Tuesday, April 26, 2011

Another Educational Milestone for Women: They Now Hold More Total Graduate Degrees Than Men

The Census Bureau released its annual report today on educational attainment in the United States for 2010 (here's the press release, here are the tables). In another educational milestone for women, they now hold more advanced degrees (Master's, Professional [medical, law and dental] and Doctoral) than men for the first time in history (see chart above).  

A decade ago, 55.4% of all advanced degrees were held by men and 45.6% by women, meaning that there were 124 men with advanced degrees for every 100 women.  But over the last ten years, the number of advanced degrees earned by women increased by 58%, or more than twice the 26% increase for men.  That disproportionately large increase in women earning graduate degrees since 2000 brought the total number of female advanced degree holders in 2010 to 10,685,000 surpassing the number of men holding graduate degrees (10,562,000) for the first time ever.  

Here's an AP story on today's Census Bureau release, and I'll have another post shortly about some other highlights of the report.  

Update: The numbers quoted in the original post were off by 1,000, and those errors have been corrected and appear in bold above.

Rules of Gramar: Insterments of White Opresion?

"After spending four depressing days this month at a meeting of 3,000 writing teachers in Atlanta, I can tell you that their parent group, the Conference on College Composition and Communication, is not really interested  in teaching students to write and communicate clearly.  The group’s agenda, clear to me after sampling as many of the meeting’s 500 panels as I could, is devoted to disparaging grammar, logic, reason, evidence and fairness as instruments of white oppression. They believe rules of grammar discriminate against “marginalized” groups and restrict self-expression."

Recovery Watch: Leading Indexes and Shipping Rise

1. Leading economic indexes for February increased in Spain (0.1%), China (0.3%) and France (0.5%).

2. In shipping news for March, the Port of Galveston reported its highest monthly tonnage in 11 years, container volume handled by the Port of Charleston increased 5.7% from a year earlier, and the volume of containers handled by the Port of Savannah increased 4.5% in from the same month last year.

On Behalf of African Hairbraiders, The Institute for Justice Goes Up Against Utah's Cosmetology Cartel

"The Constitution protects the right to earn an honest living without arbitrary and unreasonable government interference.But if you want to braid hair for a living in Utah, you must submit yourself to a completely irrational licensing scheme to get permission from the government before you are allowed to work. No one should have to hire a lawyer or lobbyist just to braid hair.  The right to earn an honest living is an essential part of our nation’s promise of opportunity."

Note: The Institute for Justice has successfully challenged state cosmetology regulations in 7 states on behalf of hairbraiders, and has never lost a case.  Hopefully, the state of Utah will be victory #8 for IJ.  

Monday, April 25, 2011

Monday Map: State Income Tax Rates

Following last Monday's state sales tax map, here's the Tax Foundation's state income tax rate map for 2011 (click to enlarge). 

P.J. O'Rourke: Irish Setter Dad

I just wasn’t cut out to be a Chinese Tiger Mom. I’m more of an Irish Setter Dad. Here are some of the things my daughters, Muffin and Poppet, and my son, Buster, were never allowed to do:

• go to Mass naked
• attend a sleepover at Charlie Sheen’s house
• mix Daddy a martini using sweet vermouth
• play the violin within earshot of me

Have you ever heard a kid learning to play the violin? A cat in the microwave is nothing to it. And let me add an addendum to the things my children were never allowed to do​—​put a cat in the microwave. I’m not saying it didn’t happen; I’m just saying they weren’t allowed to do it.

Amy Chua, I’ve got bad news. “A” students work for “B” students. Or not even. A businessman friend of mine corrected me. “No, P. J.,” he said, “ ‘B’ students work for ‘C’ students. ‘A’ students teach.” 

~P.J. O'Rourke in the Weekly Standard

1979-2007: Rich Got Richer, Poor Got Richer

WASHINGTON – "Today, the Employment Policies Institute (EPI) announced the publication of new research by economists Dr. Richard V. Burkhauser of Cornell University, Dr. Jeff Larrimore of the Joint Committee on Taxation and Dr. Kosali Simon of Indiana University, the results of which appear in the most recent issue of the Journal of Policy Analysis and Management (link fixed).

In his recent speech on deficit reduction, President Obama defended his support of higher taxes on wealthy Americans by echoing a widely-held view that the rich are getting richer while the poor and middle class are falling behind. But Burkhauser et al. find that this popular notion is mistaken; in reality, growth in after-tax household income has been substantial across the entire income distribution over the last thirty years (see table above).

“By leaving out additional sources of income – like fringe benefits or employer-provided health insurance – past studies have dramatically understated American households’ access to after-tax resources.” said Dr. Burkhauser. “What we found is that the rich did get richer over the last 30 years, but so did the middle class, the working class and the poorest.”

By taking into account previously unmeasured shifts in household size and the tax units in them, the taxes and transfers of government, and the increasing importance of fringe benefits, the research shows a picture of growth that spans all income groups.

Burkhauser continued: “For instance, the conventional wisdom holds that the poorest households saw their income shrink by a third over the last three decades. But accounting for income transfers and the value of fringe benefits, this research shows that the bottom 20 percent of households actually experienced after-tax income growth of more than 26 percent.”

Burkhauser concluded: “This isn’t a zero sum game, where one group wins at the expense of others. The growth in productivity of Americans in the top twenty percent of tax units increased the size of the economic pie sufficiently to register major gains across the entire distribution of after-tax income.”

Steel Production, Shipments Rebound

1. Crude Steel Production Rises in March -- "World crude steel production for the 64 countries reporting to the World Steel Association was 129 million metric tons in March 2011 and 372 million metric tons for the first quarter 2011. This is 7% higher than March 2010 and 8.8 % higher than the first quarter 2010.

