$460 Million Stimulus Comes to Florida This Year, From Shale Revolution, and NOT Taxpayer Dollars

John Hanger highlights a $460 million stimulus to the Florida economy this year, thanks to lower natural gas prices that prompted Florida's largest utility company to switch from oil to gas for electricity generation:

"Gas has been mainly displacing coal in electricity generation and not much oil for the simple reason that oil provides about 1% of America's electricity and that number is declining.  There is not a lot of oil to displace in the electricity industry, but FPL, Florida's biggest electric utility, is an exception.

Oil accounts for 15% of FPL's generation capacity and 4% of its electric generation, but FPL is aggressively switching its oil generation to gas, as a result of low gas prices, to the considerable benefit of the environment and consumers. FPL still has a monopoly on electricity generation so it collects from its customers every single dollar it spends on fuel to generate electricity.  Low natural gas prices will cut by an incredible $460 million the fuel costs collected from consumers just in 2012." 

HT: Robert Kuehl

Based on Record Profits, U.S. Manufacturing is Alive and Well and Had Its Best Year Ever in 2011

The chart above compares data in 1995 and 2011 for: a) inflation-adjusted manufacturing profits (2011 dollars, Census data here), and b) average manufacturing employment levels.  The year 1995 was selected as a representative year during the period when U.S. manufacturing employment exceeded 17 million workers and inflation-adjusted profits were typical for a non-recession year in the era of what might be considered the "golden age of American manufacturing."  It was definitely well before the unprecedented contraction in manufacturing employment that started in about 2001, and by the time it ended in 2009 resulted in the elimination of more than five million factory jobs over a short eight-year period, possibly the greatest loss of jobs in one U.S. industry in such a short period of time ever in American history.  And it was that period of major job losses in the American manufacturing sector that stoked frequent media stories about the "decline, demise, or death of U.S. manufacturing," which continue today.

We've heard countless stories about the manufacturing job losses, but haven't heard much about the major rebound and renaissance of profitability in American manufacturing, which likely surged to all-time historical levels in 2011.  Although fourth quarter data are not yet available, projections based on profits through the third quarter suggest that the after-tax profits of American manufacturing corporations exceeded $600 billion last year for the first time in history, and will be more than double the profits in 1995.  Thanks to investments in advanced technology and major improvements in efficiency, the American manufacturing sector will be more than twice as profitable in 2011 as in 1995, adjusted for inflation.  And part of that surge in manufacturing profitability to record highs is a direct result of the reduction in staffing levels by 5.5 million workers between 1995 and 2011.    

Bottom Line: The true economic measure of the success of any company or industry is not the number of workers, the amount of output, or the level of sales revenue, it's the level of profitability.  Based on that measure, American manufacturing is alive and well, and doing better than ever before.  

Restaurant Index Reaches 6-Year High in December Current Situation Index Is Highest in 7 Years

Washington, D.C. -- "Fueled by solid same-store sales and traffic results and a bullish outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) rose sharply in December. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 102.2 in December, up 1.6 percent from November and its highest level in nearly six years. In addition, December represented the third time in the last four months that the RPI stood above 100, which signifies expansion in the index of key industry indicators.

The Current Situation Index, which measures current trends in four industry indicators (same-store sales, traffic, labor and capital expenditures), stood at 102.1 in December – up a solid 1.9 percent from November and its strongest level in seven years (see chart above).

The Expectations Index, which measures restaurant operators’ six-month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 102.3 in December – up 1.3 percent from November and its highest level in a year. In addition, December marked the fourth consecutive month that the Expectations Index stood above 100, which represents a positive outlook among restaurant operators for business conditions in the months ahead."

MP: All three indexes: the current situation index, the expectations index, and the overall performance index are now at levels above pre-recession levels, and the current situation is at the highest level in seven years.  The rebound in the performance of America's restaurants in recent months to levels not seen since 2005-2007 shows that there are some underlying strengths in the U.S. economy.  Based on the elevated level for the expectations index, we can expect continued improvements for the restaurant industry in 2012.  

Depressed Real Estate Market? Not in N. Dakota

The oil boom in western North Dakota has created thousands of new oil-related jobs in the state, and has also generated thousands of spillover jobs throughout the entire state.  North Dakota's oil prosperity has kept the state's jobless rate below 4% for the last 20 months, and below 1% in Williams County, at the epicenter of the Bakken.

The oil boom has been fueling a shovel-ready, job-creating construction and housing boom in western North Dakota, with 2011 building permit value tripling in Williston and doubling in Dickinson.  Read more here. 

Drill, drill, drill = construction, construction, construction = jobs, jobs, jobs.

Offbeat Economic Indicators Show Strong Gains

1. Distilled spirits exports exceeded one billion dollars for the fifth consecutive year, reaching a projected record $1.34 billion in 2011 (based on 11-month totals).  Total spirits exports grew 16.5% over the preceding year. 

2.  U.S. pork and beef exports are setting new record highs. 

3. The American Staffing Association Staffing Index, a key weekly barometer of temporary and contract employment activity, is at the highest level for the third and fourth week of January for any year since 2008.

4. Cargo volume climbed 31% at the Port of Cleveland in 2011. 

5. Container traffic at the Port of Philadelphia increased by 6.7 percent in 2011 and auto shipments skyrocketed by 85 percent in the same period.

6. The Restaurant Performance Index rose to its highest level in nearly six years in December.

YouTube Ignores LAPD Cop's First Place Question for Obama About Legalizing Marijuana

WASHINGTON, DC -- "Yesterday YouTube ignored a question advocating marijuana legalization from a retired LAPD deputy chief of police (watch that video above) that won twice as many votes as any other video question in the White House's "Your Interview with the President" competition on the Google-owned site. They did, however, find the time to get the president on record about late night snacking, singing and dancing, celebrating wedding anniversaries and playing tennis."

