Tuesday, February 21, 2012

Interesting Facts about BMW in the U.S.

New Investment in the U.S.: Almost $1 billion over the next three years to expand the 4.4 million square foot BMW complex in Spartanburg, S.C. to produce the new BMW X4 (pictured above).

Number of new jobs to be added this year in U.S.: 300

Total number of BMW jobs in South Carolina: 7,500

Number of BMWs produced in the U.S. since 1994: 2,000,000

Number of BMWs produced in the U.S. in 2011: 276,065 

Percentage of U.S.-made BMWs exported in 2011: 70% (192,813)

Number of export markets for U.S.-made BMWs: 130 

Source: IndustryWeek

Markets in Everything: Gender-Based Advertising Using Facial Recognition Software with HD Camera

"Plan UK’s campaign, which highlights the plight of the world’s poorest girls, launches a groundbreaking interactive ad on a bus stop in Oxford Street on February 22. The advertisement uses facial recognition software with an HD camera to determine whether a man or woman is standing in front of the screen, and shows different content accordingly."

Professor Alan Meltzer's Three Laws of Regulation

Alan Meltzer’s Three Laws of Regulation:

1. Lawyers and bureaucrats regulate, but markets circumvent regulation. 

2. Regulations are static. Markets are dynamic. 

3. Regulation is most effective when it changes the incentives of the regulated.

From a Reason review of Professor Meltzer's new book "Why Capitalism?"

Romney 2:1 Favorite over Santorum for Michigan

After dropping to 45% a few days ago, Romney's current Intrade odds to win the Michigan primary are at about 68%, compared to 35% odds for Santorum. 

First the Dutch Pull the Plug on Wind Subsidies, Now Germany Throws in Towel on Solar Subsidies

I recently posted about how the Netherlands, the nation known for its iconic windmills, decided to throw in the towel on offshore wind power, as Dutch officials determined the country can no longer afford large scale subsidies for expensive wind turbines that cannot produce electricity at economically competitive prices.

Now there's news that Germany, the country that once prided itself on being the “photovoltaic world champion” is coming to the same conclusion about subsidizing solar energy.  The German government is now planning to cut its generous government subsidies for solar energy (more than $130 billion so far) sooner than planned, and to completely phase out public (i.e. "taxpayer") support over the next five years.  

A news report from Copenhagen explains what happened: 

"One of the world’s biggest green-energy public-policy experiments is coming to a bitter end in Germany, with important lessons for policymakers elsewhere.

What went wrong? 

Unfortunately, Germany – like most of the world – is not as sunny as the Sahara. And, while sunlight is free, panels and installation are not. Solar power is at least four times more costly than energy produced by fossil fuels. It also has the distinct disadvantage of not working at night, when much electricity is consumed."

MP: To paraphrase Paul Gigot of the Wall Street Journal, "Solar (wind) energy is produced by mixing sunshine (wind) with our tax dollars."  And the Germans, like the Dutch, are finding out that you eventually run out of other people's money (tax dollars) to fund alternative energy sources that are not justified by science or economics.  As Margaret Thatcher taught us, that's always the problem with socialism - running out of other people's money.....

Fact of the Day: Even on Less Than $15,000 per Year, 56% of 18-24 Year Olds Have Smartphones

MashableTech -- "When a twentysomething’s budget is tight, her smartphone is far from the first expense to go, suggests a new study from Nielsen. The survey of 20,000 U.S. mobile customers found that smartphone ownership skews toward the young and the wealthy — exactly as you’d expect.  What is more surprising, however, is this nugget: smartphone penetration among young people in the lowest income bracket is higher than it is among older people in the wealthiest bracket. 

Among 18- to 24-year-olds, more than half of respondents who make less than $15,000 each year said they own a smartphone. This might be explained if the parents of many college-age students are footing their children’s phone bills. 

Still, even in the next oldest, post-college age group, the percentage of those in the same income bracket who own a smartphone was a mere 13% lower. Making less than $15,000 in a year doesn’t stop 43% of these 25- to 34-year-old mobile customers from paying for a smartphone. Meanwhile, fewer than 20% of respondents older than 45 who make less than $15,000 said they owned a smartphone."

Natural Gas Prices Are the Lowest Since 1999

Based on data through the middle of February from the EIA, the inflation-adjusted spot price of natural gas (Henry Hub Gulf Coast) this month at $2.50 per million BTUs is close to the lowest price in the history of the EIA data back to January of 1997 (see chart above).  There have been only three other months in the  last 15 years that real spot gas prices have been lower: December 1998 ($2.40), February 1999 ($2.45) and March 1999 ($2.48).

Welcome to America's shale gas revolution, where thanks to modern, advanced drilling technologies, we've become the "Saudi Arabia of Natural Gas," which translates into the lowest prices in recent history for U.S consumers and businesses.   

