Monday, October 25, 2010

DP World: Shipping Back to Pre-Recession Levels

Dubai-based DP World is one of the world's largest marine terminal operators, with 50 terminals and 11 new developments and major expansions across 31 countries.  From its latest report:

"Global marine terminal operator DP World announced it handled 13 million TEUs (20-foot equivalent container units) in the third quarter of the year, an increase of 14% against the same period last year, and a 15% increase for the first nine months of the year to 36.7 million against the comparable period last year. 

DP World continues to handle container volumes ahead of the levels reported in 2008 reflecting how resilient our portfolio was to the global declines in 2009. Volume growth in the third quarter has been driven by strong growth in the Asia Pacific, Americas and Australia regions as well as a continuation of returning volumes across Europe and a stabilization of volume growth in the UAE."

Global Economic Recovery Watch: World Steel Output Rises in September to Pre-Recession Levels

Brussels - "World crude steel production for the 66 countries reporting to the World Steel Association was 112 million metric tons (mmt) in September. This is 0.9% higher than September 2009 and 3.5% higher than September 2008 when the global economic crisis started showing the impact on the world crude steel production. 

The U.S. produced 6.6 mmt of crude steel in September 2010, an increase of 15.0% compared to September 2009."

Trade Deficit = Capital Inflow = BOP = 0

We hear a lot about the U.S. "trade deficit" or the "current account deficit," but we don't hear as much about the offsetting "capital account surplus" or "capital inflow" that has to exist when there's a trade deficit.  For example, a Google search reveals three times more results for "current account deficit" (775,000) than for "capital account surplus" (224,000).  

The current account and capital account are the two main components of the U.S. Balance of Payments (BOP), which is a record of all international transactions for both: a) trade flows and b) capital flows in a given period.  Every international transaction (e.g. export, import, U.S. investment abroad, foreign investment in the U.S.) is recorded on a double-entry accounting basis, so that each transaction involves both a debit and credit.  Under double-entry accounting, debits have to equal credits, which applies to BOP accounting, where:


The chart above displays annual figures for the U.S. capital account (brown line) and current account (blue line) back to 1980, and shows graphically that the CURRENT ACCOUNT = CAPITAL ACCOUNT = BOP = 0. 

For the year 2007, we had a current account deficit or "trade deficit" of about $700 billion, and a capital account surplus, or capital inflow of approximately the same amount, of about $700 billion (statistical discrepancies account each year for any differences).  Americans in 2007 purchased $2.35 trillion of goods and services from foreigners, which was more than the $1.65 trillion foreigners spent on U.S. goods and services in that year.  On the other hand, foreigners invested more than $2 trillion in U.S. assets in 2007 (stocks, bonds, real estate, Treasuries, direct investment), which was more than the approximately $1.4 trillion invested by Americans overseas in foreign assets, resulting in a net capital inflow of about $700 billion into the U.S. that year.  

In other words, the $700 billion "trade deficit" in 2007 was exactly offset by a $700 billion capital account surplus, or capital inflow, and the overall BOP = -$700 billion + $700 billion = 0.  What are the lessons from this?

1. There are no BOP deficits once we account for all international transactions, both for: a) goods and services, and b) financial transactions.  For all of the one-sided coverage in the press about the "trade deficit," you would almost never even know that there is an offsetting "capital surplus" or "capital inflow."  It's important for the general public to understand that trade deficits are offset by capital inflows on almost a 1:1 basis, resulting in a "balance of payments" for international transactions.  When the public constantly hears about "trade deficits" without any understanding of the offsetting surplus, that economic ignorance allows politicians and special interest groups to exploit the general public, by advancing and promoting protectionist trade policies aimed to reduce the "trade deficit," or by refusing to approve trade agreements between Colombia, Panama and Korea, etc.  

2. The "trade deficit" generates so much negative coverage, that the significant advantages of capital inflows from abroad get frequently overlooked.  Since 1980, the U.S. has attracted almost $8 trillion of foreign investment, which has provided much-needed equity capital that has allowed U.S. companies to start or expand, has provided much-needed debt capital that has also funded the expansion of American companies, along with providing debt capital for U.S. consumers in the form of mortgages, student loans, and car loans.  Some of the $8 trillion of investment includes billions of dollars of Foreign Direct Investment, which has funded thousands of new projects in the U.S. (Toyota factories for example) and created hundreds of thousands of jobs.             

Home Sales Begin Rebound, Inventory Gauge Falls

"The homebuyer tax credit artificially boosted home sales in the Spring and then – after taking sales away from the future – the lapse of the credit caused a “hangover” in the Summer. Now sales are rebounding without artificial government support. Sales are up two months in a row and came in well above consensus expectations in September." 

MP: The charts above help tell the "artificial stimulus and hangover" story.  After the homebuyer tax credit ended, existing-home sales dropped precipitously by 27% in July, and the months supply of inventory increased to 12.5 months in July from 8.9 months in June.  Now that market forces are prevailing again, the real estate market is rebounding on its own, with a strong boost from record-low mortgage rates (currently at 4.21%).  Since the bottom in July of 3.84 million homes (seasonally-adjusted annual rate), sales have increased in the last two months to 4.53 million units in September, which is 18% above the July low.  The months supply of home inventory fell two months in a row, to 10.7 months in September.

Global Economic Recovery Watch: Hotel Industry Is Rebounding in U.S. and All Around the World

"The U.S. hotel industry reported increases in all three key performance metrics for third-quarter 2010 in year-over-year measurements, according to data from STR.  The industry’s occupancy was up 6.7 percent to 63.9 percent, average daily rate (ADR) rose 1.6 percent to $99.07, and revenue per available room (RevPAR) increased 8.4 percent to $63.34.  Year-to-date 2010, occupancy increased 5.2 percent to 58.9 percent, ADR fell 0.7 percent to US$97.89, and RevPAR was up 4.5 percent to US$57.70.

