Saturday, June 26, 2010

The Avertible Catastrophe in the Gulf

"The Dutch know how to handle maritime emergencies. In the event of an oil spill, The Netherlands government, which owns its own ships and high-tech skimmers, gives an oil company 12 hours to demonstrate it has the spill in hand. If the company shows signs of unpreparedness, the government dispatches its own ships at the oil company’s expense. “If there’s a country that’s experienced with building dikes and managing water, it’s the Netherlands,” says Geert Visser, the Dutch consul general in Houston.

In sharp contrast to Dutch preparedness before the fact and the Dutch instinct to dive into action once an emergency becomes apparent, witness the American reaction to the Dutch offer of help. The U.S. government responded with “Thanks but no thanks,” remarked Visser, despite BP’s desire to bring in the Dutch equipment and despite the no-lose nature of the Dutch offer — the Dutch government offered the use of its equipment at no charge. Even after the U.S. refused, the Dutch kept their vessels on standby, hoping the Americans would come round. By May 5, the U.S. had not come round. To the contrary, the U.S. had also turned down offers of help from 12 other governments, most of them with superior expertise and equipment — unlike the U.S., Europe has robust fleets of Oil Spill Response Vessels that sail circles around their make-shift U.S. counterparts.

The Americans, overwhelmed by the catastrophic consequences of the BP spill, finally relented and took the Dutch up on their offer — but only partly. Because the U.S. didn’t want Dutch ships working the Gulf, the U.S. airlifted the Dutch equipment to the Gulf and then retrofitted it to U.S. vessels. And rather than have experienced Dutch crews immediately operate the oil-skimming equipment, to appease labour unions the U.S. postponed the clean-up operation to allow U.S. crews to be trained.

A catastrophe that could have been averted is now playing out."

~Lawrence Solomon in The National Post

HT: Pete Friedlander

Friday, June 25, 2010

FL Home Sales Increase For 21st Month Year-to-Year, Median Prices for Third Straight Month

ORLANDO, Fla., June 22, 2010 – "Sales of existing homes in Florida rose 18 percent in May, marking 21 months that sales activity has increased in the year-to-year comparison, according to the latest housing data released by Florida Realtors.

A total of 16,745 single-family existing homes sold statewide last month compared to 14,172 homes sold in May 2009 (see chart above). The statewide existing-home median price of $140,400 in May was slightly higher – by $300 – than April's statewide existing-home median price of $140,100. It marks the third month in a row that the statewide existing-home median price has increased over the previous month's median."

Small Drop vs. April but May Trucking Increased 7.2% vs. Last Year, 6th Consecutive Annual Gain

ARLINGTON, VA — "The American Trucking Associations’ advance seasonally adjusted (SA) For-Hire Truck Tonnage Index decreased 0.6 percent in May, which was the first month-to-month drop since February of this year. This followed an upwardly revised 1 percent increase in April. The latest reduction put the SA index at 109.6 (see chart above).  Highlights include:

1. Compared with May 2009, SA tonnage increased 7.2 percent, which was the sixth consecutive year-over-year gain. In April, the year-over-year increase was 9.5 percent.

2. Year-to-date, tonnage is up 6.2 percent compared with the same period in 2009.

3. ATA Chief Economist Bob Costello said that truck freight tonnage is going to have ups and downs, but the trend continues in the right direction. “Despite the month-to-month drop in May, the trend line is still solid. There is no way that freight can increase every month, and we should expect periodic decreases. This doesn’t take away from the fact that freight volumes are quite good, especially considering the reduction in truck supply over the last couple of years.”

HT: Red Bund

Most Favorable Mich. Survey About Jobs in 5 Years

NEW YORK (Reuters) - "Consumer sentiment rose in June to its highest since January 2008 while reports of job losses were down sharply from a year ago, a survey showed on Friday. A gauge of current economic conditions also rose to its highest since January 2008, according to the Thomson Reuters/University of Michigan's Surveys of Consumers.

The final June reading on the overall index on consumer sentiment rose to 76 from 73.6 in May. The figure was above the median forecast of 75.5 among economists polled by Reuters, which was also the reading in early June. Reports of job losses fell by half since last June, from 65 percent of respondents to 29 percent, the survey showed.

