Tuesday, September 04, 2012

Tuesday Night Links

1. Northwest Natural Gas Co. has asked Oregon regulators for permission to reduce rates for residential customers by 8% and commercial users by 9%.  The Portland-based company also filed a request in Washington to curb residential rates there by 9% and commercial rates by 9.5%, because of the "oceans of natural gas" in the U.S. and historic low prices.  

2. New Hampshire home sales increased in July by a jaw-dropping 52% compared to a year ago. 

3. McDonald's plans to open its first veggie-only restaurant next year in India.

4. Production of the well-known, but seldom-sold Chevy Volt electric car will be suspended for a month due to slow sales. 

5. In Phoenix, foreclosure resales in July dropped to a nearly 4.5-year low, helping the median sale price rise 25% from a year earlier, following price increases of 23.1% in June, 25% in May, and 18.3% in April. 

6. Alcohol kills. Fresno State University student dies after a night of binge drinking at the Theta Chi frat house.  And yet many Americans and politicians of both parties continue to support sending other Americans to jail for smoking weeds and preventing other sick Americans from using weeds for medicinal purposes?

7. Belize plans to enter the medical tourism business.   

Huge Economist Gender Gap on Policy Issues

From the newsroom at the University of Nebraska-Lincoln:

"Is there a "gender gap" in the views of professional economists? A new national study (forthcoming in Contemporary Economic Policy) finds that while most economists agree on core economic concepts, values and methods, they differ along gender lines in their views on policy."

"The analysis, believed to be the first systematic analysis of male and female economists' views on a wide variety of policy issues, surveyed hundreds of members of the American Economic Association. The research team found that despite having similar training and adherence to core economic principles and methodology, male and female economists hold different opinions on particular current economic issues and specific economic policies including educational vouchers, health insurance and policies toward labor standards."

Among the findings:

1. By 20 percentage points, women economists are more likely to disagree that either the United States or the European Union has excessive government regulations. 

2. Female economists are 24 percentage points more likely to believe the size of the U.S. government is either "too small" or "much too small."

3. Women are 41 percentage points more likely than men to favor a more progressive tax structure. 

4. Female economists are 32 percentage points more likely to agree with making the U.S. income distribution more equal.

5. Men support the use of vouchers in education more strongly than women. 

6. Male economists were more likely to support drilling in the Arctic National Wildlife Refuge.

7. Male economists, on average, said that opportunities are relatively equal between the genders in the United States, while the average female economist in the study disagrees. 

8. When asked about the gender wage gap, the average male economist agrees that differences in productivity and voluntary occupational choices lead to men earning more, while female economists tend to disagree.

9. Compared to female economists, men exhibit greater support for reducing tariffs. 

10. Men are more opposed than women to mandating that employers provide their employees health insurance.

MP: Wow, I would not have suspected that the professional economist gender gap is that HUGE on so many issues.  

Update: Don't these results support the theory that there are innate gender differences between men and women, in terms of the way they think, learn, and view the world? "Despite having similar training and adherence to core economic principles and methodology," female and male economists come to completely different policy conclusions on many issues.  Given the statistically significant gender differences in the way male and female economists think about the world, why would we ever expect perfect statistical gender parity in anything: career choices, academic choices, average hours worked, engineering degrees, economic degrees, computer science degrees, communication degrees, education degrees, STEM degrees and careers, scores on the math SAT, scores on the critical reading SAT, etc.?  

Exhibit A: If men and women both study microeconomics and international trade theory and men exhibit greater support for free trade and reducing tariffs, can that be explained by anything other than significant gender differences in thinking, logic and reasoning?

U.S. Auto Sales Reach 4.5 Year High in August

As predicted several weeks ago by J.D. Power based on the first 16 selling days of August, U.S. new car sales did reach a four and-a-half year high last month.  Slightly more than 14.5 million units were sold in August (at an annual rate, seasonally adjusted), which was an increase of 20% from a year earlier (exactly as predicted by J.D Power), and the highest sales month since March 2008.  By individual auto company, Honda had the largest annual increase of 59.5% in August, followed by Volkswagen at 48.2%, and Toyota at 45.6%.  Chrysler led the Big Three with a 14.1% increase, followed by Ford's 12.6% gain and GM's 10.1% increase.  On a year-to-date basis, U.S. auto sales are 14.7% above last year.  

