistants guarantees clients two dates a month; the "executive service" package promises five dates a month for $1,200."

Monday, May 31, 2010

Florida Home Sales Increase +27% in April

"Sales of existing homes in Florida rose 27% in April, which means that sales activity has increased in the year-to-year comparison for 20 months, according to the latest housing data released by Florida Realtors. Another positive sign: Last month's statewide existing-home median price of $140,100 was 1 percent higher than the statewide median price in April 2009.

Existing home sales rose 27% last month with a total of 16,781 homes sold statewide compared to 13,244 homes sold in April 2009 (see chart). Statewide existing home sales last month increased nearly 3 percent over statewide sales activity in March. Meanwhile, April's statewide existing-home median price was 2.3% higher than March's statewide existing-home median price of $137,000. It marks the second month in a row that the statewide existing-home median price has increased over the previous month's median."

MP: Assuming the median home price in Florida is not too different from the mean home price, the total housing sales volume in the state increased from about $1.84 billion in April 2009 to about $2.35 billion in April 2010, for almost a 28% increase. If we measured housing market activity like we measured vehicle sales - in unit sales, without regard to price - we would conclude that the Florida housing market is booming, with 20 consecutive monthly increases compared to the same month in the previous year, and a whopping 27% increase from April of last year. And if we measured housing activity like we measure retail sales (total sales volume), we would also conclude that the Florida housing market is doing quite well, with something like a 28% increase in sales volume (assuming the median home price is an accurate estimate of the mean home price) in April compared to last year.