"The June 2010 survey recorded the most favorable news heard by consumers about jobs in five years," Richard Curtin, director of the surveys, said in a statement."

The Wealth of Nations

"The wealth of nations, according to Adam Smith, the founding father of the market economy, is not measured in GDP or cash reserves. Rather, it "consists in the cheapness of provision and all other necessaries and conveniences of life."

By that standard, American wealth in general, and the wealth of poor Americans, has skyrocketed in the last half-century, and the government had relatively little -- though certainly not nothing -- to do with it. And it's not just that consumer items are cheaper than ever, they're also better than ever. An iPhone today isn't just better than yesterday's phones, it's better than yesterday's cameras, calculators, portable stereos and computers. Many of the standard features on a 2010 Honda Accord were considered luxury items 10 years ago and almost unimaginable 20 years ago."

~Syndicated columnist and AEI colleague Jonah Goldberg

U.S. Energy Policy Should Include "YIMBY"

"Whether more exploration on federal lands would make the U.S. energy independent is debatable, but more onshore development would certainly be safer. In early June there was a blowout in western Pennsylvania. Did you see it on the nightly news? No, because it was capped in 16 hours. The Texas Railroad Commission, the state agency that regulates oil and gas production there, recorded 102 blowouts of oil and gas wells since the start of 2006, resulting in 10 fires, 12 injuries, and two deaths. None of those made the nightly news either. The largest oil spill on Alaska's North Slope in 2006 was from a pipeline leak. It dumped only 6,357 barrels and had no disastrous impacts.

When kids play baseball, there is a risk that windows will get broken. Playing on baseball fields rather than in sand lots, however, lowers the risk considerably. Putting so much onshore land off limits to oil and gas development is like closing baseball parks. More windows will be broken and more blowouts result where they are difficult to prevent and stop.

Enforcement of stricter safety regulation on deepwater drilling may reduce disasters like the current one in the Gulf. But the only real way to reduce the risk of catastrophic spills is to say yes to drilling in our backyard."

~Terry Anderson in today's Wall Street Journal

Thursday, June 24, 2010

Conference Board: Eight Leading Indexes Increased

Over the last two weeks, The Conference Board has released leading economic indexes for the following eight countries, which all registered increases in April (and May for the U.S.):

1. The U.K. leading economic index increased by 0.6 percent in April to 102.2 (2004 = 100), following gains of 1.1 percent in March and 0.6 percent in February.

2. The Korea leading economic index increased 0.2 percent in April.

3. The leading economic index for Spain increased 0.2 percent in April.

4. The leading index for the United States increased 0.4 percent in May, following no change in April, and a 1.4 percent rise in March.

5. France increased 0.8 percent.

6.  The leading index in Germany rose sharply again in April by 1.6%, and it has been rising for more than a year now.

7. Australia increased 0.1 percent in April. 

8. Mexico increased 0.7 percent in April.

Some Minority Chances of Acceptance to Medical School Almost 10 Times Higher Than White/Asian.

Data are now available from the Association of American Medical Colleges (AAMC) on acceptance rates at medical schools for all students (data here) and acceptance rates for minority students (Hispanic, Black or Native American, data here), by MCAT and GPA, for the years 2007-2009 aggregated.  From those data, I was able to create the table above for the acceptance rates for non-minorities (I'm assuming white and Asian), and compare to the acceptance rates for minorities, for those applicants with an MCAT score of 24-26 and a GPA between 3.00 and 3.19. 

See updated post here.

Mortgage Rates Set Record Low 4.69%

Mortgage rates (30-year fixed) fell this week to 4.69%, according to data released today by Freddie Mac, setting an all-time record low, going back to at least 1964 (see chart above, data here).   

Weekly Rail Traffic Continues to Improve

WASHINGTON, D.C. – "The Association of American Railroads (AAR) today reported that intermodal volume on U.S. freight railroads for the week ended June 19, 2010, reached its highest level since the 45th week of 2008.  Intermodal traffic totaled 227,985 trailers and containers, up 21.2 percent from last year but down .2 percent from 2008.

