Monday, December 07, 2009

We Live Longer Than Ever, Food's Never Been Cheaper, Economy's Never Been More Efficient

Bottom Line: Life expectancy for Americans has never been longer, food has never been cheaper, and the U.S. economy has never been more energy efficient than today. These are just a few of many long-term trends that demonstrate that the “good old days” are now, and life for the average American keeps getting better and better all the time (see related article, “How Are We Doing“).

Read my full post here at the Enterprise blog

The Imaginary Hobgoblin of "The Unbanked"

In Sunday's Washington Post, personal finance columnist Michelle Singletary provides some unbelievable commentary about the 60 million Americans who decide voluntarily to forego bank accounts, and she then goes on to support government intervention through the Community Reinvestment Act (didn't that contribute to the housing crash?) to "open banks' doors to all." 

Here is the opening:

Millions of Americans -- 60 million, in fact -- conduct their day-to-day financial business outside the banking system, leaving many to be preyed upon by payday-loan companies, rent-to-own establishments and other non-bank institutions.

Banks have largely ignored the unbanked and underbanked, arguing that it's difficult to figure out how to make money off them. But the Federal Deposit Insurance Corp. says it may look at using the Community Reinvestment Act -- and the weight that the act carries in bank examinations -- to encourage financial institutions to provide low-cost banking services and products.

A new FDIC report found that 17 million U.S. adults are unbanked. An additional 43 million are classified as underbanked. You're considered unbanked if you don't have a checking or savings account. The FDIC defined underbanked households as those that have a checking or savings account but use non-bank money orders, check-cashing services, payday loans, rent-to-own agreements or pawnshops at least once a year.

The FDIC survey, conducted by the Census Bureau, is the most comprehensive look to date at the unbanked and underbanked. The survey finally provides proof of the problem that consumer advocates have been trying to address for years, lobbying for products and services for the millions of people shut out from the traditional banking system. Under a 2005 law, the FDIC is required to monitor the financial industry's efforts to bring people into the mainstream banking system.

MP: Where to start? Here's an alternative version of the opening sentence:

Millions of Americans -- 60 million, in fact -- VOLUNTARILY conduct their day-to-day financial business outside the banking system, leaving many to be preyed upon SERVED VERY WELL by payday-loan companies, rent-to-own establishments and other non-bank institutions.

Second sentence:

Banks have largely ignored the unbanked and underbanked, arguing that it's difficult to figure out how to make money off them.

That statement seems ludicrous from beginning to end, and makes it appear that banks routinely turn certain people down when they show up with funds and attempt to open a checking or savings account.  Banks make money by converting savings and checking deposits into loans, and would therefore have no incentive to ignore or turn down new customers bringing new deposits to the bank (their main input), and banks would have no trouble at all figuring out how to make money from any customer's deposits - they loan them out!   

Given the proliferation of U.S. banks (more than 8,000) and the proliferation of banks advertising for new accounts and for free checking (examples here, here, here and here for the DC area), it seems absurd to suggest that new government regulations are necessary to address the imaginary problem of "unbanked and the underbanked."

H.L. Mencken accurately sums up the situation this way:

The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.

Manufacturing Areas Lead Surprise Job Comeback

ASSOCIATED PRESS -- Counties with the heaviest reliance on manufacturing income are posting some of the biggest employment gains of the nation's early economic recovery. This is a big change from just half a year ago, when some economists worried that widespread layoffs by U.S. manufacturers might be part of an irreversible trend in that sector.

The Associated Press Economic Stress Index, a monthly analysis of the economic state of more than 3,100 U.S. counties, found that manufacturing counties have outperformed the national average since March. The Stress Index calculates a score from 1 to 100 based on a county's unemployment, foreclosure and bankruptcy rates. The higher the number, the greater the county's level of economic stress.

Mind the Gap: Obama's Job Approval Spread Narrows to Record Low 3.9%, vs. 44.2% in January

From a spread of 44.2 points at the end of January for Obama (63.5% Approve - 19.3% Disapprove), the Real Clear Politics poll average has now narrowed to a record low spread of 3.9% points (49% Approve - 45.1% Disapprove).

Sunday, December 06, 2009

Climate Change Propagandistic Lockstep, Delusions of Intellectual Adequacy, and Messiah Complexes

Never in peacetime history has the government-media-academic complex been in such sustained propagandistic lockstep about any subject [climate change].

A CRU e-mail says: "The fact is that we can't account for the lack of warming at the moment" -- this "moment" is in its second decade -- "and it is a travesty that we can't."

The travesty is the intellectual arrogance of the authors of climate-change models partially based on the problematic practice of reconstructing long-term prior climate changes. On such models we are supposed to wager trillions of dollars -- and substantially diminished freedom.

Some climate scientists compound their delusions of intellectual adequacy with messiah complexes. They seem to suppose themselves a small clerisy entrusted with the most urgent truth ever discovered. On it, and hence on them, the planet's fate depends. So some of them consider it virtuous to embroider facts, exaggerate certitudes, suppress inconvenient data, and manipulate the peer-review process to suppress scholarly dissent and, above all, to declare that the debate is over.

Consider the sociology of science, the push and pull of interests, incentives, appetites and passions. Governments' attempts to manipulate Earth's temperature now comprise one of the world's largest industries. Tens of billions of dollars are being dispensed, as by the U.S. Energy Department, which has suddenly become, in effect, a huge venture capital operation, speculating in green technologies. Political, commercial, academic and journalistic prestige and advancement can be contingent on not disrupting the (postulated) consensus that is propelling the gigantic and fabulously lucrative industry of combating global warming.

~George Will in today's Washington Post

More Evidence on Why Ethanol Really IS More Than Just Hype, It's "Dangerous, Delusional Bullshit"

From the NY Times article "U.S. Unlikely to Use the Ethanol Congress Ordered":

Two years ago, Congress ordered the nation’s gasoline refiners to do something that is turning out to be mathematically impossible. To please the farm lobby and to help wean the nation off oil, Congress mandated that refiners blend a rising volume of ethanol and other biofuels into gasoline. They are supposed to use at least 15 billion gallons of biofuels by 2012, up from less than seven billion gallons in 2007.
But nobody at the time counted on fuel demand falling in the United States, which is what has happened during the recession (see chart above, data here). And that decline could well continue, as cars become more efficient under other recent government mandates.
At the maximum allowable blend, in which gasoline at the pump contains 10 percent ethanol, updated projections suggest that the country is unlikely to be able to use all the ethanol that Congress has ordered up. So something has to give. “The market is full,” said Jeff Broin, chief executive of Poet, a company in Sioux Falls, S.D., that produces ethanol.

