Saturday, September 08, 2012

Amazon Economics: The Amazon Doctrine

In the video above, while unveiling the new Kindle Fire HD tablets, Amazon CEO Jeff Bezos explains one the reasons for Amazon's amazing success starting about 1:05:00, it's called:

The Amazon Doctrine

Above all else, align with customers. 

Win when they win. 

Win only when they win. 

That's Amazon's corporate version of consumer sovereignty, explained here as "profit-seeking sellers find that they can make the greatest profit by providing the best possible products for the price (or the lowest possible price for a given product)."

HT: Sprewell

TED Talk: The Power of the $10 Trillion per Year Informal Economy, World's 2nd Largest Economy

TED Talk -- Robert Neuwirth spent four years among the chaotic stalls of street markets, talking to pushcart hawkers and gray marketers, to study the remarkable "System D," the world's unlicensed economic network. Responsible for some 1.8 billion jobs, it's an economy of underappreciated power and scope.

Conclusion: "This economy is a tremendous force for global development and we need to think about it that way."

Friday, September 07, 2012

There's One Place with Jobs, Jobs, and More Jobs

The jobs report today was pretty grim even though the jobless rate fell to 8.1%.  But there's at least one place where the job market is booming like never before, where the state jobless rate is only 3%, where there are ten counties with jobless rates below 2% and where one county with a jaw-dropping 0.7% unemployment rate: North Dakota.

Here's a news report on America's hottest job market, and here's a video version of that report.  

HT: Bakken Blog News

Labor Market Weakness Can Be Traced to the Biggest Loss of Government Jobs Since WWII

I don't think this issue has received much (any?) attention:

Most of the weakness in the U.S. labor market, the stubbornly high unemployment rate, and the slow rate of overall job creation can be traced to the ongoing decreases in government jobs, see chart above.  

The top chart above shows that since January 2010, more than 4.5 million jobs have been created in the private sector and the employment level today is 4.3% higher than at the beginning of 2010.  Over the same period, government sector jobs have fallen by 2.6%, or by 579,000 jobs.   

In fact, the contraction of government jobs starting in 2009 (almost 700,000 through August) is the largest contraction in public sector jobs since the 1945-1947 period following WWII when government jobs contracted by 770,000 jobs, and almost twice the 392,000 government jobs lost in 1981-1982 (see bottom chart above).

From January 2009 to August 2012, there has been a loss of 533,000 local government jobs, a loss of 149,000 state government jobs and a gain of 27,000 federal jobs, for a total net decrease of 655,000 total  government jobs.    

Update: While the overall level of job creation has been slow, it’s being dragged down by the significant job losses in the public sector, especially for local government jobs. Private sector jobs have been increasing at 91,000 per month since the recession ended in June 2009. Government jobs have contracting by 18,000 per month on average over that period, which is bringing down the overall monthly job increases to only 74,000 on average. By comparison, 30,000 private jobs were added per month in the comparable period following the 2001 recession, which along with government job increases of 11,000 per month, brought the total monthly increase in employment to 41,000. During the current recovery, the private sector alone is creating more than twice as many jobs per month as were created by both the private and public sector in the recovery of 2002-2004. 

The periods following all of the last three recessions have accurately been described as “jobless recoveries.” But we should recognize that this recovery is different, because unlike the previous two jobless recoveries, we now have ongoing losses in public sector jobs. Without the losses in government jobs at the state and local levels dragging down job growth, the overall U.S. labor market would be doing much better right now. 

Perhaps the significant downsizing of government at the state and local level is a positive development for the future growth of the U.S. economy, and one benefit of the Great Recession. But we should also pay some attention to the fact that one of the reasons for the disappointing monthly employment reports is the persistent weakness in the public sector employment, which is offsetting the relatively healthy increases in private sector hiring.

Thursday, September 06, 2012

Free-fall: Adjusted for Inflation, Print Newspaper Advertising Will be Lower This Year Than in 1950

The blue line in the chart above displays total annual print newspaper advertising revenue (for the categories national, retail and classified) based on actual annual data from 1950 to 2011, and estimated annual revenue for 2012 using quarterly data through the second quarter of this year, from the Newspaper Association of America (NAA).  The advertising revenues have been adjusted for inflation using the CPI, and appear in the chart as millions of constant 2012 dollars.  Estimated print advertising revenues of $19.0 billion in 2012 will be the lowest annual  amount spent on print newspaper advertising since the NAA started tracking ad revenue in 1950.   

The decline in print newspaper advertising to a 62-year low is amazing by itself, but the sharp decline in recent years is pretty stunning.  This year's ad revenues of $19 billion will be less than half of the $46 billion spent just five years ago in 2007, and a little more than one-third of the $56.5 billion spent in 2004.

