Monday, December 13, 2010

Wide Awake During Heart Surgery Saves Costs

WSJ -- In Bangalore a heart operation performed with a patient wide awake can keep costs down and speed up recovery.

HT: Jory

U.S. Oil and Gas Reserves Increased Significantly in 2009 and N. Dakota Set Another Oil Record in Oct.

From the summary of the EIA report released last month on U.S. crude oil and natural gas reserves for 2009:

"Domestic proved reserves of oil and natural gas increased significantly in 2009. U.S. natural gas proved reserves increased by 11 percent in 2009 to 284 trillion cubic feet. This is their highest level since 1971, despite an approximate one-third decline in the prices used to assess economic viability for 2009 reserves as compared to the prices used in 2008. U.S. crude oil plus lease condensate proved reserves rose 9 percent to 22.3 billion barrels in 2009, regaining 1.8 billion barrels of the 2.3 billion barrel decline in 2008. These increases demonstrate the possibility of an expanding role for domestic natural gas and crude oil in meeting both current and projected U.S. energy demands."

The onshore Lower 48 States drove the overall increase in proved reserves. Technologies used to increase shale gas production have also boosted oil reserves, especially from the Bakken Formation in North Dakota and Montana. North Dakota recorded especially significant gains, up 83 percent over 2008, and now ranks behind only Texas, Alaska, California, and the Gulf of Mexico in proved reserves."

And here's some related news on oil production in North Dakota for the month of October (see chart above): 

North Dakota pumped another record amount of oil in the month of October, producing more than 10 million barrels in a single month for the third month in a row and beating the previous record set in September by 368,000 barrels (see chart above, data here). Compared to October of last year, North Dakota oil production has increased by 42.6%, and oil production in the Peace Garden State has doubled since July of 2008, just a little more than two years ago.  North Dakota's rich oil fields now produce 6% of America's domestic crude oil production, up from less than 2% in 2006 (data here).  

Partly because of its ongoing oil boom in the Bakken area, North Dakota continues to lead the nation with the lowest unemployment rate at 3.8% in October, almost 6 full percentage points below the nation's average 9.6% October rate. The oil boom has fueled an employment boom for oil workers in North Dakota (data here) - the number of oil-related jobs has grown from fewer than 4,000 at the beginning of 2005 to more than 9,000 in October of this year.

Through October of this year, North Dakota has already produced more oil (91 million barrels) than all of last year (79.7 million barrels), and is on a pace to produce about 112 million barrels in 2010, which would be twice as much as 2008 (63 million barrels) and almost three times as much as 2007 (45 million barrels). 

KFC in Africa and How Imports Create U.S. Jobs

The WSJ had an interesting article last week about KFC's expansion in Africa ("KFC Savors Potential in Africa:Yum Brands Unit Plans to Double Number of Outlets on Continent, Where Middle Class Is Growing"), here are some quotes and observations:

1. "By 2014, the Louisville, Ky., restaurant-holding company expects to double its number of KFC outlets in Africa to 1,200 (see chart above). In the next four years, it aims to more than double its revenue on the continent to $2 billion.  "Africa wasn't even on our radar screen 10 years ago, but now we see it exploding with opportunity," says David Novak, Yum's chairman and chief executive officer."

2. "American restaurant companies and retailers have been moving into emerging markets as growth in the U.S. and other developed countries has slowed, and Africa is increasingly being added to the list."

3. "With more than 600 KFCs in South Africa now, the chicken chain has a 44% share of that country's $1.8 billion fast-food market, followed by South African chain Nando's, with 6%, and McDonald's and the local Chicken Licken, each with a 5% share."

MP: This example illustrates why the Obama administration's narrow focus on "doubling exports in the next five years to create U.S. jobs and combat high unemployment" is incomplete.  The U.S.-based KFC has significantly benefited from economic growth in China over the last five years, as it expanded its operations there to take advantage of a growing middle-class with the rising disposable income that allows consumers there to eat fast-food more often. Now the same trend of a growing middle-class in Africa will allow KFC to double its restaurants in Africa over the next four years, from 600 to 1,200 by 2014. 

And what is one source of the increased income in China and Africa that allows American companies like KFC and McDonald's to expand global operations, become potentially more profitable, and increase the number of jobs at their American headquarters as their global operations expand?  Exports from China and Africa to the U.S., or from our end: IMPORTS.  

It's those imports to the U.S. that provide foreigners the income they need to purchase our exports.  So instead of focusing so narrowly on half of the international trade equation and trying to expand exports, we should realize that increases in imports are a sign of economic vibrancy, and bestow significant benefits on American consumers and businesses, as well as provide foreigners with the resources to buy more of our exports.  

As I have pointed out in a previous post, why not have a goal of "doubling both exports AND imports" over the next five years? That would be a much more effective path to economic growth and job creation for all industries than an export-focused mercantilist program of job growth that would only benefit certain American industries. 

Why Not Double Imports or Just Total International Trade Over the Next Five Years to Create Jobs?

Huffington Post -- "Buoyed by strong demand from China and India, the U.S. trade deficit dropped to its lowest level in 9 months, as exports rose to their highest level in two years. These numbers should please the Obama Administration, who've set out to double exports over the next five years to combat high unemployment rates and encourage domestic manufacturers. Analysis by the Economics and Statistics Administration indicate that exports will this year support close to 9.4 million jobs, an increase from a 2009 estimate that put the number at 8.5 million." 