When Congress wrote the rules, in 2007, gasoline consumption had been growing for years, and it looked as if the nation would be able to use considerably more ethanol in the future. Gasoline consumption hit a peak of 3.4 billion barrels that year (see chart above). But gasoline demand fell in 2008, after soaring gas prices early in the year were followed by the economic crisis. Consumption was slightly less than 3.3 billion barrels last year, and it could end 2009 at about the same level. With consumers buying more fuel-efficient cars these days, and carmakers rushing to bring even more of those to market, gasoline demand may not recover much in coming years, even as ethanol production soars.

MP: As I have said before: Anytime you have prominent left-wing economist and NY Times columnist Paul Krugman agreeing that "demon ethanol" is a "scam" with such a diverse group as the Wall Street Journal, Reason Magazine, the Cato Institute, Investor's Business Daily, Rolling Stone Magazine, the Christian Science Monitor, The New York Times, John Stossel, The Ecological Society of America, the American Enterprise Institute, the Brookings Institution, the Heritage Foundation, George Will and Time Magazine, you know that ethanol has to be one of the most misguided public policies in U.S. history.

From RollingStone Magazine in August 2007:

Ethanol is not just hype -- it's dangerous, delusional bullshit. Ethanol doesn't burn cleaner than gasoline, nor is it cheaper. Our current ethanol production represents only 3.5% of our gasoline consumption -- yet it consumes twenty percent of the entire U.S. corn crop, causing the price of corn to double in the last two years and raising the threat of hunger in the Third World.

So why bother? Because the whole point of corn ethanol is not to solve America's energy crisis, but to generate one of the great political boondoggles of our time.

Econ 101: Why Peak Oil is Peak Idiocy

Related to these two recent CD posts about peak oil and how we never run out of natural resources, Mike Munger provides some excellent commentary on his KPC post "Peak Idiocy":

Of all the idiotic things that people believe, the whole "peak oil" thing has to be right up there. It is literally impossible for us to run out of oil. We have never run out of anything, and we never will.

If we did start to use up the oil we have (though, counting shale oil, we still haven't used even 10% of the total KNOWN reserves on earth, and there are lots of places we haven't looked) but suppose we were on our way to using it up. Three things would happen.

1. Prices would rise, causing people to cut back on use. More fuel effcient cars, better insulation on houses, etc. Quantity demanded goes down.

2. Prices would rise, causing people to look for more. And they would find more oil, and more ways to get at it. Quantity supplied goes up.

3. Prices of oil would rise, making the search for substitutes more profitable. At that point (though not now!) alternative fuels and energy sources would be economical, and would not require gubmint subsidies, because they would pay for themselves. The supply curve for substitutes shifts downward and to the right.

This is Econ 101.

Facebook: Actual Friends vs. People You Hate

HT: R. Adams

Saturday, December 05, 2009

Markets in Everything: Trained Russian Circus Cats

Thought for the Day: We Never Run Out of Natural Resources, We Just Find Better Alternatives

The Stone Age didn't end because we ran out of stones, and the petroleum age won't end because we run out of petroleum.

Likewise, the age of horse/animal power didn’t end because we ran out of animals, and we didn’t stop using steam power because we couldn’t build enough steam engines.

And the age of whale oil didn't end because we ran out of whales, and the age of using wood for heating homes didn't end because we ran out of trees.

Friday, December 04, 2009

Cheap Oil is Here to Stay; Forget "Peak Oil," We Now Have "Peak Demand," We'll Never Run Out

CNN Money -- A growing number of experts are saying that oil prices will remain well below $100 a barrel as the economy remains fragile and efficiency measures kick in.

"The world will never run out of oil," Deutsche Bank analysts wrote in a recent research note, echoing the old logic that the Stone Age didn't end because the world ran out of stone. "If the oil age does end, it likely will be because we become more efficient and simply use less petroleum." It's this "becoming more efficient" idea that the Deutsche Bank analysts use to predict even lower oil prices in 2010 than now - an average of $65 a barrel next year compared to nearly $80 currently.

To get there, they employ a metric known as energy intensity, which basically measures the amount of oil used in relation to the size of the economy. The energy intensity of the U.S. economy has actually dropped by about 2% a year every year since the early 1980s (see updated chart above). In the next couple of years Deutsche Bank expects it to decline by around 3% as people buy more fuel efficient cars and respond in other ways to the high prices of 2004-2008 and as government conservation measures kick in.

"US oil demand may have already peaked," the note said. "There's so much spare capacity right now," said one analyst, noting that oil prices in the $70 range are still high enough to insure new supplies are being brought online. "It's very difficult to see prices much higher."

The Motley, Motley CRU (Climatic Research Unit) Has Given All of Science a Massive Black Eye

Ken Green of The American Enterprise Institute sums up the fallout from Climategate:

Most troubling are the suggestions that a tribe of incestuous climate scientists may have actively conspired to undermine the peer-review process, until now considered a determinant of what is worthy of scientific consideration, and what is not.

Science is vitally important for the operation of a highly technological society, and that science must be open and transparent, and must adhere to the scientific method and the institution of science, which has no place in it for hiding data, hiding data-processing, shaping data to conform to pre-existing beliefs, undermining the peer-review process, cherry-picking reports in order to slant political IPCC reports, or slandering critics by comparing them with flat-Earthers, moon-landing conspiracy theorists, or holocaust deniers.

The climate scientists at the CRU have given not only climate science, but all of science, a massive black eye, and should the public lose faith in science, a great deal of the responsibility will accrue to them. The scientists involved in the Climategate scandal should be permanently removed from any position in which they can influence climate policy. They should be excluded from peer-review panels, banned from participating in the IPCC process in any capacity, and kept far away from editorial positions at journals. Their data and methods must be made absolutely transparent and available for outside inspection.

