Markets in Everything: A North Korean Restaurant

From the current edition of Washington's City Paper, "The Strange Odyssey of the DC's Area's First North Korean Restaurant: A Tale of Espionage and Sausage":

"Sitting near the border of Alexandria and Fairfax County on Little River Turnpike—the restaurant-saturated main drag of Northern Virginia’s Korean community—the restaurant doesn’t tout its unlikely origins, at least not in English. Its only English-language sign, in the parking lot, features the name of the previous restaurant to occupy the narrow building. “Pyongyang Soondae” is written above it, in Korean. Which makes it the perfect place to find a restaurant owned by a former spy and operated by North Korean defectors."

Q: Has Tyler been there?  It's not in the Ethnic Dining Guide yet.

Leasing Frenzy in Ohio for Shale Oil, Chesapeake Energy Spends $1B, Creating Instant Millionaires

Could Ohio Be Next?

From today's Wall Street Journal, "Shale Lifts Prospects in Ohio":

Windham, Ohio -- "An oil-rich underground layer of rock, called the Utica Shale, has sparked a leasing frenzy and the prospect of a new flow of cash and jobs to a development-starved corner of the Rust Belt.

Chesapeake Energy Corp. and other oil companies have swarmed this northeast Ohio hamlet and others nearby, buying mineral-rights leases to drill into what the company and some analysts say might be one of the U.S.'s last big unconventional oil fields yet to be developed on a commercial scale. Chesapeake said it has spent about $1 billion acquiring mineral rights on more than a million acres from public and private landowners.

The Utica deposit lies below sections of eight states, from Tennessee to New York, as well as parts of Canada. But drilling companies believe eastern Ohio has the most concentrated oil reserves that are the easiest to extract. The companies are in the testing and exploratory stage now. Hydraulic fracturing processes have been used to recover oil and gas from rock formations for decades through traditional vertical drills. 

Hydraulic fracturing combined with horizontal drilling techniques has allowed producers to retrieve vast quantities of natural gas from shale formations. The techniques were more recently adapted to coax crude oil from deeply buried rocks in states including Texas, North Dakota and now, potentially, Ohio.

In Portage County, home to Windham, dozens of researchers on Chesapeake's payroll have crowded the recorder's office since September, poring over land records. Normally, Portage County records about 20 mineral leases a year; in 2010 there were 1,226.

Local oil and gas attorney Eric Johnson says some of his clients have already reaped life-altering rewards from the leases. One farmer in Ohio's poverty stricken Appalachian region pocketed nearly $1 million for selling drilling rights to his land. If the play pans out, even more money could pour into Ohio via royalties, typically 12.5% per barrel of oil."

Switching to a Dollar Coin: Seems Like a No-Brainer

G-8 Country	Highest Widely Circulated Coin	U.S. Value	Lowest Bill	U.S. Value
Canada	2 Dollar	$1.97	5 Dollar	$4.92
France	2 Euro	$2.77	5 Euro	$6.92
Germany	2 Euro	$2.77	5 Euro	$6.92
Italy	2 Euro	$2.77	5 Euro	$6.92
Japan	500 Yen	$6.01	1,000 Yen	$12.02
Russia	10 Ruble	$0.33	50 Ruble	$1.67
United Kingdom	2 Pound	$3.18	5 Pound	$7.95
AVERAGE		$2.83		$6.76
United States	25 Cents	$0.25	1 Dollar	$1.00

The chart above is based on data from the Dollar Coin Alliance (DCA), a coalition of small businesses, budget watchdogs, trade associations, and private companies advocating that the U.S. transition to the dollar coin.  The DCA is asking Congress to eliminate the dollar bill in favor of the dollar coin to save billions annually in taxpayer money. According to the DCA:

1. Each year approximately 3.2 billion $1 bills are removed from circulation due to wear and tear. They are not recyclable, so they are shredded and most are deposited in landfills. Dollar coins have a lifespan of 30 years or more, while $1 notes last approximately 2-3 years. A $1 coin that is produced for less than 16¢ would replace 17 bills that would have to be printed for a cost of 47¢.

2. The private sector experiences even greater cost savings and increased revenues from $1 coins. Jammed $1 bills in vending machines cost the industry $1 billion in annual repair costs and lost sales. According to the transit industry, it costs six times more to process $1 bills than $1 coins.

3. Other countries have already recognized the cost savings and benefits of the dollar coin, including Canada, the European Union, and Japan. When Canada transitioned to a dollar coin 25 years ago, the government realized savings more than ten times initial estimates.

4. The United States has one of the smallest denominations of paper currency among the major economies of the world (G-8 Countries). The $1 bill is worth less than any of these other bills except for the Russian Ruble (see chart above).

5. According to a January 2011 poll, Americans favor the transition to a dollar coin by a two-to-one margin once the potential government savings are explained.

Manufacturing in U.S. Makes More Sense Than In a Generation; China Not Such A Great Deal Any More

Here's an interesting article titled "Made in America: Small Businesses Buck the Offshoring Trend," about how some manufacturing is being brought back to the U.S. from China, especially for smaller American firms, because of: a) rising labor costs in China, b) inconsistent quality, c) shipping costs that have doubled in the last year (see chart above), and d) the lack of safeguards on intellectual property.  Here are some key paragraphs from an article that suggests that America's manufacturing sector can look forward to a bright, dynamic and thriving future:

"For U.S. firms, the decision to manufacture overseas has long seemed a no-brainer. Labor costs in China and other developing nations have been so cheap that as recently as two or three years ago, anyone who refused to offshore was viewed as a dinosaur, certain to go extinct as bolder companies built the future in Asia. But stamping out products in Guangdong Province is no longer the bargain it once was, and U.S. manufacturing is no longer as expensive. As the labor equation has balanced out, companies—particularly the small to medium-size businesses that make up the innovative guts of America’s technology industry—are taking a long, hard look at the downsides of extending their supply chains to the other side of the planet.