“The U.S. hotel industry continued its recovery in the third quarter,” said Bobby Bowers, senior VP at STR. “Quarterly occupancy growth was the highest STR has ever recorded, and ADR growth was positive for the first time since third-quarter 2008—a seven-quarter stretch. The combined occupancy and ADR gains pushed RevPAR up 8.4 percent—the best quarterly growth the industry has recorded since second-quarter 2006. We anticipate continued but somewhat slower occupancy growth in the final quarter, while ADR should continue its positive momentum.”

In other hotel news from the industry trade group STR, positive results were also reported for the month of September for the Middle East/Africa region, the European hotel industry, the Asia/Pacific region, and the Americas region

The End of the College Textbook as We Know It?

The unsustainable "higher education bubble" has received some well-deserved attention lately - watch Glenn Reynolds talk about it in detail here. A direct partner in the "higher education bubble" is the unsustainable "college textbook bubble," captured graphically in the chart above - notice how it totally dwarfs the "real estate bubble." Since 1980, educational books have risen annually at more than twice the rate of overall inflation, 6.7% vs. 3.3% respectively. "When students pay more for new textbooks than tuition in a year, then something's wrong," says Rand S. Spiwak, executive vice president at Daytona State in the article below. 

From today's Chronicle of Higher Education, a possible solution? 

"Here's the new plan: Colleges require students to pay a course-materials fee, which would be used to buy e-books for all of them (whatever text the professor recommends, just as in the old model).

Why electronic copies? Well, they're far cheaper to produce than printed texts (MP: $25-30 vs. $150-300), making a bulk purchase more feasible. By ordering books by the hundreds or thousands, colleges can negotiate a much better rate than students were able to get on their own, even for used books. And publishers could eliminate the used-book market and reduce incentives for students to illegally download copies as well.

Of course those who wanted to read the textbook on paper could print out the electronic version or pay an additional fee to buy an old-fashioned copy—a book."

MP: As Glenn Reynolds reminds us, "a process that cannot go on forever, won't."  When some students are spending more on textbooks than tuition, that certainly seems to qualify as a situation that cannot go on forever.  For the unsustainable "textbook bubble," e-books seem to offer one possible solution.   

Markets in Everything: World's Largest Gummy

Three pounds and 4,000 calories of gummy goodness for $27.95.

Crystal Ball Website: If Election Were Held Today

Predictions from University of Virginia Political Science Professor Larry Sabato's Crystal Ball website, if the election were held today:

1. Republicans would have a net gain of 8-9 Senate seats, short of the 10 they need to control the majority.

2. Republicans would gain 47 House seats, more than the 39 they need to control the majority.

3.  Republicans would gain 8 governorships. Republicans currently hold 24 governorships to 26 held by Democrats, and that would change to 28 Republican governors and 22 Democrats.

The Crystal Ball website also provides lots of detailed information on individual races.   

Sunday, October 24, 2010

For Poor Countries, The Problem is Not Unethical Businesses, But That There Aren't Enough of Them

"In South Africa, where more than a third of the workforce is jobless, the problem is not that corporations are unethical but that there are not enough of them. One reason is that South Africa’s leaders blithely heap social responsibilities on corporate shoulders. Strict environmental laws cause long delays in building homes. This is nice for endangered butterflies, but tough for South Africans who live in shacks. Such laws also slow the construction of power plants, contributing to the rolling blackouts that crippled South Africa in 2008. South African labour laws make it hard to fire workers, which deters companies from hiring them in the first place. And a programme of “Black Economic Empowerment”, which pressures firms to transfer shares to blacks, has made a few well-connected people rich while discouraging investment."

~The Economist article "Companies Aren’t Charities"

UK To Sell Govt.-Owned Forests to Cut the Deficit

TELEGRAPH -- "Caroline Spelman, the U.K. Environment Secretary, is expected to announce plans within days to dispose of about half of the 748,000 hectares of woodland overseen by the Forestry Commission by 2020 (MP: That's an area slightly larger than the state of Rhode Island).

The controversial decision will pave the way for a huge expansion in the number of Center Parcs-style holiday villages, golf courses, adventure sites and commercial logging operations throughout Britain as land is sold to private companies."

Saturday, October 23, 2010

GM Set to Sell More Cars in China Than in U.S.; Doesn't That Mean China is Shipping Jobs to U.S.?

SHANGHAI (WSJ) -- "China's domestic auto market could reach sales of more than 17 million vehicles this year and 19 million next year, said a senior General Motors Co. executive, outpacing home-market sales for several Western auto brands . The sales forecasts are up sharply from the 13.7 million vehicles that auto makers sold in China last year (see chart) as the country's auto market grew about 50% to surpass the U.S. as the world's biggest." Also:

1. Daimler expects Chinese consumers to become the biggest buyers of Mercedes Benz cars in the next three to five years. 

2. Volkswagen AG's Audi unit expects its sales in China to surpass German sales next year.

3. GM's sales in China will surpass that of its parent company in the U.S. according to GM's Kevin Wale (source)."

MP: We hear a lot about how because of corporate greed and trade with countries like China, we end up "shipping U.S. jobs overseas." (Q: How exactly are jobs packaged and shipped from the U.S. to China or other countries, i.e. which shipping method is used to send jobs overseas: air freight, containers by ship, or ??)

