Saturday, January 28, 2012

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."

Friday, January 27, 2012

8 Amazing Artisan Videos Everyone Should Watch

From the 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.  

Thursday, January 26, 2012

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

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."

Wednesday, January 25, 2012

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.


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?"

Tuesday, January 24, 2012

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."

Tuesday Links

1. Some Chevrolet dealers are turning down Volts that General Motors wants to ship to them, a potential stumbling block as GM looks to accelerate sales of the plug-in hybrid.
2. GALLUP: U.S. economic confidence is rising and was at -25 for the week ending Jan. 22, improved from -29 the prior week and the highest level since the week ending May 22, 2011.
3. An international study of postal services in 30 high-income countries finds that most are profitable, and the ongoing losses in U.S. are an exception (losses in all five years from 2007-2011).

5. U.S. $2 bills are a hot item in Vietnam for the Lunar New Year, and are selling above face value, some for $125, Isn't that "bill scalping?"

Markets in Everything: Weed Whacking Golf Driver

"This is the golf driver with a built-in grass trimmer, ideal for surreptitiously improving one's lie. Destined for use by friendly foursomes that often find themselves in the rough, the club looks like an oversized driver that fits into any golf bag, yet a simple flick of a button on its plastic bottom flips open the club's bottom to reveal a single-string trimmer."

Available from Hammacher Schlemmer for $24.95, watch video demonstration here.

HT: W.E. Heasley

Rejecting the Keystone Pipeline: An Act of Insanity

From Robert Samuelson in the Washington Post:

"President Obama’s rejection of the Keystone XL pipeline from Canada to the Gulf of Mexico is an act of national insanity. It isn’t often that a president makes a decision that has no redeeming virtues and — beyond the symbolism — won’t even advance the goals of the groups that demanded it. All it tells us is that Obama is so obsessed with his reelection that, through some sort of political calculus, he believes that placating his environmental supporters will improve his chances.

Aside from the political and public relations victory, environmentalists won’t get much. Stopping the pipeline won’t halt the development of tar sands, to which the Canadian government is committed; therefore, there will be little effect on global-warming emissions. Indeed, Obama’s decision might add to them. If Canada builds a pipeline from Alberta to the Pacific for export to Asia, moving all that oil across the ocean by tanker will create extra emissions. There will also be the risk of added spills."

HT: Warren Smith

Monday, January 23, 2012

Bakken Oil is Having Major Impact on Western ND

A meeting was held of the North Dakota Sheriffs & Deputies Association in Bismarck, and as part of this meeting we had an opportunity to sit down with law enforcement officials from western ND to discuss what they are going through with the oil impact.  Here are some oil issues from western North Dakota.  

MP: There are 35 in total, these are my "Top 12" issues facing a community where the economy is booming, the jobless rate is less than 1%, and there are bound to be some "growing pains."

1. Traffic accidents, especially fatal traffic accidents are of very high concern. At one location on Highway 85 south of Williston, a traffic count was conducted in October of 2011. In one 24-hour period there where 29,000 vehicles through the intersection, with 60% of the traffic being semi trailer trucks.

2. Traffic is typically backed up for ½ to ¾ of a mile. One person stated that he recently sat at an intersection on Highway 85 for 30 minutes waiting for an opening in the traffic to cross over.

3. Rents in Williston currently range from $2,000 for a one-bedroom apartment to $3,400 for a three-bedroom apartment.

4. Williams County allows three campers per farmstead, the farmers almost all have three campers on their property and are charging $800 per camper per month for rent.

5. The Walmart in Williston no longer stocks shelves, they bring out pallets of merchandise at night, and set them in the aisles, and customer shops from the pallets.

6. On January 1, the Williston Walmart had 148 campers overnight in their parking lot.

7. The Williston McDonalds just announced that they will pay new workers $15 an hour, a $500 immediate signing bonus and full medical benefits. 

8. The local restaurants are full and with limited staffing, they usually just have the drive through open. The restaurants that have inside seating are now experiencing an hour wait at all times.