Auto sales in August marked the third time this year that monthly sales exceeded the artificially high sales during the "cash-for-clunkers" taxpayer-funded stimulus in August 2009, and August sales were the highest since the very early days of the recession.  Based on actual new vehicle purchases by consumers, in contrast to how they might respond to national surveys, consumer confidence is at the highest level since early 2008, and there is nothing here in today's report to suggest a serious slowdown or recession.

Time Cover Story: Deja Vu All Over Again, Part II

From the Time Magazine article titled "Why We're So Gloomy" (full article is behind paid firewall):
Well, why are Americans so gloomy, fearful and even panicked about the current economic slump? U.S. consumers seem suddenly disillusioned with the American Dream of rising prosperity. Hard times are forcing some people to turn their back on the American Dream. 

"Whining" hardly captures the extent of the gloom Americans feel as the current downturn. The slump is the longest, if not the deepest, since the Great Depression. Traumatized by layoffs that have cost million of jobs during the slump, U.S. consumers have fallen into their deepest funk in years. 

While some economists have described the current slump as a near depression, that phrase overstates the case if it is taken as a comparison with the period 1929-33, when the U.S. economy contracted by nearly a third. The D word becomes more valid, especially with a small d, when it is used to compare the growth rate of the 1930s, which averaged 0.5% a year, with the expected sluggishness of the next decade, which some economists predict will see an average growth rate of 2%. 

"I'm worried if my kids can earn a decent living and buy a house," says Tony Lentini, vice president of Mitchell Energy in Houston. "I wonder if this will be the first generation that didn't do better than their parents. There's a genuine feeling that the country has gotten way off track, and neither political party has any answers. Americans don't see any solutions." 

The deeper tremors emanate from the kind of change that occurs only once every few decades. America is going through a historic transition from a heedless borrow-and-spend society to one that stresses savings and investment. When this recession is over, America will not simply go back to business as usual. 

The underlying change in the way American consumers and business leaders think about saving and spending will make the recovery one of the slowest in history and the next decade one of lowered expectations. Many economists agree that the U.S. will face at least several years of very modest growth as consumers and companies work off the vast debt they assumed in the last decade. 

"Never in my adult life have I heard more deep-seated feelings of concern," says Howard Allen, retired chairman of Southern California Edison. "Many, many business leaders share this lack of confidence and recognize that we are in real economic trouble." 

Says University of Michigan economist Paul McCracken: "This is more than just a recession in the conventional sense. What has happened has put the fear of God into people."
MP: Note that this article appeared in Time Magazine's January 13, 1992 issue, although it could have just as easily been written at any time during the last several years.  The article was written almost a year after the July 1990-March 1991 recession had officially ended, and in the first year of a 10-year expansion that ended up being the longest and strongest economic expansion in the history of the country (from March 1991 to March 2001).

The Year of the Housing Recovery: CoreLogic Home Price Index Up 3.8% in July, Largest Gain in 6 Years

CoreLogic Home Price Index, Percentage Change Year-Over-Year, January 2002 to June 2012
CoreLogic released its July Home Price Index (HPI) report today, here are some highlights:

1. Home prices nationwide, including distressed sales, increased on a year-over-year basis by 3.8% in July 2012. This was the biggest year-over-year increase since August 2006. 

2. On a month-over-month basis, including distressed sales, home prices increased by 1.3% in July 2012. The July 2012 figures mark the fifth consecutive increase in home prices nationally on both a year-over-year and month-over-month basis.
3. Excluding distressed sales, home prices nationwide increased on a year-over-year basis by 4.3% in July 2012. On a month-over-month basis excluding distressed sales, home prices increased 1.7% in July 2012, also the fifth consecutive month-over-month increase. Distressed sales include short sales and real estate owned (REO) transactions.

5. The CoreLogic Pending HPI indicates that August home prices, including distressed sales, will rise by 4.6%

6. Excluding distressed sales, August house prices are also poised to rise 6.0% year-over-year. The CoreLogic Pending HPI is a proprietary and exclusive metric that provides the most current indication of trends in home prices.