The story above illustrates how trade with China benefits the U.S. and creates jobs in the U.S. for GM workers. But by selling more cars in China than in the U.S. this year, doesn't that mean that China is "shipping jobs overseas to the U.S.?"  And by buying so many Mercedes, Audis and Volkswagens in China, doesn't that mean that China is "shipping jobs overseas to Germany?"Don't all those brand new Buicks, Mercedes and Audis sold in China make the Chinese people worse off?

Adam Smith: Mercantilism Is Enemy of the People

From the New World Encyclopedia:

"In Wealth of Nations, one senses Smith's passion for what is right and his concern that mercantilism benefits the wealthy and the politically powerful while it deprives the common people of the better quality and less expensive goods that would be available if protectionism ended and free trade prevailed."

HT: PeakTrader

Five Ways Regulators Think Wrong

Here's one of the five.....

"Affect heuristic'" is a fancy name for a pretty obvious concept, namely that we discount the drawbacks of things we are emotionally in favor of. For example, the Deepwater Horizon oil spill certainly killed about 1,300 birds, maybe a few more. Wind turbines in America kill between 75,000 and 275,000 birds every year, generally of rarer species, such as eagles. Yet wind companies receive neither the enforcement, nor the opprobrium, that oil companies do.

~Matt Ridley in today's WSJ column "Studying the Biases of Bureaucrats"

Domain Names: Sells for $13,000,000

Communism to Capitalism: China and Cuba

1. Bloomberg -- "Yang Shuqi paces up and down Ikea’s Beijing store, looking for a “small bed with toys” for her grandson. She doesn’t plan to buy it -- 1-year-old Beibei just needs to take a nap. Saturday afternoon is a bad time to look. Every bed (and couch, see picture above) in the 43,000-square-meter (463,000-square-foot) store is occupied, with some children and adults fast asleep under the covers. 

Ikea, whose biggest Asian store is in China, plans to more than double its outlets in the country by 2015 as rising incomes turn more dozing visitors and diners at in-store restaurants into furniture buyers. The home-furnishings market is projected to surge 17 percent this year in China, the world’s fastest-growing major economy." (HT: Norman Berger)

2. Reuters - "Cuba unveiled on Friday a new tax code it said was friendlier for small business, signaling authorities are serious about building a larger private sector within the state-dominated economy. The tax redesign comes as the government has begun slashing 500,000 workers from state payrolls and preparing to issue 250,000 self-employment licenses to create new jobs in President Raul Castro's biggest reform since taking office in 2008."

Leading Economic Indicator Increasing, But Slowly

"The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.3% in September to 110.4, following a 0.1% increase in August, and a 0.2% increase in July (see chart above). Says Ataman Ozyildirim, economist at The Conference Board: “The LEI remains on a general upward trend, but it is growing at its slowest pace since the middle of 2009. There isn’t any indication of a relapse into another downturn through the end of the year.”

MP: While the Leading Economic Index rose in September for the third straight month, and has increased in 17 out of the last 18 months (since April 2009), the monthly increases in the LEI have started to slow somewhat this year, compared to the larger increases in 2009.  The chart above shows that following the last three recessions, there were times during the first year or two of the new economic expansions when the LEI flattened out for a period of 6-12 months, before gaining new momentum in economic growth.  It's possible that we are seeing the same phenomenon right now - a temporary slowdown through the end of the year, followed by stronger economic growth next year.

In contrast, the growth in Germany's LEI is accelerating, increasing sharply by 0.7% in August, following increases of 1.1% in July and 0.5% in June.  According to the Conference Board, "Between February and August 2010, the leading economic index increased 7.3 percent (about a 15.1 percent annual rate), faster than the increase of 3.1 percent (about a 6.4 percent annual rate) during the previous six-month period. In addition, the strengths among the leading indicators have remained widespread in recent months."

Overall, 10 of the the 11 Conference Board LEIs are showing increases in either August or September, with the only exception being Korea (see chart below).  The overall economic picture in both the U.S. and globally continues to remain bright. 

Intrade Updates

1. Republicans to control House: 90%

2. Republicans to gain 60 or more House seats: 39%

3. Democrats to control Senate: 56.6%

4. Republicans to hold 48 or more Senate seats: 75%

5. Michael Steele to depart as RNC chair before Dec. 31: 7.5%

6. Sarah Palin to announce run for President before Dec. 31: 67%

7. Barbara Boxer to win Senate in CA: 72.7%

8. Harry Reid to win Senate in NV: 40%

9. Jerry Brown to win governor in CA: 96%

10. Democrats to win 2012 Presidential election: 61% 

As of 9:30 a.m. on

Friday, October 22, 2010

CA Home Sales Down in Sept.; Median Prices Rise

From DQ News on California home sales in September:

1. "An estimated 33,176 new and resale houses and condos were sold statewide last month. That was down 3.1 percent from 34,239 in August, and down 17.5 percent from 40,216 for September 2009. California sales for the month of September have varied from a low of 24,460 in 2007 to a high of 68,114 in 2005, while the average is 44,310.

2. The median price paid for a home last month was $265,000, up 1.9 percent from $260,000 in August, and up 5.6 percent from $251,000 for September a year ago. The year-over-year increase was the 11th in a row, following 27 months of year-over-year declines. The bottom of the current cycle saw a median of $221,000 in April 2009, while the peak was $484,000 in early 2007.

3. Of the existing homes sold last month, 35.8 percent were properties that had been foreclosed on during the past year. That was up from a revised 35.7 percent in August and down from 41.7 percent in September a year ago. The all-time high was in February 2009 at 58.5 percent."

MP: Although September home sales in California were below both August and last September, they were above the September 2007 bottom by 35.6%.  Further, median home prices rose for the 11th month in September and were 5.6% above median prices last September; and sales of foreclosed properties in September (35.8% of the total) were below the 41.7% level in September of 2009.  

