Professor Mark J. Perry's Blog for Economics and Finance
Tuesday, April 03, 2012
North Dakota: America's "Economic Miracle State"
The Philadelphia Federal Reserve released February Coincident Economic Activity Indexes today for all 50 states along with a national coincident economic activity index. These indexes are based on four economic indicators: a) nonfarm
payroll employment, b) the unemployment rate, c) average hours worked in
manufacturing, and d) wages and salaries.
The chart above displays the indexes for North Dakota and the United States over the last ten years, showing that the economic activity in North Dakota is completely "off the charts," along with the state's oil production, which is also showing explosive growth and driving economic growth in the "miracle state." Even the "worst recession since the Great Depression" barely affected the shale oil-based economic activity in the Peace Garden State, and the February coincident index is 22% above the pre-recession level. Meanwhile the coincident economic activity index for the overall U.S. economy fell about 10.5% during the Great Recession and is still about 2% below the peak in late 2007. Drill, drill, drill = shovel ready jobs, jobs, jobs.
Tech Crunch -- "Of the 27 million Americans who qualify for a hearing aid, 75 percent choose not to purchase one — only one in seven
Americans over 50 years old who need a hearing aid actually wear one.
The problem is a sizable one, so former Stanford University classmates
Sam Tanzer and Ross Porter decided to do something about it. In early
2011, they founded a startup called Embrace Hearing to apply some entrepreneurial pressure to the situation.
The co-founders tell us the top reason that 75 percent of Americans
don’t purchase hearing aids is due to a familiar culprit: High cost. If
you take it from CareCredit,
hearing aids range in price from $1,000 to $6,000, with the average
price being $3,000. And for those who do choose to wear them, the top
pain point is the high cost of replacement.
Embrace offers three lines of hearing aids, starting at $300, next at
$500, and top of the line at $700. Obviously, the whole line prices way
below the industry average of $3,000. Because manufacturers tend to have
exclusive agreements with audiologists, Tanzer says, they collectively
tend to set prices high, but the startup’s German manufacturer only
recently decided to enter the market, and as a result, isn’t tied to any
BLOOMBERG-- "The U.S. once again may be emerging as a main engine for global growth -- and at an opportune time, as Europe slides into recession and China’s economy decelerates.
An improving job market, rising stock prices and easier credit are combining to lift U.S. consumer confidence and spending, with optimism measured by the Bloomberg Comfort Index near a four-year high. Personal-consumption expenditures increased by the most in seven months in February, rising 0.8 percent, the Commerce Department said last week.
“We’re entering a sweet spot for the economy,” said Allen Sinai, president of Decision Economics Inc. in New York. “We’re in a self-reinforcing cycle,” where faster employment growth leads to higher household income and increased consumer spending.
The U.S. is taking the lead in global growth, thanks in part to a domestic glut of natural gas, Larry Kantor, head of research at Barclays in New York, wrote in a March 22 report. Natural-gas futures on the New York Mercantile Exchange fell to 10-year lows last week, helping to blunt the impact of higher oil prices on the economy.
U.S. manufacturers are benefiting, with the Institute for Supply Management’s factory index climbing to 53.4 (NAPMPMI) last month, beating the median estimate in a Bloomberg News survey, from 52.4 in February, the Tempe, Arizona-based group said yesterday. Readings greater than 50 signal growth.
The recovery “has been an emerging-market -- really a Chinese-led -- story, with the U.S. having lagged the cycle,” Kantor said. “Now, however, the U.S. has reasserted its traditional role, and the current pickup in growth is clearly being led by the U.S.”
The world has never been a better place to live in and it will keep getting better, says Matt Ridley, and he provides 17 reasons to be cheerful, here's a sample:
1. We're better off now
Compared with 50 years ago, when I was just four years old, the average
human now earns nearly three times as much money (corrected for inflation),
eats one third more calories, buries two thirds fewer children, and can expect
to live one third longer. In fact, it's hard to find any region of the world
that's worse off now than it was then, even though the global population has
more than doubled over that period.
4. The important stuff costs less
One reason we are richer, healthier, taller, cleverer, longer-lived, and
freer than ever before is that the four most basic human needs-food, clothing,
fuel, and shelter-have grown markedly cheaper. Take one example: In 1800, a
candle providing one hour's light cost six hours' work. In the 1880s, the same
light from a kerosene lamp took 15 minutes' work to pay for. In 1950, it was
eight seconds. Today, it's half a second. In these terms, we are 43,200 times
better off than in 1800.
9. The good old days weren't
Some people argue that in the past there was a simplicity, tranquillity,
sociability, and spirituality that's now been lost. This rose-tinted nostalgia
is generally confined to the wealthy. It's easier to wax elegiac for the life
of a pioneer when you don't have to use an outhouse. The biggest-ever
experiment in back-to-the-land hippie lifestyle is now known as the Dark Ages.
14. Great ideas keep coming
The more we prosper, the more we can prosper. The more we invent, the more
inventions become possible. The world of things is often subject to diminishing
returns. The world of ideas is not: The ever-increasing exchange of ideas
causes the ever-increasing rate of innovation in the modern world. There isn't
even a theoretical possibility of exhausting our supply of ideas, discoveries,
17. Optimists are right
For 200 years, pessimists have had all the headlines-even though optimists
have far more often been right. There is immense vested interest in pessimism.