Related quote from Kevin Williamson in his National Review article "The Wonders of Frack: Why We Should Be Exploiting Our Natural Gas":

"Cheap, relatively clean, ayatollah-free energy, enormous investments in real capital and infrastructure, thousands of new jobs for blue-collar workers and Ph.D.s alike, Americans engineering something other than financial derivatives - who could not love all that?" 

BPP@MIT Data Show Inflation Trending Downward

The Billion Prices Project @ MIT just updated its daily online price index through the end of January 2012, and the annual inflation rates from that index are displayed in the graph above.  After peaking at close to 4% in the one-year period through the end of July 2011, the annual inflation rate from the BPP @ MIT daily price index has been trending downward, and the current rate is about 2.75%, the lowest annual inflation in almost a year.    

According to this real-time, daily measure of retail price changes across multiple categories and retailers, inflationary pressures in the U.S. economy have been moderating over the last six months, and annual inflation was below 3% for multiple days at the end of January for the first time since last March.    

Monday, February 20, 2012

Carter (+19) vs. Obama (-2) in February of Year 4

Now this is pretty interesting....  The chart above shows the approval-disapproval ratings for President Carter and President Obama in February of their fourth year in office (1980 vs. 2012), based on the Gallup/USA Today Presidential Approval Tracker website.  Carter's approval was 55% in early February of 1980 vs. 46% for Obama in mid-February 2012, and Carter's disapproval was 36% vs. 48% for Obama. Carter's Approval-Disapproval spread was +19 compared to Obama's -2 point spread.

Note: In March of 1980, Carter's ratings tanked and by the end of the month he was at -12 Approval-Disapproval.

Intrade Odds: Romney vs. Obama, Obama Wins

Current Intrade odds are shown above for: a) Romney to be the Republican nominee for president (72.5%) and b) Obama to be re-elected (59.5%). 

What Do AP Subject Exams Tell Us About Differences in Academic Interest By Gender?

  AP Subject Exam, 2011    % Female   % Male 
Studio Art: Drawing7426
Studio Art: Design7228
French Language6931
Art History6634
English Literature6337
Spanish Language 6337
Spanish Literature6337
English Language6238
Chinese Language5842
French Literature5842
Environmental Science5644
World History5545
Human Geography5446
U.S. History5446
European History5347
U.S. Government5347
Statistics 5248
Calculus AB4951
Comparative Government 4852
Music Theory4258
Calculus BC4159
Physics B3565
Physics C22674
Physics C12377
Computer Science A2080
Computer Science AB1486

The table above shows the gender breakdown for 35 Advanced Placement subject exams taken by high school students in 2011, based on data just released in the subject supplement as part of the 8th Annual "AP Report to the Nation."  Here are some observations:

1. Of the 35 AP subjects, female high students were over-represented in 20 subjects, male students were over-represented in 14 subjects and one subject (Latin) was perfectly balanced by gender. 

2. In the science area, female students showed a greater interest in biology (59%) and environmental science (56%) than males, and males showed a greater interest in chemistry (47%) and physics (65%).

3. For mathematics subjects, female high school students were slightly over-represented in statistics (52%) and males were slightly over-represented in calculus (51%).  For advanced calculus, male students were over-represented at 59%.  

4. For all languages except German, more female students took language AP exams than males, and for French, female students outnumbered male students by more than 2-to-1.

5. Male high school students were significantly over-represented in all three physics exams, and both computer science exams. 

Bottom Line: Assuming that high school students take AP classes and exams based on their interests and aptitudes in certain subjects, there do appear to be many gender-based differences in academic interests.  Even within STEM fields there appear to be gender differences, with female high school students showing a greater interest than males in biology and environmental science and males showing a greater interest in chemistry and physics.  Female students show an interest in statistics and calculus, but less of an interest in advanced math (calculus) and very little interest in computer science compared to their male classmates.   

Here's a prediction: If these AP test results generate any controversy or concerns, it will only be a very selective concern about female under-representation in physics and computer science, but no concern about male under-representation in art, language, history, biology, environmental science and psychology.

Further, assuming that the AP test data reflect some natural gender differences in academic interest, that could then explain this recent prediction from Science, as reported by the Chronicle of Higher Education:

"It could take nearly 100 years before half of all professors in science and engineering are female, according to an article out on Friday in the journal Science. The assertion is shocking because people in academe have been working for decades to increase the number of women in those fields."

MP: Maybe it's not so shocking if the AP subject test data are reflecting natural differences in "revealed gender preferences" of academic interest.  When there are almost 350 high school boys taking the advanced physics AP exam for every 100 high school girls, and more than 600 boys taking the advanced computer science AP exam for every 100 girls, it's understandable that it might take 100 years for perfect gender parity for STEM professors.  And based on the "revealed academic preferences" of female high school students who are voluntarily choosing different subjects than boys for AP classes and AP exams, maybe that's demonstrating that women can live perfectly successful and rewarding lives without ever achieving perfect gender parity in STEM fields.

Sunday, February 19, 2012

As China's Wages Continue to Heat Up, Expect More Reshoring of Production Back to the U.S.

