Monday, October 11, 2010

N. Dakota Oil Production Sets New Record in Aug.

In August, North Dakota pumped another record amount of oil, producing more than 10 million barrels in a single month for the first time ever (see chart above, data here).  Compared to August of last year, oil production has increased by 41%, and oil production has doubled in a little more than two years - from slightly fewer than 5 million barrels in June of 2008 to more than 10 million barrels in August this year.  

Partly because of its ongoing oil boom, North Dakota continues to lead the nation with the lowest unemployment rate at 3.7% in August, almost a full percentage point below second-lowest state South Dakota at 4.5%, and almost 6 points below the nation's average 9.6% rate. 

Forced Redistribution of Income vs. Blood

1. Do you support the forced redistribution of income?

2. Do you support the forced redistribution of blood?  After all: a) someone needs blood every two seconds, b) one in seven people entering a hospital need blood, and c) one pint of blood can save up to three lives. 

If your answers to the two questions are not the same, you have a problem on your hands, according to Philip Maymin (fellow finalist for the 2010 Bastiat Prize for Online Journalism). 

Price Discrimination: Russians Get a Discount

It is well-known in Russia that citizens often get discounts to museums, cathedrals and other culturally important national and historic landmarks. But how do Russians get the discount?

One common method of price discrimination in Russia is illustrated in the picture above, which shows a sign at Saint Issac's Cathedral in Saint Petersburg, Russia. The top sign says "ENTRANCE TO THE MUSEUM" in Russian. If you can read Russian, you enter to the left and go to a ticket counter that has a lower entrance fee than if you follow the English "ENTRANCE" sign to the right, and pay a higher price. 

Prof. Lewis: Climate Change is the Greatest and Most Successful Pseudoscientific Fraud I Have Seen

87-year old Professor Hal Lewis, Emeritus Professor of Physics at the University of California-Santa Barbara, formally resigned from the American Physical Society (APS) last Wednesday after 67 years as a member.

From Professor Lewis' resignation letter to Curtis G. Callan, Princeton University, President of the APS:

"For reasons that will soon become clear my former pride at being an APS Fellow all these years has been turned into shame, and I am forced, with no pleasure at all, to offer you my resignation from the Society.

It is of course, the global warming scam, with the (literally) trillions of dollars driving it, that has corrupted so many scientists, and has carried APS before it like a rogue wave. It is the greatest and most successful pseudoscientific fraud I have seen in my long life as a physicist. Anyone who has the faintest doubt that this is so should force himself to read the ClimateGate documents, which lay it bare. I don't believe that any real physicist, nay scientist, can read that stuff without revulsion. I would almost make that revulsion a definition of the word scientist.

APS management has gamed the problem from the beginning, to suppress serious conversation about the merits of the climate change claims. Do you wonder that I have lost confidence in the organization?

Your own Physics Department (of which you are chairman) would lose millions a year if the global warming bubble burst. When Penn State absolved Mike Mann of wrongdoing, and the University of East Anglia did the same for Phil Jones, they cannot have been unaware of the financial penalty for doing otherwise. As the old saying goes, you don't have to be a weatherman to know which way the wind is blowing. Since I am no philosopher, I'm not going to explore at just which point enlightened self-interest crosses the line into corruption, but a careful reading of the ClimateGate releases makes it clear that this is not an academic question.

I want no part of it, so please accept my resignation. APS no longer represents me, but I hope we are still friends."

HT: Tom Hemphill

IPN Announces 2010 Bastiat Prize Finalists

LONDON, 11 October -- International Policy Network is pleased to announce the finalists in its ninth Bastiat Prize for Journalism. The competition includes one prize awarded for print journalism ($15,000 total prize money), and one prize awarded for online journalism ($3,000 prize money). Winners and runners-up will be announced in early November.

