Saturday, June 18, 2011

Saturday Links

1. "Lemonade stands are supposed to come with lessons — about camaraderie, teamwork, entre­pre­neur­ship.  But sometimes the all-American rite of passage instead becomes a master class in government overreach," like near the U.S. Open as reported by the Washington Post (another story will appears on the front page the Sunday edition) and other media. 

2. Estimate: Google's Les Paul doodle guitar cost companies around the world $268 million in lost productivity.

3.  Hospitals Embrace Text Messaging of Emergency Room Wait Times 

4. To increase efficiency, Hewlett-Packard is planning to shift part of its notebook production from China to Japan in the next few months. The Californian company plans to eventually manufacture all computers for sale in Japan in factories near Tokyo.

5. Get your soon-to-be-extinct incandescent light bulbs on Ebay or Amazon while they're still legal.  (HT: Instapundit)

6. From Popular Mechanics: "101 gadgets that changed the world," from #1 (Mobile/Smartphone) to #101 (duct tape).  (HT: Instapundit)

Friday, June 17, 2011

Mapping the Dead from Mexico's Drug War

This website tracks and maps the narco-related killings in Mexico, which now exceed 40,000 since the start of the Mexican drug war in December 2006.  The map above (click to enlarge) shows the deaths in Mexico over just one 6-1/2 month period from May 15, 2010 to December 2010.  Death maps for other periods are available at the website.  Here's the map legend:

The RED balloons are civilians. The RED balloons with a dot are politicians, and other high profile killings. The BLUE balloons are police officers and soldiers (and other law enforcement officials). The BLUE balloons with a dot are high ranking officers.  The YELLOW suns represent car bombs and the 2 GREEN people represent mass graves.

40 Yrs. of Drug War Failure and 40k Dead in Mexico

Related: The number of casualties from the War on Drugs in Mexico is estimated to be 40,000 since 2006, according to some sources.  At the current rate of 10,000 deaths per year, the number of Mexicans killed in its drug war will soon approach the number of Americans killed in the Vietnam War. 

Companies Leaving California in Record Numbers

California currently ranks #49 among U.S. states for "business tax climate" (Tax Foundation) and #48 for for "economic freedom" (Mercatus).  It shouldn't be any surprise then that companies are leaving the "Golden State" in record numbers this year (see chart above) for "golder pastures" and more business-friendly climates in other states. 

From Joe Vranich:

"Today, California is experiencing the fastest rate of disinvestment events based on public domain information, closure notices to the state, and information from affected employees in the three years since a specialized tracking system was put into place. Out-of-state economic development officials are traveling through the state to alert frustrated business owners and corporate executives to their friendlier business climate versus California's hostility toward commercial enterprises.
  • From Jan. 1 of this year through this morning, June 16, we have had 129 disinvestment events occur, an average of 5.4 per week (see chart above).
  • For all of last year, we saw an average of 3.9 events per week.
  • Comparing this year thus far with 2009, when the total was 51 events, essentially averaging 1 per week, our rate today is more than 5 times what it was then.
Our losses are occurring at an accelerated rate. Also, no one knows the real level of activity because smaller companies are not required to file layoff notices with the state. A conservative estimate is that only 1 out of 5 company departures becomes public knowledge, which means California may suffer more than 1,000 disinvestment events this year. 

The capital directed to out-of-state or out-of-country, while difficult to calculate, is nonetheless in the billions of dollars. The top five destinations are (1) Texas, (2) Arizona, (3) Colorado, (4) Nevada and Utah tied; and (5) Virginia and North Carolina tied.

Based on the legislature’s recent rejection of business-friendly legislation and Sacramento’s implementation of additional regulations, signs are that California’s hostility towards business will only worsen. California is such fertile ground that representatives for economic development agencies are visiting companies to dissect our high taxes, extreme regulatory environment and other expenses to show annual savings of between 20 and 40 percent after an out-of-state move."

See related news story here

Leading Economic Index Points to Ongoing Growth

The Conference Board reported today that its Leading Economic Index (LEI) increased 0.8% in May to 114.7 (see chart above), with the largest positive contributions to the index coming from the interest rate spread, consumer expectations and building permits.  The LEI has now increased in 25 out of the last 26 months starting in April 2009, with the only monthly decrease occurring in April of this year.  

According to economist Ataman Ozyildirim at The Conference Board: “The U.S. LEI rebounded in May and resumed its upward trend with a majority of the components supporting this gain. The Coincident Economic Index, a monthly measure of current economic conditions, continued to increase slowly but steadily. Overall, despite short-term volatility, the composite indexes still point to expanding economic activity in the coming months.”

MP: Despite some recent signs of a temporary slowdown in certain areas of the economy, the ongoing upward trend in the Leading Economic Index that started in the spring of 2009 suggests that the economic expansion will continue through the rest of 2011 without interruption.  

