The Unsustainable College Textbook Bubble

I've been covering the "higher education bubble," see posts here and here.  One reason for the still-inflating higher education bubble for college tuition and fees is administrative bloat, see CD post here.

A direct partner in the "higher education bubble" is the unsustainable "college textbook bubble," captured graphically in the chart above.  To put the textbook bubble in perspective, consider that the unsustainable housing bubble started in the late 1990s when home prices started appreciating much faster than the consumer price index, and the housing bubble peaked in 2007 when median home prices had increased by a factor of about 4 since 1978. By comparison, increases in the price index for educational books and supplies have outstripped rises in the general price level for the last three decades, and are now more than 8 times higher than in 1978. Simply put, the textbook bubble displayed graphically has inflated to more than twice the size of the house price bubble.

Prediction: Just like the unsustainable housing bubble eventually peaked and crashed, the textbook bubble is likewise unsustainable and is set to crash.  As Michael Barone wrote about the higher education bubble, "The people running America's colleges and universities have long thought they were exempt from the laws of supply and demand and unaffected by the business cycle. Turns out that's wrong."  I think the exact same thing can be said about the people running today's college textbook companies. 

August State Tax Revenues Booming: Double-Dip?

Updated: 13 States Now Report August Tax Increases

1. Mississippi Tax Collections Beat Expectations in August

2. Kansas Taxes in August $38M More Than Expected

3. Pennsylvania Sees Signs of Growth in Its August Tax Collections

4. Maine Tax Revenue Bounces Back in August

5. Arkansas Governor Says State's Finances Looking Better

6. Aug. Tax Revenue Collections Increase in West Virginia

7. Iowa: State Revenues Rosier Than Projected

Update: These are the only states that have reported August tax revenues, and I'll update the list as more states release tax collections.  It seems encouraging though that all 7 states that have released data so far for August are reporting increases in sales and income tax collections.

8. West Virginia Sees Economic Growth in August Tax Revenues

9. Indiana Revenue up 8.4% in August from Year Ago

10. Increase in Missouri Tax Revenue Collections in August

Here's more:

11. Georgia revenue collections jump in August as economic picture brightens

12. Rhode Island Tax Revenues Rise in July-August

13. Nebraska Tax Revenue Beats Projections in August

Dulles Airport Has Busiest Month in 5 Years

July is always the single busiest month of the year for passenger travel at Washington Dulles International Airport, but July this year was even busier than usual.  Passenger traffic reached almost 2.3 million travellers in July, which was 2.2% above traffic in July of last year, and was the highest passenger count in any month since August of 2005 (data here), almost five years ago (see chart above).  Compared to last year, both domestic and international traffic rebounded by more than 2% in July. 

Freight volume at Dulles Airport was also up in July, by almost 18% above last year, with more than 25 tons of cargo passing through Washington's international airport.

The gains in July follow similar gains in June (2.8% growth in passengers, 24% growth in freight) and May (3.8% growth in passengers, 26.6% growth in freight).  Over the last 12 months from August 2009 to July 2009, passenger traffic is up by about 1%, with international traffic growth (2.5%) ahead of domestic traffic growth (0.30%), and freight cargo is up by 13% over that period. 

Welcome Univ. of Michigan-Flint MBA Students

To the students in the NetPlus! MBA program at the University of Michigan, Flint campus, who are enrolled in MGT 551 (Business Economics) for the fall term 2010 which started on Saturday:

WELCOME TO CARPE DIEM!

Professor Perry

Christina Sommers: Where the Boys Are(n't)

"If boys are in trouble, it's a women's issue - we're all in trouble."

Christina Sommers talks about the effects of a philosophy that can be somewhat hostile to young men: Women's Rights. Advocating for recognition of gender differences while maintaining equality, Sommers discusses the implications, risks, and consequences of consistently supporting and encouraging females only.

