Tuesday, August 17, 2010

Intrade Odds Above 60% for Reps to Take House

Intrade odds that the Republicans will control the House after the November elections have been trading above 60% for the last six days, and the current closing price is 64.7%. 

Real Compensation Increase from 2000 to 2009: Miltary (84%) vs. Federal (37%) vs. Private (9%)

"Rapidly rising pay and benefits in the armed forces have lifted many military towns into the ranks of the nation's most affluent communities, a USA TODAY analysis finds.

The hometown of the Marines' Camp Lejeune — Jacksonville, N.C. — soared to the nation's 32nd-highest income per person in 2009 among the 366 U.S. metropolitan areas, according to Bureau of Economic Analysis (BEA) data. In 2000, it had ranked 287th. The Jacksonville metropolitan area, with a population of 173,064, had the top income per person of any North Carolina community in 2009. In 2000, it ranked 13th of 14 metro areas in the state.

The USA TODAY analysis finds that 16 of the 20 metro areas rising the fastest in the per-capita income rankings since 2000 had military bases or one nearby.

What's driving the income growth: pay and benefits in the military have grown faster than those in any other part of the economy. Soldiers, sailors and Marines received average compensation of $122,263 per person in 2009, up from $58,545 in 2000 (see chart above). Military compensation — an average of $70,168 in pay and $52,095 in benefits — includes the value of housing, medical care, pensions, hazardous-duty incentives, enlistment bonuses and combat pay in war zones. More than 300 U.S. servicemembers have died this year in Iraq and Afghanistan.

After adjusting for inflation, military compensation rose 84% from 2000 through 2009. Compensation grew 37% for federal civilian workers and 9% for private-sector employees, the BEA reports (see chart below)."

HT: Newsalert

ND's Record-Setting Oil Production Fuels Economic Boom with Record Employment, 3.6% Jobless Rate

Following an ongoing pattern that I have been following all year, North Dakota set more new records in June for monthly oil production (see chart above, data here).

According to a report earlier this year from Bloomberg, "Drilling advances are enabling producers to tap the Bakken, where rocks lack the porosity and permeability of conventional oil fields. The Bakken contributed to last year’s 7.5 percent gain in U.S. crude output, the biggest since 1955 and the first in 18 years. 

Output may reach 300,000 to 400,000 barrels a day by mid-2011 and stay at that level for 10 to 15 years, said Lynn Helms, director of the North Dakota Mineral Resources Department. The state’s previous estimate was 220,000 to 280,000. "

The following are new, all-time record highs set in June:

Daily Oil Production: Record high 315,282 barrels in June, which has already exceeded the previous forecast mentioned above that oil output in North Dakota would reach 300,000 in mid-2011; that's a 5.8% increase from May, a 46.6% increase from June 2009, and a 89.7% increase from June 2008.

Total Monthly Production: Record high 9,458,455 barrels in June, almost double the amount produced two years ago.

Number of Wells Producing: Record high 4,746 in June, 13.4% above last year.

Barrels per Well: Record high of 1,993 in June, 29.3% above last year.

Daily Oil Per Well: Record high of 66 barrels in June.

As a direct result of the oil boom, North Dakota's economy is booming as well, with the lowest state jobless rate in the country of 3.6% in June, and recent jobs gains that completely offset all of the jobs lost during the recession, bringing North Dakota's employment to a record high in June of 371,300 (see bottom chart above).    

Summer Salary Survey for the College Class of 2010

According to the National Association of Colleges and Employers (NACE) Summer Salary Survey for the college Class of 2010:

1. Engineering degrees account for four of the five most highly paid majors among the college Class of 2010.

2. Accounting services employers extended the greatest number of offers to this year’s crop of bachelor’s degree graduates, followed by engineering services and financial services

3. The overall starting salary offer to Class of 2010 bachelor’s degree graduates now stands at $48,661—down by 1.3% from an average salary of $49,307 posted last year at this time. 

Beloit College Mindset List for the Class of 2014

"Born when Ross Perot was warning about a giant sucking sound and Bill Clinton was apologizing for pain in his marriage, members of this fall’s entering college class of 2014 have emerged as a post-email generation for whom the digital world is routine and technology is just too slow. Each August since 1998, Beloit College has released the Beloit College Mindset List. It provides a look at the cultural touchstones that shape the lives of students entering college this fall."

This year's list includes 75 items, here's a sample:

1. Few in the class know how to write in cursive.

2. Email is just too slow, and they seldom if ever use snail mail.

3. Korean cars have always been a staple on American highways.

4. They never twisted the coiled handset wire aimlessly around their wrists while chatting on the phone.

5. The first computer they probably touched was an Apple II; it is now in a museum.

6. Once they got through security, going to the airport has always resembled going to the mall.

7. American companies have always done business in Vietnam.

8. Rock bands have always played at presidential inaugural parties.

9. The Post Office has always been going broke.

10. The nation has never approved of the job Congress is doing.

11. Honda has always been a major competitor on Memorial Day at Indianapolis.

Doubleheaders, Starting Times and Gender Equity

Inside Higher Ed -- "A sports conference that always scheduled weekday basketball doubleheaders in which women’s teams played the first game -- letting the men play in the later time slot -- has altered the practice, after an anonymous sex discrimination complaint charged that this made the women’s games appear to be a “warm-up” act for the men’s games.

Now, hoping to avoid possible gender equity suits, other athletic conferences are considering similar scheduling changes.  Last month, the Great Lakes Intercollegiate Athletics Conference announced that it would alternate from season to season the order in which men’s and women’s teams would play in doubleheaders. The men will play first this season, and the women will play first next season.