MP: Isn't there an underlying mercantilist, fixed-pie assumption here that exports create jobs, and imports destroy jobs? As the chart above shows, more than half of U.S. imports are inputs (industrial supplies, raw materials and capital goods) that were purchased this year by U.S. firms and will become part of some production process in the U.S. that will help support or create jobs in the U.S.  Why shouldn't we have a goal to double imports over the next five years, or simply to double international trade in general over the next five years (see post below)? 

Sunday, December 12, 2010

U.S. Trade Reaches Two-Year High in October

According to last week's BEA report, total U.S. trade with the rest of the world (sales of U.S. products to consumers and firms in other countries PLUS purchases of foreign production by American consumers and businesses) reached a two-year high of $356.1 billion in October.   This was the highest level of total trade since October 2008, and is more than $100 billion and 44.7% above the April 2009 cyclical low of $246 billion (see chart above).

Further, the combined international trade volume for U.S. buyers and sellers has increased in 13 out of the last 17 months (following ten consecutive declines), providing further evidence that the economy started on a recovery path last summer and continues to make solid gains almost every month. Both the sales of U.S. goods and services produced by American firms and sold to the rest of the world, and the purchases of foreign-produced goods and services by American consumers and firms, have been on an upward trend as the U.S. and global economies recover.

Saturday, December 11, 2010

Back From Financial Ground Zero Two Years Ago

Below are charts of four different measures of financial stress and volatility, displayed over the last five years.  Taken together as a group, these four charts show that the overall conditions in the U.S. financial markets were at the worst levels in the fall of 2008, and they have now returned to their pre-recession levels of late 2007.  From the "financial ground zero" two years ago, the U.S. financial markets have made remarkable progress.    

Exhibit A.  The Kansas City Financial Stress Index:

Exhibit B. The St. Louis Financial Stress Index:
Exhibit C. The CBOE Volatility Index

Exhibit D. The Bloomberg U.S. Financial Conditions Index

Friday, December 10, 2010

Washing Windows Hanging Off a Rope; I Hope They Are Paid More Than Those Washing The Other Side

Here's one example of why men might earn more on average than women: they tend to far outnumber women in jobs that are very dangerous, and therefore highly-paid: coal mining, working on oil rigs, fishing, farming, logging, excavation, construction and window-washing, etc.  I took the picture above of two window-washers hanging off the AEI building today on ropes, with no obvious safety equipment other than the normal-size ropes attached to something on the top of the building (notice the ropes aren't even visible in the picture!), with no buckets, trays or harnesses to support them, and nothing below them except the sidewalk to stop a fall.  I'm pretty sure these guys make a higher wage than the maintenance workers who clean the same exact windows from the inside of the building.   

Of course, there's nothing that would prevent women from becoming outside window-washers, but there might be natural gender differences in preferences for work environments that would discourage most women from hanging off a rope 10 stories above the street. Perhaps men show greater tolerance than women for risky, physically demanding, dangerous work in extreme outdoor conditions, and women put a higher priority on office work environments that are low-risk, indoors, safe and pleasant.  Higher (lower) risk = higher (lower) wages, ceteris paribus, and women on average may be perfectly willing to accept lower wages for lower risk jobs, which would contribute to the wage gap.  

Here's BLS data showing that in 2009, 93% of all workplace fatalities were men, and here's data showing that 90% of all fatal motorcycle accidents in 2009 were men, so I don't think there's any question that men are significantly more risk-tolerant than women.  Any empirical study of wage differences by gender should control for risk and the probability of work-related injury or fatality, which I don't think usually happens. 

Gender Differences on the SAT Test Explained

My video above was featured today on The American Enterprise Institute's website, inspired of course by the "text-to-movie" technology from the website that was used to make "Quantitative Easing Explained" (3.5 million views now on "the YouTube").    

The Worst People on Campus Are Those Who Don't Understand Economics But Write About It Anyway

This is from an editorial in the student newspaper at the University of Wisconsin, titled "The Worst People on Campus":

"Wisconsin had 5,800 student tickets to sell. They went up for purchase on at 9 p.m. Sunday and were sold out by 9:20 p.m. The 33 students named above (Note: their names were later removed) had the nerve to put their Rose Bowl tickets up for sale on Facebook Marketplace within two hours of tickets selling out. Face value was $150. Some were trying to get the tickets for more than $400 a pop.

Truly, there is a special place in Hell for people who buy Rose Bowl tickets with the sole intention of profiting from them. It is entirely unfair to those who actually love this football team and were counting on a cheap face value ticket in order to make the trip to Pasadena an economic reality."

This response is from ESPN sports writer Jemele Hill (and MSU grad) in her article titled "No Shame in Selling Wisconsin Tickets":

"If there's a special place in hell for someone who re-sells a ticket to a sporting event for more than face value, then hell is going to have an extensive waiting list. And I'd be on it. 

Admittedly, selling tickets for more than face value is a contentious issue among fans, but these sales are as ingrained in sports culture as hot dogs and beer.  If Wisconsin wanted to undermine this capitalistic ticket culture, all the athletic department had to do -- and The Badger Herald pointed this out -- was require that the students pick up their tickets in person at the Rose Bowl. But since there is no such requirement, what the students do with their tickets is fair game. 