Compared with the same week in 2009, container volume increased 23.2 percent while trailer volume rose 10.5 percent. Compared with the same week in 2008, container volume was up 8.8 percent while trailer volume fell 32.8 percent.

Combined North American rail volume for the first 24 weeks of 2010 on 13 reporting U.S., Canadian and Mexican railroads totaled 8,837,265 carloads, up 10.3 percent from last year, and 6,225,829 trailers and containers, up 12.5 percent from last year."

MP: The weekly report on rail traffic shows promising signs of continued improvements in rail freight activity, with intermodal traffic far above last year's level by 21.2%, and almost back to the same level of traffic for Week 24 of 2008 (lower by only 0.20%).  Container volume is up both from the same week in 2008 (by 8.8%) and the same week in 2009 (by 23.2%).  Trailer volume is also above last year's level, but down by 33% from 2008.

Combined North American (Canada, U.S. and Mexico) rail activity is up by double-digit percent increases for carloads, trailers and containers. 

Hospitals Feeling Competition from Retail Clinics?

1. Phoenix hospitals tout short emergency-room wait times in their advertising.

2. Baltimore hospitals try to improve emergency wait times. 

According to Merchant Medicine, Arizona has 54 retail clinics operated by Minute Clinic, Take Care and the Little Clinic, and Maryland has 29 retail clinics operated by Target, Minute Clinic and ImmediCare. 

Could hospitals in these states be responding to competition from the increasing number of retail health clinics, which are projected to continue to grow in the future (see chart above)?

Markets in Everything: $1,000 for a Place in Line

NY Post -- "The Big Apple has iPhone fever -- and it's gotten so bad that places in an all-day, all-night line to get one are going for more than the pricey gadget itself.  A full day before the latest update to the multimedia cellphone was scheduled to go on sale, lines snaked around the Apple flagship store on Fifth Avenue at 59th Street.

Some high-tech fans actually lined up on Tuesday for today's launch of the iPhone 4.  The crowd included several entrepreneurs who were hawking their places in line for $1,000 -- for a phone whose top price is $299."

HT: Carlo DiPietro

Wednesday, June 23, 2010

The Jones Act and Its Visible Victims

"The bottom line lesson is nothing good can come from trade restrictions except windfall gains by a small group of beneficiaries, shipping companies and their unions that come at the expense of a much larger number of people -- customers who ship and passengers who travel. The only good news is that the Gulf disaster is making the victims of such restrictions (like the Jones Act) visible."

~Walter E. Williams

Tuesday, June 22, 2010

Colombia: Rags-to-Riches Success, With a Booming Bull Market That Leads World for 10-Yr. Returns

Both the Wall Street Journal and Investor's Business Daily had editorials today about the presidential election in Colombia, which should also receive some attention for its record-setting, booming stock market rally.  Colombia's MSCI Index topped 900 for the first time last Friday, and registered gains yesterday and today, closing at an all-time record high today of 909.25 (see chart above, data here).  The bull market in Colombia is especially impressive when you consider that its market stagnated for the entire decade between 1994-2004, reached a low of 42 in December 2000, before it skyrocketed to almost 600 by early 2006, and then went over 800 last year and over 900 this year. 

On a year-to-date basis, Colombia's market has increased 15%, which is the world's highest stock market return since January.  Colombia's one-year return of 47.5% isn't too bad either, although Mexico, Indonesia, Peru and Turkey have done slightly better.  But when it comes to the average annual stock market return over the last ten years, no country in the world comes close to Colombia's return of 34.55%; not China (6.75%), not Turkey (2.66%), not Russia (13.24%), and not Brazil (14%).  In fact, the only country that even comes remotely close is neighboring Peru with a 23.6% average annual return since June 2000. 