When accounting giant KPMG International recently asked 196 senior executives to list their top concerns for 2011 and 2012, labor costs ranked below product quality and fluctuations in shipping rates and currency values. And 19 percent of the companies that responded to an October survey by MFG.com, an online sourcing marketplace, said they had recently brought all or part of their manufacturing back to North America from overseas, up from 12 percent in the first quarter of 2010. This is one reason U.S. factories managed to add 136,000 jobs last year—the first increase in manufacturing employment since 1997 (see related CD post here).

The U.S. certainly isn’t on the verge of recapturing its past industrial glory, nor can every business benefit by fleeing China. But those that actually build tangible goods should no longer assume that “Made in the USA” is an unaffordable luxury. Unless a company is hell-bent on selling the cheapest goods possible, manufacturing at home makes more sense than it has in a generation.

China’s big manufacturing advantage has been cheap labor, but wages—while still low compared with those in the U.S.—have risen sharply in recent years (see chart below).

Manufacturing wages more than doubled in China between 2002 and 2008, and the value of the nation’s currency has risen steadily. It’s now under tremendous international pressure to let the yuan appreciate even more, and the country must cope with worrisome inflation at home (food prices rose by nearly 12 percent last year). And though Chinese workers still earn a fraction of what their American counterparts do, the rising costs of labor there are prompting companies to reevaluate their production strategies. Once they do, these businesses often realize something profound: China isn’t the great deal they expected."
 

Conclusion: "In dynamic systems such as supply chains, the tighter the connection between nodes, the lower the risk of something going haywire. That risk can be tolerated when the benefits of stretching the connections are too great to ignore. But when those benefits diminish, it’s time to consider building a system that is stable by design. And once America’s formidable innovation muscle is focused on keeping manufacturing nearby, new and inventive systems for reducing labor costs (see chart above)—without going overseas—will be developed quickly."

"Everyday Dumb Ideas" in Boston; They Have a Shortage of Grocers, But Mayor is Anti-Wal-Mart

“Wal-Mart does not suit the clientele we have in the city of Boston. I don’t need employers like that in our city.”

Last week, I featured a Boston Herald editorial by Michael Graham about Boston Mayor Tom Menino's anti-Wal Mart position now that the retailer has "threatened" to bring jobs and low prices to the benefit of struggling families in Beantown.  

Today's Boston Globe has a related, front page article titled "Shortage of Grocers Plagues Massachusetts Cities":

"Massachusetts ranks nearly dead last — third from the bottom nationally — in having enough supermarkets with fresh, nutritious food, according to a report to be released today by the Massachusetts Public Health Association. The shortage is especially severe in lower-income communities, where many residents struggle with obesity and related ailments.

The analysis found that in some cities, such as Lowell and Fitchburg, the number of supermarkets would need to double to be in line with the national average. In other urban areas, including Boston, Springfield, and Brockton, there are about 30 percent fewer supermarkets per person than the national average.

A growing body of research indicates that people in communities without a nearby supermarket suffer disproportionately high rates of obesity, diabetes, heart disease, and other chronic health issues."

MP: So the mayor's anti-Wal-Mart position could actually have adverse health effects on Boston communities, which is then compounded because, as Michael Graham pointed out in his editorial, the mayor also opposed low-cost, convenient retail clinics coming to Boston:

"In 2008, Mayor Menino turned down CVS’s request to open “minute clinics” here, providing cheap health care in some of Boston’s neediest communities. Why did Menino oppose it? “Allowing retailers to make money off of sick people is wrong,” Menino told CVS — a company whose entire business is selling medicine to sick people."

Bottom Line: Sure seems like Boston "doesn't need politicians like that in their city," with "Everyday Dumb Ideas"  about low prices, jobs, increased choices, and convenient, consumer-driven retailers coming to the city. 

HT: Rick Spillane

Educational Extravagance, But the Unions Love It

From The New York Post:

"This is an education in extravagance. The Syosset (New York) Central School District, which serves an enclave of gated communities, ritzy eateries and children's boutiques like "Spoiled Rotten," takes the crown in employee compensation.

The school superintendent, Carole Hankin -- who oversees 6,687 kids in 10 schools -- is the highest-paid in the state with $506,322 in total compensation. She collects a $386,868 salary, $67,454 in fringe benefits and $52,000 in retirement funds and expenses including use of a "late model car," plus gas.

By contrast, New York City Chancellor Cathie Black, in charge of 1.1 million students and 1,600 schools, takes home a $250,000 salary, plus health and pension benefits. She gets a driver.

Hankin's deputy superintendent, Jeffrey Streitman, collects $382,382 in salary, benefits and perks. An assistant superintendent gets $238,221. At least 37 other administrators take home $118,000 to $201,000 in salary. Even gym teachers score six figures, one making $145,000.

The Syosset teachers union loves Hankin. Union president Jeffrey Rozran blasted Cuomo in a statement: "Why is he treating her with the disrespect one would expect from an attorney general to an evildoer, instead of the respect due to a valued public servant?" Rozran, who teaches English, makes $129,818."

HT: Steve Bartin

World's Largest Jailer By Far, It's Not Even Close

Q: Which repressive country puts the most people in jail for violating government laws? 

A. Iran

B. Saudi Arabia

C. Libya

D. Egypt

E. United States of America

It's not even close..............

