Tuesday, April 10, 2012

The Mythology of Diversity and Mismatch Effect

UCLA Law Professor Rick Sander guest-blogging at the Volokh Conspiracy and quoted at Mind the Campus:
"Colleges and universities are committed to the mythology that diversity happens merely because they want it and put resources into it, and that all admitted students arrive with all the prerequisites necessary to flourish in any way they choose. Administrators work hard to conceal the actual differences in academic preparation that almost invariably accompany the aggressive use of preferences [the "mismatch effect"]. 

Any research that documents the operation and effects of affirmative action therefore violates this "color-blind" mythology and accompanying norms; minority students are upset, correctly realizing that either the research is wrong or that administrators have misled them. In this scenario, administrators invariably resort to the same strategy: dismiss the research without actually lying about it; reassure the students that the researchers are misguided, but that the university can't actually punish the researchers because of "academic freedom"--with the invocation of "academic freedom" becoming "a device to protect the administration."

KC Johnson at "Minding the Campus" comments:

"Sander's scholarly contributions to the issue of racial preferences came through his work on the mismatch effect in law schools--that is, the situation of "students receiving large preferences (for whatever reason) were likely to find themselves in academic environments where they had to struggle just to keep up; professor instruction would typically be aimed at the 'median' student, so students with weaker academic preparation would tend to fall behind, and, even if they did not become discouraged and give up, would tend to learn less than they would have learned in an environment where their level of academic preparation was closer to the class median."

The failure of this [affirmative action] strategy may very well backfire when the Supreme Court considers the Fisher case. The justices will be presented with several years' worth of well-researched, richly-documented studies explicating the mismatch effect--with little or nothing from the other side of the matter beyond thinly-concealed allegations of racism. Will this approach be enough to persuade Justice Kennedy to uphold the continuing use of racial preferences?"

North Dakota Now Produces More Oil Than Crude Imports from Nigeria and Colombia for First Time

The EIA reported today that:

"The trend of declining crude oil imports into the United States continued in the first month of 2012. There has been a particularly sharp decline in imports from Nigeria due to the idling in late 2011 of two refineries on the East Coast, which were significant buyers of Nigerian crude, and reduced imports by refiners on the Gulf Coast. Prior to the idling of the refineries, Nigeria typically accounted for about 10% of the crude oil imported into the United States; in January, that share dropped to about 5%.

In January 2012, imports from Nigeria totaled just 449 thousand barrels per day (bbl/d), a 54% decrease from January 2011, marking the lowest monthly import total from the country since 2002. One third of this decline was the result of two idled Philadelphia-area refineries. ConocoPhillips' Trainer refinery (idled in September 2011) and Sunoco's Marcus Hook refinery (idled in December 2011) imported a combined 173 thousand bbl/d of Nigerian crude in January 2011. Most of the remaining decrease in Nigerian imports was the result of several Gulf Coast refiners reducing Nigerian imports in favor of domestically-produced crude."

MP: The chart above shows that domestic production in just the one state of North Dakota (546,000 barrels per day in January, with production for February and March estimated) now exceeds imports from Nigeria for the first time.  Further, EIA crude oil import data show that North Dakota has been consistently producing more oil than imports from Colombia in every month since last June (468,000 bbl/d average in 2012).   

Robot Leaps Building in A Single Bound

Temporary Employment Hiring is Improving

The American Staffing Association reported today that its weekly Staffing Index of temporary and contract employment increased to a year-to-date high of 90 for the week ending April 1, which was almost 6% above the year-ago level and 0.74% above the previous week. For Week 14, it was the highest reading since 2008 (see top chart above), and just slightly below the 91 index level for the comparable week in 2007.

The bottom chart shows the monthly measure of Temporary Help Services employees from the BLS, and the 2.48 million temporary employees in March of this year was the highest since February 2008, although it fell slightly from 2.487 million in February.   

As a leading indicator of future, broader-based labor demand, the upward trend in the ASA Staffing Index this year, and the upward trend in temporary employment for the last two years would suggest that conditions in the labor market will continue to improve going forward.