No charity ever raised money by saying things are getting better. No journalist
ever got the front page writing a story about how disaster was now less likely.
Pressure groups and their customers in the media search even the most cheerful
statistics for glimmers of doom. Don't be browbeaten-dare to be an optimist!
"At a critical time for America's energy future, Obama's proposed
energy platform is likely to damage the economy, drive energy prices
higher, and move us further away from energy independence and economic
Behind Obama's recent claim that he supports a "sustained,
all-of-the-above strategy that develops every available source of
American energy," lays a war against traditional fossil-based energy
sources like oil, which he has publicly stated to be a "fuel of the
For example, Obama continues to demonize and target the oil and gas
industry for punitive tax treatment, while showering the politically
favored "green" energy sector with preferential tax subsidies, tax
credits, and public funding increases.
The reality is that our economy will continue to rely overwhelmingly on traditional energy sources in the 21st century.
Obama might wish for an energy future of alternative energy, but the
scientific and economic realities suggest that the "fuels of the future"
will mostly be the same as the "fuels of the past" — dependable and
low-cost oil, natural gas, coal and nuclear."
Investor Home Buying Increases, Could This Be the Answer to the Real Estate Mess and Falling Prices?
1. NY Times -- "With home prices down more than a third from their peak and the market swamped with foreclosures,
large investors are salivating at the opportunity to buy perhaps
thousands of homes at deep discounts and fill them with tenants.
Investors believe the rental income can deliver returns well above those offered by Treasury securities
or stock dividends. At the same time, economists say, they could help
areas hardest hit by the housing crash reach a bottom of the market.
The big investors are wooed by what they see as a vast opportunity. There are close to 650,000 foreclosed properties sitting on the books of lenders,
according to RealtyTrac, a data provider. An additional 710,000 are in
the foreclosure process, and according to the Mortgage Bankers
Association, about 3.25 million borrowers are delinquent on their loans and in danger of losing their homes.
With so many families displaced from their homes by foreclosure, rental
demand is rising. Others who might previously have bought are now unable
to qualify for loans. The homeownership rate has dropped from a peak of
69.2 percent in 2004 to 66 percent at the end of 2011, according to census data."
Economists say that these investors could help stabilize home prices.
“If you have a lot of foreclosures in one community you will improve
everybody’s home values if you take them off the market,” said Diane
Swonk, the chief economist at Mesirow Financial. “If those homes are
renovated and even rented, it is a lot better than having them stand
Related story on bulk purchases in Miami.....
2. DQ News -- "Miami-area home sales rose last month to the highest level for a February in five years. In February, 7,690 new and resale houses and condos closed escrow in the
metro area encompassing Miami-Dade, Palm Beach and Broward counties.
That was up 2.0 percent from the prior month and up 4.5 percent from a
In the resale condo category last month, Miami-Dade County saw a
dramatic gain in its median sale price. The resale condo median surged
to $150,000, up 18.0 percent from January and up 42.9 percent from a
year earlier. But there's a catch: About half of that annual increase
can be explained by a bulk purchase of 181 condo units by a limited
partnership in February at a single luxury hotel-condo project in Miami
Beach (all of the transactions were recorded on the same day).
Another bulk purchase in February saw a limited liability company buy 38
existing condo units in Miami, paying a median $158,700 per unit."
ISM Report: Manufacturing Comeback Continues; Real GDP Growth in Q1 2012 Could Be 3.6 to 3.7%
From today's ISM report on U.S. manufacturing, which came in above consensus expectations:
"Economic activity in the manufacturing sector expanded in March for the 32nd consecutive month, and the overall economy grew for the 34th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.
Manufacturing continued its growth in March as the PMI registered
53.4 percent, an increase of 1 percentage point when compared to
February's reading of 52.4 percent (see chart above). A reading above 50 percent indicates
that the manufacturing economy is generally expanding; below 50 percent
indicates that it is generally contracting."
According to ISM's Bradley Holcomb, "The past relationship between the
PMI and the overall economy indicates that the average PMI for January
through March (53.3 percent) corresponds to a 3.6 percent increase in
real GDP. In addition, if the PMI for March
(53.4 percent) is annualized, it corresponds to a 3.7 percent increase
in real GDP annually."
MP: The ISM production and employment indexes are showing strength, and are both listed as "growing faster" for March. Likewise, the "overall economy" and "manufacturing sector" are both described by the ISM as "growing faster" for March, suggesting that economic growth will continue and possibly accelerate in the months ahead. The above-expected strength in U.S. manufacturing activity according to today's ISM report provides additional support that America's industrial sector is at the forefront of the economic expansion.
"Today, Energy In Depth released "Women of the Marcellus," the video above that highlights how Marcellus Shale development is re-uniting and strengthening families across Pennsylvania. While many have seen and heard by now of the obvious economic benefits and consumer savings made possible thanks to responsible Marcellus development, this video highlights the stories of three families whose lives have been made materially better owing to these opportunities.