Denmark's 200% Car Tax: Crazy and Crazier

NY Times -- Is saving $40,000 at the showroom enough to get drivers behind the wheel of an electric car? With a program in the works to add easy access to charging stations, Denmark is about to find out. The country imposes a punitive tax of about 200% on new cars, so a vehicle that would cost $20,000 in the United States costs $60,000 here. For a quarter-century, electric cars have been exempt from that tax. But the models on the market were so limited in their capabilities that only 497 of them are registered in the entire country.

For all their potential, electric cars have always been the subject of more talk than action, and only a handful are on the road in Denmark. But now the biggest Danish power company is working with a Silicon Valley start-up in a $100 million effort to wire the country with charging poles as well as service stations that can change out batteries in minutes.

The government offers a minimum $40,000 tax break on each new electric car — and free parking in downtown Copenhagen. But even in Denmark, one of the most environmentally conscious nations in the world, skepticism abounds. It is not clear that car buyers can be persuaded to make the switch.

“There is a psychological barrier for consumers when their car is dependent on a battery station,” warned Henrik Lund, a professor of energy planning at Aalborg University. “It’s risky.”

MP: Two amazing points: First, a 200% tax on cars in Denmark? That seems crazy. Second, most car buyers in Denmark actually pay the 200% tax and buy a regular car when they could avoid it by buying an electric car? That seems even crazier. I always thought that if you subsidize something you get more of it. Not in Denmark I guess.

Thanks to Stuart Anderson.

Update: Denmark, which hosts the UN climate change conference next week, is often seen as one of the most environmentally friendly countries in the world. This reputation is mostly undeserved, but Denmark is doing its best to catch up.

MP: Undeserved is maybe right, since many seem perfectly willing to pass up $40,000 in green subsidies and tax savings?

Las Vegas Home Sales Increase for the 14th Straight Month; Highest October Sales Since 2006

DQNews -- First-time buyers and investors pushed Las Vegas-area home sales higher in October as the overall median sale price held at $130,000 for the fourth consecutive month. Foreclosure resales remained a major market force but continued to wane. In October, 66.8 percent of the Las Vegas-area houses and condos that resold were foreclosure resales, meaning those homes had been foreclosed on in the prior 12 months. That was down from 67.1 percent in September but up from 64.7 percent in October 2008. Foreclosure resales peaked in April this year at 73.7 percent of the region’s resales.

A total of 5,068 new and resale houses and condos closed escrow in the Las Vegas-Paradise metro area in October, up 1.1 percent from September and up 22.2 percent from a year earlier (see chart above). It was the highest sales total for an October since October 2006, when 5,693 homes sold. October marked the 14th consecutive month in which sales have risen on a year-over-year basis.

The median price paid for all new and resale houses and condos sold in the Las Vegas metro area in October was $130,000, unchanged from September but down 33.7 percent from $196,000 a year earlier.

Adjusted Jobless Claims Signal End of Recession

The November employment report was released today, and the graph above of Initial Jobless Claims as a Percent of the Labor Force (1974-2009) has been updated to reflect the November labor force of 153,877,000 and the November average for initial unemployment claims (502,562 for the 4-week moving weekly average). This measure of initial jobless claims, adjusted for the size of the U.S. labor force, shows that jobless claims peaked during this recession above the levels of the last two recessions (1990-1991 and 2001), but were never anywhere close to the levels of the previous three recessions in the mid-1970s and early 1980s (see chart above).

The sharp reduction in adjusted jobless claims from the March 2009 high follows the same pattern of sharp reductions in adjusted claims at the end of the 2001 recession and at the end of each of the last five recessions.

See a very
similar analysis here from Scott Grannis, who alternatively calculates jobless claims as a percent of payrolls with the exact same graphical pattern presented here using jobless claims as a percent of the labor force (slightly different denominator, but same numerator, and same story).

The Real Fiscal Cost of Government-Run Healthcare

This CF&P Foundation video explains why healthcare proposals in Washington will result in bloated government and higher deficits. This mini-documentary exposes the pervasive inaccuracy of congressional forecasts and succinctly lists 12 reasons why Obamacare will be a budget buster.

Retail Clinics Provide Network of Vaccine Outlets

TAMPA - Swine flu immunization clinics hitting the Tampa Bay area this weekend may be a sign the vaccine is finally reaching the general public.

Starting Saturday, immunization clinics in Polk and Sarasota Counties will begin offering the vaccine to people outside the priority groups for swine flu vaccination. Also, in larger counties including Hillsborough, retail health clinics at Walgreens and CVS are being approved to serve as vaccine outlets for the general public.

MP: This highlights another advantage of the 1,200 retail health clinics around the country - they provide an automatic and efficient infrastructure that is already in place to help promote certain public health initiatives, in this case by providing a network of outlets to facilitate the distribution of the swine flu vaccine.

Jobless Rate Drops, Overtime and Temp Jobs Rise

WSJ -- U.S. job losses slowed sharply in November and the unemployment rate unexpectedly declined, in a sign the labor market is finally starting to heal as the economy recovers. Nonfarm payrolls fell by just 11,000 last month, slowing down from a downwardly revised 111,000 drop seen in October, as the recovery encouraged companies to retain workers, the Labor Department said Friday.

It was the best showing since December 2007, when payrolls rose by 120,000, said a Labor department official. Economists surveyed by Dow Jones Newswires had expected a payroll decrease of 125,000. The unemployment rate, calculated using a survey of households as opposed to companies, edged lower to 10% in November from 10.2%. Economists had forecast the jobless rate would remain at October's level of 10.2%, when it rose to the highest level since April 1983. Employment fell in construction, manufacturing and information, while temporary help services and health care added jobs.

MP: Two additional positive signs from today's employment report are: a) the increase in manufacturing overtime to 3.3 hours, the highest level since October 2008, and b) the increase in temporary help workers to the highest level since February 2009 (see graph above). Both of those signal a labor market that is slowly recovering, and strongly suggest that the worst is behind us.

Thursday, December 03, 2009

Black Women Earning College Degrees Outnumber College-Educated Black Men 2 to 1

I've written before about the huge and growing female-male "college degree gap" see posts here, here and here. Women now dominate men at almost every level of higher education, in terms of degrees conferred (the only exception is for Professional Degrees - MD, JD, and DDs). Here's the breakdown for graduates of the Class of 2009 (estimates from the Department of Education, data here):

Associate's Degrees: 164 for women for every 100 for men.

