Saturday, February 04, 2012

Betting in Everything: Superbowl Prop Bets

Prop bets for the Superbowl, available at Bovada, on almost anything and everything related to tomorrow's game and half-time show.  Hey, you can even bet on whether the coin toss is heads or tails!  Some examples:

How many times will Peyton Manning (Colts quarterback) be mentioned on TV?

How many times will Jim Irsay (Colts owner) be mentioned on TV?

Length of Kelly Clarkson's National Anthem: Over or under on 1 minute and 34 seconds

Kelly Clarkson's wardrobe: Super Bowl 46 or official NFL shirt, Colts Jersey or shirt, Giants Jersey or shirt, Patriots Jersey or shirt, or Anything else

Will Kelly Clarkson forget or omit at least one word of the national anthem?

Will Kelly Clarkson's bare belly be showing when she sings?

Will Madonna wear a hat at any point during the Super Bowl 2012 halftime show?

Will Madonna wear fishnet stockings at any point during Super Bowl 2012 halftime show?

Who will win the coin toss?

Will the team that wins the coin toss win the game?

Will there be a Score in the First 7 min 30 Seconds of the 1st Quarter?

Which team will get the first penalty?

And lots more...........

Update: A gambler won $50,000 on a $1,000 Superbowl bet with 50:1 odds that the first scoring play in the Superbowl would be a safety.  (h/t to Sprewell in the comments)

Schumpeterian Waves of Creative Destruction and Turmoil in the Energy Markets from Shale Gas

From the Washington Post:

"Cheap natural gas has also thrown energy markets into turmoil. It is impossible for almost any other source of electric power to compete, especially coal and nuclear. By trimming fuel bills, cheap gas has reduced incentives for energy conservation and efficiency. And it has left solar and wind, despite their own falling costs, heavily dependent on government mandates in California and roughly 30 other states, including Maryland."

Some More Good Labor Market News

From yesterday's "Non-Manufacturing ISM Report On Business"

Employment activity in the non-manufacturing sector grew substantially in January, as ISM's Non-Manufacturing Employment Index registered 57.4 percent (see chart above, data here). This reflects an increase of 7.6 percentage points when compared to the seasonally adjusted 49.8 percent registered in December. Nine industries reported increased employment, five industries reported decreased employment, and four industries reported unchanged employment compared to December. Comments from respondents include: "Ramping up to meet increase in revenues due to expansion and acquisitions" and "More job awards."

The industries reporting an increase in employment in January — listed in order — are: Information; Professional, Scientific & Technical Services; Retail Trade; Construction; Transportation & Warehousing; Accommodation & Food Services; Wholesale Trade; Finance & Insurance; and Other Services. The industries reporting a reduction in employment in January are: Arts, Entertainment & Recreation; Public Administration; Educational Services; Mining; and Health Care & Social Assistance."

MP: The 57.4% ISM service employment index in January was the fourth highest reading in the history of that series back to January 1998, and the highest level in almost six years, since 57.6% in February 2006.

In other positive labor market news this week:

1. Monster reported yesterday that its index of online job demand increased by 9% in January on an annual basis, with all metro areas reporting increases since January 2011.

2. The Conference Board reported on Wednesday that online advertised job vacancies increased by 61,300 in January, following a 126,000 increase in December.  Compared to a year earlier, total ads have increased by 5% and new ads by 14%.

HT to Robert Kuehl for the ISM report.

Friday, February 03, 2012

Highlights from Today's Employment Report

Some highlights of today's employment report:

1. Temporary employment reached a 3.5-year high in January of 2.4 million jobs, the highest level since May 2008 (see chart).

2. Manufacturing overtime hours, at 4.3 hours in January, were at the highest level since 2006 (see chart).

3. Manufacturing companies hired an additional 50,000 workers in January, bringing the 12-month total of new manufacturing jobs to 235,000, and the 24-month total of new manufacturing jobs to almost 400,000.  

4. For the eighth consecutive month starting last June, the January manufacturing jobless rate was below the national average rate (not seasonally adjusted).

5. The construction industry has added more than 50,000 jobs in the last two months.

6. Oil and gas extraction employment has increased by 14.2% over the last 12 months to 186,100, the highest level in 20 years.


7. The more comprehensive measure of employment from the BLS household survey (civilian employment) showed a 847,000 job increase in January, the greatest monthly increase since 2003, and brings the total job increase over the last 12 months to 2.3 million.