Had Michigan State gone to the Rose Bowl this season, I couldn't imagine selling my Rose Bowl ticket if I were a student. Not even if I were offered double the price. But if you tripled it, I'd have to think about it." 

MP: I'm with Jemele on this one,  and I'm suspicious that she might have even taken Principles of Economics at MSU, whereas I predict Wisconsin editor-in-chief Kevin Bargnes (who wrote the editorial) hasn't yet been exposed to price theory?

Detroit's "Beautifully Broken" Feral Houses

A while back in the summer of 2009 a CD post featured the "feral houses of Detroit," described by the photographer as follows:

"I've seen "feral" used to describe dogs, cats, even goats. But I have wondered if it couldn't also be used to describe certain houses in Detroit. Abandoned houses are really no big deal here. Some estimate that there are as many as 10,000 abandoned structures at any given time, and that seems conservative. But for a few beautiful months during the summer, some of these houses become "feral" in every sense: they disappear behind ivy or the untended shrubs and trees planted generations ago to decorate their yards."

At a more recent post that featured the photos above from the summer of 2010, the photographer (who is self-described as one of "two yuppies raising their kids in the most dangerous city in America") added this:

"I like the idea of the feral as something "beautifully broken." A lot of people responded to the photos posted last summer by saying there was no beauty in these houses, only sadness. But with nature taking over these structures, they share a certain picturesque quality with the ancient ruins that have been appreciated throughout modern history."

Some of these photos are for sale here and here, so I guess this post could have been titled "Markets in Everything: Feral Detroit House Photos." 

Thursday, December 09, 2010

NY Fed Model: 1-in-70 Chance of 2011 Double-Dip

The New York Federal Reserve updated its "Probability of U.S. Recession Predicted by Treasury Spread" this week with treasury yield data through November 2010, and the Fed's recession probability forecast through November 2011. The NY Fed's Treasury model uses the spread between the yields on 10-year Treasury notes (2.76% in November) and 3-month Treasury bills (0.14%) to calculate the probability of a U.S. recession up to twelve months ahead (see details here).

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 November 2010, the recession probability is only 0.40% and for November of next year the recession probability is slightly higher, but still far less than 2% (1.42%). According to the NY Fed Treasury Spread model, the chance of a double-dip recession through November of next year is less than 1 out of 70.

November State Revenues Coming in Strong

Reflecting increased economic activity, the following states are reporting higher tax revenues for the month of November:

1. Missouri - Total November tax collections were up 3.3% from November 2009, largely because of a 19.2% increase in sales tax revenue compared to last year

2. Texas collected 8.7% more sales tax in November, marking the eighth month in a row that receipts were higher than last year. 

3. Tennessee - State tax revenue grew 3.4% in November compared to the year before for the eighth consecutive month, leading state officials to believe Tennessee’s economy is “slowly recovering.”

4.  Arkansas - November gross receipts collections totaled $168.7 million, up 8.3% above November 2009. The collections, which reflect taxes on October sales, have seen increases for eight consecutive months.

5. Iowa - State tax collections are returning to normal growth levels, providing evidence that Iowa is recovering from the effects of a national recession that caused state revenues to nose dive and forced budget upheaval in previous fiscal years. State tax collections grew by 5.7% in November. 

6. Massachusetts revenues continued to climb in November with the state pulling in $1.43 billion in tax receipts — an increase of nearly 11% from November of last year.

U.S. Vehicle Market is Coming Back to Life; Nov. Manheim Used Vehicle Index Hits a Record High

From today's Washington Times (thanks to Steve Bartin for sending the link):
In Germany, Mercedes Benz and BMW — both heavy seasonal advertisers this year — have shortened holiday breaks for autoworkers in response to the demand for sales. Audi, the luxury side of automaker Volkswagen, also plans to gear up production this month.

"When you see the luxury segment start to recover, it's a good sign for the rest of the economy," said Peter De Lorenzo, a Detroit-area auto analyst who operates the website "In general, the auto industry is definitely on an upward trajectory," he added. "The luxury automakers, who took a big hit the last couple of years, are definitely showing signs of rebounding. It is probably a sign that the economy is not going to go gangbusters overnight, but is going to improve with slow and steady progress."
Later in the article:
"Whether the year-end deals are a bargain for consumers is another matter., a Web-based consumer auto site, found that despite the heavy advertising and glossy commercials, the average incentive spending per car rose only $31 between October and November, when the holiday discounts were supposed to be kicking in. The average incentive per car in November was actually down $255 compared with November 2009, when auto dealers were desperate to lure any shoppers to the showroom."
With consumers coming back to auto dealers' showrooms in recent months (there was a 17.5% increase in November sales vs. last year that followed strong double-digit sales gains in both September and October), the strong demand has allowed automakers to cut back on discounting and incentives, which then results in the following:  

The Manheim Used Vehicle Index increased in November for the third straight month and brought the index up to a new record high level of 124.3 last month, rising a full 26 points above the all-time historical low of 98.0 in December of 2008 (see nearby chart). 