7. Mark Fleming, chief economist for CoreLogic: “The housing market continues its positive trajectory with significant price gains in July and our expectation of a further increase in August. While the pace of growth is moderating as we transition to the off-season for home buying, we expect a positive gain in price levels for the full year.”

8. Anand Nallathambi, president and CEO of CoreLogic: “It’s been six years since the housing market last experienced the gains that we saw in July, with indications the summer will finish up on a strong note. Although we expect some slowing in price gains over the balance of 2012, we are clearly seeing the light at the end of a very long tunnel.”

MP: The CoreLogic report today provides more evidence that 2012 will be known as the year of the U.S. housing recovery.  The 3.8% gain in July home prices was the highest annual increase in almost six years, and CoreLogic's pending home price index is predicting an even greater 4.6% gain in August.  

Monday, September 03, 2012

Time Magazine Cover Story: Deja Vu All Over Again

If America's economic landscape seems suddenly alien and hostile to many citizens, there is good reason: they have never seen anything like it. Nothing in memory has prepared consumers for such turbulent, epochal change, the sort of upheaval that happens once in 50 years. Even the economists do not have a name for the present condition, though one has described it as "suspended animation" and "never-never land."

The outward sign of the change is an economy that stubbornly refuses to recover from the recession. The current slump already ranks as the longest period of sustained weakness since the Great Depression. That was the last time the economy staggered under as many "structural" burdens, as opposed to the familiar "cyclical" problems that create temporary recessions once or twice a decade. The structural faults represent once-in-a-lifetime dislocations that will take years to work out.

Among them: the job drought, the debt hangover, the banking crisis, the real estate depression, the health-care cost explosion and the runaway federal deficit. "This is a sick economy that won't respond to traditional remedies," said Norman Robertson, chief economist at Pittsburgh's Mellon Financial. "There's going to be a lot of trauma before it's over."
~Time Magazine cover story "The Long Haul" (click to see the date of the article, text above was modified slightly from the original).

Markets in Everything: Mobile Showers in Oil Patch

It's true, this teenager didn't really build this business. Somebody else made that happen. His family.
Yahoo! News -- "An armada of food trucks and other roving enterprises is catering to North Dakota oilfield workers.  Eighteen-year-old Evan Jensen (pictured above) believed workers would value a hot shower nearly as much as a hot meal."

"He pitched the idea to his parents back at their farm in eastern South Dakota. His father and other relatives helped him convert a 53-foot semitrailer into a five-stall shower center with an office and laundry facilities.  A 6,000-gallon semi tanker alongside the trailer provides fresh water and collects the greywater."

"The mobile venture is called Better Showers, and a shower costs $10. Towels and washcloths are $1 extra. The water pressure is strong, the soap is free and there is no time limit." 

MP: One more new business and probably several new jobs created in the heart of North Dakota's oil patch, where the jobless rate in July was a jaw-dropping 0.70% in Williams County, and where ten counties have jobless rates below 2%.   

Photo of the Day: Apostrophe Hell

The photo above comes from Wordsmith.org, with the following comments from the website's founder Anu Garg:
If there's an apostrophe hell this has to be it. If you see that fellow with his banner, ask him, "Why do you ♥ the apostrophe so much? Repent and believe in grammar."

My thank's to the reader who sent me that mans photo.
HT: Larry Terry

Israel's Energy Revolution: From Barren Energy Island to a New Bonanza of Nat Gas and Shale Oil

From the August 31 Financial Times article "Field of dreams: Israel’s natural gas":
For decades a barren energy island, forced to import every drop of fuel, Israel today stands on the cusp of an economic revolution, fueled by the vast riches that lie below its waters.

With reserves of almost 10 trillion cubic feet of natural gas, the Tamar field is a hugely valuable asset for the Israeli economy (see map above). Discovered in January 2009, it was the biggest gas find in the world that year, and by far the biggest ever made in Israeli waters. But the record held for barely two years. In December 2010, Tamar was dwarfed by the discovery of the Leviathan gasfield some 20 miles farther east – the largest deepwater gas reservoir found anywhere in the world over the past decade. 

