Professor Mark J. Perry's Blog for Economics and Finance
Tuesday, August 09, 2011
Quote of the Day: No Time to Panic
"The economy can hold up.
The American free-enterprise system can weather these shocks, and I believe favorable political and policy changes are on the way. It will take time. But time heals. Longer-term investors would do well to think about the many stock market opportunities that are opening up as a tough correction runs its course."
Markets in Everything
2. Universities Offer Online High School Diplomas -- "Stanford University, George Washington University, Indiana University, and the University of Missouri have all launched online, diploma-granting high school programs over the past few years, and several other four-year universities offer online classes to high school students."
Monday, August 08, 2011
Monday Higher Education Links
1. Last week, Arnold Kling proposed an independent college grading service he calls "A Means A":
"The best way to eliminate grade inflation is to take professors out of the grading process: Replace them with professional evaluators who never meet the students, and who don't worry that students will punish harsh grades with poor reviews. That's the argument made by leaders of Western Governors University, which has hired 300 adjunct professors who do nothing but grade student work."
3. Tim Worstall writes at Forbes.com that Arnold Kling's college grading model already exists at the University of London:
Burton Malkiel: Don't Panic About the Stock Market
Sunday, August 07, 2011
Why the Gender Pay Gap Won’t Go Away. Ever.
New Fees: Bookstore Admission, Big Bank Deposits
Another Chart: Home Size Bubble
According to the Census Bureau, the average size of new single-family homes built in 2010 was 2,392 square feet, the lowest average new home size since 2004 (2,349 square feet). Another housing bubble that is now deflating - the "home size bubble."
Saturday, August 06, 2011
Map of the Government War on Lemonade Stands
The map above from the Freedom Center of Missouri shows the "Government War on Kid-Run Concession Stands," where the 24 red flags indicate a town that has shut down a kid-run concession stand (the list goes back as far as 1990, but there were nine just so far this year), the four yellow flags are cities that require kids to get at least one city permit to operate a concession stand, and the the green flags are the only two cities in America that have officially stated that they will allow kids to operate concession stands without any permits: Chadron, Nebraska, which actually encourages kid-run lemonade stands, and Nashville.
MP: What's next, a "lemonade czar"?
HT: Buddy Pacifico
Monster Employment Index Increases 4.4% in July
- U.S. annual growth in online job demand was 4.4% in July, marking the 18th consecutive month of positive year-over-year growth
- The Index edged down 2 points on a monthly basis, in-line with seasonal expectations
- All metro markets tracked by the Index exhibit positive annual growth
- Transportation and warehousing recorded the most notable improvements as recruitment demand strengthens
- Public administration continued to register the steepest annual declines on a year-over-year basis
Intrade Odds for Obama's Re-Election Drop to 52%
Intrade odds for the contract "Barack Obama to be re-elected in 2012" have fallen to 52.4% in the last few days, the lowest level yet this year (see chart above), and down about ten points in the last two months.
HT: Steve Bartin
Lemonade Freedom Day: August 20
Friday, August 05, 2011
Big Eight Computer Reported Huge Profits in Q2
|Big 5 - Q2 2011||Sales (b)||Profits (b)||Profit Margin||Tax Rate|
|Totals ($) / Avg. (%)||$488,471||$36,439||7.46%||40.80%|
|Big 8 - Q2 1011|
|Totals ($)/Avg. (%)||$151,998||$27,559||25.08%||19.81%|
U.S. companies have been reporting second quarter earnings recently, and as usual, it's open season for the usual media attacks on America's big oil companies. For some balance, here's some editing of a recent Huffington Post article "Big
July Employment Report
Related: From Reuters, "Canada jobs rise, unemployment rate fell to 7.2% in July, the lowest since 2008."