9. The local Motel 6 in Williston now rents rooms for $130 per night.

10.  Trinity Hospital in Minot has just hired 115 nurses from the Philippines, because they cannot get enough local nurses to apply.

11. The Williston General Motors dealership has now become the No. 1 seller of Corvettes in the upper Midwest.

12.  The Williams County jail has increased bookings by 150%, with a 100% increase in the inmate population. Bonds of $5,000 to $10,000 are typically paid with cash out of pocket. The Williams County Sheriff stated that a couple of weeks ago he received a $63,000 bond in cash carried into the jail in a plastic Walmart bag.

Thanks to Steve Gorkis and Bob Anderson for sending this.  

Monday Links

1. Want the Lowest Possible Airfare? Buy your ticket six weeks before your flight according to a recent study.

2. In one of the starkest signs yet that chain stores fear a new twist in shopping, Target is asking suppliers for help in thwarting "showrooming"—that is, when shoppers come into a store to see a product in person, only to buy it from a rival online, frequently at a lower price.

3. Aspen judge sentences 76-year old man to jail for 15 days for operating an unlicensed taxi service.  The senior citizen said he does not operate a taxi for profit but merely enjoys giving friends and service-industry workers a ride home late at night. The money he collects pays for gas and upkeep on his vehicle. (HT: Armin Ghazi)

4. Here's a link to Alltop, a pretty cool aggregating website for economics blogs (including CD).  You can register and customize your selections for only the economic blogs (or general news websites) that you want to read on a regular basis.

5. Chart below is from the WSJ showing how crude oil and natural gas prices have been diverging since the last week of 2008.

6. North Dakota's oil boom is fueling an energy-related education boom in the state.  The North Dakota State Board of Higher Education just approved the creation of a new department of petroleum engineering at the University of North Dakota in response to the needs of the petroleum industry, especially in western North Dakota.

Online Poll Shows Strong Approval for Gov. Walker

Wisconsin Governor Scott Walker faces a possible recall election sometime between April and June. The chart above shows the current results of an online poll being conducted by the liberal-leaning Racine Journal Times for the question "Do You Approve of the Job Gov. Walker is Doing?" Based on almost 900,000 votes so far, there is more than a two-to-one margin in favor of the response "strongly approve" over "strongly disapprove."  The issue is pretty polarizing, since almost nobody voted for either "approve" or "disapprove."

If these national results accurately reflect Wisconsin voters (which might not be the case), the recall election could be in trouble.  Governor Walker doesn't seem too concerned, his comment to Greta Van Susteren is to "bring it on."

You can vote here, and then you'll see the most recent results. If you try to vote twice, your second vote won't count but you can still see the results.

HT: Phillip Beaver

Chart of the Day: The Bright Future of Shale Gas

According to data in the EIA's Annual Energy Outlook 2012, domestic shale gas production will increase from its current 23% share of total natural gas production to 49% by 2035 (see chart above, click to enlarge).

MITx Could Revolutionize Higher Education

"MIT has invented or improved many world-changing things—radar, information theory, and synthetic self-replicating molecules, to name a few. Last month the university announced, to mild fanfare, an invention that could be similarly transformative, this time for higher education itself. It's called MITx. In that small lowercase letter, a great deal is contained.

MITx is the next big step in the open-educational-resources movement that MIT helped start in 2001, when it began putting its course lecture notes, videos, and exams online, where anyone in the world could use them at no cost. The project exceeded all expectations—more than 100 million unique visitors have accessed the courses so far.

Meanwhile, the university experimented with using online tools to help improve the learning experience for its own students in Cambridge, Mass. Now MIT has decided to put the two together—free content and sophisticated online pedagogy­—and add a third, crucial ingredient: credentials. Beginning this spring, students will be able to take free, online courses offered through the MITx initiative. If they prove they've learned the materi­al, MITx will, for a small fee, give them a credential certifying as much.

In doing this, MIT has cracked one of the fundamental problems retarding the growth of free online higher education as a force for human progress. The Internet is a very different environment than the traditional on-campus classroom. Students and employers are rightly wary of the quality of online courses. And even if the courses are great, they have limited value without some kind of credential to back them up. It's not enough to learn something—you have to be able to prove to other people that you've learned it. The best way to solve that problem is for a world-famous university with an unimpeachable reputation to put its brand and credibility behind open-education resources and credentials to match." 