From Manheim's report:

"The real restraint on wholesale pricing is that imposed by the dealer’s ability to pass on cost increases. That restraint has yet to appear. Dealer margins have held steady and, with better financing and insurance opportunities, used vehicle profits for many dealers have risen to record levels."

Bottom Line: New car sales have gotten much stronger this year with double-digit gains in 9 out of the last 11 months, and the higher-end luxury segment of the car market is showing renewed signs of strength at year end.  The rebounding demand for new vehicles is apparently happening without the aggressive pricing and incentives that were much more common last year, which has also led to a strengthening of the pricing in the used vehicle market.  In sum, the consumer demand is coming back for new and used cars, even at higher prices, which has translated into rising profitability for car dealers and automakers, and an industry that has come back to life.    

Oct. LAX Passenger and Freight Demand Improved

Just under 5 million passengers (4,988,085) traveled through Los Angeles World Airports (LAX) in October, which was 4.75% higher than the passenger count in the same month a year earlier, and 6.5% above passenger traffic in October of 2008.  For the month of October, traffic this year was just slightly below the pre-recession level of 5,070,042 in 2007.  Passenger demand for both domestic and international flights at LAX in October was above last year's levels, by 5.42% and 2.92% respectively.  Year-to-date (YTD), passenger traffic at LAX is running 4.35% higher than last year.

Air cargo at LAX came close to reaching a three-year high in October at 169,315 tons, which was 6.4% above last October, and the highest monthly freight volume since November 2007 (see chart above).  For the YTD, air cargo at LAX is above last year by 19.6%, mostly due to strong double-digit gains from January through August. 

Reflecting the economic recovery underway, passenger and freight traffic at America's 3rd busiest airport registered solid gains both in the month of October and for the first 10 months of 2010.  

Weekly Jobless Claims Fall to New 27-Month Low

The Department of Labor reported today that the four-week average of initial unemployment claims fell to 427,500 for the week ending December 4, which is the lowest level since the first week of August 2008, more than two years ago (see chart above).  The number of workers continuing to receive jobless benefits fell to 4,226,000 on a four-week average basis for the week ending November 27, the lowest level for that count since early December 2008.

The drop in claims was the fifth consecutive weekly decline in the four-week average, which has also declined in 7 out of the last 8 weeks, and 13 out of the last 15 weeks,  so the trend in jobless claims is definitely on a downward path as the labor market gradually recovers.    

Wednesday, December 08, 2010

Markets in Everything: Pre-Paid Lab Tests; It's Like Using to Buy Your Lab Tests

(CNN) -- Day after demoralizing day, Dr. Doug Lefton watched uninsured patients leave his office needing laboratory tests but unlikely to have them done because of the cost. So the Fairlawn, Ohio, family physician decided to do something about it. Working with other doctors and an online marketer, Lefton devised a way to slash the cost of lab tests not only for his patients but for almost anyone, anywhere. 

Working with the Summit County Medical Society, Lefton struck a deal with LabCorp, one of the largest testing companies in the country, and PrePaidLab. The arrangement allows patients to get lab tests done for a small fraction of the normal cost, simply by ordering them through the medical society's website.  People who would ordinarily not be able to afford lab work are paying almost identical the amount the government pays for Medicaid. 

"The prices are spectacularly low for something you can get on the market yourself," says Tom Patton, CEO of PrePaidLab, an online marketer of lab tests. For example, a lipid panel (cholesterol test) can cost as much as $148 for an uninsured person. The same test is available for less than $18 through the site."

Here's how it works: Patients needing lab work can go to the medical society's website and click on the big yellow box in the middle of the page. From there they choose the tests their doctor says they need, give the doctor's fax number, pay with a credit card and print out the order. They then take the order to any LabCorp location in 47 states and have the work done. Results are sent securely to the patient and the doctor, often within 24 hours.

"It's like using to buy your lab tests," Lefton said.

HT: Daniel Sellers

Mike Mandel and The Jobs Opening Paradox

The chart above shows that job openings have been increasing nicely since the recession ended, according to two different measures, one from the BLS (job openings) and another from the Conference Board (online advertised vacancies).  In contrast, the unemployment rate has barely moved from its peak a year ago of 10.1%. What's going on here?  

Mike Mandel offers three possible explanations for why the jobless rate hasn't improved much, despite the significant, ongoing improvements in job openings: Mismatch, offshoring, and lags.  

1. Mismatch says that companies would like to hire, but can’t find the right people. 

2. Offshoring says that companies have openings, but they are filling them overseas. 

3. Lag would say that companies have openings, but it’s taking them time to pull the trigger, given the overall uncertainty.

I’m going to vote for a combination of offshoring and lag. I’m sure that some job openings are going overseas. But the statistics also suggest that hiring pressure is building up in some sectors of the economy. If that’s so, 2011 may be a better year for the labor market than people expect."

MP: After looking at jobless rates by educational attainment, I would offer some support for the mismatch explanation for the following reason: the jobless rates for the highest and least educated workers have continued to rise and reached all-time highs in November.

1. The jobless rate for workers with less than a high school degree was 15.7% in November, the highest in BLS history back to 1992 for this data series.

2. The jobless rate for workers with a bachelor's degree or higher reached an all-time record high of 5.1% in November.    

On the other hand, the jobless rate for workers with a high school degree has fallen by almost one percentage point from its 10.9% peak to 10% in November, and the rate for those with an associate's degree has fallen almost a half percentage point from its peak of 9.1% to 8.7%.  This might suggest some mismatch in the labor market between the education requirements of job openings and the educational attainment of job candidates? 