The two fields, together with a string of smaller discoveries, will cover Israel’s domestic demand for gas for at least the next 25 years, and still leave hundreds of billions of cubic feet for sale abroad. The government take from the gasfields alone is forecast to reach at least $140 billion over the next three decades – a staggering sum for a relatively small economy such as Israel’s.

Experts are convinced that Tamar and Leviathan will not be the last big Israeli discoveries. They point to the US Geological Survey, which estimates that the subsea area that runs from Egypt all the way north to Turkey, also known as the Levantine Basin, contains more than 120 trillion cubic feet of natural gas. Israeli waters account for some 40 per cent of the total. Should these estimates be confirmed through discoveries in the years ahead, Israel’s natural gas reserves would count among the 25 largest in the world, on a par with the proven reserves of Libya and ahead of those of India and The Netherlands.
And it's not just natural gas, Israel also might have as much as 250 billion barrels of shale oil in the recently discovered Shfela Basin southwest of Jerusalem (see map below), according to this July 13 article in the Financial Post article titled "Israel's Shale Gale." 

HT: Warren Smith

Sunday, September 02, 2012

Great Moments in Government Regs, 1,000s of Low-Level Bank Employees Have Been Fired

From USA Today:
Richard Eggers doesn't look like a mastermind of financial crime. The former farm boy speaks deliberately, can't remember the last time he got a speeding ticket, and favors suspenders, horn-rim glasses and plaid shirts. But the 68-year-old Vietnam veteran is still too risky for Wells Fargo Home Mortgage, in Des Moines, Iowa, which fired him on July 12 from his $29,795-a-year job as a customer service representative.

Egger's crime? Putting a cardboard cutout of a dime in a washing machine in nearby Carlisle, Iowa, on Feb. 2, 1963.

Eggers got a chance to explain himself to company officials after they received the results of his criminal background check from a Florida company called First Advantage. He was fired anyway.

The computerized report obtained by First Advantage listed Eggers' crime as "fraud." However, records in the Warren County Courthouse confirmed his account of the 1963 incident. The files say he was arrested as a 19-year old for "operating a coin changing machine by false means" and convicted of that charge.

Big banks have been firing low-level employees like Eggers since the issuance of new federal banking employment guidelines in May 2011 and new mortgage employment guidelines in February. The tougher standards are meant to weed out executives and mid-level bank employees guilty of transactional crimes, like identity fraud or mortgage fraud, but they are being applied across-the-board thanks to $1 million a day fines for noncompliance.

Banks have fired thousands of workers nationally because of the rules, said Natasha Buchanan, an attorney with Higbee & Associates in Santa Ana, Calif., who has helped some of the banking workers regain their eligibility to be employed.

Videos on the Hydraulic Fracturing Process and the Energy Prosperity It Has Brought to North Dakota

Here's the technology driving our energy bonanza.

Here's another great animation (see another one here) of the drilling technology that is responsible for America's revolutionary, game-changing, shale-based energy bonanza, which was described by CEO Robin West of PFC Energy as the "energy equivalent of the Berlin Wall coming down."

The video above comes from the Energy from Shale organization: 

"Hydraulic fracturing is a process that has been used for more than 60 years for the extraction of oil and natural gas from underground shale formations. The technology continues to improve accessing abundant energy sources, while limiting environmental impact."
The videos below are also from Energy from Shale, and they explain how hydraulic fracturing and shale oil are supporting communities in North Dakota by bringing energy-related jobs and prosperity to the state's Bakken region.

Classic Milton Friedman Video from 1977

In this classic video from 1977, Milton Friedman delivers a 52-minute lecture at Utah State University titled "Myths That Conceal Reality" including: 1) the Robber Baron Myth, 2) the Great Depression Myth, 3) the Demand for Government Service Myth, 4) the Free Lunch Myth, and 5) the Robin Hood Myth. 

Here's how Milton Friedman introduces his lecture:

"As you are all aware, there has been a drastic shift in public attitudes public opinion in the past fifty years or so, with respect to the role of the individual on the one hand and the role of government and collective institutions on the other."