MP: This development has the potential to be big, very, very big.  

Update: Here's a news release from MIT, with a list of FAQs.

Minnesota's Anti-Consumer Embalming Laws

From an editorial in the StarTribune about the Institute for Justice's latest case in Minnesota (featured on CD last week):

"Should the government require cabbies to drive six-wheeled taxis or make art galleries buy a Picasso just to prove how serious they are about serving the public? No, because it is silly to force entrepreneurs to waste money on things they don't want, don't need, won't use and can't afford. But the state of Minnesota thinks otherwise.

Verlin Stoll is a 27-year-old entrepreneurial dynamo who owns Crescent Tide funeral home in St. Paul. He wants to expand his business, hire new employees and offer the very lowest prices in the Twin Cities to even more people, particularly disadvantaged communities. But Minnesota refuses to let Stoll build a second funeral home unless he builds a $30,000 embalming room there that he will never use.  Minnesota's law is irrational.

The only reason this law is still on the books is so that the big, full-amenity funeral-home businesses can benefit by a law that drives up prices for consumers and drives up operating expenses for competitors such as Stoll. Stoll's basic services fee is only $250, which is about 90 percent lower than the $2,500 that the average Twin Cities' funeral home charges. Stoll's business model is built on minimizing fixed costs, which is why he does not have a hearse or chapel.

This law -- to the advantage of his competitors -- stands in the way of his expanding his low-cost, high-quality approach. The government shouldn't force Minnesotans to do useless things. That's why Stoll and the Institute for Justice are challenging the law in a lawsuit filed last week."

MP: If we applied the Bastiat principle to "Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race" to this issue, Verlin Stoll and the Institute for Justice would easily prevail over the state of Minnesota and its anti-consumer, anti-competitive embalming laws.   

Abundance: The Future Is Better Than You Think

In the upcoming book "Abundance: The Future is Better Than You Think" (to be released February 21) space entrepreneur turned innovation pioneer Peter H. Diamandis (featured in the video above) and award-winning science writer Steven Kotler document how progress in artificial intelligence, robotics, infinite computing, ubiquitous broadband networks, digital manufacturing, nanomaterials, synthetic biology, and many other exponentially growing technologies will enable us to make greater gains in the next two decades than we have in the previous two hundred years.

Some factoids from the book's website:

1. A Masai warrior in Africa with a smartphone on Google has access to more information than the President of the United States did just 15 years ago.

2. The number of people living in absolute poverty has fallen since the 1950s has dropped by more than half. At the current rate of decline, it would hit zero around 2035.

3. From the very beginning of time until 2003, humankind created five billion gigabytes of digital information. In 2010, the same amount of information is created every two days; by 2013, every 10 minutes.

4. In 15 years, the average $1000 laptop should be computing at the rate of the human brain.

HT: Michael Breazeale

Sunday, January 22, 2012

Government Fights to Perpetuate Artificial Bone Marrow Shortage By Banning Donor Compensation

Here are some facts about bone marrow donation:

1. Thousands of Americans die of various blood diseases each year because they cannot find matching bone marrow donors. 

2. Donor compensation could substantially increase the number of people who sign up to be a potential bone marrow match. 

3. Advances in medical technology have made the extraction of the hematopoietic stem cells found in bone marrow essentially as easy as blood donation.

4. Last month a unanimous three-judge panel ruled in favor of a nonprofit group,, that wants to encourage bone marrow donations by offering $3,000 scholarships, housing allowances, or charitable donations to those who are matched with blood disease patients. The donor group said the application of the National Organ Transplant Act, which includes bone marrow among the "organs" that cannot be sold, violated the equal-protection clause, because there is no rational basis for government to treat donors undergoing apheresis differently from blood or sperm donors.