Thanks to War on Drugs, U.S. is World's #1 Jailer

This is a post to recognize the 40th anniversary of the day in 1971 that President Nixon declared that the U.S. government would start waging a "War on Drugs" war on peaceful Americans who chose to use intoxicants not approved of by the U.S. government (HT: Don B.).

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

Well, it's not even close..............

World Rank, 2010CountryPrisoners per 100,000 Population
70Saudi Arabia178

The table above shows how the 2010 U.S. prison incarceration rate (prisoners per 100,000 population) 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 the world's 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-terrorism 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" war against peaceful Americans using intoxicants currently not approved of by the U.S. government (see chart below).  

Note that in the full list of countries, neighboring Canada ranks #124 (117 prisoners 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).   

Update: AIG claims that "There is ZERO evidence that this greater number of prisoners in the U.S. is due to the war on drugs." Here is some evidence:

1. "A major cause of such high numbers of prisoners in the United States system is that it has much longer sentences than any other part of the world. The typical mandatory sentence for a first-time drug offense in federal court is five or ten years, compared to other developed countries around the world where a first time offense would warrant at most 6 months in jail.  Mandatory sentencing prohibits judges from using their discretion and forces them to place longer sentences on nonviolent offenses than they normally would have."

2. "One of the biggest contributors to the United States' spike is the war on drugs. Around 1980, the United States had 40,000 people in prison for drug crimes. After the passage of Reagan's Anti-Drug Abuse Act in 1986, incarceration for non-violent offenses dramatically increased. Part of the legislation included the implementation of mandatory minimum sentences for "the distribution of cocaine, including far more severe punishment for distribution of crack—associated with blacks—than powder cocaine, associated with whites."

Under the Anti-Drug Abuse Act, users of powder cocaine can possess up to 100 times more substance than users of crack, while facing the same mandatory sentence.  The Anti-Drug Act targeted low-level street dealers, which had a disproportionate effect on poor blacks, Latinos, the young, and women.

The United States houses over 500,000 prisoners for these crimes. Ethan Nadelmann of the Drug Policy Alliance said, "We now imprison more people for drug law violations than all of Western Europe (with a much larger population) incarcerates for all offenses."

Thursday, June 16, 2011

The Geography of Ethanol Support and Why Corn Ethanol is Doomed Without Taxpayer Dollars

From the Percolator Blog:

"Today the Senate voted 73-27 in favor of repealing a $6 billion tax credit for ethanol producers. The measure would end a 45-cent-per-gallon tax credit for ethanol refiners and a tariff of 54 cents per gallon on imported ethanol. The bill’s passage may be a pleasant surprise — ethanol is, after all, not so great for the environment. But which senators voted in favor of the tax credits is all too predictable (see maps above, click to enlarge)."

"A broad bipartisan majority of the Senate voted Thursday to end more than three decades of federal subsidies for ethanol, signaling that other long-sacrosanct programs could be at risk as Democrats and Republicans negotiate a sweeping deficit-reduction deal. The tax breaks, which now cost about $6 billion a year, had long been considered untouchable politically because of the power of farm-state voters and lawmakers. Iowa's role as the site of the first presidential caucuses has further elevated the political potency of the biofuel. 

Presidential hopefuls made a quadrennial ritual of going to Iowa and pledging to support the tax breaks, tariffs and mandates that supported production of ethanol motor fuels from corn. This year, however, some Republican presidential candidates have pointedly refused to endorse ethanol tax breaks. Thursday's vote doesn't by itself doom federal support for the corn ethanol industry. The House is expected to reject the repeal as unconstitutional because tax bills must originate in that chamber, and the White House opposes it. But the 73-27 vote signals that once-unassailable programs could be vulnerable."

MP: Paul Gigot of the WSJ pointed out a decade ago that "ethanol is produced by mixing corn with our tax dollars." Hopefully, given the reality of our worsening fiscal situation, the Senate vote today signals that taxpayer funding of ethanol will eventually end, and ethanol will have to survive on its economic and scientific merits.  Simply put, without tax dollars, the current political-motivated recipe for producing so much corn ethanol is doomed.   

President Jimmy Carter Says: Let's Call the Whole Thing Off; The "War on Peaceful Americans" That Is

Pres. Jimmy Carter in the NY Times, "Call Off the Drug War":

"Drug policies here are more punitive and counterproductive than in other democracies, and have brought about an explosion in prison populations. At the end of 1980, just before I left office, 500,000 people were incarcerated in America; at the end of 2009 the number was nearly 2.3 million. There are 743 people in prison for every 100,000 Americans, a higher portion than in any other country and seven times as great as in Europe. Some 7.2 million people are either in prison or on probation or parole — more than 3 percent of all American adults! 