Markets in Everything: Cutting Cars in Half
Thursday, August 04, 2011
Amid All of the Bad News, a Few Positive Items
1. Luxury Goods Fly Off Shelves -- "The luxury category has posted 10 consecutive months of sales increases compared with the year earlier, even as overall consumer spending on categories like furniture and electronics has been tepid. In July, the luxury segment had an 11.6 percent increase, the biggest monthly gain in more than a year." (HT: Cabodog)
2. July Monster Employment Index Europe Gains 21% Year-over-Year.
June Seattle Existing Home Sales Highest in 4 Years
DQ News -- "Seattle area's resale market posted the highest sales for the month of June in four years. Existing single-family house and condo sales combined rose 19.6 percent compared with May and increased 5.5 percent from June 2010. That's significant, given that the June 2010 sales were boosted by outgoing federal homebuyer tax credits, which ceased to have a significant impact on the market by the following month, July 2010. This June's 3,822 house and condos resales were the highest since 5,647 homes resold in June 2007."
The Brokers with Hands on Their Faces Blog
The "Brokers with Hands on Their Faces Blog" was updated today, August 4, with the photo below:
NY Fed Model: 1-in-125 Chance of 2012 Double-Dip
The New York Federal Reserve updated its "Probability of U.S. Recession Predicted by Treasury Spread" this week with treasury yield data through July 2011, and the Fed's recession probability forecast through July 2012 (see chart above). The NY Fed's Treasury model uses the spread between the yields on 10-year Treasury notes (3.00% in July) and 3-month Treasury bills (0.04%) to calculate the probability of a U.S. recession up to twelve months ahead (see details here) using the spread between those two yields (2.96% in July).
The Fed's model (data here) shows that the recession probability peaked during the October 2007 to April 2008 period at around 35-40% (see chart above), and has been declining since then in almost every month. For July of this year, the Fed's recession probability was less than 1% (0.97%) and for July of next year the recession probability is even lower, at only 0.80% (8/10 of 1%). According to the NY Fed Treasury Spread model, the chances of a double-dip recession through the summer of next year are essentially zero (a 1-in-125 chance for July 2011).
The Jobless Recovery and the Education Gap, II
Here's more evidence that the weakness in the current job market is directly related to educational attainment, and job losses have been greatest for workers without a high school degree (almost a 20 percent loss of jobs since 2007), and to a lesser extent for those workers with only a high school diploma (almost 10 percent). In contrast, employment of college graduates is actually higher now than in January 2007 by about 5 percent.
I haven't checked yet for the last two jobless recoveries in 1991-1992 and 2002, but it's possible that the current jobless recovery will be more severe and will last longer than the previous two because of the weak demand today for workers with less than a high school diploma. And it's also possible that the weakness in job growth during the last two jobless recoveries reflected weak demand for workers with no high school diploma, much more than weak demand for college graduates. More to follow.
More Good News About the Shale Gas Revolution
"The Baker Institute study dismisses the notion, recently debated in the U.S. media, that the shale gas revolution is a transitory occurrence. The study projects that U.S. shale production will more than quadruple by 2040 from 2010 levels of more than 10 billion cubic feet per day, reaching more than 50 percent of total U.S. natural gas production by the 2030s."
Wednesday, August 03, 2011
New Retro Government Policy, How Nostalgic
Alex Tabarrok at Marginal Revolution points to this item at the American Economic Association website:
Natural Gas Production is Booming, So is Demand for Shale Sand; Drill, Drill, Drill = Jobs, Jobs, Jobs
The EIA released data yesterday on U.S. natural gas production and reported that 2,414,685 million cubic feet of natural gas was produced in May, second only to the all-time monthly record set in March of 2,422,763 million cubic feet. On a three-month moving average basis to smooth out variability, the three-month average for March-May was the highest natural gas production on record (see chart above).
As a follow-up to yesterday's post about how the shale gas boom has boosted the demand for steel tubes and brought new life, investment and 400 jobs to Youngstown, Ohio comes this story today from National Public Radio "Natural Gas Extraction Creates A Boom For Sand":
"The rise of fracking as a method for extracting natural gas from shale rock has triggered demand for a key ingredient in the process: silica sand. In parts of the upper Midwest, there's been a rush to mine this increasingly valuable product.
Bottom Line: The "natural gas revolution" is not only creating thousands of new U.S. jobs directly involved with the exploration, drilling and extraction of shale gas, but it's also creating thousands of new jobs in the domestic industries that support shale gas production, like steel tubes and shale sand, to highlight just a few.
Markets in Everything: The Cruzin Cooler
The U.S. is Drunk on Ethanol: Where's the Outrage?