From a dairy farmer in Troy who significantly expanded her operations, to a young couple that purchased a bed and breakfast operation in Towanda - all of these stories highlight families brought together, and made stronger, as a result of development in the area."
Quote: "In 2008 alone, natural gas companies paid over $1.8 billion in lease and bonus payments to Pennsylvania landowners many of whom are Pennsylvania farmers."
"Online advertised vacancies rose 246,300 in March to 4,669,600, according to The Conference Board Help Wanted OnLine (HWOL) Data Series released today. The March rise is the fourth consecutive monthly rise. The Supply/Demand rate stands at 2.9 unemployed for every vacancy; however, nationally there are still 8.4 million more unemployed than advertised vacancies.
“The March sharp rise in labor demand continued to narrow the gap between the unemployed and available job opportunities,” said June Shelp, Vice President at The Conference Board. Nationally advertised vacancies are 60 percent above their levels in June 2009, the official end of the great recession."
The Supply/Demand rate for the U.S. in February (the latest month for
which the national unemployment number is available) stood at 2.90,
indicating that there are just under 3 unemployed workers for every
online advertised vacancy.
MP: Both total online job vacancies (4.67 million) and
new ads (3.13 million) are now well above their pre-recession levels (see chart above); total ads by 5.2% and new ads by 14.0% above their 2007 peaks. The March increase in news ads - 390,000 - was the largest monthly increase in new ads in the history of the Conference Board series. The
Supply/Demand ratio has been below 3.0 for the last two months in a row for the first time since the fall of 2008, more than three years ago. Today's Conference Board report provides more evidence that the labor
market is gradually recovering, and the sharp increase in March online job vacancies forecasts increased hiring through the year.
The Energy Information Administration reports that it took only 7.32 thousand BTUs of energy to produce each dollar of real GDP in 2011, making last year's economy the most energy-efficient in history (see chart). Energy consumption per dollar of output in 2011 was 2% less than 2010 (7.47 thousands BTUs), and half of the energy required in 1973 (14.79 thousand BTUs).
Spectrem Affluent Investor Index Nears 5-Year High
MSNBC -- "The Spectrem Group announced last week that its Spectrem Affluent
Investor Confidence Index jumped 10 points in March to 5,
the highest level in nearly five years (yellow line in graph above). The Index measures the
investment confidence and outlook of households with $500,000 or more in
investable assets. This is the seventh consecutive month that the Index
has posted a gain.
The Spectrem Millionaire Investor Confidence Index gained six points to 10, the highest reading in just over a year (blue line above). In both Millionaire and Non-Millionaire households, there was a shift
toward investing in equities, signaling stronger engagement in the
According to Spectrem, "The rise in both indexes is a reflection of a strong market performance
in the last few months, which has buoyed investor confidence despite
continuing concern with other issues, such as the economy."
Drug Lord Thanks Obama, Both Bushes, and Reagan For War On Drugs: "I Owe My Whole Empire to You"
Top billionaire Mexican drug lord (ranks #701 on Forbes list of the world's richest people) "bitch slaps five American presidents" by saying "I couldn't have gotten so stinking rich without George Bush, George Bush, Jr., Ronald Regan and even El Presidente Obama, none of them have the cojones to stand up to all of the big money that wants to keep this stuff illegal. From the bottom of my heart, I want to say "Gracias Amigos" I owe my whole empire to you."
HT: Mi amigo Jaime Hoyos Fonseca in Bogota, Colombia
Update: The Huffington Post originally reported this story back in 2009, but the Daily Caller is now reporting that the original article was a satire to draw attention to the War on Drugs War on Peaceful People Who Voluntarily Choose To Use Intoxicants Not
Currently Approved of By Various Governments, Who Will Put Users in
Cages if Caught. Even if Mexican drug lord Joaquin “El Chapo” Guzman Loera — kingpin of the
Sinaloa Cartel, the world’s most powerful drug trafficking organization — didn't make the statement thanking U.S. presidents for his wealth, it's still true that his billionaire status was made possible only because of U.S. drug policy.
From the Competitive Enterprise Institute (CEI)-- "On March 31, some people will be sitting in the dark to express their
"vote" for action on global climate change (see CD post on Earth Hour). Instead, you can join CEI
and the thousands of people around the world who will be celebrating
Human Achievement Hour (HAH). Leave your lights on to express your
appreciation for the inventions and innovations that make today the best
time to be alive and the recognition that future solutions require
individual freedom not government coercion."
As a consumer, you gotta love the intense "cut-throat" competition on the Avenue of the Americas in midtown Manhattan that has brought the price for a slice of pizza down from $1.50 to now only 75-cents, and it might even go lower. One of the owners says "We may go to 50 cents," and a rival says "We might go to free pizza soon." Midtown Manhattan is experiencing significant food price deflation.... at least for pizza.....