2. Chinese To Build $1Billion Steel Plant in Texas -- The building of the steel plant in the U.S. is a strategy to avoid U.S. imposed anti-dumping duties of 32% and 98% on imports of Chinese steel pipe products.

3. Steel Leads Recovery at Antwerp Port --  First quarter 2011 volumes have improved over 2010 results at the port of Antwerp, particularly in breakbulk cargoes, hit hardest by the global recession. The best performer in this segment was steel, which rose 41.8% to 1.9 million metric tons.

Service Sector Inflation Remains Mild

According to BEA data, the U.S. economy has increasingly become more and more of a service economy (see top chart above).  In the early 1950s, less than half of the national output took place in the private services-producing sector of the economy, and more than 40% in the private goods-producing sector.  Now more than 2 out of every three dollars of GDP is produced by private service industries in the U.S. (legal, financial, management, administrative, technical, scientific, publishing, information technology, etc.), and the share of value added by private goods-producing industries has fallen to 17.7%, or less than half its share fifty years ago.  

CNBC reported last week:

"The annual change in prices for data processing, recreation, lodging, medical services and tuition are all showing a downward trend, according to David Rosenberg’s analysis of the government’s CPI data.

With all the hubbub about $100 oil, surging food prices, along with the comparisons to the 1970s, Rosenberg, who is chief economist and strategist at Gluskin Sheff, is trying to make the point that the U.S. is now primarily a service economy, with these industries accounting for much of our employment and two-thirds of our spending (see top chart above).

“Service sector inflation is now running at historical lows of little more than one percent, and here we are about to enter the third year of a statistical economic recovery,” said Rosenberg, formerly the economist at Merrill Lynch where he made his name by going against the perma-bullish Wall Street crowd (see bottom chart above). “Service sector inflation used to be sticky, because this area of the economy years ago was dominated by unions, was protected by entry barriers, and did not face much in the way of competitive pressures. The times have changed,” wrote Rosenberg in a note to clients Tuesday.

“Commodity-based economies have a serious inflation problem because food and energy are so crucial to that smokestack, low-income model,” said Steve Cortes of Veracruz LLC. “But in a services-based economy like the U.S., many areas are outright deflating, like technology — and many more key areas churning sideways: professional services, brokerage of all kinds, hotels.  Inflationary periods like the 1970s start with wage inflation, which is sorely missing from this recovery.”

Indeed, Rosenberg found there is an 88 percent correlation between wages and inflation —and wages today, adjusted for productivity gains, are declining on an annual basis. Don’t look for that to change any time soon with unemployment still above 8 percent. Maybe that’s why the Federal Reserve says it has a dual mandate of stable prices and full employment."

MP: I've made some of these same points before.  In the inflationary 1970s, almost every measure of prices was increasing: food, energy, core inflation, wages, services, interest rates, etc.  We now have a wide mix of inflationary, deflationary and flat inflationary forces, along with decelerating wage increases and low interest rates, and that's not a formula that results in overall inflationary pressures.  At least not yet.  And since inflation for services has been below 2% for almost two years now, there's not inflationary pressure there.     

HT: Bob Wright

Cellphone Economics: Free Markets Spread Wealth

New York Times — "It’s not quite the stuff of bragging rights, but Arkansas and Mississippi find themselves at the top of a new state ranking: They have the highest concentrations of people in the nation who have abandoned landlines in favor of cellular phones. At the other extreme? People in Rhode Island, Connecticut and New Jersey are still holding on to their landlines, and they have the lowest concentrations of people whose homes use only cellphones. 

According to Stephen Blumberg, the researcher who conducted the study, nearly 40 percent of all adults living in poverty use only cellphones, compared with about 21 percent of adults with higher incomes. There appear to be many reasons for this. Cellular phones have become more affordable. The barrier to owning one is lower with pay-as-you-go plans. Some states allow subsidies for low-income residents to be applied to wireless bills. And increasingly, those who cannot afford both types of phones choose their cellular phone."

James Taranto comments in the WSJ:

"Once again, a landline telephone--or, as it used to be called, "a telephone"--is a symbol of wealth. Between the olden days of 1990 and today, we've heard endless complaints, including in the Times, about rising "income inequality." In a strange twist, we've even ended up with a president who has said he would like to "spread the wealth around" by heavily taxing the "rich" and increasing handouts to the "poor." The story of the cellphone shows how a free economy spreads wealth. In actual material terms, the "poor" get richer as the rich also get richer."

MP: The chart above shows the dramatic 40% decline in the CPI for cell phone services that is the driving force in the significant increase in cell phone affordability, which was led to the widespread adoption of this new technology by America's poor.  Thanks to James Taranto for pointing to a great example of how competitive free markets help "spread the wealth."

