Tuesday, February 15, 2011

NY Fed: Delinquent Loans Fall Back to 2007 Levels

The NY Federal Reserve recently released it "Quarterly Report on Household Debt and Credit," and here are some key points:

1. Aggregate consumer debt continued to decline in the fourth quarter, continuing its trend of the previous two years. As of December 31, 2010, total consumer indebtedness was $11.4 trillion, a reduction of $1.08 trillion (8.6%) from its peak level at the close of 2008Q3, and $155 billion (1.3%) below its September 30, 2010 level.  This was the lowest level of consumer debt in almost four years, since the first quarter of 2007 when household debt totaled $11.34 trillion. 

2. New delinquent loan balances dropped to $271 billion in the fourth quarter of 2010, the lowest level since the second quarter of 2007, three and-a-half years ago (see chart). 

3. New delinquent mortgage loan balances fell to $202.4 billion in the fourth quarter of 2010, the lowest level since $202 billion in the third quarter of 2007 (see chart). 

HT: Junkyard Hawg

Markets in Everything: $200 Concierge Medicine

The NY Times recently featured One Medical Group which is:

"A new model for primary care that aims to set a nationwide example. With 31 physicians in San Francisco and New York, it offers most of the same services provided by personalized “concierge” medical practices, but at a much lower price: $150 to $200 a year. 

One Medical Group doctors see at most 16 patients a day; the nationwide average for primary-care physicians is 25. They welcome e-mail communication with patients, for no extra charge. Same-day appointments are routine. And unlike most concierge practices, One Medical accepts a variety of insurance plans, including Medicare. 

But One Medical is the first to try to carry out such a model on a large scale. It now has several thousand patients and a growth rate of 50 percent a year, fueled largely by word of mouth. The group's founder Dr. Lee said he planned to open a third office in Manhattan next month and expand to a third large city next year."

MP: Add this to the growing list of market-driven innovations in U.S. health care including ZocDoc, retail clinics, the No Insurance Club, Deeply-Discounted Surgery for Cash, medical care using web-based social media, medical tourism, and Roadside Medical Clinics for over-the-road truck drivers.

Home Depot To Hire 60k Workers for Spring Rush

"The Home Depot, the world's largest home improvement retailer, today announced it will hire more than 60,000 seasonal associates in time for the Company's second annual Spring Black Friday event.

Like the traditional Black Friday that occurs the day after Thanksgiving to unofficially start the holiday shopping season, The Home Depot's Spring Black Friday marks the start of home improvement's busiest shopping season. In preparation, the Company will hire and train new seasonal associates in every market during the month of February and March. Additionally, The Home Depot will be adding net new permanent full-time and part-time positions to its stores for the second year in a row."

HT: Steve Bartin at Newsalert

Update: Note that Home Depot stock has risen about 20% over the last three months, or about twice the return on the S&P500 (10%) over the last three months (see chart above). 

LA Port Sets New Export Record for January

The Port of Los Angeles released shipping data today for the month of January. Here are some highlights:

1. Exports from the LA Port set a new record for the month of January, with 159,051 loaded outbound containers leaving the port last month.  That was 12.61% above January 2010, 52% above January 2009, and 7.5% above the previous record for January exports in 2008 (see chart above).  

2. The total volume of shipping at the port in January was 660,517 TEUs, which was above its year-earlier level by 15.3%, and 12.5% above the level in January 2009.   

California's Tech Boom and "Bifurcated Recovery"

1. "California's Silicon Valley is Hiring Again" -- "Silicon Valley is starting to pop again. Green tech is alive, as is anything in social networking. Venture capitalists are investing. Google is hiring 2,000 workers this year; Facebook is moving into new quarters with room for hundreds of additional employees.

"We've got a lot of recruiting to do," said Dena Quinn, facilities manager at Skype's Palo Alto office. The Internet phone company will hire 280 workers in Palo Alto this year, more than doubling its Silicon Valley employment."

2. San Diego Tech Companies Can't Fill Thousands of Jobs -- "Even though the jobless rate continues to hover in the double digits, there are literally thousands of high-paid job openings in San Diego County just waiting for the applicants with the right skills, according to the leaders of the local high-tech community.

But they say that finding those applicants can be a challenge, partly because of the area’s high cost of living and the lingering perception that San Diego’s more of a beach town than a Silicon Valley South."

3. "While overall California home sales declined last year, the number of homes that sold for $1 million or more in 2010 rose for the first time in five years as certain segments of the economy improved and high-end home shoppers went bargain hunting.  Last year 22,529 Golden State homes sold for $1 million or more. That was up 21.0 percent from 18,621 in 2009 and the highest since 2008, when 24,436 homes sold for $1 million-plus, according to San Diego-based DataQuick Information Systems. Million-dollar sales peaked in 2005 at 54,773, after which they declined each year through 2009."

HT: Steve Bartin at Newsalert for the first two stories. 

Retail Sales Reach Post-Recession High in January

The Census Bureau reported today that U.S. consumers set a new all-time monthly record by spending $381.5 billion on retail and food services in January.  Without adjusting for inflation, this was the second straight month since the recession started in December 2007 that consumer spending has surpassed the pre-recession, previous record-high retail sales volume of of $380.0 billion set back in November 2007.  

The highest-ever retail spending amount in January was 7.8% higher than the year-earlier level, and spending in every category except electronics and appliance stores (-0.3%), and department stores (-0.8%) registered annual gains last month, with especially strong gains in motor vehicles and parts (15.7%), building materials (8.7%), miscellaneous stores (+10.2%) and nonstore retailers (13.5%).  The 3-month retail sales total through January 2011 of $1.14 trillion is running 7.6% ahead of the same period a year ago.

Monday, February 14, 2011

Japan's Per-Capita GDP is 10X Greater Than China's

The news media is making a big deal about the fact that China surpassed Japan in 2010 as the world's second largest economy, see WSJ article here.  But on a per-capita basis, China's GDP ranks #95 in the world, and is still lagging behind Ecuador and Iran. Japan's per-capita GDP is about 10 times greater than China's (see chart above). 