Smackdown: Spirit Air vs. Dept of Transportation

IBTraveler -- Spirit Airlines announced this week that it would add a $2 "unintended consequences fee" to all tickets due to new federal regulation aimed at protecting consumers. The "Department of Transportation Unintended Consequences Fee" was added to each ticket effective immediately and is a direct response to new DOT rules put in place Jan. 26 to offer travelers better "passenger protections."

The most visible of the new rules was a law that required airlines to include mandatory government taxes and fees in all advertised fares. Other rules pertained to ticket cancellation policies and baggage fees. Spirit says it's the DOT regulation allowing passengers to change flights within 24 hours of booking without paying a penalty that's forced them to add the fee. The low-cost airline says the new regulation forces them to hold the seat for someone who may or may not want to fly while not allowing someone who really does want to fly to book that seat.

However, the nation's transportation chief disagrees. "This is just another example of the disrespect with which too many airlines treat their passengers," Department of Transportation Secretary Ray LaHood said in a statement. "Rather than coming up with new and unnecessary fees to charge their customers, airlines should focus on providing fair and transparent service - that's what our common sense rules are designed to ensure."

HT: W.E. Heasley

Thursday, February 02, 2012

Superbowl Economics

1. Tickets on StubHub!: $2,000 to $20,000.

2. Hotels: $500 per night, 4 night minimum.

So that's a minimum of $6,000 for two people just for tickets and lodging!

New Index: Listrak Shopping Cart Abandonment

LITITZ, PA-- - Listrak, an email marketing solutions provider for the leading internet retailers, today launched the e-commerce industry's first daily and six month average Shopping Cart Abandonment index, which tracks cart abandonment rates of online shoppers from the company's top internet retail clients. In an effort to help online retailers recoup sales, the index provides a daily abandonment rate with the ability to expand the timeline and identify trends over a period of time. Until now, the e-commerce industry only had access to annual abandonment rates published by Forrester Research, which last year estimated the cost to be $18 billion.

Listrak's new index provides a closer look at fluctuations in shopping cart abandonment and the ability to identify specific moments within a given timeframe. For example, a look at the 2011 holiday season revealed the lowest abandonment rate at 67.66% was on December 16th, "free shipping day" (see chart above, also available here). This was more than 1% lower than Cyber Monday, the second lowest abandonment day at 68.88%."

Underground Energy Revolution in PA Without Any Government Interference, Just Consumer Greed

PENN LIVE -- "It’s an underground energy revolution happening in the basements of home after home, throughout the midstate and across Pennsylvania.

For the fiscal year that ended in September, the gas utility UGI completed more than 7,300 residential and 1,600 commercial fuel oil-to-gas conversions, a company record. Yet, the record pace accelerated by another 57 percent in October, November and December, the first quarter of UGI’s 2012 fiscal year. The reason?

“It’s clearly price,” answered Joe Swope, UGI’s communication manager in Reading. “That is the driving factor. Right now, you have a situation where there is just a tremendous price disparity.”

How big are the savings?

UGI estimates that the average family of four will save $1,000 to $1,500 a year at current prices by switching from oil to gas."

MP: Note that this "underground energy revolution" in Pennsylvania is happening automatically and spontaneously without any specialgovernment taxpayer-financed tax breaks, tax credits, incentives or subsidies, but is being driven purely by "consumer greed" because it makes economic sense to switch from fuel oil to natural gas.  When energy sources like natural gas make sense based on their scientific and economic merits, government and political support is unnecessary.  When energy sources like solar (or electric vehicles) don't make sense scientifically and economically, no amount of government support coercively extracted taxpayer money will make those energy sources or vehicles competitive in the long run. 

HT: John Hanger

Wednesday, February 01, 2012

Car Sales Start Year with Best January Since 2008

According to Fox News, "U.S. auto sales are off to a strong start this year, continuing their brisk pace from late 2011. Sales of cars and trucks rose 11 percent to 913,287 in January, kicking off what is expected to be the strongest year for the industry since before the recession in 2007.

New products, low interest rates and better loan availability helped overcome lingering worries about the economy and pushed car sales pace to the highest level since the Cash for Clunkers program in August 2009."

MP: Car sales increased to 14.18 million units in January on a seasonally adjusted annual basis, the best sales month since May 2008 except for a slightly higher sales total in August 2009 from the artificial "cash for clunkers" stimulus (see chart above, data here).  For the month of January, it was the highest sales activity in four years, since 15.43 million units were sold in January 2008. 

U.S. Producing Natural Gas at Record Levels

The U.S. continued to produce natural gas at record levels in November, according to new data released this week by the Energy Information Administration (see chart above of the 12-month moving average). The record-setting production in November (almost 2.50 trillion cubic feet) was above its year-earlier level by 6.5% and above the level two years ago by 9%.