Bachelor's Degrees: 137.5 for women for every 100 for men.

Master's Degrees: 152 for women for every 100 for men.

Professional Degrees: 99.15 for women for every 100 for men.

Doctoral Degrees: 105 for women for every 100 for men.

The Department of Education also has college degree data based on sex and race/ethnicity, but it's only through the 2006-2007 academic year. The chart above shows the college degree breakdown for the graduating classes of 1977 and 2007 based on the number of degrees earned by black females for every 100 degrees earned by black males. The "degree gap" is much wider for black college graduates compared to the degree gap for all racial/ethnic groups.

For example, there were almost 250 master's degrees awarded in 2007 to black females for every 100 degrees earned by black men. Consider also that in 1976-1977, black men outnumbered black women for doctor's degrees and professional degrees (MDs and JDs) and there were 100 doctor's degrees earned by black men for every 67 degrees awarded to black females, and 100 professional degrees for black men for every 44.1 degrees earned by black women (more than a 2:1 ratio in favor of black men). By 2007, the gender imbalance had completely reversed and black women outnumbered black men by almost 2:1 for both doctor's and professional degrees.

Comments welcome.

Jobless Claims Drop for 13th Week to 13-Mo. Low

WASHINGTON New claims for unemployment benefits in the United States fell unexpectedly, according to the latest weekly data Thursday, showing fresh signs of stabilization in the ailing labor market. The seasonally adjusted number of new unemployment claims in the week ending November 28 fell to 457,000, down 1.1 percent from the previous week's downwardly revised figure of 462,000, the Labor Department said.

New claims for unemployment insurance benefits are now at the lowest level since September 2008 and have declined for five consecutive weeks, the longest streak since the US economy entered recession in December 2007. The four-week moving average, which smooths out week-to-week volatility, was 481,250, a decrease of 14,250 from the previous week's revised average of 495,000 (see chart above).

MP: Jobless claims (4-week moving average) have now decreased for the 13th consecutive week to a new 13-month low of 481,250, the lowest level since November 1, 2008.

60% of All Vanguard Accounts and 71% of Target-Date Funds Have Recovered to 2007 Levels

ABC News -- Another major provider of 401(k) accounts says the typical retirement saver now has more money in their account than they did before the stock market began tumbling two years ago. The Vanguard Group Inc. said Wednesday that 60 percent of participants who continued to contribute and stayed invested have more money in their accounts than they had in September 2007 — before the market decline. That means 40 percent of continuous participants have lower balances, although Vanguard said most of them are less than 20 percent below their earlier peak value.

From Vanguard's press release:

The study looked at Vanguard participant balances between September 2007 and September 2009, a period during which the market peaked in October 2007 and declined dramatically in 2008 and early 2009. At Vanguard as of September 2009, 60% of continuous participants (those with a balance in their plan over that two-year period) had the same or a higher account balance than they had at the stock market’s October 2007 peak. The balances of 40% of continuous participants were lower, although most of them had balances that are less than 20% below their earlier peak value.

The study also found that 71% of pure Vanguard target-date fund investors (those investing their entire plan account in a target-date fund) saw their account balances return to or exceed the level of two years ago. The median pure target-date investor’s account increased more than 80% during the period. These positive outcomes occurred regardless of the stated retirement year of the fund.

“The main reason for the recovery in 401(k) balances is ongoing contributions. Both investment returns and contributions jointly determine retirement savings,” said Stephen P. Utkus, head of the Vanguard Center for Retirement Research. “Growth in one of those factors can offset losses in another over a given period. Our evidence suggests that ongoing contributions plus improvement over time in the capital markets may restore many more of these individuals to their pre-October 2007 wealth levels, perhaps more rapidly than previously anticipated.”

HT: Lyle Meier

Wednesday, December 02, 2009

Texas vs. California

From "America’s Future: California vs. Texas" in Trends Magazine:

What's the worst state to do business in? According to readers of Chief Executive magazine, it's California. In the same poll, Texas won first place as the best state in which to put your headquarters. As reported in The Economist, the two largest states in the nation have very different philosophies and very different success rates.

What’s wrong with California, and what’s right with Texas? It really comes down to four fundamental differences in the value systems embodied in these states:

1. Texans on average believe in laissez-faire markets with an emphasis on individual responsibility. Since the '80s, California’s policy-makers have favored central planning solutions and a reliance on a government social safety net. This unrelenting commitment to big government has led to a huge tax burden and triggered a mass exodus of jobs. The Trends Editors examined the resulting migration in “Voting with Our Feet,” in the April 2008 issue of Trends.

2. Californians have largely treated environmentalism as a “religious sacrament” rather than as one component among many in maximizing people's quality of life. As we explained in “The Road Ahead for Housing,” in the June 2009 issue of Trends, environmentally-based land-use restriction centered in California played a huge role in inflating the recent housing bubble. Similarly, an unwillingness to manage ecology proactively for man’s benefit has been behind the recent epidemic of wildfires.

3. California has placed “ethnic diversity” above “assimilation,” while Texas has done the opposite. “Identity politics” has created psychological ghettos that have prevented many of California’s diverse ethnic groups and subcultures from integrating fully into the mainstream. Texas, on the other hand, has proactively encouraged all the state’s residents to join the mainstream.

4. Beyond taxes, diversity, and the environment, Texas has focused on streamlining the regulatory and litigation burden on its residents. Meanwhile, California’s government has attempted to use regulation and litigation to transfer wealth from its creators to various special-interest constituencies.

MP: The 4.2% difference in October jobless rates (12.5% in CA vs. 8.3% in TX) tells the story (see graph above). In fact, California's unemployment rate has been more than 4 percent above the rate in Texas every month this year except for January, and that is the first time in state jobless rate history back to 1976 that there has ever been a 4-point difference in the unemployment rates between those two states.