Tariffs on China Will Cost U.S. Jobs

"Think about the IPod, for instance. It is designed in America and its 451 parts are made in dozens of different countries. But just because it is finally assembled in China, it officially counts as a Chinese import and therefore a contributor to America’s trade deficit — never mind that the Chinese add only $4 to the IPod’s $150 final value. Imposing duties on IPods to slash the deficit, then, won’t just cost Chinese jobs  in Beijing assembly plants, but American jobs in Cupertino (Apple’s headquarters) computer labs."

Friday Links

1. Male affirmative action is being used at Canadian medical schools, now that some  entering classes of medical students are only 23% male.  

3. The "People of Wal-Mart." Kinda scary.

4. What do the best classrooms in the world look like? Surprisingly, a lot like American ones—circa 1959 or 1989. 

An Attractive Option: Dropping Existing Coverage

From yesterday's WSJ, an article by the Democratic governor of Tennessee, Philip Bredesen:

"Our recent health reform has created a situation where there are strong economic incentives for employers to drop health coverage altogether. The consequence will be to drive many more people than projected—and with them, much greater cost—into the reform's federally subsidized system. This will happen because the subsidies that become available to people purchasing insurance through exchanges are extraordinarily attractive.

For a person starting a business in 2014, it will be logical and responsible simply to plan from the outset never to offer health benefits. Employees, thanks to the exchanges, can easily purchase excellent, fairly priced insurance, without pre-existing condition limitations, through the exchanges. As it grows, the business can avoid a great deal of cost because the federal government will now pay much of what the business would have incurred for its share of health insurance. The small business tax credits included in health reform are limited and short-term, and the eventual penalty for not providing coverage, of $2,000 per employee, is still far less than the cost of insurance it replaces.

For an entrepreneur wanting a lean, employee-oriented company, it's a natural position to take: "We don't provide company housing, we don't provide company cars, we don't provide company insurance. Our approach is to put your compensation in your paycheck and let you decide how to spend it."

The economics of dropping existing coverage is about to become very attractive to many employers, both public and private. By 2014, there will be a mini-industry of consultants knocking on employers' doors to explain the new opportunity. And in the years after 2014, the economics just keep getting better."

Thursday, October 21, 2010

Interesting Fact of the Day

According to this article, there are "more tigers in captivity in the U.S. than survive in the wild. As few as 3,200 tigers are left in the wild across Asia, down from 100,000 a hundred years ago. America's 5,000-plus captive tigers are mostly kept by private individuals, not zoos."

Via Twitter from Paul Kedrosky.

Carbon-Monoxide Detector with Snooze Button Recalled

Gotta love The Onion

Explaining Income Inequality

Click to enlarge.

There's a lot of discussion on the topic "income inequality," especially concerns about "increasing income inequality" (223,000 Google hits) and "rising income inequality" (432,000 Google hits).  There's apparently not as much discussion on "explaining income inequality" (18,800 Google hits), a topic this post addresses. 

The chart above (click to enlarge) shows selected characteristics of U.S. households by income quintiles (and the top 5%) for 2009, using data from the Census Bureau (here and here). Here is a summary of some of the differences between low-income and high-income households in America:

1. On average, there are more income earners per household in highest-income households (2.05 earners for the top fifth) than earners in the lowest-income households (0.48 for the lowest fifth).

2. Married-couple families represent a much greater share of the top income quintile households (79%) than lowest quintile households (18%).

3. More than 3 out of 4 households in the top fifth of households are in their prime earning years between 35-64 years old, compared to only 43% of households in the bottom fifth. The lowest quintile households are more than 1.5 times as likely to be younger (under 35 years) as the highest quintile households (23.4% to 14.8%), and more than three times as likely to be old (65 years and over) as the top fifth (33.3% vs. 9.9%).

4. Almost 4 times as many top quintile households are working full-time (78%) compared to the bottom quintile (20.8%), and more than five times as many households in the bottom quintile are not working (65%) as households in the top quintile (12.2%).

5. Households in the top quintile are almost seven times more likely to have a college degree than bottom quintile households (72.8% vs. 10.8%). 

Bottom Line: The highest-income quintile has four times more people working per household than the lowest quintile (2.08 earners vs. 0.48), and individuals in those households are far more likely to be well-educated, married and working full-time in their prime earning years.  In contrast, those individuals with low incomes are far more likely to be less-educated and working part-time, and either very young or very old living in single-parent households.  Given these significant differences in household characteristics, it's not too surprising that there are huge differences in incomes among American households.  It's also very likely that those individuals in the highest quintile were once in the lower quintiles before they acquired job experience and education, and they'll likely be in a lower quintile again when they retire.  

Understanding the factors explaining income inequality would also help explain why income inequality changes over time.  For example, compared to previous years, in 2009 there were both: a) more single-parent households, and b) more married, dual-earner households, following trends going back to the 1960s, and both of those trends would explain rising income inequality over time.

Thanks to Diana Furchtgott-Roth for the idea.

NY Fed Model: 1-in-50 Chance of 2011 Double-Dip

The New York Federal Reserve updated its "Probability of U.S. Recession Predicted by Treasury Spread" with treasury yield data through September 2010, and the Fed's recession probability forecast through September 2011. The NY Fed's Treasury model uses the spread between the yields on 10-year Treasury notes (2.65% in September) and 3-month Treasury bills (0.15%) to calculate the probability of a U.S. recession up to twelve months ahead (see details here) using the spread between those two yields.

The Fed's model (data here) shows that the recession probability peaked during the October 2007 to April 2008 period at around 37-42% (see chart above), and has been declining since then in almost every month.  For September 2010, the recession probability is only 0.45% and by September of next year the recession probability is slightly higher, but still less than 2% (1.7%). According to the NY Fed Treasury Spread model, the chances of a double-dip recession through fall of next year are less than 1 out of 50.