1. New York Times editorial "Chinese Labor, Cheap No More" by Beijing journalist Michelle Dammon Loyalka:

"But while China’s industrial subsidies, trade policies, undervalued currency and lack of enforcement for intellectual property rights all remain sticking points for the United States, there is at least one area in which the playing field seems to be slowly leveling: the cheap labor that has made China’s factories nearly unbeatable is not so cheap anymore. 

 In the past, China’s migrant workers were just thankful not to go hungry; today they are savvy and secure enough to start being choosy. Higher salaries, basic benefits, better working conditions and less physically taxing jobs are only the beginning of their demands, and for many factories, these are already too costly to be tenable. 

Thanks to China’s rising labor costs, it looks as if America might be back in the manufacturing game sooner than expected."

2. From a CNBC report last February, "China's Role as 'World's Factory' Coming to an End":

"China’s economy is at a significant crossroads as it enters 2011, with wages rising rapidly and the labor force, particularly of migrant laborers, starting to shrink. The shift is causing many to predict the end of the country’s status as the world’s shop floor."

3. Bloomberg -- "Foxconn Technology Group, the world’s biggest contract manufacturer of electronics including Apple Inc.’s iPhone, raised the pay of its workers in China this month, the third increase since 2010.

Pay rose by 16 percent to 25 percent starting Feb. 1, the company said in an e-mailed statement yesterday. The basic monthly pay of a junior worker in Shenzhen has risen to 1,800 yuan ($290) from 900 yuan three years ago, it said. Foxconn will raise monthly salaries to more than 2,200 yuan for workers who pass technical examinations."

4. Hal Sirkin, a senior partner and managing director at the Boston Consulting Group (BCG):

"It's now becoming more effective to produce in the U.S. than it is to produce in a lot of different countries. Between the shift in the dollar and the incredibly rapid rise in wages in China, people are starting to do this. In a BCG report, we predicted that this would not happen until 2015. We're surprised in a very good way because we're starting to see it happen in 2010, 2011 and 2012. Now we think this is just the tip of the iceberg that we're seeing -- that we're going to see a whole lot more because the economics continue to shift in favor of the U.S. The fundamentals are that the tide has turned, as it did with Japan, as it did with the Asian Tigers. We're seeing a repeat of this with China."

HT: Scott Lincicome's blog and here on Twitter.

Donor Compensation, Not Kidney Swaps, is the Only Solution to Growing Kidney Shortage in U.S.

Saturday's New York Times article "60 Lives, 30 Kidneys, All Linked" features "the longest chain of kidney transplants ever constructed, linking 30 people who were willing to give up an organ with 30 who might have died without one."  The article has been getting a lot of attention and is currently the second most e-mailed NY Times article and fourth most viewed.

After a similar 13-kidney exchange in December 2009, which at that time was the world's largest ever, Sally Satel and I wrote an article in the Washington Post, and excerpts of that article appear below, with some minor edits and updating:

Such organ exchanges are a godsend for sick people with loved ones who are willing to give them a kidney but are not biologically compatible with them. In an exchange, unmatched couples switch partners to form compatible pairs.

But now for the bad medical news. There are more than 90,000 Americans with renal failure on the national waiting list for kidneys, a grim new high (see top chart above). Almost 13 patients on the waiting list die each day. In addition, almost 7 people are removed each day from the waiting list because they are too sick to survive a transplant operation.  As ingenious, painstaking and justifiably attention-getting as domino swaps are, they shouldn't blot out the dismal news that rates of kidney donation, from both living and deceased donors, fall woefully short of the need.

As the number of renal transplant operations remains mired between 16,000 and 17,000 a year, the number of candidates on the waiting list mounts. Within the last seven years, for example, the list grew by 50%, from about 60,000 patients in 2004 to 90,500 at the end of last year.

This means that only one kidney transplant operation was performed in 2011 for every 5.4 needy patients, making the chance last year of getting an organ less than one in five -- an all-time low of only 18.5%. As recently as the early 1990s, patients on the waiting list had a greater than 50 percent chance of receiving a kidney in a given year, but the situation has worsened every year since 1991 (see bottom chart).  Thus, even if surgeons were able to schedule an additional 30-kidney swap operation every day this year, more than 62,000 patients would still languish on dialysis, facing premature death.

The only realistic long-term solution to the growing kidney shortage in the United States is not kidney swaps, but rather it is to allow some form of donor compensation (which was never mentioned in the NY Times article). This would require Congress to amend the National Organ Transplant Act of 1984 so that people who give organs could receive a benefit, perhaps a tax credit, tuition voucher, lifetime health coverage or a contribution to a retirement plan. Such compensation would be regulated by the government, with kidneys allocated to ill patients according to the national formula being used across the country.

We should surely celebrate the world's largest-ever 30-kidney exchange and hope that more of them occur. Yet we shouldn't lose sight of the reality that the most promising long-run solution to the kidney shortage is a system of donor compensation.