From a Scientific American article "Intoxicated on Independence: Is Domestically Produced Ethanol Worth the Cost?" (emphasis added):
ADP Reports 114,000 Jobs Added in July, But There's Still a 6 Million "Private Job Deficit"
Employment in the service-providing sector rose by 121,000 in July, marking 19 consecutive months of employment gains. Employment in the goods-producing sector fell by 7,000 in July, the second decline in three months. Manufacturing employment decreased 1,000 in July, which has seen growth in seven of the past nine months. Employment on small payrolls (<50 workers) rose 58,000 in July, while employment on medium payrolls (50 to 499 workers) rose 47,000. Employment on large payrolls (500 or more workers) rose a smaller 9,000.
The slowdown in employment makes more sense in light of last week’s revised GDP numbers showing the economy grew slower late last year and this year than initially reported.
MP: The chart above of monthly changes in private payrolls shows that the U.S. economy has added almost 2 million jobs since February 2010, at an average pace of about 106,000 new jobs per month. But there were almost 8 million private jobs lost in 2008 and 2009, so it would take more than four more years of job creation at the current pace just to replace the remaining 6 million "private job deficit."
Tuesday, August 02, 2011
Shale Gas Rocks the World in Youngstown, Ohio
"Demand for steel tubes is being fueled by natural gas drilling in the Marcellus Shale. That has brought life to Youngstown, an Ohio steel town that had lost thousands of jobs over the decades. On the edge of the Mahoning River, where once stood dozens of blast furnaces, more than 400 workers are constructing what long has been considered unthinkable: a new $650 million steel plant. When complete, it will stand 10 stories tall, occupy one million square feet and make a half million tons of seamless steel tubes used in "fracking" or drilling for natural gas in shale basins.
France's Vallourec & Mannesmann Holdings Inc., one of the world's largest makers of steel tubes for the energy market, has decided to build the plant here next to an existing facility for two main reasons. Youngstown has an experienced steelmaking work force and the city is at the door of the Marcellus Shale, a natural-gas basin beneath New York, Pennsylvania, West Virginia and Ohio.
Police Shut Down 4-Year Old's Lemonade Stand in Iowa and Shut Down a Veggie Garden in Michigan
Nanny of Month video from Reason.tv: "Plant a Garden, Go to Jail":
4 Fin. Stress Indexes Stable - No Cause for Concern
The nearby charts show four Federal Reserve Bank measures of financial stress and economic conditions, from the top are: 1) Kansas City Financial Stress Index, b) National Financial Conditions Index (Chicago Fed), c) St. Louis Financial Stress Index, and d) Aruoba-Diebold-Scotti Business Conditions Index (Philadelphia Fed, measures overall business conditions). Each of these four index measures of financial stress/economic conditions are at pre-recession, 2007 levels, and none are showing any indications of evelated risk or stress in U.S. financial markets or the economy with data through July 2011. While there have certainly been signs of moderating economic growth lately, and some reasons for concern, the underlying conditions in the financial markets remain stable and this would weaken the case for a pending double-dip recession.
Hiring for Professional/Business Workers is Strong
A CD post yesterday highlighted the huge differences between workers with a college degree and those without a high school degree, in terms of employment levels and jobless rates.
Here's more evidence that might support the idea that college graduates are doing much better in the labor market today compared to workers without a high school degree. The chart above shows that there has been more hiring activity for the job category "Professional and Business Services" than for hiring activity overall (data are from the BLS' "Job Openings and Labor Turnover" division).
Since the recession ended in June 2009, hiring for "Professional and Business Services" has increased by 39%, which is more than three times the rate of overall hiring (12.4%). Assuming that most jobs for "Professional and Business Services" require a college degree, the increased hiring activity for this group of workers would support the notions that a) it's the less educated workers that are struggling in today's job market and b) the jobless recovery is affecting college educated workers much less than workers without a high school degree.
Thanks to Juandos for the idea.
Global Economy Links for Tuesday
June Restaurant Index Highest Since August 2007
The National Restaurant Association released its monthly report on the health of America's restaurant industry last week for the month of June, here are some highlights:
1. The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 100.5 in June – up a solid 1.4 percent from May’s level of 99.2 (see chart above). The Current Situation Index has been above 100 in three of the last four months, which signifies expansion in the current situation indicators.