Energy Boom Comes to Appalachia Ohio

Appalachia has been the "forgotten part of Ohio for the last 50 years," explains Glenn Enslen, Carroll County’s economic development director, in the video above, "but now we're at the forefront of economic development in the state of Ohio." 

Reason? A huge boom has just started for oil and gas development in the Utica Shale area of east-central Ohio. There are thousands of new jobs being created in and around Carroll County, the local Days Inn hotel is booked for the next three years, local landowners and residents are receiving bonus and royalty checks from oil and gas companies, and the local Chevy dealer has seen a huge increase in sales. And it's just getting started. 

HT: Energy Tomorrow via Robert Kuehl

Monday, April 09, 2012

That Hissing Sound? Textbook Bubble Is Deflating

Can $220 textbooks survive?
Is this really a sustainable model where a concentrated group of textbook publishers charge students more than $1,000 per semester for traditional college textbooks (assuming 5 books @ $200 like Mankiw's "Principles of Economics" above at $220) when comparable textbooks are now available "for free" from Flat World Knowledge?  One example is "Principles of Economics, " by Libby Rittenberg and Timothy Tregarthen, which is currently in use at 120 colleges including University of Florida, San Diego State, New Mexico State, St. Louis University, Penn State, etc.

Actually it's only the online version that's totally free, the other options are $35 for a printed black and white version, $90 for full color version, a print-it-yourself version for $25, and the e-book version for $25.  Students can also purchase individual chapters at a reduced cost.

According to the Wikipedia entry for Flat World Knowledge, 2,000 colleges and 300,000 students have used its textbooks.

Bottom Line: It's hard to see how the traditional cartel-style textbook model can survive, and that giant hissing sound you might be hearing is the "college textbook bubble" starting to deflate.....  After all, the U.S. textbook bubble makes the U.S. housing bubble seem almost insignificant by comparison, see the chart below:

HT: Sy Banerjee

Monday Energy Links

1. Kansas Prepares for Gold-Rush Style Oil Boom. "It will enrich the area in a way it never has before economically," says independent oilman Robert Murdock. "It is going to change things forever in this part of the world."

2. "If the Tuscaloosa Marine Shale formation proves to be a honey hole for oil and gas companies, then southwest Mississippi could see a boost in business and an influx of oil workers and residents with new disposable income.  Britt Herrin, executive director of the Pike County Chamber of Commerce and Economic Development District, points to hundreds of new jobs and customers for existing businesses seen in communities in and around the Eagle Ford oil formation in Texas."

 3. "The combined forces of high oil prices and improved drilling technology have produced a gush of unexpected tax dollars from oil and gas wells across Texas. Six months into the state's budget year, taxes paid on natural gas production are up 73% over the same period last year, while revenue from the oil production tax is up 49%. 

Together, oil and gas taxes so far have brought in a total of $1.8 billion. That amounts to $684 million more than in the first half of last year, which was a blockbuster year in itself with $2.6 billion in oil and gas tax revenues. And the state's most important source of revenue — sales tax collections — has been far exceeding projections, due in part to oil and gas companies' heavy spending on equipment, supplies and services needed to drill new wells."

VIDEO: Why We Need Voter-ID Laws

Polling station in DC would have allowed an imposter to vote as "Eric Holder."

From John Fund's NRO column "Why We Need Voter-ID Laws Now":

"Average voters understand that it’s only common sense to require ID because of how easy it is for people to pretend they are someone else.

In the video above, filmmaker James O’Keefe demonstrated just how easy it is on Tuesday when he dispatched an assistant to the Nebraska Avenue polling place in Washington where Attorney General Holder has been registered for the last 29 years. In Washington, it was child’s play for O’Keefe to beat the system. O’Keefe’s assistant used a hidden camera to document his encounter with the election worker at Holder’s polling place. 

Note that O’Keefe’s assistant never identified himself as Eric Holder, so he was not illegally impersonating him. Nor did he attempt to vote using the ballot that was offered him, or even to accept it." 