Markets in Everything: Floating Cities

"The Seasteading Institute was founded in 2008 by activist, software engineer and political economic theorist Patri Friedman, grandson of Nobel Prize winning economist Milton Friedman, and technology entrepreneur, investor and Philanthropist Peter Thiel.

At The Seasteading Institute, we believe that experiments are the source of all progress: to find something better,you have to try something new. But right now, there is no open space for experimenting with new societies. That’s why we work to enable seasteading communities — floating cities — which will allow the next generation of pioneers to peacefully test new ideas for government. The most successful communities can then inspire change in governments around the world. We’re opening this new frontier because humanity needs better ways to live together to unlock our full potential."

Reuters recently featured seasteading in the video above. 

 HT: Michael Denny

Renegade Aspen Cabbie Back in "Business"

About a month ago, I reported on a 76-year old Aspen senior citizen, Phil Sullivan, who received a 15-day jail sentence for operating an unlicensed taxi service.  After serving nine days in jail, the renegade cabbie is back on the street of Aspen, this time as a volunteer driver for his new nonprofit organization, Free Rides for People Who Need Them Inc., according to the Aspen Times:
Donations to the company will be used to maintain Sullivan's white Kia minivan and to pay for vehicle insurance, according to a “sponsorship agreement” between Sullivan and the nonprofit that accompanies the certificate of incorporation.

Sullivan cannot draw a salary or receive any compensation for his time, the agreement states. “It allows me to operate and give my friends a free ride home, but I don't look at it as a victory,” Sullivan said Thursday of his new arrangement.
Members of Aspen's "taxi cartel" couldn't be reached for comment, but have complained very vocally in the past about Sullivan's low prices (voluntary contributions) and "unfair competition."  They are probably not happy that the renegade senior is back on the road.   

Markets in Everything: Mansion Rental

Minneapolis StarTribune -- Rental houses used to be limited to modest starter homes or rundown digs for college students. But if you prefer the finer things -- and can shell out as much as $10,000 a month in rent -- you can now choose from a variety of million-dollar-plus houses: Historic mansions in Kenwood, executive homes in gated communities, sprawling estates on Lake Minnetonka.

Thanks to the sluggish real estate market, luxury rentals, once an oxymoron, have become a way to generate cash for their owners. Transferred executives and builders with excess inventory are renting their unsold homes while they wait for the upper-bracket market to recover.

"It's the new American way," said agent Paul Larson of Coldwell Banker Burnet. "If you can't sell 'em, rent 'em."

Interesting Fact of the Day: Anthem in 4/4 Time

Rickey Minor, Whitney Houston's musical director in the 1990s (now band leader on "The Tonight Show") discussing Whitney Houston's performance singing the national anthem at the 1991 Superbowl:

“The original version [of the national anthem] is in 3/4 time, which is more like a waltz.  What we tried to do was to put it in 4/4 meter… We wanted to give her a chance to phrase it in such a way that she would be able to take her time and really express the meaning.”

MP: Besides the great vocals, that change to 4/4 time is probably another reason that Whitney Houston's version of the national anthem was so memorable.  

Saturday, February 18, 2012

Quote of the Day on U.S. Manufacturing

UT-San Diego -- “When you look at the full cost of doing business abroad, U.S. factories can compete on price, delivery and quality. People would be surprised to learn how many things we still manufacture in the U.S.

Many companies have already brought production lines back from foreign lands, breathing new life into long-ailing U.S. factories." 

MP: Note that the "reshoring" of manufacturing production and jobs to the U.S. has been happening naturally due to market forces, without any government support, assistance, tax breaks, subsidies, public policy, etc., and the manufacturing sector was so successful last year that industry profits set a new record.  In most cases, the "laissez-faire" approach works much better than politically-motivated policies that "pick winners" and target certain politically-favored industries with special subsidies, loan guarantees, and tax breaks, e.g. farming, or solar and wind energy.     

Saturday Energy Links

1. "Airline boardings at North Dakota's eight large airports in January were up 19 percent over the year. The jump was due in large part to booming business at the Dickinson and Williston airports in western North Dakota's oil patch. Boardings at Dickinson were up nearly 78 percent, and they rose more than 172 percent in Williston."

2. Delta Airlines plans more flights and larger planes that could mean more boardings at Minot International Airport. Boardings in January already were up 63 percent from January 2011.  Andrew Solsvig, airport director, said that Delta will be bringing in an Airbus A-319 aircraft beginning the evening of March 4. The aircraft will be the first plane operated by the mainline company rather than by a regional carrier to fly out of Minot in almost three years." (ht: BakkenBlog News)

3.  From a new report from Citigroup Global Markets: "The concept of peak oil is being buried in North Dakota, which is now leading the US to be the fastest growing oil producer in the world.  We expect oil production in the U.S. to surprise to the upside. We expect industry expectations to lag behind reality, just as they did with shale gas for many years." (ht: BakkenBlog News)

Meanwhile, things aren't as bright for green energy....