"There has been a shift in the philosophy and attitudes of the public from a belief in individual responsibility, from a belief in a society in which the role of government was as an umpire, to a belief in a society in which the emphasis is on social responsibility and the role of government as Big Brother and protector of the individual. As always when such shifts arise in public opinion, they are largely produced and reinforced by the development of myths about prior experience."

"Somebody wrote that a myth is like an air mattress: there’s nothing in it, but it’s wonderfully comfortable, and deflation causes an uncomfortable jolt. My purpose today is to give you that jolt."

HT: Newsalert

Saturday, September 01, 2012

Great Moments in Government Overreach: DOJ Accuses Sacramento Library of Discrimination

The Sacramento Public Library Authority partnered with Barnes and Noble on a trial basis to provide a NOOK e-book reader at each of its 28 libraries, pre-loaded with 20 books in a variety of genres.  Sure seems like a sensible,  innovative, market-based, consumer-friendly option now that so many people do their reading using Kindles, NOOKs, and iPads instead of print copies.  

So what's the problem? According to the Department of Justice (DOJ), the pilot e-reader program violates the Americans with Disabilities Act because it discriminates against blind patrons of the library, because NOOK e-readers are "inaccessible" to the blind.  The library reached a settlement that requires it to purchase iPod touch and iPad devices, which read e-books aloud with a computerized voice.  DOJ has also directed the library not to buy any additional e-readers that exclude blind and it requires the library to train its staff on ADA compliance.

Read the whole story here (CNS News) or here (Sacramento Bee).  Here's the full text of the settlement and the DOJ press release.

Question: Isn't the Sacramento Public Library's entire collection of books, magazines, and newspapers in hard copy also"inaccessible" to its blind patrons?  

Update: Census data on Sacramento indicate that a language other than English is spoken in almost 37% of the city's homes, so couldn't you make a case that the books in English at the city's libraries be "inaccessible" to many of the local residents?  If so, then shouldn't the libraries be required to have each book available in several languages?  

Update: The DOJ's enforcement of equal treatment and non-discriminatory practices seems to be somewhat selective. In the case above, it was considered illegal to give sighted people special treatment, preferences or access to resources at public libraries that were not available to blind people, and the legal standard applied was "equal treatment under the law for all at a publicly funded library."  But the DOJ doesn't seem equally concerned about special preferences at publicly-funded universities, where it allows a different legal standard of "unequal treatment" and "special preferences" based on race?       

HT: Curtis Purington

Quotation of the Day: Comparing Abstractions

"Sports statistics are kept in a much more rational way than statistics about political issues. Have you ever seen statistics on what percentage of the home runs over the years have been hit by batters hitting in the .320s versus batters hitting in the .280s or the .340s? Not very likely."

"Such statistics would make no sense, because different batters are in these brackets from one year to the next. You wouldn't be comparing people, you would be comparing abstractions and mistaking those abstractions for people."

"But, in politics and in commentaries on political issues, people talk incessantly about how "the top one percent" of income earners are getting more money or how the "bottom 20 percent" are falling behind. Yet the turnover in income brackets over a decade is at least as great as the turnover in batting average brackets."

~Thomas Sowell 

Update: "Comparing the top income bracket with the bottom income bracket over a period of years tells you nothing about what is happening to the actual flesh-and-blood human beings who are moving between brackets during those years. Following trends among income brackets over the years creates the illusion of following people over time. But the only way to follow people is to follow people."

~Thomas Sowell's 2007 column on Income Confusion 

Update: “Only by focusing on the income brackets, instead of the actual people moving between those brackets, have the intelligentsia been able to verbally create a "problem" for which a "solution" is necessary. They have created a powerful vision of "classes" with "disparities" and "inequities" in income, caused by "barriers" created by "society." But the routine rise of millions of people out of the lowest quintile over time makes a mockery of the "barriers" assumed by many, if not most, of the intelligentsia.”

 ~Thomas Sowell

Quotation of the Day: Gender Pay Discrimination

"The reason economists have trouble with the idea of rampant [gender] pay discrimination is that it defies common sense. Let's say I own a company and I am employing only men. Is it really true that I could fire all the men, replace them with women and lower my cost of labor by 23%? If I could do that why wouldn't I? If I were stupid enough not to do it, wouldn't a competitor of mine do it and drive me out of business?"

