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."   

Tuesday, November 30, 2010

If You Subsidize Something with Tax Dollars, You Get More Of It, Even If Costs Far Exceed Benefits

Nov. 23 (Bloomberg) -- "Michigan taxpayers foot the bill for the most generous movie subsidies in the U.S. Since 2008, the state has allotted $282 million to lure the filming of Hilary Swank’s “Conviction,” Clint Eastwood’s “Gran Torino,” George Clooney’s “Up In The Air” and more than 120 other productions.

Now the governor-elect, Republican Rick Snyder, wants to curb the largesse. A state agency found the price of the program -- which covers as much as 42 percent of local expenses -- exceeds the economic activity generated. Jobs created in 2009 cost the state about $193,000 each, the agency estimated."

MP: Economic lessons to be learned here:

1. From Thomas Sowell: "The first lesson of economics is that we live in a world of scarcity. There is never enough of anything to satisfy all those who want it.  The first lesson of politics is to ignore the first lesson of economics."

2. Public Choice Economics: In their short-sighted self-interest to get re-elected, politicians will always favor programs that have immediate benefits that are easily identifiable, even if the long run costs are much greater than the benefits, especially when the costs are hard to identify.  Film subsidies are a perfect example. It would have been cheaper for the state of Michigan to simply pay people in the film industry salaries of $50,000 per year not to work, than to fleece taxpayers almost $200,000 per job in the film industry.  But there's no political payoff to pay people $50,000 not to work, compared to the huge political payoff, though illusory, of "putting people to work in the Michigan film industry" at a cost of almost $200,000 per job. 

HT: Tom Hemphill

If You Tax Something, You Get Less of It

From the New York Post:

"The underground tobacco market is spreading like a fast-growing cancer in the wake of tax hikes that make New York cigarettes the most expensive in the nation -- and it's costing the state tens of millions a month in lost tax revenue.

Illegal cigarettes are pouring into neighborhood bodegas by the truckload from neighboring Indian reservations, lower-tax states in the South and even as far away as China. Government data show that New York state is being smoked out of as much as $20 million a month from all these illegal cigarette purchases -- an estimated 7.3 million packs a month sold off the state tax radar.

Sales of taxed cigarettes have plummeted 27 percent since July, when state lawmakers raised the excise tax to $4.35 a pack on top of the city's tax of $1.50, making the average price of Marlboros here $11.60, with some shops charging as much as $14. About 30 million packs are being sold legally each month -- down from 41 million packs a month before July.

The plunge far exceeds tobacco-control experts' predictions that sales would fall 8 to 10 percent, indicating that smokers are finding other means to get their nicotine fix."

MP: Economic lessons to be learned here:

1. Taxes are always distortionary because people can change their behavior to avoid the tax.  (The only exception: a "head tax," which cannot be avoided.)  Elected officials almost always underestimate the ability of taxpayers to change their behavior to avoid taxes, and the New York cigarette tax example is no exception  - experts predicted a 8-10% reduction in sales vs. the actual 27% decline.  

2. In any discussion about taxes, we have to distinguish between "tax rates" and "tax revenues," especially when we talk about "increasing or decreasing taxes," with the assumption being that increases (decreases) in tax rates and increases (decreases) in tax revenues automatically happen together.  In the case of cigarettes in New York the "tax increase" in rates resulted in a "tax decrease" in revenues because of what happened to the "tax base" (the amount of activity subject to the tax).  In this case (as often happens), the increase in tax rates on cigarette caused the tax base (amount of cigarettes subject to state taxes) to shrink so significantly, that there was a decrease in tax revenue. 

The same outcome often happens, whether the tax increase is on income, dividends, capital gains or retail sales.  See a good overview here of "tax rates" and "tax revenues" by Thomas Sowell on a recent episode of "The Kudlow Report."

HT: Craig Newmark via Lee Coppock.

More Positive News: Green Shoots Everywhere

1. U.S. consumer confidence in November reached its highest level since May, five months ago.

2. The Leading Economic Index for the Euro Area increased by 0.4% in October, following increases of 0.2% and 0.6% in September and August, respectively.   

3. Shipping in Europe is showing strong gains: Hamburg's total cargo volume rose 8% during the first nine months of the year compared to 2009, Rotterdam's traffic jumped 31.4% over the same period, and Antwerp's cargo volume was up 13.2%.

4. The Vancouver port set a new record in October for container traffic, with volume up 19.5% over the same month a year ago.


6. Manufacturing output improved in the Midwest region in October according to the Chicago Fed, and in the Chicago region in November according to the Chicago PMI.  The Dallas Fed reported a strengthening of manufacturing activity in Texas for November.  