4. "The wind power industry is predicting massive layoffs and stalled or abandoned projects after a deal to renew a tax credit failed Thursday in Washington.  Up to 37,000 jobs, many in Illinois, could be lost as projects are halted or abandoned."  Peak wind subsidies?  

U.S. Manufacturing Is Open for Business and Doing Well; Despite, Not Because of, Government Policy

"Manufacturing is not the basket case of political lore, and America really is still "making things." There's another, subtler myth too—that this industrial decline is inevitable, by economic determinism or business mistakes. That's some of it, but the truth is that America would probably be making many more things if not for bad but deliberate political choices.

The manufacturing crisis, if that's the word, has been jobs. Industry employed one of three workers after the war. Today, it's one of eight. Yet this, too, is largely a measure of economic progress—because it is the result of productivity gains. Productivity is the basic measure of how much we can do with our resources, human and monetary, and increasing it is what drives wage gains and higher standards of living.

Real manufacturing output stood at about $35,000 per worker in 1947, in constant dollars. It doubled by 1980 as companies became more efficient. Today this measure is an astonishing $150,000 (see chart above). Manufacturing productivity has increased by 103% since the late 1980s, outpacing every other industry and double the 53% in the larger business economy.

This translates to gains for consumers: Prices for manufactured goods have declined 3% since the 1990s, even as overall prices rose 33%. One reason manufacturing is shrinking as a share of GDP is that its costs are falling—unlike, say, in health care, with its negative productivity rate in the official statistics.

U.S. manufacturing has problems, but it is strong enough to succeed both at home and abroad merely with reforms that all companies ought to enjoy: a corporate tax code with lower rates and fewer loopholes that is competitive with the rest of the world; fewer regulatory hobbles; an education system that better prepares the work force with 21st-century skills; an immigration policy that invites the world's brightest.

This election-year debate will be more constructive if it is less about how to help manufacturers and more about how to fix government."

Chart of the Day: Drill, Drill, Drill = Jobs, Jobs, Jobs

While the overall economy struggles to create jobs during another "jobless recovery," it's been a much rosier employment picture in one of America's most successful "shovel-ready" job-creating industries: Oil and Gas Extraction.

The chart above displays the monthly percentage changes in employment levels since January 2007 for oil and gas extraction jobs compared to total nonfarm payroll jobs.  As of January 2012, payroll employment is 3.3%, and 4.7 million jobs, below the month of January five years ago.  In contrast, the explosion of new oil and gas jobs has increased employment in that industry by about 1/3 since January 2007.  Over the last 12 months, oil and gas companies have added 23,200 new workers, at a rate of almost 100 new hires every business day

Markets in Everything: Linsanity Trademark

Huffington Post -- "Jeremy Lin is going on offense to protect Linsanity. The Knicks sensation this week applied for trademark rights to Linsanity. Lin paid a filing fee of $1,625 to cover use of the trademarked term on all manner of apparel, including underwear. In a detailed listing of goods, the filing seeks to protect its use on everything from action figures to beverage sleeves and backpacks.

According to the document, Lin filed his application on Feb. 13, several days after two California men entered the cash-in derby to trademark Linsanity. Lin's move with the U.S. Patent and Trademark Office could also jeopardize an online venture of one of the men, Andrew Slayton. By selling "Linsanity" T-shirts on his Linsanity.com website (see photo above), Slayton is playing fast and loose with certain protections, trademark attorney Josh Gerben said. He believes the marketing tactics of Slayton and his website potentially violate the trademark rights of the New York Knicks and the publicity rights of Lin, whose sudden success with the Knicks has generated the term Linsanity."

Friday, February 17, 2012

Cleveland Federal Reserve: Ten-Year Expected Inflation is Only 1.34%, the Lowest in 30 Years

"The Federal Reserve Bank of Cleveland reported today that its latest estimate of 10-year expected inflation is 1.34 percent. In other words, the public currently expects the inflation rate to be less than 2 percent on average over the next decade.

The Cleveland Fed’s estimate of inflation expectations is based on a model that combines information from a number of sources to address the shortcomings of other, commonly used measures, such as the "break-even" rate derived from Treasury inflation protected securities (TIPS) or survey-based estimates. The Cleveland Fed model can produce estimates for many time horizons, and it isolates not only inflation expectations, but several other interesting variables, such as the real interest rate and the inflation risk premium."

Documentary Coming (Maybe): "FrackNation"

"FrackNation is the film that will tell the truth about fracking.

$150,000 is the absolute minimum we need to finish FrackNation - the more we get - the better the film will be. Also it is important to know if we don't reach the full amount of $150,000 within the 60 days, Kickstarter will return all pledged money to the backers and NOTHING will go to FrackNation. So please send what you can, help us reach the $150,000 target within the 60 days and become an Executive Producer of FrackNation the documentary.

People across the US told us that everything we had heard about fracking was wrong. They say that anti-fracking campaigns, one-sided media coverage and moratoriums and bans have damaged the lives of thousands of people who are now desperate to have their voices heard."

Note: They're halfway to their goal, with $73,500 raised so far, and 48 days to go.   