The Economics and Logic of Ticket Scalping

The economics of "ticket re-selling" aka "ticket scalping" is really pretty simple.  In general, there can only be a secondary market for tickets selling above face value if the following condition exists:

The quantity of tickets demanded by fans has to be greater than the quantity of tickets supplied by the band, promoter, arena, stadium, etc., which results in a sold-out show and a secondary market for tickets selling above face value.  Obviously, without that condition, the show is not sold out, and you can buy tickets at the box office on the night of the performance at face value.

Alternative ways to describe that condition are: a) an excess demand for tickets at face value, b) the number of tickets is being under-supplied relative to fan demand at face value, and c) the face value of the tickets is below the true market value of the tickets based on actual fan demand.  

That helps explain why we don't see "ticket scalping" for movie tickets - the number of movie tickets supplied to the market is adjusted based on consumer demand.  For popular movies, the number of movie tickets available is increased to meet demand, by showing the movie in more theaters, and showing the movie on multiple screens in individual theaters.  The length of time the movie remains in theaters is also increased for popular movies to increase the number of tickets available, and the ticket prices for popular new releases are also increased slightly by not allowing discounts or matinee pricing.       

For music concerts, if the goal is to eliminate ticket scalping, the solutions are easy: a) increase ticket prices to reduce the number of tickets demanded, and/or b) increase the number of tickets available, either by moving the show to a larger venue or by increasing the number of shows in a given location.   In other words, the band and/or promoter can simply increase the number of tickets supplied to meet the number of tickets demanded by the fans, especially if they are unwilling to raise ticket prices.  And since the number of tickets supplied is under direct control of the band and its promoter(s), there should be absolutely no excuse for any band or performer ever complaining about "ticket scalping."  For bands to complain about ticket scalping is really to acknowledge the band's faulty under-estimation of fan demand, and the blame should therefore be directed at the band for under-supplying tickets to its performances, not towards the greed of secondary ticket brokers. 

With that background in mind, consider what happened recently when the band LCD Soundsystem decided to retire and announced it would perform one last show for their fans at Madison Square Garden on April 2.  The band grossly under-estimated fan demand and therefore grossly under-supplied tickets - the show sold out as soon as tickets went on sale - which then created an active secondary market for the "ticket brokers," affectionately known as "ticket scalpers" (in a voluntary transaction for concert tickets, who's getting "scalped"?).  

So what did the band do?  They first got really mad at the ticket brokers (see the rambling, all-lower-case response on the band's website "fuck you, scalpers.") and then called their lawyer about the ticket scalping who told them “it’s legal." According to the band member james who wrote the letter on the band's website, "no joke. it’s fucking legal. i tramped around with friends and band getting insane. i wanted to buy some expensive tickets and then track the seller down to BEAT him. i acted stupid. i did some classic, shakespearean vain “fist shaking”, etc. i made angry tweets."

And then the band "found economic logic" and did what any rational movie theater owner does on a regular basis: The band added four shows at Terminal 5 in NYC from March 28-31, right before their farewell performance at MSG.  So the band will make more money, they will be better able to accommodate the demand of their fans, and in the process they will probably reduce the market for "ticket scalping." But they really still don't understand ECN 101, since the band's response concludes with:

"oh—and a small thing to scalpers: “it’s legal” is what people say when they don’t have ethics. the law is there to set the LIMIT of what is PUNISHABLE (aka where the state needs to intervene) but we are supposed to have ethics, and that should be the primary guiding force in our actions, you fucking fuck.  and to everyone else: thank you. you rule. don’t let the shitbags win."

HT: Armin Ghazi

The Growing Gender MD Pay Gap CAN Be Explained

Here's the abstract of the paper "The $16,819 Pay Gap For Newly Trained Physicians: The Unexplained Trend Of Men Earning More Than Women" in Health Affairs (Feb. 14, 2011): 
"Prior research has suggested that gender differences in physicians’ salaries can be accounted for by the tendency of women to enter primary care fields and work fewer hours. However, in examining starting salaries by gender of physicians leaving residency programs in New York State during 1999–2008, we found a significant gender gap that cannot be explained by specialty choice, practice setting, work hours, or other characteristics. The unexplained trend toward diverging salaries appears to be a recent development that is growing over time. In 2008, male physicians newly trained in New York State made on average $16,819 more than newly trained female physicians, compared to a $3,600 difference in 1999."
What's causing the growing pay gap?  The authors don't think it's driven by increasing gender discrimination and conclude that:
"It would be difficult to believe that discrimination, after a period of quiescence, has actually been on the rise in recent years. Moreover, our results indicate a trend toward diverging salaries not only in the traditionally male-dominated sub-specialty fields, which experienced an influx of women in our sample, but also in primary care fields."
Despite the title of the paper, the authors actually provide some very plausible explanations for the growing pay gap for MDs:
"It is possible that the continued influx of women into medicine has reached a tipping point, and physician practices may now be offering greater flexibility and family-friendly attributes that are more appealing to female practitioners but that come at the price of commensurately lower pay.

Such an explanation not only is consistent with the pattern observed in the data, but it also suggests that the continued integration of women into the physician workforce is reshaping the practice and business of medicine in ways that need to be measured by variables that are more subtle and comprehensive than salary.

If true, it also implies that female physicians respond to non-monetary elements in a given job offer and are willing to accept lower salaries in return for jobs that better reflect their broader employment preferences.

Thus, instead of being penalized because of their gender, female physicians may be seeking out employment arrangements that compensate them in other—non-financial—ways, and more employers may be beginning to offer such arrangements."
MP: In other words, the trend of male MDs earning more than female MDs is pretty easily explained: female (male) physicians put a higher (lower) priority on flexibility in work hours and family-friendly attributes of their employment arrangements, and are willing to accept lower (higher) financial compensation in return for greater (lower) non-monetary compensation.  That is, it's possible that male and female physicians are not true counterparts in the labor market for MDs, and it therefore could be expected that average starting salaries would reflect the significant gender differences in workplace priorities.  