World Rank, 2010	Country	Prisoners per 100,000 Population
1	U.S.A.	743
37	Tunisia	297
52	Turkmenistan	224
53	Iran	223
61	Libya	200
61	Mexico	200
69	Colombia	180
70	Saudi Arabia	178
92	Bahrain	149
116	China	120
126	Venezuela	114
137	Iraq	101
140	Ethiopia	98
150	Egypt	89
156	Yemen	83
185	Syria	58
187	Afghanistan	56
198	Sudan	45
198	Pakistan	45

The table above shows how the prison incarceration rate for in the United States (per 100,000 population) in 2010 compares to some of the roughest countries in the world.  The full list of 216 countries is here, the countries above were selected as some of world's the most repressive regimes (Iran, Saudi Arabia and Libya), some of the world's least economically free countries (Venezuela, Turkmenistan, Sudan, Afghanistan, according to the Heritage Foundation) and some countries with the biggest narco-terroism problems (Colombia and Mexico).  But none of them even come close to the incarceration rate of the World's #1 Jailer - the United States, largely because of the "war on drugs" (see chart below).  
 

Update: Note that neighbor Canada ranks #124 (117 per 100,000), and countries with liberalized drug laws like Portugal rank #128 (112 per 100,000) and Netherlands ranks #145 (94 per 100,000).  

Manufacturing is Still Alive and Well in the United States: But It Has Gone High-Tech and High-Skilled

Here's an MSNBC News story about America's new, high-tech manufacturing, and how community colleges are training new high-skilled manufacturing workers for the 21st century.  Here's an important point: 25-30 years ago, U.S. manufacturing was "80% brawn and 20% brains," and today it's "10% brawn and 90% brains."  That's another way of saying that we're able to produce increasing amounts of factory output in the U.S. with fewer and fewer workers, as the productivity of American manufacturing workers has tripled since the 1970s. 

Time to Get Serious About U.S. Oil, Like N. Dakota

Alaska governor Sean Parnell wrote this week in the WSJ that it's "Time To Get Serious About American Oil," and posed the question: "Why is Washington blocking oil exploration in states like Alaska and Louisiana when the Middle East is such a powder keg?"  Here are some excerpts:

"Over the past several decades, we have allowed ourselves to become dependent on oil from unstable regions that are hostile to our nation. The United States relies on an open Suez Canal, the security of which has been funded by our tax dollars for decades. With gasoline prices surging, and manufacturing and transportation costs rising, the rising cost of goods will soon impact every American, putting our economic recovery at risk.

The U.S. imports more than 63% of its oil. The time is now for our federal government to re-examine its current policy—which severely hampers domestic oil exploration and development—and to learn from our recent history.

Millions of American jobs are directly tied to our energy production. Even as the energy sector necessarily diversifies, oil will continue to be a key piece of our national energy profile for many decades. And yet Alaska and the Gulf states have been blocked from developing America's oil by politically driven federal policy, much of it aided by misinformation. If Americans wonder what our economic Achilles' heel is, they need look no further than the federal regulatory system that delays permits for domestic exploration and production.

As we watch fuel prices rise, inflation take hold, and government debt reach record levels, Alaskans and those in other oil-producing states are frustrated. We wonder why the Obama administration is openly hostile to a sector of our economy that has created hundreds of thousands of jobs, kept the country on an even keel even during the recession, and produces a global commodity we depend on every day.

As residents of our individual states, we desire responsible resource development. We don't want to live and work in a spoiled nest. We also want to create jobs that contribute to our economic recovery. Why should we spend billions overseas for foreign oil when we could spend those dollars here at home?" 

MP: The chart above shows one state's oil success story - North Dakota -  where oil production has almost tripled in four years, from 40 million barrels in 2006 to almost 120 million barrels last year.  Perhaps Alaska and the Gulf states could experience the same dramatic increases in oil production as North Dakota, if more domestic drilling was allowed.  

Tea Party Cleans Up $7.5m Protest Mess in Madison

HT: Paul, who comments "Could the symbolism here be any more obvious that the Tea Partiers are busy cleaning up after the protester slobs in Madison?"

Huge Benefit of the Recession: World's Largest Jailer Rethinks Drug Laws at the State Level

Here's another potentially significant, long-term benefit of the 2007-2009 recession and the "rise of arithmetic as a player in the drama" at the state level as states face huge budget deficits: it's causing states to rethink draconian drug laws, and opt for lower-cost treatment options instead of long, higher-cost jail sentences for the "victimless crime" of drug possession.  Even if the main motivation is to save money, it's still a big step in the right direction of more sensible, humane and sane drug policy (see charts above).  

Here are some excerpts from today's WSJ article "States Rethink Drug Laws":

"A growing number of states are renouncing some of the long prison sentences that have been a hallmark of the war on drugs and instead focusing on treatment, which once-skeptical lawmakers now say is proven to be less expensive and more effective.

Kentucky on Thursday became the latest to make the shift when Gov. Steve Beshear signed into law a measure increasing spending on rehabilitation programs and intensive drug testing. The law also reduces penalties for many drug offenses and may allow some traffickers and users of smaller amounts of drugs to avoid prison.

Delaware, Florida, Indiana, Massachusetts and Pennsylvania are among those that have pending bills to reduce penalties for drug offenders, in some cases by directing defendants into treatment programs. Similar laws have taken effect in South Carolina, Colorado and New York in recent years. States have maintained stiff penalties for more-serious drug crimes. 

Although some states started rethinking drug punishment before the recession, many more states have come on board in the past two years."