Markets in Everything: Celebrities Paid to Tweet

How Much Can a Celebrity Make for Tweeting?  For some, thousands of dollars per tweet.

Homeownership Rate Falls to Lowest Level Since 1997; The Homeownership Bubble Is Still Deflating

The U.S. homeownership rate fell in 2011 to 66.15%, according to data released today by the Census Bureau. That was the lowest homeownership rate in 14 years, since the 65.7% rate in 1997.

Conclusion: The political obsession with homeownership in the 1990s and early 2000s raised homeownership in the short run to an artificial and unsustainable level of 69% by 2004, but failed in the long run to create a homeownership rate that was sustaintable.  In the process, numerous government policies turned good renters into bad homeowners, created a housing bubble, waves of foreclosures, and a subsequent housing meltdown and financial crisis. In other words, the chart illustrates how government policies (monetary, mortgage market, GSEs, CRA, affordable housing, etc.) created an unsustainable "homeownership bubble" that is still deflating.  It's likely that the homeownership rate will continue to fall for at least several more years, until we eventually get back to the more sustainable 64-65% homeownership rate that prevailed from 1975-1995 before various government policies destabilized the U.S. housing market.  

Update: The chart below shows how the U.S. homeownership rate increased from a stable rate of about 64% for almost a decade through 1994, up to historically unprecedented and unsustainable "homeownership bubble" levels above 68% between 2003-2007.  At the same time, the percentage of residential mortgages with a 3% down payment or less increased from 2.3% in 1994 to almost 40% by 2007 (data from Ed Pinto).  One of the primary reasons for increased homeownerhip rates above 68% was the deterioration of credit and lending standards, including significant increases in the share of home purchases with very low down payments. 

Markets in Everything: Recycling Surgical Implants

The World.Org -- "Advances in medical technology, combined with the fact that people are living longer, means that more and more of us pass away with some kind of surgical implant. Maybe it’s a steel pin here, or a titanium hip there. Have you ever wondered what happens to those metal implants after people die? For almost 15 years, a Dutch company called OrthoMetals has been recycling them, and giving the bulk of the proceeds to charity.

These metal parts do not end up back in other people. Instead, they are melted down and resold for industrial purposes, for things such as cars, planes, and even wind turbines. It turns out it’s a lot of scrap metal, OrthoMetals recycles more than 250 tons a year from cremations."

Green Energy Policies Harm the Poor

From an editorial in the Washington Examiner "When 'Being Green' Means Subsidies for Rich, Harm for the Poor" by Iain Murray and David Bier of the Competitive Enterprise Institute:

 

"Consider the Obama administration's subsidies for electric vehicles. To start with, there is the $7,500 credit for the car itself. Add to that the recently expired $1,000 credit for installation of a 220-volt charger. And on top of these, the government has thrown more than $3 billion at the Chevrolet Volt alone -- which totals out to $250,000 per vehicle. Not only do these credits go to corporate giants like General Motors, they subsidize cars for the wealthy.

The Volt sells for about $40,000, while the Fisker Karma sells for $100,000 -- well above most Americans' price range. That means that the federal government is again working to benefit the rich so they can drive cars that ease their environmental conscience. And for what? If 6 million wealthy Americans buy these cars, as the president hopes, it will reduce oil consumption nationwide by less than 1 percent.

OK, so Obama's environmental policies are subsidizing the rich, but they're helping the poor, too, right? Wrong. In fact, nearly every environmental policy hurts the poor the most.

Last year, Americans spent more on gasoline as a percentage of their income than they have in almost 30 years (see chart above). Yet that hasn't stopped the president, cheered on by his environmentalist allies, from rejecting the Keystone XL oil pipeline or restricting offshore oil permits."

HT: NCPA

Univ. of North Dakota Responds to Oil Boom

Grand Forks Herald -- "The University of North Dakota (UND) is stepping on the gas to meet the needs of the state's oil boom. The new Department of Petroleum Engineering at UND has enrolled 40 students in its bachelor’s degree program, and the number will climb to 50 or more by fall."

Bringing Manufacturing Jobs Back to the U.S.

Tonight's "Rock Center" show on NBC at 10 p.m. ET will have a segment on the rebound in American manufacturing, featuring Lincolnton Furniture, a  six-generation American furniture company, which has recently started making furniture in North Carolina again after previously shutting down its U.S. factories back in 1996 to move production to China for lower wage costs.  Watch a preview above from CNBC this morning.

The Rust Belt Came Back Strong in 2011; Midwest Manufacturing Is At the Forefront of the Recovery

The Chicago Federal Reserve reported today that its Midwest Manufacturing Index (CFMMI) increased 1.7% in December, to a seasonally adjusted level of 87.4 (2007 = 100).  Here are some highlights of manufacturing activity in the 7th Federal Reserve district that covers Illinois, Indiana, Iowa, Michigan, and Wisconsin:

1. Manufacturing output in the Midwest region rose 8.4% from a year earlier in December, more than twice the 4% increase in national manufacturing output over the same period.

2. Regional machinery output in December was up 12.1% from its year-earlier level, compared to a 3.9% increase in machinery output at the national level. 

3. Regional steel output was up 14.6% from its December 2010 level, compared to a 8.5% increase in national steel output over that period.

4. The Midwest’s automotive output was up 14.8% in December from its year-ago level, compared to a 9.8% gain in national automotive output. 