The WSJ and IBD focus mostly on Juan Manuel Santos' landslide victory on Sunday's (note that most other countries vote on weekends,  and that weekday voting in the U.S. is unique), but point out some important economic lessons about free markets and free trade:

IBD:  "Santos is probably most dangerous for Venezuela's Hugo Chavez, because Colombia's rags-to-riches success story is so dramatic — showing that any beat-up nation can drag itself out of misery through markets — and because Venezuela and Colombia are such close neighbors. Word gets out about how well things are going in Colombia and it spreads fast in Venezuela. Santos need never fire a shot at Venezuela to slay Chavez's revolution because the power of the markets will do it for him.

Santos is also planning something that is likely to give Chavez — and for that matter, President Obama, something to think about — a forging of a more assertive Pacific alliance with free-market Chile and Peru, as well as the nations of the Pacific Rim. Given Obama's dithering on free trade — and the fact that Canada on Tuesday, has just finalized its pact, and it's obvious Colombia is going to prosper with or without its friends or enemies."

WSJ - "This triumph in Colombia also ought to echo in Washington, where Democrats in Congress and the White House continue to deny a vote on the U.S.-Colombia free trade agreement. One liberal Democratic excuse has been concerns about Mr. Uribe's (current president) security policies, but Colombia's people have now spoken.    Like Mr. Uribe, Mr. Santos wants the free trade deal to force his country to face the discipline of global competition and turn Colombia into the next Chile or Taiwan. Such progress would further reduce the FARC's appeal, and it is certainly in the U.S. national interest. This one shouldn't even be controversial.

See CD post here on Colombia, where I pose the question: 
With incredible export opportunities awaiting U.S. manufacturers in booming, emerging markets like Colombia (see chart above), with the huge potential to create much-needed jobs for America’s workers, and with universal support from almost every sector of the economy, what could possibly be holding up the Free Trade Agreements with Panama, Colombia and Korea?

ASA Staffing Index at 82-Week High

The American Staffing Association released its weekly update today on hiring trends for temporary help and contract work, with the following comment:

"During the week of June 7–13, 2010, temporary and contract employment increased 1.96%, pushing the index up one point to a value of 90.  At a current index value of 90, U.S. staffing employment is 30% higher than the level reported for the first week of the current year and is 25% higher than the same weekly period in 2009."

MP: For the 22 weeks since the beginning of the year, the ASA staffing index has increased (or stayed the same) for 20 of those weeks, and declined in only two.  The index values of 90 for both the week of May 17 and the week of June 7 mark the first time in 82 weeks (since the week of November 10, 2008) that the ASA index has been at the 90 level.  While still below 2008 levels, the gradual upward trend in the staffing index starting about a year ago signals gradual, but ongoing improvements in the labor market for temporary positions and contract work.   

Temporary help employment tracked by the 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 (see chart above), and the continuing strength in temporary hiring hopefully signals future employment growth for the U.S. economy.

June Richmond Fed Index Still in Record Territory

"Manufacturing activity in the central Atlantic region expanded for the fifth consecutive month, according to the Richmond Fed’s latest survey.  Looking at the main components of activity, shipments were virtually unchanged, while employment grew at a modest pace, and new orders grew more slowly. Other indicators varied."

MP: Despite the 3-point drop from the all-time high of 26 in May to 23 in June (a "skid" in manufacturing activity according to this report), Richmond regional manufacturing in June is at the second-highest level in the history of the index back to January 1994.   

How Gov't. Created The Ironing Board Monopoly

WASHINGTON POST -- There is one factory left in the United States that manufactures the basic ironing board, and its survival against Chinese competition demands unrelenting, production-line hustle. The company survives in part because it convinced U.S. trade officials that Chinese firms were unfairly dumping ironing boards into the United States at less than fair-market value; in response, the United States levied anti-dumping taxes of 70 to more than 150 percent on its Chinese rivals.

But imposing tariffs on foreign goods also elicits loud protests, and not just from the foreign manufacturers who face the burden. Some U.S. retailers say that the tariffs have given the American factory, long the market leader in the United States, a near monopoly on ironing boards. And economists say that the tariffs push up prices for American consumers, who buy an estimated 7 million ironing boards each year.