Over the last five years as unconventional shale gas has become increasingly more accessible due to advanced extraction techniques (fracking and horizontal drilling), gross withdrawals of natural gas have increased by about 25%. Welcome to America's new age of energy abundance with enough natural gas to last well into the 22nd century.

Kauffman Foundation Economic Bloggers Outlook

"Despite a continued cloudy view of the U.S. economy, some top economics bloggers are beginning to see a ray of hope on the horizon. According to a new Ewing Marion Kauffman Foundation survey, 14 percent of respondents now believe the economy is "strong and growing" or "strong with uncertain growth," an improvement over last quarter (see chart above).

For the Kauffman Economic Outlook: A Quarterly Survey of Top Economics Bloggers of 2012, the Kauffman Foundation sent invitations to more than 200 leading economics bloggers as identified in the Palgrave's December 2010 rankings about their views of the economy, entrepreneurship, and innovation.

Looking ahead, only 33 percent now anticipate U.S. poverty to increase in the next three years, a significant positive change from previous surveys. Respondents also believe that employment and global output will rise faster than anything else and, surprisingly, some expect a higher marginal tax rate."

Indiana Is Now Rust Belt's First Right-to-Work State

Percentage Change,    
2000 to 2010
 Forced Union
Private Employment10.30%1.90%
Private Sector Compensation11.10%0.70%
Real GDP per Capita9.70%7.89%
Source: BEA

USA Today -- "Indiana's controversial right-to-work bill became Indiana's law Wednesday. The state Senate voted 28-22 Wednesday to pass the labor union bill as thousands of protesters packed Statehouse hallways shouting their disapproval. Thousands more lined up outside waiting to get in. Gov. Mitch Daniels signed the "right to work" bill shortly thereafter without ceremony, making Indiana the 23rd state in the nation with the law.

Sen. Carlin Yoder, the Middlebury Republican who is the chief sponsor of the bill in the Senate, said for him "this bill is all about jobs." Unions, he said, will thrive despite it. And he said he apologized for all the "issues" lawmakers had to struggle with on it, an apparent reference to the constant protests against the bill.  "But the fact is this bill is worth it for Hoosiers who desperately need jobs," he said.

Senate Minority Leader Vi Simpson, D-Ellettsville, disputed that, saying "there is no empirical evidence … that right to work creates one job." "It's a downward spiral to lower wages and fewer benefits," she said. "Was it worth it?" she repeatedly asked, saying they had pushed a divisive bill based on "myth and anecdote" and not fact."

MP: Some facts appear in the table above, showing the differences in some key economic variables between right-to-work states and forced unionism states in the ten-year period between 2000 and 2010 based on BEA data available here.  Here's a summary:

1. Private employment in right-to-work states grew by 10% between 2000 and 2010, or more than five times the 1.9% private job growth in forced union states. 

2. In the period between 2000 and 2007 before the recession started, almost 8 million jobs were created in right-to-work states compared to fewer than 6 million new jobs in forced union states, even though forced union states outnumber right-to-work states 28 to 22 and have populations and labor forces that are 65% greater than right-to-work states.

3. Total private sector compensation grew more than 11% in right-to-work states in the 2000s, compared to only 0.70% in forced union states. 

4. Real per-capita GDP increased 9.7% between 2000 and 2010 in right-to-work states, compared to 7.89% in forced unionism states.

Myth and anecdote?

Shale Oil Revolution Comes to Eagle Ford Texas

Reuters reports that the shale oil-rich area of Texas known as the Eagle Ford is quickly becoming the country's new hot spot for oil, and could rival production in the Bakken region of North Dakota within a few years:

"Over the past two years, some 30 companies have moved in to a shale prospect in South Texas called the Eagle Ford that could add 420,000 barrels per day (bpd) to U.S. crude oil production, nearly matching the output of OPEC member Ecuador. The first phase of this latest boom has accelerated over the past year. Companies have hastened development of the estimated 3 billion barrels of shale oil across Eagle Ford by bringing in the horizontal drilling and hydraulic fracturing techniques that opened up North Dakota.

Eagle Ford output has risen from nil two years ago to 71,000 barrels of oil per day, and will leap fivefold by 2015, according to energy consultancy Bentek. To relieve a bottleneck producers say has begun to choke growth, pipeline companies in recent weeks committed more than $1 billion to add 940,000 barrels per day (bpd) of pipeline capacity by the end of 2012."