Some of this increase has been caused by mandatory minimum sentencing and “three strikes you’re out” laws. But about three-quarters of new admissions to state prisons are for nonviolent crimes. And the single greatest cause of prison population growth has been the war on drugs war on peaceful Americans who chose to use intoxicants not currently approved of by the U.S. government (HT: Don B.), with the number of people incarcerated for nonviolent drug offenses increasing more than twelve-fold since 1980."

U.S. Manufacturing in 2009 = Germany, Italy, France, Russia, U.K., Brazil and Canada COMBINED

The chart above helps put the size of the U.S. manufacturing sector into perspective. In 2009, the U.S. produced $2.33 trillion of manufacturing output including mining and utilities, according to data from the United Nations.  The U.S. ranked #1 in the world for manufacturing, and produced 14% more output than second-ranked China ($2.04 trillion) and twice as much output as third-ranked Japan ($1.15 trillion). 

What's most impressive is that the U.S. produced almost as much manufacturing output as the manufacturing sectors of Germany (#4), Italy (#5), France (#6), Russia (#7), U.K. (#8), Brazil (#9) and Canada (#10) combined ($2.44 trillion).

Harvard B-School Admits More MBA Students with Manufacturing Backgrounds: From 9% to 14%

From the WSJ article "Harvard Business School Changes Its Class Profile":

"Harvard Business School's incoming class will have a substantially smaller percentage of finance professionals than in previous years. Instead, a higher number of students will have manufacturing and technology backgrounds.

Students with manufacturing backgrounds make up 14% of the class of 2013, up from 9% the previous year (see chart above). Technology rose three percentage points to 9%." 

MP: Maybe Harvard is preparing more MBAs in anticipation of America's coming "manufacturing renaissance"?

U.S. Trade With Rest of World is Always Balanced

In a Tuesday Washington Times editorial "Truth about Trade Deficits and Jobs," Cato Institute trade specialist Dan Griswold makes the following important point about U.S. trade deficits:

"A trade deficit doesn't mean that the dollars flowing abroad just disappear. They quickly return to the United States. If they are not used to buy our goods and services to export, they are used to buy American assets — Treasury bills, corporate stock and bonds, real estate and bank deposits. 

In this way, America's trade deficit is always and almost exactly offset by a foreign investment surplus. The net surplus of foreign investment into the U.S. each year keeps long-term interest rates down, prevents the crowding out of private investment by government borrowing and promotes job creation through direct investment in U.S. factories and businesses.

In the broadest sense, our trade with the rest of the world is always balanced. In 2010, Americans bought $4 trillion worth of goods, services and assets from abroad, while foreigners bought $4 trillion worth of goods, services and assets from the U.S."

MP: The Bureau of Economic Analysis released detailed data today on U.S. international transactions for the first quarter 2011. The U.S. had a $182.45 billion "trade deficit" for goods in the first quarter, which was offset by multiple surpluses for other international accounts including services, income receipts and asset purchases, so that our overall trade with the rest of the world remained balanced.  (What a relief!)

While most of the media attention focuses on the "trade deficit," a more complete analysis always reveals offsetting surpluses for other international transactions that result in a "balance" of our total payments (cash outflows) and receipts (cash inflows) with the rest of the world.   Because international transactions are calculated using double-entry bookkeeping accounting, international payments HAVE TO BALANCE, and the balance of payments has to equal ZERO, just like a corporate "balance sheet" has to balance such that Total Assets - (Debt + Equity) = ZERO.

The chart above illustrates graphically the "balance" of international transactions for the first quarter showing that the $1.1 trillion of cash inflows to Americans between January and March from: a) the export of U.S. goods and services, b) income receipts (e.g. dividends and interest income) to Americans owning foreign assets, and c) the sales of U.S. assets (e.g. stocks and bonds) to foreigners, is exactly equal to the $1.1 trillion of cash outflows paid to foreigners for: a) imports of goods and services, b) income payments to foreigners owning U.S. assets, and c) the purchase of foreign assets by Americans.  

In other words, even though it's not very "newsworthy," America's international transactions were once again balanced in the first quarter, just like every quarter and every year, and the "balance of payments" was once again ZERO.  

Bottom Line: As Dan Griswold concludes, politicians, and everybody else, should just stop worrying about the "trade deficit."