7. Positive results were reported for both the U.S. hotel industry and Canada's hotel industry for the week of November 14-20.

8. State tax collections increased by 3.9% in the third quarter of this year compared to same period last year, the third consecutive quarterly gain in state tax revenues.  

Restaurant Performance Index Reaches 3-Year High

The National Restaurant Association (NRA) reported today that its Restaurant Performance Index reached a three-year high of 100.7 in October, the highest level since September 2007 (see chart above).  Restaurant sales set a new monthly industry record in October, with sales above last October by more than 4%, and year-to-date restaurant sales above last year by 2.6%.  There were 24,000 new restaurant industry jobs added in October, bringing the total number of new jobs added this year at U.S. restaurants to more than 130,000.  

A spokesman for the NRA, senior VP Hudson Riehle, credited recent improvements in real disposable income (+2.5% year-over-year gain in October, the highest increase in more than two years) as the main driver of increased restaurant activity in October.  Further, Riehle says that with the upcoming holiday period ahead, it is definitely turning into a sales growth momentum  environment for the restaurant industry, which is expected to carry well into 2011.     

Consumer spending at restaurants is highly cyclical, and consumers can easily reduce this type of discretionary spending as economic conditions weaken, and this is exactly what the graph above shows.  In fact, consumers starting cutting back on restaurant spending in the late summer of 2007, even before the recession officially started.  The upward trend in the restaurant index over the last year suggests that consumers are gradually becoming more confident and eating out more often, and it looks like this trend will continue. 

Monday, November 29, 2010

Markets in Everything: Cash for Fast Care in Canada

It's well known that Canada's single-payer health care system frequently results in delayed access for health care, since the "free" but still scarce medical resources get inefficiently rationed by non-price methods such as long waiting times.  For example, the median wait time in Canada for a "free" MRI in 2009 was 9 weeks, but can be as long as 15.5 weeks in some provinces (source), compared to a wait of generally less than a week in the U.S.

Here's one description of the situation in Canada:

"It's like the old Soviet system. Everything is free, but nothing is readily available. Except that we're not talking about lining up for toilet paper in Russia in 1976, but queuing for surgery in Canada in 2006."

But now there's a growing black market in Canada that allows patients to make cash payments to get to the head of the line or get the experienced surgeon they want, according to the Montreal Gazette in this article, "Want Fast Care? Slip an MD Some Cash":

 "When their mother was diagnosed with pancreatic cancer, the twin sisters didn't hesitate for a moment: They chose the surgeon they wanted and slipped him $2,000 in cash to bump their mother to the top of the waiting list.

"We wanted to save our mother," Vivian Green said. "It was cash incentive, to buy our place ahead of everyone else." Green and her sister, Ora Marcus, say bribes are an open secret in the medical field. "If you have money, you live, and if you don't, you die."

The prices?

Minimum $2,000 to guarantee that a woman's doctor will be there for the birth.  And it can go up to $10,000.For general surgery, the cost runs between $5,000 to $7,000 to jump the wait list into the operating room, he said. For Green and Marcus, the $2,000 got their mother's operation bumped up -but not the surgeon they wanted."

HT: David Henderson via Pete Friedlander

Shocking Video Evidence of "Consumer Greed"

 Exhibit A: 


And more examples of "consumer greed" here: Exhibit B, Exhibit C, Exhibit D, and Exhibit E.  

Next time you hear somebody talk about "corporate greed" or about how greedy corporations are only concerned with profits and their "bottom lines," or that corporations "put profits before people," etc. show them these shocking examples of money-grubbing, greedy consumers who seem only concerned about one thing: their household's bottom line, and they are so greedy that they'll even "put low prices before people" as they trample one another to enter Target and Wal-Mart on Black Friday to snatch up low-priced items before others do.       

Sept. Traffic Volume Sets New Record; Trucking Volume Shows Strong Gains in Sept. and Oct.

The Federal Highway Administration reported recently that travel on all roads and streets in the U.S. increased by +1.5% in September compared to the same month last year. Total travel for the month of September was estimated at 247.8 billion vehicle miles, the highest travel volume ever for the month of September.  The September increase in traffic was the fourth consecutive monthly increase compared to the same month last year, and the sixth increase in the last seven months. 

On a moving 12-month total basis, the annual vehicle-distance traveled through September was 2,990 billion miles, the highest 12-month total since August 2008, more than 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 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, along with a record-high volume for the month of September, indicate that the U.S. economy is recovering gradually, and the chances of a double-dip recession are negligible. 

In related traffic news, the American Trucking Association reported last week that its Truck Tonnage Index rose 6% in October on an annual basis, following a 5.3% year-over-year gain in September.  There were also month-to-month gains of 0.8% in October and 1.8% in September. Year-to-date trucking tonnage is up 6.1% compared to last year.  