WSJ Forecasting Survey: 2.1% Inflation in 2011

The WSJ Economic Forecasting Survey was released today, and based on the consensus average of more than 50 economists and forecasters, CPI inflation in December 2011 will be 2.1%, real GDP growth will be 3.5% in 2011, and the unemployment rate in December will be 8.6%.   

Sunday, February 13, 2011

2010 Global Air Traffic: The World is Moving Again

Geneva - "The International Air Transport Association (IATA) reported full-year 2010 demand statistics for international scheduled air traffic that showed an 8.2% increase in the passenger business and a 20.6% increase in freight. For the month of December, passenger traffic was up by 5% compared to December 2009, and freight volume was up year-to-year by 6.7% (see chart above). 

Compared to the pre-recession levels of early 2008, December air travel volumes were 4% higher. Air freight was 1% higher than pre-recession levels; however volumes have fallen 5% since the peak of the post-recession inventory re-stocking boom in early 2010.

“The world is moving again. After the biggest demand decline in the history of aviation in 2009, people started to travel and do business again in 2010. Airlines ended the year slightly ahead of early 2008 volumes, but with a pathetic 2.7% profit margin. The challenge is to turn the demand for mobility into sustainable profits,” said Giovanni Bisignani, IATA’s Director General and CEO."

New Criticism of Wal-Mart: Teens Can't Resist Temptation to Steal and Will Get Criminal Records

The first-ever Wal-Marts are coming soon to four retail-starved Washington, D.C. neighborhoods.  There have been lots of arguments against Wal-Mart: low, non-union wages, adverse effects on local merchants, child labor violations, predatory behavior, monopsony power, poor benefits and working conditions, traffic congestion, etc., there is even an entire Wikipedia listing for "Criticism of Wal-Mart," but note that there are not comparable listings for "Criticism of Target" or "Criticism of Home Depot"). 

Well, Wikipedia can now add some new criticisms for Wal-Mart, based on this recent Washington Post article:

"Washington, D.C. residents worry that the store would suffer severely or even fail because of petty theft. 'There will probably be a lot of shoplifting going on. They'll need a lot of security,' local resident Terriea Sutton, 35, said.

Brenda Speaks, a Ward 4 Advisory Neighborhood Commissioner, actually urged blocking construction of the planned store in her ward at Georgia and Missouri avenues NW partly because of that risk. Addressing a small, anti-Wal-Mart rally at City Hall last Monday, Speaks said young people would get criminal records when they couldn't resist the temptation to steal [from Wal-Mart]." 

Take The Buy Virginian (Or Your State) Challenge

Randy Erwin of the Buy American Challenge blog asks you to take the "Buy American Challenge" to save American jobs (see Don Boudreaux's post here for some background).

I hereby challenge Mr. Erwin, a resident of Arlington, Virginia to take the "Buy Virginian Challenge" to save jobs in Virginia (or even better yet, I challenge him to take the "Buy Arlington, VA Challenge" to save jobs in his local community).  Based on the Buy American Challenge (if you're not a resident of Virginia, substitute your state below), here are the guidelines to the Buy American Virginian Challenge:

"Keep in mind these are just guidelines, not hard-and-fast rules.  These guidelines are just here to give people who want to begin buying American Virginian a place to start.  Buying American Virginian can be confusing at first, so these guidelines are here to let people know that buying American Virginian doesn’t literally mean never buying anything not 100% made in U.S.A.  Virginia. That would be close to impossible to do in this day and age.  But we should not let that keep us from trying to buy American Virginian whenever we can.  Those taking the Buy American Virginian Challenge are committed to making a good-faith effort to buy American-made Virginian-made goods whenever an  American-made Virginian-made version of what they are looking to buy is available to them.  The more diligent we can be about it, the better.  So, here are the guidelines…

Buy American VIRGINIAN Challenge Guidelines:
  1. Buy only American-made Virginian-made finished products or American-grown Virginian grown or -raised foods.
  2. Items you buy may have parts, materials, and content that is not American-made Virginian-made, -grown, or -raised.
  3. Items you buy may be made in America Virginia by foreign-owned or multinational corporations.
  4. This challenge applies only to one’s own personal purchase decisions, not those made for households, groups, businesses, associations, or for one’s profession.
  5. Embarking on this challenge should be done willingly.  No one should ever be obligated or forced into buying American Virginian made.
Exceptions to the Buy American VIRGINIAN Challenge Guidelines:
  1. One, of course, may buy a specific foreign-made out-of-state product if a doctor, dentist, or other medical expert prescribes or recommends it.  Example: If your dentist says you need a fancy foreign-made West Virginian-made tooth brush, don’t worry about it, just get it.
  2. One may buy a specific foreign-made out-of-state product if the item is simply not made, grown, or raised in the United States Virginia, and the item does not have a suitable replacement that is made, grown, or raised in the United States Virginia.  Example 1: A lot of electronics cars just aren’t made in the U.S.A. Virginia anymore.  If you can’t find what you want American-made Virginian-made don’t worry about it.  Example 2: There is no such thing as an American-grown bananaVirginian-grown oranges. No worries, you can still eat them. 
  3. One may buy a specific foreign-made or -grown  out-of-state product if one is for some reason required to buy a specific item.  Example: If your professor assigns a specific foreign-made Texas-made TI calculator to use for a class, don’t worry about it, just get it.
  4. One may buy a foreign-made out-of-state item if it is urgently needed, and time or proximity preclude one from buying an American-made Virginian-made version of the item.  Example: You are really thirsty, and the only water available is bottled in France West Virginia.  Don’t worry about it, just get it.
  5. If one has a kinship with another country state other than the U.S.A. Virginia, he or she should feel free to buy items made, grown, or raised in that country state as well.  Example: Let’s say you have Irish Minnesotan heritage and like to buy things made wild rice harvested in Ireland Minnesota from time to time.  Go right ahead continue doing that.
  6. One is allowed five “cheat items” (or more if you really need more).  These are items that one may have an existing attachment to.  If you simply can’t live without a specific foreign-made out-of-state good (oranges, grapefruit, avocados, computers, cell phones, automobiles, potatoes, etc.), you can continue to purchase it.  Example: Let’s say you just love Swiss chocolate salt water Taffy from New Jersey.  You can, of course, continue to buy your chocolate taffy as often as you would like.
Again, these guidelines are just here to give people who are new to buying American Virginian a reasonable framework to start from.  The majority of Some items we buy can be found made in the U.S.A.  Virginia. These soft rules are spelled out simply so people don’t throw in the towel when they are forced to buy foreign-made out-of-state which is going to happen from time to time in all likelihood. 