Walmart "Gets Served" By DC Community Group

Washington Business Journal -- "Walmart foes on Thursday released a massive list of demands they expect the world's largest retailer to accept, in a legally binding contract, before locating in the District (it plans to open four D.C. stores by 2013). The stipulations run the gamut from a living wage ($12.50 an hour) to transit benefits ($50 per employee per month) to parking minimums (up to 2.5 free or low-cost spaces per 1,000 square feet of building space)."  Other demands include:
  • Employ at least 65 percent of its D.C. employees on a full-time basis.
  • Not ask job applicants about previous criminal convictions.
  • Use project labor agreements to construct its stores.
  • Fund all infrastructure improvements made necessary by its stores.
  • Provide free shuttle transportation to and from the nearest Metro station to each D.C. store every 10 minutes.
  • Commit to traffic alleviation studies.
  • Provide up to 2.5 free or low-priced parking spaces per 1,000 square feet of building space.
  • Provide secure, accessible bicycle parking, car sharing and bike sharing for workers and shoppers.
  • Not sell firearms or ammunition.
  • Employ no less than two off-duty D.C. police officers on its premises at all times.
  • Abide by a "code of conduct with regard to its employees' freedom to choose a voice on the job without interference."
  • Fund workforce training programs for D.C. residents, and use training programs as its primary avenue for hiring D.C. residents.
  • Hire at least 40 percent of its employees at each store from the ward in which the store is located.
  • Make "ongoing contributions to a fund managed by a council of community stakeholders" that will provide incentives and support to local small businesses.
  • Make ongoing payments for community funds controlled by "community advisory councils" for education and faith-based programs.
MP: It sure seems like Walmart always gets singled out, and the community groups never place similar demands on Home Depot, Target, or McDonald's?  

HT: Colin Grabow

Sunday, April 24, 2011

Obama Re-Election Odds Trending Down, But > 50%

Obama's re-election odds have fallen to 58% on Intrade.com, the lowest level since early January, and down from the nearly 65% peak around March 1 (see chart above, click to enlarge). 

Washington Job-Destroying Hubris Gone Wild

Can Washington bureaucrats force a private company like Boeing to build a factory in the forced-union state of Washington (or move it there now?), even though Boeing's new factory in right-to-work South Carolina is nearly complete and it's hired more than 1,000 new employees? Members of President Obama's National Labor Relations Board are trying.
Read about it here in the Washington Examiner

HT: Matt B.  

The College Class of 2011: Hiring, Salaries Up

News about the College Class of 2011:

1. Chicago Sun-Times -- "Job postings and recruitment activity are up at Chicago area college campuses this year, and employers nationally say they plan to boost hiring — more evidence of a slowly recovering but still highly competitive job market.  Employers will hire 19 percent more new college graduates nationally this year than they did in 2010, according to a survey released this month by the National Association of Colleges and Employers. This is the first time since 2007 the NACE survey has revealed a double-digit increase in spring hiring projections." (HT: Steve Bartin)

2. NACE -- "The good news continues to roll in for the Class of 2011 as results from NACE’s Spring 2011 Salary Survey show that the average salary offer to all Class of 2011 graduates now stands at $50,462, which is up 5.9 percent over the overall average of $47,673 to Class of 2010 graduates."

3. The chart above shows the gender breakdown for college graduates this year, and the projected breakdown for the Class of 2020, according to data from the Department of Education.

Saturday, April 23, 2011

Why Do Air Traffic Controllers Fall Asleep on the Job? Because They Want a Three-Day Weekend

"For decades controllers themselves have had the last word on the schedules they work, and controllers and their union have fought to keep a "2-2-1 schedule" (known as "the rattler" because it comes back and bites the controllers) because it gives them a three-day weekend afterwards."

To Be PC, They're "Spring Spheres" NOT Easter Eggs

Responses to a Seattle public school policy requiring Easter eggs to instead be called "Spring Spheres" for a third grade class activity:

1. When the teacher said, "Oh look, spring spheres," the third graders said "Wow, Easter eggs."

2. Matt Gurney writing in Canada's National Post: "For this crime of extreme political correctness, let us all hope the school officials responsible receive a lump of carbon-based fuel in the cloth tube-sack they hang next to their December Light-Festooned Interior Coniferous Vegetation this Winter Holiday." ("Notable and Quotable" in today's WSJ).

3. No response yet from the White House about whether Monday's event will be re-named the "2011 White House Spring Sphere Roll," or whether the official souvenirs featuring the signatures of President and Michelle Obama will be re-named "Official White House Spring Spheres" (see photo above).

What's next for political correctness re-naming, will "Frosty the Snowman" become "Frosty the Snow Friend"?

Update: To be scientifically accurate, I think the correct term would be "Spring Prolate Spheroids." 

George Carlin on Environmentalism and Earth Day

George Carlin on "Saving the Planet" (some profanity).

Friday, April 22, 2011

Interesting Fact of the Day: We Walk Slower Now

"For years, traffic lights nationwide were timed to the stride of the average pedestrian, who covered 4 feet of ground per second, according to federal research carried out in the 1950s. A couple of years ago, however, the Federal Highway Administration urged traffic engineers to recalibrate to an average stride of 3.5 feet per second, after new research showed that Americans' average walking pace had slowed over the decades. That would give elderly walkers more time to cross safely."

Today Is Earth Day: What About a Capitalism Day?

From an Investor's Business Daily editorial on Earth Day in 2009, featured on Carpe Diem here (the IBD link no longer works):

"Of the estimated 1 billion people who will observe Earth Day worldwide this year, few will know about the progress that has been made. Fewer still will know how it was made. The media, uninterested in looking at the real story, will simply credit the environmental movement for the improvements.

Buried beneath all the badgering and fear-mongering about lavish Western lifestyles is a reality that the stuck-on-green left won't talk about and the average American isn't aware of: The world, especially in developed nations, is a cleaner — and greener — place than it was when the environmental movement began (the chart above shows the positive trends in air quality since 1980, data).

Topping the agenda of today's environmentalist groups is the pulling down of market economies, the raising up of central planning for egalitarian goals, forced lifestyle changes and the vilification — in hopes of the elimination — of signs of wealth.

None of these advance the planet's environmental health. But capitalism has. Through wealth generated by the free market, we have enough resources to move beyond the subsistence economies that damage the environment, enough disposable income to fund clean-up programs, enough wealth to scrub and polish industry.