Interesting Facts of the Day About China

1. China will become the second largest consumer market in the world by 2015, behind only the U.S.

2. Wal-Mart is opening one store per week in China. 

3. KFC is opening one store per day in China.

4. IKEA has stopped advertising in China because its stores have become so crowded it's facing "crowd control" problems. 

 ~James McGregor, author of the book "One Billion Customers: Lessons from the Front Lines of Doing Business in China," from his interview today on NPR

Markets in Everything: Handwritten Obama Letters

Yahoo! News -- "Destiny Mathis, a young woman in Indiana, reached out to President Obama for a sign of hope in tough economic times, and was initially thrilled to receive a handwritten reply from the president. Now, however, the same economic hardships that prompted her to write to Obama last November have prompted her to put up the letter for sale on the Moments in Time auction website for $11,000--marking the ninth such sale of an Obama letter that the online auction service has handled."

Wednesday, June 15, 2011

China Considers a Market-Based Approach to Solve Its Kidney Shortage, Maybe the U.S. Can Follow?

The chart above illustrates a very serious and escalating health care crisis in America:  The number of kidney transplant operations has remained flat for the last six years, and there were actually fewer last year (16,968) than in 2006 (17,095).  Meanwhile, the number of registered transplant candidates continues to grow, at an average rate of more than 4,500 new candidates in every year since 2005.  In 2010, the chances of receiving a kidney for the almost 88,000 patients on the waiting list fell below 20% for the first time ever, and those odds probably won't improve any time soon.   

Reason? It's illegal for Americans to receive any kind of financial compensation for providing a kidney to save the life of a stranger, and without financial compensation there's no way to solve the growing kidney shortage.  The number of kidney donations and transplant operations will remain flat, the kidney waiting list will grow, and the pain, suffering and death for those waiting will continue to escalate as the waiting list becomes a sure death sentence for a large majority of patients.  

By relying exclusively on altruistic kidney donation in the supposedly market-friendly U.S., the kidney shortage will surely continue to worsen.  But there's now hope for a more rational, market-based approach in historically market-unfriendly China, according to AEI scholar Sally Satel in

"Last month, the China's health ministry announced a proposal that could expand the pool of organs available for transplant surgeries. Huang told the Chinese press that his office was considering several possible incentives. These include tax rebates, deduction of transplant-related hospital fees, medical insurance, tuition waivers for donors' family members, or deduction of burial fees for people who donated in death. 

Unfortunately, much of the international transplant establishment—including the World Health Organization, the Transplantation Society, and the World Medical Association—focuses exclusively on obliterating illicit organ sales. While this may seem like a reasonable approach to abhorrent practices, in reality it is a lethal prescription."

Sally concludes:

"The only way to save lives and starve underground markets abroad is to provide more transplants at home. And the only way to do that is to break radically—and ethically—with a status quo that forbids an informed donor to be rewarded for saving the life of a stranger."

Cops, Prosecutors and Judges Say: "Legalize It"

WASHINGTON, DC -- "In conjunction with this week's 40th anniversary of President Nixon declaring "war on drugs," a very expensive war on peaceful Americans who get high using intoxicants the government disapproves of (thanks to Don Boudreaux for this editing) a group of police, judges and jailers who support legalization released a report today showing how the Obama administration is ramping up a war it disingenuously claims that it ended two years ago.

Following the report's release at a press conference this morning, the pro-legalization law enforcers attempted to hand-deliver a copy to Obama administration drug czar Gil Kerlikowske, who is a former Seattle chief of police.  Instead of making time to listen to the concerns of fellow law enforcers who have dedicated their careers to protecting public safety, he simply sent a staffer to the lobby to receive a copy of the cops' report.

The full text of the pro-legalization cops' report is available online here

Law Enforcement Against Prohibition (LEAP) represents police, prosecutors, judges, prison wardens, federal agents and others who want to legalize and regulate drugs after fighting on the front lines of the "war on drugs" war on peaceful people who get high using intoxicants the government disapproves of, and learning firsthand that prohibition only serves to worsen addiction and violence."

Manufacturing Productivity Has Improved Our Lives

In a comment on this CD post about the dramatic gains in U.S. manufacturing productivity, JoeMac asks an important question: "How have these gains in productivity improved the lives of Americans?"

The chart above displays the share of Personal Consumption Expenditures represented by three categories of manufactured consumer goods that are most important to U.S. households: a) food and beverages consumed at home, b) clothing and footwear, and c) furnishings and durable household equipment (BEA data here).  In the late 1940s, it required almost half (41%) of consumer expenditures to provide for the household basics: food, clothing and home furnishings, which are all manufactured goods.  

As a direct result of the significant improvements in manufacturing productivity, manufactured goods have become cheaper and more affordable over time, resulting in a declining share of total consumer expenditures required to furnish our homes, and cloth and feed our families.  By 1985, the share of consumer spending on household basics was only 20%, or less than half of the 41% share in 1948.  For each of the last five years since 2006, the share of consumption expenditures on food, clothing and household furnishings has been below 14%, and was only 13.5% in 2010.  