Rail Traffic Continues to Show Improvement

WASHINGTON, D.C. – Oct. 21, 2010 – "The Association of American Railroads (AAR) today reported that weekly rail traffic continues to show improvement over 2009 levels with U.S. railroads originating 303,664 carloads for the week ending Oct. 16, 2010, up 10.1% compared with the same week last year. Intermodal traffic for the week totaled 237,180 trailers and containers, up 15.1% compared with the same week a year ago, with container volume up 15.8% and trailer volume up 11.1%."

MP: Based on the continuing gains in weekly rail traffic week after week, we would have to conclude that: a) there are ongoing increases in the demand for raw materials, parts, chemicals, grains, lumber, petroleum products, farm products, coal, etc., and b) these inputs will then end up as increases in final output (GDP), and c) eventually increased employment.  

No One Pays Taxes On Business Not Done

I have been reporting on the increases in September state tax revenues for at least 14 states so far, and have suggested that this should be interpreted as a sign that the economic activities subject to state taxes (retail sales, individual income earned, corporate income generated, etc.) are expanding as the economy improves.   

In today's "The Gartman Letter," Dennis seems to concur that the improving tax collections reported for September are a sure sign of economic strength:

"We don’t know many things upon which we can count on unequivocally, but we can count upon this: no one in history has ever paid taxes upon business not done. Taxes are paid on business done; on deals consummated; on sales made and delivered; on hours worked and billed."

The Great Mancession Continues Yet Obama Pushes for Economic Security, Jobs for America’s Women

The chart above displays monthly employment levels by gender back to 2002, and the shaded area highlights the job picture from December 2007 (the start of the recession) through September 2010.  As of last month, total U.S. employment is still 6.78 million jobs below the level when the recession started.  Of those jobs lost, 4.66 million, or 68.7% of the total, were jobs held by men, and 2.12 million were jobs lost by women, or 31.3% of all jobs lost.  In other words, for every 100 jobs lost by women since the start of the recession in late 2007, men have lost an astonishing 219 jobs. That's one reason that the last few years are known as "The Great Mancession of 2008-2009."  

The gender differences in unemployment rates during the “Great Mancession” tell a similar story of disproportionate economic hardship for men.  In the chart below, the monthly differences in jobless rates by gender are displayed back to 1948, and illustrate the unprecedented adverse effects on men in recent years.  During the last three recessions (1981-82, 1990-91 and 2001), the male jobless rate also exceeded the female jobless rate, but only by about 1% on average at the peaks.  In contrast, during the most recent recession, the “jobless rate gender gap” reached an historically unprecedented high (in either direction) of 2.7% in favor of women in August 2009 (11% male jobless rate vs. 8.3% female), and has decreased over the last year to 1.9 percent last month (10.5% for men vs. 8.6% for women).  Even at 1.9%, the current jobless rate gap in favor of women is still about twice the maximum jobless rate gaps favoring female workers during the last three recessions, and indicates that the Great Mancession continues.   

Bottom Line: The empirical evidence is clear and undeniable: men suffered much more than women during the Great Mancession and they continue to bear a disproportionate share of the job losses compared to women (by more than 2:1), and remain unemployed at jobless rates that are almost 2 percent higher than female workers. 

And yet, the National Economic Council released a report today (“Jobs and Economic Security for America’s Women”) “on the impact of the recession on women and how the Obama administration’s economic policies benefit American women. The report lays out the economic landscape facing women today and details some of the many ways the administration is committed to making sure the government is working for all Americans especially American women.”

Read more here at The Enterprise Blog.  

Wednesday, October 20, 2010

Positive Economic News Updates

1. The Leading Economic Index (LEI) for France increased in August by 0.90%.  According to the Conference Board, the LEI for France has been on an upward trend since April 2009.  

Out of 10 countries and the Euro area that are tracked by the Conference Board, all are showing positive LEIs for August except Korea.  The U.S. LEI will be released tomorrow for September.

2. "Colorado's tax collections were higher than expected in September, continuing an overall trend of growth in tax collections for the year. Total year-to-date collections were 5.3 percent higher than collections through September a year earlier and 4.2 percent higher than forecast.

Tax collections for September show that gross general-fund collections were $68.5 million — or 10.5 percent — higher than forecast. Meanwhile, individual income-tax collections came in at $433.4 million, 11.8 percent higher than forecast. Net corporate income-tax collections were 23.4 percent higher than forecast, coming in at $88.9 million."

Quote of the Day: China Should Worry, Not Us

From the always-insightful Scott Grannis today:

"The Chinese sell us mountains of cheap goods, then turn around and invest most of the proceeds (equivalent to our trade deficit with China) in U.S. Treasury securities. We get the goods, and we get to keep the money. Then we devalue the dollar, and they lose on their investment. Why we would want them to stop doing this is beyond me, though if I were a Chinese citizen, I would be furious with my government for directing such massive quantities of my country's export earnings to Treasuries.

The central bank of China has no need to further increase its already-massive reserves; instead, the government should be relaxing capital constraints, allowing Chinese citizens more freedom to save and invest abroad in the types of vehicles with which they feel most comfortable. China's workforce is aging daily, and like Japan a few decades ago, China's economy cannot accommodate all the savings of the Chinese people—they are essentially forced to save overseas.

Contrary to what you read in the press—which mistakenly believes that our large trade deficit with China is something we need to worry about—China is the one that needs to worry, not us."