HT: Morgan Frank

Caterpillar: Poster Child for the U.S. Manufacturing Renaissance: Record Order Backlog of $30 Billion

Reuters - "It hasn't been long since Caterpillar Inc looked like the typical resident of the Rust Belt. Having misjudged how deep the U.S. economy would decline, the world's largest maker of construction machinery reduced its workforce by 33,000 people worldwide in 2009, closed plants and posted lower profits.  But the Peoria, Illinois-based company has mounted a quick recovery and is emerging as the poster child for America's manufacturing renaissance.

In 24 months, 15 Caterpillar facilities have been built or updated in the U.S., tens of thousands of workers have been added to the payroll and $2 billion is committed for capital investments on its home soil this year.

"We haven't seen Caterpillar doing this much building in the United States since probably the 1960s," said Peter Holt, owner of the Holt Caterpillar dealership in San Antonio. Caterpillar is building a $200 million plant two hours southeast of his store, in Victoria, Texas, that is slated to start churning out badly needed excavators later this summer.

Underpinning Caterpillar's U.S. momentum is a flood of demand by heavy equipment users in America - ranging from construction companies to oil drillers to cement producers - who are looking to replace aging machines now that the economy is improving and credit is easier to obtain.

While the company has expanded quickly in emerging markets and new sectors, including mining and railroads, much of its confidence hinges on its faith in a gradually improving U.S. economy.

"We came out of the recession much stronger and faster than expected," Caterpillar Chief Executive Doug Oberhelman said in a company report in March. "I'm not one for passing up sales, so we really had to ramp up production quickly."  Key to this optimism is Caterpillar's record order backlog of $30 billion, three times higher than it was in 2009. Some customers will not get trucks they have ordered until as late as 2014."

Related: See CD post below on Midwest manufacturing.  

John Taylor: Trust in The Power of the Market

Stanford Professor John Taylor discusses the "Power of the Market" on CNBC based on his book "First Principles: Five Keys to Restoring America's Prosperity." 

HT: Warren Smith

Chicago Fed: Midwest Manufacturing Is Booming

The ChicagoFederal Reserve reported today that its Midwest Manufacturing Index increased 1.0% in February, to a three and-a-half year high of 90.1 (2007 = 100), following a revised 2.1% monthly gain in January. Here are some highlights of manufacturing activity in the 7th Federal Reserve district covering Illinois, Indiana, Iowa, Michigan, and Wisconsin:

1. Manufacturing output in the Midwest region rose 10.1% from a year earlier in February, almost twice the 4.7% increase in national manufacturing output over the same period (see chart).
2. Regional machinery output in February gained 10.9% from its year-earlier level, compared to a 4.8% increase in machinery output at the national level. 

3. Regional steel output improved 13.9% from its February 2010 level, compared to an 9.8% increase in national steel output over that period.

4. The Midwest’s automotive output increased 18.7% in February from its year-ago level, compared to a 12.9% gain in national automotive output. 

MP: The manufacturing sector of the economy grew at 4.6% last year, or more than twice the 1.7% growth in real GDP, so it's clear that American manufacturing is at the forefront of the economic recovery as has been frequently reported here and elsewhere.  And given the growth in Midwest manufacturing activity over the last year (+10.1%) compared to output at the national level (4.8%) as reported today by the Chicago Fed, I think we can say that it's "Midwest manufacturing" that is at the forefront of the economic recovery.  The Rust Belt and its traditional industries like machinery, steel and motor vehicles are coming back. 

Sunday, April 08, 2012

Markets in Everything: Mobile Hangover Treatment

From the HangoverHeaven.com website, based in Las Vegas:

"Hangover Heaven is a revolutionary new treatment that can cure your hangover in less than 45 minutes. Hangover Heaven involves placing a small IV in your arm to give you the necessary treatment to continue the party or just get back to your normal self. We use small Pediatric IVs and numbing medicine to make the process very comfortable.