For every $100 of consumer spending today, only $13.50 is spent on food, clothing and household furnishings and $87.50 is spent on everything else.  Contrast that to 1948, when it took $40 of every $100 of spending for the basics, leaving only $60 to spend on all other goods and services.      

Bottom Line: Without the major productivity gains in the manufacturing sector over the last fifty years, it would still require almost half of consumer spending just to furnish our houses, and feed and clothe our families.  The standard of living for the average American household has improved significantly over the last 50 years, and keeps getting better all the time, thanks in large part to greater manufacturing productivity.  

Here's the proof that productivity gains have improved our lives: Would you be willing to exchange your computer and laser printer for an old manual typewriter?  Would you be willing to exchange your cell phone or iPhone for an old rotary phone?  Would you be willing to exchange your big-screen color TV for an old black and white TV?  Would you be willing to trade your iPod and iTunes for an old phonograph and 45 RPM records?  Would you be willing to trade your modern refrigerator, washing machine or dishwasher for appliances from the 1950s?  I think most rational people would much prefer today's manufactured goods to those from past eras, and we can thank manufacturing productivity for lower costs and greater variety, and for better quality and more energy-efficient products.          

Markets in Everything: Weiner-Gate Strip Show

"Ginger Lee, the receiver of the infamous lewd photo from the “peter tweeter” Anthony Weiner, and her rumored sexual relationship which created “WEINER GATE,” is making her first public show appearance at the famous Pink Pony strip club in Atlanta, Ga. this Wednesday & Thursday June 15th & 16th."

TMZ is reporting that Ginger Lee is getting 3 times her normal fee.  

Wednesday Links

1. John Goodman reports on free health care screenings, currently available at Sam's Clubs, and comments that  "In just three years you are going to be forced to buy insurance coverage for the very services Wal-Mart is giving away for free!"

2. Wendell Cox argues that land-use restrictions and planning policies like smart growth fueled property prices and became the engine of the housing boom and bust.

3. Tourism officials at Alabama beaches say taxes have been up for the past seven months and people are spending money on the beach at a higher level than before the recession hit in 2008.  

4. Scotts Miracle-Gro has long sold weed killer. Now, it's hoping to help people grow killer weed

5. China's cell phone pirates are helping to bring down Middle Eastern governments. 

6. Virginia state revenue collections increased 17.9% in May.

7. Kentucky’s general fund receipts in May rose 17.8 percent compared with a year earlier.

8. Stage is Set for Long Run-Up in Class 8 Vehicle Demand
(HT: Gary Lyle)

Stranded in Libya

While most countries have rushed to evacuate their citizens from Libya in recent months, one country decided to leave 200 of their nationals stranded in Libya.  Guess the country, it should be easy. 


"Out of fear that what they witnessed -- a full-blown popular rebellion against Qaddafi's dictatorship -- could lead to a copycat rebellion back home," according to a story in Foreign Policy.  "The fear was obviously that these 200 would have a kind of a viral effect, bringing news and information about what was happening in Libya." 

Here's the full article, and here an NPR segment on the story.  

Tuesday, June 14, 2011

Phenomenal Gains in Manufacturing Productivity

The chart above shows annual real manufacturing output per worker from 1947-2010 using data from the BEA for manufacturing output by industry and data from the BLS on manufacturing employment.  

In 1950, the average U.S. manufacturing employee produced $19,600 (in 2010 dollars) of output, and by 1976 the amount of output per worker had doubled to $38,500.  During that period manufacturing productivity was growing annually at 2.63%.  Output per worker doubled again to $75,000 by 1997 (21 years later), as productivity per worker increased to 3.23%.  Manufacturing output per worker approximately doubled again to $149,000 by 2010, but it only took 13 years because worker productivity accelerated to 5.42% during this period.

This is an amazing story of huge increases in U.S. worker productivity in the manufacturing sector.  In fact, the growth in manufacturing worker productivity more than doubled from 2.63% per year in the period between 1950 and mid-1970s to 5.42% annually between 1997 and 2010.  Whereas it took 26 years for output per worker to double during the first period (1950-1976), it only took 13 years during the more recent period (1997-2010). 

We are constantly hammered with bad news about the decline in the number of manufacturing jobs in the U.S., but we never hear the good news about why that is happening: Manufacturing workers in America keep getting more and more productive, which then allows us to produce more and more output over time, with fewer and fewer workers.  That's a great story about an American industry that is healthy, successful and thriving, and not an industry in decline.  

By continually increasing worker productivity and productive efficiency, the American manufacturing sector has been hugely successful at achieving one of the most important economic outcomes of being able to "produce more with less." In the process, those efficiency and productivity gains have helped conserve scarce resources, including human resources, more effectively than almost any other industry, except maybe farming. It's hard to overstate how much the efficiency gains achieved by U.S. manufacturing have contributed to the improvements in our standard of living by making manufactured goods more affordable over time.  We should spend less time complaining about fewer workers in manufacturing, and more time celebrating the phenomenal gains in manufacturing worker productivity.    