Public Unions: The Rise of Arithmetic and How Taxpayers and the Little Guy Are Left Behind

Two excellent points from Peggy Noonan's editorial in today's WSJ:

1. It's All About the Math: "The seemingly small thing is that the battles in the states, while summoning emotions from all sides, are not at their heart emotional. Yes, a lot of people are waving placards, but it's also true that suddenly everyone's talking about numbers; the numbers are being reported in the press and dissected on talk radio.

The very force of the math has the heartening effect of squeezing ideology right out of the story. It doesn't matter if you're a liberal or a conservative, it's all about the numbers, and numbers are sobering things. The rise of arithmetic as a player in the drama is politically promising because when people argue over data and hard facts, and not over ideological loyalties and impulses, progress is more possible. Governors can take their stand, their opponents can take theirs, and if they happen to argue the budget problem doesn't really exist, they'll have to prove it. With numbers.

2. Taxpayers and The Little Guy Aren't Even in the Room: "Unions have been respected in America forever, and public-employee unions have reaped that respect. There are two great reasons for this. One is that unions always stood for the little guy. The other is that Americans like balance. We have management over here and the union over here, they'll talk and find balance, it'll turn out fine. But with the public-employee unions, the balance has been off for decades. And when they lost their balance they fell off their pedestal.

When union leaders negotiate with a politician, they're negotiating with someone they can hire and fire. Public unions have numbers and money, and politicians need both. And politicians fear strikes because the public hates them. When governors negotiate with unions, it's not collective bargaining, it's more like collusion. Someone said last week the taxpayers aren't at the table. The taxpayers aren't even in the room.

As for unions looking out for the little guy, that's not how it's looking right now. Right now the little guy is the public school pupil whose daily rounds take him from a neglectful family to an indifferent teacher who can't be removed. The little guy is the beleaguered administrator whose attempts at improvement are thwarted by unions. The little guy is the private-sector worker who doesn't have a good health-care plan, who barely has a pension, who lacks job security, and who is paying everyone else's bills."

State Dept. Awards Cuban Blogger Yoani Sanchez

HAVANA TIMES -- "Award winning Cuban blogger Yoani Sanchez has been chosen to receive yet another prize this week, this time from the US State Department. The “International Women of Courage” award will go to nine women worldwide and goes to Sanchez “for her work on behalf of freedom of expression in Cuba.”

Secretary of State Hillary Clinton and first lady Michelle Obama will head up the awards ceremony set for Tuesday March 8, on International Women’s Day. Sanchez was invited to attend the ceremony but, as on other occasions when she has won international prizes, the Cuban government keeps her grounded, refusing to grant the required exit visa."

Visit her blog Generacion Y here, where there is a petition for Yoani to be allowed to leave Cuba for Spain, where she is scheduled to receive yet another international prize.   

Gender Differences in Ability vs. Achievement

Here's an interesting explanation for gender differences in ability vs. achievement,  from "The Trouble With Bright Girls" in the Huffington Post:

"Psychologist Carol Dweck (author of "Mindset") conducted a series of studies in the 1980s, looking at how Bright Girls and boys in the fifth grade handled new, difficult and confusing material.

She found that Bright Girls, when given something to learn that was particularly foreign or complex, were quick to give up; the higher the girls' IQ, the more likely they were to throw in the towel. In fact, the straight-A girls showed the most helpless responses. Bright boys, on the other hand, saw the difficult material as a challenge, and found it energizing. They were more likely to redouble their efforts rather than give up.

Why does this happen? What makes smart girls more vulnerable and less confident when they should be the most confident kids in the room? At the 5th grade level, girls routinely outperform boys in every subject, including math and science. So there were no differences between these boys and girls in ability, nor in past history of success. The only difference was how bright boys and girls interpreted difficulty -- what it meant to them when material seemed hard to learn. Bright Girls were much quicker to doubt their ability, to lose confidence and to become less effective learners as a result.

Researchers have uncovered the reason for this difference in how difficulty is interpreted, and it is simply this: More often than not, Bright Girls believe that their abilities are innate and unchangeable, while bright boys believe that they can develop ability through effort and practice."

HT: Norman Berger

$1 Coin Would Save $5.5 Billion, Let's Do It

According to this new government (GAO) study:

"Replacing the $1 note with a $1 coin could save the government approximately $5.5 billion over 30 years. This would amount to an average yearly discounted net benefit—that is, the present value of future net benefits—of about $184 million. However, GAO’s analysis, which assumes a 4-year transition period beginning in 2011, indicates that the benefit would vary over the 30 years.  The government would incur a net loss in the first 4 years and then realize a net benefit in the remaining years. The early net loss is due in part to the up-front costs to the U.S. Mint of increasing its coin production during the transition.

GAO has noted in past reports that efforts to increase the circulation and public acceptance of the $1 coin have not succeeded, in part, because the $1 note has remained in circulation. Other countries that have replaced a low-denomination note with a coin, such as Canada and the United Kingdom, stopped producing the note. Officials from both countries told GAO that this step was essential to the success of their transition and that, with no alternative to the note, public resistance dissipated within a few years."

MP: It seems obvious that the key to a successful transition to a $1 coin is the elimination of the $1 note, to overcome the "tyranny of the status quo." 

HT: Paul Kedrosky

"White House Council on Boys and Men"?

From the foreword of the report "WOMEN IN AMERICA: Indicators of Social and Economic Well-Being" released this week by the White House:

"The White House Council on Women and Girls was created by President Obama in early 2009 to enhance, support and coordinate the efforts of existing programs for women and girls. The Council’s mission is to provide a coordinated Federal response to the challenges confronted by women and girls and to ensure that all Cabinet and Cabinet-level agencies consider how their policies and programs impact women and families. 