Seven finalists for the print journalism prize are:

•Andrew Ferguson, Weekly Standard

•Peter Foster, National Post, Canada (2009 finalist)

•Tim Harford, Financial Times (2006 co-winner)

•Jeff Jacoby, Boston Globe

•Bret Stephens, Wall Street Journal

•Jamie Whyte, freelance (for articles written in The Times and Wall Street Journal; (2006 co-winner)

•Martin Wolf, Financial Times

Three finalists for the online prize are:

•James Delingpole, blogger for

•Philip Maymin, columnist, and

Mark Perry, Carpe Diem blog / American Enterprise Institute / University of Michigan

The Bastiat Prize was first awarded in 2002 and judges have included Lady Thatcher and Nobel-Prize-winners James Buchanan and Milton Friedman. The winner of the Bastiat Prize will receive US$10,000, and the winner of the Bastiat Prize for Online Journalism will receive US$3,000. They will also receive an engraved crystal candlestick - a reference to an essay by Frederic Bastiat entitled “A Petition.”

A list of judges is available on IPN’s website

2010 Nobel Prize in Economics

As usual, Tyler Cowen at Marginal Revolution has the best summary, commentary and analysis of this year's Nobel Prize winners in economics:

Peter A. Diamond

Dale T. Mortenson

Christopher A. Pissarides

Tyler's personal observations

Sunday, October 10, 2010

Competition for Spare Change: Homeless Meters

Orlando Sentinel -- "Panhandlers in downtown Orlando may soon have some mechanical competition for spare change. City Hall is set to roll out a plan to install "homeless meters" near spots where panhandling is grudgingly allowed.

People could deposit their coins in the repurposed parking meters — painted a different color and set back from the street — instead of giving spare change to panhandlers. The city would collect the money and give it to a nonprofit group to help the homeless."

HT: Buddy Pacifico

Tragedy of the Commons Comes to D.C.

Not to be deterred by the reality that most common property bike programs fail, Washington, D.C. just launched the largest and most ambitious bike-sharing program in the country a few weeks ago.  Capital Bikeshare will eventually provide more than 1,000 red bikes (pictured above on the Duke Ellington Bridge in Woodley Park near my apartment) at more than 100 stations in D.C. and Arlington, VA. (see station map here).   Read a news report here about Capital Bikeshare. 

How have these bike-sharing programs worked out elsewhere?  Not so well.  Here are three examples of bike-sharing programs that have "gone flat" and failed in Paris, Lexington, KY, and Berry College in Rome, Georgia. Reason? "Tragedy of the commons."

Update: Here's another example of a failed bike-sharing program at Florida Atlantic University (HT: E. Frank Stephenson). 

Saturday, October 09, 2010

Interesting Fact of the Day: Population in 2050

By 2050, India will overtake China as the world's most populous country, and the United States will still rank #3.  Not too surprising.  But by 2050, which countries will rank #4, #5, and #6 by population?  That's a little more surprising, see the list here

And look at what's expected to happen for the populations of Japan and Russia between 2025 and 2050. 

Entrepreneurs Built Amway, But Their Kind Is Not Welcome Near the Amway Center in Orlando

"When the old arena for the Orlando Magic opened 21 years ago, it was common for Parramore neighborhood residents who lived nearby to charge Magic fans and concert-goers to park on their property. But five weeks ago, the Orlando City Council approved standards that will likely keep most Parramore homeowners from profiting on parking near the Orlando Magic's new $480 million Amway Center (pictured above).

Among other things, property owners must pay a $275 application fee and provide a business tax receipt. Lots must have an attendant, signs, proper lighting and a paved, gravel or grass surface free of potholes or ruts. City officials also recommend hiring security. Even when all those requirements are met, temporary parking lots are allowed only during an event expected to draw at least 5,000 attendees. So far, five applications have been approved, but all are for large properties such as churches, not homeowners. 

The city, meanwhile, has doubled its event-parking rate to $20 at the two garages closest to the Amway Center; elsewhere, event parking at city garages and lots is $10."

Read more here in the Orlando Sentinel of what you can't do at the new Amway Center (opens tomorrow), including sell an extra ticket near the stadium.  

Price Discrimination: India and Disney World

The picture of the sign above is a good example of "price discrimination" at an archeological site in India, where citizens of India pay an admission fee of 10 rupees (about 25 cents) and "other citizens" pay $5 (or 250 rupees).

Another example of price discrimination are the many discounts at Disney World that are only available for resident of Florida.  

Rhode Island: 10th State to Report Sept. Tax Gains

PROVIDENCE — "The amount of money the state pulls in from taxes has increased for three consecutive months — further evidence that Rhode Island’s economy has begun to turn the corner, Governor Carcieri said Thursday.  For the three months ended Sept. 30, overall state tax revenue is up about 10.4 percent, or $54 million, compared with the same period a year ago, according to preliminary state estimates. 