Now that you know what the Buy American Virginian Challenge entails, I hope you will take the Buy American Virginian Challenge. Good luck on your buy American Virginian journey. Please come back to this website to share some of your buy American Virginian experiences."

Update: If Mr. Erwin and his followers find the "Buy Virginian Challenge" to be successful at creating jobs in Virginia, then they should next consider narrowing the geographical area for their "buying loyalty" and job creation to smaller and smaller areas, which would eventually end up with them taking the "Buy From My Own Household Challenge" (see below). 

Sunday Quiz

What do these four items have in common? Mackerel, instant coffee, stamps and combination locks.  Find out here.

Saturday, February 12, 2011

Markets in Everything: U.S. Medicine for Canadians

Canada's Times Colonist -- "A Buffalo-based company is the latest to get in on the medical brokering scheme that’s gaining ground in Canada as lengthy wait times force more and more people south of the border for treatment.

Cross Border Access has been helping Canadians book appointments and negotiate fees for a variety of procedures in upstate New York since May, putting a new twist on an industry that’s raising ethical questions and helping fuel the private-public health-care debate.

Unlike Canadian companies that have popped up offering similar services, this American operation charges a $200-a-year membership fee and connects patients directly with service providers." 

MP: How successful is the company at attracting Canadians to come to the U.S. and pay for medical care when it's "free" in Canada? According to the company's founder, business in 2010 more than doubled over 2009. 

Economic Impact of the Printing Press: Info Age 1.0

Some key paragraphs from the paper "Information Technology and Economic Change: The Impact of the Printing Press" by American University professor Jeremiah Dittmar:

"The first printing press was established around 1450 in Mainz, Germany (see chart above on left). Contemporaries saw the technology ushering in dramatic changes in the way knowledge was stored and exchanged. Printing was from the outset a for-profit enterprise. But what was the economic impact of this revolution in information technology? By lowering the cost of disseminating ideas, did the explosion of print media erode the importance of location?

I find that cities in which printing presses were established 1450-1500 had no prior growth advantage, but subsequently grew far faster than similar cities without printing presses. My work uses a difference-in-differences estimation strategy to document the association between printing and city growth. The estimates suggest early adoption of the printing press was associated with a population growth advantage of 21 percentage points 1500-1600, when mean city growth was 30 percentage points. The difference-in-differences model shows that cities that adopted the printing press in the late 1400s had no prior growth advantage, but grew at least 35 percentage points more than similar non-adopting cities from 1500 to 1600.

Cities that adopted print media benefitted from positive spillovers in human capital accumulation and technological change broadly defined. These spillovers exerted an upward pressure on the returns to labour, made cities culturally dynamic, and attracted migrants.

The printing press was one of the greatest revolutions in information technology. The impact of the printing press is hard to identify in aggregate data. However, the diffusion of the technology was associated with extraordinary subsequent economic dynamism at the city level. European cities were seedbeds of ideas and business practices that drove the transition to modern growth. These facts suggest that the printing press had very far-reaching consequences through its impact on the development of cities."

MP: It's estimated that the invention of the printing press started Information Age 1.0 by lowering the cost of processing, copying and disseminating information by about 1,000 times.  The commercial introduction of the microchip in 1971 was the invention that launched Information Age 2.0, and it's estimated that the microchip lowered the cost of information by about 10 million times.  And today's microchips are about 30,000 times faster than the 1971 version.   

HT: Paul Kedrosky

Wal-Mart Bias, NYC Edition

From today's WSJ, an editorial by Charles Fishman, on Wal-Mart's attempt to open stores in NYC, and the typical, expected opposition it faces (but which apparently Home Depot, Target and Family Dollar didn't face):

"The question, though, is why in capitalist democracy those fears of competition should determine public policy. New York is famous as the center of the nation's media business. But the city didn't step in and ban the Internet 15 years ago out of fear that the city's magazines, ad agencies, TV networks and music recording would be devastated by the new media. And many were.

The city's small groceries, diners, coffee shops, food trucks and boutiques also aren't quite as fragile as the Wal-Mart critics would have us believe. They've already survived the big-box, national-chain onslaught.

Home Depot first came to New York City in 1994. It now has 21 locations, including two in Manhattan. Target first opened in New York in 1998, and now has 10 stores, including one in Harlem. New York has Kohl's and Best Buy, Costco and Ikea, Olive Garden and McDonalds. For those worried about low-priced competition, the city already has 50 Family Dollar outlets. And Manhattan has 150 Duane Reade drug stores, often sharing the same block with thriving family-owned bodegas.

The varied, dense, energetic economy of New York City is very different than the commercial squares of the small towns where Wal-Mart earned its reputation for wiping out local merchants. In Gotham, anyone who doesn't like Wal-Mart's employment and business practices can work and shop elsewhere. Yes, Wal-Mart is nonunion, but Target and Home Depot and Starbucks are all nonunion as well, as are most mom-and-pop stores. 

Perhaps most importantly, it's puzzling why elected officials would oppose a store that, everyone agrees, brings low prices to working-class consumers who need those low prices more than ever."

WSJ Quotes of the Day on Egypt and Iran

From today's WSJ:

1. Peggy Noonan -- "Social media is a revolutionary force. We know that, but we're still catching up with its implications. A leader of the Egyptian revolt was a Google executive. Could the future be any clearer? 