Further, there are sectors like construction that still has a stubbornly high jobless rate of 18.8% and leisure and hospitality that has a jobless rate of 12.4%, and there are probably very few of those jobs that are being offshored. In contrast, the jobless rate in the manufacturing sector, maybe the sector most likely to have jobs outsourced, has come down to 9.9% in November, just slightly higher than the 9.3% rate overall (not seasonally adjusted).

In any case, I do agree with Mike that there are many indications that 2011 might be a better year for the U.S. labor market than many people are probably expecting.

Update 1: Thanks to Morganovich for pointing out in the comments section a fourth explanation - the troubles in the housing market make workers less mobile than in past post-recession periods, which would be a variation of the mismatch explanation.  And yes, it would be interesting to see a geographical overlay of job openings and unemployment rates.

Update 2: Thanks to Westywildcat and Scott Lincicome for another explanation, or variation of the mismatch theory: The historically unprecedented 99 weeks of government unemployment insurance benefits, which would create disincentives to work even though job openings are available and increasing. 

Probably The Best Feedback a Teacher Can Get

From one of my students after a recent MBA economics class: 

"I learned a great deal in your class, and had a lot of my assumptions challenged. Thanks for giving my brain a wedgie."

Cartoon of the Day

The latest from IBD's Mike Ramirez

HT: Newmark's Door via Lee Coppock

Job Openings Rise to Two-Year High in October

The BLS reported yesterday that job openings rose to 3,362,000 in October, which was the highest level since August 2008, more than two years ago.  Compared to the cyclical low of 2,338,000 in July of last year, job openings have risen by more than one million and by 44% through October of this year. 

Although the ongoing increase in job openings hasn't translated yet into a lower unemployment rate (see chart above), it's another sign that conditions in the labor market are gradually improving and headed in the right direction. 

Incentives Matter: The Speed Camera Lottery

From Wired: "As well as ticketing you when you run through a speed-radar too fast, the “Speed Camera Lottery” in Sweden also notices you when you come in at or under the speed-limit. It then automatically enters you in a lottery. And here’s the really smart part: the prizes come from the fines paid by speeders."

Average speed before the experiment: 32 km/hour

Average speed after the experiment: 25 km/hour

Watch video above for the full story.

Tuesday, December 07, 2010

Employment Trends Index Gains in November

Yesterday the Conference Board released its latest Employment Trends Index, and reported that the labor market index increased by 1.4 points in November and is now 9.3% above the level a year ago (see chart above).  The Employment Trends Index is a composite of eight labor-market variables and is considered to be a leading indicator for trends in labor market conditions and total nonfarm employment.  In November, 7 of the 8 components improved (Initial Claims for Unemployment Insurance, Percentage of Firms With Positions Not Able to Fill Right Now, Number of Temporary Employees, Part-Time Workers for Economic Reasons, Job Openings, Industrial Production and Real Manufacturing and Trade Sales), which helped drive the index to its highest level in two years. 

Gad Levanon, Associate Director, Macroeconomic Research at The Conference Board said: 

“The disappointing employment numbers released last Friday are at odds with most of the leading indicators included in the Employment Trends Index. While we are not expecting economic activity or employment to grow rapidly anytime soon, we do expect employment to continue to moderately increase, following the trend of recent months.”

MP: The Employment Trends Index has had a pretty accurate track record of predicting past trends in payroll employment back to 1973. In that case, the ongoing gains in the index predict that we can look for gradual improvements in labor market conditions. 

Monday, December 06, 2010

Perfect SAT Scores: Male vs. Female for 2010

Perfect scores by gender for the 2010 SAT tests for mathematics, critical reading and writing

Government Website Promotes "3% or Less" Down

Here's a brochure titled "How to Buy a Home With a Low Down Payment: A Consumer’s Guide to Owning a Home with Less Than Three Percent Down," which was developed by the Mortgage Insurance Companies of America in cooperation with the Extension Service of the U.S. Department of Agriculture, and appears on this government (GSA) website.

“Many people mistakenly believe that you have to come up with a down payment equal to 20 percent of the price of a home. In fact, home loans with down payments of less than 20 percent are becoming increasingly popular. They are called “low down payment mortgages." This is good news for the millions of home buyers who are finding it difficult to save a large down payment, especially for their first house. More and more borrowers are taking advantage of low down payment mortgages and becoming homeowners with less than three percent down."  

Q: Isn't that exactly the kind of mortgage lending that helped cause the housing bubble? 

HT: Joy Pavelski

Saturday, December 04, 2010

ISM Employment Indexes Above Fall 2007 Levels

"All is not doom and gloom on the economy. There is some optimism. In fact, there's a mystery to Friday's jobs report, since it just doesn't tally with all the other good economic news. Retail sales are up four straight months, and chain-store sales for the early holidays surprised on the upside. Manufacturing reports have been solid. Even for November, the Institute for Supply Management's surveys for manufacturing and services were solid. The ISMs are basically real-time economic indicators. And oddly enough, the employment component of each looks fairly strong."