There were increases in categories that economists and others watch closely, including sales-tax revenue and tax withheld from workers’ paychecks. Based on those and other figures, Carcieri said he is “cautiously optimistic.” “My sense is we are, month by month, improving,” Carcieri said in an interview at the State House."

See previous CD post here.

Retail Clinics: "Disruptive Innovation and Improved Value Proposition" v. Govt. Takeover of Healthcare

From a Reuters report yesterday: "CVS has invested heavily in its walk-in MinuteClinic medical clinics, and plans to double the number of locations to 1,000 by 2015."

As a Deloitte Center for Health Solutions study concluded last November:

1. "Retail clinics represent a new channel to deliver primary care services more conveniently and at lower cost to consumers. Clinic services are safe and effective, due in large measure to medical management programs that are evidence-based and supported by electronic medical records. As a new entrant, retail clinics represent a threat to many traditional health care industry stakeholders; however, to consumers, health plans and employers they offer an important care alternative with a strong value proposition.

2. The growth and evolution of retail clinics reflect opportunities for disruptive innovation and an improved value proposition for the U.S. health care system."

MP: It's encouraging that even though Obama and the Democrats in Congress disregarded any market-based health care solutions and legislated a federal government takeover of the nation's health care system, private companies like CVS are still pursuing market-based solutions to health care by investing in retail clinics that provide convenient health care 7 days a week, with affordable, transparent low prices.     

NY Times: 72% Chance Republicans to Control House, Many Gubernatorial Takeovers Likely

From the NY Times FiveThirtyEight blog:

"Our model now estimates that the Republicans have a 72 percent chance of taking over the House, up from 67 percent last week. Moreover, they have nearly even odds of a achieving a net gain of 50 seats; their average gain in a typical simulation run was between 47 and 48 seats."

The blog's model also forecasts a 76 percent chance that Democrats will control at least 50 Senate seats, and is predicting a greater than 50% chance that Democrats will lose in governors' races to Republicans in at least ten states (WY, KS, OK, IA, TN, MI, PA, WI, OH, and NM), see graphic above.

Check out the blog's "Forecast Center" on the right side of the page for lots of detailed projections, interactive maps, etc.  

Friday, October 08, 2010

Two More States Reporting Sept. Tax Increases

1. Georgia's economic picture brightened with the news that state tax and fee collections increased in September by nearly 6 percent over the same month a year ago. It is the fourth consecutive month of positive revenue collections and follows a 13 percent jump in August. Revenue was up 3.8 percent in June and 4.7 percent in July.

2. Kentucky’s general fund receipts for September 2010 were up 5.3 percent from September 2009.  During September, the state’s individual income tax collections increased 3.3 percent, to $320.1 million from $309.7 million a year earlier. Corporation income taxes during the month increased 62.2 percent, to $63.6 million from $39.2 million.

That brings the total to nine states so far reporting improvements in tax revenues for September (see previous posts here and here).

Odds for Dems to Control Senate Slip Below 50%

Intrade link. 

Update: Odds now down to 46%.

Gain of +863,000 Private Payroll Jobs This Year

Some highlights of today's employment report:

1. The September jobless rate remained unchanged at 9.6%.

2. Private-sector payroll employment increased in September for the ninth straight month (every month this year).  The increase of 64,000 jobs last month brings the total number of private-sector jobs added this year to 863,000, which is the largest 9-month gain in private payroll employment since the summer of 2007 (see top chart above).

3. Temporary employment increased in September by 16,900 jobs to a total of 2,128,600, the highest level for temporary employment since October 2008, almost two years ago (see bottom chart above). Except for a small decrease in July, temporary help services employment has increased in each of the last 12 months.

4. Average overtime hours for manufacturing rose slightly in September to 3.9 hours from 3.8 hours in August, matching the 3.9 hours in May and June, which is the highest level of overtime hours since 4.0 hours in April 2008. 

MP: Today's employment report suggests a weak, but ongoing, slow recovery in the labor market, with no indications that a double-dip recession is a real threat.