MP: The manufacturing sector of the U.S. economy grew at 4% last year, or more than twice the 1.7% growth in overall GDP, so it's pretty clear that American manufacturing is at the forefront of the economic recovery as has been frequently reported here and elsewhere, as weak and sub-par as the overall recovery might be.  Without that strong rebound and growth in manufacturing activity last year, the current recovery would be much weaker.  And given the strength of Midwest manufacturing activity compared to output at the national level as reported today by the Chicago Fed, I think we can say that it's "Midwest manufacturing" that's at the forefront of the economic recovery.  The Rust Belt is coming back.  

Related excerpt from a recent WSJ article:

"Many big U.S.-based industrial companies are benefiting from "pent-up demand for motor vehicles, the need to upgrade business equipment and more investment in energy and mineral exploration," said Daniel Meckstroth, chief economist at the Manufacturers Alliance for Productivity and Innovation."

Updates: See previous posts on the Rust-Belt recovery here, here, and here. 

Want to Save Endangered Species? Hunt Them

On tonight's show, "60 Minutes" profiled private big-game hunting in Texas, which has become a $1 billion industry and is credited with saving some exotic species that are now extinct in their native lands in Africa. It's a great example of how private property rights and profit-based game hunting give the animals a positive economic value and create strong economic incentives to increase the herds in far greater numbers than if we were to rely on pure altruism. The big-game hunters have become the true "conservationists," and the animal rights activist are not happy about that.

Watch the full segment below:



(CBS News) -- "The scimitar horned oryx . . . the addax . . . the dama gazelle - three elegant desert antelope that you'd hope to see on a journey through Africa, except that their numbers are dwindling there. Which is why Lara Logan went to Texas -- yes, Texas. There, on large grassland ranches, some exotic species that are endangered in the wild have been brought back in large numbers. But there's a catch: a percentage of the herd is hunted every year by hunters who pay big money for a big catch. The ranchers say this limited "culling" gives them the money they need to care for the animals and conserve the species. But animal rights activists don't buy that argument, claiming the hunts are "canned" and that hunting is wholly inconsistent with conservancy."

Chart of the Day: America's Energy Revolution

The U.S. Energy Information Administration just released December 2011 data for U.S. petroleum trade. The EIA reports that net oil imports fell last year to 45.2% (lower even than previously reported based on data that didn't include year-end figures), which is the lowest level for net oil imports in 16 years, going back to a 44.5% share in 1995.  Part of this 16-year low for net oil imports is because of the domestic shale oil revolution that allowed North Dakota to surpass the daily oil production of OPEC-member Ecuador last year.  

At the current pace of monthly increases, North Dakota will be producing oil later this year at a level that could displace imports from Venezuela or Nigeria, and it will also likely surpass Alaska and California this year to become the No. 2 oil-producing state in the U.S.  This year will also likely be the seventh consecutive year of falling U.S. net oil imports, and if net oil imports fall below 44% (which is likely), it will be the lowest level in 20 years.  

Update: The new EIA data also show that U.S. petroleum production reached an 8-year high in 2011 (highest since 2003) and oil from the lower 48 states reached a 14-year high (highest since 1997), see chart below.  Since the lows in 2008, total U.S. oil production has increased by 14.6% overall and by almost 20% in the lower 48 states. 

Chart of the Day: Structural Shift in U.S. Economy

An earlier version of the chart above was featured on CD in November and it generated a lot interest and 133 comments, so I'm providing an update here based on employment and real GDP data through 2011.  More than any single chart, I think this one really helps to accurately capture graphically the current state of the U.S. economy, although Scott Grannis has another GDP graph that also helps us understand today's economic situation. 

1. Measured by real output (GDP), the U.S. economy has made a complete recovery from the 2007-2009 recession.  Real output in Q4 of 2011 was higher than the 2007 Q4 level when the recession started by 0.72%.  

2. While real output has completely recovered to above pre-recession levels, U.S. civilian employment at 140.56 million is still 5.7 million jobs (and 3.9%) below the 2007 peak of 146.27 million jobs, and that translates into the ongoing and persistent "jobless recovery."   

3. The recovery of real output to historical highs with 3.9% fewer employees has also translated into record-level corporate profits, which are now 40% above pre-recession levels.  

4. The recovery of both output and profits to above 2007 levels with 5.7 million fewer workers could explain the sluggish job growth that will probably continue for several more years.  If companies can produce more output now than in 2007 with fewer workers and record profits, where's the incentive to hire more workers?  

The Great Recession stimulated huge productivity and efficiency gains as companies shed marginal workers and learned how to do "more with less (fewer workers)."  The surge in productivity over the last few years may be unprecedented in recent history and may be responsible for a "structural shift" in the U.S. economy that will have long-lasting effects, e.g. an extended period of time with a jobless rate above 7%. 

Sunday Morning Links

1. North Dakota's oil prosperity is spreading statewide to cities on the far eastern edge of the state like Grand Forks and Fargo that are 300 miles away from the Bakken oil region in the far western part of the state.  Oil prosperity may also start to spreading across state lines into Montana.   (h/t BakkenBlog on Twitter)  

2. A landslide Florida primary victory is being predicted for Romney, according to current Intrade odds of 96%.  Odds for Romney to win the Republican nomination are 88%. 

3. Houston Chronicle - "The fight for hearts and minds when it comes to climate change has moved to a new battleground: your television set. Climate change activists have launched a campaign, dubbed Forecast the Facts, that outs television meteorologists who are "deniers" of mainstream climate change science."

4.  Brian Wesbury report that the weakest part of Friday's GDP report was government purchases.  "Excluding government, real GDP grew at a robust 4.5% annual rate in Q4 and was up 2.6% for 2011 as a whole." 

5. Bloomberg profiles oil wildcatter Harold Hamm, the biggest winner in the biggest American oil find (Bakken region of western North Dakota) since Prudhoe Bay.