HT: Enterprise Blog

LASIK As a Model for Health Care Reform

Market-based health care solutions are discussed in this video, based on what works quite well in the other five-sixths of the U.S. economy, where choice and competition lead to increases in quality and lower prices over time (electronics, automobiles, clothing, etc.). In one of the few truly market-based areas of health care that is actually consumer-driven (since it's not covered by insurance and patients make direct cash payments) - LASIK eye surgery - there have been market-driven improvements in quality and dramatic reductions in cost, which could be a model for health care reform for other procedures.

Specific recommendations from Reason include:

1. Change the tax code.

2. Scale back state regulations and create a national market for health insurance.

3. Promote Health Savings Accounts (HSAs).

MP: The chart above shows the 42% reduction in LASIK surgery between 1991 and 2009 (in inflation-adjusted 2009 dollars).

Corporate Layoffs: The Storm Has Passed

Scott Grannis at the always excellent Calafia Beach Pundit blog produced the graph above on Corporate Layoffs, and comments:

I've been showing this chart since early this year, saying that it was a good indicator of improvement in the economy. Corporate layoff announcements (which are presumably a fairly accurate gauge of distress in the large corporate sector of the economy) are now down to levels that in the past have been consistent with healthy economic growth. The storm has clearly passed.

MP: What's interesting is to compare Scott's graph above to the graph below of the "
Search Volume Index" for the term "layoffs" using Google Trends, showing the same surge towards the end of 2008 followed by a huge spike around the first of the year, and then a sharp decline over the year, falling to levels in recent months that are about the same as in 2007. (Note: Google Trends only goes back to 2004 so it's not possible to match the same time periods in both graphs.)

Tuesday, December 01, 2009

NY Fed Treasury Spread Model: Economic Recovery Underway, NO Chance of a Double-Dip Recession

The New York Fed recently released its latest "Probability of U.S. Recession Predicted by Treasury Spread," with data through October 2009, and the Fed's recession probability forecast through October 2010 (see top chart above). The NY Fed's model uses the spread between 10-year and 3-month Treasury rates (3.32% spread in October) to calculate the probability of a recession in the U.S. twelve months ahead.

The Fed's model (
data here) shows that the recession probability peaked during the October 2007 to April 2008 period at around 35-40%, and has been declining since then in almost every month. For October 2009, the recession probability is only 0.18% (less than 1/5 of 1%) and by a year from now in October 2010 the recession probability is only .105%, or about 1/10 of one percent.

Further, the Treasury spread has been above 3% for the last six months (since May), a pattern consistent with the economic recoveries following the last two recessions (see bottom chart above). Finally, the pattern of the recession probability index so far this year (going below double-digits and declining monthly) is very similar to the pattern starting in March 2002 that signalled the end of the 2001 recession.

According to the NY Fed model, the chances of a double-dip recession this year or next year? Zero.

DJ Economic Sentiment Indicator Increases in 11 of Last 12 Months to Highest Level Since August 2008

Increasingly positive media coverage of consumer spending contributed to a significant rise in the Dow Jones Economic Sentiment Indicator (ESI) in November. The ESI rose to 38.3, up from 36.9 in October.

The Dow Jones Economic Sentiment Indicator aims to predict the health of the U.S. economy by analyzing the broad coverage of 15 major daily newspapers in the U.S. The ESI has risen 11 out of 12 months since its low of 22.2 in November 2008, data that confirm the consensus among economists that the U.S. recession ended sometime early in the summer.

“The Dow Jones Economic Sentiment Indicator climbed to its highest level since August 2008, suggesting the U.S. economic recovery is entrenched and that the number of jobs lost during the month continued to shrink sharply,” Dow Jones Newswires 'Money Talks' columnist Alen Mattich said. “Market expectations for November job losses have been falling, a view supported by the indicator. This in turn could underpin retail sentiment over the next month."

The ESI represents one of the most comprehensive and far-reaching examinations of media coverage as an economic indicator. The ESI’s back-testing to 1990 shows that the ESI clearly highlighted the risk that the U.S. economy was sliding into recession in 2001 and 2008 and suggests the indicator can help predict economic turning points as much as seven months in advance of other indicators.

Monday, November 30, 2009

Interesting Lists

1. America's Best Bang-For-The-Buck Cities: Omaha, Little Rock, Jackson, Des Moines, Augusta.

2. Top Words, Phrases and Names for 2009: a) Twitter, H1NI, Obama; b) King of Pop, Obama-mania, Climate Change; c) Barack Obama, Michael Jackson, Mobama. For previous years, go here.

When It Rains in Cuba: Leaky Roofs, No Umbrellas

One might think that in a tropical country life is organized taking the climate into account, and that along with our light clothing we always have umbrellas and raincoats at hand. Not so. Leaking roofs are common, especially in the construction of the last fifty years; homes, offices, schools and hospitals, and even stores suffer repeated losses because of them. Collapses, now typical in the urban landscape, are not the result of bombardments of imperialism, rather they are caused by the difficulty of acquiring waterproof construction materials.

In foreign films we often see scenes of crowds in the rain. We are impressed by the image of a cloud of umbrellas that extends the length of a street or the full width of the stands in a stadium. We inevitably compare these scenes with the typical appearance of our streets during a cloudburst: nylon bags used as protection, trying to cover one’s head with the newspaper Granma or a piece of cardboard; older people waiting under the balconies or huddled together at a bus stop.

These are days to ask ourselves when we will have a raincoat – one without holes that fits – let alone what seems to be a pipe dream for so many, when the city will not collapse because of a simple shower that falls in the tropics.

~Yoani Sanchez

The Greatest Scientific Scandal of Our Age

Here's a good summary of why Climategate is the greatest scientific scandal of our generation:

There are three threads in particular in the leaked documents which have sent a shock wave through informed observers across the world.

Perhaps the most obvious, as lucidly put together by Willis Eschenbach (see McIntyre's blog Climate Audit and Anthony Watt's blog Watts Up With That ), is the highly disturbing series of emails which show how Dr Jones and his colleagues have for years been discussing the devious tactics whereby they could avoid releasing their data to outsiders under freedom of information laws. They have come up with every possible excuse for concealing the background data on which their findings and temperature records were based. Most incriminating of all are the emails in which scientists are advised to delete large chunks of data, which, when this is done after receipt of a freedom of information request, is a criminal offence. But the question which inevitably arises from this systematic refusal to release their data is – what is it that these scientists seem so anxious to hide?