Dell Robinson, the conference commissioner, said the decision was made after the league received an inquiry in March from the U.S. Department of Education’s Office for Civil Rights. An anonymous complaint filed with the agency argued that the negative connotation conveyed by always having women’s teams play first in these doubleheaders was detrimental to women’s athletics."

Monday, August 16, 2010

China Might Be #2 by GDP, but It Ranks #99 for Per-Capita GDP Behind Jamaica, Belize and Namibia

According to a Bloomberg story today, "China surpassed Japan as the world’s second-largest economy last quarter, capping the nation’s three- decade rise from Communist isolation to emerging superpower. The country of 1.3 billion people will overtake the U.S., where annual GDP is about $14 trillion, as the world’s largest economy by 2027."

Adjusting for GDP (Purchasing Power Parity) on a per-capita basis, China (at $6,567) has a long way to go before it achieves "superpower" status, considering that it ranks #102 according to the CIA, #99 according to the IMF, and #92 according to the World Bank.  In fact, on a per-capita basis in 2009, China ranked behind Namibia, Jamaica, Belize, Thailand, El Salvador, and Albania.  And the last time the U.S. had per-capita GDP of $6,567 was back in 1932.

HT: Gene Hayward

More On Total Trade vs. Net Exports

I had a post last week about how trade gets reported: a) we treat exports as a positive contribution to the U.S. economy and imports as a negative contribution, and b) we never report the total amount of trade, but instead report the net difference between exports and imports, leading to analysis such as this from Vanguard:

"The economy continued to show signs of weakness in June as the U.S. trade deficit widened at an unprecedented pace." 

Alternatively, it could be reported that imports in June exceeded $200 billion for the first time in 20 months, and import activity has improved in 8 out of the last 10 months (see top chart above).  Further, if you look at the composition of imports in the bottom chart, it seems strange to consider the increases in imports to be a "sign of weakness," because they contributed to a widening of the trade deficit in June. 

More than half of U.S. imports are inputs (industrial supplies, raw materials and capital goods) that were purchased by U.S. firms and will become part of some production process in the U.S.  In June, more than $110 billion was spent by American companies on foreign inputs, which seems to indicate a sign of strength and expansion, not weakness and contraction, no?  Likewise, if American consumers could afford to spend 29.2% more on foreign cars, food and clothing this June than last June, how is that a sign of "economic weakness."      

As I mentioned before, I think this obsession with the trade deficit and "net exports" can be traced to the fact that the calculation of Gross Domestic Product treats exports as positive and imports as negative, but maybe that's not the only way to measure economic performance.  Fisher Investments summarized it this way: "Focusing on net exports is simply wonky. We benefit in myriad ways from importing goods others make more cheaply and efficiently. Plus, increased imports is a sign of economic vibrance!"

America's Busiest Airports

Here are the top 10 U.S. Airports, ranked by January-May 2010 Total Scheduled Enplanements (domestic and international passengers), according to the Bureau of Transportation Statistics.

What is the busiest airport in the U.S.?  Hint: It's not even close, the #1 airport has 43% more traffic than the #2 airport.  Notice also that 8 out of the 10 busiest airports are in the South, and 7 out of 10 are in Right-to-work states. 

The Race Card is Maxed Out

The Daily Show With Jon StewartMon - Thurs 11p / 10c
Race Card Is Maxed Out
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HT: Don Boudreaux

Sunday, August 15, 2010

Inflation Variability Reached All-Time High in 2009

There's been a lot of debate lately about inflation, and many conflicting opinions about whether we're headed for inflation or deflation.  The consensus among economists seems to be now leaning more towards pending deflation than inflation, and yet gold, the classic hedge against pending inflation, is still trading close to all-time historical highs of around $1200 per ounce, double the price four years ago and triple the price five years ago.  Between the summer of 2008 and the end of year, the monetary base doubled, and yet the annual CPI inflation rate was negative in most months in 2009 on an annual basis.  So there seems to be a lot of conflicting signals, and perhaps a breakdown of some of the traditional relationships regarding inflation and other key variables. 

Here's another twist to add to the inflation confusion - despite relatively low inflation in recent years, inflation variability is at an all-time high, another break from the traditional positive relationship between the level of inflation and level of inflation variability (or uncertainty).  That is, low inflation is usually associated with low inflation variability, and high inflation is associated with high levels of inflation variability.  

For example, the charts above show that the high levels of inflation in the 1970s and early 1980s (red lines) were associated with high levels of inflation variability (blue lines) and when inflation fell in the 1990s, it was accompanied by a fall in inflation variability.  But now in recent years, we are seeing historically high levels of inflation variability associated with relatively low levels of inflation.   

Note: In the top chart above, inflation uncertainty/variability (blue line) is measured with a GARCH (1,1) model and in the bottom chart inflation variability (blue line) is measured with a 12-month moving average of the standard deviation of the inflation rate.  The statistical details of how to measure a time series of inflation variability aren't as important as the fact that both of these measures of inflation variability show higher levels in recent years than the previous peaks in the 1970.   

So despite low levels of inflation over the last five years, inflation variability peaked in 2009 by both measures, and those historically high levels of variability might be adding to the confusion about whether we're headed for inflation or deflation.  And the high levels of inflation variability might be a result of the Fed's erratic, "stop-and-go" monetary policy over the last few years.         