Yoani Sanchez, Could Help Bring Down the Castro Regime With Her Award-Winning Blog in Cuba

Courageous Cuban blogger Yoani Sanchez (pictured above), whose regular posts on her blog Generation Y "offer punchy accounts of the day-to-day environment" in Cuba (frequently featured on CD), can add two new awards to the many she has previously received:

1. The International Press Institutes's (IPI) 60th World Press Freedom Hero:

 “Sanchez’s tremendously important work provides a glimpse into what is otherwise a closed world,” said IPI Interim Director Alison Bethel McKenzie. “It is perhaps fitting that our 60th and final World Press Freedom Hero represents a future where the power of the internet can be harnessed to promote free speech. We are proud to know Yoani and to award this prestigious prize to her.”

The other IPI prize winning press heroes ("Symbols of courage in global journalism") are listed here.
 
2. The Prince Claus Award for Yoani's courageous efforts to raise "global awareness of daily Cuban realities through her blog, for her inspiring and courageous example in giving a voice to the silenced, and for demonstrating the immense impact internet communications technologies can have as tools for social change and development."
 
See these related posts:
 
1. CD post: "How Cuba's "Blogostroika," the Internet, and Social Media Could Bring Down the Castro Regime."  
 
2. Enterprise Blog post: "Revolutionary Blogger and Freedom Fighter: Yoani Sanchez," where I concluded that:
 
"When the history of Cuba’s freedom movement is written, it’s likely that Yoani Sanchez will be recognized as a national hero and freedom fighter, the equivalent of Lech Walesa in Poland or Vaclav Klaus in the Czech Republic. Yoani Sanchez demonstrates that we should never underestimate the power of one courageous individual with a computer, a blog, and intermittent access to the Internet (Sanchez says she has not actually been able to see her own blog since 2007), or the individual’s power to change the world in the Information Age, especially with a message of freedom and individual liberty. Intellectual figures like Milton Friedman, Friedrich von Hayek, and Thomas Jefferson would be proud of Yoani and her powerful message of individual freedom in one of the only remaining regimes of totalitarianism left in the world."

How To Start A Fire With Nothing But Ikea Products

HT: Ron A.

Two Market Measures of Risk Show Improvement

The charts above over the last 12 months of: a) the Bloomberg U.S. Financial Conditions Index (data here) and the S&P 500 Volatility Index (data here) show that the financial markets went through a rough patch in May, June and July of slightly elevated risk, but have now recovered to the conditions that prevailed in the spring.  The recent improvements in these two daily market measures of risk should probably mean that the chances of a double-dip recession are much less likely now than at any time over the last four months.

Bad News for Labor This Labor Day

From Linda Chavez:

"The labor movement doesn't have much to celebrate this Labor Day. Congress first established the national holiday in 1894 at unions' behest. Since then, the American labor movement's fortunes rose to their zenith in 1956, when more than three-in-10 workers were union members, only to decline each year after. Today, only 12 percent of workers hold union cards (see top chart). And if you discount union members who are public employees, barely 7 percent of private-sector workers are union members (see bottom chart).

So why has labor unions' membership declined so far?

Some of it has to do with the changing work trends in the United States. We've moved from large-scale industry to service and white-collar jobs, from big employers to small business, and from lifetime tenure to job insecurity and frequent career changes -- all of which makes union organizing more difficult.

But the biggest problem for unions has been their own leadership, which has grown out of touch with the very people those unions hope to represent."

Read more here. 

Interesting Union Facts:

1. Half of all American union members live in just six states: California, New York, Illinois, Michigan, Pennsylvania, and New Jersey (from Linda Chavez's article). 

2. The bottom chart above shows that in 2009 there were more public-sector union members (7.89 million, 37.4% of all government workers) than private-sector members (7.43 million, 7.2% of all private workers) for the first time ever.   

Back to School

1. Greg Mankiw has some advice for college freshman, although given the reality that there are 150 women in some "freshman classes" this year for every 100 men (see this CD post), can we really still call first-year college students "freshman?"

2. Via Cuban blogger Joani Sanchez, here's the handwritten draconian dress code for a typical high school in Cuba (pictured below in Spanish), including "The skirts should be 4 centimeters (1.5 inches) above the knee," and "Males must not have hair longer than 4 centimeters (1.5 inches)."  Although not specifically mentioned, I think it's safe to say that tattoos and baseball caps worn backwards would be completely out of the question. 