Only in advanced economies can the technology needed to recycle hazardous waste or to replace dirty coal-fired power plants with cleaner gas or nuclear plants be developed. That technology cannot be produced in centrally planned economies where the profit motive is squelched and lives are marshalled by the state.

There's nothing wrong with setting aside a day to honor the Earth. In fairness, though, it should be complemented by Capitalism Day. It's important that the world be reminded of what has driven the environmental improvements since Earth Day began in 1970."

The Global Economy’s Remarkable Recovery

The CPB Netherlands Bureau for Economic Policy Analysis released its monthly report today on world trade and world industrial production for the month of February.  Here are some of the highlights:

1. World trade volume increased in February for the seventh consecutive month, bringing global trade to a new all-time record high (see chart).   This was also the third month in a row that world trade was above the previous peaks during early 2008 when the U.S. recession and financial crisis started spreading, causing world trade to drop by 20% in 2009.     

2. World trade in February was 10.5% above its year-ago level, and marked the 14th consecutive month of double-digit annual growth starting in December of 2009.  Compared to the cyclical high in April 2008, world trade volume has recovered to a level that is now 2 percent higher than its previous peak.  Compared to the cyclical low in May 2009, global trade has increased by 28% through February of this year. 

3. World industrial output was the same in February compared to January, but was above its year-ago level by 7.4%.  World output in the first two months of 2011 established a new, all-time record high level, which is 5.2% above the previous cyclical high of 134.4 in March 2008 (see chart above).   After falling by 12% during the global recession in 2008-2009, world output has increased by almost 20% during the last two years of a strong global rebound.  Global output has increased in almost every month compared to the previous month during the worldwide recovery that started in 2009, with only one month of decline in industrial output in the last two years. 

Bottom Line: Based on the ongoing and solid improvements in both international trade and world output, especially the fact that global trade and production are both at all-time historical highs, I think we can now say that the world economy has made a complete recovery from the financial crisis and global slowdown in 2008 and 2009.  The remarkable recovery in the global economy over the last few years is a testament to the ability of markets to recover from even a severe financial crisis and the worst economic slowdown in generations.  Even though there are still many uncertainties and headwinds moving forward, the strong world economic recovery so far is both remarkable and encouraging as we hopefully have entered a new period of global growth, expansion and prosperity. 

2011 Startup Outlook Optimistic for Business/Hiring

Key Findings of the "Startup Outlook 2011" released today by Silicon Valley Bank:

The near-term business outlook for startups is optimistic.
  • Nearly one in four companies (23 percent) exceeded their 2010 revenue targets, up significantly from 2009 (15 percent).

  • Two in three executives say that business conditions in 2010 are better than they were last year, and three in four expect they will get even better in the coming 12 months.

  • The vast majority of surveyed companies (83 percent) plan to hire in the coming year, up from 73 percent a year ago (see chart above).

Because They're Not Spending Their Own Money, Patients Aren't Consumers, But They SHOULD Be

Paul Krugman argues in yesterday's NY Times that Patients Are Not Consumers (link is fixed now):

"How did it become normal, or for that matter even acceptable, to refer to medical patients as “consumers”? The relationship between patient and doctor used to be considered something special, almost sacred. Now politicians and supposed reformers talk about the act of receiving care as if it were no different from a commercial transaction, like buying a car — and their only complaint is that it isn’t commercial enough. What has gone wrong with us?

Medical care, after all, is an area in which crucial decisions — life and death decisions — must be made. Yet making such decisions intelligently requires a vast amount of specialized knowledge. Furthermore, those decisions often must be made under conditions in which the patient is incapacitated, under severe stress, or needs action immediately, with no time for discussion, let alone comparison shopping. 

That’s why we have medical ethics. That’s why doctors have traditionally both been viewed as something special and been expected to behave according to higher standards than the average professional. There’s a reason we have TV series about heroic doctors, while we don’t have TV series about heroic middle managers.

The idea that all this can be reduced to money — that doctors are just “providers” selling services to health care “consumers” — is, well, sickening. And the prevalence of this kind of language is a sign that something has gone very wrong not just with this discussion, but with our society’s values." 

MP: Krugman is correct that patients are not consumers, but for a completely different reason that Krugman misses entirely: Almost 90% of health care costs are paid with "other people's money" (insurance companies, government and employers, see chart above, data here), and only about 11% is paid "out of pocket" by patients.  So patients are no longer the "consumers" of health care, and they haven't been for a long time, because the "consumer" paying almost the entire cost of medical care is a third party.  Over time, the "consumer" paying the bill for health care services has gradually become third party payers, and the trends projected in the chart above indicate that it won't get any better in the future.

But Krugman seems to be arguing that regardless of who is paying for health care, "there’s something terribly wrong with the whole notion of patients as “consumers” and health care as simply a financial transaction." Krugman's further claims that “'Consumer-based' medicine has been a bust everywhere it has been tried."

Well, what about LASIK surgery, retail health clinics, concierge medicine, medical tourism and cosmetic surgery, to name just some of the successful "consumer-based" medical services?  

When we think about soaring health care costs in the United States, isn't one of the main reasons precisely because patients have NOT been treated as consumers spending their own money?  In that case, I think Krugman has it backwards.  If the goal is to control health care costs, that will never happen until patients are treated like consumers

Markets in Everything: $6,500 High-Tech Toilet

Kohler introduces Numi, the world's most advanced, high-tech toilet with a motion-activated lid and seat, an integrated air dryer, heated seat, deodorizer, feet warmer, and built-in speakers with pre-programmed audio, touch-screen remote control, etc.  

Maybe a potential market for these $6,500 toilets will be the swelling ranks of the rich in China.  