Here's another perspective: It took 50 years to go from about $20 billion in annual newspaper print ad revenue in 1950 (adjusted for inflation) to $63.5 billion in 2000, and then only 12 years to go from $63.5 billion back to less than $20 billion in 2012.

Even when online advertising is added to the print ads (see red line in chart), the combined total spending for print and online advertising this year will still only be about $22.4 billion, less than  the $22.47 billion spent on print advertising in 1953.

Economic Lesson:
It's another one of those huge Schumpeterian gales of creative destruction.  

More Evidence of Recovery: Home Builders Don't Have Enough Workers to Meet New Demand

CNBC's Diana Olick reports that:
After losing 70 percent of their business in the housing crash, the nation's home builders are breaking ground again. New orders for homes are rebounding strongly, and housing starts have shown sustained growth over the past year. The demand is there; unfortunately, in some areas, the workers to build these homes are not.

Many former construction workers moved on to facilities maintenance work or remodeling, or whatever jobs they could find. Replacing them is difficult because today's market demands highly skilled workers, and there is simply no available base. In the past, builders would hire workers and train them on the job. 

"They don’t have the luxury of that now," says John Courson, CEO of the Home Builders Institute, an industry training group. "They want workers that are available to them, that come out trained with a skill, and ready to hit the ground working. They don’t want the expense of on the job training.” 

The shortage is across the spectrum, but especially in need are framers, concrete workers, plumbers, roofers and painters. The shortage is also felt most in areas where housing is coming back strongest, and permitting is easiest, like Texas and much of the West. The situation is not nearly as dire in the Northeast, where home building volume is smaller, and it can take years to get a project off zoned and ready to build. Still, as construction across the nation pulls itself off life support, the bitter irony persists. After years of nobody knocking on the door, suddenly this industry is struggling to meet demand. 
Update: In today's Monster Employment report, they are reporting a 6% overall increase in online job postings for August compared to a year ago, while online listings for construction jobs increased by 9% versus last year. 

Welcome Univ. of Michigan-Flint MBA Students

To the MBA students at the Flint campus of The University of Michigan who are enrolled in MGT 551 (Business Economics) for the Fall term 2012:


Professor Perry

Danish Government May Scrap Its "Fat Tax"

Global Tax News is reporting today that:
Only one year after its implementation, the Danish government is planning to scrap the “fat tax.” The reason why: reports show that it simply doesn't work.

Denmark is now likely to abolish the tax levied on saturated fats, as empirical evidence shows that its negative effects outweigh the benefits for the Danish Treasury. In particular, reports point to job losses in the food processing industry and Danes crossing the German border to buy cheaper products.

The proposals to scrap the fat tax have been included in the 2013 draft budget, which is currently under consideration by Parliament.  Under current law, Denmark is applying a tax of DKK16 ($2.40) per kg of saturated fat on food items. This tax was introduced back in autumn 2011 to combat obesity and raise tax revenues.
MP: Taxes are always distortionary, for one reason: People can change their behavior to avoid them, as this case demonstrates. 

Update: In the comments section, Scott Drum poses an excellent question: 

"Why is that liberals constantly embrace the idea that taxing something of which they don't approve (fat, soft drinks, gasoline) will result in less of that thing being produced/consumed, but insist that increasing taxes on investment or income won't have any affect on those activities?"

Markets in Everything: On-Demand Ridesharing

From today's San Francisco Chronicle, an article about how social media, smart-phone technology and "on-demand ridesharing" is challenging the city's taxi cartel:
The taxi business in San Francisco is famously fractious. "It's like a car crash - you can't look away," says Hansu Kim, owner of DeSoto Cab Co. Drivers and cab companies bicker, freelance town cars poach fares, and there are not enough cabs on the street
That's how it has been for years, which is why it's been easy for some savvy startups to jump into the market. They've invented smartphone apps that combine ride sharing, social media and (in one case) pink mustaches to capture a trendy new way to get around town. Suddenly, a taxi looks old, dated and sadly unhip.

The startups - SideCar, Lyft, Uber, RelayRides and Getaround - let riders pay with a preloaded credit, request a ride with a click of a smartphone and track it in real time on a Google map. It's far more efficient than calling a switchboard, talking to a surly dispatcher and standing on the corner at 2 a.m. wondering whether a cab would show up.

"We are offering a more enjoyable alternative," said John Zimmer, co-founder of Lyft, which uses cars with pink mustaches. "We offer a marginally less-expensive experience with extreme convenience and personality experience."

The popularity of these companies is forcing taxi folks to realize they need to make changes. "The industry is spoiled," said Kim. "Many of the ills have been self-inflicted."
HT: Morgan Frank

Today's Employment Reports

1. Global outplacement consultancy Challenger, Gray & Christmas announced today that:

"Employers announced plans to shed 32,239 workers from their payrolls in August. It was the fewest number of monthly job cuts by US-based firms since December 2010, when layoffs totaled 32,004.& August job cuts were down 12.5% from a July total of 36,855, making it the third consecutive decline in monthly job cuts. Last month was 37% lower than August 2011, when employers announced plans to eliminate 51,114 positions from their ranks."