"In other words, if workers received substantially different pay for doing the same job, an employer would have to be leaving a lot of money on the table by not hiring the lower-paid employees. (Remember, most people who believe in pay discrimination also believe most CEOs are selfish, money-grubbing sorts as well.) And it can't just be one employer. In order for pay differentials to persist in entire industries, every employer in the market must be willing to discriminate — including the firms run by women!"

~John Goodman

Quotation of the Day: Happy Capital Day?

"Capital without labor means machines with no operators, or financial resources without the manpower to invest in. Labor without capital looks like Haiti or North Korea: plenty of people working but doing it with sticks instead of bulldozers, or starting a small enterprise with pocket change instead of a bank loan."

"Like most Americans, I’ve traditionally celebrated labor on Labor Day weekend—not organized labor or compulsory labor unions, mind you, but the noble act of physical labor to produce the things we want and need. Nothing at all wrong about that!"

"But this year on Labor Day weekend, I’ll also be thinking about the remarkable achievements of inventors of labor-saving devices, the risk-taking venture capitalists who put their own money (not your tax money) on the line and the fact that nobody in America has to dig a ditch with a spoon or cut his lawn with a knife. Indeed, what could possibly be wrong about having a “Capital Day” in odd numbered years and a “Labor Day” in the even-numbered ones?"

"Labor Day and Capital Day. I know of no good reason why we should have just one and not the other."

~Larry Reed, President of the Foundation for Economic Education

Friday, August 31, 2012

Pew's Political Party Quiz

Do your views align more with Republicans, Democrats or Independents? Answer 12 questions in a new Pew Research Center quiz to learn where you fit on the political spectrum. Explore how you compare to other Americans by age, gender, race and religion.

Update: If you don't like the Pew quiz, try the World's Smallest Political Quiz.

Friday Afternoon Links

1. Detroit metro area home sales increased 13.2% in July vs. last year, and the median sale price increased 17%.

2. Natural gas spot prices fell this week to $2.64 per million BTUs, the lowest since mid-June more than two months ago.  

3. Rates for 30-year mortgages fell 7 basis points this week to 3.59%.

4. Data Quick: National home sales over the last 30 days increased 9.7% above last year.

5. Real personal consumption expenditures increased 2% in July YoY and reached a new all-time monthly record high of $9.62 billion. The July increase was the 30th consecutive monthly increase in real consumer expenditure on a YOY basis starting in February 2010. 

6. July home sales in San Antonio increased 13% vs. last year, and the median price was up by 4.6%. 

7. Compressed Natural Gas (CNG) Filling Station Opens in Akron, OH Selling CNG at Equivalent Gas Price of $1.95 per Gallon.  

8. New York might not allow fracking in its state, but it sure likes to guzzle down frack-produced natural gas from Pennsylvania and other states.  John Hanger points out that NY's natural gas consumption increased 18.6% in the first half of 2012, and it consumes 10% more than neighboring Pennsylvania, and points out the following hypocrisy:

"New York guzzles gas everyday and supports fracking with its purchases, whether or not it does its part to meet America's energy needs."

9. Another stunning fact from John Hanger: "A seven-well pad in Morris Township has produced 23 billion cubic feet of gas. Of that total, the top producing single well in the Commonwealth has provided 6 billion cubic feet.  A true gusher!

Since the annual, average residential gas consumption in Philadelphia is about 87,000 cubic feet, this prolific well pad has supplied enough gas for 264,000 residential gas accounts in Philadelphia for a full year.  That's more than half of the homes using gas in Philadelphia and is just amazing!"

10. From this week's rail traffic report: Lumber shipments were up 21% last week and are up 12.6% YTD (to supply an increase in new home construction?), oil shipments increased 56% for the week and are up 41% YTD, and motor vehicle shipment were up 7% for the week and are up 20.5% YTD.  