Earth Hour is Today: N. Korea is the Likely Winner
"Earth Hour" will take place today (March 31) at 8:30 p.m. According to the WWF (watch video above), the mission of Earth Hour is to "Dare the World to Save the Planet":
"We only have one planet. You can help protect it. Participate in the
world’s largest single campaign for the planet: Earth Hour. It starts by
turning off your lights for an hour at 8:30 pm on March 31, 2012 in a
collective display of commitment to a better future for the planet.
Think what can be achieved when we all come together for a common cause."
Here's a dissenting opinion on Earth Hour from Ross McKitrick, Professor of Economics at the University of Guelph, who abhors Earth Hour.
"Abundant, cheap electricity has been the greatest source
of human liberation in the 20th century. Every material social advance in the
20th century depended on the proliferation of inexpensive and reliable
Giving women the freedom to work outside the home depended on the
availability of electrical appliances that free up time from domestic chores.
Getting children out of menial labor and into schools depended on the same
thing, as well as the ability to provide safe indoor lighting for reading.
Development and provision of modern health care
without electricity is absolutely impossible. The expansion of our food supply,
and the promotion of hygiene and nutrition, depended on being able to irrigate
fields, cook and refrigerate foods, and have a steady indoor supply of hot
Many of the world’s poor suffer brutal environmental conditions in their own
homes because of the necessity of cooking over indoor fires that burn twigs and
dung. This causes local deforestation and the proliferation of smoke- and
parasite-related lung diseases.
Anyone who wants to see local conditions improve in the third world should
realize the importance of access to cheap electricity from fossil-fuel based
power generating stations. After all, that’s how the west developed.
The whole mentality around Earth Hour demonizes electricity. I cannot do
that, instead I celebrate it and all that it has provided for humanity.
Earth Hour celebrates ignorance, poverty and backwardness. By repudiating
the greatest engine of liberation it becomes an hour devoted to anti-humanism.
It encourages the sanctimonious gesture of turning off trivial appliances for a
trivial amount of time, in deference to some ill-defined abstraction called
“the Earth,” all the while hypocritically retaining the real benefits of
continuous, reliable electricity.
People who see virtue in doing without electricity should shut off their
fridge, stove, microwave, computer, water heater, lights, TV and all other
appliances for a month, not an hour. And pop down to the cardiac unit at the
hospital and shut the power off there too.
I don’t want to go back to nature. Travel to a zone hit by earthquakes,
floods and hurricanes to see what it’s like to go back to nature. For humans, living
in “nature” meant a short life span marked by violence, disease and ignorance.
People who work for the end of poverty and relief from disease are fighting
against nature. I hope they leave their lights on.
Here in Ontario, through the use of pollution control technology and
advanced engineering, our air quality has dramatically improved since the
1960s, despite the expansion of industry and the power supply.
If, after all this, we are going to take the view that the remaining air
emissions outweigh all the benefits of electricity, and that we ought to be
shamed into sitting in darkness for an hour, like naughty children who have
been caught doing something bad, then we are setting up unspoiled nature as an
absolute, transcendent ideal that obliterates all other ethical and humane
obligations. No thanks.
I like visiting nature but I don’t want to live there, and I refuse to
accept the idea that civilization with all its tradeoffs is something to be
Thanks to Joe Lais for the pointer to WUWT, which features the photo below with the caption:
The winner for Earth Hour every year since 2003 - North Korea. Odds favor them to be the winner again this year.
Chinese Workers Are Upset With Less Overtime: "We're Here to Work and Not to Play"
Reuters - "When
Chinese worker Wu Jun heard that her employer, the giant electronics
assembly company Foxconn, had given employees landmark concessions her
reaction was worry, not elation.
Foxconn's concessions, including cutting overtime for its
1.2 million mainland Chinese workers while promising
compensation that protects them against losing income, were
backed by Apple, which has faced criticism and media scrutiny
for worker safety lapses and for using relatively low-paid
employees to make high-cost phones, computers and other gadgets.
But at the Foxconn factory gates, many workers seemed
unconvinced that their pay wouldn't be cut along with their
hours. For some Chinese factory workers - who make much of their
income from long hours of overtime - the idea of less work for
the same pay could take getting used to.
"We are worried we will have less money to spend. Of course,
if we work less overtime, it would mean less money," said Wu, a
23-year-old employee from Hunan province in south China.
"We are here to work and not to play, so our income is very
important," said Chen Yamei, 25, a Foxconn worker from Hunan who
said she had worked at the factory for four years.
"We have just been told that we can only work a maximum of
36 hours a month of overtime. I tell you, a lot of us are
unhappy with this. We think that 60 hours of overtime a month
would be reasonable and that 36 hours would be too little," she
added. Chen said she now earned a bit over 4,000 yuan a month
The Energy Information Administration reported today that natural gas production in the United States reached a new monthly record high of 2.577 trillion cubic feet in January. That's an increase of 11.6% compared to a year ago, and 16% above January 2009. The ongoing increases in production to record high levels, along with sluggish demand due to the mild winter, explain why prices for natural gas in the futures market are at a 10-year low, and a 17-year low, when adjusted for inflation (lowest since 1995).