We continuously make loops up and down the Las Vegas Strip. Most of the larger casinos have a “Tour Bus” pick up area, that’s where you’ll want to crawl and wait for us to pick you up. All of the casinos have this area pretty well marked–if your eyes are too blurry to read signs, ask the concierge or just some person walking by. We have faith in you. Below is a list of casinos with Tour Bus pick up areas and those where we can pick you up at the main entrance.

Once on the bus, our physician will take a brief medical history, and assess your hangover severity score. Then, numbing medicine is applied to your skin and a small IV will then be placed. Most people find it completely painless. Then you start receiving the treatment."

HT: Drudge with this link

Corporate Profits Reached Record High in 2011

WSJ -- "Big U.S. companies have emerged from the deepest recession since World War II more productive, more profitable, flush with cash and less burdened by debt. An analysis by The Wall Street Journal of corporate financial reports finds that cumulative sales, profits and employment last year among members of the Standard & Poor's 500-stock index exceeded the totals of 2007, before the recession and financial crisis.

Deep cost cutting during the downturn and caution during the recovery put the companies on firmer financial footing, helping them to outperform the rest of the economy and gather a greater share of the nation's income. The rebound is reflected in the stock market, with the Dow Jones Industrial Average at a four-year high. "U.S. companies became leaner, meaner and hungrier," said Sung Won Sohn, a former chief economist at Wells Fargo WFC."

MP: The chart above shows after-tax corporate profits for U.S. corporations as a whole, which set a new record high in 2011 of more than $1.5 trillion, and were 20.5% above the pre-recession peak of $1.26 trillion in 2006 (adjusted for inflation).  While the weakness in the labor market continues to receive media attention, we shouldn't lose sight of the fact that U.S. corporations have never been more profitable.  

Measured by real GDP, output is just now barely above pre-recession levels, and measured by employment, the economy is still five million jobs below December 2007.  Measured by corporate profits, the economy has made a strong and complete recovery and is now above pre-recession levels by more than 20%.

Markets in Everything: 3D Chocolate Printer

BBC News -- "The UK scientists who developed a prototype chocolate printer last year say they have now perfected it. They hope to have the machine on sale at the end of April - just missing the Easter egg rush. It would allow chocolate lovers to print their own custom-made sweets, layer by layer.

Lead scientist Dr Liang Hao, from the University of Exeter, founded the Choc Edge company to commercialize the device after interest from retailers. 3D printing using plastic, wood and metal is already widely used by industry to create objects ranging from jewellery and footwear to human bones."

Sunday Morning Links

1. 50 Amazing Numbers About Today's Economy.

2.  How A Dumb Federal Law Blocks A Great Way To Fuel America with Ethanol from Natural Gas and Coal, Instead of Corn 

3. Oil Boom Fuels Population Boom in North Dakota City: The fastest-growing small city in the U.S. is Williston, North Dakota.

4. Bill Gates funds new machine that filters toilet waste into 'drinkable' water.

5. President Obama Claims: “Google, Facebook Would Not Exist” Were It Not For Government Spending.

6. Interesting article: "The Price of Nails" back to 1700.....

Saturday, April 07, 2012

Fuel Economy Index for New Cars Sets Record

Wards Auto -- "U.S. new light vehicles achieved record fuel-efficiency for the third month in a row in March, according to the WardsAuto Fuel-Economy Index (see chart above).  Cars and light trucks sold in the month had a combined 24.1 mpg rating, a 1% improvement on the previous record set in February. It was the first time the index has risen above 24 mpg.

The new benchmark represents a 15% increase in fuel efficiency over the index’s base rating of 20.9 mpg, established in fourth-quarter 2007. March light vehicle sales signified a continued movement toward smaller fuel-efficient vehicles that dominated the first quarter.

Car companies have rolled out an increasingly large selection of small and midsize vehicles, including a growing number of hybrid and alternate-power vehicles that provide consumers interested in fuel economy greater choice than ever. Indeed, vehicles rated higher than 30 mpg on the index accounted for 11.8% of sales in March, up from 4.3% year-ago. The 270% increase was made possible, in part, by the increasing number of vehicles available in that category."