6. VIDEO -- President Obama leaves event promoting clean energy in a motorcade of 22 fossil-fueled vehicles.  

7.  Residential real estate sales in Destin, Florida are stronger than they’ve been in the past five years.  Agents report multiple offers on houses priced below $200,000 with the expectation that prices will rise. (h/t Gary Lyle)

Cartoon of the Day: The Word "Sustainable"

Click to enlarge.

From XKDC.com.

Sugar Tariffs Cost Americans $3.86 Billion in 2011

The chart above displays annual refined sugar prices (cents per pound) using data from the USDA (Tables 2 and 5) between 1982 and 2011 for: a) the U.S. wholesale refined sugar price at Midwest markets, and b) the world refined sugar price. Due to import quota restrictions that strictly limit the amount of imported sugar coming into the U.S. at the world price, the domestic producers are protected from more efficient foreign sugar growers who can produce cane sugar in Central America, Africa and the Caribbean at half the cost of beet sugar in Minnesota and Michigan.

Of course, there's no free lunch, and this sweet trade protection comes at the expense of American consumers and U.S. sugar-using businesses, who have been forced to pay more than twice the world price of sugar on average since 1982 (28.6 cents for domestic sugar vs. 14 cents for world sugar, see chart). How much does this trade protection cost Americans?

We can estimate the cost of sugar protection, using some additional data from the USDA (Table 1) about sugar:

1. American consumers and businesses consumed 10.18 million metric tons (22.44 billion pounds) of sugar last year, and therefore every 1 cent increase in sugar prices costs Americans an additional $224.4 million per year in higher prices.

2. The U.S. produced 7.15 million metric tons (15.76 billion pounds) of sugar last year.

3. Due to quotas, Americans were only allowed to purchase 3 metric tons (6.67 billion pounds) of world sugar, or about 30% of the total sugar consumed. Domestic sugar producers ("Big Sugar") are allowed to control 70% of the sugar market every year through protectionist sugar trade policies that strictly limit foreign competition.

4. If sugar quotas were eliminated, and American consumers and businesses had been able to purchase 100% of their sugar in 2011 at the world price (average of 31.68 cents per pound) instead of the average U.S. price of 56.22 cents, they would have saved about $3.86 billion. In other words, by forcing Americans to pay 56.22 cents for inefficiently produced domestic sugar instead of 31.68 cents for more efficiently produced world sugar, Americans pay an additional 24.54 cents per pound for the 15.76 billion pounds of American sugar produced annually, which translates to $3.86 billion in higher costs for American consumers and businesses.

(Note: This is an estimate based on the assumptions that: a) the amount of sugar consumed in the U.S., and b) world prices, wouldn't change if the U.S. sugar market was completely open.)

Bottom Line: The cost of most trade protection is largely invisible and hard to calculate, but the cost of sugar protection is directly visible and measurable, since the USDA and the futures markets regularly report prices for both high-cost domestic sugar and low-cost world sugar. Like all protection, sugar tariffs exist to protect an inefficient domestic industry (sugar beet farmers) from more efficient foreign producers (cane sugar farmers), and come at the expense of the U.S. consumers and the American companies using sugar as an input, and make our country worse off, on net.

I'm reminded of the recent Quote of the Day from Bastiat: "Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race." U.S. sugar policy has a long history, going back to 1789 when the First Congress of the United States imposed a tariff upon foreign sugar, and is a perfect illustration of trade protection that ignores the viewpoint of disorganized, dispersed consumers in favor of the concentrated, well-organized interests of producers.

Markets in Everything: Tater Tot Food Truck

St. Paul Pioneer Press -- "Look for a new entry coming soon to the food truck scene in downtown St. Paul. Tot Boss will be the city's first truck specializing in Tater Tots. The owner is Dan Docken, a cabinet-maker-turned-chef, who grew up eating all things tots, including his mom's Tater Tot hot dish. The Tot Boss menu will include Tater Tot hotdish, of course, but also bacon-wrapped Tots, Tater Tot nachos, chili Tots and a Tot and beef burrito."

8 Amazing Artisan Videos Everyone Should Watch

From the MakeUseOf.com website:

"Have you ever watched a masterful expert perform their work with such skill and passion that you had no choice but to watch and admire in awe? As I scour the Internet from day to day, I run into videos of these masters every once in a while. And every time, I can’t help but stare in wonder and respect.

An artisan is a craftsman who is a master of their field. Here is a collection of some of the most interesting and mesmerizing videos of artisans who take immense pride in their work and strive to be the best at what they do (watch the master tea server above)."

MP: I might also add that the artisans are all engaged in activities that involve serving others in a market setting....

Modern Automotive Manufacturing

Impressive video of a state-of-the-art VW car factory in Germany, and this February 2009 video is now almost three years old!

What Obama Won't Mention Today in Michigan: Campus Has 53% More Administrators Than Faculty

From an open letter to President Obama on December 16, 2011 from University of Michigan President Mary Sue Coleman:

"Higher education is a public good currently lacking public support. There is no stronger trigger for rising costs at public universities and colleges than declining state support."

According to the Washington Post, "President Barack Obama will announce a plan to shift some federal dollars away from colleges and universities that don’t control tuition costs and new competitions in higher education to encourage efficiency as part of an effort to contain soaring college costs. Obama will spell out his plans Friday at the University of Michigan in Ann Arbor."

One issue that will probably not receive a lot of attention today from either President Obama or President Coleman is the contribution of rising administrative positions and salaries to the rising cost of college tuition.  For example:

1. According to data from the Chronicle of Higher Education (also available from IPEDS), the University of Michigan-Ann Arbor has 53% more full-time "administrators and professionals" (9,652) than full-time faculty (6,305), or a ratio of 1.53 administrative and professional positions for every full-time faculty member.  Couldn't those administrative/professional expenses have something to do with rising tuition?