The nearby chart shows the employment indexes from the ISM-Manufacturing and Non-Manufacturing reports for November that were released this week.  The Employment Index for the service sector of the economy increased in November for the fourth month in a row, and for the 9th time in the last 12 months, and is now at a pre-recession level of 52.7, the highest since October 2010.  The index for employment in the manufacturing sector has been above pre-recession levels for the last year now. The positive trends in these employment indexes suggest that the labor market might be stronger than the BLS report, and the "underlying trend in job growth should accelerate in the months ahead," as Brian Wesbury and Bob Stein reported yesterday

Friday, December 03, 2010

Perfect SAT Math Scores: Male-Female Ratio of 2:1

Update: Mean Scores for the SAT Math Test, 2010
Males: 534
Females: 500
and Standard Deviation
Males: 118
Females: 112

In September I had a post about the 2010 Math SAT test results, and reported on the gender differences in favor of males, who scored 34 points higher on average this year than their female counterparts.  This follows a persistent 30+ point differential in favor of male high school students that goes back to at least the early 1970s. 

This is a follow-up to that post, and the chart above (click to enlarge) displays the results of the 2010 Math SAT test by gender for all scores between 580 and 800 by 10-point intervals.  Notice that:

1. For all math SAT scores of 580 and above (70th percentile), male students outnumbered female students.

2. As the scores increased by 10-point intervals from 580 to 800, the male-female ratio increased in almost all cases, reaching a peak of 2.08-t0-1 for perfect scores of 800.

3. More women (827,197) than men (720,793) took the SAT test in 2010, and to adjust for those differences in sample sizes, we can calculate that 1.12% of males had perfect 800 scores compared to 0.47% of females, for an adjusted male-female ratio of 2.38:1 (vs. the 2.08 unadjusted ratio). By either calculation, there were more than twice as many male high school students getting a perfect score on the SAT Math test than female students.  

As I reported before, these results are especially significant because female high school students are generally better students overall than males, and equally or better prepared for the SAT Math test than male students:

a. Females outnumbered males in the top 10% of their 2010 classes - there were 127 female students in the top 10% of high schools for every 100 male students (56% female to 44% male).

b. Nationwide, there were 144 female high school students with GPAs of A+ for every 100 males (59% female vs. 41% male). 

c. Females had a higher average GPA of 3.40 compared to 3.26 on average for male students in 2010. 

d. More than half of female high school students (51%) took more than 4 years of mathematics, compared to 49% of male students.

e. There were 117 female high school seniors who took AP or Honors Math for every 100 male students.  

Bottom Line: Despite now being better prepared academically by many different measures, both overall and for mathematics specifically, female high school students score significantly lower on the SAT math test, and the 30-point differences in test scores favoring males has persisted since Richard Nixon was president. 

And yet, we hear statements like this from the gender activists: "There just aren't gender differences anymore in math performance," says University of Wisconsin-Madison psychology professor Janet Hyde, "So parents and teachers need to revise their thoughts about this.  Stereotypes are very, very resistant to change, but as a scientist I have to challenge them with data."

Given the significant and persistent differences in SAT Math tests that have persisted over many generations, and continue to be found for all ethnic groups, the scientific data about gender differences in math performance seem to be challenging Professor Hyde's fact-resistant stereotypes.  

Update: Janet Hyde explains the 30-point male advantage on the SAT math test as follows,  "Greater numbers of girls take the test now than boys, because more girls are going to college. So you're dipping farther down into the distribution of female talent, which brings down the average score," says Hyde. "That may be the explanation for (the results), rather than girls aren't as good at math."

But that would imply several outcomes that are not happening:

1. The average female test score should be falling over time as more girls take the SAT test and "dip farther down in the distribution of female talent." In fact, the opposite is happening - average female scores have increased over time, not decreased (see graph above).

2. If more female test-takers dip farther down in the female distribution, the male-female gap should be widening, when in fact it's been remarkably constant over time (see graph).

Further, the "dipping down the female distribution" theory would only potentially explain average test scores, and would NOT explain at all why males outnumber females by huge 2-to-1 ratios for test scores on the high end.  

Update: Graph below shows male-female ratios for all test scores between 200 and 800:

Phrase of the Day: Frugality Fatigue

WSJ -- "Retailers' reports of robust November sales offered more evidence that the lackluster U.S. economy may finally be gaining momentum, despite stubbornly high unemployment. After several years of relative thrift, consumers may be parting with their money more willingly simply due to pent-up demand, something industry watchers are calling "frugality fatigue."

Schumpeterian Creative Destruction in IT

1. The Apple iPad is a Kindle Killer - Amazon Kindle's market share fell 15 points in November to less than half of the e-reader market (47%), due to competition from the Apple iPad (32% market share). 

2. "A research firm predicts that in 2011, computing’s third major technology wave will become mainstream, when computers held in one’s hand — smartphones and tablets — really take over and start putting personal computers in the rearview mirror."