Output and Profits Per Worker Are at Record Highs; Bad News: That Means a Jobless Recovery Ahead

The chart above shows quarterly increases in worker productivity, using output per hour from the BLS for the nonfarm business sector.  The shaded areas highlight the one-year periods following the end of the last three recessions (1990-1991, 2001, and 2007-2009), and show the huge surges in productivity in the early stages of the subsequent expansions - as companies learn how to "do more with less."  Notice that the productivity surge was greater following the 2001 recession than the 1990-1991 recession, and now the most recent productivity surge characterized by two consecutive quarters of gains above 6% (2009:Q3 and 2010:Q1) is much greater than the 2002 period.  It's partly those productivity surges that translate into "jobless recoveries," and this time will be no different, and might actually be longer than the post-recession periods of weak job recovery following the last two recessions.  

What motivated this post was a story in the Washington Post last Friday titled "Rising worker productivity, innovation boosts profits but may lessen hiring need," and here are a few key points:

"Companies slashed 8.5 million jobs during the worst recession since the Great Depression while also slowing capital investment plans. Campbell, the world's largest soup maker; DuPont, the country's third-biggest chemical maker; and United Parcel Service, the world's largest package-delivery business, are asking workers to help save cash by working smarter with existing technology. A potential cost: Efficiency gains reduce the chances that recession-casualty jobs will come back. 

"When the productivity growth comes, then watch out because that is when companies start not needing so much labor," Edmund Phelps, a Columbia University economist and Nobel laureate, said in an interview. Phelps says productivity growth works in long waves. In boom times, companies stock up on equipment. In lean times, they find ways to maximize performance of that equipment.

Growth in productivity, or output produced in an hour of work, averaged an annualized 3.4 percent in the five quarters since the 18-month recession ended in June 2009. That is similar to the 3.7 percent gain in the first five quarters after the 2001-03 so-called jobless recovery. The efficiency gains have paid off in corporate profits. Earnings from continuing operations of companies in the S&P 500 have rebounded 23 percent since the fourth quarter of 2007. Sales have declined 9 percent over the same period."

Bottom Line: The good economic news is that the productivity of American workers has never been higher, and the recent huge productivity gains have translated into record-high profits for U.S. companies, measured both in the absolute dollar amount of after-tax profits, and also measured in real dollars of after-tax corporate profits per private-sector worker, which is at an all-time high of $11,312 and above the 2008 cyclical low of $7,000 by more than 60% (see bottom chart above).  The bad economic news is that we might be in for several years of anemic job growth and a "jobless recovery," as a result of companies being able to expand output and increase profits without increases in employment. 

Sunday, November 28, 2010

U.S. Patent Activity Continues to Grow


Except for 2006, more U.S. patents were granted in 2009 (191,927) than in any previous year (see top chart).  And the number of patents granted in the last decade (1,827,000) is more than the number of patents granted in the quarter century between 1963 and 1987 (1,752,000).  For patent applications, almost five million applications have been filed in each of the last three years, and there were more applications filed in the last ten years than in the 33 years from 1963-1995 combined (see bottom chart).

Bottom Line: Despite the "worst economic crisis since the Great Depression," the most important ingredients and determinants of long-term growth for the United States were relatively unaffected: innovation, entrepreneurship, ingenuity, creativity, originality, and advances in science and technology, measured by U.S. patents.  Looking at the graphs above, you wouldn't even know anything of economic significance happened in the last few years - certainly nothing that materially affected patent activity.

Our "ultimate resource" - America's human resources,  human capital and entrepreneurial talent - are still strong, and the vitality and dynamism of the U.S. economy will prevail.  The U.S. economy has experienced 33 recessions since around the time of the Civil War, and has successfully emerged after each one into a new cycle of growth and expansion, and there's no reason that this last recession and the current expansion will be any different.  Judging by the ongoing expansion of U.S. patent activity, the future looks very bright, and American exceptionalism will continue to thrive.

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World Stock Market Value Doubles Since 2009


Update: For the third time in the last four months, the World Federation of Exchanges reported a significant gain in world stock market capitalization for the month of October, with a $2.5 trillion increase that pushed the total value of world stocks to $52.7 trillion (see chart). The October increase follows strong gains of $2.7 trillion in July and $3.8 trillion in September (and a slight decline of $0.50 trillion in August), for a cumulative four-month gain of $8.5 trillion from July-October, one of the largest four-month gains ever for world stock market value.

From the cyclical low of $26.6 trillion in February 2009, the total value of world stock markets has almost doubled to $52.7 trillion last month, and provides further evidence of a worldwide economic recovery and global bull market rally.