3. A New York Times article asks if it's time for "The End of Tenure?"

4. Michael Barone says that the "Higher education bubble is poised to burst."

Administrative Bloat at American Universities

Why is college tuition rising so much faster than prices in general, faster even than the unsustainable rise in home prices that led to a housing bubble (see top chart above)?  Well, here's one explanation from the Goldwater Institute's report "Administrative Bloat at American Universities: The Real Reason for High Costs in Higher Education":

"Enrollment at America’s leading universities has been increasing dramatically, rising nearly 15 percent between 1993 and 2007. But unlike almost every other growing industry, higher education has not become more efficient. Instead, universities now have more administrative employees and spend more on administration to educate each student. In short, universities are suffering from “administrative bloat,” expanding the resources devoted to administration significantly faster than spending on instruction, research and service.

Between 1993 and 2007, the number of full-time administrators per 100 students at America’s leading universities grew by 39 percent, while the number of employees engaged in teaching, research or service only grew by 18 percent.  Inflation-adjusted spending on administration per student increased by 61 percent during the same period, while instructional spending per student rose 39 percent. Arizona State University, for example, increased the number of administrators per 100 students by 94 percent during this period while actually reducing the number of employees engaged in instruction, research and service by 2 percent. Nearly half of all full-time employees at Arizona State University are administrators (emphasis added).

A significant reason for the administrative bloat is that students pay only a small portion of administrative costs. The lion’s share of university resources comes from the federal and state governments, as well as private gifts and fees for non-educational services. The large and increasing rate of government subsidy for higher education facilitates administrative bloat by insulating students from the costs. Reducing government subsidies would do much to make universities more efficient."

MP: For public universities the administrative bloat is much worse than at private colleges - administrative positions grew by 39% between 1993 and 2007, almost four times the 9.8% increase for instructional positions, see bottom chart above.  At private universities, without access to the public largess, administrative and instructional positions increased at about the same rate. 

HT: Chris Douglas

WSJ Interactive Graph of the Great Mancession

Here's a great WSJ Interactive Graphic that allows you to watch: a) monthly job losses by sector from December 2007 to August 2010, and b) monthly changes in the number of unemployed workers by gender and race over the same period. 

When watching the job losses by sector, you'll see that that: a) construction and manufacturing were the two sectors hit with the most job losses during the recession (combined loss of almost 4 million jobs through August 2010), and b) education and health care were the only two private sectors that continued to add jobs during the entire recession (more than 1 million jobs combined through August).

Then watch the interactive graph of the monthly number of unemployed workers by gender and you'll see that men were disproportionately affected by job losses, to the extent that in many months there were two men unemployed for every female who was unemployed. Even now that the recession has ended, there were still 172 unemployed men in August for every 100 women who were unemployed.

These two trends in sector job losses/gains and unemployment by gender are directly related by these facts about employment shares by gender:

Education: 74.3% female, 25.9% male
Health Care: 74.6% female, 25.4% male
Construction: 4.4% female, 95.6% male
Manufacturing: 21.4% female, 78.6% male

In other words, these two interactive graphs help tell the story of the Great Mancession of 2007-2010 and how men were disproportionately affected by the recessionary conditions that adversely impacted male-dominated industries (construction and manufacturing), while employment in female-dominated industries actually increased throughout the entire recession.  And according to the employment report yesterday, there is still a 2% male-female jobless rate gap of 10.6% for men and 8.6% for women, so the Great Mancession is not yet close to ending.  

Bottom Line: Maybe it's not such a good time to be man, now that men are on the wrong side of the jobless rate gap by 2%, the wrong side of the college degree gap (142 women graduated from college in 2010 for every 100 men) and now even the wrong side of the wage gap.     

New Monthly Business Blog Rankings from Wikio

Top 20 Business Blogs, according to Wikio (see methodology here).

