Monday, October 04, 2010

Automation, Productivity Reduce U.S. Workforce

From today's LA Times:

"Forced to cut costs during the recession, employers across the country are looking at ways to avoid hiring. They've accelerated use of computers and technology, replacing administrative assistants with software, cashiers with self-service kiosks and laborers with machines.

These structural changes mean some jobs that disappeared during the recession may never come back. Productivity gains are good for company profits and help the economy grow over the long run. But in the short term, the shift is exacerbating America's jobless recovery.

"Recessions tend to act as ratchets; they'll often speed the pace of fundamental changes that were going on in the economy anyway," said Erica Groshen, vice president and director of regional affairs at the Federal Reserve Bank of New York.

Ditching workers is an appealing prospect to many California farmers. Few states have minimum wages higher than California's $8 an hour. The heightened focus on workers' immigration status has increased farmers' administrative burden.

With the help of machines, though, growers can continue to boost output while reducing headcount. Farm labor in California has fallen 11% over the last decade, yet cultivation of heavily automated crops soared over the same period: almond production has more than doubled, to 1.6 billion pounds.

"If cheap technology is available, you substitute technology for people," said Allen Sinai, chief global economist at Decision Economics in Boston.

Automation has been a steady progression since the Industrial Revolution. Still, laying off workers is never easy. Recessions give companies a motive to move more swiftly than they otherwise might have to cut staff, outsource work to cheaper locations and implement labor-saving technology, Sinai said. When sales pick up, companies can help profits rise quickly by keeping a lid on hiring.

That's part of the reason that earnings at some large companies have soared over the last year while job creation has lagged behind. In August, U.S. private sector employers added 67,000 jobs, far fewer than the 100,000 needed to keep pace with population growth."

MP: The chart above shows a trend in manufacturing that is consistent with the changes outlined in the LA Times article.  Since the end of the recession in June 2009, manufacturing output has increased by 9.6% (or by $270 billion) through August of this year, while manufacturing employment has decreased by -0.90% (or by 103,000 workers) during that 14-month period.  
HT: Tom Hemphill

Cass Freight Index Reaches Two-Year High

From the Journal of Commerce:

"The Cass Freight Index for U.S. shipping reached its highest point in more than two years in September, growing 1.9 percent over the month before, Cass Information Systems announced last Friday.  The shipments index (blue line in the graph above) grew for the second straight time on a month-to-month basis, although the 1.9 percent gain was a sharp slowdown from the 8.3 percent gain the month before. The index increased 15.5 percent over September 2009 after growing 16.5 percent year-over-year in August.

That put the shipments index, which reflects industrial freight shipments moving through U.S. distribution networks, at 1.116, the highest point since August 2008, just before the crash in financial markets sent trade into a tailspin.

The separate Cass expenditures index (red line above), a measure showing how much shippers are spending to transport goods, also reached its highest point in more than two years. The 30.5 percent year-over-year expansion pushed the expenditures index to its highest point since June 2008.  The spending index grew 3 percent in September compared to August, a slowdown from the previous month's 7.6 percent month-to-month expansion."

Here's some information about the Freight Indexes from Cass Information Systems:
"We have developed a monthly Volume Index of Freight Expenditures and Shipments that is based upon transportation dollars and shipments of Cass clients. The index is comprised of shippers throughout the United States who participate in the Cass Information Systems Payment Service. Over 1,200 divisions of 400 unique companies representing a broad spectrum of the SIC categories contribute data to the index.
Freight expenses, for the index base, consist of participating shippers with volumes ranging from $50,000 to over $500,000,000 annually. This diversity of shippers and range of volume provides a statistically valid cross-sampling of industries in the United States. The Index's purpose is to compare levels of shipment activity on a month to month basis."
Related: See Scott Grannis' shipping update today

Interesting Fact of the Day

As reported in the movie Waiting for "Superman":

About one of 57 medical doctors and one of 97 lawyers loses his or her license annually for malpractice.  In contrast, only one in 2,500 unionized, public school teachers with tenure gets fired each year.

Special DC Bonus: I was at the 4:15 showing yesterday for "Waiting for 'Superman'" at the E Street Cinema in DC, and Michelle Rhee was there with her two daughters in the row in front of me.

Stronger Recovery Now Than in 1992 or 2002

From Jim Paulsen in today's Financial Times:

"Although this recovery is not as strong as those of the 1970s, on many metrics its first year anniversary has proven stronger than either of the last two recoveries during the previous 25 years.

1. Despite a significant slowdown in the second quarter of this year, real GDP growth in the first year of this recovery was 3 per cent compared with first year recovery gains of only 2.6 per cent in 1991 and 1.9 per cent in 2001 (see chart above).

2. Persistent private job creation took 12 months once the recession ended in the early 1990s and it took 21 months after the 2001 recession. This recovery began producing persistent private job gains only six months after the recession ended. Moreover, in the first 14 months of this recovery, 205,000 jobs have been lost. While this is surely disappointing, it compares with 220,000 and 935,000 cumulative job losses respectively at this point in the 1991 and 2001 recoveries.

3. Corporate profits have already recovered to the all-time record highs of the last recovery – one of the fastest profit recoveries in the post-war era.

4. To date, the current stock market recovery is the strongest since – and on a par with – the 1982 recovery.

5. Finally, the household debt burden (i.e., financial obligations ratio), while at a record high in early 2008, has recently improved to only average since 1980 and the household energy burden is now below average."
Conclusion: "Policy officials may want to consider that perhaps the current recovery is less a new-normal to be panicked over (with ostensibly never-ending monetary and fiscal stimulus) than simply just “normal” (for the past 25 years) which, like the last two recoveries, requires patience?"