The Council also serves as a resource for each agency and the White House so that there is a comprehensive approach to the Federal government’s policy on women and girls. In support of the Council on Women and Girls, the Office of Management and Budget and the Economics and Statistics Administration within the Department of Commerce worked together to create this report, which for the first time pulls together information from across the Federal statistical agencies to compile baseline information on how women are faring in the United States today and how these trends have changed over time."

From the Table of Contents, here are some chapter titles:

1. Women’s gains in educational attainment have significantly outpaced those of men over the last 40 years.

2. Female students score higher than males on reading assessments and lower than males on mathematics assessments.

3. Higher percentages of women than men age 25–34 have earned a college degree.

4. More women than men have received a graduate education. 

5. Women earn the majority of conferred degrees overall but earn fewer degrees than men in science and technology.

6. Higher percentages of women than men participate in adult education. 

7. Unemployment rates for women have risen less than for men in recent recessions.

8. Women have longer life expectancy than men, but the gap is decreasing.  

Question: Shouldn't there also be a "White House Council on Boys and Men" for the obvious challenges confronted by boys and men in terms of falling behind in educational attainment most obviously, and also for bearing a disproportionate share of job losses during the "mancession," and experiencing higher unemployment rates?  

Fundamental Shift: Transparent Hospital Pricing

From today's Detroit Free Press, "Shopping Comes to Health Care: More Hospitals Post Prices, Negotiate Costs":

"As out-of-pocket costs for health care increase, some of the most significant changes in decades are coming to hospitals to meet the demand for price information. Three Michigan hospital systems -- Ford, Dearborn's Oakwood Healthcare and Spectrum Health in Grand Rapids -- post average prices for common tests and procedures, from X-rays to back surgery. Ford and Oakwood have expanded financial counseling programs and give their best discounts to uninsured customers, as do a growing number of other hospitals.

In some of the most significant changes in decades, hospital systems are beginning to post their prices publicly and offer a range of help, including big discounts to uninsured and underinsured people with limited household incomes.

"It's a fundamental shift" in how health care prices are set and publicized, said Stephen Hathaway, chief revenue officer for the Detroit-based Henry Ford Health System.

The changes come as Michigan's uninsured population has grown to 1.35 million, an increase of 200,000 between 2007 and 2009, the latest year of information available from the state health department.

Interest in health care prices also comes from a growing number of people with high-deductible health insurance plans -- including 23,000 salaried General Motors workers who, starting in January 2010, were transferred into a Blue Cross Blue Shield of Michigan plan with a $3,000 annual deductible that families have to pay first before their insurance covers most costs. GM also gave employees $1,000 to create a health savings account, plus an additional $500 credit for those who quit smoking or make other lifestyle changes -- money that workers can put towards their deductible or use for another health purchase. The number of Michigan employers offering such high-deductible plans or health savings accounts rose from 16% to 23% from 2008 to 2010." 

MP: The chart above is from the Henry Ford Hospital website for its "Pricing Information," showing a 40% discount for being uninsured, and I assume paying in cash.  The Ford hospital website also has a section for "Canadian Patient Information."

HTs: Steve Bartin and Ben Cunningham

Today's Employment Report

From today's BLS employment report:

1. Payroll employment increased for the fifth straight month, as the U.S. economy added 192,000 payroll jobs in February, bringing the total increase to 671,000 jobs added since last October.   Total employment according to the household survey (including self-employed and agriculture workers) increased by 250,000 jobs in February, following increases of 117,000 in January and 297,000 jobs in December. 

2. The jobless rate fell to 8.9% in February, the lowest monthly rate since March 2009, and the third consecutive monthly decline.  The last time the U.S. jobless rate decreased three straight months was in late 2003.  

3. Employment in temporary help services continued to grow by 15,500 jobs in February, which is the 15th increase during the last 18 months.  Since the cyclical low of 1.724 million jobs in September 2009, there has been an increase of almost half-a-million jobs in the temporary sector to 2.218 million jobs in February.  That level of temporary and contract employment jobs is the highest since September of 2008, 28 months ago (see chart above).

4. Overtime hours for the manufacturing sector, at an average of 4.2 hours per week, reached a 3-1/2 year high in February, the highest level of manufacturing overtime hours since June 2007 (see chart above). 

5. Manufacturing employment increased by 15,500 jobs in February, which brings the total number of new manufacturing jobs over the last year to 189,000, the largest 12-month increase in factory jobs since 1998.  Compared to the peak manufacturing jobless rate of 13% in January 2010, the February rate was down by more than three percent to 9.9%.   

Taken together, these employment trends suggest that many U.S. companies are meeting the increasing demand for their products and services by: a) continuing to rely on temporary and contract employees, and b) using existing employees more intensely with increased overtime hours in the manufacturing sector, but c) starting to hire more permanent workers as well.  Further, the manufacturing sector of the U.S. economy continues to register some of the strongest signs of economic recovery, but we're starting to see positive signs of gradual, but ongoing improvements in the labor market overall (ongoing decreases in jobless claim, rising employment levels and a falling jobless rate).  

Photo of the Day

The photo above was featured in today's The Gartman Letter, and is also featured here.