No takeable dictatorship will survive this era. The ones that do last will be so effectively totalitarian that their very brutishness will be their bulwark.

A Hollywood director once said that a great Western is defined by this dynamic: "The villain has arrived while the hero is evolving." Egypt itself is evolving. May its people be heroes and do great things." 

2.  Fouad Ajami --  "The Egyptians will be tested again as to their fidelity to democratic ways. But if this standoff that ended in the demise of the dictator is any guide, the Egyptians may give us a consoling tale of an Islamic people who rose to proclaim their fidelity to liberty, and who provided us with a reminder that tyranny is not fated for the Arabs." 

3. Melik Kaylan about the Iran's ban on Valentine's Day --"Theocratic regimes invariably suffer from the same besetting sin: As the world evolves, they must either revise their antiquated doctrines or try to hold the world rigidly in stasis. Iran's ruling mullahs keep choosing the latter option.

In the end, Iran's rulers face an impossible task. Their genesis myth of a society based on a codified schema of sacred laws looks neither codified nor sacred. It convinces no one. Instead, the regime seems dedicated above all to stamping out joy wherever it may accidentally arise—a sour, paranoid struggle against irrepressible forces of nature, change, the seasons, music, romance and laughter. The Iranian people can take comfort: No earthly authority has won that particular contest for long."

The Waning Power of Unions in the U.S.

In 2010, there were only 11 major strikes and lockouts involving 1,000 or more workers, the second-lowest number  since the major work stoppages series began in 1947 (in 2009 there were 5), the U.S. Bureau of Labor Statistics reported this week (see chart above). The decline in work stoppages over the last sixty years coincides with the ongoing decline in union membership as a share of all workers, from a high of 32.5% of all workers in 1953 (almost 1 in 3) to 11.9% in 2010 (fewer than 1 in 8, and for private workers only 6.9% are in a union, or fewer than 1 in 14).

For example, in the 1947-1980 period when union membership averaged 30% of the workforce, there was an average of 300 major strikes and lockouts per year, and during the last twenty years since 1990, union membership has dropped to an annual average of 14% and the average annual number of strikes fell to 26. 

Update: In what may be a sign of the waning power of public unions and the start of a national trend to help repair state budgets, here's what's happening in Wisconsin:

"Gov. Scott Walker unveiled sweeping legislation that would severely curtail public employee rights and dramatically change the way Wisconsin negotiates with unions going forward.  
To union leaders, and many Democratic lawmakers, the governor's moves represent an all-out effort to end the influence of organized labor in Wisconsin."

Here's more:

"Perhaps the most controversial aspect of Walker's repair bill deals with collective bargaining. The governor wants to remove those rights for most of the 175,000 state and local employees in Wisconsin, allowing workers to negotiate only over salary. By ending state employees' ability to negotiate for their pensions and insurance rates, the governor will be able to increase employee pension contributions to 5.8 percent of salary and more than double their health insurance contributions (to 12.6 percent)."  

HT: Phil Beaver

Friday, February 11, 2011

Exports to China Surge to Record Level in Dec. ($10B); Exports to China Have Grown Faster (19%/yr.) Than Imports (13.8%/yr.) Since 2000

Obama says he wants to double exports in the next five years to create U.S. jobs.  According to data released today by the BEA (available here), U.S. exports to China surged to $10.12 billion in December, a new monthly record, and more than double the $4.6 billion in February 2009, less than two years ago.  In fact, exports to China have more than tripled since January 2006, slightly less than five years ago.  And this apparently happened without any special help from Obama or Bush, it most likely happened because China's economy is booming.

Updated with Annual Data: And as much as we continually hear about China's currency manipulation to artificially increase its exports to the U.S., the chart below shows something very interesting.  When annual exports of China and imports from China are both normalized to equal 100 in January 2000 (when imports were $100 billion and exports were only $16 billion), we can see that exports to China have actually grown much faster (+19% per year) than imports from China (13.8% per year).  We could also say that in 2000, there were $6.25 of imports from China for every $1 of exports to China, and by 2010 the ratio of China imports-to-China exports had fallen to 4. 

HT: Robert Kuehl

Huge Gender Degree Gap at Ages 22-23: National Crisis, Title IX, Government Funding? Probably Not

According to a report released this week by the BLS:

"At age 23, there is a clear gender gap in educational attainment. While nearly 1 in 4 women had earned a bachelor’s degree by the October when they were age 23, only 1 in 7 men had done so, the U.S. Bureau of Labor Statistics reported (see chart above). Additionally, the same percentage of men and women, 16 percent, were enrolled in college at age 23, so it is unlikely the gap in educational attainment will close in the next few years." 

MP: The BLS also reported that at age 22, 12.7% of women had earned a bachelor's degree compared to only 6.8% of men at that age. In other words, at age 22, there are 187 women holding a Bachelor's degree (or more) for every 100 men who have graduated from college.  By age 23, there are 164 women with a bachelor's degree for every 100 men, and that degree gap won't likely change much at later ages because the same percentage of women and men (16%) are enrolled in college at age 23.   

Now that's a huge gender disparity in college completion at ages 22 and 23, but I predict:

1. This gender degree gap will receive almost no media attention, and certainly no attention from the gender activists, who demonstrate a selective concern for only those gender imbalances that favor men.

2. There will be no calls for government studies, or increased government funding to address the problem, and nobody will refer to this persistent gender degree gap as a "crisis."

3. President Obama will not address the issue by signing an Executive Order creating a "White House Council on Men and Boys," like he did for
women and girls.

4. Neither Obama nor Congress will address the gender degree gap by invoking the Title IX gender-equity law, like they have threatened for the gender gap in some college math and science programs.