2. The Current Situation Index in June was at the highest level since August 2007, almost five years ago.
Monday, August 01, 2011
The Jobless Recovery and the Education Gap
Note that the employment level for college graduates flattened during the 2008-2009 recession, but is now at a record high level. In contrast, the employment level for workers without a high school diploma is about 2.5 million below the pre-recession peak. Likewise the jobless rate for college graduates has increased by a few percentage points because of the recession (and is now at 4.4%), but the jobless rate for workers with less than a high school diploma has increased by more than six percentage points (now at 14.3%), and was recently almost ten percentage points above its pre-recession level.
Bottom Line: The current jobless recovery, compared to the last two, is more severe and persistent, largely because of: a) the falling employment level and b) elevated jobless rate for workers lacking a high school diploma. While lacking a high school diploma has always been a liability for workers, that liability has gone from a minor liability to now a major setback as we move increasingly into a knowledge-based economy. Comparatively, college-educated workers are doing quite well, it's the less educated workers that are struggling, and will continue to struggle, to find employment and keep a job.
Safeway to Open 100 Retail Clinics in California
Income Mobility for All Income Groups is Significant
"One big problem with inferring income inequality from the census income statistics is that the census statistics provide only a snapshot of income distribution in the U.S., at a single point in time. The statistics do not reflect the reality that income for many households changes over time—i.e., incomes are mobile. For most people, income increases over time as they move from their first, low-paying job in high school to a better-paying job later in their lives. Also, some people lose income over time because of business-cycle contractions, demotions, career changes, retirement, etc. The implication of changing individual incomes is that individual households do not remain in the same income quintiles over time. Thus, comparing different income quintiles over time is like comparing apples to oranges, because it means comparing incomes of different people at different stages in their earnings profile.
Thomas Sowell sums up the issue of income inequality and income mobility this way:
"Only by focusing on the income brackets, instead of the actual people moving between those brackets, have the intelligentsia been able to verbally create a "problem" for which a "solution" is necessary. They have created a powerful vision of "classes" with "disparities" and "inequities" in income, caused by "barriers" created by "society." But the routine rise of millions of people out of the lowest quintile over time makes a mockery of the "barriers" assumed by many, if not most, of the intelligentsia."
Sunday, July 31, 2011
Our Biggest Budget Issue: Increased Spending on Payments to Individuals, i.e. "Entitlement Nation"
I'm sure most of us are experiencing "debt ceiling overload" by now and will be happy that a deal was just reached (it's 8:50 p.m.). Over the last month, we've heard endless debates on federal spending, federal spending as a share of GDP, the $14 trillion ever-increasing federal debt, the the federal debt as a share of GDP, spending cuts as a condition to raise the debt limit, possible revenue/tax increases, a possible balanced budget amendment later, etc.
But there's an important issue about federal spending that's been pretty much completely overlooked in all of the debates, and it's an issue that was discussed on a CD post back in February. In that post, I featured an editorial by AOL opinion editor John Merline who pointed out "the biggest thing the federal government does these days is cut checks to individuals."
In 2010, the OMB reports (Table 6.1 Composition of Outlays, 1940-2016) that the federal government spent $3.45 trillion, and made about $2.3 trillion in "payments to individuals," which was about two-thirds (66.13%) of total federal spending last year, the highest ever in history (see top chart above). And that category was more than three times larger than the share of 2010 federal spending on defense (20.1%) and more than 11 times larger than the share spent on net interest (5.7%).
So while it looks like the short-term problem has been temporarily fixed with an increase in the debt limit, the long term problem won't be fixed until we address the nation's most serious problem: we're increasingly becoming an "entitlement nation," with "payments to individuals" increasing both in absolute dollar amounts and as a share of total federal spending, or in the words of John Merline:
The Mancession Continues: Men Have Lost 192 Jobs for Every 100 Jobs Lost by Women Since Jan. 2008
Most of the news reports seemed to have missed this key paragraph in the Pew Center report (emphasis added):
"Although the latest trends in employment are working in favor of men, the full period of the recession and the recovery has set men back more than women. From December 2007 to May 2011, the employment of men has decreased from 70.7 million to 66.1 million, or by 4.6 million. For women, employment has fallen from 67.3 million to 64.9 million, or by 2.4 million. Thus, while men have taken an early lead in the recovery, they still have far more ground to cover than women to return to pre-recession employment levels."