Thursday, October 07, 2010

Private vs. Federal Government Saving

We frequently hear about how: a) the U.S. trade deficits are unsustainable and demonstrate that we are living beyond our means, b) we've become a nation of debtors, partly at least because: c) Americans don't save.   

And yet the data above possibly suggest otherwise.  Personal saving is now close to an all-time high in nominal dollars at $673 billion, and has more than tripled since the fourth quarter of 2007 when it was $223.6 billion.  Meanwhile, negative federal government "saving" has increased by 5 times over that period from -$276 billion to -$1.35 trillion. 

So if there's a problem with a lack of saving, it's not the private sector that's the problem, it's the negative federal government saving of more than $1 trillion that's the real problem, no? At least for the last few years, the private sector looks pretty thrifty and responsible, and it's the federal government that looks pretty recklessly profligate.

Is the U.S. a Currency Manipulator?

The trade-weighted U.S. dollar index has depreciated by almost 40% over the last ten years vs. the world's major currencies (see chart above).  Does that make the U.S. a currency manipulator?  Here's a little editing fun of this article:

"China The United States flatly denies that its currency manipulation undervalues the renminbi (yuan) dollar by 40 percent and has become one of the foremost impediments to fair and equitable global trade, experts say.

“That undervaluation of the renminbi dollar acts as a subsidy for Chinese American exports, artificially making them as much as 40 percent cheaper when sold in outside the U.S. Conversely, it acts as a tax of as much as 40 percent on Americanforeign-made goods sold in China the United States,” according to a recent article on The Hill’s Congress Blog.

Odds for the Nobel Prize in Economics

The Nobel Prize for Economics will be announced next Monday, October 11 in Sweden.  From the New Zealand-based prediction website iPredict, here are the current odds for winners:

Richard Thaler: 24.35%

Oliver Hart: 24%

Robert Shiller: 20.86%

Jean Tirole: 19.78%

Martin Weitzman: 17.50%

William Norhaus: 16.80%

Angus Deaton: 11.24%

Eugene Fama: 8.32%

Avinash Dixit: 7.82%

Robert Barro: 6.91%

Internet Explorer Browser Share Falls Below 50%

CNNMoney -- "StatCounter, which tracks Internet data, said that Internet Explorer's share of the browser market fell to 49.9% in September. More people still use IE than any other single browser, but the combined market share of non-Microsoft browsers now outpaces IE. The other browsers have outpaced IE's innovations, has led Mozilla's Firefox, Google's (GOOG, Fortune 500) Chrome and Apple's (AAPL, Fortune 500) Safari browser to eat away at Microsoft's market share. Internet Explorer's use has been falling steadily over the past several years. 

"This is certainly a milestone in the Internet browser wars," said Aodhan Cullen, StatCounter's CEO. "Just two years ago IE dominated the worldwide market with 67%."

MP: For visitors to Carpe Diem, the share of various IE browsers (6.0, 7.0, 8.0 and 9.0) is only 43.3% vs. 32% for Firefox, and 22% for Safari (see chart above).  It wasn't too long ago that Microsoft was accused of being an evil monopolist, and prosecuted for bundling Internet Explorer with its Microsoft Windows operating system, which was supposedly unfair because it restricted the market for competing web browsers.  

The end of Microsoft's dominance for browsers demonstrates that in the long run, vigorous market competition is almost always the best regulator of all, and the consumer's best friend.  

Caveman Thinking and Our Protectionist Instinct

Economic Paul Rubin writing in today's Wall Street Journal explains why our "caveman heritage" makes us resistant to clear thinking about international trade:

"There are two aspects of our evolved psychology that help explain beliefs about trade. First, humans tend towards zero-sum thinking. That is, we do not intuitively understand the possibilities of economic growth or the benefits of trade in achieving it.

Our ancestors lived in a static world with little intertribal trade and virtually no technological advance. That is the world our minds understand. This doesn't mean that we can't grasp the crucial concept that trade benefits both parties to a transaction—but it does mean that we must learn it.

Positive-sum thinking doesn't come naturally. By analogy, we learn to speak with no teaching, but we must be taught to read. Understanding the mutual benefits of exchange is like reading, not speech.

Second, we evolved in a hostile world. Our ancestors engaged in constant conflict with neighbors, much like present-day chimpanzees. We developed strong in-group and out-group instincts, and for many aspects of behavior we still have such feelings.