5. The Justice Department and the National Marrow Donor Program have moved quickly to try to overturn the decision that would allow compensation for bone marrow donors. Reasons? The Justice Department claims that that donor compensation undermines Congress’s clear policy of allowing only voluntary bone marrow donations. The National Marrow Donor Program claims that "a donor system that relies on the human desire to help others is far superior to one that focuses on self-gain."  

MP: So the government and the National Marrow Donor Program want to perpetuate a needless bone marrow shortage and thereby sentence thousands of Americans to a guaranteed death sentence as a direct consequence of the artificial bone marrow shortage.  Just wondering - would the National Marrow Donor Program likewise suggest that donor systems for food, clothing, cars, and shelter, which rely on the human desire to help others, are far superior systems to ones that focus on self-interest and self-gain?    How would your current diet compare, in terms of quantity and quality, to the food available to you if you had to rely on the human desire of wheat farmers in Kansas, cattle ranchers in Texas, and dairy farmers in Wisconsin to help others and supply you with your food?

Question: Are there any material differences between the provision of life-sustaining food products and the provision of life-sustaining bone marrow that would justify allowing market transactions for food but not bone marrow?  If so, what are those differences?

Quote of the Day from Frederic Bastiat

Four days before his death in 1850, Frederic Bastiat sent this message to a friend:

"Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race."

MP: How simple and yet deeply profound at the same time, with major implications for public policy and policymakers, who routinely ignore the interests of the unorganized consumers and thereby the human race, but place close attention to the well-organized, well-funded, concentrated interests of producers when they enact legislation like farm subsidies, protectionist tariffs, anti-dumping laws, occupational licensing, forced unionism, restrictions limiting the number of taxicabs, etc.

Obama's Disgraceful Choice of Carbon-Intense Conflict Oil from Our Greatest Enemy in the Western Hemisphere Over Ethical Oil from Canada

Here's how one Canadian, Toronto Sun columnist Ezra Lavant, views Obama's "Keystone Cop-out":

"U.S. President Barack Obama made a choice last week: He chose Venezuela over Canada.

That’s what he did when he rejected the proposed Keystone XL pipeline that would have taken oilsands oil from Alberta to the Gulf Coast of Texas.

That pipeline would have delivered 700,000 barrels of oil every day from Canada (and from a new oilfield called Bakken that straddles the North Dakota-Saskatchewan border). Which is almost precisely the amount of oil Venezuela now ships to the United States, to those same refineries in Texas.

With one fell swoop, Obama could have replaced conflict oil, from a belligerent, authoritarian OPEC regime, with ethical oil from Canada.  But he didn’t.

Venezuela sells an enormous amount of oil to the U.S. About 800,000 barrels a day. At a hundred bucks a barrel, that’s $80 million a day. That’s about $30 billion a year America pays to its greatest enemy in the western hemisphere.

It’s not just conflict oil, though. Venezuelan oil is some of the most carbon-intense oil in the world — even more so than Canada’s oilsands. So by replacing Venezuelan imports with Keystone XL oilsands oil, not only would Obama have been doing the right thing geopolitically, it would have reduced America’s carbon footprint — which Obama claims to care about

Obama’s decision is a disgrace, but it’s America’s business. So now our business is to sell our oil to Asia. Not just for our economic success, but to prove we are an independent country.

If Obama doesn’t want our oil, well, the rest of the world does."

Twitter Reminder and A Blog Content Bleg

1. Reminder that you can follow me on Twitter for daily updates, news, blog posts, links, economic reports, headlines, re-tweets, data, charts, etc. 

2. The "hat tips" that you see at the bottom of many CD posts reveal the fact that about one-third of the posts (or more) originate with an email "tip" from a regular (or occasional) CD reader.  Publishing CD as a "one-man operation" makes it  impossible to be aware of even a fraction of all the interesting content, news, blog posts on the Internet every, so I'm forever grateful for the "research support" that I get on a regular basis from dozens of contributors.  In the never-ending search for new blog content, I would gladly accept suggestions, links and recommendations by email (mjperry at from anybody who has the time and inclination to send me your ideas, links, articles, etc.  I'm always happy to give the public "hat tip" to acknowledge my "sources," but can also keep you anonymous if you prefer it that way.      