MP: Every time I think I'm aware of all of the economic indexes available, I find a new one like this. 

Perhaps this is a consumer response to higher gasoline prices?  Replacing a used vehicle getting 20 mpg with a new vehicle getting 24 mpg would completely offset an increase in the price of gas going from $3.33 per gallon to $4 per gallon, on an annual basis. 

More on the Great American Manufacturing Renaissance: And It's Just Getting Started

Off a Cliff: Falling natural gas prices are making U.S. manufacturers more competitive.

From today's WSJ article "The Great Reversal: Playing the U.S. Manufacturing Boom":

"Investors who have favored emerging markets like China in recent years should pay attention to another growing manufacturing center. It boasts plenty of skilled workers; cheap and abundant energy; stable institutions; and a large middle class that likes to shop. It is the U.S., where a long industrial decline might be in reverse.

In March, manufacturing expanded for the 32nd straight month, and contributed 37,000 of the 120,000 U.S. jobs added, the government reported (see related CD post). That's partly because of the ongoing recovery from the Great Recession. But the economy is also changing.

Three trends suggest America's "manufacturing renaissance" is just getting started, says Neil Dutta, U.S. economist at Bank of America Merrill Lynch.

1. The cost advantages of outsourcing factory work are narrowing. Emerging market wages, while still much lower than U.S. wages, are rising, and high oil prices have made shipping more expensive. That is expanding the range of goods U.S. factories can produce at competitive prices (think sophisticated machines, not toys).

2. A weakening dollar makes U.S. goods more attractive to foreign buyers. The dollar has fallen by nearly one-third over the past decade against a basket of currencies including the euro, British pound and yen.

3. Energy production is booming in the U.S., and domestic natural-gas prices have recently plunged. That gives an edge to U.S. producers of fabricated steel, transportation equipment, machinery and chemicals, which use natural gas extensively, according to a recent report from Citigroup."

HT: Robert Kuehl

Spot Natural Gas Prices Fall Below $2, Might Be Lowest Inflation-Adjusted Price in U.S. History?

The spot price of natural gas fell below $2 per million BTUs this week, reaching lows not seen since 2001 in nominal terms (see chart above, data here).  When adjusted for inflation, the $1.88 spot price on Monday could likely have established a new all-time record low for natural gas (EIA data only go back to 1997).  Some industry analysts expect prices to fall even lower in the coming months, due to the strong supplies and weak weather-related demand, possibly as low as $1?

Friday, April 06, 2012

Markets in Everything: Market-Based, Deeply-Discounted Surgery for Cash, Payable in Advance

Here's something rarely seen in U.S. health care - an actual, transparent price list for medical procedures: 
 Knee $3,740
 Knee with lateral release or microfracture $4,510
 Shoulder $5,720
 Elbow $3,740
 Wrist $3,740
 Hip $5,225
 Ankle $3,740
 Anterior cruciate ligament repair $7,040
 Posterior cruciate ligament repair $7,040
 Medial Collateral Ligament $6,160
 Tibial Tubercle Osteotomy $6,160
 Open Rotator Cuff Repair $6,160
 Bankhart Stabilization $6,160
 Distal Clavicle Excision $4,730
 Ulnar Nerve Trasposition / Epicondylectomy $4,510
 Carpal Tunnel Release $2,750
 Dupuytrens Contracture $2,915
 Trigger Finger $2,750
 Ganglion Excision $2,750
 Achilles Repair $5,830
 Bunion $4,125
 Hammertoe (1) $2,475
 Hammertoe (2) $2,860
 Hammertoe (3) $3,355
 Gastrocnemius Recession $4,180
 Plantar Fasciotomy $3,080
 Neuroma Excision $2,750
 Closed Reduction and Casting $1,925
 Percutaneous Pinning - finger 1-2 pins $2,805
 Inguinal $2,860
 Bilateral $4,275
 Umbilical $3,190
 Incisional $4,075
 Cholecystectomy $5,665