Thursday, April 21, 2011

108 Cents on the Dollar Isn't Fair

A few adjustment in today's NY Times editorial: "77 108 Cents on the Dollar Isn't Fair":

In a disappointing defeat for women men, Senate Republicans worked overtime in December to ensure that a measure addressing gender-based wage discrimination never reached the Senate floor where it likely would have passed by a sizable majority. Fortunately, supporters of the Paycheck Fairness Act have not given up.

Last week, Senators Harry Reid, the majority leader from Nevada, and Barbara Mikulski, a Maryland Democrat, reintroduced the bill. Representative Rosa DeLauro, a Democrat of Connecticut, has reintroduced the legislation in the House.

Women Men now make up almost more than half of the American work force, but, according to data compiled by the Census Bureau,
James Chung of Reach Advisors, who has spent more than a year analyzing data from the Census Bureau's American Community Survey, single, unmarried, childless full-time female employees still make, on average, only 77 cents $1.08 for every $1 earned by men in America's largest cities.

The bill, a much-needed updating and strengthening of the nation’s half-century-old Equal Pay Act, would enhance remedies for victims of gender-based wage discrimination, shield employees from retaliation for sharing salary information with co-workers and require employers to show that wage differences are job-related rather than sex-based, and justified by business necessity.

President Obama has pledged to “keep up the fight” to pass the bill. In a recent radio address, he explained that he takes the issue personally, “as the father of two daughters a man who wants to see his girls young boys grow up in a world where there are no limits to what they can achieve.”
Women Men around the country — from both parties — need to speak up. Lawmakers might think twice about refusing to act if they knew that female male voters were taking down the names of those who would rather please corporate interests than stand up for a woman’s man's right to earn equal pay for equal work.  For young, single, unmarried childless women to be now earning $1.08 for every $1.00 earned by their male counterparts clearly demonstrates that paychecks for men and women are not equal, and that's why we need the Paycheck Fairness Act.  Simply put, 108 cents on the dollar just isn't fair. 

Leading Economic Index Increases for 24th Month, 1st Time in 40 Years; Recovery Remains on Track

The Conference Board reported today that its Leading Economic Index (LEI) increased again in March (see chart above), which is the 24th consecutive monthly increase starting in April 2009 just before the recession officially ended in June of that year. The last time the Leading Economic Index increased every month for a two-year period was in the early 1970s, almost 40 years ago. 

Says Ataman Ozyildirim, economist at The Conference Board: “The U.S. LEI continued to increase in March, pointing to strengthening business conditions in the near term. The March increase was led by the interest rate spread and housing permits components, while consumer expectations dropped. The U.S. CEI, a monthly measure of current economic conditions, also continued to rise, led by gains in industrial production and employment.”

Says Ken Goldstein, economist at The Conference Board: “The U.S. LEI continues to point to sustained economic growth through year end. Global disruptions, including unrest in the Middle East, rising oil prices and the Japan earthquake, may have some repercussions. However, it remains to be seen what the impact of these shocks will be on the United States and the broader global economy.”

Recovery Watch

1. The underwear indicator is rising.  (ht/Mike LaFaive)

2. Heavy Truck Orders Jump 20 Percent -- Production backlog hits level not seen since December 2006.
3. Today's WSJ -- "Global demand is revving up profits at big U.S. manufacturers, and investors are jumping on for the ride, shrugging off high oil prices and concerns about Japan. Manufacturing output, which has bounced back much faster than consumer demand over the past year, grew more than four times as fast in the first quarter as the estimated rate for the overall U.S. economy. A series of surprisingly strong earnings reports this week have underscored that momentum." 

MP: Manufacturing continues to be the "shining star" of the U.S. economic recovery. 

Tax Rates and Share of Tax Revenues from Top 1%

The chart above shows the relationship over time (from 1979 to 2007) between: a) the top marginal income tax rate, and b) the share of total income taxes paid by the top 1% (data).  In 1979 the top marginal income tax rate was 70% and 18.3% of the total taxes paid were collected from the top 1% of taxpayers.  By 2007 the top tax rate was 35% (half of the 1979 rate), and the tax share of the top 1% had more than doubled to 39.5% (from 18.3% in 1979).    

The historical record shows an inverse relationship between the highest marginal income tax rate and the share of taxes collected from "the wealthy."  It's a relationship to keep in mind during the current tax policy debate, where Obama wants to increase tax revenues by raising tax rates for "the rich," and Rep. Ryan alternatively suggests a cut in the top marginal rate to stimulate economic growth, which would likely increase tax revenues from the wealthy, and increase overall tax revenue. 

Thanks to Steve Moore for the idea for the graph.

Markets in Everything: Men in Kilts

Canadian Success Story, Men In Kilts, Launch First US Location in Seattle, according to this Press Release:

Men In Kilts, a window and exterior building cleaning company, has taken their kilted lads down south. CEO, Tressa Wood comments, “We’re very excited to bring the Men In Kilts' concept to the US and open our first franchise location in Seattle."

Tech Jobs, Tech Stocks: Boom-Boom-Boom-Boom

1. USA Today article "Tech Boom Like It's 1999" -- "Tech workers like Mersy are coveted commodities as the high-tech industry undergoes its biggest hiring binge in more than a decade. Not since the dot-com bubble of the early 2000s has competition been so fierce. Would-be employees are being enticed with fat contracts, hefty bonuses and such freebies as iPads, meals, sporting events and shuttle services. These and other perks are in play to hook top talent in engineering, social media, website development, product design and management.

The jump in tech hires highlights what some economists see as a bounce-back in the $805 billion U.S. tech industry that could eventually make a dent in the national unemployment rate of 8.8%.  A surge in tech hires in California could portend an upturn for the overall U.S. economy, says Jesse Harriott, chief knowledge officer at online job site Monster.com."