2 Stories on India's 2 Faces: Capable, Competitive Private Sector and Legendary Govt. Bureaucracy

1. From the Washington Post article "On eve of Commonwealth Games, India's persistent red tape is in spotlight":

"It didn't take long for the first athletes arriving in New Delhi last week for the upcoming Commonwealth Games to catch a glimpse of modern India's two faces. Their gateway to the country was the capital's gleaming new international airport terminal, built by a privately led consortium and opened in June four months ahead of schedule.

But the official wristbands that the visitors were handed at the airport turned out to be an emblem of India's famous red tape and government inefficiency. When the teams reached the athletes' village, the police guarding the facility refused to recognize the IDs, saying that the Games Organizing Committee had not sent the required authorization order. The jet-lagged athletes stood about under a tree for hours with their luggage, calling their embassies for help, and the problem was not finally resolved for four more days.

To observers, the incident illustrated more than just the well-documented sloppiness that has marked India's preparations for the Games. It also underscored the gap that has emerged between a government rooted in a slower-moving, socialist era and a private entrepreneurial class that is busy building global IT companies, the world's largest oil refineries and spectacular structures such as the $2.8 billion airport terminal."

"It is about two aspects of the India story," said Rajeev Chandrasekhar, an entrepreneur and member of Parliament. "India's private sector has been exposed to competition and therefore has developed capability. Accountability is firmly built into the entrepreneurial mind-set. But the government structure is a relic of the colonial past and continues to plod along."

2. From the WSJ article "My Commonwealth Games: Then and now":

I stood recently beside the swimming pool where the 19th Commonwealth Games will begin in October, wondering if the 20 members of the Indian team sprinting up and down the sparkling 50-meter pool stood a better chance at winning a medal than I did when I represented this country in the Commonwealth and Asian games 28 years ago.

"At the edge of the pool this September day, I see some of the same cast of characters from my swimming days in 1982, the first clue that not much has changed. Running alongside the swimmers, a stop watch in hand, is Satish Suri, who was one of our coaches then—and remains a national coach today.Viren Nanavati, the joint secretary of the Indian Swimming Federation, remains in exactly the same position he held 28 years ago."

Q: Given its enormous population, why hasn't India been able to produce any world-class swimming champions?

"India's legendary sports bureaucracy continues to get in the way, swimmers and others say. Aaron D'souza, one of India's top swimmers in the 100 meters and 200 meters freestyle, said it took him four months to get the required approvals from government sports officials to train in the U.S. this year. He says he waited from January to April for government sports officials to approve his U.S. training, missing critical months.

Mr. D'souza and Pradeep Kumar, the national team coach, say the freestyle champion wasted months in a government swim camp in Pune, where it was too cold in December and January for swimmers to practice comfortably. As a result, says Mr. Kumar, Mr. D'Souza swam his best event, the 200 meters freestyle, in 1 minute 53 seconds in the recent tryouts a month ago, far slower than the 1 minute 50 seconds he clocked a year ago in the Asian Swimming Championships in China.

"Most of our swimmers are not at their peak because the haphazard government policies have upset their training," Mr. Kumar says.

Sunday, October 03, 2010

Increases in U.S. Worker Productivity, More Than China's Currency, Responsible for Loss of U.S. Jobs

According to AFL-CIO President Richard Trumka:

"The Chinese government has been keeping the renminbi undervalued by about 40% as a deliberate and central plank of its export strategy. That's a 40% subsidy for the products they send here and a 40% tax on products we try to send there. Our dollars stimulate another nation's economy while we rack up unsustainable trade deficits at home.

The result is writ large on the walls of the Great Recession: 57,000 U.S. manufacturing facilities shut down in the last 10 years, costing us five-and-a-half million good-paying jobs, nearly half of those to China alone. The loss of these skilled workers, engineers, designers and scientists has undermined our middle class and dangerously eroded our technical, industrial and innovative capacity."

MP: It's true that the U.S. has lost more than 5.5 million manufacturing jobs in the last ten years, from more than 17 million jobs in 2000 to fewer than 12 million jobs in 2010 (see top chart above, data here), which is a 32.5% reduction in factory employment.  And yet during that same period, manufacturing output (data here) actually increased by more than 5%, from $3.1 trillion in 2000 to $3.26 trillion (measured in 2005 dollars) this year (see chart above).  On a per employee basis, manufacturing output per worker increased by more than 50%, from $182,000 in 2000 to $278,000 (measured in 2005 dollars) this year (see bottom chart above). 

Since manufacturing output bottomed in June 2009 at $2.97 trillion due to the recession, there has been a 10% increase in the gross value of industrial output to $3.26 trillion, during a period when manufacturing employment actually decreased by almost 1 percent (and by more than 100,000 jobs), resulting in an 11% increase in output per worker in just a little more than a year.  That surge in manufacturing worker productivity is the largest increase ever over a one-year period, going back to 1972 (see chart), and we can thank the recession for that efficiency surge, as companies were forced to learn how to increase output with fewer workers. 

Bottom Line: Manufacturing worker productivity has doubled in the last 17 years since 1993, and that has contributed to the loss of more than 11 millions jobs. That is, if factory workers were only as productive today as their counterparts in 1993, it would require more than 23 million factory workers today to produce $3.26 trillion worth of manufacturing output today, instead of the 11.7 million workers employed today to produce that much manufacturing output. 

