Tuesday, April 13, 2010

Why So Few? Women Choose Different Disciplines

One summary of the report "Why So Few?" from Susan Pinker is:

"Women avoid going into STEM careers (science, technology, engineering and math) because hidden cultural signals have persuaded them that women don't have what it takes to succeed in those fields. The few women who do buck these stereotypes then tend to abandon their career plans due to implicit gender biases and university science programs that make women feel unwelcome. Hence, a ratio of women in physical science and math that won't budge past 20 percent, and the title of the report, 'Why So Few?'"

Susan writes further that:

"There's good evidence that on average, women choose different disciplines than men do--or in different proportions--and they do so with their eyes and options open. What about Margaret Chan, the head of the World Health Organization and arguably the world's most powerful public health official, or all the other talented women who go into biology, medicine, dentistry, ecology, pharmacology, neuroscience, or veterinary science, all science programs that were mostly male forty years ago, but are now dominated by women on every university campus? Do the women really choose these fields over physics and engineering because they've been convinced by subliminal forces that their math skills are sub-par?"

Another V-Shaped Sign of Recovery: OECD Index

The OECD released updated data yesterday for its Composite Leading Indicators Index for 29 member countries. The Leading Indicators Index has increased in each of the last 12 months, and reached the highest level in February (103.57) since May of 1979, more than 30 years ago (see chart above, data here). It sure looks to me like another V-shaped sign of worldwide economic recovery - add this to the growing list.

Update on Recession Ending in July 2009

I posed a question on this recent CD post asking why the St. Louis Fed graphs are showing the recession ending in July 2009. Max commented and provided the answer. In the Notes section below each graph you can click on "US recession dates" where it says:

"The NBER has not yet determined the end of the recession that began in December 2007. The date 2009-07-01 has been substituted in graphs as an estimate. This estimate is based on a statistical model for dating business cycle turning points developed by Marcelle Chauvet and Jeremy Piger (A Comparison of the Real-Time Performance of Business Cycle Dating Methods, Journal of Business and Economic Statistics, 2008, 26, 42-49). For more information, see

The graph above shows the Chauvet and Piger recession probabilities back to January 2010 (data here). By July 2009, the recession probability had decreased to 15%, from 77.3% in June 2009, and that huge drop signalled the end of the last recession. Since August of last year, the recession probabilities have been in single-digits and falling, to only 2.8% for January 2010 (most recent month).

My UM-Flint colleague Chris Douglas also points out that the Minneapolis Fed is also using July 2009 as its estimate of the end of the recession.

Random Links

1. Cuba is turning over hundreds of state-run barber shops and beauty salons to employees in what appears to be the start of a long-expected revamping of state retail services by President Raúl Castro.

2. The
Monster Employment Index Europe noted a three percent uptick in March, returning to a level not seen since May 2009. The Monster Employment Index Europe’s longer term trends also suggests there has been a modest improvement in online recruitment activity; the Index increased 4% during the first quarter of 2010 and the annual rate of contraction slowed from the rate seen in February.

Social Security Payroll Tax is Very Progressive

Paul Krugman claims here that "The thing to bear in mind is that overall, the US tax system isn’t actually that progressive: the payroll tax is regressive, as are most state and local taxes, which largely offsets the progressivity of the income tax."

Unfortunately for Krugman, the facts suggest otherwise. Andrew Biggs of The American Enterprise Institute presents those facts, including the chart above in this
Enterprise post, which show that the Social Security payroll is extremely progressive, not regressive as Krugman suggests.

The bottom four quintiles (by lifetime earnings) pay negative net tax rates for Social Security, meaning that they receive more in Social Security benefits than they pay in payroll taxes. Only the top income quintile pays more in payroll taxes than they receive in Social Security benefits. The bottom income quintile gets the best deal of all, with a negative net payroll tax rate of almost 27%, meaning that their lifetime Social Security benefits far exceed the payroll taxes they contribute to the Social Security program.

Bottom Line: Just like the extremely progressive income tax (see
CD post here), where the "bottom 40% make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes," the Social Security payroll tax is also extremely progressive - the bottom 80% make a profit from the program.

Monday, April 12, 2010

Updates on College Degrees by Field and Sex

Click to enlarge.

New data were recently released by the Department of Education for college degrees awarded for the 2007-2008 academic year by sex and field of study, and those data are summarized in the two tables above. Some interesting points:

1. Engineering and computer science remain the two most male-dominated fields, at all levels (bachelor's, master's and doctor's).

2. Women earn almost as many degrees in mathematics as men at the undergraduate (44.1%) and master's level (42.6%), but earn significantly fewer 31% at the doctoral level.

3. At the Master's level, women earn more degrees than men in 10 out of the 17 fields.

4. At the First Professional Level, women earn significantly more of the degrees in Optometry (66%), Pharmacy (66%), veterinary medicine (77%) and naturopathic medicine (80%).