2. Apple sells 18.65m iPhones in 2011 --  "Apple has revealed it shipped an enormous 18.65m iPhones in the first three months of 2011, representing a 113 per cent improvement on this time last year. The colossal tally is the highlight of the second fiscal quarter earnings report in which Cupertino boasted of a record net profit of $5.9 billion and income of $24.67 billion between January and the end of March."

MP: The chart above helps to illustrate the tech boom and bull market for technology stocks, showing that the NASDAQ-100 Technology Sector Index has almost doubled in the last two years, compared to a 60% increase in the S&P500 Index.  

HTs: Steve Bartin and Ben Cunningham

Wednesday, April 20, 2011

Why Are Banks Holding So Many Excess Reserves And Will Those Reserves Fuel Future Inflation?

The chart above shows how the monetary expansions known as QE1 and QE2 have expanded the monetary base (blue line) in about the same proportion as the increase in the excess reserves that banks are holding (red line, data here). Why are banks holding so many excess reserves, and will those reserves eventually translate into higher inflation?

Here's one explanation from the conclusion of a NY Fed research paper titled "Why Are Banks Holding So Many Excess Reserves?":

"We also discussed the importance of paying interest on reserves when the level of excess reserves is unusually high, as the Federal Reserve began to do in October 2008. Paying interest on reserves allows a central bank to maintain its influence over market interest rates independent of the quantity of reserves created by its liquidity facilities. The central bank can then let the size of these facilities be determined by conditions in the financial sector, while setting its target for the short-term interest rate based on macroeconomic conditions. This ability to separate monetary policy from the quantity of bank reserves is particularly important during the recovery from a financial crisis. If inflationary pressures begin to appear while the liquidity facilities are still in use, the central bank can use its interest-on-reserves policy to raise interest rates without necessarily removing all of the reserves created by the facilities."

In a blog post, Donald Maron summarizes the paper this way:

"Some have expressed concern that the excess reserves are fuel for future inflation. The authors argue, quite rightly in my view, that this concern is also misplaced. The key reason is that the Federal Reserve gained a new power in 2008 — the ability to pay interest on reserves. That ability breaks the traditional link (in U.S. monetary policy) between reserves, bank lending, and inflationary pressures."

Update: For some excellent commentary on this topic see Scott Grannis, who points out that excess reserves are a close substitute for T-bills now that the Fed pays interest on reserves.  And in fact, the Fed is currently paying 0.25% on excess reserves, which is higher than the rate on 3-month T-bills (0.06%), 6-month T-bills (0.12%), and even 1-year T-bills (0.23%).  No wonder banks are holding $1.4 trillion of excess reserves!

March Architecture Index Holds Steady

From the American Institute of Architects: 

"The March 2011 Architecture Billings Index (ABI) remains virtually unchanged and right at, or slightly above, the break-even level. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the March ABI score was 50.5, a negligible decrease from a reading of 50.6 the previous month (see chart above). This score reflects a modest increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 58.7, up significantly from a mark of 56.4 in February."

“Currently, architecture firms are essentially caught swimming upstream in a situation where demand is not falling back into the negative territory, but also not exhibiting the same pace of increases seen at the end of 2010,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “The range of conditions reported continues to span a very wide spectrum with some firms reporting an improving business environment and even ramping up staffing, while others continue to operate in survival mode. The catalyst for a more robust recovery is likely financing, with stronger growth occurring only when lending institutions begin approving credit for construction projects with much greater regularity.”

Key March ABI highlights:

Regional averages: Midwest (53.5), Northeast (51.4), West (50.6), South (49.7)

Sector index breakdown: commercial / industrial (54.7), multi-family residential (50.8), mixed practice (49.8), institutional (48.0)
Project inquiries index: 58.7
MP: The most positive part of this month's report is the fact that the new project inquiries index increased in March, and was at the highest level for the month of March since 2007.  Although a sustained recovery in construction will probably not be a reality until at least later this year, the upward trend in the new project inquires index suggests that the construction recovery is coming. 

IJ Takes on the High-End Limo Cartel in Nashville

From the Institute for Justice: "Until 2010, sedan and independent limo services were an affordable alternative to taxicabs in the Music City. A trip to the airport only cost $25. But in June 2010, the Metropolitan County Council passed a series of anti-competitive regulations requested by the Tennessee Livery Association - a trade group formed by expensive limousine companies. These regulations force sedan and independent limo companies to increase their fares to $45 minimum.

The regulations also prohibit limo and sedan companies from using leased vehicles, require them to dispatch only from their place of business, require them to wait a minimum of 15 minutes before picking up a customer and forbid them from parking or waiting for customers at hotels or bars. And, in January 2012, companies will have to take all vehicles off the road if they are more than 7 years old for a sedan or SUV or more than 10 years old for a limousine.

These regulations have nothing to do with public safety. Nashville is stooping to economic protectionism to put affordable car services out of business in favor of more expensive services that happen to have more political power. Many Nashville residents who regularly use limos and sedans will be forced to spend twice as much money for exactly the same service and hard-working sedan drivers will be driven out of business.

The Institute for Justice teamed up with three Nashville entrepreneurs and will file a federal lawsuit today in the U.S District Court for the Middle District of Tennessee to vindicate the right of Nashville's limo and sedan operators to earn an honest living free from excessive government regulation."

MP: This reminds me of something I read recently on Seth Godin's blog:

"Companies that operate in a free market generally work as hard as they can to make that market not free. The free market is a great idea, which is why we need to be careful when market incumbents lobby to make it un-free."