Therefore, it's the significant increase in the manufacturing worker productivity that is more responsible for the loss of millions of U.S. manufacturing jobs than the value of the Chinese currency.  Instead of pressuring China to strengthen its currency to increase American factory jobs, it might be even more effective to pass legislation that would make it illegal to increase worker productivity, e.g. enacting legislation prohibiting the use of labor-saving technologies such as internal-combustion and turbine engines, as Don Boudreaux suggests here.

CA Wants to Legalize It: Intrade Odds Jump to 70%

Intrade odds are now at 70% for the California marijuana legalization ballot initiative to pass in November.

Top 10 Best-Selling Cars and Trucks in 2010

The top 10 best-selling cars and trucks are listed above for the first nine months of the year (January - September 2010), according to Ward's Automotive.  Note that:

1. Japanese and Korean automakers have the top 5 best-selling cars, and have 6 out of the top 10. 

2. American companies dominate truck sales, and have 8 out the top 10 best-selling models, and 4 out of the top 5 brands.  

3. The top two best-selling vehicles are trucks (Ford F and Chevy Silverado), and of the top 20 best-selling vehicles, 47% are trucks. 

Saturday, October 02, 2010

Amazing Illusion; One of the Best Ever

The two birds in the image above are identical. Not just in size and shape, but in color too. Don't believe it? Check out the same image with the background removed.

Thanks for Paying Your Federal Income Taxes, Here's Your Itemized "Taxpayer Receipt"

From the policy paper "A Taxpayer Receipt" from a D.C.-based policy group called "The Third Way":

"Corn syrup, milk chocolate, sugar, cocoa butter, coconut, almond, soy lecithin… any consumer can read these ingredients and their nutritional value on every package of a75-cent Almond Joy. What is provided to a taxpayer with a $5,400 tax bill? Nothing. For many Americans, the amount they pay in taxes is larger than any purchase they make during the year, but studies show they know almost nothing about where that money goes.

An electorate unschooled in basic budget facts is a major obstacle to controlling the nation’s deficit, not to mention addressing a host of economic and social problems. We suggest that everyone who files a tax return receive a “taxpayer receipt.” This receipt would tell them to the penny what their taxes paid for based on the amount they paid in federal income taxes and FICA."

MP: See the example above of an itemized tax receipt for the median tax filer in 2009 making an adjusted gross income of $34,140, and paying $2,790 in federal taxes, and $2,610 in Social Security and Medicare "contributions," for a total federal tax bill of $5,400. 

And here's a slightly different version of an interactive itemized tax receipt calculator at a website called "Where My Money Goes," which allows you to put in any income amount and see an itemized tax receipt (thanks to Alex Rodriguez for this website).

China's Currency Policy is the Greatest Anti-Poverty Program in America, Why Should We Complain?

Warren Meyer writing in Forbes asks "Why Are Democrats Promising to Raise Prices?" by pressurng China to appreciate its currency instead of celebrating cheap imports from China as one of the most effective anti-poverty programs in America today?
Democrats claim the American manufacturing base is declining in the face of unfair competition from a Chinese government that is unfairly helping its own manufacturers through currency manipulation and export subsidization. To which I say: So what?

We should be thrilled that the Chinese government and its people see fit to spend their own money to subsidize lower prices for American businesses and consumers. Last week, President Obama put substantial pressure on the Chinese prime minister to revalue Chinese currency, a revaluation that would have the effect of raising prices of all Chinese goods in the United States. What possible sense does such a move make, particularly in a recession?

There is no question that if Democrats are successful in changing China’s currency policy and/or imposing new tariffs (taxes) on Chinese goods, prices will rise for all Americans, but particularly so for the lower income brackets that are supposedly the Democrats’ constituency.  In a sane world, Democrats would be celebrating Chinese imports as one of the greatest anti-poverty programs that exist in America today. 

Except for CFC, Auto Sales Reach 2-Year High

Vehicle sales were released today for September, and here are some highlights:

1. On a "seasonally-adjusted annual rate" basis, total U.S. light vehicle sales increased to 11.76 million units in September, which was 2.55% higher than August, and 25.4% higher than September last year (see chart above). 

2. Except for the artificial sales stimulus of "cash-for-clunkers" (CFC) in August 2009 when sales topped 14 million (at an annual rate), September vehicle sales reached the highest monthly level in two years. 

3. Ford and Chrysler led the automakers in September with sales increases of 46.4% and 60.9%, respectively, compared to the same month last year.

4. Light truck sales were especially strong in September, with a 40.8% increase over last year.  See related CD post "The Pickup Truck Indicator: Recovery is Real."

5. Year-to-date vehicle sales this year are 10.3% ahead of last year. 

Friday, October 01, 2010

NFL Income Inequality: It Just Keeps Getting Worse

Click once, and then again to enlarge.
According to a new report from the Census Bureau, the top 20% of American households earned 50.3% of the total income in 2009, just slightly higher than the 50% share of income for the top fifth of households in 2008. Looking at a longer period of time going back to 1967 when the top quintile earned 43.6% of all income, the share of income going to the top fifth increased throughout the 1970 and 1980s, until stabilizing in the 49-50 percent range in the mid-1990s.

Using NFL salary data from USA Today, the shares of total team payrolls going to the highest-paid  20% of players in 2000 and 2009 are displayed in the chart above for all 32 teams. The average share of NFL payrolls going to the highest-paid 20% of players in 2009 was 62.4%, higher than the 59.5% share in 2008, and much higher than the 56.3 percent in 2000.  Between 2000 and 2009, income inequality increased for 27 of the 31 teams that played in both years. 