Some economists have also questioned whether such tariffs amount to good U.S. policy.  "It doesn't make much sense to force millions of U.S. consumers to pay higher prices for ironing boards to save 200 jobs," said Howard Rosen, an economist at the Peterson Institute who has organized efforts to get retraining programs for workers displaced by the offshoring of jobs. "It would make more
sense to help workers move to other jobs."
MP: Isn't this an example of how government trade policy created an anti-consumer, anti-competitive monopoly? Shouldn't the Department of Justice investigate?

Steve Bartin

What's Going On? Pageview Inflation?

At the bottom of this article in today's Washington Post:

This is NOT a very long article (< 1,400 words) so WHY do they stretch it out over FOUR separate web pages?  Is this "pageview inflation," or for advertising reasons, or what explains this?  

The Good Old Days Are Now: Radio Shack Version

In 1964, here's what the average American consumer could afford after working 152 hours (almost a full month) at the average hourly wage then of $2.50: a "moderately priced, excellent stereo system" from Radio Shack on sale for $379.95. 

In contrast, the typical consumer today working 152 hours at the current average hourly wage of $19 could afford this "cornucopia" of electronic goods:

Read more here at the Enterprise blog.

Monday, June 21, 2010

"Spinal Tap" Grade Inflation in Law Schools

NY TIMES -- "One day next month every student at Loyola Law School Los Angeles will awake to a higher grade point average. But it’s not because they are all working harder. The school is retroactively inflating its grades, tacking on 0.333 to every grade recorded in the last few years. The goal is to make its students look more attractive in a competitive job market.

In the last two years, at least 10 law schools have deliberately changed their grading systems to make them more lenient. These include law schools like New York University and Georgetown, as well as Golden Gate University and Tulane University, which just announced the change this month. Some recruiters at law firms keep track of these changes and consider them when interviewing, and some do not.

Law schools seem to view higher grades as one way to rescue their students from the tough economic climate — and perhaps more to the point, to protect their own reputations and rankings. Once able to practically guarantee gainful employment to thousands of students every year, the schools are now fielding complaints from more and more unemployed graduates, frequently drowning in student debt."

HT: Michael Kelly

Men Still Hold 52.8% of All Jobs

From The Atlantic article "The End of Men":

"Earlier this year, women became the majority of the workforce for the first time in U.S. history."

That statistic gets cited by the media all the time, but it's not really accurate, at least not according to the BLS household employment survey, which is more comprehensive than the payroll survey, which doesn't include the self-employed.  As of May 2010, there are almost 8 million more men (73.639 million) employed than women (65.781 million), and men hold almost 53% of all jobs (see chart above).   

SAT is Racist: Solution? Make The Test Harder.

In a recent CD post, I featured some claims that the SAT test is sexist and "rigged to favor boys," even though the College Board's Board of Trustees is headed by a woman (Youlonda Copeland-Morgan, pictured above), and has slightly more women (16 members) than men (15 members).  Now there's some new evidence that the SAT is also racially biased, and I guess therefore "rigged to favor whites," even though the current Chair of the Board of Trustees of the CollegeBoard (which owns the SAT) is black (Ms. Copeland-Morgan pictured above) and Lester Monts, the past chairman, is black.  

And this part of the new research seems especially confusing:

There's a concept on test-taking research known as "differential item functioning" (DIF). A DIF question is one on which students "matched by proficiency" and other factors, have variable scores predictably by race, on selected questions.  On some of the easier verbal SAT questions, two studies find that the DIF favored white students, but on some of the most difficult verbal questions, the DIF favored black students. The white advantage is larger such that the studies suggest scores for black students are being held down by the way the test is scored, and that a shift to favor the more difficult questions would benefit black test-takers.

The Highly Transient Millionaires

Key findings from a new study from The Tax Foundation "Income Mobility and the Persistence Of Millionaires, 1999 to 2007":

1. Using a panel of tax returns from 1999 through 2007, this report finds that nearly 60 percent of households in the bottom quintile in 1999 are in a higher quintile in 2007 (and more than 16 percent are in one of the top two quintiles in 2007). Roughly 40 percent of tax returns in the top quintile in 1999 are in a lower quintile in 2007 (and more than 14 percent moved down by two or more quintiles by 2007).