HT: Matt B.

Leading Economic Index Points to Ongoing Growth

The Conference Board reported today that its Leading Economic Index (LEI) increased in January for the fourth consecutive month, reaching and index level of 94.9, the highest level since July of 2008, three and-a-half years ago (see chart above).  The 0.4% increase in January followed a 0.5% increase in December. 

From the report, Ataman Ozyildirim, economist at The Conference Board commented: 

“This fourth consecutive gain in the LEI reflected fairly widespread strength among its components, pointing to somewhat more positive economic conditions in early 2012. The LEI’s increase in January was led not only by improving financial and credit indicators, but also rising average workweek in manufacturing. These both offset consumers’ outlook about the economy, which remained pessimistic, though slightly less so. Meanwhile, the Coincident Economic Index rose again in January as employment, income, and sales data all point to improving current economic conditions despite a lack of contribution from industrial production.”

Inflationary Pressures Were Falling at Year-End

The chart above (click to enlarge) shows some interesting data from Table 2 in today's CPI report on seasonally adjusted, annualized inflation rates for the three and six month periods ending July 2011 compared to comparable periods ending January 2012.  For example:

1. For the six month period ending July 2011, the annualized inflation rate for CPI: All Items was 4.1%, and that fell to only 1.8% for the six month period ending last month.

2. For the three month period ending July 2011, the annualized inflation rate for "food at home" was 5.5% and for the three month period ending January 2012, the annualized inflation rate was only 1.0%.

Bottom Line: Compared to last summer for the three and six month periods ending in July 2011, inflationary pressures fell significantly towards the end of last year and in the first month of 2012 for the three and six month periods ending in January.  Inflation for food at home has fallen to only 1% (at an annual rate) for the November-January period.  

Thursday, February 16, 2012

George Will: Rent Control is Unconstitutional

"Most tenants in rent-controlled units can renew their leases forever. Tenants can bequeath their rent-controlled apartments — they have, essentially, a property right to their landlord’s property — to their children, or to a friend who lives with them for two years . This is not satire; it is the virtue of caring, as understood by liberal government.

Rent control is unconstitutional because it is an egregious and uncompensated physical occupation of property. The Constitution says that private property shall not 'be taken for public use, without just compensation.'"

~George Will's latest column

Great Moments in Bureaucratic Excess

RAEFORD, NC — "A preschooler at West Hoke Elementary School ate three chicken nuggets for lunch Jan. 30 because the school told her the lunch her mother packed was not nutritious. The girl’s turkey and cheese sandwich, banana, potato chips, and apple juice did not meet U.S. Department of Agriculture guidelines, according to the interpretation of the person who was inspecting all lunch boxes in the More at Four classroom that day.

The Division of Child Development and Early Education at the Department of Health and Human Services requires all lunches served in pre-kindergarten programs - including in-home day care centers - to meet USDA guidelines. That means lunches must consist of one serving of meat, one serving of milk, one serving of grain, and two servings of fruit or vegetables, even if the lunches are brought from home.

When home-packed lunches do not include all of the required items, child care providers must supplement them with the missing ones. The girl's mother - who said she wishes to remain anonymous to protect her daughter from retaliation - said she received a note from the school stating that students who did not bring a "healthy lunch" would be offered the missing portions, which could result in a fee from the cafeteria, in her case $1.25."

Another Spelling/Grammar/Punctuation Rant on It's vs. Its: Maybe It's Time to Just Change the Rule?

From the comments section:

...convinced the agency to now give energy it's due....

...has been abandoning it's libertarian bearings over the last couple of years...

...is Cuba is prepared to allow it's citizens…

… or what it’s impacts are likely to be...

...The Fed has the ability to manipulate the rate toward it's target...

...in it's current incarnation, wind power makes no sense...

...is definitely it's own economy...

...more than twice it's current value...

...which abandoned it's socialist leadership...

Bottom Line: Since this simple spelling/punctuation rule seem's so difficult for so many, maybe its' time to just change the rule?

Update: I don't know if anybody has ever done research on this, but I would think that the misuse of "it's" has to be the most frequent grammar/spelling/punctuation mistake in the English language, and it's become a hobby of mine to document it.  There's actually an organization in the U.K. called the Apostrophe Protection Society, with "the specific aim of preserving the correct use of this currently much abused punctuation mark in all forms of text written in the English language," so at least I'm not the only one fascinated/obsessed about this.....

Producer Price Inflation Lowest in a Year; For Finished Goods, 0% Over the Last Four Months

Some highlights of the BLS report today on Producer Prices for January:

1. The annual inflation rate for crude goods (including crude energy materials and crude foodstuffs and feedstuffs) fell to 4.5% in January, the lowest rate in more than two years, since a 4.8% rate in November 2009.  As recently as June 2011, inflation for crude goods was more than 26% (see chart).

2. The annual inflation for intermediate goods fell to 4.2% in January, the lowest rate since December 2009, and down from a recent high of 11.5% in July (see chart).  On a monthly basis, the prices for intermediate goods have fallen or remained flat for five out of the last six months. 