Thanks again to the Institute for Justice for its ongoing efforts to battle economic protectionism and challenge market incumbents, who are always looking for ways to use the political process to thwart competition, raise prices and make the free market less free.

Markets in Everything: One-to-One Video Chats

The website ExpertInsight.com is now offering one-to-one private video chats with economists, authors, bloggers, investment advisors, sports coaches, and poker players.  The website is featured in this Bloomberg article.    

Some of the fees for a one-hour video chat are:

Nobel economist Gary Becker: $5,000
Economist Steven Levitt: $3,000
Author Steven Dubner: $3,000
Political blogger Nate Silver: $1,000
Harvard economist Jeffrey Miron: $400

HT: Peter Parlapiano

Tuesday, April 19, 2011

Significant Increases in Income Inequality for MLB

New York Yankees Salaries, 1988 vs. 2011

 Salaries19881988 Salaries in 2011 Dollars     2011
Ratio High/Low29.929.977.3
Gini Coefficient0.4590.636
Share of Payroll
Top 10%28.5%39.2%
Top 20%49.7%61.9%
Top 50%80.1%93.9%

The salary data displayed in the table above for the New York Yankees from 1988 and 2011 are from the USA Today Salaries Database.  By every possible measure (ratio of high:low salary, Gini coefficient, and shares of total payroll going to the  top 10%, 20% and 50% of players) income inequality has increased significantly for the baseball players employed by the New York Yankees between 1988 and 2011, and I suspect these huge increases in income inequality would be the same for other MLB teams, and for all players in MLB as a group.  And yet the typical pro baseball player is doing much better today than in 1988 because the mean and median salaries have increased dramatically, as has the salary of the lowest-paid Yankee, despite the huge increase in income inequality.  

What can we learn from this? 

The lesson from MLB  is that rising income inequality over time, whether it’s in professional sports or in society as a whole, can be a natural and expected outcome of competitive labor markets and the expanded opportunities that come from larger and increasingly competitive global markets. And those same competitive forces that lead to greater income inequality in both the MLB and the overall economy over time also usually help to make all MLB players and all Americans better off year after year, just not at exactly the same rate.

Ticketmaster to Start Dynamic Ticket Pricing

"Ticketmaster will begin pricing events based on consumer demand in a drive to take revenue from resellers and boost overall sales. Clients including sports teams, music acts and promoters will be able to adjust ticket prices based on how well the event is selling. 

The world’s biggest concert- promoter and ticketing company is partnering with Los Angeles- based MarketShare to provide the so-called dynamic pricing. The system lets venue owners target the markups that brokers charge for top events and sell more tickets for less-popular acts. Dynamic pricing will reduce scalping, freeing-up more tickets for consumers, the company said."

MP: So now Ticketmaster, venues, and bands and their promoters are acknowledging that it was under their control all along to reduce, minimize or even completely prevent ticket scalping by simply pricing and supplying tickets according to market forces.  It's only because venues, bands and their promoters have regularly under-supplied tickets at below-market prices relative to fan demand that a secondary market has flourished, with concert tickets frequently being sold above face value.

As Paul mentions in the comments below, when a band has a show that is sold-out, they can simply add more shows to increase the supply of tickets to meet the demand of their fans.  Greedy ticket brokers ("scalpers") have taken all of the blame for the secondary ticket market, when the real blame should be directed towards the non-market-based, anti-fan behavior of bands and their promoters, who frequently under-supply the number of tickets their fans want to buy.  They then play to sold-out shows, which creates the secondary market for tickets to those shows, but only because there is excess demand that the band failed to meet.        

Update: To paraphrase/quote NormanB in the comments, "The degree to which scalpers can make money is directly related to the: a) under-pricing and b) under-supplying of the tickets in the first place."  Since the: a) price and b) supply of tickets is under the direct control of the bands and their promoters/managers, they're the ones responsible for creating the secondary market.

Public Opinion: More Favor Drilling, Legalizing Pot

New CNN public opinion polls show that: 

1. The percentage of Americans favoring increased drilling for oil and gas offshore in U.S. waters has increased significantly since last year, with 45% of respondents now strongly in favor of increased offshore drilling, compared to only 26% in June 2010.

2. The percentage of Americans favoring legalization of marijuana is now 41%, compared to 34% in 2002 and only 18% in 1986.

Zillow Home Value Data Now Available for Feb.

Zillow.com released housing price data today with home values through February, see the graph above of Zillow's monthly U.S. Home Value Index back to January 1996 (you can also get price data and graphs for more than 100 metro areas, and all states).   According to Zillow, its Home Value Index is calculated as the median value (Zestimate) of all homes in a particular geographic area, and for the national index shown above, the housing price data are weighted according to population in each area.

The median Zillow price in February 2011 of $170,000 was the lowest since June 2003, more than 7 and a-half-years ago, and is 29% below the $240,000 peak Zillow median home price in May 2006.  For an estimate (or "Zestimate") of your home's value, go here and type in your address. Warning: You might be depressed, I know I was, but maybe that's because my home is in Michigan. 

"A Testament to the Resilience of Markets": World Stock Market Capitalization Doubles in Two Years

The Paris-based World Federation of Exchanges, an association of  52 regulated stock market exchanges around the world, recently released data on the world stock market capitalization, which increased to $57.8 trillion in March.  That was a 39-month high for world equity values and the highest level since December 2007 when the U.S. recession started.  Compared to the cyclical low of $26.6 trillion two years ago in February 2009, the total world stock market capitalization has more than doubled to the current level of almost $58 trillion.  From the all-time high of $63 trillion in October 2007, the value of world equity markets is currently about 8% below that pre-crisis peak, or about $5 trillion in dollars.