MP: Here comes more energy prosperity, shovel ready jobs, economic stimulus, and increased government revenue to the state of Texas from America's "shale revolution" that is changing the world energy map.  And it's all happening in the private sector without any taxpayer money.  Drill, drill, drill.....   

HT: Lyle Meier 

The Irrelevance of the Baltic Freight Index

For those loyal CD readers who have been asking lately for an update on the Baltic Freight Index, Dennis Gartman explains in today's The Gartman Letter why its relevance as an economic indicator has diminished to the  point that it is being ignored:

"There has been a great deal written of late regarding the collapsing Baltic Freight Index, with those writing about that weakness making the case that that collapse speaks volumes about the state of the global economy. This is nonsense, for the collapsing Baltic Dry Freight Index speaks only to the idiocy and greed and very poor timing of ship owners and nothing more.

We begin this discussion by stating for the record that we believe it was we here at TGL and Jim Grant of the eponymous newsletter who brought the Baltic Freight Indices to Wall Street’s attention more than a decade and a half ago. Then it was indeed a fine and useful economic tool. It rose ahead of economic growth; it fell ahead of economic weakness. Its worth was proven. We embraced it enthusiastically and we extolled its virtues.

However, in the past several years its usefulness has waned to the point where we’ve not even paid attention to its plunge. Why? Because the index has fallen for the very simple reason that there were far, far, FAR too many ships brought on line when the BFI rose from its low at or near 2000 back in 2005-06 to its high near 11,500 in 2008. Ship owners became stupidly greedy believing that these good times would continue ad infinitum.

Worse, the banks that supported them became even more ignorant and financed those dreams. Ships were built and they were big ships and bigger. Ships were being scrapped, but the ships being scrapped were capable of carrying 2-5 thousand TEUs (twenty-foot export containers) and they were being replaced by ships capable of carrying 15-20 thousand TEUs! We are not math whizzes here at TGL, but even we know that one has to scrap a lot more 2-5 thousand TEU carriers to offset one carrying 17 thousand.

Further, the cost of moving a ship carrying 15-20 thousand TEUs is not much different than that of one carrying 1/10th as many. Once the ship is underway, the fueling cost of the larger ship is marginally higher than that of the smaller. Given the numbers of large ships contracted for and built over the course of the past two or three years, the over-supply of space-aboard-ship is high and is rising. Greed and stupidity have trumped economic wisdom.

Thus, where others are pointing to the weakness in the Baltic Dry Index… it has fallen 11,500 in 2008, to 4,500 in early 2010 to 800 presently!.... as evidence of economic weakness we suggest instead that it is a simple inverse index of stupidity and nothing more. Rather, we count the numbers of TEUs moving through the port facilities around the world as the true signal of economic strength or weakness, and those numbers are rising, not falling. The BFI was a fine index to watch fifteen years ago; it ain’t no more, unless you are trading shipping owner’s greed and stupidity."

Tuesday, January 31, 2012

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

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

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

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

HT: Robert Kuehl

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

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

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

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

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

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

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

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

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

Depressed Real Estate Market? Not in N. Dakota

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

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

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

Offbeat Economic Indicators Show Strong Gains

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

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

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

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

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

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

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

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

Markets in Everything: Celebrities Paid to Tweet

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

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

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

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

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

Markets in Everything: Recycling Surgical Implants

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

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

Green Energy Policies Harm the Poor

From an editorial in the Washington Examiner "When 'Being Green' Means Subsidies for Rich, Harm for the Poor" by Iain Murray and David Bier of the Competitive Enterprise Institute:
"Consider the Obama administration's subsidies for electric vehicles. To start with, there is the $7,500 credit for the car itself. Add to that the recently expired $1,000 credit for installation of a 220-volt charger. And on top of these, the government has thrown more than $3 billion at the Chevrolet Volt alone -- which totals out to $250,000 per vehicle. Not only do these credits go to corporate giants like General Motors, they subsidize cars for the wealthy.

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

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

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


Monday, January 30, 2012

Univ. of North Dakota Responds to Oil Boom

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

Bringing Manufacturing Jobs Back to the U.S.

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

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

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

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

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

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

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

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

Related excerpt from a recent WSJ article:

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

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

Sunday, January 29, 2012

Want to Save Endangered Species? Hunt Them

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

Watch the full segment below:

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

Chart of the Day: America's Energy Revolution

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

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

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

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

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

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

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

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

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

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

Sunday Morning Links

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

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

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

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

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

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

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

Cartoon of the Day: The Word "Sustainable"

Click to enlarge.