3. Producer price inflation for finished goods fell to 4.1% in January on an annual basis, the lowest rate in a year, since a 3.6% inflation rate in January 2011 (see chart).  The annual inflation rate for finished goods reached a three-year high of 7.1% last July, and has fallen in five out of the last six months since then.  On a monthly basis, prices for finished goods have fallen in two out of the last four months.  The price index for finished goods in January 2012 at 193.5 was slightly below the index level in September 2011 of 193.6, so there has been a very slightly downward pressure on prices for finished goods over the last quarter.

Bottom Line: At the producer level, there don't appear to be any inflationary pressures; and in fact, the trend in annual inflation for crude and intermediate goods has been generally downward for the last several years, which will likely translate into lower inflation for finished goods over the next several months.

Update: The chart below shows that the price index for finished goods (seasonally adjusted) has been flat for the last five months, with an inflation rate of 0% since September.

Markets in Everything: iPhone Repair

Boston Globe -- "Curt Ingram (iPhoneCurt.com) is part of the expanding mini-industry of repairmen working outside the realm of Apple, whose warranty does not cover “damage caused by accident,’’ such as liquid contact (i.e. dropping it in the toilet) or broken screens.

In this growing age of smartphone dependence, the 45-year-old Ingram says, a broken iPhone is an emotionally stressful problem that must be fixed, immediately. “There are lots of people who won’t leave the room while we’re working on their phones,’’ he said. “They’re so attached to their phone they don’t know what to do without it.’’

Ingram, who has the wholesome handsomeness of a cartoon quarterback, has become a mini-celebrity in Brighton, which is known for, among other things, young people behaving like young people. “I always get recognized in bars,’’ he said; that’s also where a lot of his business originates."

Coming This Spring: "Testing Milton Friedman"

Free to Choose Network -- "2012 is the 100th anniversary of Milton Friedman’s birth. His work and ideas continue to make the world a better place. As part of Milton Friedman’s Century, a revival of the ideas featured in the landmark television series Free To Choose are being revisited in a new 3-part PBS broadcast. It will air across the country this spring and summer. Watch a preview above."

Jobless Claims Fall to Lowest Level Since Apr. 2008

In another positive sign that the U.S. labor market is gradually improving, the Labor Department reported today that the four-week moving average for initial jobless claims fell to 362,250 for the week ending February 11, which is the lowest level since the week of April 26, 2008, almost four years ago (see chart above). This marks the fifth consecutive weekly decline in the four-week moving average, and the tenth decline in the last eleven weeks. The number of seasonally-adjusted initial claims (not the four-week average) fell to 348,000, the lowest level since early March 2008.  

If the current rate of decline in jobless claims over the last few months continues (-3,100 average per week since December), the four-week moving average for initial jobless claims will be back to pre-recession, November 2007 levels by mid April. 

Great Moments in Socialism

1. "Imagine a city where all the major economic planks of the statist or "progressive" platform have been enacted: living wage laws, strong public-sector unions that militantly protect above-market wages and benefits, high taxes that redistribute income from businesses and the wealthy to the poor and bloated government bureaucracies. 

Would this be a shining city on a hill, exciting the admiration of all? We don't have to guess, because there is such a city right: Detroit."

2.  "The founding principle of the U.K.'s National Health Service, that care should be free to all regardless of ability to pay, has great merit. But so attached to that worthwhile idea are the English that many recoil in horror when words such as efficiency and profit are even mentioned in the field of healthcare. 

All that various reformers in both major parties have been trying to achieve in the past four decades is the creation of a system more responsive to consumer demands, to drive efficiency, innovation and quality while making scarce resources go further."

But alas, so entrenched is socialized medicine in the U.K. that any attempt to introduce competition or market forces is immediately rejected by socialism's "sick patient."

HTs: Small Dead Animals and Pete Krieger 

Wednesday, February 15, 2012

New January Record for U.S. Exports from L.A. Port

Following up on a record-setting year in 2011 for U.S. export containers shipped from the Port of Los Angeles, another record was set last month, this time for the most ever loaded outbound containers shipped in the month of January, at 168,427.   That was a 5.9% increase over last January, and a 19% increase over two years ago.     