5. Nobody will blame the gender degree gap on structural barriers from grades K-12 that discourage men from attending or graduating from college, like they do for explaining the gender gap for women in math and science

In other words, the standard "disparity-proves-discrimination" dogma will not be applied in this case of a huge gender imbalance in college completion by ages 22-23, because the disparity favors women, not men. But consider what happens when the disparity favors men, and this is just one example of many:

NY Times: "Women make up 46% of the American workforce but hold just 25% of the jobs in engineering, technology and science, according to the National Science Foundation. To Sally K. Ride, a former astronaut, that persistent gender gap is a national crisis that will prove to be deeply detrimental to America’s global competitiveness."

The Movie "Cedar Rapids" Was Actually Filmed in Ann Arbor, Michigan? Reason? "Film Credit Crack"

According to the Michigan Film Office website, 129 movies have been filmed in Michigan since 2008, including 48 in 2010 ("Gulliver's Travels), 43 in 2009 ("Capitalism: A Love Story"), and 38 in 2008 ("Gran Torino").  

It might seem curious that so many movies are now being filmed in Michigan, a state known more for its automotive industry, failing cities, flat landscape and cold weather than as a top movie destination.  And it might also seem curious that a movie being released this weekend titled "Cedar Rapids" that supposedly takes place in Cedar Rapids, Iowa, was actually instead filmed in Ann Arbor, Michigan.   

Well, it's not so curious once you know that Michigan offers filmmakers a 42% refund or tax credit on their direct production costs in Michigan.  Spend $10 million making a movie in Michigan and you could get $4,200,000 back!  With that kind of taxpayer money available, who wouldn't make a movie in Michigan? Even Michael Moore decided to cash in on Michigan tax credits when he filmed parts of his movie "Capitalism: A Love Story"  in Michigan.

The state of Iowa used to have some tax incentives available for filming there, but they were being phased out around the time that the movie "Cedar Rapids" was originally going to be filmed on location in 2009 in the movie's namesake Cedar Rapids.  So Ann Arbor was selected for filming, because it's comparable in size to Cedar Rapids, and more importantly because Michigan taxpayers would foot the bill for 42% of the film's production costs.  

Fortunately, the Mackinac Center for Public Policy has been exposing the Michigan Film program as a complete boondoggle for Michigan taxpayers.  Even the State Senate Fiscal Agency questioned the program when it estimated that the state gave out credits of almost $150 million during a period when it only took in $26.6m in taxes from filmmakers, for an estimated net loss to the state of $122 million.  

Here's one of the Mackinac Center's first studies exposing the Michigan film program for generating net losses to the state.  Also fortunate is that Michigan's new governor Rick Snyder wants to end the state's "film credit candy," which is maybe more like "film credit crack" for filmmakers, like the producers of "Cedar Rapids." 

Jan. Federal Tax Revenues Rise by $20B (10%)

Following an $18 billion, 8% year-over-year increase in December federal tax revenues, January's federal tax revenues showed an even bigger $20 billion, 10% increase (see top chart above), according to data released earlier this week by the CBO.

Tax receipts for the first four months of fiscal year 2011 (October-January) were higher than receipts during the comparable period last year by $64 billion, representing a 9% increase (see bottom chart above). 
From the CBO report, "Nearly all of that increase was from individual income and social insurance taxes, which together rose by $61 billion (or 10%).  Withholding from employees’ paychecks for income and payroll taxes increased by $45 billion (or 8.2 percent), at least partly reflecting higher wages and salaries."

Now, if they could just get federal spending under control.

See related post here showing 12 states reporting improvements in state tax revenues for January.  

Animation Nation

From today's WSJ article "Animation Nation":

"On the heels of Twitter, blogs and YouTube videos, do-it-yourself animation has emerged as the latest form of self-expression online. These days, anyone looking to make fun of their boss, unleash a rant or comment on the latest news can quickly create a cartoon, thanks to a crop of animation websites. And corporations, advertisers—and Hollywood executives—are beginning to take notice.

Xtranormal, which is backed by Boston-based venture capital firm Fairhaven Capital, says its registered users have jumped from 800,000 to nearly 2.4 million in the last six months. In December, the site began charging for cartoon characters that once were free; the average movie costs about $1 to make. The site says it has seen a steady increase in revenue but has not yet turned a profit. Chief Executive Officer Graham Sharp says the company expects to do so by midyear."

Here's something new from Cato's Dan Mitchell, "Obama and Clinton Talk Taxes."

And here's my attempt at animation:

More Signs of Labor Market Improvements

1. Salaries, Job Offers Up for Class of 2011 (Bloomberg) -- "Undergraduates in general, and undergraduate business students in particular, have reason to rejoice.  New surveys by the National Association of Colleges and Employers show that employers are planning to increase their college hiring by double digits this year, and that salaries are up for the first time since 2008.

Employers reported plans to increase hiring from the Class of 2011 by 13.5% over the prior year. The latest poll, in January, showed that 51.5% of respondents planned to increase hiring, the first time in 18 months that a majority reported such plans.  In the latest salary survey, the average salary offer to a Class of 2011 graduate was $50,034, up 3.5% year over year, with increases reported for two thirds of academic disciplines." 

2. Higher Pay Gains Seen for 2011 (WSJ) -- "U.S. workers have reason to hope for slightly better pay raises this year, a shift that could add momentum to the economic recovery. With corporate America sitting on large piles of cash and manufacturers seeing a surge in exports to fast-growing emerging markets, signs are mounting that some of the benefits will start trickling down to employees.

This could mean average wage gains of as much as 3% in 2011, compared with 1.7% in 2010—enough to boost consumer spending, which accounts for more than two-thirds of the economy, but not so much that it would stoke concerns of an inflationary spiral."

Thursday, February 10, 2011

UCLA Commerce Index Increases for 14th Month

"The Ceridian-UCLA Pulse of Commerce Index (PCI), issued yesterday by the UCLA Anderson School of Management and Ceridian Corporation fell 0.3% on a seasonally and monthly workday adjusted basis in January, giving up some of December’s exceptional 1.8% sequential gain. Because of the very strong December showing, the three-month annualized moving average is up 5.1% and gaining strength (see chart above). This follows a string of weak or negative readings experienced in the second half of last year, further supporting our view that there is no evidence for a “double dip” in 2011. Importantly, however, we are not yet seeing signs of the growth required to drive meaningful employment gains.