2.  From today's ADP National Employment Report:

"Employment in the U.S. nonfarm private business sector increased by 201,000 from July to August, on a seasonally adjusted basis. The estimated gain from June to July was revised up from the initial estimate of 163,000 to 173,000. Employment in the private, service-providing sector expanded 185,000 in August, up from 156,000 in July. Employment in the private, goods-producing sector added 16,000 jobs in August. Manufacturing employment rose 3,000, following an increase of 6,000 in July."

MP: Over the last 12 months, the U.S. economy has gained 2.14 million private jobs according to ADP, which is the largest one-year increase in jobs since early 2006, more than six years ago.  While those jobs gains are promising, it will take two more years of gains at that pace to replace all of the jobs lost during the recession - private ADP payroll employment is still about 4 million jobs below early 2008 levels.    

Wednesday, September 05, 2012

Introducing Marginal Revolution University

Marginal Revolution bloggers, economists, and George Mason University professors Tyler Cowen and Alex Tabarrok announced today the creation of Marginal Revolution University. The first course to be offered will be Development Economics, taught by Tyler and Alex.  Here are posts today at the Marginal Revolution blog from Tyler and Alex

U.S. Railroads Are Booming, Thanks to Bakken Oil

CNBC reporter Frank Byrt travelled to the Bakken region of North Dakota and wrote this report
Among the biggest beneficiaries of the demand for transport of crude oil out of North Dakota’s Bakken shale region are the owners of the two main rail links to the region, Canadian Pacific Railway and Burlington Northern Santa Fe, which is owned by Warren Buffett’s Berkshire Hathaway

The companies are exploiting the lack of pipeline capacity needed to ship the region’s rapidly growing production of crude to refineries thousands of miles away, and that demand is serving to more than offset expected weakness from their shipment of agricultural products due to the drought and lower coal shipments as utilities shift to burning the cheaper natural gas.

Oil production from the 200,000-square-mile Bakken basin, which extends into Montana and southern Canada, is skyrocketing, thanks in part to the use of hydraulic fracturing, or hydro-fracking, a process where a mixture of water, sand and chemicals is blasted deep underground to release oil and natural gas trapped within shale rock. 

My recent visit to the Bakken underscored the importance of rail traffic to the region, as this projected long-term boom, still in its infancy, is in dire need of infrastructure to support it.

That means material for the build-out of roads, housing, pipelines, and oil-storage facilities has to be shipped in, in addition to the pipes, machinery, chemicals and sand used in the hydro-fracking drilling process creating high demand for inbound rail traffic, while oil is being shipped out over the same rail network. 
MP: The chart above shows annual rail car shipments of oil for the years 2007 to 2011 according to rail traffic reports from the American Association of Railroads, and an estimate for 2012 shipments based on data through Week 34 of this year. The number of carloads  transporting oil this year will likely be at least 35% ahead of last year.  Rail shipments of oil year to date this year are 41% ahead of last year, and shipments for Week 34 (the week ending August 25) were 56% above the same week last year.    

This is another example of how shale prosperity is spreading down the supply chain for the many industries that support oil and gas drilling, including railroads, fracking sand, drilling equipment, housing, construction, etc.  

America’s Real Fiscal Problem: Federal Gov't Has Become a Gigantic Wealth-Transfer Machine

The charts above illustrate two disturbing trends that help frame the long-run fiscal challenges confronting the U.S. that far outweigh any possible near-term fallout from the pending “fiscal cliff” that the federal government faces at the end of this year.

1. The top chart above (data here, see Table 6.1) displays the increasing share of the federal government’s spending on “payments to individuals,” based on actual data from the Office of Management and Budget (OMB) for the years 1952 to 2011 and its projections through 2017.

In 1952, less than one out of every six dollars spent by the federal government represented payments to individuals.  By 2010 payments to individuals had increased so dramatically over time that roughly two out of every three dollars (66.1 percent) spent by the federal government in that year were payments to individuals for programs like Social Security, Medicare and Medicaid, public assistance, food and housing assistance, and unemployment assistance.  Last year, payments to individuals as a share of federal spending decreased slightly to 65 percent, and that category was more than three times larger than the share of 2011 federal spending on defense (20.1 percent), and more than ten times larger than the share spent by the federal government on interest payments for the national debt (6.4 percent).  The OMB estimates that payments to individuals will exceed 68 percent of federal spending in 2014, 2015 and 2016, before falling slightly to 67.5 percent in 2017 when payments to individuals will exceed $3 trillion for the first time.