Shipping Activity at L.A. Port Was Strong in May

Loaded outbound 20-foot containers (TEUs) exported from the L.A. Port in May totaled 184,275 units, which was the highest export container count ever for the month of May, and the second highest monthly export shipping volume for any month in the port's history, next to the all-time monthly record of 192,850 TEUs in March of this year (see chart).  Other highlights of this month's report include:

1. Containerized exports in May were above the year-ago level by 14.7%, and up by 21% from two years ago in May 2009.  

2. For the first five months of the year, January-May shipping activity for outbound export containers this year improved by 11% compared to the same period last year.  

3. Loaded inbound containers in May, at 360,969 containers, were above last year's level by 5.5%, and the highest count for the month of May in three years, since 2008.

4. Overall shipping activity at the L.A. Port set a new record for the month of May at 545,243 containers, and it was the second-highest monthly loaded container count in port history.   

Bottom Line: The strong level of shipping volume at the Port of Los Angeles in May indicates that the U.S. and world economies are continuing to expand and grow, and the recent slowdown in some economic indicators was probably temporary and mild.   

Drill, Drill, Drill = Jobs, Jobs, Jobs

Joshua Wright at the New Geography website has a great article titled "The Explosion of Oil and Gas Extraction Jobs."  The whole article is worthwhile and there's a lot of interesting jobs data, but here's the most amazing data point:

"In total, nine of the top 11 fast-growing jobs in the nation are tied in one way or another to oil and gas extraction." 

Producer Price Food Inflation: Crude vs. Consumer

The chart above shows the annual inflation rates for: a) crude foodstuffs and feedstuffs (e.g. wheat, corn, animals for slaughter, peanuts, cottonseed, and soybeans), and b) finished consumer foods (pasta products, processed meats, bakery products, fresh fruits and vegetables, tree nuts, and eggs), based on today's BLS report on Producer Price Indexes through May.

It's interesting to note the following:

1. Inflation for crude foodstuffs and feedstuffs is much more volatile (monthly standard deviation of almost 14% over the last ten years) than inflation for finished consumer foods (standard deviation of 3%). 

2. Double-digit inflation (0r deflation) rates in crude food items (like we've had for the last 11 months now starting last July) never translate into double-digit inflation (deflation) rates for finished consumer food products. 

3. The current 12-month inflation rate of 4.0% through May for finished consumer foods is only slightly higher than the 3% average over the last ten years (see red line above).

4. The annual inflation rates in May of 24.1% for crude foodstuffs and 4% for finished consumer foods were both lower than the recent peaks of 29.1% for crude foodstuffs and 7.4% for finished consumer foods in February of this year. 

MP: Based on the May PPI data for food, I think it's still hard to make a strong case for inflationary pressures building in the U.S. economy.   

A New Age of Energy Abundance in the U.S.

According to data released recently by the Energy Information Administration, U.S. natural gas production set a new monthly record in March of 2.4 trillion cubic feet (see chart above). This production record is another new milestone for the ongoing success of the hydraulic fracturing method of extracting natural gas from deep shale rock that is bringing about a new age of energy abundance in the United States.

The booming natural gas production is also helping to create thousands of new jobs for Americans in a very tough job market. More than 34,000 drilling-related jobs were added over the past year in Pennsylvania—that’s almost a hundred new jobs every day in just one state and demonstrating that drill, drill, drill = jobs, jobs, jobs.

Another benefit of the record production of natural gas in America is that inflation-adjusted gas prices for commercial users are lower this year than in any year since 2002, and are about 50 percent below the peak highs in 2005 and 2008 (see chart, data here). Affordable energy costs are a key factor in helping America’s manufacturing sector survive and thrive in a very competitive world marketplace, and the natural gas boom can play an important role here.

Read more here at The Enterprise Blog

Positive Economic News from Europe

1. The Leading Economic Index for the U.K. increased 0.4% in April, following increases of 0.4% in March and 0.5% in February. 

2. The Monster Employment Index for Europe increased by 21% in May from a year ago, led by Germany's 42% year-over-year increase, and strong industry gains in manufacturing (53%) and transportation (53%).    

Markets in Everything: Food Truck Catering

From today's WSJ "Every Bride Expects a Lovely Food Truck":

"Street sales aren't the only source of revenue for the gourmet food trucks that have taken New York City by storm in a few years. Some are deriving as much as half of their income from catering and rentals. They cater everything from weddings (see photo above) to bar mitzvahs to movie and television crews filming on the street. Food trucks also are being hired by businesses to woo corporate clients."