The Public Sector Premium for School Teachers

Full-time Elementary and Secondary School Teachers, by Experience and Education, Total School-Year and Summer Income

Average Salaries: 2007-2008
Experience	Private	Public	Public Premium
1 year or less	$32,120	$42,210	31.41%
2 to 4 years	$34,220	$43,490	27.09%
5 to 9 years	$38,110	$49,120	28.89%
10 to 14 years	$41,310	$54,150	31.08%
15 to 19 years	$42,740	$58,260	36.31%
20 to 24 years	$43,880	$61,210	39.49%
25 to 29 years	$42,910	$63,860	48.82%
30 or more years	$50,560	$65,470	29.49%
Highest Degree Earned
Less than bachelor's degree	$26,670	$53,880	102.02%
Bachelor's degree	$36,880	$47,060	27.60%
Master's degree	$45,340	$58,460	28.94%
Education specialist3	$50,880	$62,410	22.66%
Doctor's degree	$57,490	$65,560	14.04%
Total	$39,690	$53,230	34.11%

The chart above is based on Department of Education data available here for the 2007-2008 school year comparing average salaries for public and private school teachers at the elementary and secondary level.  Here are some interesting (shocking?) comparisons:

1. Overall, public school teachers make a 34.11% premium compared to their private school counterparts.

2. Controlling for experience, public school teachers make a premium that generally increases with the number of years teaching, reaching a maximum premium of 49% for public school teachers with 25-29 years of experience.

3. Public school teachers with one year of experience make about the same ($42,210) as private school teachers with 25-29 years of experience ($42,910). 

4. Comparing teachers with equal education, public school teachers earn large premiums over their private school counterparts, especially for public school teachers with less than a bachelor's degree, who earn more than twice the amount on average ($53,880) as private school teachers with the same level of education ($26,670).

Are Public School Teachers Overpaid? Only By 34%

The data in the chart above are featured in this Reason.tv video:

Recession's Over, Economy's in Recovery: It's Time for Some Gloom and Doom from Time Magazine

One thing you can always count on at (or towards) the end of a recession? An "end of the world," the "sky is falling," "it's never been this bad," "gloom and doom" article in Time Magazine, here are 4 examples:  

1. "The Recession: Gloomy Holidays--and Worse Ahead" (December 1974):  "Some consumers are so alarmed that they are muttering about a return of the Great Depression of the 1930s.  Are even harder times coming? Probably. The recession still has some way to go, and though economists fore see an upturn some tune by next year, it is difficult to pick its timing and predict how far down the economy will go before it turns back up. Indeed, the course of the recession so far is something of a lesson in the hazards of economic forecasting: its length and virulence have surprised almost everyone."

2. "Recession: Why We're So Gloomy" (January 1992):  "'Whining' hardly captures the extent of the gloom Americans feel about the current downturn. The slump is the longest, if not the deepest, since the Great Depression. Traumatized by layoffs that have cost millions of jobs during the slump, U.S. consumers have fallen into their deepest funk in years.

"Never in my adult life have I heard more deep-seated feelings of concern," says Howard Allen, retired chairman of Southern California Edison. "Many, many business leaders share this lack of confidence and recognize that we are in real economic trouble."

Says University of Michigan economist Paul McCracken: "This is more than just a recession in the conventional sense. What has happened has put the fear of God into people."

3. "The Long Haul: the U.S. Economy" (September 1992):  "If America's economic landscape seems suddenly alien and hostile to many citizens, there is good reason: they have never seen anything like it. Nothing in memory has prepared consumers for such turbulent, epochal change, the sort of upheaval that happens once in 50 years. That may explain why so many polls reveal such ragged emotional edges, so much fear and misgiving. Even the economists do not have a name for the present condition, though one has described it as "suspended animation" and "never-never land."

4. "Are America's Best Days Behind Us?" (March 2011):  "It is now possible to produce more goods and services with fewer and fewer people, to shift work almost anywhere in the world and to do all this at warp speed. That is the world the U.S. now faces. Yet the country seems unready for the kind of radical adaptation it needs. The changes we are currently debating amount to rearranging the deck chairs on the Titanic."

New CPA Outlook Index: Highest Level Since 2007

Here's a brand new economic indicator - The CPA Outlook Index - just introduced jointly by the American Institute of CPAs (AICPA) and the UNC Business School and featured in today's WSJ.  From the report:
 
"This quarter the AICPA/UNC Kenan-Flagler Economic Outlook Survey introduces a new index – the CPA Outlook Index (CPAOI). The CPAOI is a broad-based composite index that captures the expectations that our members (CEOs, CFOs, Controllers, and other CPA executives) have about the prospects for their own organizations, their expectations for revenues and profits, and their plans for spending and employment.  It is a composite of nine survey measures at equal weights (see CPAOI inset for description).

The CPA Outlook Index (CPAOI) increased by .07 this quarter to reach .69, its highest level since the 3rd quarter of 2007. A quarter of that improvement (26%) is attributable to the increase in optimism about the US economy which had lagged the improvement in organizational optimism which had occurred during 2010. Also contributing notably to this quarter’s improvement were expectations for revenue and for training and development spending." 

MP: One more piece of the mounting and  overwhelming evidence that this recovery "has legs," to quote finance blogger extraordinaire Scott Grannis. 

ISM Business Activity Index Surges To 7-Year High

The ISM Non-Manufacturing Business Activity Index increased to 66.9 in February, the highest level in seven years (see chart above).  Some of the categories in the index that are listed as "growing" for direction and "faster" for rate of change are: production, employment, backlog orders, and new export orders.  Prices are "increasing" at a "faster" rate.

There were 13 industries reporting business activity growth in February: Real Estate, Rental & Leasing; Accommodation & Food Services; Utilities; Educational Services; Professional, Scientific & Technical Services; Public Administration; Mining; Finance & Insurance; Wholesale Trade; Transportation & Warehousing; Management of Companies & Support Services; Other Services; and Information. The four industries reporting business activity declining in February are: Construction; Health Care & Social Assistance; Arts, Entertainment & Recreation; and Retail Trade.