Update: In response to the comment from Unknown, the chart below shows both Gross Withdrawals and Marketed Production, on a 12-month moving average basis. Over the one-year period through January 2012, marketed production has actually increased by 8%, which is more than the 7.1% increase in gross withdrawals. On an unadjusted basis, the 12-month increase through January was 9% for marketed production and 11.6% for gross withdrawals, but for December, the increases were 8.5% for marketed and 7% for gross withdrawals.
Tie Society is an online service like Netflix that allows you to rent designer neckties (and bow ties and cufflinks), for those guys who never want to be seen wearing the same tie twice or just want access an endless rotating, fresh collection of ties. Membership plans start at $10.95 for one item and go up $49.95 per month for 10 items. Shipping is included and you can have unlimited exchanges. If you really like a tie, you can buy it at a discount instead of sending it back.
"Bolstered by positive same-store sales and traffic results and an optimistic outlook among restaurant operators, the National Restaurant Association’s Restaurant Performance Index (RPI) remained above 100 for the fourth consecutive month in February. The RPI – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 101.9 in February, up 0.6 percent from January’s level of 101.3 (see chart). In addition, the RPI stood solidly above the 100 threshold in February, which signifies expansion in the index of key industry indicators.
The Expectations Index, which measures operators’ six month outlook for four industry indicators (same-store sales, employees, capital expenditures and business conditions), stood at 102.0 in February – essentially unchanged from January (see chart above). February marked the sixth consecutive month that the Expectations Index stood above 100, which represents an optimistic outlook among restaurant operators for business conditions in the months ahead."
Update: Sales for "Food Services and Drinking Places" were up by 8.2% in February from a year earlier, following a 9.3% increase in January. Sales at "Full Service Restaurants" were up by 11% in January. The restaurant industry has made a full recovery from the recession and is now operating back at pre-recession levels.
NY Times -- "The next two months will bring sleepless nights and high anxiety — and quite possibly an extraordinary windfall — for a small universe of people in Maine. They are the lucky few with licenses to catch elvers — young, tiny eels that look like cellophane noodles and by some accounts are fetching up to $2,200 per pound this spring.
Maine is one of only two states, along with South Carolina, where elver fishing is still allowed. And with Asian demand especially high — last year’s tsunami curbed supply in Japan, and Europe has cracked down on exporting eels — a gold rush of sorts is on along the rivers and streams of coastal Maine. Since the season began last week, stories have abounded of people making a small fortune in an often hard-luck state."
Michigan Economy Shifts Into High Gear in January as Economic Activity Index Reaches 6-Year High
Comerica Bank's Michigan Economic Activity Index rose seven points in January, up to a level of 98. The January index level is 38 points, or 63%, above the index cyclical low of 60, and marks the highest index reading since January 2006 (see chart above).
"A rebounding U.S. auto industry drove our Michigan Economic Activity Index sharply higher in January, after stalling in late 2011. Every component of the Michigan index increased in January, a sign that the recovery in Michigan is reaching beyond the revitalized auto industry and into the non-manufacturing sectors of the state economy," said Robert Dye, Chief Economist at Comerica Bank. "Threats to the Michigan economy are still visible in the form of cooler global macroeconomic conditions, higher energy prices and expected cuts in federal defense spending. However, these headwinds are not expected to reverse the state's recent hard-fought gains."
"If you want to take advantage of the latest plummeting price of genetic sequencing, it will be because of the Ion Proton. How did scientists find a way to get such a cheap window into our DNA?
The machine that can do that--in just two hours--is the Ion Proton, a genetic sequencer introduced by Life Technologies in January. It’s 1,000 times more powerful than its year-old predecessor, the Ion Torrent, and, at $1,000 per genome, a fraction of the price. A combination of Moore’s Law, ingenuity, and demand stand to make the Ion Proton the go-to gene decoder in a market that Life Technologies CEO Greg Lucier estimates will hit $2 billion by 2014. In turn, Life Technologies stands to make possible a future in which medicine is tailored to each individual’s DNA.
The inventor of the Ion Torrent, Jonathan Rothberg comments, “This is just the start--it’s not a magic wand, but I do believe in the next few years we’ll see an understanding of many complex disorders.” After all, giving doctors and researchers faster and easier access to DNA gives them a better look into life itself.
“Everything in the world starts with DNA,” Lucier says, “so our ability to understand how things work by understanding their computer code will allow us to do amazing things.” So while there’s no easy magic yet, there are the first glimpses into the once unknowable."
ELKO -- "In almost every way Nevada is still reeling from the recession. It has the highest unemployment rate in the country at almost 13 percent, and one of the highest foreclosure rates. But in the northeast corner of the state, almost 500 miles from the Vegas strip, life is suddenly very good.
In Nevada's gold country the global boom that’s pushed gold prices to an all-time high – currently hovering around $1,700 per ounce -- brought an influx of jobs to mining towns like Elko, Nev., population 18,000."
MP: Mining employment in Nevada has increased by 27% over the last two years and reached an all-time record high in January. The employment level in Elko also set a record in January and is now about 12% above the pre-recession level.
NBC -- "The catchy Subway sandwich shop jingle involving a variety of foot-long sandwiches available for $5 doesn't apply in San Francisco. Apparently, the city's new minimum wage, raised to $10.24 as of January 1, make $5 footlongs an impossible business model."