Update: There is also some statistical support for a negative relationship between inflation variability and output growth, which could help explain why the economic recovery has been weak.  That is, higher inflation variability adversely affects economic performance and leads to lower economic growth for industrial production or real GDP, ceteris paribus.   

Cars Aren't Free, So Why is it Free to Park Them?

From Tyler Cowen in today's NY Times, "99 percent of all automobile trips in the United States end in a free parking space, rather than a parking space with a market price.

The question Tyler addresses is: If we don’t give away free cars or free gas, then why do we give away parking spaces for free?

Economics Goes to Hollywood

Watch the trailer above for "Freakonomics: The Movie," in theaters on October 1, but premiering on iTunes on September 3.

Saturday, August 14, 2010

Global Economic Recovery? Mercedes Sales Surge

Stuttgart, Germany -- "Sales at Mercedes-Benz continue to improve, rising by 17 percent in July. This marked the ninth month in a row that sales have increased at a double-digit rate. Global deliveries to customers amounted to 97,700 units last month (July 2009: 83,500). As a result, sales now total 654,400 units since the beginning of the year (January-July 2009: 566,600), representing an increase of 16 percent.

Mercedes-Benz made great gains in many automotive markets in July. The brand had its best month ever in China (incl. Hong Kong), where it sold 14,600 passenger vehicles (July 2009: 4,800), an increase of 205 percent compared to the same month last year. As a result, Mercedes-Benz remains the fastest-growing premium brand in China.

Mercedes-Benz achieved its biggest gains last month in the dynamically growing market of South Korea, where 1,300 customers bought a vehicle bearing the Mercedes star. This was five times the number sold in July of last year (plus 446 percent). Within the Asia/Pacific region, sales also rose substantially in Australia (plus 48 percent). Mercedes-Benz in July also achieved its best month ever in Russia (plus 116 percent). Record sales were posted as well in India (plus 142 percent) and Turkey (plus 155 percent)."

L.A. Port Shipping Reaches 23-Month High in July

I reported on Wednesday that international trade reached a 20-month high in June, and Friday's report from the Port of Los Angeles provides additional statistical evidence of an ongoing boom in international trade activity. Shipping volume reached a 23-month high in July of 730,746 Twenty-foot Equivalent Units (TEUs), the highest monthly shipping activity since August of 2008 (see chart above), and 26.8% above July last year. On a year-to-date basis, shipping activity at the LA Port is up by 16.8% compared to last year.

Other highlights include:

1. Imports (loaded inbound containers) were up 21% and exports (loaded outbound) increased by 6% compared to last July.
2. The 26.8% increase in July follows double-digit gains of 32.3% in June, 19.9% in May and 11.9% in April.  The last time there were back-to-back monthly gains as high as 26.8% and 32.3% was back in 2003. 
3. For the month of July, this year's shipping activity was the highest in four years since July of 2006, and this follows a record last month for the highest June shipping volume ever in history.

Canada, Land of Smaller Government, Has Regained All Jobs Lost in 2008-09 vs. U.S. Still Down By -8m

The chart above displays monthly employment levels in the U.S. and Canada back to 2002, and shows that while Canada has now basically recovered all of the jobs that were lost during the recession, the U.S. is still about 8 million jobs below the pre-recession peak employment level.  In fact, a recent WSJ article by Jason Clemens points out that "Canada is emerging more quickly from the recession than almost any industrialized country." 

How did Canada survive the global slowdown with fewer job losses than the U.S. (-2.3% reduction in employment vs. almost -6% in the U.S.), and how did Canada recover from the recession so much faster that the U.S.?  Well, it sure wasn't because Canada raised taxes, like the U.S. is now considering during a fragile recovery. In fact, Canada has actually been aggressively cutting both taxes and government spending, with impressive results in economic performance.  Here's more from the WSJ article "Canada, Land of Smaller Government":

"Canadian taxes have also come down at the federal and provincial level. They were reduced with the stated goal of improving incentives for work effort, savings, investment and entrepreneurship. Tellingly, the last three Canadian elections have all had key debates on tax relief—not whether there should be tax cuts but rather what type of tax cuts. Beginning in 2001 under a Liberal government, even the politically sensitive federal corporate income tax rate has been reduced. It is now 18%, down from 28%, and the plan is to reduce it to 15% in 2012. The U.S. federal rate is 35%."

And what about government spending? Accoding to Jason, "If present trends continue, within two or three years Canada will have a smaller government as a share of its economy than the U.S."

Jason concludes that "Americans can learn much by looking north," and maybe the lesson from Canada is that tax cuts along with cuts in government spending are the keys to both improved economic performance and greater fiscal responsibility. 

Friday, August 13, 2010

Chart of the Day: Lowest Mortgage Rates in History

30-year fixed mortgage rates fell to 4.44% this week, according to Freddie Mac, which has to be the lowest rate ever in the history of the world.  Maybe it's time now to refinance, or buy that $25,000 condo?

Intrade Odds Now 70%: Republicans to Take House

I'm not sure exactly what happened, but Intrade odds surged today by 7.5% to a 69.9% chance that the Republicans will control the House after the November elections.

Problem with New Blogger Comment Spam Filter

Blogger recently added some kind of new spam filter for comments, and some of your comments with links (e.g. from Walt G. and Juandos) have been automatically sent to a special spam area that requires moderation.  So in case your comments with links don't appear automatically, it's not that they are being censored in any way, it's just a new problem with Blogger.  I'll see what I can do to remove or adjust the spam filter for comments, to make it as easy as possible for you to continue to add comments with links.  Please accept my apologizes and assurance that I have not started any new kind of comment censorship.   