U.S. Traffic Volume Reaches 2-Year High in August

The Federal Highway Administration reported today that travel on all roads and streets in the U.S. increased by +1.6% in August 2010 compared to the same month last year. Total travel for the month of August was estimated at 267.4 billion vehicle miles, the second highest travel volume for the month of August, just 0.50% below the all-time August record in 2007 of 268.7 billion miles.  The August increase in traffic was the third consecutive monthly increase, and the fifth increase in the last six months. 

On a moving 12-month total basis, the annual vehicle-distance traveled through August was 2,987 billion miles, the highest 12-month total since August 2008, two years ago (see chart).

Following a sharp decline in U.S. traffic volume (moving 12-month basis) that started in late 2007 and ended at a cyclical low in May 2009, traffic volume has been gradually increasing as both personal and commercial travel on U.S. roads and highways have rebounded (see graph above).  Note that the cyclical pattern of traffic pattern over the last three years, especially the sharp decline from late 2007 to May 2009, coincided almost perfectly with the official U.S. recession period from December 2007 to June 2009 (shaded area in graph).  The sustained and ongoing improvements in vehicle miles since the summer of 2009 indicate that the U.S. economy is recovering gradually, and weakens the chances of a double-dip recession.  

In contrast, Nouriel Roubini still expects a 35-40% chance of a double-dip.     

Tea Workers on Strike Over Machines

BusinessDay -- "A strike by tea workers in Kenya over the use of picking machines by companies went on for a second day yesterday. The tea-industry strike is aimed at protecting the livelihoods of thousands of Kenyan families who will be affected if machines continue to be used, Adam Baraza, personal assistant to Central Organisation of Trade Unions secretary-general Francis Atwoli, said on Monday."
MP: Maybe the union can negotiate a "tea jobs bank?"

Tuesday, October 19, 2010

Architecture Indexes Back to Pre-Recession Levels; Highest Billings Since Jan. '08, Inquiries July '07

Washington, D.C. – October 20, 2010 – "For the first time since January 2008, the Architecture Billings Index (ABI) indicated a growth in design activity in September, increasing for the fourth straight month. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. 

The American Institute of Architects (AIA) reported the September 2010 (Overall National) ABI score was 50.4, up from a reading of 48.2 the previous month (see chart above). This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was also up sharply, moving from 54.6 to 62.3 – the highest mark since July 2007 (see chart)."

MP:  The Architecture Billings Index and New Projects Inquiry Index are both back to pre-recession levels now, more evidence that a) the economic recovery is real and sustained, and b) chances of a double-dip recession are fading.  The ongoing gains in the ABI in 7 out of the last 8 months (and 10 out of the last 13 months), and the September reading above the benchmark level of 50 signaling expansion, both indicate that we can also expect continued, future improvements in construction activity.   

The Economics of Seinfeld

The website "The Economics of Seinfeld" (notice the URL is is operated by three economics professors (two at Eastern Illinois University and one at Baker University), and they explain it here:

"Seinfeld ran for nine seasons on NBC and became famous as a “show about nothing.” Basically, the show allows viewers to follow the antics of Jerry, George, Elaine, and Kramer as they move through their daily lives, often encountering interesting people or dealing with special circumstances. It is the simplicity of Seinfeld that makes it so appropriate for use in economics courses. Using these clips (as well as clips from other television shows or movies) makes economic concepts come alive, making them more real for students. Ultimately, students will start seeing economics everywhere – in other TV shows, in popular music, and most importantly, in their own lives."

Dozens of Seinfeld episodes are identified for highlighting specific economic principles like price ceilings, incentives, imperfect information, moral hazard, marginal analysis, cost-benefit analysis, game theory, arbitrage (the famous "Bottle Deposit" episode), free entry and exit, etc.  

HT: Link Exchange

The Antidote to Obamacare? Dr. Wal-Mart, Retail Clinics and Strip Mall Medicine Are Booming in U.S.

Following this morning's report on the second CVS retail clinic in the nation's capital, here are two more new reports on market-based alternatives to government-run health care:

1. "Shopping List: Milk. Bread. Paper towels. Motor oil. Blender. Physical. 

Now along with the typical shopping list, people have access to health care inside the North Topeka Walmart. Walmart and Stormont-Vail HealthCare on Monday announced the opening of The Clinic, located inside the lobby of the North Topeka Walmart (pictured above).  With the opening of this clinic, there will be 98 in-store clinics in Walmart stores across 22 states. This is the first one in Kansas." (Source)

2. "Promising convenience and consumer-friendly pricing, urgent care clinics such as Physicians Medical are quickly becoming a ubiquitous sight along highways and in strip malls across America. The Urgent Care Association of America estimates the number of clinics has reached 8,700, up about 8 percent since 2008 despite the recession. Within a 50-mile radius of downtown Jacksonville (FL), at least 32 clinics provide walk-ins with timely care.  

The clinics tend to offer care during regular doctors' hours and at nights and on weekends. "Most cases when you get sick on a Friday afternoon, they can't see you until Tuesday," said Michael Critzer, director of operations for Physicians Medical. "Nobody wants to wait. We live in a world of instant gratification, so that's where we come in."

And urgent clinics charge far less than their main after-hours competitors: emergency rooms. A 2009 study of Minnesota patients seeking treatments for ear infections, sore throats or urinary-tract infections found that the bills averaged $156 at urgent care clinics vs. $570 at emergency rooms." (Source)

Tax Revenues Now Growing in Most States

Albany, N.Y. — "The second quarter of 2010 represented the second period in a row that states reported overall gains in tax collections — following five straight quarters of decline — according to a new study by the Rockefeller Institute of Government (see chart above). 

Overall state tax revenues grew by 2.3 percent in the second quarter of 2010, according to the Institute’s latest State Revenue Report. Thirty-four states reported gains in revenue during the second quarter, with 12 showing double-digit growth. Preliminary data for July and August suggest the third quarter of 2010 may show another revenue increase, with early figures from 42 states showing gains averaging 2.8 percent.