For the second year in a row, the Indiana Colts led the league in income inequality, with just two players (Kelvin Hayden at $17.5 million and Peyton Manning at $14 million) capturing more than 30% of the total team payroll of $103.4 million in 2009. Top-paid Kelvin Hayden's salary was a whopping 56.4 times more than his lowest-paid teammate, Rudolph Hardie, who made the NFL minimum of $310,000. That would mean that Kelvin Hayden was paid almost as much for each quarter of regular-season play ($273,125) as Rudoph Hardie made for the entire season. (How can that be fair?)

In other words, there is significantly greater income inequality in the NFL than in the general U.S. population, with 62.4% share of team payrolls going to the top fifth of NFL players in 2009, compared to 50.3% of total national income going to the top quintile of American households. And while the share of income going to the top 20% of U.S. households has been constant for more than a decade, payroll inequality in the NFL keeps increasing each year.

What are some of the lessons we can learn from the escalating income inequality in the NFL?

Find out here at The Enterprise Blog.

Booming Bull Market Rally in Emerging Markets; MSCI Index Reaches 27-Month High Today

BLOOMBERG -- "Emerging-market stocks rose, sending the benchmark index to the highest level in 27 months (see chart above), and currencies strengthened as reports showed China’s manufacturing grew and developing-nation fund inflows hit an 11-month high.

The MSCI Emerging Markets Index climbed 0.7 percent to 1,082.92 at 11:07 a.m. New York time, poised for a fifth straight weekly advance.  China’s manufacturing expanded at the fastest pace in four months in September, adding to signs that growth is stabilizing in the world’s fastest-expanding major economy. Investors poured $4.3 billion into emerging-market equity funds in the week ended Sept. 29, the biggest amount since October 2009, and the funds are poised for record annual inflows."

MP: The Emerging Markets Index has gained 9.4% over the last month, and 19% over the last twelve months, and reached the highest level today since June 30, 2008, 27 months ago.

Stronger Yuan Will NOT Bring Jobs Back to the U.S.

Nancy Pelosi claims that "One million U.S. jobs could be created if the Chinese government took its thumb off the scale and allowed its currency to respond to market forces." 

In the NPR "Planet Money" report, Adam Davidson is pretty skeptical about Pelosi's claim, based on the following example:

Some American manufacturers that use industrial springs can buy them in China for 95% less than in the U.S. - if they cost $1.00 here, they're only 5 cents from China, shipping included.  In that case, even if China's currency appreciated significantly by 30% or 40% or more, the springs from China would still cost only 7 or 8 cents, or maybe even 10 cents, and there would be NO jobs coming back to the U.S. That's just one example, but there are many other products (toys, T-shirts, shoes, low-end electronics, commodities, etc.) that are so cheap to produce in China compared to the U.S., that even a greatly-appreciated renminbi/yuan wouldn't bring any manufacturing jobs back to America, and certainly not anywhere close to 1 million jobs.

A similar point was made in a WSJ article in May, subtitled: "You're not going to change the balance of China trade by adding 25 cents to the cost of a T-shirt."

There are other reasons that a stronger renminbi wouldn't bring jobs back to America:

1. A stronger renminbi/yuan would give China an advantage for any commodities, inputs, raw materials, and energy products (oil and natural gas) that it imports, which might allow them to maintain the current prices for exports to the U.S.

2. If a stronger renminbi/yuan did make Chinese exports to America more expensive, manufacturing production and jobs would likely shift to other areas in Asia (Vietnam, Bangladesh, India, Thailand, Korea, etc.) and not back to America.

Real Consumer Spending Increases in August to 27-Month High, Almost Back to Pre-Recession Level

According to today's report from the BEA on "Personal Income and Outlays," real personal consumption expenditures reached a 27-month high of $9,321.2 billion in August, the highest level of consumer spending since May of 2008 (see chart above).  Real consumer spending in August was just $34.3 billion (or 0.37%) below the peak of $9,355.5 billion reached in December 2007, the month the U.S. economy went into recession. 

In the 16-month period between January 2008 and April 2009, real personal consumption fell in 13 of those months; in the 16-month period from May 2009 to August 2010, consumer spending has increased in 13 months, as the economy has gradually recovered.  Over the last seven months, consumer spending has increased in every month except April.   The August increase in real spending was the fourth straight monthly increase and beat the expectations of economists.

This rebound in consumer spending over the summer is consistent with the widespread increases in August state tax revenues (which includes sales taxes) that were higher than expected in many states, see CD post here with 13 states reporting increases in August tax revenues.     

Thursday, September 30, 2010

Another Record Week for Intermodal Rail Traffic

"The Association of American Railroads (AAR) today reported that U.S. railroads saw the highest weekly intermodal volume for 2010 and highest container count on record for the second consecutive week. For the week ending Sept. 25, 2010, intermodal traffic on U.S. railroads totaled 241,167 trailers and containers, up 17.3 percent from the same week in 2009, but down 2.1 percent compared with 2008. Container volume last week increased 19.2 percent compared with 2009, and rose 6 percent compared with 2008. Trailer volume last week rose 7 percent compared with 2009, but dropped 32.8 percent compared with 2008.

U.S. railroads originated 300,908 carloads for the week, up 10.7 percent compared with the same week in 2009, but down 8.2 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."

MP: For the year-t0-date (38 weeks), carload rail volume is up by 7.2% and intermodal rail traffic is up by 14.7%. This marks the 37th straight week starting in mid-January of improvements in intermodal rail traffic compared to the same week in 2009, and except for a holiday-related decline in July, carload volume has increased for the last 31 weeks starting in late February.