Monday, June 13, 2011

If You Tax Something, You Get Less of It

From an IBD editorial, "Will the Chicago Merc Flee Illinois Taxes?"

"The company that owns Chicago's two largest futures exchanges is thinking about moving operations out of state to flee oppressive business taxes. Terence Duffy, chairman of CME Group Inc., which owns the two institutions as well as the New York Mercantile Exchange, and Chief Financial Officer James Parisi announced the financial giant is considering moving operations and jobs out of the state in response to massive increases in state taxes.

Parisi told the company's annual meeting of shareholders that the state legislature's tax hike on corporations from 4.8% to 7% costs CME an extra $50 million a year. Corporations in Illinois also pay 2.5% tax on income, called a personal property replacement tax, which is collected by the state and flows to local governments. The two rates taken together come to 9.5%, the third highest corporate tax rate in the nation. In February, CME reported a 3% drop in fourth-quarter earnings partly because of expenses it booked related to the tax hike.

The ways of Washington, D.C., and Illinois stand in stark contrast with Texas, a state with no income tax, where workers decide for themselves whether to join a union, and that doesn't impose harsh regulatory burdens on businesses or their employees. It recently added to its business-friendly climate with loser-pays tort reform legislation.

Texas eschews while Illinois embraces the Obama model of more government, more unions, more central planning, higher taxes. So it's not surprising that while Obama's Illinois flounders, Texas has created 37% of all new net jobs since June 2009.

Illinois is losing a congressional seat as businesses and people leave. Texas is adding four seats as that state prospers. Build it and they will come; tax it and they will leave."

HT: Pete Friedlander

U.S. Manufacturing Profits Set New Record in Q1

In another sign of a strong economic recovery in the manufacturing sector, the after-tax profits of U.S. manufacturing corporations reached a record-high $144.5 billion in the first quarter of 2011, according to data released today by the Census Bureau. Adjusted for inflation, first quarter profits this year were 6.6% ahead of the previous quarter, and 28.7% ahead of a year earlier.  Compared to the pre-recession level of $124.1 billion in the fourth quarter of 2007, manufacturing profits have increased by 16.2% and $20.4 billion.

I think we can now safely say that the profitability of the U.S. manufacturing sector has made a complete and total V-shaped recovery from the effects of the U.S. recession and global slowdown, and is now well-prepared and situated for a new cycle of growth and expansion in output, sales, jobs, R&D, and capital investment. 

Monday Links

1. "Facebook Sees Big Traffic Drops in US and Canada as It Nears 700 Million Users Worldwide."

2. Banking in Africa via a cellphone and a shack.

3. Chinese food delivery in Manhattan goes from the bicycle to illegal battery-powered bikes. (HT: Dan Greller)

4. Interactive state map for 2010 GDP growth at Economix.

5. Steven Landsburg on a "miracle of the marketplace": the Apple iPhone. (HT: Lee Coppock)

6. Markets NOT in Everything: Raw milk.

Medical Manufacturing in the U.S. is Alive and Well

"Made in the USA": The Continuous Flow Heart Pump
NPR featured a story this morning titled "Heart With No Beat Offers Hope Of New Lease On Life" about new technological advances in the U.S. for making artificial hearts.  Several specialists at the Texas Heart Institute have developed a "no beat" continuous-flow heart pump that should last longer than other artificial hearts and cause fewer problems (see photo above).  This development represents a departure from the traditional research in pulsating heart pumps and would result in a patient having "no pulse" because of the continuous flow feature of the new pump.  

The medical breakthrough is interesting by itself, but the story is important for another reason: It's a great example of "U.S. manufacturing in the 21th century."   You probably won't see or notice a "Made in the USA" label on a heart pump or a lot of other high-tech medical equipment manufactured in America like MRI machines, CT Scans or X-ray equipment, but they are all part of America's thriving and growing high-tech manufacturing sector.

The chart above displays the Federal Reserve's monthly inflation-adjusted measure of "Medical Equipment and Supplies" back to 1986, and shows the continual growth in this sector of America's manufacturing industry.  Except for two months in 2008, the amount of medical equipment and supplies manufactured in the U.S. was higher in April of this year than ever before.  The annual growth in the production of medical equipment manufacturing over the last year was 3.5%, slightly lower than the 4.25% annual average growth over the last 25 years.  Consider also that the amount of medical equipment manufactured in the U.S. has doubled since the early 1990s, which is in direct contradiction to the frequent claims about the "demise or death of U.S. manufacturing." 