The two-quarter trend has begun to reverse the overall declines reported by states from the fourth quarter of 2008 through the end of 2009. Both of the largest sources of tax revenue for states produced gains in the April-June period, with sales tax collections rising by a strong 5.7 percent and personal income taxes up by 1.6 percent. The sales tax increase during this year’s second quarter marked the largest such year-over-year gain since the third quarter of 2006, but sales tax revenues were still down 4.2 percent from the same period in 2008."

ASA Staffing Index Holds Steady at 100 for 3rd Wk.

From today's American Staffing Index's weekly report: "During the week of Oct. 4–10, 2010, temporary and contract employment dipped slightly (-0.21%), maintaining the ASA Staffing Index at a value of 100.  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 23% higher than the same weekly period in 2009.

From the Monthly Report: "Staffing employment in September is 25% higher than in the same month last year, according to the ASA Staffing Index. The index for September is 96, up one point from 95 for August, suggesting that staffing employment has increased about 1% over the past month."

MP: The ASA Staffing Index has remained at a level of 100 for the last three weeks, which is the first time in 29 months (since May 2008) of three consecutive weeks at 100 for the nation's key barometer of the demand for contract, temporary and freelance employment.  As a leading indicator of nonfarm employment, the ongoing improvements in temporary help employment signal future gains in permanent employment opportunities.  

Interactive Maps for Crime, Sex Offenders & Weed

You can check crime reports by address or zipcode at the CrimeReports website, and you can even check to see where any registered sex offenders live, and see his or her picture.  The map above shows all the reported crimes over the last 30 days near the White House, and one of the registered sex offenders in the neighborhood.  (HT: L. Johnson) 

At another website called WeedMap, you can find legal marijuana dispensaries by address or zip code, see an example map below for San Diego.

Can Twitter Mood Predict the Stock Market?

This academic paper says Yes, here's the abstract, watch CNBC video above:

"Behavioral economics tells us that emotions can profoundly affect individual behavior and decision-making. Does this also apply to societies at large, i.e. can societies experience mood states that affect their collective decision making? By extension is the public mood correlated or even predictive of economic indicators? 

Here we investigate whether measurements of collective mood states derived from large-scale Twitter feeds are correlated to the value of the Dow Jones Industrial Average (DJIA) over time. We analyze the text content of daily Twitter feeds by two mood tracking tools, namely OpinionFinder that measures positive vs. negative mood and Google-Profile of Mood States (GPOMS) that measures mood in terms of 6 dimensions (Calm, Alert, Sure, Vital, Kind, and Happy). We cross-validate the resulting mood time series by comparing their ability to detect the public’s response to the presidential election and Thanksgiving day in 2008. 

A Granger causality analysis and a Self-Organizing Fuzzy Neural Network are then used to investigate the hypothesis that public mood states, as measured by the OpinionFinder and GPOMS mood time series, are predictive of changes in DJIA closing values. Our results indicate that the accuracy of DJIA predictions can be significantly improved by the inclusion of specific public mood dimensions but not others. We find an accuracy of 87.6% in predicting the daily up and down changes in the closing values of the DJIA and a reduction of the Mean Average Percentage Error by more than 6%."

HT: Peter Parlapiano

2nd Retail Clinic Opens in DC 4 Miles from Capitol

WASHINGTON (Oct. 18) -- "MinuteClinic celebrated the opening of its second clinic location inside a CVS/pharmacy store in the District of Columbia with a ribbon-cutting ceremony.

The new MinuteClinic, located inside the CVS/pharmacy at 320 40th Street NE in the Benning neighborhood, serves residents in Ward 7 and is within walking distance of Metro stations on the orange and blue lines, as well as Metrobus service. It joins the first MinuteClinic to open in the district at 845 Bladensburg Rd. NE in Ward 5 in the Carver Langston neighborhood.

MinuteClinic stressed its commitment to helping the "district broaden access to healthcare services," and plans to announce additional openings in the coming year. MinuteClinic locations also can be found inside select CVS/pharmacy stores in Montgomery and Prince George's counties in Maryland and in cities throughout Northern Virginia."

MP: CVS is aggressively expanding its retail clinics around the country, and plans to double the number of locations from 500 to 1,000 by 2015 (source).  This second CVS retail clinic in the District of Columbia is only four miles from the U.S. Congress, and follows the first CVS clinic only two miles from the Capitol (see map above, click to enlarge).  

As I pointed out in a previous post, 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. 

Now that there are two market-based alternatives to government-run healthcare within 4 miles of the U.S. Capitol, maybe some members of Congress could go out and see what the private sector is doing to provide convenient, affordable health care solutions.  As a Deloitte report concluded last year:

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

Monday, October 18, 2010

Global Economic Recovery Watch

Over the last few weeks, the Conference Board has reported increases in Leading Indexes for the following countries for August:

1. Japan (+0.2%)

2. U.K. (+0.1%, following gains in June and July).  

3. China (+0.7%, following increases of 0.8% in July and 1.2% in August).

4. Spain (+0.6%, second consecutive monthly increase).   

Is the U.S. Manipulating Dollar to Boost Exports?

"The slumping U.S. dollar is opening new sales opportunities abroad for American manufacturers...  Many U.S. companies—from coal miners to a producer of tugboat clutches—are seeing stronger demand in Europe and Asia as the weak dollar makes U.S. goods cheaper there. 

Economists say the dollar's swoon, which started in mid-September following a summer rally, will provide a modest boost for U.S. exports, but they caution that it means American consumers and businesses will pay more for imported goods and raw materials. 