Once again, Warren Buffett's favorite economic indicator improved last week and container rail traffic set an all-time historical high.  It has to be a sign of economic recovery that the amount of raw materials, natural resources, grains, chemicals, metals, lumber, paper, glass, sand, gravel, ores, coal, petroleum and farm products being shipped by rail around the country keeps increasing week after week.  After all, those inputs are being ordered by producers somewhere around the country, and will eventually be produced into some intermediate good or final product, and be counted as part of GDP in future quarters.  And an increased volume of inputs moving around the country and the subsequent increase in final output has to eventually translate into more employment. 

Markets in Everything: Ads on Currency?

Maybe this would help pay down the federal debt: sell advertising on U.S. currency?  Here are some possible designs that would allow companies to "cashvertise," including the one above for Campbell Soup. 

This blog points out that the USPS currently allows customized "branded stamps," so maybe the Bureau of Engraving and Printing should follow with "custom branded dollar bills."

$27.5m Because The Feds Don't Like the Font.....

NY Daily News -- New York City will change the lettering on every single street sign - at an estimated cost of about $27.5 million - because the feds don't like the font. Street names will change from all capital letters to a combination of upper and lower case on roads across the country thanks to the pricey federal regulation (see photo above).

By 2018, MADISON AVE. will become Madison Ave. and will be printed in a font called Clearview, the city Department of Transportation says. The Federal Highway Administration says the switch will improve safety because drivers identify the words more quickly when they're displayed that way - and can sooner return their eyes to the road."

HT: Steve Malanga

Wednesday, September 29, 2010

Companies Leaving California in Record Numbers

Update: See related article "Companies Fleeing California For Utah Over Confiscatory Tax Rate" (HT: Juandos): 

"Computer software giant Adobe, computer game monster EA Games, and Internet auction king eBay are abandoning California to set up shop in Utah. Why? California’s horrid business climate and high taxes."

Online Job Openings Reach 22-Month High in Sept.

"Online advertised vacancies rose 59,900 in September to 4,296,100 following a decrease of 57,100 in August, according to The Conference Board Help Wanted OnLine™ (HWOL) Data Series released today (see chart above). The gap between the number of unemployed and advertised vacancies (supply/demand rate) stood at 3.51 unemployed for every advertised vacancy in August (the last available unemployment data) but is down from its peak of 4.73 in October 2009. (see Chart 1 in the report).

“Since the NBER June 2009 end of the recession, HWOL has increased by 1 million advertised vacancies,” said June Shelp, Vice President at The Conference Board. “The HWOL series trough in April 2009 led the NBER official trough by about 2 months, reflecting a rather typical pattern where labor demand leads at economic turning points. Following the rapid HWOL rises in labor demand in the 4th quarter 2009 and 1st quarter 2010, the end of 2010.” (see Chart 2)."

MP: Although the increases in the HWOL index have slowed in recent months, the 4,296,100 job vacancies in September were the highest level since November 2008, almost two years ago.  

Tuesday, September 28, 2010

The U.S. Has More than 12,000 Tariffs

Most Americans think of the U.S. as a free-trade country with open markets, and countries like China and Japan as protectionist countries with closed markets. And yet the U.S. is quite protectionist, when we consider that there are more than 12,000 tariffs (i.e. taxes) on imported products that are sometimes as high as 350% in the case of tobacco (pictured above); 164% on peanuts; 100% on jam, chocolate and ham; and 48% on sneakers, see the 25 American Products That Rely On Huge Protective Tariffs To Survive, and read a short accompanying article.

HT: Juandos

ASA Staffing Index Reaches Two-Year High

From today's weekly report from the American Staffing Association:

"During the week of Sept. 13–19, 2010, temporary and contract employment rose 2.08%, pushing the index up two points to a value of 98 (see chart above).  At a current index value of 98, U.S. staffing employment is 42% higher than the level reported for the first week of the current year and is 23% higher than the same weekly period in 2009."

The index value of 98 for the ASA Staffing Index is the highest reading since the week of September 22, 2008, just about two years ago.  As I have previously reported, the ongoing improvement in the demand for temporary and contract employment, which is a leading labor market indicator, bodes well for positive broader-based and permanent employment gains in the future.

Global Air Traffic Above Pre-Recession Levels

"The International Air Transport Association (IATA) announced today that international scheduled traffic results for August indicating year-on-year increases of a 6.4% for passenger and 19.6% for cargo (see chart above).  August demand is down from the 9.5% increase recorded for passenger and 23.0% growth in cargo recorded in July.  The August 2010 data is partially distorted by the comparison to August 2009, by which time markets were already expanding rapidly in a post-recession rebound."  Other highlights include:

1. The August gain in freight traffic was the 11th consecutive monthly increase, and the 10th straight double-digit increase starting last November.

2. Passenger traffic has improved in 12 out of the last 13 months, with the only exception being the April decline because of the adverse travel effects of the European volcanic ash.

3. Global passenger traffic in August was 2% above pre-recession levels of early 2008.

4. Global international cargo traffic in August was 3% above the pre-recession levels of early 2008.

NY Fed Model: Slim Chance of a Double-Dip in 2011

The New York Federal Reserve updated its "Probability of U.S. Recession Predicted by Treasury Spread" yesterday with treasury yield data through August 2010, and the Fed's recession probability forecast through August 2011 (see top chart above). The NY Fed's Treasury model uses the spread between the yields on 10-year Treasury notes (2.70% in August) and 3-month Treasury bills (0.16%) to calculate the probability of a U.S. recession up to twelve months ahead (see details here) using the spread between those two yields (2.54% in August, 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 August 2010, the recession probability is only 0.08% and by a year from now in August of next year the recession probability is slightly higher, but only 0.61% (about 6/10 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.