5. Medicine, dentistry, osteopathic medicine, podiatry, and law degrees are pretty balanced between men and women, and men earn significantly more chiropractic degrees than women.

St. Louis Fed Graphs: Recession Ended July 2009?

OA asks a good question on a previous CD post: If the NBER has not officially announced the end of the last recession, why are the St. Louis Fed graphs showing the recession ending in July 2009 (see example above)? I was wondering the same thing myself.....

Inventory Rebuilding Shows Economic Strength

April 12 (Bloomberg) -- Companies from Tiffany & Co. to Home Depot Inc. are restocking shelves in a move that will boost economic growth and may keep the recovery on track through 2010. New York-based Tiffany is planning for a “high single-digit percentage increase” in inventories this year as the world’s second-largest luxury jeweler retailer opens new stores, Chief Financial Officer James Fernandez told analysts. Home Depot, the largest U.S. home-improvement retailer, “will be building inventory” this year in support of stronger sales.

“We’re moving into the restocking phase,” said David Hensley, director of global economic coordination for JPMorgan Chase & Co. “We’ll see successive additions to growth in the first quarter, second quarter and third quarter.”

“Sales bottomed sooner than companies expected,” so businesses now have fewer goods than they need, Hensley said. He projects the economy will expand 2.5% in the first quarter and 4% in both the second and third quarters, with the inventory cycle boosting GDP by 0.5%, 1% and 0.4% respectively.

The ratio of business inventories to sales was 1.25 in January, just above a 29-year low of 1.24 set in 2006 and down from a recession high of 1.46 in January 2009 (see chart above). The ratio averaged 1.3 in the last economic expansion, from 2001 to 2007.

As sales rise, businesses will have even more reason to add to their stocks, said Stephen Stanley, chief economist at Pierpont Securities. Nike reported that future orders for delivery from March through July rose 4% in North America from a year earlier. “We will certainly need the inventory to support that business,” Chief Financial Officer Don Blair told analysts.

MP: The inventory-to-sales ratio of 1.25 in January is back to pre-recession levels and is consisent with economic expansion. The strong inventory replenishment is just one more indicator that the economic recovery is real and sustainable.

Might Be 2011 Before Official NBER Announcement

WASHINGTON — "A panel of academics that date the beginnings and ends of recessions isn't ready to declare just yet when this downturn ended. The National Bureau of Economic Research said Monday that although most barometers show improvements in the economy, it would be "premature" to pinpoint the end of a recession based on economic data seen so far. That assessment came after the group of academic economists met at its Cambridge, Mass., headquarters on Thursday to review mountains of economic data."

MP: It took 20 months after the 2001 recession, and 21 months following the 1990-1991 recession, for the NBER to make the official announcement that those recessions had ended. In that case, we shouldn't expect the official announcement until early 2011 that the most recent recession ended, assuming that the recession may have ended as early as June 2009.

Lumber Prices Reaching Four-Year Highs

Dennis Gartman points out that lumber prices are rising in his newsletter today. The chart above (NAHB data here) shows that lumber prices are indeed rising, and are approaching four-year highs. CME lumber futures prices have doubled since early 2009, and random length lumber prices have increased by 80%. Here's one explanation from Reuters:

"Industry analysts have said that while the higher prices are encouraging, they likely reflect reduced production capacity rather than significant increased demand for the wood used largely in housing construction. Sawmills across Canada and the United States have cut production or shutdown completely over the past three years because of the U.S. housing market collapse."

Update: Another factor in rising lumber prices might be increased demand from China: "British Columbia's lumber exports to China increased by 70% in 2009 (source)." Thanks to rjs.

Sunday, April 11, 2010

CD Milestone: 6,000 Posts

The first CD post was on September 20, 2006, which is 1,299 days ago. As of today, there are now more than 6,000 CD posts (see graphic above), which works out to an average of 4.62 posts per day.

Milton Friedman on the Responsibility to the Poor

Classic Milton Friedman in 1978 at Stanford University.

The Increasing College Degree Gap; Will College Women's Centers Address *This* Gender Issue?

The Department of Education recently updated its dataset on college degrees by gender, with actual data through the 2007-2008 academic year, and projected data through the 2018-2019 academic year).

The chart above shows the reversal between the 1966-1967 academic year and the 2018-2019 year for the percentage of all college degrees by gender: from 61% of all college degrees in 1966-1967 awarded to men, to a projected 61% of all college degrees in 2018-2019 awarded to women. The last year of gender parity for college degrees was 1981, and in almost every year since then, women have increased their share of all college degrees.

The chart below shows more detailed degree data by gender for this year's Class of 2010 and the Class of 2019 (both are estimates):

The only degree category where men are currently slightly overrepresented (50.6%) is for "First-Professional Degrees," which includes M.D., D.D.S., and law degrees. The Department of Education estimates that by 2014-2015 there will be more women than men earning those degrees, and by 2018-2019 women will earn 51% of those degrees (see chart above).