Energy Prosperity: Oil Production in Lower 48 Hits 23-yr. High in July, Oil/Gas Jobs Reach 24-yr. High

Buried in this week’s 213-page August Monthly Energy Review from the EIA (full report here) is the fact that U.S. crude oil production for the lower 48 states is estimated to have reached a 23-year high in July of 5.865 million barrels per day (see top chart above, data here).  If so, that would be the highest monthly production of crude oil in the lower 48 states in more than 23 years, since April of 1989 when 5.88 million daily barrels of oil were produced.  From January-July of this year, the EIA estimates that oil production in the non-Alaska states increased more than 14% compared to the same period last year, boosted by the strong, ongoing gains in North Dakota oil (+66% year-to-date through June 2012 vs. last year) and Texas oil (+35% year-to-date through June compared to 2011).

Thanks to advances in technology (fracking and horizontal drilling), domestic oil production has been increased dramatically since 2010, reversing a quarter-century downward trend in U.S. oil production that started in the mid-1980s.  Over the last year, we’ve seen one of the largest annual increases (17%) in domestic oil production (for the lower 48 states) in the history of monthly EIA oil production data going back to 1973.

 Accompanying the boom in domestic oil and gas production has been a huge boom in “shovel-ready” jobs for that sector (see bottom chart above, data here).  Over just the last two years, employment in the oil and gas industry for drilling-related jobs has increased by more than 23% to 195,500 jobs in July, which is the highest level for those jobs since early 1988, more than 24 years ago.  America’s booming energy sector has been creating an average of 85 new jobs every business day for the last year, and those are just the direct jobs for oil and gas extraction, and doesn’t count all of the indirect jobs created throughout the supply chains for oil and gas.

A recent Bank of America/Merrill Lynch report estimates that the economic benefits to the U.S. economy from the booming domestic energy production, especially from the surging output of unconventional shale gas and oil, are approaching $1 billion per day. With all of the concerns about the sub-par growth of the overall economy during the last three years of recovery (2.2% average real GDP growth since June 2009), imagine what the growth rate of the economy would be if we didn’t have the booming oil and gas industry that is bringing energy prosperity and shovel-ready jobs to states like North Dakota, Texas and Pennsylvania.

Bottom Line: America’s booming energy sector, especially the increased production related to shale oil and gas reflected in the 23-year high for domestic crude production (lower 48 states) and 24-year high for oil and gas jobs, remains America’s “economic bright spot,” and it continues to get better and brighter all the time.

Great Moments in Government Regulation: Thou Shall Not Change Signs More than Twice per Day

1. Washington Post -- "If the Church of the Good Shepherd in Vienna, VA wanted to post the Ten Commandments on its sign on Hunter Mill Road, it would take five days to broadcast them all. That’s because Fairfax County has a commandment of its own: Thou shall not change electronic signs more than twice a day."

"So, after the Vienna United Methodist church posted three messages one day last month — offering refuge from the heat, then promoting its Web site and finally listing the time of a group prayer meeting — a zoning inspector called it a sin and hit the church with a warning letter":

“It is noted that the screens changed more than twice in a twenty-four (24) hour period,” the letter stated. “This changeable copy LED sign is considered a prohibited sign.”

"The county offered two choices: permanently limit the sign to two message changes per day or remove it altogether. At a meeting at the end of July, about two months after the church installed the sign, the county and the congregation couldn’t agree on a compromise. So the church, believing that the First Amendment also applies to the word of God, sued last week in federal court in Alexandria, saying the two-message limit violates the church’s rights to free speech and the free exercise of religion. The suit says that the county’s ordinance violates a 2000 law, the Religious Land Use and Institutionalized Persons Act, which prohibits zoning rules that place undue burdens on religious institutions."

UpdateFairfax County says it will revisit sign rule that sparked church lawsuit

HT: Curtis Purington

Thursday, August 30, 2012

Gas Prices Around the World: Relative to Income, U.S. Has Some of the Cheapest Gas in the World

A few weeks ago Bloomberg featured the "Highest & Cheapest Gas Prices by Country, where they ranked 60 countries by the average retail gas price at the pump and by the "pain at the pump," which is measured by the percentage of average daily income needed to buy a gallon of gas.  Here are some of the findings:

1. Based on both the retail price of gas and "pain at the pump," Venezuela has the cheapest gas in the world at $0.09 cents per gallon, cheaper even than bottled water.  