China's Currency Policy As A Form of Technology

Don Boudreaux at Cafe Hayek argues again that Chinese subsidization of its exporters through an (alleged) undervalued renminbi means that Americans get more output at lower costs, and asks "What’s the problem?"

We could also invoke Bastiat's famous Candlemakers' Petition, and think of China as the sun, providing us with manufactured goods for prices so low that it's almost like getting free light from the sun.  After all, if China was willing to ship goods for free as gifts to the American people, it would be even better than subsidized low prices, and we would really want to ask the question: "What's the problem?"

Or we could invoke Steven Landsburg's excellent essay "The Iowa Car Crop" and look at trade with China as a form of technology. To paraphrase Landsburg, "The fact that there is a place called China, with people and factories, is quite irrelevant to Americans’ well-being when we get access to cheap manufactured goods.  To analyze trade policies, we might as well assume that China is a giant machine with mysterious inner workings that produces manufactured goods at incredibly low prices." 

And we could ask the question: If China could produce cheap goods for Americans because it developed some amazing new technology, we wouldn't complain, so why complain when the result is the same because of a currency policy that gives us the same result.  Maybe we should think of China's currency policy as an "advanced form of technology with a giant machine with mysterious inner workings" that miraculously produces products for Americans at prices that rival the sun's provision of free light. 

Update: See related post at the Coyote Blog "Obama Presses Chinese to Raise Prices to the Poor and Middle Class."

Monday, September 27, 2010

Recycling is Garbage, Part II

More on recycling from Jeff Jacoby (see previous post here):

"Most of the stuff we throw out — aluminum cans are an exception — is cheaper to replace from scratch than to recycle. “Cheaper’’ is another way of saying “requires fewer resources.’’ Green evangelists believe that recycling our trash is “good for the planet’’ — that it conserves resources and is more environmentally friendly. But recycling household waste consumes resources, too.

Extra trucks are required to pick up recyclables, and extra gas to fuel those trucks, and extra drivers to operate them. Collected recyclables have to be sorted, cleaned, and stored in facilities that consume still more fuel and manpower; then they have to be transported somewhere for post-consumer processing and manufacturing. Add up all the energy, time, emissions, supplies, water, space, and mental and physical labor involved, and mandatory recycling turns out to be largely unsustainable — an environmental burden, not a boon.

Recycling makes many people feel good, but feelings are not the best test of environmental soundness.  When it makes more sense to recycle than to throw something away; government compulsion isn’t needed (Don Boudreaux reminds us that "The benefits of recycling clothing are large enough to prompt us to buy costly clothes-recycling machines that we routinely use to recycle for tomorrow the clothes we wear today.  We call these machines 'washers and dryers.'"). And when recycling is a profligate use of natural and human resources, government mandates can’t change the fact. Big Brother can force you to recycle your garbage, but that doesn’t make garbage-recycling green."

How the Cell Phone is Changing Lives in Cuba

"On the streets of Havana, it is rare to walk a hundred yards and not see someone texting. According to official statistics, by the end of the year the number of mobile phone users nationwide is expected to exceed a million. Considering the growth in cellphone use in other Latin American countries, it is a low figure, only about one Cuban in twelve. Nevertheless, one could say that no element of our economy has grown as fast, in recent months, as mobile phone use. Moreover, despite the technical limitations and the difficulties in purchasing modern and inexpensive phones, the symbol of modernity represented by this little gadget has begun to change our lives."

~Yoani Sanchez, dissident Cuban blogger, in the Miami Herald

Obama Responds to the Movie "Waiting for 'Superman'" (7:40) and Whether His Daughters Would Get Good Education at DC Skools (17:27)

There's No Magic Keynesian Fiscal Wand

From "John Maynard Keynes, R.I.P." by Richard McKenzie:
The late great economist Milton Friedman frequently peppered Keynesian enthusiasts in the 1960s and 1970s with a remarkably simple question that needs to be remembered today: Where does the government get the money it spends on roads (or bridges to nowhere)?

Friedman followed with an equally revealing observation: When the government engages in deficit spending, it must borrow the extra funds from someone who could have spent them on private-sector projects. An increase in government spending could be totally offset by a decrease in—or a “crowding out” of—private spending, as lendable funds are diverted from private to government uses. The net effect can be no net increase in aggregate demand—and no multiplier effect. Indeed, with the inevitable waste in government stimulus projects, the multiplier effect could as easily be negative as positive.

The country will learn anew an old lesson: Don’t count on the federal government to wave away the country’s economic troubles with some refurbished fiscal wand. The wand didn’t work in the 1960s and 1970s (it only contributed to “stagflation”). The wand is an illusion that should have died with Keynes long ago. We will also relearn the oft-repeated wisdom of Keynes when he wrote, “Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”

The Political Obsession with Middle-Class Markers

Glenn Reynolds at Instapundit writes:

"The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle-class people. But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits — self-discipline, the ability to defer gratification, etc. — that let you enter, and stay, in the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them."

(MP: For example, the political obsession with homeownership turned thousands, if not millions, of good middle-class renters into really bad homeowners and undermined the "American Dream.") 

Megan McArdle responds and asks a great question: "Who but a lunatic would loan money to an eighteen year old with no job and no credit record, in the hopes that they will graduate college and begin speedy repayment?"

Let's Hope This Trend Continues.....