MP: The chart above helps to graphically illustrate the paragraph above by showing monthly employment levels for men and women from January 2002 to June 2011. Although it's true that men have made greater employment gains since the recession ended, it's also true that men are still much worse off than women when we consider the entire period from January 2008 to June 2011. The current number of payroll jobs in the U.S. (131 million) is about 7 million jobs below the peak of 138 million jobs in January of 2008 when the recession was first starting. Of the 7 million jobs lost since 2008, men have lost 4.6 million or 65% of the total, compared to 2.4 million fewer jobs for women, or 35% of the total.
Bottom Line: Despite the recent job gains for men since early 2010, the Great Recession has still had a disproportionately and significantly negative effect on men compared to women, and it's not even close: For every 100 jobs lost by women since January 2008, men have lost 192 jobs, so it's still very much of a "mancession," despite the recent "hecovery."
Saturday, July 30, 2011
Miami Real Estate Market Heats Up: June Home Sales Are the Highest in 4 Years, for Condos 6 Years
The 4,911 condos that resold last month marked a 2.2 percent decrease from May but a 12.7 percent increase from a year earlier. It was the highest number of condo resales in the month of June since 2005, when 6,070 condos resold.
MP: Miami home and condo sales are now back above their pre-recession levels, largely because median home prices are less than half of their 2007 peak level. But it looks like Miami home prices are starting to find a bottom, and if buying activity continues to remain active, the median home prices will eventually start to increase. At this point, it's an incredible buying opportunity, as most of Miami real estate is "on sale" at a "50% discount" from 2007 prices.
Markets in Everything: iPhone Dermatoscope
World's First Flight of a Fully 3D Printed Airplane
About three weeks ago, I featured two amazing videos of "3D Printers" on this CD post. There's another amazing video above of the world's first flight of a fully "3D printed airplane." Here's a report from Gizmag:
Markets in Everything: Used Lottery Tickets
The Global Lottery Collector's Society, a worldwide group of enthusiasts who study and collect lottery tickets is having its 23rd Annual "Lotovention" this weekend in Philadelphia.
Here's a USAToday article about the "lotologists."
The World is Getting Richer: Developing Economies Fall from 58% to 39% of All Countries in 15 Years
Don Boudreaux at Cafe Hayek provides a link to this July 2011 report on World Bank Income Groups, which includes the graph above (click to enlarge) based on the World Bank's annual review and re-classification of countries into four income groups—Low, Lower Middle, Upper Middle and High. From the report:
"More interesting is the shift over the last two decades of countries out of the bottom two groups and into the top two groups (see chart above). The number of Low-income and Lower Middle-income countries, often referred to as ‘developing economies’, is clearly diminishing."
MP: Based on "eyeballing" the data in the chart, we can compare 1996 to 2011:
1996: There were about 125 countries classified in the bottom two categories: Low (income per capita of $1,005 or less) or Lower/Middle ($1,006 to $3975 per capita income), and 80 countries classified in the top two categories: Upper Middle ($3,976 to $12,275) or High ($12,276 or higher).
2011: The number almost exactly reversed between the two lower and two higher groups: In 2001, there were only about 90 countries in the two low-income categories (vs. 125 in 1996) and 125 countries in the two high-income categories (vs. 80 in 1996).
Bottom Line: In just the 15-year period between 1996 and 2011, there were about 40 countries that moved from the two lower income groups to the two high-income categories, which is about 20% of the countries in the world that moved from "developing economy" status in 1996 to Upper Middle/High Income status by 2011. We could say that in 1996, the World Bank classified about 58% of the world's economies as low-income or "developing," and by 2011 that percentage had fallen to only 39%.
Yes, the world is clearly getting richer, as Don points out.
Related: See this November 2009 CD post "New Study Shows Significant Drop in World Poverty."
3 Things You Need To Know About Trade Deficits