2. In a front page article on March 27, 2011, the Detroit Free Press reported that:

"Michigan public universities increased their spending on administrative positions by nearly 30% on average in the last five years, even as university leaders say they've slashed expenses to keep college affordable for families. The number of administrative jobs grew 19% over that period at the state's public universities, according to data submitted by the schools to the state budget office.

The increases took place from the 2005-06 school year through 2009-10 -- a period in which both student enrollment and state funding of universities remained about the same, state data show. The higher administrative costs were slightly exceeded by tuition hikes over this period."

3. From this Detroit Free Press database that accompanied the article above, administrative salaries at the University of Michigan-Ann Arbor increased by almost 27% in the five-year period between 2005-2006 and  2009-2010, compared to an 18.2% increase in faculty pay during the same period.   

4. From a related March 13, 2011 story in the Flint Journal:

"The University of Michigan-Flint’s administrative ranks has grown the fastest among the 15 public universities in the state, according to figures from the Michigan Higher Education Institutional Data Inventory released earlier this year. The data showed that the percentage growth in full time administrative and professional staff positions swelled 74 percent between 2005 and 2009, although the percent of administrative positions on campus remains average compared to other universities.

As the number of deans, associate deans and program directors grew at the Flint campus over the last five years, so have administrative paychecks. Six-figure salaries more than doubled on campus since 2006, according to the newest faculty and staff salary information recently released by UM. Nearly 50 of the roughly 1,000 employees made $100,000 or more at UM-Flint, compared to about 20 four years earlier."

5. It's not just Michigan universities that have added administrators, it's a national phenomenon, here's a story from a few years ago about the growth in administrative positions in the University of North Carolina system.

Update 1: According to IPEDS data from the U.S. Department of Education, here are the headcounts for the Univeristy of Michigan-Ann Arbor in 2010 (most recent year available):

Full Time Faculty: 5,693
Full Time Executive/Managerial: 1,711
Full Time Professionals: 6,772
Total Executive/Managerial/Professional: 8,483

Therefore, in 2010, there were 49% more full-time administrative/professional staff than full-time faculty.

Update 2: Examples of positions in the Executive/Managerial category include: Deans (including Associates and Assistants), Program Directors, Office Managers, Supervisors, Registrar, Provost, President, Chancellor, Vice-Chancellors, etc.

Positions in the Professional category include Coordinators, Trainers, Graphic Artist, Program Manager, Analyst, Benefits Representative, Accountant, Associate Librarian, Financial Aid Administrator, Major Gifts Officer, Counselor, etc.  

Interesting Fact of the Day

The jobless rate for the manufacturing sector of the U.S. economy was below the national jobless rate for each of the last seven months of 2011 from June through December.  That reversed a period from October 2008 to May 2011 when the manufacturing jobless rate was equal to or higher than the national average rate for 32 consecutive months.  The gap during that period was at its highest in April 2009 when the manufacturing jobless rate was almost 4 points higher at 12.4% than the national average rate of 8.6%.  There has never been any comparable 7-month period going back to when the BLS started tracking manufacturing jobless rates that the manufacturing unemployment rate was below the national average for that many consecutive months.

Update: See Table A-14 of the BLS Employment Report for jobless rates by industry. 

U.S. Manufacturing Already Has Record Profits and Is Doing Quite Well Without Any Government Help

Obama at the SOTU: "If you’re an American manufacturer, you should get a bigger tax cut. If you’re a high-tech manufacturer, we should double the tax deduction you get for making products here. And if you want to relocate in a community that was hit hard when a factory left town, you should get help financing a new plant, equipment, or training for new workers."

In December, I posted about the financial results for the U.S. manufacturing sector through Q3 of 2011, with the following highlights:

1. After-tax profits for U.S. manufacturing corporations were just short of $150 billion during the July-September period in 2011.  Profits for Q3 fell by 4.5% from Q2, but were 20.4% ahead of the same quarter in the previous year, and were the second-highest quarterly profit total for U.S. manufacturers in history. Compared to the $118.6 billion in profits for Q4 2007 when the recession started, manufacturing profits are now 26% above that pre-recession level.  The chart above show annual manufacturing profits back to 1999, with 2011 profits estimated at $600 billion based on results through the first three quarters.

2. The 20.4% increase in manufacturing profits over the last four quarters through Q3 was more than four times greater than the 6.5% increase in profits after-tax for all U.S. corporations during that time period.   

3. While real GDP has increased by only 1.5% during the most recent four quarter period from 2010 Q3 to 2011 Q3, the manufacturing component of U.S. industrial production grew at almost three times that rate (4.22%) from September 2010 to September 2011.

4. Over the most recent 12-month period from December 2010 to December 2011, manufacturing employment grew by 1.95%, compared to the 1.20% growth in total payroll employment over that same period.   

5. For the last seven months of 2011, the jobless rate for manufacturing was below the national average, and is currently at 7.9%, or almost a full half-point below the U.S. average of 8.3% (not seasonally adjusted). 

6. By all relevant measures of economic performance: growth in profits, output gains, employment growth, and unemployment rates, American manufacturing remains the "shining star" of the U.S. economy.  

Bottom Line: American manufacturing is doing quite well and experiencing record profits, without any special government taxpayer help or tax breaks from Obama financed by taxpayers.  In fact, you could almost make a case that U.S. manufacturing is experiencing "windfall profits." But if that information spreads to Capitol Hill, there could be a call for a "Reasonable Profits Board" for American manufacturing, or a "windfall profits tax," which are the political responses whenever U.S. oil companies experience record profits!