When you think of "U.S. manufacturing in the 21st century" think of high-end, high-value-added heart pumps, MRI machines, and surgical heart values produced by high-wage American medical manufacturing companies like Medtronic.  And don't believe the nonsense from Donald Trump and others about how "we don't make anything in the U.S. any more."  The U.S. is the world leader in the manufacturing of medical equipment and supplies, and we make more now than ever before.    

Sunday, June 12, 2011

Who's Winning the Drug War? According to Judge Jim Gray, Six Groups Are, Including The Terrorists

Jim Gray, a conservative judge in conservative Orange County, California, is featured in the Reason video above.  Judge Gray came to the following realization as a criminal defense attorney, federal prosecutor and judge, and says that it has to be understood by others:

"The tougher we get with regard to drug crimes, literally, the softer we get with regard to the prosecution of everything else." He also says that drug prohibition is the "golden goose" of terrorists - one of the 6 groups that are winning from America's war on drugs.

HT: Mike Carlson

Update: See George Shultz and Paul Volcker's related editorial in yesterday's WSJ on why America's "War on Drugs" has failed, and what to do next.

More on Strong Big-Truck Sales in May

As a follow-up to this recent CD post on strong big-truck sales in May, Indiana-based Americas Commercial Transportation (ACT) Research (a leading publisher of new and used commercial vehicle industry data, market analysis, and forecasting services for the North American market) is also reporting that orders for heavy-duty commercial vehicles remained strong in May.  Orders for Class 8 vehicles increased by 85% from the same month last year, and were above the 24,000 unit level for the seventh straight month, a "clear sign of elevated demand." 

From the ACT press release:

“May represents the seventh consecutive month of orders above the 24,000 unit level, a clear sign of elevated Class 8 demand. Though May had the lowest order intake of the last three months, orders were booked in excess of a 365,000 unit annualized rate from March to May. Industry backlogs, which stood at just over 125,000 units at the end of April, likely rose as May orders outpaced OEM planned production for the month.  

Said Steve Tam, vice president of the commercial vehicle sector, “So far, trucks have yet to show any reaction to the recent rash of disappointing economic news. Their freight remains strong, exceeding hauling capacity at this time. Carriers are thinking about their future prospects when making significant capital expenditures on new equipment. If they only reacted to today’s news, they would be paralyzed into inaction.”

HT: Gary Lyle

Job Market and Economy Improve in Michigan, Continued Job Growth Is Expected

The last recession hit the auto industry and the Michigan economy pretty hard. In the summer of 2009, the Michigan economy "hit bottom" as its unemployment rate peaked at 14.1% in August, which was 4.4 percent above the national average that month of 9.7% (see chart above).  It was actually a lot worse for Michigan in the early 1980s, when the jobless rate was at 14% or higher for almost two years from late 1981 until the fall of 1983, and reached a high of almost 17% (16.8%) in December 1982 (not much of a "merry" Christmas that year!). 

But the Michigan economy has improved a lot recently, thanks to a gradual economic recovery in the U.S. and around the world that has boosted car sales and resulted in some needed job growth in Michigan, which has brought the state unemployment rate down a 2-1/2 year low of 10.2% in April.  In fact, the Michigan economy has been recovering much faster than the rest of the country, and its jobless rate is now only 1.2 percent above the national rate of 9%, the narrowest Michigan-U.S. jobless rate gap in seven years, since April 2004 (see chart).  In contrast to Michigan "leading the country" with the highest state jobless rate during the recession, Michigan now has a lower jobless rate than five other states (Nevada, California, Rhode Island, Florida and Mississippi).  

In the last year, Michigan has added an impressive 30,000 new manufacturing jobs, and 9,000 of those were in automotive manufacturing.  Looking forward, we can expect continued improvements for job growth and the Michigan economy, based on hiring projections reported in today's Detroit Free Press:
  • A second shift with about 1,000 new jobs added at Chrysler's Sterling Heights assembly plant in February. 
  • Ford has added 50 engineers to develop hybrid and plug-in electric powertrains and is hiring about 170 people to make batteries in Rawsonville and hybrid transmissions in Sterling Heights. 
  • Ford executives said in January they plan to hire more than 7,000 hourly and salaried workers over the next two years. 
  • Last month, GM said it will hire about 4,000 people in 17 plants, including 2,500 at the Detroit-Hamtramck assembly plant, about 18 jobs at a Bay City powertrain plant and 60 at a Flint engine factory.
  • Suppliers are making more parts at their plants, and, in some instances, adding engineers and product development people locally.
  • Magna Electronics, a division of a Canada-based supplier, is investing $64.8 million on a 35,000-square-foot expansion in Grand Blanc. Eventually Magna will hire about 385 people to make rear-vision cameras.
  • Magna Steyr is expanding a Troy engineering center where it will add about 200 people over the second half of this year.
MP: More evidence that U.S. manufacturing is making a huge comeback and leading the economic recovery.