Initial jobless claims (seasonally adjusted) fell to 359,000 for the week ending March 24, which was the lowest number since April 2008, almost four years ago, according to today's Labor Department report. The four-week moving average of weekly claims, which smooths out some of the weekly volatility, fell to 365,000 - the lowest level since May 2008. At the current rate of decline, weekly jobless claims should be back to pre-recession levels below 350,000 by this summer, possibly by June.
About a year ago, I reported on CD about the Institute for Justice's legal challenge of the anti-competitive protectionism in Nashville that was being practiced by the city's high-end limousine cartel, with help from their government enablers, against competition from lower-cost entrepreneurs.
George Will writes in today's Washington Post about the Nashville limo cartel, which he describes as the "collusion between entrenched businesses and compliant government."
This is good time to invoke the spirit of French economist Bastiat, who wrote these words in a letter four days before his death in 1850:
"Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race."
Given a choice between siding with the disorganized, dispersed consumers/human race and the concentrated, well-organized special-interest of the producers, the politicians will crush economic liberty to protect the incumbent producers almost every time, and the city officials in Nashville are no exception. Sadly, the human race suffers.
Interestingly, in the Nashville case the government supported the price-fixing behavior of the limo cartel, which pressured city regulators to set prices at a $45 minimum charge for any ride. The intention of the price-fixing was obviously to squash competition from the cut-rate newcomers, who were charging only $25 to take customers to the Nashville airport. But in another recent case, the government just sentenced auto executive Norihiro Imai to one-year in jail, and imposed more than $550 million in fines on several auto suppliers, for fixing prices on automotive heater control panels.
So in some cases the government enables incumbent producers like limousine companies to fix prices and in other cases it fines auto suppliers and sends their executives to jail for price-fixing? Welcome to the wacky world of government anti-trust.
1. The number of homes sold in the Las Vegas area (4,240) rose to the highest level for a February in six years, with new-home transactions at a four-year high and resale activity the strongest since 2005.
2. Total February sales were 11.5% higher than the average number of homes sold in that month since 1994, while resale activity was 52.7% above average for a February.
3. In February, 3,744 existing homes resold (excludes newly built homes), up 5.1% year-over-year. It was the 14th consecutive month in which resales have posted an annual gain, and marked the highest number of February resales since 3,875 sold in February 2005.
4. Cash buyers purchased 52.9% of the Las Vegas-area homes that sold in February. That was down from a cash-buyer share of 53.7% of total sales in January and down from a record 56.7% a year earlier.
5. Absentee buyers – mainly investors and vacation home buyers – purchased a near-record 48.2% of all Las Vegas-area homes sold in February. That compares with 49.1% in January and 49.7% a year earlier. The record was 49.9% in March last year.
6. The median price paid for all new and resale houses and condos sold in the Las Vegas metro area in February was $112,000, up 1.8% from $110,000 in January and down 5.9% from $119,000 in February 2011. Last month’s figure was 64.1% below the November 2006 peak of $312,000.
MP: The Las Vegas real estate market is now being driven by cash buyers and absentee buyers (often the same) who are attracted to the bargain prices today that are about one-third (median price of $112,000) of the median home prices at the peak in 2006 of $312,000. But the fact that existing home sales are at a 7-year high suggests that the Las Vegas market is recovering and adjusting to a new era where "cash is king."
1. State personal income rose 5.1% in 2011 following a 3.7% increase in 2010, a -1.7% decrease in 2009 and a 3.9% gain in 2008.
2. North Dakota led the country with the highest gain in state income for 2011 (8.1%), the largest increase in per-capita state income (6.7%), and the highest gain in personal income during the last quarter of 2011 (1.5%).
3. Mining had the highest earnings growth rate by industry in 2011 at 25.4%, led by a 70% increase in mining income for North Dakota, a 41% increase in Oklahoma, and a 38% increase in Pennsylvania.
MP: More evidence that increased drilling for oil and natural gas in states like North Dakota, Oklahoma and Pennsylvania is not only creating thousands of shovel-ready jobs, but thousands of high-paying jobs that are boosting personal income for workers in the mining industry in those states.
1. China is now the third-largest U.S. export market, and U.S. exports to China continue to expand rapidly. As a buyer of U.S. goods, China ranks behind only Canada and Mexico—two immediate neighbors with whom the United States has a regional free-trade agreement (see top chart above).
2. Between 2000 and 2011, total U.S. exports to China rose 542 percent, from $16.2 billion to $103.9 billion. Total U.S. exports to the rest of the world increased only 80 percent during this period (see bottom chart above).
3. Top exports to China in 2011 included agricultural products ($14.7 billion), computers and electronics ($13.7 billion), chemicals ($13.6 billion), and transportation equipment, primarily aerospace and autos ($13.2 billion).
4. The nearly $88 billion increase in exports to China during 2000–11 exceeded the increase to every other market for U.S. goods and farm products, with the exception of Canada. U.S. exports to Canada rose $102 billion over the same period, while U.S. exports to Mexico rose $86 billion. Brazil was a distant fourth with just a $28 billion increase in purchases of US products.