Jobless Claims Fall to 2-1/2 Year Low

CNBC -- "New U.S. claims for unemployment benefits unexpectedly fell last week to touch their lowest level in more than 2-1/2 years, while nonfarm productivity rose as expected in the fourth quarter. The four-week moving average of unemployment claims—a better measure of underlying trends—dropped 12,750 to 388,500 last week, the lowest since July 2008 (see chart above).

Claims have now held below the 400,000 threshold for a second straight week. Claims below that level are widely viewed as signaling strong jobs growth and economists believe it is only a matter of time before this is reflected in the payrolls numbers."

MP: The chart below shows jobless claims over a longer period, back to 2000.  With the four-week average dropping consistently since the end of the recession, and now falling below 400,000 for the first time since mid-2008, jobless claims are now at a level consistent with the economic recovery period of 2002-2004.  The labor market is gradually stabilizing, and we can look for ongoing jobs gains this year and a gradual decrease in the jobless rate.  

Stifling Entrepreneurship in The Middle East

Here's an excellent economic and  political analysis of the situation in the Middle East, by James Surowiecki writing in the The New Yorker:

"Healthy economies need a thriving and independent private sector, where resources are allocated by markets and competition, and where small and medium-sized businesses can flourish. But in most of the Middle East the state and big business are so tightly intertwined as to be indistinguishable, and competition has been discouraged in favor of central planning and private monopolies. It’s hard for entrepreneurs to start and run a business. Minimum capital requirements tend to be high, so you can’t get started without lots of cash, and getting business licenses and registering property are frequently arduous. Political favoritism is rampant, and byzantine regulations are difficult for outsiders to navigate. It’s instructive that the young man whose self-immolation helped set off the protests in Tunisia had had his fruit cart confiscated for violating some government rule.

The stifling of entrepreneurship shrinks opportunity for the young. The state’s intrusive presence forces much economic activity off the books—in Egypt, eighty-five per cent of small businesses are in the “informal” sector—and this reduces growth, since informal businesses have a hard time getting credit or expanding beyond a certain size. Thus the region’s economies are growing more slowly than they should, and the benefits of economic growth tend to be concentrated in the hands of those lucky enough to work for, or own, companies favored by the state.

Since weak economies eventually give rise to discontent, one might have thought that self-interest would impel autocrats to embrace reform. But, while clinging to the status quo can be dangerous for autocrats, real reform comes with its own risks. After all, in a system of state-controlled capitalism without a large, independent private sector, huge numbers of citizens are dependent on the state for their livelihood in one way or another. In the Arab world, an estimated thirty per cent of the workforce is employed by the state. Strict regulations enable the government to protect its friends in the private sector from competition, and bureaucrats line their own pockets, becoming further indebted to the system. The reliance in most of these countries on food and fuel subsidies likewise increases people’s dependence on the state. The big risk of reforming the system is that it weakens the state’s economic hold over its citizens."

HT: Stuart Anderson

U.S. Is Inundated With Natural Gas, Record Output in 2010, Residential Prices Fall to 7 Year Low

According to data just released by the EIA, natural gas production in the U.S. reached an annual record high of 26.85 trillion cubic feet in 2010.  That output was an increase of 3.22% above the previous record high last year, which pushed U.S. production in 2009 above Russia's, and made the U.S. the #1 producer of natural gas in the world.  

On a monthly basis, natural gas production in December surged to 2.386 trillion cubic feet, which was almost 9% above the year-ago level, and set a new all-time record for the most gas ever produced in a single month (see chart below):

The record high level of production in 2o1o and record monthly output in December helped drive the average residential gas price for the month of December down to $9.86 per 1,000 cubic feet, the lowest monthly average since February 2004, almost 7 years ago (data here), see graph below:   

From yesterday's WSJ: 

"The U.S. is inundated in natural gas, and the glut may not ease any time soon. Domestic production last year hit its highest level in almost 40 years, and 2011 will likely see another year of strong production. That means another year of subdued electricity prices and pressure on drillers' bottom lines as well as a powerful incentive for companies and other consumers to switch to the heating fuel.

With no way to export large quantities of gas and a drilling boom fueled by easy availability of credit and widespread international interest in U.S. gas assets, the glut is seen continuing through 2011.

"Rising production will once again overwhelm demand, leading to yet another year of low prices," Credit Suisse analyst Stefan Revielle said in a research note.

In its latest outlook, the EIA saw U.S. production increasing by 0.8% this year, while deliveries to consumers are expected to rise by 0.3%. For consumers, that means cheaper electricity prices and inexpensive gas for heating and cooking in homes and businesses."

MP: At the same time that oil and gasoline prices in the U.S. are surging due to political unrest in the Middle East, prices for residential natural gas in the U.S. are falling to 7-year lows. Maybe one of the lessons here is that by opening up our domestic energy reserves to drilling for natural gas and oil, we get the multiple benefits of: a) reduced dependence on foreign oil, b) less exposure to what will likely be ongoing turmoil in the oil-rich Middle East, and c) lower energy prices.  

Traffic Volume Increases in Dec. for Seventh Month

The Federal Highway Administration reported today that travel on all roads and streets in the U.S. for the month of December was estimated at 243.4 billion vehicle miles, which is 0.6% above the same month last year, and almost 2.6% higher than the traffic volume in December 2008.  What makes those December traffic increases especially noteworthy is that the price of gas in December last year averaged $2.99 per gallon, which was almost 15% above the December 2009 price of $2.61, and 77% above the December 2008 price of $1.69 (data here). Consumers and commercial drivers appear to be able to absorb the higher gas prices and still continue to increase driving as the economic recovery strengthens.  In fact, traffic volume in December 2010 set a new record for monthly vehicle-miles of travel in that month.