With New Super-Fracking Advances, the Shale Revolution Might Be Just Getting Started

Last Wednesday, I posted a link to a Bloomberg article about "super-fracking" and commented that the ongoing advances in fracking technology might mean that the "shale revolution" is just beginning.  Here are some excerpts from a longer and more detailed Bloomberg article about how "super-fracking" could continue to revolutionize domestic energy development by significantly lowering the costs of unlocking even  more and deeper reserves of shale gas and tight oil than were accessible by traditional fracking:

Bloomberg -- "Oil services companies including Baker Hughes, Schlumberger and Haliburton are continuing their quest to devise ways to create longer, deeper cracks in the earth to release more oil and gas. These companies are no longer content to frack—they want to super frack.

High crude prices and newly accessible oil and gas embedded in shale rock in North America are driving the wave of innovation. The more thoroughly that petroleum-saturated rock is cracked, the more oil and gas is freed to flow from each well, raising the efficiency—and profit—of the expensive process.

1. Baker Hughes has set its sights on creating “super cracks,” a method of blasting deeper into dense rock to create wider channels. The aim of the technology, branded as DirectConnect, is to better concentrate the pressure of fracking fluids to reach oil or gas farther from the well bore, which existing methods fail to do as effectively. The company also is trying to speed up the fracking process. Wells usually are fracked in steps, as plastic balls are dropped down to plug the well at various stages and isolate different zones for fracking. It can take days to get a drilling rig to the site and fish out conventional frack balls, which can get stuck over the course of 20 or 30 preparation phases in a typical well before production can begin. With land-based rigs renting for up to $30,000 a day, reducing such delays is critical. So Baker Hughes has developed disintegrating balls, which turn into powder “like an Alka-Seltzer” after a couple of days.

2. Schlumberger has developed a technique called HiWAY. The technology can generate bigger cracks in surrounding rock formations than current methods by combining fiber with typical fracking materials such as sand so the stuff clumps as it’s being pumped in repeated pulses and at high pressure into the side of a well. The number of customers using HiWAY in North America has grown from two a year ago to more than 20. Chief Executive Officer Paal Kibsgaard told investors in October that the HiWAY technology is yielding larger oil and gas production while using less water and sand than conventional fracking.

3. Halliburton, the No. 1 provider of fracking services, is trying to reduce the amount of materials and labor used on each well. It’s rolled out RapidFrac, a series of sliding sleeves that open throughout the horizontal well bore to isolate zones for fracking. Fracking fluid is then injected at high pressure through multiple holes exposed by the sliding sleeve, cracking the surrounding rock. The process can be faster and cheaper than the most popular fracking method, which involves sending an explosive charge down the well to blast one hole at a time."

The Big Three's Dramatic U-Turn

The chart above shows annual market shares for the U.S. vehicle market (Ward's Auto data here).  From a peak of 90.6% in 1965, the market share of the Big Three (GM, Ford and Chrysler) fell in almost every following year, including a 16-year streak of annual declines in every year from 1994 to 2009.  At the end of that 16-year period, the market share of the Big Three went below 50% for the first time in 2008 at 46.9%, before falling in the next year to an all-time low of 43.7% in 2009.

But the Big Three are making a comeback.  The group gained market share in both 2010 and 2011, marking the first time since 1992-1993 of two consecutive annual gains for the Big Three. The 1.71% increase in 2011 to a 46.2% market share from 44.5% in 2010 was the largest single year gain since a 3.2% gain in 1988.  All three companies posted solid sales gains in 2011, led by Chrysler at 26.1% and followed by GM at 13.2% and Ford at 10.8%.

Production, sales, profits and hiring are now improving significantly for the Big Three and the American automakers are back in the fast lane again, as CBS Sunday Morning reported today on a feature titled "The Big Three's Dramatic U-Turn."  

Related: The Detroit Free Press reported this week that Michigan's unemployment fell to 9.3% in December, the lowest state jobless rate since September 2008, and there was positive net job growth in Michigan last year for the first time since 2000.