2. The world's highest retail gas price is found in Norway, where it would cost almost $400 to fill up the 39-gallon tank of a Chevy Suburban at $10.12 per gallon.  Turkey has the second-highest retail gas price at $9.41, followed by Israel at $9.28 and Hong Kong at $8.61.

3. For "pain at the pump," India has the most expensive gas in the world relative to income, even though the retail price there of $5.44 per gallon is about 50% less than the prices in Norway, Turkey and Israel.  

At $5.44, one gallon of gas in India is 1.43 times more expensive than its $3.81 in per-capita daily income, based on annual per-capita nominal GDP of $1,389 according to the IMF for 2011. Filling up a Chevy Suburban in India would be equivalent to about two months of income, based again on per-capita GDP. 

If gas was that expensive in the U.S., it would cost us about $189 per gallon (based on annual per-capita GDP of $48,387).  So even at $3.81 per gallon, gasoline here is a real bargain.  

4. For "pain at the pump," the U.S. ranks No. 55 out of 60 countries in the latest Bloomberg ranking (where No. 1 is the most expensive/painful and No. 60 is the most affordable/least painful).  Relative to our income, Americans have some of the cheapest gas in the world. 

Update: Another way to express the "pain an the pump" concept of the relative cost of gas around the world is to consider the "time cost of gasoline," measured in the number of minutes, hours, or days of work necessary to earn enough income to purchase one gallon of gasoline at the retail price in various countries.  

Using per-capita GDP as an approximation for income, a typical Indian would have to work about 12.5 hours (or more than a day and-a-half) to earn enough income to buy a gallon of gas at $5.44.  In America, the typical worker would have to work less (fewer?) than 10 minutes (9.45 minutes) to purchase a gallon of gas at $3.81.  

Bottom Line: Measured in time, gasoline in the U.S. is almost 80 times cheaper than in India, and for that we should be thankful.  

Shifting Demographics Explain the "Hollowing Out"

In a post earlier this week, I featured a recent Pew Research Center report that presented data on the changing distribution of income in the U.S. between 1971 and 2011.  In 1971, Pew calculated that 25% of U.S. adults were in the “lower income” category, but by 2011 the share of “lower income” Americans had increased to 29% (see chart above).  During that period, the percentage of “middle income” Americans decreased from 61% to 51%, leading Pew to conclude that “The hollowing of the middle -income tier has been a steady and virtually uninterrupted process over the past four decades.”
Importantly though, there were very significant demographic changes that took place over that forty year period that could help explain the shifting distribution of income.  For example, consider three groups of Americans that would likely be overrepresented in the “low income” category relative to their share of the U.S. population: a) immigrants, b) older Americans, and c) young Americans in college.  How have those groups changed over time?

1.  In 1970, immigrants accounted for only 4.7% of the U.S. population, but the immigrant share of today’s population is 12.5%.

2. The percentage of Americans aged 65 or older in 1975 was 10.5 percent, but had risen to 13.1 percent by 2011.

3. The number of students enrolled at an institution of higher education increased from 4.2 percent of the total population in 1970 to 6.6 percent of the total population in 2009.

Over the 40-year period between 1971 and 2011, the number of immigrants, older people, and college students have all increased relative to the total population, and those groups would naturally be expected to have lower-than-average incomes.  The changing demographics could therefore help explain Pew’s conclusion that “… from 1971 to 2011, the U.S. adult population has become more economically polarized with relatively more in the top and the bottom tiers, and fewer in the middle.”

Bottom Line: What Pew calls “economic polarization” might alternatively be described simply as changes in demographics over time.  Compared to 1970, we now have more immigrants, more older Americans, and more young Americans in college as a share of the population, and that could help explain the “hollowing out” of the middle class and the increase in Americans with low incomes.  Pew’s rather gloomy conclusion is that the middle class is shrinking and “falling backward in income and wealth.”  But perhaps it’s more the case that shifting demographics and longer life expectancy over the last forty years can explain what is likely just a natural increase in the percentage of Americans classified as “low-income.”

HT: Colin Grabow