2. The second and most shocking revelation of the leaked documents is how they show the scientists trying to manipulate data through their tortuous computer programs, always to point in only the one desired direction – to lower past temperatures and to "adjust" recent temperatures upwards, in order to convey the impression of an accelerated warming. What is tragically evident is the picture of the CRU scientists hopelessly at sea with the complex computer programs they had devised to contort their data in the approved direction, more than once expressing their own desperation at how difficult it was to get the desired results. This comes up so often that it becomes the most disturbing single element of the entire story.

The third shocking revelation of these documents is the ruthless way in which these academics have been determined to silence any expert questioning of the findings they have arrived at by such dubious methods – not just by refusing to disclose their basic data but by discrediting and freezing out any scientific journal which dares to publish their critics' work. It seems they are prepared to stop at nothing to stifle scientific debate in this way, not least by ensuring that no dissenting research should find its way into the pages of IPCC reports.

Conclusion: Our hopelessly compromised scientific establishment cannot be allowed to get away with a whitewash of what has become the greatest scientific scandal of our age.

~Christopher Booker, author of "The Real Global Warming Disaster: Is the Obsession with 'Climate Change' Turning Out to be the Most Costly Scientific Blunder in History?" writing in
The Telegraph

Thanks to Warren Meyer at Coyote Blog.

First 2-Month Restaurant Index Gain (%) in 3 Years

The outlook for the restaurant industry improved somewhat in October, as the National Restaurant Association's comprehensive index of restaurant activity registered its first gain in three months. The Association's Restaurant Performance Index (RPI) a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry stood at 98.0 in October, up 0.5% from its September level (see top chart above). However, the RPI still remained below 100 for the 24th consecutive month, which signifies contraction in the index of key industry indicators. Although restaurant operators continue to report soft samestore sales and customer traffic levels, they are somewhat more optimistic about improving conditions in the months ahead.

MP: Although not reported by the NRA, the bottom chart above shows the percentage change in the RPI from the same month in the previous year. Following negative year-to-year growth in 23 out of 24 months from September of 2007 through August 2009, there have been positive increases in September and October of this year, marking the first back-to-back monthly increases since the summer of 2006. Further, the October-to-October gain of 0.93% is the single largest monthly gain since a 1.3% increase in September 2006, more than three years ago.

Online Black Friday Spending Up By 11% vs. 2008

ComScore, a leader in measuring the digital world, today reported holiday season retail e-commerce spending for the first 27 days of the November – December 2009 holiday season. For the holiday season-to-date, $10.57 billion has been spent online, marking a 3-percent increase versus the corresponding days last year. Black Friday (November 27) saw $595 million in online sales, making it the second heaviest online spending day to date in 2009 and representing an 11-percent increase versus Black Friday 2008.

Saturday, November 28, 2009

The Rich Are Getting Richer and the Poor Are Getting Richer; The Good Old Days Are Now

Click to enlarge.
Steve Horwitz at the Austrian Economists blog has a good post based on Census Bureau data that were recently released on "Living Conditions in the United States, 2005." The chart above (click to enlarge) shows the percentage of all U.S. households owning various household appliances in 1971 and 2005, and the percentage of poor households (below the official poverty line) owning those appliances in 2005. The data show a significant improvement in living standards between 1971 and 2005, as the percentage of households with clothes dryers increased from 44.5% to 81.2%, the percentage of households with dishwashers increased from 18.8% to 64%, and the percent of household with air conditioners increased from 31.8% to 85.7%.

data from the Department of Energy (based on Census Data) in the chart show that the percentage of households owning two or more vehicles increased from 34.8% in 1970 to 57% in 2000, and has likely increased since then.

What's most impressive though is the comparison of the living standards of households living below the poverty line in 2005 to all U.S. households in 1971. By almost every measure of appliance ownership, poor American households in 2005 had much better living conditions than the average American household in 1971, since poor households in 2005 had much higher ownership rates for basic appliances like clothes dryers, dishwashers, color TVs, and air conditioners than all households did in 1971.

As Steve Horwitz concludes "Life for the average American is better today than 35 years ago, life for poor Americans is much better than it was 35 years ago, and poor Americans today largely live better than the average American did 35 years ago. Hard to square with a narrative of economic stagnation or decline."

The reasons for the significant improvements in living standards for all Americans (at all income levels) include innovation, technology improvements, supply chain efficiencies, increases in productivity and other market-driven efficiencies that drive prices lower and lower year by year, measured in what is most important: our time, and the amount of labor it takes to earn the money to purchase household appliances and other goods and services.

Time Value of Common Household Appliances, 1973 vs. 2009
The chart above (click to enlarge) shows retail prices for eleven different household appliances in both 1973 (data here) and 2009 (data here), and the cost of those appliances measured in "hours of work" at the average hourly wage for all industries (BLS data here, $4.12 in 1973 vs. $18.72 today). The charts shows significant reductions in the real cost of basic household appliances between 1973 and today of from -50.7% for a basic kitchen stove (70.4 hours in 1973 vs. 34.7 hours in 2009) to -83.5% for color TVs (97.1 hours in 1973 vs. 16 hours in 2009), and an average reduction in real cost of more than 70% between 1973 and 2009. In other words, to purchase those 11 basic household appliances in 1973 would have taken 551.1 hours of work, 13.8 weeks or 3.4 months working full-time at the average hourly wage in 1973. To purchase those same eleven appliances in 2009 would have only taken 171 hours of work, or 4.3 weeks or 1.1 month. Or the typical worker in 1973 would have had to work from January 1 until the second week of April to earn enough income to purchase those 11 appliances (pre-tax), whereas a worker today would only have to work from January 1 until the first few days of February to earn income for those appliances.
Bottom Line: As much as we hear about declines in median income, economic stagnation, the disappearance of the middle class, falling real wages, increasing income inequality, the data tell a much different story: The rich are getting richer and the poor are getting richer.

Friday, November 27, 2009

Another V-Sign: Manufacturing Overtime Hours

Scott Grannis writes about another V-sign of the economic recovery: the rebound in real personal consumption expenditures:

The turnaround has nothing to do with cash-for-clunkers, since that washed out of the numbers by the end of October (i.e., some spending was accelerated, followed by some payback). On balance, real spending increased in 5 out of the six months ending October, and it rose at a 2.6% annualized rate in the four months following the likely end of the recession in June.