NY Times -- "A private company in Maryland has taken over public libraries in ailing cities in California, Oregon, Tennessee and Texas, growing into the country’s fifth-largest library system. The company, known as L.S.S.I., runs 14 library systems operating 63 locations. Its basic pitch to cities is that it fixes broken libraries — more often than not by cleaning house."

“A lot of libraries are atrocious,” said the company's CEO Frank Pezzanite.  Their policies are all about job security. That’s why the profession is nervous about us. You can go to a library for 35 years and never have to do anything and then have your retirement. We’re not running our company that way. You come to us, you’re going to have to work.”

Sunday, September 26, 2010

Those Who Are Willing to Pay Higher Taxes Now Could've Rejected the Bush Tax Cuts in 2001

Linda McGibney responds this week on CBS Sunday Morning to Ben Stein's commentary last week "Raising My Taxes Is a Punishment" :

"I am an American. I am in the highest tax bracket. I also work in entertainment - which is what Mr. Stein does as well. I am fine with the tax increase. I think it patriotic that I am taxed in this way. I want to help my country.

I believe the fact that I can have a job this year, and hopefully every year to come, is a privilege. Mr. Stein, there are Americans who qualify for this tax increase under the proposed plan who don't feel "punished" by it. We feel it is our duty in hard times to help the rest of America.

I am a "have." I am willing to pay this tax increase. I'm not going to whine about it. I won't feel punished. I will understand it's the cost of doing business."

It should be noted that the current "Bush tax rates" are NOT the MAXIMUM tax rates on income, they are actually the MINIMUM tax rates. Anybody, including Linda McGibney, who wants to pay more in taxes can do that right now, and they could have been doing that all along. Ms. McGibney and others could have personally rejected the "Bush tax cuts" and continued to pay at the 2000 Clinton tax rates above in each year starting in 2001 instead of paying at the lower rates.  

In case there's any problem with the IRS accepting the additional tax payments for the higher tax rates, here is the link to the Department of the Treasury website "Gifts to the United States Government" for "citizens who wish to make a general donation to the U.S. government."  According to Treasury, "This account was established in 1843 to accept gifts from individuals wishing to express their patriotism to the United States."

Ms. McGibney and her supporters can express their patriotism immediately by making a gift to the U.S. government - there's no need to wait to see if the Bush tax cuts expire.

Markets in Everything: Name Your Price for Medical and Dental Procedures at PriceDoc

You've all heard of, where you can name your own price for airline tickets, hotel rooms, rental cars, and cruises. 

Now there's PriceDoc, an "online marketplace connecting healthcare providers with consumers looking for medical and dental procedures. PriceDoc enables consumers to compare and negotiate pricing on medical procedures in a given location in the U.S. while providers receive the benefit of generating patients who are willing to pay directly, out of pocket to the provider for their services.  Featured within the web site are "Make Offer" and "Name Your Price," opening the door for consumers to negotiate with providers for the cost of their procedures." 

Chart of the Day: Inflation-Adjusted Gold Prices

Adjusted for inflation, the current price of gold ($1,296) is 36.41% below the peak price of more than $2,000 per ounce (2010 dollars) in January of 1980 (see chart above). 

UK Politician: Companies Don't Need More EU Regulations To Enable Them to Sell Across Borders

Saturday, September 25, 2010

Bull Market Rally in Lumber Futures As Economic and Construction Growth May Increase Demand

Sept. 24 (Bloomberg) -- "Lumber futures rose the most allowed by the Chicago Mercantile Exchange, capping the biggest weekly gain since July, as a rebound in demand for U.S. capital equipment bolstered prospects for industrial materials.

Lumber futures for November delivery rose the CME’s $10 limit, or 4.3 percent, to settle at $240.50 per 1,000 board feet at 1:13 p.m. in Chicago. This week, the price jumped 10 percent, the most since the five days ended July 2. The commodity has surged 38 percent in the past year (see chart above, data here).

On Thursday, lumber futures reached $243.50, the highest price since June 4. This week, the Commerce Department reported a jump in U.S. housing starts that revived prospects for construction materials."

Waiting for "Superman" Released Yesterday

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

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

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

From a movie review by Stewart Nusbaumer.

Filmmaker Davis Guggenheim talks about the movie:

HT: Mike Carlson

Update on the NYC "Taxi Cartel"; Medallion Prices Reach Record Highs in Aug. of $609k and $825k

The "priciest piece of aluminum in NYC" - a taxi medallion to operate a single cab in NYC - reached a new record-high of $609,000 in August for an individual medallion (see chart above, data here), more than double the average prices in 2004. The average price for a corporate-owned taxi medallion reached a new record high in July and August at $825,000. 

Membership in the "taxi cartel" certainly has its privileges: above-market returns of 17% per year for corporate medallions and 15% for individual medallions in a permanent bull market.  Over the same period from 2004 to 2010, the average annual return on the S&P500 was -1.10%.  See previous CD posts here, here and here.

Friday, September 24, 2010

Emerging Stock Markets Hit 2-Year High Today

The MSCI Emerging Markets Index reached a 26-month high today of 1053.3, the highest closing level since July 2, 2008.

For Young Adults, Health Insurance Is Available for About Same Monthly Cost as A Cell Phone

We always hear how medical insurance is expensive and unaffordable, and that's why there are 50 million uninsured Americans (details here). But almost 21 million of those uninsured are between the ages of 18 and 34, which is 41% of all uninsured (see CD post below or here). At least in Michigan for young adults between the ages of 18 and 30, insurance is available for as little as $49.30 per month through Blue Cross-Blue Shield of Michigan, for its Young Adult Blue program (details here), which is about the same monthly cost as a cell phone.