1.	The Conscience of a Liberal
2.	DealBook - New York Times blog
3.	The Big Picture
4.	Calculated Risk
5.	Techdirt
6.	felixsalmon.com
7.	Grasping Reality with Both Hands: Brad DeLong's Se
8.	naked capitalism
9.	Seth Godin's Blog
10.	The Baseline Scenario
11.	EconLog
12.	Company Town
13.	Freakonomics - New York Times Blog
14.	Mish's Global Economic Trend Analysis
15.	Greg Mankiw's Blog
16.	Vox
17.	Economist's View
18.	A VC
19.	CARPE DIEM
20.	Infectious Greed

Colombia is the World's #1 Stock Market; Maybe It's Time for Obama to Push the U.S.- Colombia FTA

The chart above shows the MSCI Colombia Stock Market Index, monthly back to 1993 (data here).  Over almost every time horizon up to ten years, the returns for the Colombia stock market are the highest in the world:

YTD: 43.4%
One-Year: 67.2%
Three-Year: 25.1%
Five-Year: 25.8% (second to Indonesia's at 27.6%)
Ten-Year: 38.1% 

It's now been 1,382 days since the U.S.-Colombia free trade agreement (FTA) was signed in 2007, and it is now languishing into its fourth year awaiting Congressional approval.  The Latin American Trade Coalition estimates that almost $3 billion in tariffs have been imposed on U.S. exports since the FTA was signed.  Especially now that Colombia's stock market is booming, the failure to pass the Colombian FTA is especially inexcusable because it means that U.S. exporters are missing out on a golden opportunity to gain from Colombia's thriving economy.

The Colombian FTA has support from 1,200 American companies, associations, farm and ranch groups, and chambers of commerce, as well as support from the editorial boards of almost every major U.S. newspaper including the Wall Street Journal, L.A. Times, Washington Post, Miami Herald, Chicago Tribune, Detroit News, and even the New York Times, which wrote in 2008, “We don't say it all that often, but President Bush is right: Congress should pass the Colombian free-trade agreement now. We believe that the trade pact would be good for America's economy and workers.”

With incredible export opportunities awaiting U.S. manufacturers in booming, emerging markets like Colombia, 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 FTAs with Panama, Colombia and Korea?  Apparently just one group: U.S. labor unions and their Democratic enablers in the White House and Congress. 

If Obama was really serious about supporting free trade, doubling U.S. exports, creating jobs and stimulating the economy, he could easily and costlessly accomplish all four by pushing Congress to approve the signed FTAs with Colombia, Panama and Korea. 

Private-Sector Jobs Increase for the 8th Month, First Time Since 2007; +763,000 Payroll Jobs This Year, But Almost +1.8 Million Total Household Jobs

Some highlights of today's employment report for August:

1. Private-sector jobs have increased in each month this year, and by 67,000 in August, bringing the total to 763,000 private-sector jobs that have been created this year.  This is the first time since December 2006 to July 2007, three years ago, of eight consecutive monthly gains in private-sector employment (see top chart above).

2. Temporary help service jobs increased in August by 16,800 to 2,116,000 jobs, the highest employment level in this sector since December 2008 (see middle chart above).  Except for a small decrease in July of 900 jobs, temporary employment has increased in each month since last October, following 23 consecutive monthly losses from November 2007 to September 2009.  Since last October, temporary employment has increased by 392,200.

3. Average overtime hours for manufacturing increased slightly in August to 3.9 hours from 3.8 hours in July, matching the 3.9 hours in May and June, which is the highest level of overtime since May 2008, more than two years ago. 

Update: Inspired by Scott Grannis' post today, the bottom chart above shows the monthly change in number of private-sector jobs using the household survey measure of total civilian employment that includes the self-employed, MINUS the total number of government employees from the household survey (data available here). Based on that measure of private-sector employment, the economy has added almost 1.8 million new jobs since the first of the year, a pace of more than 200,000 private-sector jobs per month.  (Thanks to Scott Grannis for clarification of how private-sector employment is calcuated using household data.)