The December traffic increase from its year ago level was the seventh consecutive monthly increase starting in June 2010, and the eighth increase in the last nine months starting in March 2010.

On a moving 12-month total basis (to smooth out the monthly seasonal variations), the annual vehicle-distance traveled through December 2010 was 3,000 billion miles, the highest 12-month total since July 2008, almost two and-a-half years ago (see chart above).

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 and truck tonnage post here).  The ongoing improvements in traffic volume since the summer of 2009, which is taking place despite rising gas prices, indicate that the economic recovery is real, sustainable and gaining momentum.

Total Online Ads Slip, New Ads Reach 2.5 Yr. High

From The Conference Board: "Online advertised vacancies dipped by 27,400 in February to 4,245,600 according to The Help Wanted OnLine (HWOL) Data Series released today. Labor demand has risen 1.41 million since the series’ low point in April 2009. This increase offsets approximately 80 percent of the 1.76 million drop in ad volume during the 2-year downturn period from April 2007 through April 2009."

“Total labor demand (new ads and ads that are reposted from the previous month) paused in February, but the number of new, first-time advertised vacancies continued to rise and is an indication that employers are continuing to look for workers,” said June Shelp, Vice President at The Conference Board. “Nationally, new ads were up 86,100 in February, and that is a positive sign in contrast to the last few years when advertised vacancies either dropped or remained unchanged from January to February.” 

MP: Despite the drop in total online job ads, the 4.24 million advertised job openings is above the pre-recession levels in late 2007.  And the number of new ads in February, 2.62 million, is the highest level since July 2008. 

If Free Trade = Technological Progress, Then Restrictions on Trade = Restrictions on Technology

From Greg Mankiw's textbook:

"Trade is, in some ways, a form of technology. When a country exports wheat and imports textiles, it is as if it had invented a form of technology for turning wheat into textiles. A country that eliminates trade restrictions will, therefore, experience the same kind of economic growth that would occur after a major technological advance."

With that understanding that free trade = technological progress, here's some editing of Ian Fletcher's latest anti-trade tirade, which Don Boudreaux responds to here:

"It is sometimes argued that although free trade technological progress has some victims, its benefits exceed its costs, so it is possible for its winners to compensate its losers out of their gains, everyone thereby coming out ahead in the end.

This is, in fact, the usual fallback position of mainstream economists once they admit that free trade technological progress has drawbacks.

It is sometimes even mischievously argued that if such compensation doesn't happen, any problems are due to society's failure to arrange it, and are therefore not the fault of free trade technological progress per se.

Hmm... Sounds like a perfect excuse.

Now in theory, they might be right, but it also means that a bureaucratic deus ex machina is required to make free trade technological progress work as even its supporters admit that it should.  So free trade technological progress turns out to be laissez faire on life support from big government.

In any case, such compensation rarely occurs, because free trade's technological progress winners don't have to pay off its losers.

It is often impossible to identify who has lost a job due to free trade technological progress as changing technology and consumer tastes also cost jobs (and legitimately so).

The time is past for free-trade technology band-aids. We need to stop treating the defects of free trade technological progress as mere imperfections to a fundamentally sound policy and realize that free trade technological progress itself is the problem, and should be ended with public policy that freezes technology at its current level."

Intrade Predicted 11 out 12 Oscars in 2010-11

For the last two years, I've reported the Intrade odds for the leading contracts to win the top six Academy Awards (2010 and 2011), as of the day of the awards, and here is a summary of the odds and results:

Best Picture:
2009: Hurt Locker (53%) YES
2010: The Kings Speech (79.7%) YES

Best Actor:
2009: Jeff Bridges (92%) YES
2010: Colin Firth (94.1%) YES

Best Actress:
2009: Sandra Bullock (68%) YES
2010: Natalie Portman (89.9%) YES

Best Support Actor:
2009: Christoph Waltz (93.5%) YES
2010: Christian Bale (88.9%) YES

Supporting Actress:
2009: Mo'Nique (86%) YES
2010: Mellisa Leo (64.9%) YES

Best Director:
2009: Kathryn Bigelow, The Hurt Locker (85%) YES

2010: David Fincher, The Social Network (63.5%) NO

Bottom Line:  In 11 out of 12 cases, the Intrade contracts correctly predicted the Oscar winners. 

27% Increase in Feb. Car Sales, Highest Since 1988

Led by huge year-over-year sales gains from GM (+46.4%) and Toyota (+41.8%), U.S. auto sales increased in February by 27.3% compared to the same month last year, which is the highest annual gain in 23 years for auto sales, since a 29.7% increase in January 1988 9see bottom chart).  Except for the artificial increase in August 2009 due to "cash for clunkers," the 13.44 million units sold last month (at a seasonally adjusted annual rate) was the best month for car sales since August 2008, two and-a-half years ago (see top chart).  

Truck sales were also strong in February, with a 49% market share and a 31.7% increase over the year-ago level.  This is especially noteworthy because according to AutoNation Chairman and CEO Mike Jackson: "Pickup trucks are bought by small business entrepreneurs who have their finger on the pulse of the U.S. economy. It's an expression of confidence in the future of the economy. They don't buy until they see the prospects for business are brighter. This is small business America saying that the worst is over, I see opportunities in the future, I feel confident enough to go out and buy a new truck."

More evidence that the economic recovery is real, "has legs" (see Scott Grannis), and is being led by the manufacturing sector (see ISM report today), the "shining star" of the U.S. recovery.