Doom-and-Gloom Hasn't Hit the Containers Market

"The first half was a crackling good start to the year, so why all the worry? Container shipping volumes and profits rebounded — first half box handling increased 15, 20 and 19 percent, respectively, at the ports of Los Angeles, Long Beach and Charleston (see chart above). The resulting capacity shortages and skyrocketing rates triggered huge swings from loss to profit at container lines.

As Neptune Orient Lines’ Ron Widdows somewhat triumphantly commented on Aug. 6 in announcing a $100 million second quarter net profit versus a $146 million loss a year earlier (and a 53 percent increase in revenue), “The result for this latest quarter reflects significant progress as we turn around our performance from the economic downturn of 2009.”

And the market is holding. Whatever doom-and-gloom sentiment may exist, it hasn’t hit the container markets yet. Drewry Shipping Consultants’ Container Rate Benchmark for the trans-Pacific spot market soared 225 percent over the last year and backed off only imperceptibly in the last week after climbing steadily since March. It got a further boost in recent weeks from carriers’ apparent success in implementing a peak-season surcharge on import containers."

From the commentary "Doom and Gloom, Round 2" by Peter Tirschwell, senior PV for global strategy at UBM Global Trade, in the Journal of Commerce (subscription required).  

Perfect Proportional Representation: Nobody Can Demonstrate It, And Yet It's Taken As a Norm

"Anyone who has watched football over the years has probably seen at least a hundred black players score touchdowns-- and not one black player kick the extra point. Is this because of some twisted racist who doesn't mind black players scoring touchdowns but hates to see them kicking the extra points?

At our leading engineering schools-- M.I.T., CalTech, etc.-- whites are under-represented and Asians over-represented. Is this anti-white racism or pro-Asian racism? Or are different groups just different? 

As for baseball, I have long noticed that there are more blacks playing centerfield than third-base. Since the same people hire centerfielders and third-basemen, it is hard to argue that racism explains the difference.

No one says it is racism that explains why blacks are over-represented and whites under-represented in basketball. Bean-counters only make a fuss when there is a disparity that fits their vision or their agenda.

Ask the bean-counters where in this wide world have different groups been proportionally represented. They can't tell you. In other words, something that nobody can demonstrate is taken as a norm, and any deviation from that norm is somebody's fault!"

Thursday, August 12, 2010

Sports Feminists vs. The Market

In 2009, more than 23 million sports fans attended a professional basketball game. But fans evinced significantly greater interest in the men’s NBA, which captured 92.3 percent (21.39 million) of the total attendance, while women’s professional basketball (WNBA) attracted only 7.7 percent of the total number of basketball fans (1.77 million, see chart above). In other words, 12 basketball fans attended an NBA game in 2009 for every one fan that attended a WNBA game.

Given the fact that fan interest in men’s basketball was 12 times greater than for women’s basketball, wouldn’t it be natural to expect that media coverage for the NBA would be much greater than for the WNBA? Well, that’s exactly what a recent study by the Center for Feminist Research (University of Southern California) found in its study “Gender in Televised Sports"—the NBA got greater media coverage in 2009 than the WNBA, by a factor of 3.5 to 1 (see chart).

You would think the sports feminists would be thrilled. After all, the WNBA got only 7.7 percent of the attendance at professional basketball games in 2009, but women’s basketball received a disproportionately larger share of the media coverage, at 22.2 percent of the total. Therefore, using attendance as a direct measure of fan interest, men’s pro basketball was significantly under-reported by the media (it got 92 percent of total attendance but only got 78 percent of media coverage), and women’s pro basketball was significantly over-reported (it had 7.7 percent of attendance, but got almost three times that share of media coverage).

But the sports feminists and gender activists aren't thrilled at all, they're actually really upset.  Find out why here.

Intrade Odds at 62% for Republicans to Take House

Intrade odds for the Republicans to control the House are now at an all-time contract high of 62%

Portland, Seattle, and Denver Home Sales in June Were Above Both May 2010 and June 2009

1. Portland -- A total of 3,008 new and resale houses and condos closed escrow during June in the five-county Portland-Vancouver-Beaverton metro area. June sales rose 5.2 percent from 2,859 in May and increased 11.3 percent from 2,703 in June 2009. The median price paid for all new and resale houses and condos combined in June was $235,000, up 2.2 percent from $230,000 in May but down 2.9 percent from $242,000 a year earlier.

2.  Seattle -- A total of 4,513 new and resale houses and condos closed escrow during June in the Seattle-Tacoma-Bellevue metropolitan statistical area encompassing King, Snohomish and Pierce counties. June sales rose 9.0 percent from 4,142 in May and increased 9.6 percent from 4,118 in June 2009.  Seattle-area sales have risen on a year-over-year basis for 12 consecutive months.

3. Denver-area home sales picked up in June but remained well below average. A total of 4,881 new and resale houses and condos closed escrow in June across the eight-county Denver-Aurora metro area. That was up 12.8 percent from May and up 6.7 percent from a year earlier.  The median price paid for all new and resale houses and condos combined in June was $217,740, up 2.1 percent from $213,000 in May and up 3.6 percent from $210,000 in June 2009.