Instead of Marching, Let's End the War on Drugs

"Every time I see one of these marches or forums covered as significant, what occurs to me is that there is one thing we should all be focused on instead. It is, of all things, the War on Drugs. The most meaningfully pro-black policy today would be a white-hot commitment to ending its idiocy.

1. The War on Drugs destroys black families. It has become a norm for black children to grow up with their fathers in prison and barely knowing them. Data are unanimous in showing that children, especially poor ones, do better with two parents. We see the young black man in a do-rag pushing a baby carriage as a welcome sight rather than as a norm. That must stop.

2. The War on Drugs discourages young black men from seeking legal employment. Because the drugs' illegality keeps their price high, there are high salaries to be made in selling them -- not at first as a low-level runner, but potentially as one rises in the hierarchy. This makes selling drugs a standing alternative to legal employment, especially if one has a poor education.

3. The War on Drugs brings firearms into black lives. Policing turf for drug sales entails guns, which then become tools for maintenance of the pecking order, including settling petty scores. A striking difference between surveys of black ghettos before the War on Drugs and today is how common guns have become.

Marches don't hurt, but they are a misdirection of energy. And not from an equally empty war on racism in the Tea Party or the n-word. Black uplift in 2010 should be about a war on the War on Drugs -- after the success of which, I can guarantee you, slowly but surely, the teens would start pulling up their pants."

~John McWhorter

HT: Radley Balko

Rail Traffic At Highest Level Since 2008

WASHINGTON , D.C. – Sept. 2, 2010 – "The Association of American Railroads (AAR) today reported weekly rail traffic continues to set records with U.S. railroads posting their highest numbers for 2010 in both rail carloads and intermodal volume for the week ending Aug. 28. U.S. railroads originated 302,358 carloads for the week, up 5.8 percent compared with the same week in 2009 and intermodal traffic totaled 237,194 trailers and containers, up 17.1 percent from the same week in 2009 (see charts above).  Compared with the same week in 2009, container volume, a subset of intermodal, increased 18.1 percent and trailer volume rose 11.4 percent."  Other highlights include:

1. This is the 33rd consecutive week in 2010 that intermodal volume is above the same week in 2009, with 24 of those weeks being double-digit percentage gains. 

2. Rail carloads have increased in 26 out of the last 27 weeks versus the same week last year.

3. Fifteen of the 19 carload commodity groups increased from the comparable week in 2009 with significant increases in metallic ores (62.2 percent), metals and metal products (40.2 percent) and farm product excluding grain (33.4 percent).

4. Canadian railroads reported volume of 76,064 cars for the week, up 16.5 percent from last year, and 53,747 trailers or containers, up 24.4 percent from 2009. For the first 34 weeks of 2010, Canadian railroads reported cumulative volume of 2,458,747 carloads, up 20.6 percent from last year, and 1,585,669 trailers or containers, up 15.7 percent from last year.

5. Mexican railroads reported originated volume of 14,531 cars, up 18 percent from the same week last year, and 8,168 trailers or containers, up 26.7 percent.

MP: Warren Buffett's single most favorite economic indicator - rail freight traffic - continues to set records for both 2009 and 2010, with both rail carloads and intermodal volume now at the highest levels since 2008. Based on the steadily increasing volume of raw materials, natural resources, lumber, coal, grains, chemicals, metals, motor vehicles and paper products moving around the country by rail (and Canada and Mexico), the economic picture continues to get a little brighter almost every week.

7th Monthly Gain in Monster Employment Index

"The U.S. Monster Employment Index recorded its seventh consecutive month of positive year-over-year in August at a growth rate at 12.4 percent. The annual growth rate eased from July's 21% growth possibly due to moderation in underlying job market drivers. The Index dropped two points (1 percent) in August to 136 (from 138 in July) as online job demand eased contrary to seasonal patterns traditionally witnessed at this time of the year (see chart above). Highlights include:

1. Online recruitment activity rose in six of the 20 industries between July and August.  Compared to year-ago levels, 17 industries are showing positive growth trends, although at decelerated rates from July.