These feelings are benign when applied to something like rooting for local sports teams, but are more harmful when applied to international trade. They are most harmful when they generate actual warfare. Yet the metaphor of a "trade war" shows how close to the surface harmful instincts are.

These two sets of beliefs interact to explain our natural (mis)understanding of trade. We believe that the number of jobs is fixed (a result of zero-sum thinking) and that as a result of trade these jobs go to foreigners, whom in a deep sense we view as enemies. Both beliefs are incorrect, but both are natural. And in many cases politicians are only too eager to capitalize on these beliefs to be re-elected.

One of the great triumphs of modern economics is the reduction in tariffs and other barriers to the free international flow of goods. Enough voters have been convinced of the benefits of free trade that it has generally been a winning political position, and those running on protectionist platforms do not do well in contemporary America. It would be a disaster if the current economic malaise reversed this situation."

Weekly Rail Traffic Maintains Steady Growth

"The Association of American Railroads today reported that weekly rail traffic continues to maintain a steady pace with U.S. railroads originating 299,394 carloads for the week ending Oct. 2, 2010, up 7.7% compared with the same week in 2009, but down 10.7% 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.

Intermodal traffic on U.S. railroads totaled 240,252 trailers and containers, up 16.5% from the same week in 2009, but down 1.9% compared with 2008. Container volume last week increased 17.6% compared with 2009, and rose 5.8% compared with 2008. Trailer volume last week rose 10.2% compared with 2009, but dropped 30.6% compared with 2008."

MP: For 2010 year-t0-date (39 weeks), carload rail volume is up by 7.2% and intermodal rail traffic is up by 14.7%. This marks the 38th 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 32 weeks starting in late February. 

Rail traffic for all of North America (U.S., Canada and Mexico) is up by 9.8% year-to-date for carloads and 15.2% for intermodal units. The ongoing improvements in rail traffic this year are consistent with an economy that is steadily expanding and growing, and that growth is gradually increasing the demand for the inputs, raw materials, commodities, minerals and chemicals that move around the country by freight.  

Aug. Private Sector Job Openings +36% vs. 2009

The BLS reported today that job openings increased to 3.2 million at the end of August, which was 60,000 higher than job openings at the end of July, and 790,000 higher than at the end of August last year (or 33%).  Job openings for the private sector are 36% ahead of last year, or by 751,000 openings.  

Compared to last August, job openings have improved in all six sectors except for Education and Health Services, which declined by 7%.  Job openings in all of the other five sectors have
improved, led by Professional and Business Services (+70.5%) and followed by Leisure and Hospitality (+62.2%), Manufacturing (+43.3%), Trade, Transportation and Utilities (+7.1%) and Construction (+3%).  On a regional basis, job openings have increased in all four parts of the country, led by the West (+49.7%), followed by the Midwest (+43.1%), the Northeast (+36.5%), and the South (+34.8%).   

Except for the 3.3 million job openings in April of this, the August number was the highest since November of 2008, 21 months ago. 

Monster Index Shows Continuing Employment Gains

"The U.S. Monster Employment Index recorded its eighth consecutive month of positive year-over-year growth during September with a growth rate of 16 percent (see top chart above). This is an accelerated rate from the 12 percent in the previous month, but less than the peak of 21 percent seen during June and July. The Index rose two points (1 percent) in September as online job demand partially rebounded from the August levels (see bottom chart above).

“Although we have seen the growth rate slow a bit over the last two months, it is encouraging that the Index continues to show positive year-on-year growth during 2010. This is a clear sign that employers are recruiting in greater numbers than they were a year ago and bodes well for steady, but continued improvement in the U.S. labor market,” said Jesse Harriott, senior vice president and chief knowledge officer at Monster Worldwide." 

Highlights of today's report include:

1. All major metropolitan markets tracked by the Monster Employment Index had positive annual growth in September.

2. Service related industries - health care and social assistance; and professional, scientific, and technical services rose in September.