Scott concludes:

Things could be a lot better, to be sure, but there are things to be thankful for this Thanksgiving. One year ago we were standing on the edge of a fearsome abyss, while today we are arguing about how fast the economy is going to grow.

MP: Another V-sign of economic recovery is the turnaround in overtime hours for manufacturing workers (see chart above). The 23.1% increase over the last seven months, from 2.6 hours in March to 3.2 hours in October, is the largest 7-month percentage increase in manufacturing overtime hours since 1983 following the 1982 recession.

See related from today's Wall Street Journal "
Overtime Creeps Back Before Jobs," which starts by saying that "Overtime is returning at many manufacturers, boosting workers' battered wages and helping companies increase output during a period of uncertain growth."

Fattened Up Over Time: Turkeys and Americans

THE ECONOMIST - Between 1960 and 2008, turkeys bulked up by around 11 pounds to 29 pounds, an increase of 64%. Coincidentally, in that same period the average American man gained 28 pounds (166.3 pounds to 194.3 pounds, a 16.8% increase), almost the equivalent of a turkey (see chart above).

Update: "Recently I asked an acquaintance in Bombay why he has been trying so hard to relocate to America. He replied, “I really want to move to a country where the poor people are fat.” From Dinesh D'Souza's column "What's So Great About America."

What If Food Shopping Worked Like Health Care?

Watch the video.

Thursday, November 26, 2009

Help Wanted: No Real World Experience Required

Great post and graph on the Enterprise blog from my friend and colleague at the American Enterprise Institute Nick Schulz.

The Marvel and Mystery of the World

But we can all remind ourselves that the richness of this country was not born in the resources of the earth, though they be plentiful, but in the men that took its measure. For that reminder is everywhere—in the cities, towns, farms, roads, factories, homes, hospitals, schools that spread everywhere over that wilderness.

We can remind ourselves that for all our social discord we yet remain the longest enduring society of free men governing themselves without benefit of kings or dictators. Being so, we are the marvel and the mystery of the world, for that enduring liberty is no less a blessing than the abundance of the earth.

Wall Street Editorial on the day before Thanksgiving

Wednesday, November 25, 2009

First Retail Clinic Opens in DC 2 Miles from Capitol

FOX BUSINESS NEWS -- MinuteClinic, the pioneer and largest provider of retail-based health care in the United States, has opened its first retail health care center in Washington, D.C. inside a CVS/pharmacy store on Bladensburg Road. The clinic is open seven days a week and will serve patients in Northeast neighborhoods, including Trinidad, Carver Langston, Kingman Park, Atlas District, Ivy City and the Gallaudet University campus.

"Through this conveniently located store-based clinic, we are expanding access to high-quality, affordable care for common family illnesses in the Northeast neighborhoods of the District of Columbia," said Andrew Sussman, M.D., MinuteClinic president. "We are committed to making our innovative model, which includes a series of prevention and wellness services, part of the District's extensive efforts to broaden access to quality medical care for its citizens."

The MinuteClinic health care center in Northeast is open Monday - Friday from 8:30 a.m. to 7:30 p.m., Saturday from 9 a.m. to 5:30 p.m. and Sunday from 10 a.m. to 5:30 p.m. Examinations typically take 10-15 minutes and no appointment is necessary.

Additional MinuteClinic locations are expected to open inside CVS/pharmacy stores in the District of Columbia in 2010. There are 23 MinuteClinic health care centers inside select CVS/pharmacy stores in Northern Virginia and Maryland counties surrounding the District of Columbia.

MP: While Congress considers how to bring down health care costs and expand access to medical care through various grandiose government interventions, programs and public options (and they've got 2,000 pages worth of "health care reform" to prove it), the private marketplace is already doing it - lowering costs and expanding access at more than 1,000 retail clinics (with maybe as many as 4,000 by 2015, see chart above). And unlike government-based health care reform, the explosion of affordable, convenient retail health clinics across the country didn't require any tax increases, government spending or funding, or special legislation.

Isn't it ironic that within a week of the Senate vote to start debate on health care reform, the first retail clinic opens in Washington, D.C. less than two miles from the U.S. Capitol? Could the senators maybe take a field trip to the clinic to see what market-based health care reform looks like before they plot their takeover of the health care system?

New Home Sales Highest in a Year, Inventory Measure of New Homes Lowest Since 2006

WASH POST --Sales of newly built homes rose to the highest level in more than a year while the supply of these homes dropped to new lows, according to government data released on Wednesday.

Purchases of single-family homes rose 6.2% in October from September to a seasonally adjusted annual rate of 430,000, the Commerce Department reported. The jump was driven solely by the South, the largest new home sales market in the nation. That region, which includes the Washington, D.C. area, posted a 23% gain while sales in other regions slipped.

Meanwhile, the supply of new homes has plummeted to the lowest level in nearly four decades, a promising sign that supply and demand for new homes will soon fall in line and help stabilize home prices.

MP: The months supply of homes at the current sales rate fell to 6.7 months in October, the lowest reading since December 2006 (see bottom chart above), almost three years ago. The balance between supply and demand for new homes is returning to the conditions of a normal housing market, and the October inventory of 6.7 months supply is just slightly above the average inventory of 6.13 months, based on new home sales data going back to 1963.

Giving Thanks for Capitalism, The Invisible Hand, the Miracle of the Free Market and No Turkey Czars

Like in previous years, you probably didn't call your local supermarket ahead of time and order your Thanksgiving turkey this year. Why not? Because you automatically assumed that a turkey would be there when you showed up, and it probably was there when you showed up "unannounced" at the grocery store to select your bird.

The reason your Thanksgiving turkey was waiting for you without an advance order? Because of "spontaneous order," "self-interest," and the "invisible hand" of the free market - "the mysterious power that leads innumerable people, each working for his own gain, to promote ends that benefit many." And even if your turkey appeared in your local grocery stores only because of the "selfishness" or "corporate greed" of thousands of turkey farmers, truckers, and supermarket owners who are complete strangers to you and your family, it's still part of the miracle of the marketplace where "individually selfish decisions lead to collectively efficient outcomes."