2. The report also examines the persistence/transience of millionaires and finds that this group of taxpayers, which has been the focus of millionaire surtaxes among some states and some tax policy proposals at the federal level, is highly transient. Roughly 50 percent of those taxpayers who were millionaires at some point during the 1999 through 2007 period attained this status just once. In contrast, only 6 percent of this group of taxpayers were millionaires in all nine years (see chart above).

3. Millionaires are a highly transient group of taxpayers, and it appears that the realization of capital gains is at least one explanation. This income source tends to be lumpy and periodic and is a major explanation for why taxpayers reach millionaire status.

More on The Jones Act

Wall Street Journal -- President Obama has repeatedly said his Administration is doing everything in its power to expedite the oil clean-up and mitigate the damage. But in the two weeks immediately after the spill, 13 foreign governments reached out and offered their assistance. The U.S. response? Thanks, but no thanks.  Blame it on the protectionist Merchant Marine Act of 1920, also called the Jones Act, that requires ships working in U.S. waters to be built, operated and owned by Americans.

Michael Barone -- And what about the decision not to waive the Jones Act, which bars foreign-flag vessels from coming to the aid of the gulf cleanup? The Bush administration promptly waived it after Katrina in 2005. The Obama administration hasn't and claims unconvincingly that, gee, there aren't really any foreign vessels that could help. The more plausible explanation is that this is a sop to the maritime unions, part of the union movement that gave Obama and other Democrats $400 million in the 2008 campaign cycle. It's the Chicago way: dance with the girl that brung ya.

CD Visits Break 4,000,000

Sometime earlier today, visits to CD went over the 4,000,000 mark.  Thanks very much for your support!

Sunday, June 20, 2010

Progessive Income Tax = Tax on Going to College

"In 1980, an American with a college degree earned about 30 percent more than an American who stopped education at high school.  But, in recent years, a person with a college education earned roughly 70 percent more (see chart above).  Meanwhile, the premium for having a graduate degree increased from roughly 50 percent in 1980 to well over 100 percent today.  The labor market is placing a greater emphasis on education, dispensing rapidly rising rewards to those who stay in school the longest. 

For many, the solution to an increase in inequality is to make the tax structure more progressive - raise taxes on high-income households and reduce taxes on low-income households.  While this may sound sensible, it is not.  Would these same individuals advocate a tax on going to college and a subsidy for dropping out of high school in response to the increased importance of education?  We think not.  Yet shifting the tax structure has exactly this effect."

~Gary Becker and Keven Murphy, "The Upside of Income Inequality," from The American, May/June 2007.   

Happy Father's Day: It's Still a Mancession

The top two charts above display monthly jobless rates by gender, and the third chart displays employment levels by gender, with the following key points:

1. Between 2002 and 2007, jobless rates were roughly equal by gender, except during the "jobless recovery" of 2002-2003 when male unemployment exceeded female unemployment, but never by more than 0.9% (July 2003).   

2. Male unemployment reached 11.4% in October 2009, a record all-time postwar jobless rate high for men, exceeding the previous record high of 11.2% in December 1982.

3.  Female unemployment is currently at 8.8%, and has been at that level for four out of the last eight months, but never higher.  That's far below the record-high female jobless rate of 10.4% set in December 1982.  

4. The May 2010 male-female jobless rate gap of 1.7% (10.5% male vs. 8.8% female) is down from the postwar record-high gap of 2.7% last August, but is still very high by historical standards.  During (or following) the three previous recessions (1981-82, 1990-91, 2001), the peak male-female jobless rate gap averaged about 1%, and never exceeded 1.2% (April 1983).   

5. During the 1970s, the female unemployment rate was generally higher than the male rate, and jobless rate gaps exceeded 2% during recessions, but in favor of men (see middle chart). 

6. Between December 2007 and December 2009, household employment fell by almost 8.38 million jobs, and 68.5% of those were jobs held by men (5.74 million) and 31.5% were jobs held by women (2.64 million).  During this two-year period, 217 men lost their jobs for every 100 women who lost jobs. 

Read more here about The Great Mancession of 2008-2009 (and it's still not yet over).