2. While the Monster Employment Index experienced a marginal contraction in August, several industries, occupations and all 28 metro markets including Cleveland and Detroit continue to record positive annual growth trends. 

Docs4PatientCare

Click arrow above to watch Dr. Hal Scherz's "video for doctors" above from Docs4PatientCare.  See his editorial in yesterday's WSJ here, about this "Waiting Room Letter for Physicians and Patients," here's an excerpt:

"ObamaCare will bring major cost increases, rising insurance premiums, higher taxes, a decline in new medical techniques, a fall-off in the development of miracle drugs as well as rationing by government panels and by bureaucrats like passionate rationing advocate Donald Berwick that will force delays of months or sometimes years for hospitalization or surgery."

Aug. Online Ads Increase By 1 Million vs. Apr. 2009

"Online advertised vacancies dropped 57,100 in August to 4,236,200, following an increase of 139,200 in July, according to The Conference Board Help Wanted OnLine (HWOL) Data Series released today. The gap between the number of unemployed and advertised vacancies (supply/demand rate) stood at 3.40 unemployed for every advertised vacancy in July (the last available unemployment data) but is down from its peak of 4.73 in October 2009."

“Labor demand continues to struggle to post gains month after month,” said June Shelp, Vice President at The Conference Board. “During the last few months, gains in online job demand one month have been partially offset by dips in the following month. But the good news is that overall job demand is still maintaining a modest upward trend for both the nation and most States.”

MP: Compared to last August (3.37 million ads), online advertised vacancies were 25.4% higher this August (4.236 million ), and except for July's level of 4.29 million online ads, was the highest monthly level since November 2008 (see chart above).  July's 25.4% year-over-year increase was the sixth straight increase of 20% or higher, and follows increases of 30.8% in July, 26.1% in June, 23.3% in May, 31.4% in April and 20.6% in March.  Compared to the April 2009 bottom of 3.2 million online vacancies, the August count of 4.23 million help wanted ads is more than one million job openings higher. 

See Scott Grannis' related post here.

Evidence of a New "Reverse Gender Wage Gap"

From Time Magazine:

"According to a new analysis of 2,000 communities by a market research company, in 147 out of 150 of the biggest cities in the U.S., young women's median full-time salaries are 8% higher than those of the guys in their peer group. In two cities, Atlanta and Memphis, those women are making around 20% more. This squares with earlier research from Queens College, New York, that had suggested that this was happening in major metropoles. But the new study suggests that the gap is bigger than thought, with young women in New York City, Los Angles and San Diego making 17%, 12% and 15% more than their male peers respectively. And it also holds true even in reasonably small cities like Raleigh Durham, N.C., Charlotte, N.C., (both 14% more) and Jacksonville, Florida (6%).

Here's the slightly deflating caveat: this reverse gender gap, as it's known, applies only to unmarried, childless women under 30 who live in cities."

MP: In other words, if you control for all of the important variables that contribute to wage differentials (age, marital status, having children, etc.), i.e. impose ceteris paribus conditions, there is no evidence of gender discrimination, and either there is no statistically significant wage gap, or now there's a wage gap in favor of women. 

ASA Staffing Index, NRA Restaurant Index Flat

The American Staffing Association (ASA) Staffing Index for temporary and contract employment activity remained at 95 for the week of August 16 (same as last week), which is the highest index level since a reading of 97 in the week of September 29, 2008 (see chart above, data here).

Compared to the same week last year, the latest ASA Staffing Index has improved by 25% for Week 34 (see bottom chart above). This marks the 18th week in a row with percentage gains above 20% compared to the same month in 2009, the 27th straight week of double-digit percent increases vs. 2009, and the 33rd consecutive week for the ASA Index being above the same level in the previous year (every week this year). The improvements this year follow 80 consecutive weeks of percentage declines in the weekly index vs. the previous year that started in May 2008 and continued through the end of 2009.

In another report released yesterday, the National Restaurant Association's Restaurant Performance Index was flat in July (99.4) compared to June (99.5), but above the index levels in July of 2008 and July 2009.