5. Thirty states now count China as one of their top three export markets and 25 states exported more than $1 billion to China in 2010, with export categories reflecting a broad range of products. The list of top 15 state exporters to China in 2011 includes states not usually thought of as benefiting from trade with China: Michigan, New York, North Carolina, Ohio, Pennsylvania, and South Carolina.
1. Chicago Tribune -- "In a corner of a manufacturing plant in the Chicago suburb of St. Charles, a dozen workers steadily assembled electric motors that until December were produced in China. The Bison Gear & Engineering Corp. workers inserted copper wires, tested the assembly and then readied them for the next step, the addition of a gearbox. The end products, gear motors, are used in everything from ice machines to solar panels. At one time it made sense for Bison to import motors from China, but no longer."
2. "Saunders Manufacturing Co. is reshoring plastics manufacturing jobs as part of a pledge to bring jobs back to the United States. The Readfield, Maine-based manufacturer of aluminum clipboards, forms holders and plastic storage clipboards will relocate jobs from China to LC Industries in Jackson, Miss."
3. "Whirlpool Corp.’s KitchenAid brand is bringing production of its hand mixers back to the U.S. from China. That shift will mean new business for suppliers of the mixers injection molded parts, said Larry Simpson, global business development manager for KitchenAid Small Appliances. The company is in the process of moving production now to Greenville, Ohio, which is already home to KitchenAid’s larger stand mixers. Motors will still be made by key suppliers for St. Joseph, Mich.-based KitchenAid in Asia, but the bulk of other components will move to local sources."
Shale Gale: The Energy Equivalent of the Berlin Wall Coming Down and Best Reason to Be Bullish
1. Natural gas futures prices fell to another 10-year low today of $2.208 per million BTUs on the New York Mercantile Exchange, see chart above. In nominal dollars, that's the lowest price for natural gas since February 2002, and adjusting for inflation it's the lowest price since July 1995, almost 17 years ago.
2. Michigan-based Consumers Energy announced today that it will lower natural gas prices starting next month for 1.7 million customers by 13% -- welcome news in tough economic times and rising gasoline prices. Customers will save about $130 million in energy costs over the next year as natural gas prices drop to levels not seen in nine years. This long-term reduction in natural gas prices comes on top of lower fuel costs from the recent mild winter, saving a typical residential gas customer about $94 compared to the previous year.
"It's the most dramatic change that is happening beneath the surface of the U.S. economy today. As the rest of the world struggles with oil prices that are very expensive both nominally and in real terms, the U.S., thanks to new fracking technology, is enjoying natural gas prices that are plunging. Even as crude oil prices have surged over the past 13 years from $12/bbl to over $100, the price of natural gas in the U.S. is roughly unchanged on net. That means that natural gas has dropped by an astounding 85% relative to crude oil (see recent CD post here). We've never seen anything like this.
The U.S. now enjoys an incredible energy price advantage that not only is transforming industries (for example, it shouldn't be too long before we start seeing cars that run on LNG), but that should be an important source of growth for the entire economy. This could be the best reason to be bullish."
MP: As Robin West, chairman and CEO of PFC Energy, reminds us "This shale gale is the energy equivalent of the Berlin Wall coming down. This is a big deal."
The American Staffing Association reported today that its weekly Staffing Index of temporary and contract employment increased to a year-to-date high of 89 for the week ending March 18, which was almost 5% above the year-ago level and about 1% above the previous week. For Week 12, it was the highest reading since 2008 (see chart above), and just slightly below the comparable week in 2007. As a leading indicator of future, broader-based labor demand, the upward trend in the Staffing Index this year would suggest that conditions in the labor market will continue to improve going forward.
"Are there any limits," asked Justice Anthony Kennedy, one of three conservative justices whose votes are seen as crucial to the fate of the unprecedented insurance mandate.
Chief Justice John G. Roberts Jr. suggested that the government might require Americans to buy cellphones to be ready for emergencies. And Justice Antonin Scalia asked if the government might require Americans to buy broccoli or automobiles. "If the government can do this, what else can it do?”
Kaiser Health News -- "In recent years, insurers have tried to cajole consumers into using less-expensive health-care providers by promising lower co-payments and other cost-sharing breaks for members who select those doctors and hospitals. Lately, they're trying an even more direct approach: cash rewards.
Some Anthem Blue Cross and Blue Shield members in New Hampshire, Connecticut and Indiana can receive $50 to $200 if they get a diagnostic test or elective procedure at a less expensive facility than the one their doctor recommended. The offer covers nearly 40 services, from standard radiology tests such as mammograms and MRIs to such surgical procedures as hip and knee replacements, hernia repair, bariatric surgery and tonsillectomies.
It seems to be working. The city of Manchester, N.H., the first employer to pilot Anthem's Compass SmartShopper program in January 2010, has saved more than $250,000 in health-care costs in two years, even after factoring in the cash rewards paid to the 476 members who have participated The differences in costs can be eye-popping. According to Anthem data, in Manchester a hernia repair ranges in price from $4,026 on the low end to $7,498 on the high end. A colonoscopy could cost $1,450 to $2,973.