3. Annual growth remains stable for manufacturing; and transportation and warehousing between August and September. 

Wednesday, October 06, 2010

2 More States Report Sept. Tax Increases vs. 2009

1. Texas collected sales tax revenue totalling $1.57 billion in September, up by 6.8 percent from September 2009.  "This increase is significantly larger than recent monthly gains which have been in the 0 to 2 percent range,” said Texas Comptroller Susan Combs. “Sales tax increases were posted across almost all sectors, including oil and gas, construction, manufacturing, wholesale trade, retail trade and restaurants.”

2. Indiana collected $1.16 billion in September--$28.9 million short of what it had expected. Still, total tax collections are $64 million -- or 5.8 percent -- higher than the same period last year. And, in an encouraging sign for the state, sales tax collections, compared with 2009, have increased by 4 percent for the past six months.

See five more states here

International Comparison of Home Ownership Rates

In his testimony before a Senate subcommittee last week, American Enterprise Institute's Alex Pollock provided an interesting international perspective on homeownership rates around the world:

"In the days of Fannie and Freddie’s pride, their representatives and political supporters used to frequently say, “American housing finance is the envy of the world!” It really wasn’t, at least based on my discussions with housing finance colleagues from other countries. But many Americans—including members of Congress—thought it was, just as they mistakenly thought and said that the U.S. had the highest home ownership rate in the world. We didn’t and don’t. This is apparent from the International Comparison of Home Ownership Rates (see chart above). The U.S. ranks 17th of 26 economically advanced countries, or about two-thirds of the way down the list.

I think we can agree that we would like our society to have a property-owning democratic citizenry, which includes widespread home ownership. But the international perspective makes it clear that many countries achieve home ownership levels as high or higher than ours with no government-sponsored enterprises. It turns out that these levels can be achieved without tax deductions for the interest paid on home mortgages, without our very unusual practice of making mortgages into non-recourse debt, without government mandates to make “creative” (that is, riskier) loans, without 30-year fixed-rate loans, and with prepayment fees on mortgages.

Of course, as bubbles and busts in other countries show, you can also get in trouble with different systems. At a minimum, we should never assume that the particular historical development so far of the U.S. housing finance system is definitive."

Memo to Congress: Affordable Imports from China Are A Godsend, Not Grounds for a Trade War

From Jeff Jacoby in today's Boston Globe:

"The policies of the Chinese government make it possible for Americans to acquire a vast array of products at affordable prices. For that high crime and misdemeanor, the US House of Representatives voted last week to punish China.

Affordable imports are a godsend, not grounds for a trade war. It’s distressing that so many members of Congress have trouble understanding that. Maybe a return to private life would help them figure it out."

Tuesday, October 05, 2010

It's Not Just CEOs, the Top Pay for MLB Players, Oprah, Criss Angel, Cesar Millan is "Out of Control"

The CNBC discussion above focuses on the question of whether CEO pay is "out of control."  LA Times business writer Michael Hiltizk say Yes, and in a recent LA Times article he cited this Harvard Magazine article that reports that the "Ratio of Average CEO Pay to Average Worker Pay" has increased from 107:1 in 1990 to 344:1 in 2007. 

Big deal. The ratio of the median salary of the top 25 highest-paid Major League Baseball (MLB) players to the median U.S. household income has increased steadily from 70:1 in 1990 to an estimated 374:1 for 2010, an all-time historic high (see chart below).  
The chart above was calculated using the USA Today Salaries Database, and shows the ratio of the median salary of the top 25 highest-paid MLB players in each year (i.e. the player who ranked #13 in the MLB by salary) to the median U.S. household income for each year. In 1990, Andre Dawson was paid $2.1 million by the Chicago Cubs (#13 highest paid in the MLB) and that was 70 times the median household income in that year of $29,943.  By 2010, Manny Ramirez (13th highest-paid player this year) is making $18,695,000 for the LA Dodgers, and that's 370 times the estimated median household income this year of $50,500. 

In the same way that there are only a few hundred athletes in a given year who are talented enough to make it into the elite group of world-class athletes who earn multi-million dollar salaries, there is likewise only a small group of individuals with the necessary skills and talents to lead large corporations (average CEO pay in 2009 was $9.2 million for the S&P 500 companies).  