Bright Spots: Temp Help and Mfg. Overtime Hours; But Jobless Recovery May Continue to 2012

Today's disappointing BLS employment report reflects a fairly weak job market and a continuation of the "jobless recovery" that will likely continue well into 2011, maybe even into 2010.  Looking back at the periods following the last two recessions, the jobless rate continued to rise for 15 months (until June 2002) following the end of the recession in March 19991, and it took 29 months, until August of 1993, before the unemployment rate fell back to the same level that prevailed at the end of recession.  Following the 2001 recession, the jobless rate continued to rise for another 19 months (June 2003), and it took 32 months until July 2004 for the jobless rate to return to the same level as the month of the recession's end in November 2001.  If this recovery follows the same pattern, it might be 2012 before this "jobless recovery" ends. 

Several bright spots in today's jobs report include:

1. Employment in temporary help services continued to grow by 39,500 jobs in November, which is the 13th increase during the last 14 months.  Since the cyclical low of 1.724 million jobs in September 2009, there has been an increase of 494,000 jobs in the temporary sector to 2,218 million jobs in November.  That level of temporary and contract employment jobs is the highest since September of 2008, 26 months ago. 

2. Average overtime hours for the manufacturing sector reached a 31-month high of 4.0 hours per week in November, the highest level since April 2008. 

Taken together, it appears that many U.S. companies are meeting the increasing demand for their products and services by:  a) using temporary and contract employees instead of hiring permanent, full-time employees, and b) using existing employees more intensely with increased overtime hours in the manufacturing sectors.  Both of those factors would be characteristic of an economy that is in recovery measured by production, income and sales, but is not yet creating enough full-time permanent jobs to bring down the overall jobless rate.     

Update: See the always-insightful analysis here from Scott Grannis, who writes "Despite the failure of job growth to pick up, there is no sign that it is slowing down. The economy continues to plod ahead at a slow pace. If this keeps up, and worker productivity rises at its long-term average pace of 2% per year, then we can expect to see about 3.5% real GDP growth going forward."

And here's some commentary from Brian Wesbury and Bob Stein on today's report: "Given recent data on consumer spending as well as growth in manufacturing production and construction, the underlying trend in job growth should accelerate in the months ahead."

Thursday, December 02, 2010

Free Market Capitalism: Best Path to Longer Life

HT: Coyote Blog via Pete Friedlander

Monster Employment Index Increases by 13% in November: 10th Straight Month of Annual Growth

The Monster Employment Index for the U.S. was released today with the following highlights:

1. Compared to last November, online job demand was up by 13% this year, and November marked the tenth consecutive month of a positive annual growth rate in the index, and the eighth straight month of double-digit growth (see chart above).   

2. 17 of the 20 industries monitored by the Index showed positive annual growth trends.

3. All 28 metro markets recorded positive annual growth in November, with especially strong gains in Detroit (53%), Philadelphia (51%), Orlando (45%), Cleveland (37%), and Minneapolis (36%).

D.C.'s Mom 'n' Pops Aren't Afraid of Walmart; They're Afraid of Wal-Mart's Greedy Customers

From today's Washington Examiner, an article I have edited slightly and re-titled "D.C.'s Mom 'n' Pops Afraid of Walmart's Cost-Conscious Customers":

The District's family-owned businesses are worried that greedy consumers who shop at Walmart for its everyday low prices will kill their livelihoods if the retailer forges ahead with plans to open four locations in the coming years. 

"I think we've got enough local grocery stores around," said Jeremy Frost, manager of 5th Street Ace Hardware. "They (Wal-Mart customers) drive local small businesses out of business.  It's a slippery slope once you start letting consumers' greed for low prices determine which merchants create the most value for the District.  Once you let value-conscious customers shop at four new Walmarts in ... I can see a lot of developments turning to big box businesses that would appeal to District families trying to stretch their hard-earned dollars as far as possible."

Weekly Jobless Claims Fall to 27-Month Low

The Department of Labor reported today that the four-week average of initial unemployment claims fell to 431,000 for the week ending November 27, which is the lowest level since the first week of August 2008, more than two years ago (see chart above).  The number of workers continuing to receive jobless benefits fell to 4,288,500 last week on a four-week average basis, the lowest level since early December 2008.

Wednesday, December 01, 2010

More "Non-End-of-the-World Economic Data"

Thanks to Daniel Gross for that great headline.   

1. Automakers reported strong sales gains in November, as "the economy accelerates out of the 2007-2009 slump."  U.S. vehicle sales in November of 873,323 light trucks and passenger cars were above last year's sales by 16.9%, led by a whopping 26.6% gain in light truck sales and a more modest 7.4% improvement in passenger car sales. Year-to-date sales of 10.44 million units so far this year are more than one million vehicles ahead of the 9.4 million units sold last year through November.  On a seasonally adjusted annual rate basis, vehicle sales in November topped 12 million units for the second month in a row for the first time in more than two years, going back to the late summer of 2008.    

2. According to today's ADP National Employment Report, private sector employment increased by 93,000 jobs in November, the largest monthly job gain in three years and the tenth consecutive monthly improvement.  October's employment increase was revised upward from a previously reported 43,000 jobs to 82,000, bringing the total gain over the last two months to 175,000 new private-sector jobs. More than half of the job increases in November (54,000) were added by small businesses (fewer than 50 employees).  

Now here's a possible connection between these two reports: Pickup trucks are typically purchased by small business owners and entrepreneurs, and the huge increase in November truck sales is an indication of increased business activity for America's small businesses.  The increased business activity for small businesses also translates into increased hiring by small businesses, which we saw in ADP's November job report.   