Intermodal Container Traffic Up Over 2008 & 2009

WASHINGTON, D.C. – Aug. 12, 2010 – "The Association of American Railroads today reported only moderate gains in rail traffic for the week ending Aug. 7, 2010. U.S. railroads originated 284,507 carloads for the week, up 3.5 percent compared with the same week in 2009, but down 13 percent from the same week in 2008. In order to offer a complete picture of the progress in rail traffic, AAR reports 2010 weekly rail traffic with comparison weeks in both 2009 and 2008. Note that U.S. rail traffic fell sharply in fall 2008, when the financial crisis took hold.

Intermodal traffic totaled 231,208 trailers and containers, up 18.6 percent from the same week in 2009, but down 1.2 percent compared with 2008. Compared with the same week in 2009, container volume increased 19.8 percent and trailer volume rose 12 percent. Compared with the same week in 2008, container volume increased 6.8 percent and trailer volume dropped 30.7 percent.

Sixteen of the 19 carload commodity groups increased from the comparable week in 2009, with metallic ores, up 61.2 percent, and metals and metal products, up 37.8 percent, posting the most significant increases. In comparison to 2008, all 19 commodity groups posted declines.

MP: The growth in intermodal freight traffic has been especially strong all year, with carload loadings showing slightly weaker improvements.  Weekly intermodal traffic of 231,208 trailers and containers for week 31 was just slightly below last week's volume of 232,895, which was the highest weekly intermodal activity for all of both 2009 and 2010.  This also marks the 30th consecutive week in 2010 of a positive weekly gain compared to the comparable week in 2009, and the gains have been double-digit improvements in 16 out of the last 20 weeks starting in February.  And the container volume component of intermodal freight is above last year's level by 19.8%, and above the 2008 level by 6.8%. 

Although this latest report is not quite as strong as last week's report when both carloads and intermodal freight set weekly records for 2009 and 2010, Warren Buffett's "favorite economic indicator" is still indicating improvements over last year for shipping activity by rail.

The Monks vs. The Louisiana Funeral Cartel

The Institute for Justice has teamed up with a group of monks from Saint Joseph Abbey to get Louisiana’s casket licensing law overturned. Under Louisiana law, it is a crime for anyone but a licensed funeral director to sell “funeral merchandise,” which includes caskets.

To sell caskets legally, the monks would have to abandon their calling for one full year to apprentice at a licensed funeral home, learn unnecessary skills and take a funeral industry test. They would also have to convert their monastery into a “funeral establishment” by, among other things, installing equipment for embalming human remains.

The monks face crippling fines and up to 180 days in jail. This is classic economic protectionism, and this case has a great chance of making it to the Supreme Court.

See the video above and go here for more information.

Pulse of Commerce Index Reaches 23-Month High

MINNEAPOLIS, Minn., August 11, 2010 – "All signs continue to point to an economy in recovery with the latest release of the Ceridian-UCLA Pulse of Commerce Index (PCI) by UCLA Anderson School of Management. The July PCI climbed 1.7 percent after dropping 1.9 percent in June.

Though the PCI fell significantly in June, a careful examination of the daily data revealed that June was not as bad as the headline number suggested because of a late Memorial Day and due to the second half of June being stronger than the first. This more positive interpretation of the June data has now been confirmed with a strong July PCI.

Year-over-year growth for July of 8 percent represented the eighth straight month of mid to high single digit year-over-year percentage growth after approximately two years of decline. The sustained growth is welcome news; however, the PCI needs to reach year-over-year growth of 10 to 15 percent in the near term to drive a meaningful increase in employment.

“The key takeaway from the July report is that the economy continues to recover – which is encouraging – but the pace needs to substantially pick up to put people back to work,” said Ed Leamer, chief PCI economist. “With the unemployment rate still at 9.5 percent and consumers understandably nervous about opening their wallets, it is hard to be very optimistic about economic growth. On the other hand, there is nothing about the PCI that is supportive of the pessimistic double-dip view.”"

MP: The chart above shows the seasonally-adjusted, three-month moving average (data here) version of the PCI, which has increased now for the last thirteen months in a row starting in July 2009, which is likely when the recession ended.  In July of this year, the PCI reached 110.62, the highest level since the 111.23 reading in August of 2008 almost two years ago.

Related: Trucking Activity Fuels TravelCenter Earnings

HT: Scott Grannis, who reported on the PCI yesterday.

Wednesday, August 11, 2010

U.S. Total International Trade (Exports + Imports) Reaches 20-Month High of $350 Billion in June

Every month the BEA releases its closely-watched report on “U.S. International Trade in Goods and Services,” here’s a link to today’s release. In June there was $150.5 billion of international selling activity (U.S. firms selling their output to other countries, or exports) and $200.3 billion of international buying activity (U.S. firms and consumers purchasing products from other countries, or imports). Then what the BEA does next (and this is what gets reported widely by the media) is to subtract imports ($200.3 billion in June) from exports ($150.5 billion), to arrive at the monthly “trade deficit,” which was -$49.9 billion in June.

When the trade deficit gets larger (in absolute terms) this is described by the media as a negative event, here’s an example today from Haver Analytics:

“Unexpectedly, the June U.S. foreign trade deficit deteriorated to $49.9B from $42.0B in May. The combination of lower exports and higher imports brought the deficit to its deepest level since September 2008.”

But this standard approach to calculating international trade activity seems somewhat flawed. Why should exports of U.S. goods and services be seen as a positive contribution to the U.S. economy (these are goods that we produce but consumers and firms in other countries get to consume), and imports of foreign goods into the U.S. seen as a negative contribution to the economy (these are goods produced by foreigners, but we get to consume them)? In other words, the implication that a larger deficit is a "deterioration" of our trade position can only result from the false, mercantilist belief that exports are somehow “good” and imports are “bad.”