"The Surgery Center of Oklahoma is a 32,535 square foot, state-of-the-art multispecialty facility in Oklahoma City, owned and operated by approximately 40 of the top surgeons and anesthesiologists in central Oklahoma. The facility has been accredited by the AAAHC since 1998 without interruption and has annually provided care to thousands of patients. If you have a high deductible or are part of a self-insured plan at a large company, you owe it to yourself or your business to take a look at our facility and pricing which is listed on this site. If you are considering a trip to a foreign country to have your surgery, you should look here first. Finally, if you have no insurance at all, this facility will provide quality and pricing that we believe are unmatched."
From the FAQ section:

"To keep our prices as low as possible, cashier's checks or cash are the methods preferred. Credit cards and personal checks cannot be accepted. Human resource departments or divisions of self-insured companies can make other arrangements if necessary.

Payment in full is required at the time service is rendered. No payment arrangements can be made. These deeply-discounted prices are otherwise not available."

HT: Paul Harris

In Celebration of the Speculators, Who Bless Society With Significant Benefits

1. "Nothing sparks spasms of poor economic commentary like rising oil prices. From left to right, pundits and politicians outdo each other at accusing evildoers of hurting good people. This week, a Democratic congressional committee held a hearing on the issue of high gas prices and excessive oil speculation.

Speculators are easy targets. They seem to produce nothing. They merely buy and sell and hope for prices to move in directions that will bless them with big profits. In fact, though, speculators also bless the rest of us with significant benefits -- although too few Americans understand this truth.

Speculators should be celebrated -- not so much for their motives (which are no better or worse than normal) but for the socially beneficial, if largely invisible, consequences of their activities. Speculation makes resources more abundant when there is great scarcity by encouraging people to use those resources more sparingly when there is relative abundance."

~Don Boudreaux in Newsday

2.  "Speculators anticipate shortages and buy up commodities early, thereby removing them from the market. This alerts consumers to the oncoming shortage, fulfilling the important financial market role of providing information and allowing them to reduce consumption as prices rise. Later, the speculator sells, ameliorating the shortage while making a profit.

Speculators anticipate and warn others about shortages—they do not cause shortages. As a result of their trades, price swings are less severe than they otherwise would have been. We do not blame doctors, police, or firemen for profiting from the misfortune of others because it is understood that they help a bad situation. Speculators deserve the same consideration."

3. "People who argue that speculation is destabilizing seldom realize that this is largely equivalent to saying that speculators lose money, since speculation can be destabilizing in general only if speculators on the average sell when the currency (commodity) is low in price and buy when it is high."

~Milton Friedman, Essays in Positive Economics (p. 175)

MP: In other words, speculators who continually lose money by buying high and selling low (which would increase volatility and be destabilizing) will be forced to leave the market eventually, and only rational speculators – those who will actually help to stabilize prices – will survive.

Strong Gains in Manufacturing Jobs Continue

Here are some highlights from today's BLS employment release:

1. Manufacturing employment increased by 37,000 in March, following gains of 31,000 in February and 52,200 in January, for a first quarter factory job gain of 120,000.  That's the largest first quarter increase in manufacturing jobs in 28 years, going all the way back to 1984.

2. The 37,000 gain in March factory jobs represented almost one out of every three of the total 120,000 payroll jobs added last month.

3. The jobless rate for the manufacturing sector fell from 8.4% in February to 7.6% in March (not seasonally adjusted - NSA), which was the lowest rate since November 2008, and marked the tenth straight month that the manufacturing jobless rate was below the national average (8.4% in March, NSA).

4. Average weekly overtime for manufacturing edged up to 4.3 hours in March, which was the highest weekly overtime since March 2007. 

MP: The chart above displays the percentage employment gains since January 2010 for: a) manufacturing and b) total payroll employment, showing the 4.03% increase in factory jobs compared to the 2.71% increase in overall payrolls.  American manufacturing has made a strong comeback over the last several years, which has increased factory employment by 462,000 since 2010, and has brought the once-dismissed industrial sector to the forefront of the economic expansion.