The Newly Revised Leading Economic Index Finishes 2011 With Three Monthly Gains

"The Conference Board Leading Economic Index (LEI) for the U.S., after its first major comprehensive revision since 1996, increased in December (see chart above). The largest contributors to the increase were the interest rate spread and improving employment indicators. In the six-month period ending December 2011, the leading economic index increased 0.1 percent (about a 0.2 percent annual rate), much slower than the growth of 2.7 percent (about a 5.5 percent annual rate) during the previous six months. But, the strengths among the leading indicators have been somewhat more widespread than the weaknesses through December."

Seven of the ten indicators that make up The Conference Board LEI for the U.S. contributed positively in December. The positive contributors – beginning with the largest positive contributor – were interest rate spread, average weekly initial claims for unemployment insurance (inverted), average weekly manufacturing hours, stock prices, ISM new orders index, manufacturers’ new orders for nondefense capital goods excl. aircraft, and manufacturers’ new orders for consumer goods and materials*. The negative contributors – beginning with the largest negative contributor – were average consumer expectations for business and economic conditions and Leading Credit Index(inverted). Building permits held steady in December."

MP: The revisions to the leading index included replacing three of the ten individual components with new economic variables, and making a minor adjustment to another component.  The Leading Index has been on an upward trend since April 2009 as it signalled that the recession was coming to an end in June of that year, and the LEI has increased in 30 out of the last 33 months since the upward trend started in 2009.  While the newly revised index has been relatively flat for the last 8 months, the index increased in each of three months at the end of 2011, and there's nothing to suggest a pending slowdown in economic growth this year.

Markets in Everything: Hire People for $5

Fiverr.com -- The online marketplace for people to share things they're willing to do for $5. Examples include:

I will create a ventriloquist puppet video with any message you want for $5.

I will write anything on my feet in high heels for $5 and send you three photos.

I will edit your document for correct American English grammar for $5.

Chart of the Day: Energy Shares Through 2030

The chart above is from the "BP Energy Outlook 2030" (p. 18) and shows the historical and estimated future mix of world energy sources through 2030.  Some key points:

1. In the future, natural gas usage as a share of total energy will increase, oil usage will decrease, and coal's share of energy consumption will be about the same, and those three hydrocarbons will converge in 2030 at about a 28% share for each energy source.

2. Renewables (including biofuels) will increase in importance as a source of energy, but by 2030 will only represent about 5% of total world energy consumption. 

3. Hydro, nuclear and renewables will converge at about a 5% share of energy usage for each source.

Bottom Line: BP's projections for energy shares through 2030 is more evidence that a new world energy map is emerging thanks to advances in drilling technologies like fracking and the abundance of natural gas, and the new energy map will be increasingly centered not on the Middle East but on the Western Hemisphere as Daniel Yergin pointed out recently in the Washington Post.  The projections also demonstrate that renewable energy will continue to play a very minor role as a future energy source over the next several decades, and even massive taxpayer subsidies won't change that reality. 

Markets in Everything: LowestMed App

From MedGadget -- "LowestMed is a discount prescription service that shops for the lowest price for prescription medications.  The idea is that you enter the medication prescribed, and whether you are at the doctor’s office or out looking for a refill, the app tells you (and shows you, via GPS), the pharmacy with the best deal on that prescription."

Women Have Less Political Ambition Than Men. So?

From the executive summary of the article "Men Rule: The Continued Under-Representation of Women in U.S. Politics," by Jennifer L. Lawless (American University) and Richard L. Fox (Loyola Marymount University):

"Study after study finds that, when women run for office, they perform just as well as their male counterparts. No differences emerge in women and men’s fundraising receipts, vote totals, or electoral success. Yet women remain severely under-represented in U.S. political institutions (see top chart above). We argue that the fundamental reason for women’s under-representation is that they do not run for office. There is a substantial gender gap in political ambition; men tend to have it, and women don’t.

We arrive at this conclusion by analyzing data from a brand new survey of nearly 4,000 male and female “potential candidates” – lawyers, business leaders, educators, and political activists, all of whom are well-situated to pursue a political candidacy – and comparing our results to a survey we conducted in 2001. Despite the emergence over the past ten years of high-profile women in politics, such as Nancy Pelosi, Hillary Clinton, and Sarah Palin, we find that the gender gap in political ambition is virtually the same as it was a decade ago (see middle chart above). The gender gap in interest in a future candidacy has actually increased (see bottom chart above)."

Up to this point, the study seems to take an unbiased, gender-neutral, scientific approach by pointing out that female under-representation in holding political office is not because women are discriminated against once they decide to run for office, but rather that there are significant gender differences in terms of political ambition to run for office in the first place. In that case, isn't it possible that those gender differences and "political gender gap" might be innate and/or acceptable?  Well, not if perfect statistical gender parity for holding political offices is the goal, and that's what the authors seem to be suggesting is the ideal outcome. For example, here's the concluding paragraph:

"Concerns about democratic legitimacy and political accountability necessitate that we continue to examine and work to ameliorate gender disparities in office holding. The large gender gap in political ambition we identify, coupled with the stagnation in the number of women serving in elected offices in the last decade, makes the road ahead look quite daunting. Indeed, many barriers to women’s interest in running for office can be overcome only with major cultural and political changes. But in the meantime, our results suggest that recruiting female candidates and disseminating information about the electoral environment and women’s successes can help narrow the gender gap and increase women’s numeric representation. The challenges in front of us are to continue to raise awareness about the barriers women face, and to continue to advocate for a more inclusive electoral process."