See a related post here from Scott Grannis, "The $29 Trillion Recovery," where he comments:

"It is a testament to the resilience of markets, risk-takers, and workers that the global market economy has not collapsed under the weight of the fiscal and monetary policy errors that contributed to this extraordinary volatility. There are still plenty of problems left to deal with, but the recovery to date inspires hope that the problems can be overcome with time."

Monday, April 18, 2011

Vague Insider-Trading Rules Increase SEC Power

"For decades, the SEC has kept the insider-trading rules vague and undefined. This ambiguity increases the SEC's power and allows government lawyers to pick and choose among prosecution targets. Some, though by no means all, trading on the basis of informational advantage is and should be illegal. But the government should be compelled to provide clear guidance as to what constitutes illegal insider trading and what constitutes legitimate, albeit aggressive, research."

~Yale Law School Professor Jonathan Macey in the WSJ

Markets In Everything: Toys NOT Made in China

From the No More China Toys website

"In 2007, we walked through the toy department of big box retailers and could not find a toy produced outside of China. Gone were the wooden blocks, dolls and wooden trains we played with as children. These toys were replaced with cheap plastic toys that had character ties to movies and cereals. We then turned to the Internet and were frustrated by the lack of alternatives and lack of country of origin information. We experienced first hand the frustration and angst associated with taking away our child’s favorite toy that was recalled and we routinely threw away toys within a few days or weeks of purchase due to poor quality. These experiences led to the development of NMCtoys.com.

NONE of the toys found in NMCtoys.com are Made in China. When it comes to our own home we choose to keep Chinese Made Toys out of our children's hands."

Monday Map: State Sales Tax Rates

From the Tax Foundation

"The map above (click to enlarge) shows state sales tax rates as of January 1st of this year.  This includes only the statewide rate. Many cities and towns impose a local rate on top of the statewide rate, which is not reflected in these numbers."

Note: Sales tax rates range from a low 0% in Oregon, Montana, New Hampshire, and Delaware to a high of 8.25% in California.  

Heritage: An Open Letter to Paul Krugman

From "An Open Letter to Paul Krugman" from Bill Beach, Director of the Center for Data Analysis at the Heritage Foundation:

"Over the past two weeks, you have relentlessly engaged in dishonest, deceptive and factually incorrect critiques of Heritage’s recent analysis of the Ryan budget plan, and they need to be addressed. With all of the work good people of every political stripe need to be doing in Washington today, the last thing we all have time for is correcting your typically contrived commentary. But when The New York Times gives you such a platform to spread distortions, they necessitate a response.

New Chicago Fed Financial Conditions Index

The Chicago Federal Reserve Bank recently released a new index called the National Financial Conditions Index (NFCI), which "provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems.  The NFCI is a weighted average of a large number of variables (100 measures of financial activity(pdf)) each expressed relative to their sample averages and scaled by their sample standard deviations.  The NFCI is constructed to have an average value of zero and a standard deviation of one over a sample period extending back to 1973.  Positive values of the NFCI indicate financial conditions that are tighter than on average, while negative values indicate financial conditions that are looser than on average.

MP: Every Wednesday, the Chicago Fed will update the NFCI based on financial data through the previous week.  The chart above displays the NFCI on a weekly basis back to January of 2005, and shows that the index in the last several months has fallen back to levels not seen since the summer of 2007, well before the beginning of the recession.     

Rampant Yosemite Park Reservation Scalping

Sacramento Bee -- "Campsite reservations and permits to scale Half Dome have become such hot commodities that the National Park Service is scrambling to halt the auctioning of park access to the highest bidder. The flipping of reservations and permits in Yosemite – the third-most-visited national park – is so rampant on Internet sites like Craigslist that park officials are "becoming more aggressive" in trying to shut down these operators, said Yosemite spokesman Scott Gediman."

"We want to stop it as much as we can," he said. "It's not fair. These (reservations and permits) aren't intended to go into the after-market. But it's becoming more sophisticated. … People are finding ways to abuse the system."

Jesse Jackson Jr. Blames The iPad For Killing Jobs

On the House floor back in March, holding an Apple iPad and an Amazon Kindle, Rep. Jesse Jackson, Jr. proclaimed "Let me be clear about a few things. These devices are revolutionizing our country — and they will fundamentally alter how we will educate our children." Now it looks like Rep. Jackson has flipped, and is blaming the iPad for being a jobs-killer:

Here's a great quote about this from Jonah Goldberg, "It’s not often one hears the case for Luddism made with so much earnestness and, not coincidentally, ignorance," in a post on the Enterprise Blog appropriately titled "Somewhere Ned Ludd is Smiling."

Monday Links

1. The Lost Beatles Photos: Rare Shots From 1964-1966.

2. Sales tax receipts rise in metro Chicago, signaling retail revival.

3. There is an active trade for Apple’s latest gadgets in China, and it’s evident in long lines of Chinese camping overnight outside NYC Apple’s stores waiting to buy the products — originally made in China — to send them back to that country for resale. 
4. In a blind taste test, most people are unable to distinguish between expensive and cheap wine

5.  From a Princeton  University Working Paper: "When we adjust for unobserved student ability by controlling for the average SAT score of the colleges that students applied to, our estimates of the return to attending a highly selective college fall substantially and are generally indistinguishable from zero."

6. Detroit Moves Against Unions: "Detroit Mayor Dave Bing presented a $3.1 billion annual budget to City Council in which he proposed substantial cuts in city workers' health care and pensions to close an estimated $200 million budget gap."

Thanks to Steve Bartin, Paul Kedrosky, Ben Cunningham and Pete Friedlander.