Durable Manufacturing Leads the U.S. Economy

  Jan. 2011 to   
Jan. 2012
Total Industrial Production3.4%
1. Manufacturing 4.5%
a.  Durable manufacturing 8.3%
    Wood products 1.0%
    Nonmetallic mineral products 4.1%
    Primary metals 7.4%
    Fabricated metal products 9.4%
    Machinery 8.2%
    Computer and electronic products 4.5%
    Electrical equip., appliances,0.3%
    Motor vehicles and parts 16.9%
    Aerospace Equipment13.3%
    Furniture and related products 5.2%
b. Nondurable manufacturing 1.1%
   Food, beverage, and tobacco products -0.6%
   Textile and product mills 6.1%
   Apparel and leather -0.4%
   Paper -1.8%
   Printing and support -0.1%
   Petroleum and coal products 5.7%
   Chemicals 1.5%
   Plastics and rubber products 2.7%
2. Mining 5.8%
3. Utilities -7.5%
   a. Electric -6.2%
   b. Natural gas -15.2%

The chart above is based on data from Table 1 in today's industrial production report from the Federal Reserve, and shows annual percentage gains through January by industry group (manufacturing, mining and utilities and sub-groups within those three main categories).  The annual growth in manufacturing output at 4.5% was more than a full percentage point higher than the overall growth in industrial production of 3.4% (which includes mining, manufacturing and utilities). And the durable manufacturing group showed an especially strong annual gain of 8.3%, almost twice the growth rate of total manufacturing, and was led by strong output growth in the industry groups: motor vehicles (16.9%), aerospace equipment (13.3%), fabricated metal products (9.4%) and machinery (8.2%).  

The chart also shows utility output (electric and natural gas) decreased sharply, due to the unseasonably warm winter this year. Nondurable manufacturing increased by only 1.1% overall, but there were some strong gains within that category for petroleum and coal production at 5.7% and textiles at 6.1%.  

A Reuters article on today's Fed report commented that "Manufacturing remains the main pillar of the economy," and it's true that today's industrial production report provides further confirmation that American manufacturing is at the forefront of the economic recovery.  

Empire State Manufacturing Expands in February

"The February Empire State Manufacturing Survey indicates that manufacturing activity in New York State expanded for a third consecutive month. The general business conditions index rose six points to 19.5, its highest level in more than a year (see brown line in graph). The index was last negative in October, then rose to a level of around zero in November; subsequently, the readings have become increasingly positive, suggesting that the expansion in business activity for New York manufacturers has gained momentum in recent months.

Indexes for the six-month outlook, while somewhat lower than last month, conveyed a widespread expectation that conditions would improve in the months ahead. The future general business conditions index fell four points to 50.4 (blue line), with 58 percent of respondents expecting conditions to improve over the next six months and 7 percent expecting conditions to worsen."

Tuesday, February 14, 2012

1989 Radio Shack Cell Phone Commercial

In today's dollars, the $799 sale price would be about $1,450, and the full price of $1,139 would be more than $2,000.

HT: Peter Krieger

NY Times on the Minimum Wage: 1987 vs. 2012

New York Times editorials on raising the minimum wage:

"Raising the minimum wage by a substantial amount would price working poor people out of the job market. A far better way to help them would be to subsidize their wages or - better yet - help them acquire the skills needed to earn more on their own.

An increase in the minimum wage to, say, $4.35 would restore the purchasing power of bottom-tier wages. It would also permit a minimum-wage breadwinner to earn almost enough to keep a family of three above the official poverty line. There are catches, however. It would increase employers' incentives to evade the law, expanding the underground economy. More important, it would increase unemployment: Raise the legal minimum price of labor above the productivity of the least skilled workers and fewer will be hired.

The idea of using a minimum wage to overcome poverty is old, honorable - and fundamentally flawed. It's time to put this hoary debate behind us, and find a better way to improve the lives of people who work very hard for very little."

2. From 2012, "Raise New York's Minimum Wage":

"It is time for New York to raise its minimum wage enough to help more than 600,000 struggling workers. Assembly Speaker Sheldon Silver is vigorously pushing a bill to raise the minimum to $8.50 an hour immediately and to adjust it each year for inflation. This should not be a controversial measure. 

Gov. Andrew Cuomo supports an increase, as does Mayor Michael Bloomberg. Only Republican state senators are resisting, using the same stale argument that a minimum wage increase is bad for business. The Senate Republican leader, Dean Skelos, argues that the measure “could be a job killer rather than a job promoter.” That contention has been proved wrong time and again."

MP: How to explain this regression in economic reasoning over the last 25 years at the New York times? Paul Krugman joined the NY Times in 1999? Economic amnesia? None of the current editorial staff ever took high school or college economics?

Related: See Don Boudreaux's response to the most recent NY Times editorial.  

We Should All Get Valentine's Day Cards from Big Sugar for the $4B We Paid Them in Higher Prices

In an article today on American.com today titled “Bitter Sweet: How Big Sugar Robs You,” Michael Wohlgenant and Vincent Smith provide some timely Valentine’s Day commentary and report that:

“For decades, sugar beet and sugar cane farmers and processors have been the beneficiaries of a sugar program that stealthily drives up sugar costs—and, consequently, the cost of that heart-shaped box of chocolates (see chart above of U.S. sugar prices vs. world prices). Over the past 30 years, the annual burden on U.S. consumers has averaged over $3 billion in higher food prices.”

On Valentine’s Day, it’s appropriate that Wohlgenant and Smith remind us that the “hand on your back pocket billfold today is not your sweetheart’s, it’s the sugar lobby’s,” which lifted almost $4 billion from American consumers last year, read more here at The Enterprise Blog.