Another way to ask the question: When analyzing the contribution of international trade to the U.S. economy, why should U.S. sellers (exporters) have such a favored position (their sales are considered as a positive contribution) over U.S. buyers/importers, whose international transactions are considered to be a negative contribution to the economy? After all, both exports and imports are important to the U.S. economy, and shouldn't we really be more concerned about the overall total amount of international trade taking place by American buyers and sellers than the difference of international trading activity between those two groups of Americans?

I think the answer is that international trade data is used to calculate Gross Domestic Production (GDP) by the BEA, and that economic measure focuses specifically on the production of domestic goods, and not the consumption of goods and services, which would include both domestic and foreign products. That’s why exports are considered as a positive contribution to production and increase GDP, and imports are a negative contribution to production, and subtracted from GDP (C + I + G + X – M).

Given the importance of all international transactions to the U.S. economy, why not consider a measure of international trade that would compute the total amount of international trading activity in a given month by ADDING exports to imports, instead of netting out these two amounts to calculate the “trade deficit”?

Here’s how the June statistics might get reported:

Total U.S. trade with the rest of the world (sales of U.S. products to consumers and firms in other countries PLUS purchases of foreign production by American consumers and businesses) reached a 20-month high of $350.8 billion in June, the highest level since October 2008, and 42.6% above the April 2009 low of $246 billion (see chart above).

Further, the combined international trade volume for U.S. buyers and sellers has increased in 11 out of the last 13 months (following ten consecutive declines), providing further evidence that the economy started on a recovery path last summer and continues to make solid gains almost every month. Both the sales of U.S. goods and services produced by American firms and sold to the rest of the world, and the purchases of foreign-produced goods and services by American consumers and firms, have been on an upward trend as the U.S. and global economies recover.

Antidote to Obamacare and Gov't. Healthcare: Dr. Wal-Mart is Changing the Face of Medicine

COLUMBUS DISPATCH -- "From operating one of the nation's largest optometry businesses to offering in-store retail health clinics to selling $4 prescriptions, Wal-Mart is changing where people get health care.

When Wal-Mart started selling generic medications for $4 for a month's supply, critics said it was just a way to lure more customers. Six years later, that move has changed the way doctors prescribe medications and made the big-box retailer a force in the nation's health-care system.  Most chain pharmacies followed Wal-Mart's lead, saving consumers money on drug costs.  The company says it has saved its customers $3 billion in prescription costs since starting the generic program.

"It's part of this whole wave of getting health care in places where you don't expect," said Ron Galloway, a Georgia-based filmmaker and speaker who speaks nationally about Wal-Mart's influence on the U.S. health system. "Obamacare is going to have people looking for getting primary care in other places than hospitals. And Wal-Mart, they can ramp up quickly."

Falling for the Promise of an Untested Redeemer

From today's WSJ article "The Obsolescence of Barack Obama" by Johns Hopkins School of Advanced International Studies Professor Fouad Ajami:

"It is in the nature of charisma that it rises out of thin air, out of need and distress, and then dissipates when the magic fails. The country has had its fill with a scapegoating that knows no end from a president who had vowed to break with recriminations and partisanship. The magic of 2008 can't be recreated, and good riddance to it. Slowly, the nation has recovered its poise. There is a widespread sense of unstated embarrassment that a political majority, if only for a moment, fell for the promise of an untested redeemer—a belief alien to the temperament of this so practical and sober a nation."

If You Tax Something, You Get Less of It

"In New York, the average state, federal and local tax on a pack of 20 cigarettes is now $6.02. That includes an 8 percent combined state and local sales tax, as well as a $1.01 federal excise tax, according to the state tax department. New York raised its tax on July 1 to $1.60 a pack to generate $260 million to help offset a $9.2 billion budget gap.

A pack of Marlboros hovered around $6 or $7 a pack at Lucky 7 before the tax hike. Now, a pack costs $9.60. The store’s cheapest, Grand Prix, costs $7.95 a pack and its most expensive, Carlton, checks in at $11.05 a pack. A pack of Senecas manufactured by Indian nations ? $3.50 at the Onondaga Nation Smoke Shop. That’s $2.52 less than the tax alone on the average pack of non-Nation cigarettes. A pack of Marlboros costs $6.50 there.

But President Jim Calvin of the convenience store association, called the tax increase a “policy disaster.” “Law-abiding stores like ours lose enormous amounts of business, state and local governments lose hundreds of millions in tax revenue, and public health loses because the financial incentive to quit is easily and routinely circumvented,” he said."

HT: Chris Gardner

Prediction: The cigarette tax will not generate $260 million in tax revenue.

NY Fed Model: No Chance of a Double-Dip in 2011

The New York Federal Reserve updated its "Probability of U.S. Recession Predicted by Treasury Spread" this week with treasury yield data through July 2010, and the Fed's recession probability forecast through July 2011 (see top chart above). The NY Fed's Treasury model uses the spread between the yields on 10-year Treasury notes (3.01% in July) and 3-month Treasury bills (0.16% in July) to calculate the probability of a U.S. recession up to twelve months ahead (see details here) using the spread between those two yields (2.85% in June, see bottom chart above).

The Fed's model (data here) shows that the recession probability peaked during the October 2007 to April 2008 period at around 35-40% (see chart above), and has been declining since then in almost every month. For July 2010, the recession probability is only 0.06% and by a year from now in June of next year the recession probability is only slightly higher, at only 0.3137% (less than 1/3 of 1%).