And in the same way that the top athletes can command higher salaries each year because of increased fan interest in sports (domestically and globally) and increased competition for those top positions (domestically and globally), CEOs can command higher salaries because of increased global competition and bigger markets, and bigger companies.  Just like the highest-paid athletes deserve to make more today than their counterparts in the past, the CEOs of Ford, Caterpillar, Johnson & Johnson, and McDonald's deserve to make more than their counterparts of the past.  The markets today for cars, machinery, consumer products and fast food are not only much bigger today than in the past, both domestically and globally, they're much more competitive and challenging and the CEOs who can face those challenges deserve to make a lot of money.  

We rarely hear anybody say that the pay of athletes, musicians, movie stars, entertainers is "out of control," and yet many of those celebrities (Oprah, Tiger Woods, Michael Jordan, Criss Angel, Cesar Millan aka The Dog Whisperer, etc.) ARE CEOs, of their own multi-million dollar enterprises.  And as Reason's Katherine Mangu-Ward pointed out in the video, the CEOs don't write those checks to themselves, so we should realistically assume that market forces play a large role in determining CEO compensation, just like we should assume that Alex Rodriguez's $33 million salary this year is determined largely by market forces. 

71% Odds of At Least +45 Seats for Republicans

The chart above is from this website and summarizes the current Intrade betting odds for various gains in House seats for Republicans.  Intrade contracts which are trading above 50% odds are shaded dark red, and contracts below 50% are a lighter shade.  As of today, there is 71% chance that the Republicans will gain at least 45 seats. 

The same website is showing a net gain of 8 Senate seats for the Republicans (AR, CO, IL, IN, ND, PA, WI and WV).  Updated: It should be AR, and not AZ.

ASA Staffing Index Reaches 28-Month High

From the American Staffing Association (ASA):

"During the week of Sept. 20–26, 2010, temporary and contract employment rose 1.36%, pushing the index up two points to a value of 100. The last time the weekly index hit 100 was during the week of May 12, 2008 (see chart above).  At a current index value of 100, U.S. staffing employment is 45% higher than the level reported for the first week of the current year and is 25% higher than the same weekly period in 2009."

According to the ASA "Staffing industry employment serves as a coincident economic indicator and a leading indicator of total U.S. nonfarm employment. The ASA Staffing Index bears watching as a near real-time measure of weekly trends in staffing industry employment and current economic conditions, as well as future overall employment trends."

MP: The ASA Staffing Index reached a 28-month high in Week 39 (September 20-24), and this marks the 23rd consecutive week with percentage gains in the ASA Staffing Index above 20% compared to the same week in 2009, and the 32nd straight week of double-digit percent increases vs. 2009.  As a leading indicator of U.S. nonfarm employment, the ongoing improvements in the ASA Staffing Index this year suggest that we can expect future increases in nonfarm employment, along with reductions in the U.S. jobless rate.

Assorted Tech Stories

1. Adoption Rate for iPad Fastest Ever. The sales rate for the iPad is blowing past the one million units the iPhone sold in its first quarter and the 350,000 units sold in the first year by the DVD player, the most quickly adopted non-phone electronic product.

2. Panasonic’s Hair Washing Robot

3.  Don’t Worry, Robots Now Guarding Nukes In Nevada

September State Tax Revenues Reflect Recovery

1. Kansas reported Thursday that it collected $3 million more in taxes than anticipated in September. It was the third consecutive month the state met or surpassed its projections. Tax collections since the fiscal year began July 1 were almost $38 million more than anticipated.

2. Massachusetts tax revenues surged in September, increasing more than 14 percent compared to the same month last year.  Revenue Commissioner Navjeet Bal says the state collected more than $2 billion last month, or about $250 million more than September of last year. She said it was a sign of a growing economy.

3. West Virginia's economy continues to perform above expectations, based on state tax collections in September, according to the state deputy secretary of revenue.  Overall, the state collected a total of $380.5 million in taxes for the month, $28.35 million above estimates, and up 5.9 percent from September 2009.

4. Net general revenue collections in Missouri for September 2010 increased by 9.1 percent compared to those for September 2009, from $648.7 million to $707.7 million.

5. Arkansas tax collections for September were 1.8 percent below the monthly forecast but 6.9 percent above collections a year ago, the state’s top fiscal officer said today.  “We’re still well ahead of last year, and each month we’re progressing well ahead of last year,” said Richard Weiss, director of the state Department of Finance and Administration.

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.