MP: Like most gender differences in outcomes, there only ever seems to be concern when women are under-represented in fields like politics, and never any concern when men are under-represented for outcomes like bachelor's degrees, master's degrees, doctor's degrees, graduate school enrollment, biology degrees, veterinary degrees, optometry degrees, pharmacy degrees, etc.  The only exceptions are when the outcomes are negative like prison populations, learning disabilities, occupational injuries and fatalities, motorcycle injuries and fatalities, suicides and drug addiction and then there is no concern about female under-representation.  

A Revolution in Higher Education is Underway

A few days ago, I reported on how MITx could revolutionize higher education by offering free online classes along with a new benefit: credentials. Beginning this spring, students will be able to take free, online courses from MIT, and if they prove they've learned the materi­al through an assessment, they can pay a fee and receive a certificate from MITx.  

In a related recent development, Felix Salmon and The Chronicle of Higher Education report this week that Stanford University professor Sebastian Thrun, who taught an online artificial intelligence course to more than 160,000 students in the fall through Stanford, has given up his tenured teaching position there to go full-time with Udacity, a new start-up firm he co-founded that offers low-cost online classes.

From The Chronicle:

"Mr. Thrun told the crowd at the Digital–Life–Design conference in Munich, Germany that his move was motivated in part by teaching practices that evolved too slowly to be effective. During the era when universities were born, “the lecture was the most effective way to convey information. We had the industrialization, we had the invention of celluloid, of digitial media, and, miraculously, professors today teach exactly the same way they taught a thousand years ago,” he said.

He concluded by telling the crowd that he couldn’t continue teaching in a traditional setting. “Having done this, I can’t teach at Stanford again,” he said.

One of Udacity’s first offerings will be a seven-week course called “Building a Search Engine.” It will be taught by David Evans, an associate professor of computer science at the University of Virginia and a Udacity partner. Mr. Thrun said it is designed to teach students with no prior programming experience how to build a search engine like Google. He hopes 500,000 students will enroll.

Teaching the course at Stanford, Mr. Thrun said, showed him the potential of digital education, which turned out to be a drug that he could not ignore.

“I feel like there’s a red pill and a blue pill,” he said. “And you can take the blue pill and go back to your classroom and lecture your 20 students. But I’ve taken the red pill, and I’ve seen Wonderland.”

Watch his talk here.  More evidence that the revolution in higher education in underway. 

Obama Deserves No Credit for the Oil and Gas Boom

From Warren Meyer in Forbes (ht/Morganovich): 

"The one person who deserves no credit for this [oil and gas] boom is Barack Obama.  In fact, this Administration has bent over backwards to make oil and gas production and exploration as difficult as possible. According to the Institute for Energy Research (IER), the Obama Administration has been issuing BLM oil and gas leases at the lowest pace of any president in the last 30 years  – in fact at half the rate of the Clinton White House and 80% slower than in the Reagan era, dragging their feet to please the environmental lobby (see top chart above).

By comparing oil and gas production on Federal vs. state and private lands, we can get a true read on this Administration’s energy policy. Since Obama took office, according to the Institute for Energy Research, oil production has fallen precipitously on Federal onshore and offshore leases, while it has increased by an even larger amount on state and private lands largely outside of this Administration’s reach. The only reason total oil [and gas] production has increased since Obama took office is because private companies on state and private lands have increased production enough to offset the large drop that has occurred in Obama-controlled producing regions. Obama’s taking credit for the current oil and gas boom ranks up there in the pantheon of great political whoppers right next to Al Gore’s invention of the Internet."

MP: The bottom chart above shows that the share of total natural gas production taking place on federally administered land fell to 20% in 2010, the lowest share in at least 35 years. 

Walmart Holds 'Idol'-Style Contest for Small Businesses; Winner Will Be Sold in Select Stores

USAToday -- "Walmart is holding a contest called the "Get on the Shelf" program — an American Idol-style competition for small businesses. Two rounds of online voting will determine three winners, all of which will be sold online, with the grand prize winner gaining a spot in select stores."  

Here are photos of some of the products that have been submitted, see photo above of "Uggs for dogs." 

Will U.S. Oil and Gas Manufacturers Be Included?

U.S. oil and gas companies have been increasing production in America with "high-tech" manufacturing and creating thousands of new U.S. jobs for years. 

President Obama last night at the SOTU speech:

"If you’re an American manufacturer, you should get a bigger tax cut. If you’re a high-tech manufacturer, we should double the tax deduction you get for making products here. And if you want to relocate in a community that was hit hard when a factory left town, you should get help financing a new plant, equipment, or training for new workers. 

My message is simple. It’s time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America. Send me these tax reforms, and I’ll sign them right away."

By some classifications, the "petroleum and coal products" industry is considered to be part of U.S. manufacturing, e.g. see IndustryWeek's report on the 500 largest publicly held U.S. manufacturing companies, which includes Exxon Mobil, Chevron, Conoco Phillips, etc.

Questions:

1. Will Obama include U.S. oil companies in the group of American manufacturers that qualify for a "bigger tax cut?"

2. Will oil and gas companies using advanced technologies like hydraulic fracturing (and the "super-fracking" technologies that are under development) qualify as "high-tech manufacturers" and get a double tax deduction for "high-tech" domestic energy production?

3. Will some of the oil and gas companies get any credit for re-vitalizing some formerly depressed communities in North Dakota and rust-belt states like Ohio and Pennsylvania, and creating jobs in America (see chart above)?

4. Will oil and gas companies (and other American manufacturers supporting the oil and gas industries with steel pipes, drilling equipment and sand, etc.) that create jobs in America, get rewarded with help financing new plants, equipment, or training for new workers for future energy production and the manufactured products that support the industry?

Somehow I don't think Obama was thinking of oil and gas companies when he talked about "American manufacturing," and I don't think he gives any credit to thousands of American energy-related jobs that have already been created thanks to advanced "high-tech" fracking techniques that created the "shale revolution" (see chart above).