The PCI grew 3.4% on a year-over-year basis in January. This marked the 14th consecutive month of year-over-year growth in the index. Growth of 3.4% is respectable, but not exceptional – particularly when compared to the gains recorded in April through July of 2010. However, like last month, the year-over-year growth is encouraging because January of last year was strong, and the index was able to grow over that strong comparison."

NY Politicians Seek to Tame Lawless Bus Industry

A thriving business has developed over the last few years that delivers super low-cost express bus transportation between cities like Washington D.C. and New York City, for as low as $1 (see picture above), but with fares typically running more like $26 round-trip on Megabus, $55 round-trip on DC 2 NY, and $35 round-trip on Chinatown Bus for travel in February.

So what's the problem? The buses are clean, convenient, affordable, on time, and offer free wireless service, and the intense competition between many rival companies keeps it that way.   Well, there really is no problem; that is, unless you're a politician and can't fathom the idea that a market can exist without some kind of government regulation and oversight, i.e. no appreciation at all of "spontaneous order."

Worried that there is a "chaotic lack of rules" that could put travelers "at risk," New York lawmakers have introduced legislation to tame a "lawless bus industry that has left Chinatown like the 'Wild West'." Read more here

HT: Michael Kelly

Offbeat Economic Indicators: Economy is Booming

1. The "RV Indicator":  Sales of Recreational Vehicles are rebounding, and are expected to increase by 8.2% in 2011 compared to last year. 

2. The "Vanity/Implant Index": Plastic surgery procedures were up by 5% in 2010 (296,000 breast implants last year).   

3.  The "Divorce Index":  "In a grim sign of the economic recovery, the divorce rate, which dipped during the recession, appears to be on the rebound."

Markets in Everything: Datasets (Many Are Free)

The website "Infochimps" makes it easy to buy, sell and share data online.  Many datasets are free, and some are available for sale, here are some examples:

1. Play-by-play data for every Major League Baseball game from 1950 through 2009 (free), and MLB boxscores for all games between 1871 and 2008 (free).

2. Twitter Census: 500 million "tweets" from 35 million users between March 2006 to November 2009 ($1,000). 

3. NYSE daily data (open, high, low, close, volume) from 1970 to February 2010 (free), free datasets also available for NASDAQ and AMEX

4. Word list: +100,000 Official Crossword words (Excel file, free).

5. MySpace user count by zipcode ($120).

HT: Peter Parlapiano

Jobless Claims Fall to 2.5 Year Low

Weekly initial jobless claims fell last week to 383,000 on a seasonally adjusted basis, according to today's Department of Labor report, which was the lowest level since July 5, 2008, more than 2-1/2 years ago.  The four-week moving average fell by 16,000 to 415,500 (see chart).

Here's a report from Reuters:

"New U.S. claims for unemployment benefits dropped more than expected last week to touch their lowest point in 2-1/2 years, a government report showed on Thursday, offering assurance that the labor market was strengthening despite January's poor jobs numbers."

Wednesday, February 09, 2011

100 Years of The American Economic Review: The Top 20 Articles

From the February issue of the American Economic Review

100 Years of the American Economic Review: The Top 20 Articles 

Note that the most recent article of the top 20 is Robert Shiller's article from 1981, everything else is before, starting with the Cobb-Douglas article in 1928. 

Michigan, Manufacturing Are Making a Comeback

The chart above displays the monthly jobless rates for Michigan, California and Nevada, and here are a few key observations:

1. For 101 consecutive months between December 2001 and April 2010, the Nevada jobless rate was at or below Michigan's jobless rate, until May 2010 when Michigan's rate dropped below Nevada's for the first time in more than nine years.  The Nevada-Michigan jobless rate gap has increased in every month since May and stands now at 2.8% in December: Nevada (14.5%) vs. Michigan (11.7%, a 23-month low). 

2. For 93 consecutive months between March 2003 and November 2011, the California jobless rate was at or below Michigan's, until last month when Michigan's December jobless rate (11.7%) fell below California's rate of 12.5% for the first time in almost eight years.  

It was easy to spot these trends using Google's interactive graph of state unemployment rates.

Homeownership Rate Falls to 13-Year Low; Gov't. Created An Unsustainable "Homeownership Bubble"

The homeownership rate in the U.S. fell in the fourth quarter of 2010 to 66.5%, according to data recently released by the Census Bureau.  That was the lowest homeownership rate in 13 years, since the 66.4% rate in the fourth quarter of 1998, and it looks like it will probably fall further in the coming years.  

Conclusion: The political obsession with homeownership raised homeownership in the short run to an artificial and unsustainable level of 69% by 2006, but failed in the long run to stimulate homeownership at a sustainable level, and in the process government policy turned good renters into bad homeowners, created a housing bubble, waves of foreclosures, and a subsequent housing meltdown and financial crisis. In other words, the chart illustrates how government policies (monetary, mortgage market, GSEs, CRA, affordable housing, etc.) created an unsustainable "homeownership bubble."

The "Time Cost" of Food Has Fallen Since 2008

Time Cost (in Minutes), Selected Food Items

Although this is not a complete analysis, the chart above (click to enlarge) provides some additional evidence that there is not a lot of food inflation right now in the U.S.  In the post below, there are a lot of comments that are critical of the way the BLS calculates inflation, with some general consensus that the BLS and CPI massively "under-report inflation." 

So here's an alternative approach to measuring food inflation by calculating the "time cost" of food, using:  a) actual retail food prices ("Average Price Data" U.S. city average) in December 2008, December 2009, and December 2010, and b) the average hourly earnings in those same months for "Total Private Industries."  