Interactive Chart of the Day: Global House Prices

From The Economist, a great interactive chart of global house prices, with options to adjust home prices for inflation and income, and compare to rents. Compared to the U.S. housing bubble, the bubble was much worse in countries like Australia and South Africa, and it doesn't matter whether or not you adjust for inflation or income levels.      

Rasmussen Employment Index Reaches 2-Year High

I'm reporting this index for the first time - the monthly Rasmussen Employment Index of worker confidence, which was released today and is based on a survey of 8,730 working Americans in November.  Here's what Rasmussen is reporting:

"The Rasmussen Employment Index posts its largest single-month gain in over a year and reaches its highest level since September 2008 for the third straight month. At 84.0, November's index is up six points from last month and 18 points from the beginning of 2010. The index, which measures confidence of workers in the employment market, is also up 22 points from a year ago when the index was 61.7 (see chart above)." 

MP: More evidence that while it might be slower than everybody would like, there is a gradual but real recovery happening in the U.S. labor market based on this index of worker confidence, along with the steady improvements almost every week this year in the ASA Staffing Index for temporary employment, and the gains in online job openings in almost every month since the summer of 2009, both reported earlier today.  

ASA Staffing Index At Highest Level Since 2007

From today's weekly report from The American Staffing Association (ASA):

"During the week of Nov. 15–21, 2010, temporary and contract employment rose 0.87%, raising the ASA Staffing Index up one point to a value of 101.  At a current index value of 101, U.S. staffing employment is 46% higher than the level reported for the first week of the current year and is 17% (23%) higher than the same weekly period in 2009 (2008)."

MP: The weekly staffing index of temporary and freelance employment has now been at a level of 100 or higher for the last ten weeks for the first time since the spring of 2008, more than two and a half years ago. Further, the 101 index reading for the Week 47 matches the same index level for two weeks in March 2008, and reflects the strongest demand for contract, freelance and temporary employment since an index reading of 104 in December 2007.  As a leading indicator of nonfarm employment, the ongoing improvements in the nation's key barometer of the demand for temporary and freelance workers signal future gains in permanent employment opportunities. 

The ASA also released a monthly report last week for results of the staffing industry through the third quarter of this year, here are some highlights:

1. U.S. staffing companies employed an average of 2.6 million temporary and contract workers per day from July through September. This is 24.9% more staffing employees per day than in the same quarter last year and an increase of 8.1% in average daily staffing employment over this year's second quarter. 

2. The year-to-year percentage increases in employment in this year's second and third quarters are comparable to the industry's job growth rates in the early 1990s—and the strongest since. 

3. "During the past 12 months, staffing firms have added over a half million new jobs to the economy," says ASA president and chief executive officer Richard Wahlquist. "Demand for temporary and contract help is expected to remain strong as businesses turn to flexible work force solutions to help them improve efficiency and productivity while adjusting to changing economic conditions."

Markets in Everything: Online Jury Trials

"The website eJury provides an attorney the opportunity to "pre-try" the case before it goes to trial in front of an actual jury at the courthouse.  Cases at the courthouse are usually tried to juries of 12 people.  At eJury, each case is tried to a minimum of 50 people.  This provides the attorney with a tremendous amount of feedback which he/she will use to establish a settlement value, find strengths and weaknesses in the evidence, learn "public" attitudes, improve jury selection, discover the most effective arguments."

Qualified eJurors get paid $5-10 depending on the size of the case, here's a sample case that paid $10.  Attorneys pay $350 per page, with a 2-page minimum and a suggested 5-page maximum, and usually get a minimum of 50 verdicts. 

Markets in Everything: Cash for Hair, Part 2

From the New York Times last week, an article about harvesting the best hair in the world: naturally blond hair in Russia, which is a "golden treasure" for the global beauty industry.  The going rate for "a 16-inch braid, the shortest length a buyer will consider, fetches about $50." 

HT: Greg Allar

Online Job Openings Reach 27-Month High in Oct.

"Online advertised vacancies rose a modest 47,400 in November to 4,457,200 following an increase of 113,700 in October, according to The Conference Board Help Wanted OnLine (HWOL) Data Series released today (see chart above).  The nation’s Supply/Demand rate stood at 3.37 unemployed for every advertised vacancy in October (the last available unemployment data)—a figure that is down from a peak of 4.73 in October 2009."

"In November, demand for workers continued to be positive, albeit moving at a disappointingly slow pace for the last few months," said June Shelp, Vice President at The Conference Board. "November was a surprisingly quiet month throughout the nation, with most states posting small gains / losses in advertised vacancies. In this weak U.S. economic recovery, office help, construction jobs, and positions in business and finance continue to show very sluggish growth."

MP: The number of online vacancies in November at 4.457 million was almost 31% above the advertised vacancies in the same month last year, and was the highest monthly count in more than two years (since August of 2008).  

Markets in Everything: Cash for Human Hair

At the Hairwork website you can sell or bid on human hair, here's an example:

"I am cutting my hair and it is mostly 12.5-13.5 inches long, with the longest strands reaching to 15.5 inches (pictured above).  I don't straighten or blow dry. Silky, smooth, and lays straight with no need for straightening. Never drink, never smoke, healthy diet. I will cut it after money is received. I receive compliments all the time on my hair. $600.00 or best offer."