According to the NY Fed Treasury Spread model, the chances of a double-dip recession through the middle of next year are essentially zero, see earlier CD post here.

Markets in Everything: Betting on Grades

Inside Higher Ed -- "Ultrinsic, which is one year old and still in its beta phase, invites college students to make bets on whether they can make or exceed a certain grade in a course. If a student makes the grade, Ultrinsic pays him according to the calculated handicap; if not, the student pays the company."

Chronicle of Higher Education -- "A Web site called Ultrinsic tries to make the rewards of studying more immediate. Students can make a small bet on how well they'll do in a course, with a starting limit of $25 on how much they can earn. The students contribute a chunk of the money, and Ultrinsic puts up the rest. If they make the grade, they win it all. If they don't, the students lose what they put in. And the higher students set their sights for their own academic performance, the bigger the payoff."

See also Marginal Revolution.

Tuesday, August 10, 2010

July Tax Collections in Some States Are Booming

1. TENNESSEE – State sales tax revenues for July jumped with the largest monthly growth in over three years. The last month in which sales tax collections exceeded this month’s growth rate was April of 2007.

2. OKLAHOMA - State revenue collections for the month of July, the first of the new fiscal year, outperformed both prior year collections and the official estimate, state Treasurer Scott Meacham reported. "Collections in all major areas are above the same month of last year," Meacham said. "As we begin the new fiscal year, the recovery of Oklahoma's economy is obviously under way."

3. KENTUCKY — State General Fund tax revenue grew for the third consecutive month in July and is on pace to reach budgeted expectations in the new fiscal year.  For the month, sales tax revenue was up a strong 8.1 percent, corporation tax revenue was up 25.2 percent and income tax revenue was up 3.3 percent, compared to July 2009.

4. GEORGIA -- For the second consecutive month, tax collections -- an indication of economic activity -- improved in July. Officials announced Friday that tax collections were up 4.7 percent in July over July 2009. That's after a 3.8 percent gain in June. It may not seem like much, but the state hasn't registered consecutive months of improved tax collections in more than two years.

5. MASSACHUSETTS -- Massachusetts got $721 million in income taxes, $21 million more than the same month last year, or a 3 percent increase. That was $67 million more than the state expected to collect. Sales tax collections totaled $450 million, up more than 30 percent from July 2009 and $12 million above the state benchmark.

"Suspicious Packages": A Proposed Islam-Friendly Gay Bar To Be Built Next to Mosque at Ground Zero

On the Glenn Beck show, Greg Gutfeld discusses his plan to "build and open the first gay bar that caters not only to the west, but also Islamic gay men. To best express my sincere desire for dialogue, the bar will be situated next to the mosque Park51, in an available commercial space."

HT: Nick Gillespie

If You Tax Something, You Get Less of It

In this previous CD post, it was reported that world-class Jamaican sprinter Usain Bolt won't be competing in this weekend's Aviva London Grand Prix because of a new U.K. tax rule that imposes a top rate of income tax of 50 percent on athletes, not just on the income earned in the U.K., but also on a proportion of their worldwide sponsorship and endorsement income. 

Now it looks like some of the leading professional golfers aren't so sure they want to play in this year's Ryder Cup, scheduled to take place in Wales in October.  The European Tour's director of public relations said today that the tax rule was "seriously hampering our efforts."

You have to wonder, couldn't they have predicted this would happen? 

HT: Chris Silva

Update: Tiger Woods’ reluctance to accept a Ryder Cup wild card may in part be due to a £1m tax bill he could face by playing.

ASA Staffing Index Reaches 94-Week High in July

The American Staffing Association (ASA) Staffing Index for temporary and contract employment activity reached a 94-week high of 94 for the week of July 26, the highest index level since a reading of 95 for the week of October 6, 2008 (see chart above, data here).

Compared to the same week last year, the latest ASA Staffing Index has improved by 27% for Week 31 (see bottom chart above). This marks the 15th week in a row with percentage gains above 20% compared to the same month in 2009, the 24nd straight week of double-digit percent increases vs. 2009, and the 30th consecutive week for the ASA Index being above the same level in the previous year (every week this year).

The ongoing gains in the ASA Staffing Index every week this year to a new 94-week high, along with the recent huge gains in online help wanted ads,translating into more broad-based, permanent job creation as we move forward, and a gradual decline in the nation's jobless rate. 

Monday, August 09, 2010

Chart of the Day: Jobs vs. Help Wanted Ads Gap

The chart above shows monthly payroll employment and monthly online help wanted ads from May 2005 to July 2010.  Since the April 2009 low of 3,188,800 total online help wanted ads, there has been an increase of 1.105 million help wanted ads to 4.29 million in July.  From the December 2009 bottom of 129.58 million jobs there has been an increase of only 654,000 payroll jobs, for a ratio of 1.7 new jobs advertised and available for every one new job added to U.S. payrolls.  And the last time there were 4.29 million online help wanted ads in November 2008, there were 135 million payroll jobs.  So perhaps there's a long lag between when online help wanted ads appear and when those jobs are actually filled, in which case we can expect almost 5 million jobs to be filled based on the number of jobs advertised.  Or maybe the "U.S. could end up with a permanent caste of long-term unemployed, like those that weigh on government budgets in some European countries," as mentioned in today's Wall Street Journal?