Young Adults Are Key to Health Care Reform; But There Are Strong Incentives to Remain Uninsured

FOX NEWS -- (Note: This is from January 2010, before Obamacare passed.) For the first time ever, the federal government is going to require that everybody obtain health insurance coverage. For those who have insurance through their employers, the so-called individual mandate may have very little impact. But for young adults, many of whom are not currently covered, the health care bill will add a new and costly expense to their budgets.

MP: For the age group below 35 years, there were more than 28 million uninsured Americans in 2009 and that represented 56% of the 50.6 million uninsured (data here), see chart above. For the 18-34 year age group, there were almost 21 million uninsured, which is 41% of the total number of uninsured.

The federal government wants to require young, healthy people to buy insurance because if they don't, premiums for everyone else will go up. Insurance companies need low-maintenance, young customers on their rolls so they can raise money to cover benefits for less-healthy people the health care bill will require them to insure.

"If you don't have a mandate that gets in the young people who are cheaper, you're going to see average premiums rise," said Jim Kessler, vice president for policy with Third Way. "There's no way around that." But both houses passed two other reforms that create an incentive not to buy insurance.

1. The bills allow patients to basically purchase insurance whenever they want.

"You can literally buy an insurance policy in the ambulance on the way to the hospital," said Douglas Holtz-Eakin, former director of the Congressional Budget Office. "You could imagine a situation in which you would pay the fines, stay out of the insurance pool, and at the moment when you need it, you go out and buy it."

2. The other disincentive is that both houses change how much older customers can be charged relative to younger customers. Analysts agree this will drive up the cost for young people, though it's not clear by how much.

"If you charge people a fair price, then a 50-to-60-year-old should pay about six times as much as a 20-year-old," said John Goodman, president of the National Center for Policy Analysis. But he noted that the Senate bill says older people can be charged only three times as much; the House bill says they can be charged two times as much. "So we're going to penalize low-income young people in order to lower the premiums for older wealthier people."

"Young people are going to bear a disproportionate cost in this reform," Holtz-Eakin said. The Senate tries to make it easier on the young by offering them a bare-bones insurance plan that would be less expensive than all the others. This is perhaps the keystone for the entire reform effort, because if young healthy people don't get into the insurance pool, everything else -- especially cost containment -- could fall apart.

MP: In other words, it seems like any real cost containment in the health care overhaul is pure fantasy, and will never happen under any conditions. Either you force 20 million young people to purchase insurance they aren't willing to buy now and overall costs go up, or the young people (and older people as well) pay the fine and remain uninsured until they need insurance (in the ambulance on the way to the hospital) and overall costs go up.

Thursday, September 23, 2010

If You Tax Something, You Get Less of It....

WSJ -- "Last year, Congress sharply increased the federal excise tax on "little" cigars—filtered, often sweetly favored products that are similar in size and shape to cigarettes. Some manufacturers responded by increasing the weight of their little cigars so they qualified as conventional, "large" cigars, which are taxed at lower rates. Now, a surge in sales of the small, inexpensive cigars is attracting the scrutiny of members of Congress and a prominent anti-smoking group, who say that tobacco manufacturers are exploiting this tax loophole.

Currently, little cigars—those weighing three pounds or less per thousand—are taxed at the same rate as cigarettes, about $10.07 per carton. But cigars heavier than three pounds per thousand are taxed at 52.75% of the manufacturer's price, resulting in taxes of only about $2 to $4 per carton for the smaller products in this bracket. Many small cigars already weighed almost three pounds per thousand before the tax increase, so some manufacturers needed only to modestly increase the amount of paper, filter or tobacco in their cigars to meet the higher threshold.

In the 14 months since the excise-tax increase, sales volumes of cigars classified as large more than quadrupled to 12.3 billion units. Sales of products listed as "little" cigars fell by 79% (see chart above)."

MP: This is Econ 101.  Couldn't they have predicted this would happen?  See previous, related CD post here

HT: Jonathan Butcher

Surprise, Surprise, Surprise: Beer Industry Opposes Marijuana Legalization: "This Bud's Not for You"

"The California Beer & Beverage Distributors is spending money in the state to oppose a marijuana legalization proposition on the ballot in November, according to records filed with the California Secretary of State. The beer sellers are the first competitors of marijuana to officially enter the debate; backers of the initiative are closely watching liquor and wine dealers and the pharmaceutical industry to see if they enter the debate in the remaining weeks."

HT: Huffington Post, via Catherine Rampell

Leading Index Improving, But Very Slowly

The Conference Board reported today that the U.S. Leading Economic Index reached a new high of 110.2 in August, and increased for the 15th time in the last 17-month period that started in April 2009 just before the recession ended.  Today's announcement follows recent reports from the Conference Board that its July Leading Indexes increased in Germany, France, Spain, China, and the U.K.; and fell in Korea and Japan in July.  

Ken Goldstein, economist at The Conference Board, said: “While the recession officially ended in June 2009, the recent pace of growth has been disappointingly slow, fueling concern that the economic recovery could fade and the U.S. could slide back into recession. However, latest data from the U.S. LEI suggest little change in economic conditions over the next few months. Expect more of the same – a weak economy with little forward momentum through 2010 and early 2011.”

MP: Looking at the chart above, there were several periods in mid-2002 and early 2003 when the economy was in recovery from the 2001 recession, but the LEI was flat for several months in a row, similar to the flattening in recent months.