The program is entirely voluntary. If the member wants to stick with his doctor's initial plan and forgo the cash bonus, no problem."
MP: Sure seems like a win-win situation, and helps overcome patients' general lack of concern about health care costs when only 10% of all medical costs are paid "out-of-pocket" by consumers and the other 90% are paid using "somebody else's money" (insurance, government, employers, etc.).
Update: See full article at the link above for the details of how the patients can find lower cost providers for various procedures to qualify for the cash reward.
Wikipaintings: The Encyclopedia of Fine Arts, now in Beta version.
"The project aims to create high-quality, most complete and well-structured online repository of fine art. We hope to make classical art a little more accessible and comprehensible, and also want to provide a new form of interaction between contemporary artists and their audience. In the future we plan to cover the entire history of art — from cave artworks to the new talents of today.
The project is non-profit. The site will not contain advertising in any form and its creators do not intend to make profit from the activities or sale of the project. Initial work on the establishment and maintenance of the site is paid from funds of the initiative group, but later we hope to cover the costs through donations from users."
Libertarians say it's like watching dear friends in an ugly divorce, as the billionaire Koch brothers try to take control of the highly regarded Cato Institute. The head of Cato says the Kochs are out to politicize the think tank.
"Britain's recent experiment with hiking taxes on the rich may have some lessons for the U.S.
To dig itself out of recession, Britain hiked its income-tax rate to 50% for those making more than £150,000 ($240,000). Proponents said the tax was needed to bring fairness to an economy, in which the rich were getting richer and not contributing enough to the cause. Critics said the tax would chase out the job creators.
As it turned out, the real impact was in tax avoidance. According to the Chancellor of the Exchequer’s budget announced today, the income-tax hike caused “massive distortions” that cost the government. A study found that £16 billion of income was deliberately shifted into the previous tax year. As a result, the tax raised only £1 billion – a third of the £3 billion amount forecast."
MP: There are several basic economic lessons here including:
a) If you tax something, you get less of it, b) taxes and regulations are always distortionary because people can change their behavior to avoid them, i.e. raising tax rates raises tax avoidance, c) incentives matter (as do disincentives), and d) the Laffer Curve accurately predicts the inverse relationship between tax rates and tax revenues at high marginal tax rates.
Business Insider goes to the St. Louis Federal Reserve to find out the history of FRED (Federal Reserve Economic Data), " and interview the four people currently responsible for the "most amazing economics website in the world" (except for Carpe Diem of course!).
Here are some FRED stats:
1.9 million visits in 2011 from 200 countries (42% increase from 2010)
Average of 6,000 visits per day
14.5 million page views during 2011
13,000 visits from Twitter during 2011
Approximately 600,000 custom FRED Graphs were created during 2011 (more than one per minute)
GeoFRED received 15,000 visits during 2011
ALFRED received 48,000 visits during 2011
During Q4 2011, 14.7 million data calls sent through API
15,000 new series added during 2011
FRED's mission: To continue to add more data series and "FRED-ify" the world! As a daily FRED user, I see a very bright FRED-ifed world of economic and financial data! After all, you can never have too much data (or too many tools, guitars, cowboy boots, CDs, books, etc.).
"Low natural-gas prices represent a competitive advantage across the U.S. manufacturing base. The price of natural gas is $11.35 per million BTUs in northwest Europe and $15.9 in Japan, according to researcher Platts, compared with U.S. levels of $2.27 (see chart above).
"Companies that had left the U.S. in sectors like chemicals and fertilizers are talking about coming back to take advantage of the low cost of gas," said Don Norman, an economist for the Manufacturers Alliance for Productivity and Innovation.
In January, Methanex Corp. of Vancouver said it would relocate a plant to manufacture methanol, used in making plastics and other materials, to Louisiana from Chile. At the time, Bruce Aitken, the company's chief executive, cited "the outlook for low North American natural-gas prices" as key reason for the move. And low natural-gas costs were a factor in the decision by Brazil's Santana Textiles LLC to build a $180 million denim plant now under construction in Edinburg, Texas, rather than Mexico."
Note: The data in the chart above for international natural gas futures prices are from the chart in the WSJ article, original source is Platts. U.S. gas prices are 80% lower than Europe and 85% cheaper than Japan.
"One of the most important but under-reported financial indicators is the CBOE’s Volatility Index (^VIX), which measures the market’s expectation of future volatility in stock prices (over the next 30 days). (The CBOE has written a nice technical white paper describing how it is calculated, here.) When it drops below 30 percent, it will be a strong indication that the market correction is complete and we’re back to business as usual."
Often referred to as the "fear index," the VIX represents one measure of the stock market's expectation of volatility over the next 30-day period (Wikipedia). The VIX is a widely used measure of market risk and it is often referred to as the "investor fear gauge" (Investopedia).
The chart above shows that the VIX Index closed today at 14.26, the lowest value since early June 2007, almost five years ago, and a full six months before the recession started in December 2007. Investor fear has gradually subsided, and market volatility is now back to normal pre-recession levels.