Muslim Raheel Raza Speaks Out Against Ground Zero Mosque

Despite 9.5% Jobless Rate, Firms Struggle to Hire; Help Wanted Ads Increased by 1m Since Apr. 2009

Wall Street Journal -- "With a 9.5% jobless rate and some 15 million Americans looking for work, many employers are inundated with applicants. But a surprising number say they are getting an underwhelming response, and many are having trouble filling open positions.

"This is as bad now as at the height of business back in the 1990s," says Dan Cunningham, chief executive of the Long-Stanton Manufacturing Co., a maker of stamped-metal parts in West Chester, Ohio, that has been struggling to hire a few toolmakers. "It's bizarre. We are just not getting applicants."

Employers and economists point to several explanations. Extending jobless benefits to 99 weeks gives the unemployed less incentive to search out new work. Millions of homeowners are unable to move for a job because the real-estate collapse leaves them owing more on their homes than they are worth.

The job market itself also has changed. During the crisis, companies slashed millions of middle-skill, middle-wage jobs. That has created a glut of people who can't qualify for highly skilled jobs but have a hard time adjusting to low-pay, unskilled work like the food servers that Pilot Flying J seeks for its truck stops."

Some economists fear the U.S. could end up with a permanent caste of long-term unemployed, like those that weigh on government budgets in some European countries. "It is a very worrisome development," says Steven Davis, an economist at the University of Chicago's Booth School of Business. "It leads over a long period of time to social alienation as well as economic hardship."

MP: The chart above helps to illustrate the situation described in the WSJ article.  Online help wanted ads (available from the Conference Board) reached a 20-month high in July at 4,293,300, the highest number since November of 2008, and an increase of more than 1 million since the April 2009 low of 3,188,800.  During the same period (April 2009 to July 2010), the jobless rate has remained stubbornly stuck at between 9-10%, despite an increase in more than 1 million new job openings.   

Completely Automatic Underground Car Parking

HT: Bob Wright

Where Americans Are Spending More...and Less

Since the recession started, Americans have increased spending the most on telephone equipment, pets, education, child care, health care, housing, food and drink and have cut back spending the most on moving, motor vehicles, gas, recreational vehicles, video/audio equipment, and travel outside the U.S.

Read more of Mike Mandel's analysis on the changes in consumer spending since the fourth quarter of 2007.  

Markets in Everything: Smart Parking Meters with 'Demand-Responsive Pricing'

"San Francisco has been working on making parking "smarter" for quite a while now, and it's just recently taken another big step in that direction by starting to replace over 5,000 older parking meters with the snazzy new model pictured above. Those will not only let you pay with a credit or debit card, but will automatically adjust parking rates based on supply and demand, which means you could pay anywhere from $0.25 to $6.00 an hour depending on how many free spaces there are. Those rates are determined with the aid of some sensors that keep a constant watch on parking spaces, which also means you'll be able to check for free spaces in an area on your phone or your computer before you even leave the house."


More On the Higher Education Bubble

Glenn Reynolds has a new follow-up article to his earlier article that predicted that "higher education is in a bubble (see chart above), one soon to burst with considerable consequences for students, faculty, employers, and society at large." In his new article, Glenn offers some advice to students (don't go into debt) and colleges (don't go on spending binges).

Creating A New Job Carries a Punishing Price Due to Government's 33% Surtax on a Typical Job

Michael Fleischer, a small business owner in New Jersey, writes in today's WSJ that when he adds it all up, it costs him $74,000 to put $44,000 in his median-paid employee's pocket and provide her with $12,000 in benefits, because of the 33% surtax charged by the state and federal governments for income taxes, Social Security taxes (employer and employee shares), state and federal unemployment coverage, workers' compensation, and Medicare (employer and employee shares).  Mr. Fleischer concludes that:

"A life in business is filled with uncertainties, but I can be quite sure that every time I hire someone my obligations to the government go up. From where I sit, the government's message is unmistakable: Creating a new job carries a punishing price."

HT: Juandos and Pete Friedlander

Sunday, August 08, 2010

The Miracle of Flight Has Never Been Cheaper

There's been a lot of complaints lately about air travel because of crowded planes, fees for checked luggage, security lines, etc., and there's a lot of nostalgia for the good old days of free food, no extra fees for baggage or anything else, half-empty planes where you could often get 2 or 3 seats to yourself, no security issues, etc. But I don't think anybody is too nostalgic for the airfares of yesteryear, which were 66% higher in 1993 at an average ticket price of $541 (in 2010 dollars) compared to today's average air fare of only $326.  That's an average savings today of $215 per flight compared to the average airfare in 1993, and an average savings of more than $100 per flight compared to the average airfare in the 1990s (1993-1999, data here and here).     

I couldn't find average airfare data before 1993, but it's probably safe to say that the average, inflation-adjusted airfares of 2009-2010 are the cheapest in history, in case that's any consolation for your recent inconveniences while travelling by air.   

And any time you're really depressed about your air travel experience, watch Louis C.K.'s video "Everything's Amazing and Nobody's Happy," which you can now watch on your laptop while flying on an airplane that has Internet access, and be thankful that you're sitting in a chair flying through the air in the sky, because of the "miracle of human flight."
Update: According to this source (thanks to Jet Beagle), "The average airfare dropped by more than one-third between 1977 and 1992 (adjusting for inflation).  That would mean that the average airfare in the late 1970s was around $800 (in today's dollars). 

Saturday, August 07, 2010

Update: Lemonade Stands Get Reprieve

"Multnomah County's top elected official apologized Thursday for health inspectors who forced a 7-year-old girl to shut down her stand last week because she didn't have a food-safety permit."

HT: Ron H.