2. At the same time that payments to individual Americans consume an increasing share of federal spending, the burden of taxes to finance federal spending is falling on a shrinking group of American taxpayers.  According to a recent study by The Tax Foundation, 41 percent of federal income tax filers in 2010 had a zero or negative federal income tax liability after taking deductions and credits, which was a slight decrease from the previous year when 41.7 percent of tax filers had no tax liability (see bottom chart above).  In both years, the number of nonpaying tax filers exceeded 58 million.  After fluctuating in a range between roughly 20 and 25 percent for the fifty year period from 1950 to 2000, the percent of Americans filing tax returns but paying no federal income taxes has increased sharply over the last decade to record-setting levels above 40 percent in the two most recent years.

So why does this matter?

Our long-term fiscal problems won’t be fixed until we address what might be our nation’s most serious fiscal-related problem: we’re increasingly becoming a European-style “entitlement nation,” with “payments to individuals” increasing both in absolute dollar amounts and as a share of total federal spending, while at the same time the share of Americans who face a zero or negative federal income tax liability is above 40 percent and rising.  In other words, a declining share of American taxpayers is being forced to finance the rising cost of the federal government, which is increasingly being spent on payments to individuals.

John Merline (now at Investor’s Business Daily) described the situation this way in an AOL News editorial last year:

“When you put these two trends together, what you find is that the federal government has over the years essentially turned into a gigantic wealth-transfer machine — taking money from a shrinking pool of taxpayers and giving it out to a growing list of favored groups.  This situation will make getting the federal budget under control increasingly difficult, since it will invariably involve pitting those writing checks against those cashing them.”

More recently, AEI’s Nicholas Eberstadt wrote in last Saturday’s Wall Street Journal:

“Within living memory, the federal government has become an entitlements machine. As a day-to-day operation, it devotes more attention and resources to the public transfer of money, goods and services to individual citizens than to any other objective, spending more than for all other ends combined.”

That’s the long-term fiscal cliff that should have us all very concerned – the fact that the federal government over time has turned into a gigantic entitlements and wealth-transfer machine.

Trulia's Asking Home Price Index Increased by 2.3% in August, the Biggest Increase Since the Recession

From Trulia’s press release today
Trulia today released the latest findings from the Trulia Price Monitor, the earliest leading indicator available of trends in home prices. Based on the for-sale homes listed on Trulia, this monitor takes into account changes in the mix of listed homes and reflect trends in prices for similar homes in similar neighborhoods through August 31, 2012. (Note: The Price Monitor leads the commonly watched sales price indexes by several months, see details here.) 

Asking prices on for-sale homes–which lead sales prices by approximately two or more months – increased 2.3% in August year over year (YoY) and rose in 68 of the 100 largest metros. Excluding foreclosures, prices rose 3.8% YoY. These are the largest YoY gains since the recession. Meanwhile, asking prices rose nationally 1.8% quarter over quarter, seasonally adjusted. Month-over-month asking prices rose by 0.8%, the seventh consecutive month of increases (see chart above). 

Jed Kolko, Trulia’s Chief Economist commented, “Asking prices rose 2.3% year over year in August, hitting two housing recovery milestones. First, asking prices rose faster than at any time since the recession. Second, asking prices excluding foreclosures are now rising faster than wages, putting an end to many years of affordability gains. In addition, price gains are catching up with slowing rent increases, which will tip some renters in favor of staying put in their rentals rather than buying a home." 

MP: More evidence today from Trulia of rising home prices and a housing recovery. And because the Trulia Price Monitor is a leading indicator of future home sales prices, we can expect the price gains and housing recovery to continue into the fall season. 

HT: Morganovich

Great Moments in Government Regulation

Business owner and blogger Warren Meyer explains at his Coyote Blog how the California Department of Labor forces employers to force employees to take an unpaid 30-minute lunch,  even when employees want to work through lunch and get paid and employers agree.  Here's part of Warren's post:
Theoretically, under California law, employees have a choice - work through lunch and get paid while eating at the job post, or employees can leave the job post for 30 minutes for an unpaid lunch break.   As background, every one of our employees have always begged to have the paid lunch because they need the extra 30 minutes of pay.  

Unfortunately, it does not matter what preferences the employee expressed on the job site. In the future, the employee can go to the labor department and claim he or she did not get their break, and even if they did not want it at the time, and never complained to the employer about not getting it.  The employer always, always, always loses a "he-said-she-said" disagreement in a California court or review board.  Always.

So, we find ourselves at the bizarre crossroads of making working through lunch a fireable offense, and employees who generally want to work an extra thirty minutes each day to earn more money are not allowed to do so.  Yet another example of laws that are supposed to be "empowering" to employees actually ending up limiting their choices.
HT: Morgan Frank

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, 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