According to a recent Merrill-Lynch research report "An Industrial Revolution":

"We think that the manufacturing sector represents an important growth driver for the U.S. economy – generating more economic activity than any other business sector. In our view, the U.S. economy is in the early stages of a long term manufacturing renaissance. Manufacturers are increasingly likely to bring at least some production back to the U.S. while established players reinvest for further productive capacity and productivity improvements over the coming years."

In its March 27 report, Merrill-Lynch lists 68 new major industrial investment projects totaling more than $200 billion that have been announced or started just since 2011 in a wide variety of manufacturing industries like petrochemicals, chemicals, steel, refining, autos, heavy equipment, aerospace, plastics and ethylene.  

Welcome to America's manufacturing renaissance. 

Thursday, April 05, 2012

Markets in Everything: Bully Prevention Guru

Yahoo News -- "A former tattoo artist who legally changed his name to The Scary Guy is using his persona—and frightening facial ink—to teach schoolkids to stop bullying. Scary, a Minnesota man formerly known as Earl Kauffman, has become an in-demand "bully prevention guru." His mission, according to his website, is "The Total Elimination of Hate, Violence and Prejudice Worldwide." The 58-year-old changed his name in 1998, when 85 percent of his body was covered in tattoos, according to the Smoking Gun. According to CNN, which profiled Scary on Sunday (see video above), he charges as much as $6,500 for scholastic speaking engagements."

HT: Joe Lais

Jobless Claims Fall Close to a New Four-Year Low, ASA Staffing Index for Temporary Help Improves

Initial jobless claims (seasonally adjusted) fell to 357,000 for the week ending March 31, which was the lowest number since mid-April 2008, almost four years ago, according to today's Labor Department report.   The four-week moving average of weekly claims, which smooths out weekly volatility, fell to 361,750 - also falling to the lowest level since April 2008.  The ongoing declines in jobless claims suggest that the labor market is gradually stabilizing and improving. If the declines in claims continue at the current pace,  they'll reach pre-recession December 2007 levels sometime this summer.  

Further evidence of an improving labor market is provided by the ongoing gains in the weekly ASA Staffing Index, which measures hiring activity for temporary, contract and freelance staffing (see chart below, 2012 is the orange line).     

Philadelphia Fed Reports that State Economies Are Improving, with Future Gains Expected

According to reports this week from the Philadelphia Federal Reserve:

1. Over the past three months through February, the coincident economic indexes increased in all 50 states (see top map above).  The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic: nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index.

2.  Based on the Philadelphia Fed's leading economic indexes, 47 states are predicted to see their economies improve in the coming months (see bottom map above).  The leading index for each state predicts the six-month growth rate of the state’s coincident index. In addition to the coincident index, the models include other variables that lead the economy: state-level housing permits (1 to 4 units), state initial unemployment insurance claims, delivery times from the Institute for Supply Management (ISM) manufacturing survey, and the interest rate spread between the 10-year Treasury bond and the 3-month Treasury bill.

Only three states -- New Mexico, Louisiana and Rhode Island -- can expect lower growth in the next six months, and West Virginia has the strongest prospects, "likely due to a boost from natural gas drilling in the Marcellus ShaleThe state also wasn't hit hard by the housing boom and bust, and has had far fewer government layoffs than other states," according to a CNN Money report.

Wednesday, April 04, 2012

Interactive Chart/Map of State Coincident Economic Activity Indexes Since Dec. 2007

The interactive chart/map above was created by the folks at Tableau Software, inspired by this CD post yesterday on North Dakota's state Coincident Economic Activity Index (calculated by the Philadelphia Fed, based on nonfarm payroll employment, the unemployment rate, average hours worked in manufacturing, and wages and salaries).   In the map above, the Coincident Economic Activity Indexes for all of the states in blue are below their December 2007 levels, led by Nevada which is -22.27% below pre-recession level.  The other non-blues states are above their pre-recession levels, led by North Dakota, which is 21.77% above the December 2007 level.   