For example, in December 2008, the food item "Ground chuck, 100% beef" had an average retail price of $3.00 per pound, and the average hourly wage in that month was $18.39 (or 30.65 cents per minute), which would mean that the average worker in December 2008 would have spent 9.78 minutes working at the average wage to earn enough income (disregarding taxes) to purchase one pound of ground beef.  In December 2009, the "time cost" of ground beef would have been 9 minutes, and in December 2010 the "time cost" of hamburger was 9.14 minutes (see chart above).  Therefore, in the two-year period between December 2008 and December 2010, the "time cost" of hamburger fell by 6.54%, and in the one-year period between December 2009 and December 2010, the "time cost" of hamburger rose by 1.56%.  

The chart above shows comparable "time cost" calculations for the food items in the BLS list of average price data for its "Top Picks," and this measure of food inflation should avoid some of the dueling criticisms of the CPI measure of food inflation (upward bias vs. downward bias) by using two nominal measures (retail prices and wages) to calculate the cost of food in what's ultimately most important: the amount of time spent working to earn the income needed to buy food at retail prices. 

Although the list is not exhaustive (and I'll provide a more comprehensive list later), the initial results of these items confirm my previous report that there does not appear to be a lot of food inflation in the U.S. right now.  Especially compared to food prices two years ago, there's no question that the "time cost" of all of these food items fell between December 2008 and December 2010, on average by 5.54%.  Over the last year (December 2009 to December 2010), the changes in the "time cost" of these food items has been mixed: the "time cost" of bread, chicken, eggs, orange juice concentrate, and tomatoes has fallen, while the "time cost" of hamburger, milk, apples, oranges and bananas has risen

I'm working on a more comprehensive list of the "time cost" of food items and will post when it's complete. 

Tuesday, February 08, 2011

There's No Food Inflation in the U.S.

We hear a lot lately about how the prices for commodities, metals (gold and copper), agricultural products and food are rising, but it sure hasn't started showing up yet in the CPI for Food and Beverages, see chart above of annual price inflation for that series.  Annual food inflation through December 2010 was only 1.5%, more than a full percent below the ten-year average of 2.72%. 

Treasury Spread Shows No Sign of Inflation

The current spread between nominal 10-year Treasuries at 3.68% (data) and 10-year TIPS (data) at 1.30% has increased slightly over the last few months, to the current level of 238 basis points as of February 4.  But the current spread is still below the 250 basis point average during 2004, 2005, 2006, 2007 and the first half of 2008 (see chart above).  At least by this Treasury bond-market derived estimate of future inflation, there don't appear to be any inflationary pressures building yet.

Monster Employment Index Gains 25% in January

The Monster Employment Index Europe increased in January by 25% from its year-ago level, the largest year-over-year increase of the current economic expansion (see chart above), and above the 22% gain in December.  There were especially strong annual gains for online job demand in Germany (+37%), Sweden (+32%), France (+23%) and the U.K.'s IT sector (+34%).  

Markets in Everything: Polish Board Game Recreates Communist Shopping Hell

BBC -- "Poles have been queuing to buy a new board game called "Kolejka" (The Queue), which recreates the tedious shopping experience of communist-era Poland. Crowds of people, including those who remember standing for days in queues and teenagers who were not even born in the 1980s, lined up at the state-run Institute of National Remembrance (IPN) to buy the game.

The game's functional box (pictured above) also mimics no-frills communist shopping."   

MP: Interesting that the Poles are lining up in queues today to buy a board game called "The Queue" about the queues of the past.  

HT: Colin Grabow

Will Cuba Be the Next Egypt or Have Market-Based Reforms There Delayed an Egyptian-Like Rebellion?

Mary Anastasia O'Grady asks in yesterday's WSJ: "Will Cuba Be the Next Egypt?", here are the opening and ending paragraphs:

"Developments in Egypt over the last two weeks brought Cuba to my mind. Why does a similar rebellion against five decades of repression there still appear to be a far-off dream? Part of the answer is in the relationship between the Castro brothers—Fidel and Raúl—and the generals. The rest is explained by the regime's significantly more repressive model. In the art of dictatorship, Hosni Mubarak is a piker.

With very limited access, Cubans are already using the Internet to share what has until now been kept in their heads: counterrevolutionary thoughts. If those go viral, even a well-fed military will not be able to save the regime. But for now, Cubans can only dream about the freedoms Egyptians enjoy as they voice their grievances."

From Hernando De Soto's editorial about Egypt in the WSJ last week:

"As in most developing countries, Egypt's legal institutions fail the majority of the people. Due to burdensome, discriminatory and just plain bad laws, it is impossible for most people to legalize their property and businesses, no matter how well intentioned they might be.

The examples are legion. To open a small bakery, our investigators found, would take more than 500 days. To get legal title to a vacant piece of land would take more than 10 years of dealing with red tape. To do business in Egypt, an aspiring poor entrepreneur would have to deal with 56 government agencies and repetitive government inspections.

All this helps explain who so many ordinary Egyptians have been "smoldering" for decades. Despite hard work and savings, they can do little to improve their lives."

From Cuban blogger Yoani Sanchez:

"In just the few months since the announcement of the expansion in the number of licenses for independent work, the results are encouraging. We have begun to recover lost flavors, longed-for recipes, hidden comforts. More than 70,000 Cubans have taken out new licenses to work for themselves and at their own risk, and thousands more are seriously considering the advantages of opening a small family business.

Despite the caution of many, the still excessive taxes, and the absence of wholesale markets, the brand new businesses have started to be noticed in a society marked by stagnation. You see them building their little stands, hanging colorful signs announcing their merchandise, rearranging their homes to accommodate a snack bar or to offer haircuts or manicures. Most are convinced that this time they are here to stay, because the system that so suffocated and demonized them in the past, has lost the ability to compete with them."

MP: Whether it was intentional or not, perhaps the Castro brothers have prevented Cuba from being the next Egypt by introducing market-based reforms that have apparently been well-received by entrepreneurial Cubans.  Even without the access to the Internet that Egyptians enjoy, the new freedom for Cubans to start small businesses may prevent the "smoldering" frustration that led to the Egyptian rebellion.