In a 2003 Boston Globe column titled "Giving Thanks for the Invisible Hand" Jeff Jacoby explains below why he is thankful for the miracle of the invisible hand that makes affordable turkeys automatically available so efficiently at Thanksgiving:

The activities of countless people over the course of many months had to be intricately choreographed and precisely timed, so that when you showed up to buy a fresh Thanksgiving turkey, there would be one -- or more likely, a few dozen -- waiting. The level of coordination that was required to pull it off is mind-boggling. But what is even more mind-boggling is this: No one coordinated it.

No turkey czar sat in a command post somewhere, consulting a master plan and issuing orders. No one forced people to cooperate for your benefit. And yet they did cooperate. When you arrived at the supermarket, your turkey was there. You didn't have to do anything but show up to buy it. If that isn't a miracle, what should we call it?

Adam Smith called it "the invisible hand" -- the mysterious power that leads innumerable people, each working for his own gain, to promote ends that benefit many. Out of the seeming chaos of millions of uncoordinated private transactions emerges the spontaneous order of the market. Free human beings freely interact, and the result is an array of goods and services more immense than the human mind can comprehend. No dictator, no bureaucracy, no supercomputer plans it in advance. Indeed, the more an economy *is* planned, the more it is plagued by shortages, dislocation, and failure.

It is commonplace to speak of seeing God's signature in the intricacy of a spider's web or the animation of a beehive. But they pale in comparison to the kaleidoscopic energy and productivity of the free market. If it is a blessing from Heaven when seeds are transformed into grain, how much more of a blessing is it when our private, voluntary exchanges are transformed - without our ever intending it - into prosperity, innovation, and growth?

Jobless Claims Drop for 12th Week; Falling to Below 500,000 For First Time Since Nov. 2008

The Department of Labor reported today that jobless claims (four-week moving average) dropped for the 12th straight week, and fell below 500,000 for the first time since November 8, 2008. The 16,500 drop in jobless claims to 496,500 from last week's 513,000 was the third largest weekly decline this year, behind a 22,000 drop in July and a 26,000 drop in January.

It might be happening slowly, but the labor market is gradually recovering.

Quote of the Day: H.L. Mencken

The urge to save humanity is almost always a false front for the urge to rule it.

~H. L. Mencken


Recently leaked emails and documents from the Climate Research Unit at the University of East Anglia in the United Kingdom expose deceit, duplicity and collusion between climate researchers to maintain the fraud of the manmade global warming theory. These emails reveal stunning behind-the-scenes details about how this fraud has been developed and perpetuated. In this video historical climatologist and retired university professor Dr. Timothy F. Ball shares his insights on what they show.

Here are several more links on Climategate:

CLIMATE BOMBSHELL: Hacker leaks thousands of emails showing conspiracy to "hide" the real data on manmade climate change

The Death Blow to Climate Science

And of course, Wikipedia already has a webpage: Climatic Research Unit e-mail Hacking Incident

Tuesday, November 24, 2009

Price War Brews Between Amazon and Wal-Mart; Cutthroat Competition is a Consumer's Best Friend

Wal-Mart, the mightiest retail giant in history, may have met its own worthy adversary: In what is emerging as one of the main story lines of the 2009 post-recession shopping season, the two heavyweight retailers are waging an online price war that is spreading through product areas like books, movies, toys and electronics.

The tussle began last month as a relatively trivial but highly public back-and-forth over which company had the lowest prices on the most anticipated new books and DVDs this fall. By last week, it had spread to select video game consoles, mobile phones, even to the humble Easy-Bake Oven, a 45-year-old toy from Hasbro that usually heats up small cakes, not tensions between billion-dollar corporations.

Last Wednesday, Wal-Mart dropped the price of the oven to $17, from $28, as part of its "Black Friday" deals. Later the same day, Amazon cut its price, which had also been $28, to $18. "It’s not about the prices of books and movies anymore. There is a bigger battle being fought," said Fiona Dias, executive vice president at GSI Commerce, which manages the Web sites of large retailers. "The price-sniping by Wal-Mart is part of a greater strategic plan. They are just not going to cede their business to Amazon."

Chart of the Day: Medical School Graduates

The chart above displays the gender breakdown for medical school graduates back to 1961 (data here), showing the dramatic shift over time towards gender equality. In 1961, men outnumbered women by more than 17 to 1 (94.5% to 5.5%), and by 2006 it was almost evenly split between male and female graduates (51.3% male vs. 48.7% female for 2009).

Life Is Getting Measurably Better for Many People Here and Abroad; There's A Lot to Be Thankful For

From today's Wall Street Journal, "20 Advances to Be Thankful For":

News about health often focuses on the negative: scary new flu viruses, incurable diseases, dashed hopes for miracle drugs. Maybe that's because we have such high expectations that doctors and scientists can fix anything. But amid all that bad news—not to mention the acrimony over health-care reform—it's easy to overlook how much progress has been made in recent years. Here are 20 health-care advances to give thanks for this Thanksgiving (see four of the 20 below):

1. Life expectancy in the U.S. reached an all-time high of 77.9 years in 2007, the latest year for which statistics are available, continuing a long upward trend (see chart above, data here). (That's 75.3 years for men and 80.4 years for women.)

2. Fewer Americans died in traffic fatalities in 2008 than in any year since 1961, and fewer were injured than in any year since 1988, when the National Highway Traffic Safety Administration began collecting injury data. One possible reason: Seat-belt use hit a record high of 84% nationally.

3. The death rate from cancer, the second-biggest killer, dropped 16% from 1990 to 2006. That reflects declines in deaths due to lung, prostate, stomach and colorectal cancers in men, and breast, colorectal, uterine and stomach cancers in women.

4. Death rates dropped significantly for eight of the 15 leading causes of death in the U.S., including cancer, heart disease, stroke, hypertension, accidents, diabetes, homicides and pneumonia, from 2006 to 2007. (Of the top 15, only deaths from chronic lower respiratory disease increased significantly.) The overall age-adjusted death rate dropped to a new low of 760.3 deaths per 100,000 people—half of what it was 60 years ago.

MP: Not sure exactly what happened, but it looks life expectancy really took a dive during the Great Depression, dropping by almost five years from 63.3 years in 1933 to 58.5 years by 1936.