Update: Marko in the comments section asks "By saying that he wants to cut taxes in certain sectors to encourage or help them, doesn't Obama admit that higher taxes hurt business?"

More Gains for U.S. Manufacturing

From this morning's report on manufacturing activity in the Richmond Fed district (Virginia, most of W. Virginia, North and South Carolina and Maryland):

"In January, the seasonally adjusted composite index of manufacturing activity—our broadest measure of manufacturing—increased nine points to 12 from December’s reading of 3. Among the index’s components, shipments gained fourteen points to 17 and new orders doubled, picking up seven points to finish at 14. The jobs index picked up eight points to 4.

In our January survey, our contacts were more bullish about their business prospects for the next six months. The index of expected shipments increased nine points to 36, expected orders gained eleven points to finish at 32, and backlogs added eight points to 14. The capacity utilization and vendor delivery times indexes each rose nine points to finish at 11 and 20, respectively. Moreover, readings for planned capital expenditures moved up eight points to finish at 15. District manufacturers’ hiring plans in January were somewhat more optimistic as well. The expected manufacturing employment index edged up three points to 20, while the average workweek indicator held steady at 7. The index of expected wages was virtually unchanged at 19."

This follows a strong report last week from the Fed on both current and future manufacturing activity in New York state, and is consistent with today's ATA Truck Tonnage Index for December, which registered the largest annual gain in 13 years, largely due to solid manufacturing output.

Amazing YouTube Stats

Uploads to YouTube:

One hour of video every second.

9 months every two hours.

A decade every day.

A century every 10 days.

YouTube Views per day:

4 billion.

BPP@MIT Data Show Inflation Slowing at Year-End

The charts above shows monthly and annual inflation rates from the Billion Prices Project @ MIT over the 12-month period ending at the end of December.  According to the BPP website, the index is "designed to provide real-time information on major inflation trends, not to forecast official inflation announcements. We are constantly adding new categories of goods, but we do not cover 100% of CPI goods and services. The price of services, in particular, are not easy to find online and therefore are not included in our statistics."

Bottom Line: Monthly inflation, measured by the BPP @ MIT, has been trending downward since February, and was showing slight deflationary pressures in November and December.  Similarly, BBP annual inflation has been trending downward since July and reached an eight-month low on December 21.  According to this real-time measure of inflationary trends in the U.S. economy, inflationary pressures are gradually moderating, and there is even evidence now of short-term deflation for the months of November and December.    

Bakken Shale Oil Continues to Fuel a Shovel-Ready Successful Job Stimulus Program in North Dakota

The state of North Dakota continued to lead the country in December with: a) the lowest state jobless rate at 3.3%, and b) the highest annual rate of employment growth in December at 5.7% (BLS data here), which also set a new all-time North Dakota record for the largest 12-month percentage employment increase since monthly records started back in 1990.  The 5.7% over-the-year percentage job gain for North Dakota in December was almost twice the 3% pace of job growth in Utah, the state with the second highest job growth in 2011.

Job growth in the state's booming oil industry was spectacular, with almost a 40% increase in mining jobs in 2011.   Further, North Dakota has nine counties with jobless rates at 2% or less for November, and one county - Williams County, at the epicenter of the Bakken oil region - with a jobless rate less than 1%.    

The chart above shows the phenomenal employment growth in North Dakota since 2000, especially during the last three years.  Over the 12-year period since 2000, U.S. payroll employment has been almost flat, with only a slight 0.86% increase between January 2000 and December 2011.  During that same period, North Dakota employment grew by 24% overall and by 448% for the state's mining sector.

In a related story, Investor's Business Daily (IBD) reported this yesterday:

"High oil prices hurt at the gas pump. But they help at the wellhead pump. That has boosted profit margins at Continental Resources (CLR) the largest landholder in the Bakken Shale oil and gas play in parts of North Dakota, Montana and Canada. Continental generated almost 63 cents of profit for every dollar of sales last year, topping IBD's Screen of the Day for Monday, which ranks firms by that key metric.  Northern Oil & Gas (NOG), another Bakken Shale play, also ranked high, with a 58.1% profit margin." 

In a separate news item, IBD reported that Continental share prices hit a three-and-a-half year high Jan. 10 because of the recent strength in the oil market.

Bottom Line: Drill, drill, drill = jobs, jobs, jobs and also = profits, profits, profits. But don't tell Rep. Dennis Kucinich, he'll want to establish the first "Reasonable Profits Board" in the state of North Dakota. 

ATR Presents Obama/State of the Union Bingo

Americans for Tax Reform (ATR) once again presents these handy Bingo cards (see sample above, there are four other versions available) which you may use to check off terms and phrases likely to be used during President Obama's State of the Union address tonight.
 
ATR also provides a handy key for what the terms and phrases really mean, here's a sample:

Investment – Spending taxpayer money on Obama re-election constituencies such as government employee unions, teachers' guilds, and big-city political machines.

Energy – Something that flows from good intentions, government programs, "stimulus" spending but not pipelines.

Exports – That trade – and only that trade – acceptable to union bosses.

Compromise – Tax hikes.

Sacrifice – Tax hikes.

Bipartisan – Tax hikes.

Fair or Fair Share – Tax hikes.

Balanced – Tax hikes.

Obstructionists – House Republican lawmakers who have actually passed a budget – NOT the Senate Democrats who have refused to pass a budget for 1,000 days.

Wall Street – 1. Where your IRA and 401(k) live. 2. A bauble to distract you from noticing my bailout of Fannie and Freddie.

Jobs – "You want to find work on the Keystone XL pipeline? Tough luck – I've got a campaign to run."