According to Larry Kantor, global head of research for Barclays Capital in New York, the weak dollar "is a net plus for the U.S. economy." In the absence of free-trade agreements, a weaker dollar "is one of the few ways you can get exports going," says Mr. Kantor, who thinks many U.S. energy, industrial and agricultural companies will benefit."

Update: From Bob Wright in the comments:

"So to ask the obvious question: How can anyone in the U.S. Congress be upset with the value of the yuan when the value of the U.S. dollar has been dropping for the last 10 years?

The corollary being: why don't those U.S. congressmen who favor "fair trade" not also favor increasing the value of the U.S. dollar? Why do they only rail against the Yuan while remaining silent about the clearly unfair value of the U.S. dollar?

The chart above clearly shows the U.S. is not playing on a level playing field and yet no U.S. politician seems to be concerned about how unfair this is. Is FAIRNESS a one-way street? Is a level playing field simply a club with which to beat your opponent with?"

Assorted Links

1. Hamburgers: The Economics of America’s Favorite Food

2. Mobile Nation: Cellphones and Tablets Take Hold - the cellphone is Gadget No. 1 for Americans, but 19.5 million tablet devices will be sold in 2010 and a staggering 150 million units by 2013.

3. Toddlers’ Favorite Toy: The iPhone -Adults have a hard time putting down their iPhones, and so do many 1-, 2- and 3-year-olds, it's often their Toy of Choice.

4. Why It Doesn't Feel Like a Recovery - Good interactive graphic/slideshow of the economy's output gap. 

Sunday, October 17, 2010

Intrade Odds Now 15:1 That Reps Will Take House

Updated: Republicans need to gain 39 seats to control the House of Representatives after the midterm elections.  The chart above shows the current Intrade odds for the Republicans gaining different numbers of seats from "35 or more" to "60 or more." The chances of a 40-seat Republican gain are now 93.9%, meaning Intrade odds are 15:1 in favor of the Republicans controlling the House after the November elections. The chances of a 50-seat gain are now 80%, and a gain of 55 seats is now above 50%.

Saturday, October 16, 2010

How Diversity Punishes Asians and Poor Whites

From Princeton Professor Russell K. Nieli's article "How Diversity Punishes Asians, Poor Whites and Lots of Others":

"A new study by Princeton sociologists Thomas Espenshade and Alexandria Radford is a real eye-opener in revealing just what sorts of students highly competitive colleges want -- or don't want -- on their campuses and how they structure their admissions policies to get the kind of "diversity" they seek. The study draws from a new data set, the National Study of College Experience (NSCE), which was gathered from eight highly competitive public and private colleges and universities (entering freshmen SAT scores: 1360). Data were collected on over 245,000 applicants from three separate application years, and over 9,000 enrolled students filled out extensive questionnaires.

Consistent with other studies, though in much greater detail, Espenshade and Radford show the substantial admissions boost, particularly at the private colleges in their study, which Hispanic students get over whites, and the enormous advantage over whites given to blacks. They also show how Asians must do substantially better than whites in order to reap the same probabilities of acceptance to these same highly competitive private colleges. On an "other things equal basis," where adjustments are made for a variety of background factors, being Hispanic conferred an admissions boost over being white equivalent to 130 SAT points (out of 1600), while being black rather than white conferred a 310 SAT point advantage. Asians, however, suffered an admissions penalty compared to whites equivalent to 140 SAT points.

The box students checked off on the racial question on their application was thus shown to have an extraordinary effect on a student's chances of gaining admission to the highly competitive private schools in the NSCE database. To have the same chances of gaining admission as a black student with an SAT score of 1100, an Hispanic student otherwise equally matched in background characteristics would have to have a 1230, a white student a 1410, and an Asian student a 1550.

At private institutions whites from lower-class backgrounds incurred a huge admissions disadvantage not only in comparison to lower-class minority students, but compared to whites from middle-class and upper-middle-class backgrounds as well. The lower-class whites proved to be all-around losers. When equally matched for background factors (including SAT scores and high school GPAs), the better-off whites were more than three times as likely to be accepted as the poorest whites (.28 vs. .08 admissions probability). Having money in the family greatly improved a white applicant's admissions chances, lack of money greatly reduced it. The opposite class trend was seen among non-whites, where the poorer the applicant the greater the probability of acceptance when all other factors are taken into account. Class-based affirmative action does exist within the three non-white ethno-racial groupings, but among the whites the groups advanced are those with money.

When lower-class whites are matched with lower-class blacks and other non-whites the degree of the non-white advantage becomes astronomical: lower-class Asian applicants are seven times as likely to be accepted to the competitive private institutions as similarly qualified whites, lower-class Hispanic applicants eight times as likely, and lower-class blacks ten times as likely. These are enormous differences and reflect the fact that lower-class whites were rarely accepted to the private institutions surveyed. Their diversity-enhancement value was obviously rated very low.

Poor Non-White Students: "Counting Twice"

The enormous disadvantage incurred by lower-class whites in comparison to non-whites and wealthier whites is partially explained by Espenshade and Radford as a result of the fact that, except for the very wealthiest institutions like Harvard and Princeton, private colleges and universities are reluctant to admit students who cannot afford their high tuitions. And since they have a limited amount of money to give out for scholarship aid, they reserve this money to lure those who can be counted in their enrollment statistics as diversity-enhancing "racial minorities." Poor whites are apparently given little weight as enhancers of campus diversity, while poor non-whites count twice in the diversity tally, once as racial minorities and a second time as socio-economically deprived. Private institutions, Espenshade and Radford suggest, "intentionally save their scarce financial aid dollars for students who will help them look good on their numbers of minority students."

HT: Andrew Biggs