The other states whose coincident indexes are above pre-recession levels are New York (3.51%), Texas (3.29%), Massachusetts (2.56%), Alaska (2.05%), Minnesota (1.93%), South Dakota (1.25%), Louisiana (0.68%), Wyoming (0.56%) and Connecticut (0.28%).  

Wednesday Links

1. U.S. apartment vacancy rate fell to a decade low of 4.9% in Q1 2012, the lowest rate since Q4 2001.

2. Hiring at U.S. workplaces jumped in March; Gallup Monthly Job Creation Index rose four percentage points to the highest level since mid-2008.  

3.  Canadians protest wind subsidies claiming that turbine noise is making them ill and wind energy is raising energy prices and lowering rural property values.

4. How is changing the creative economy $5 at a time.

 5. Burnsville, Minnesota man arrested, jailed for two Days for a siding code violation on his suburban Minneapolis house.  (HT: Walter Olson)

Rubio Top VP Candidate at Paddypower and Intrade

The Washington Post reports today that betting has opened on the Paddypower.com website for the Republican VP candidate.  Marco Rubio is currently the top choice at odds of 11/4 (26.7%), which is almost same as the current Intrade odds for Rubio (25.3%).  Chris Christie has the second highest odds on both sites, 1/6 on Paddypower (16.7%) vs. 11% on Intrade. 

Cartoon of the Day

Impressive Sales Gains at Full-Service Restaurants

Sales at full service restaurants increased in January by 11% compared to a year-ago, following a 12.5% gain in December according to the Census Bureau (see chart above, data here). The increasing willingness on behalf of consumers to open up their wallets to spend money at sit-down restaurants suggests that Americans are becoming more confident about the economy, the job market and their future prospects.   

Worth a Thousand Words....

Too good not to share.... via Cafe Hayek.

Kudos to Peter Schweizer

Last November, Hoover Institution research fellow and author Peter Schweizer released his latest book "Throw Them All Out," documenting how members of Congress and their friends "get rich off insider stock tips, land deals, and cronyism that would send the rest of us to prison."  The book inspired a CBS News "60 Minutes" segment highlighting congressional insider trading.

Today, largely because of that expose'.....

WASHINGTON, April 4 (UPI) - "U.S. lawmakers must obey insider-trading laws like everyone else, the White House said, as President Barack Obama prepared to sign a law curbing such trading. Obama is scheduled to sign the Stop Trading on Congressional Knowledge Act, or STOCK Act, at 11:55 a.m. today.

The legislation, which the House and Senate passed on bipartisan votes, prohibits congressional employees and their families -- along with the president, vice president, thousands of executive branch workers and the judiciary -- from buying and selling securities based on their possession of non-public information they gained through their jobs."

MP: That sure didn't take long.  From the book's release in mid-November, to the STOCK Act passing in the House in early February by a vote of 417-2, to passing the Senate 96-3 on March 22, to being signed by the President in early April. 

And it's a real testament to the efforts of Peter Schweizer, who has demonstrated the power of a single individual to sometimes bring about major changes that will have long-lasting effects and change history. 

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.

How the Administration's Energy Strategy Has Contributed to Price Increases

Markets in Everything: $300 Hearing Aids

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 exclusive partnerships."

MP: The invisible hand at work.....

U.S. Emerges As A Main Engine of Global Growth

America is now a "standout economy"

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.”

Matt Ridley's 17 Reasons to Be Cheerful

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, and inventions.
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!

HT: Joe Lais

Monday, April 02, 2012

The White House's War Against Fossil Fuels

From my editorial in today's Investor's Business Daily (with Thomas Hemphill):

"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 security.

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 past."

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."

Personal 3-D Home Printers for $1,300

"Direct digital manufacturing" at home.....

HT: John Sturges

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 empty.”

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 year earlier. 

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.

Women of the Marcellus

"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 Job Demand Jumps in March; Both Total Ads and New Ads Are Above Pre-Recession 2007 Levels

From today's Conference Board report on online labor demand:

"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. 

2011: Most Energy-Efficient Economy in History

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 market."

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."