There are hundreds, if not thousands, of University and College Women's Centers across the country, here is a
partial list. A Google search of "College Women's Centers" finds almost 6,000 links on the Web. A Google search of "College Men's Centers" finds almost no links on the Internet (a few hundred, now inlcuding this post), and asks the question: Did you mean: "College Women's Centers"?

The first search points to a book titled "University and College Women's Centers: A Journey toward Equity":

"This handbook provides insights from women's center directors at institutions across the country on how best to build a women's center that can improve the quality of women's experiences in college. The best centers aid universities and colleges in responding to particularly difficult challenges in higher education related to gender."


1. Now that women completely dominate higher education at almost every degree level and men have clearly become the "second sex" in U.S. higher education, isn't there a greater need for thousands of "Men's Centers" on college campuses than "Women's Centers" to help address the challenges males face completing college and help improve the quality of men's experiences in college?

2. Didn't the "journey toward equity" that is mentioned in the book title above end back in 1981 when women started earning a greater share of college degrees than men?

3. If the best college Women's Centers "respond to particularly difficult challenges in higher education related to gender," will they now turn their attention to the apparent difficult challenges men are having completing college degrees at the same rate as women?

G. Will on Decadent Dependence of Welfare State

"Today, nearly half of Social Security recipients choose to begin getting benefits at 62. This is a grotesque perversion of a program that was never intended to subsidize retirees for a third to a half of their adult lives.

It also reflects the decadent dependence that the welfare state encourages: Because of the displacement of responsibility from the individual to government, 48 percent of workers over 55 have total savings and investments of less than $50,000."

George Will

Saturday, April 10, 2010

Next Equal Occupational Fatality Day in 2020

"The next Equal Pay Day is Tuesday, April 20, 2010. This date symbolizes how far into 2010 women must work to earn what men earned in 2009. Because women earn less, on average, than men, they must work longer for the same amount of pay. Equal Pay Day was originated by the National Committee on Pay Equity (NCPE) in 1996 as a public awareness event to illustrate the gap between men's and women's wages."

MP: The next "Equal Occupational Fatality Day" is Sunday October 11, 2020. This date symbolizes how far into the future women are expected to work to experience the same loss of life from work-related deaths that men experienced in just the single year 2008 (4,703 deaths for men compared to only 368 for women), according to
BLS data (see chart above). Because women work in much safer occupations and work environments than men, they must work decades longer than men to experience the same number of occupational fatalities. Equal Occupational Fatality Day is being established here as a public awareness event to illustrate the huge gap between men's and women's occupational deaths.

As the recent all-male coal mining deaths in West Virginia illustrate, a disproportionate number of men work in higher-risk occupations that are typically compensated with higher pay like coal mining (almost 100% male), fire fighters (96.6% male)
, police officers (84.5% male), correctional officers (73.1% male), and construction (97.4% male), BLS data here. A disproportionate number of women work in lower-risk, more comfortable and safer industries, often with lower pay to compensate for the more worker-friendly, indoor, comfortable, air-conditioned office environments, like Office and Administrative Support Occupations (74.5% female), Education, Training and Library Occupations (74.3%), and Healthcare (74.6%). These differences in work environments could likely reflect differences in "revealed preference" by gender - men prefer higher-paid, higher risk occupations, and women prefer lower-paid, lower risk occupations, in general and on average. It might not have anything to do with discrimination, and everything to do with differences in risk tolerances and risk-reward preferences.

To achieve gender pay equity, there will have to be an increase in the number of women in higher-paying, but higher-risk occupations like coal mining. That outcome will certainly reduce the gender pay gap, but it will come at a huge cost: sentencing thousands of women per year to certain fatal occupational deaths. Would closing the pay gap, if it also means closing the gender occupational death gap and exposing thousands of women to work-related deaths each year, really be worth it for women?

The Triumph of the Ordinary Cellphone

From yesterday's NY Times:

"A quarter-century ago, when Michael Douglas famously carried one in “Wall Street,” it was an exorbitant gadget for high rollers. Now it’s more common than a toilet.

The number of mobile subscriptions in the world is expected to pass five billion this year, according to the International Telecommunication Union, a trade group. That would mean more human beings today have access to a cellphone than the United Nations says have access to a clean toilet.

Because it reaches so many people, because it is always with you, because it is cheap and shareable and easily repaired, the cellphone has opened a new frontier in global innovation."

See related post here.

Ongoing Economic Recovery, Even in Michigan!!

Comerica Bank’s Michigan Economic Activity Index rose three points in February, to a level of 84. February’s reading is the highest Index observation since October 2008 (see chart above). February marks a 10 point, or 13.5 percent, year-on-year increase in the Index, the largest 12-month increase since January 2005. The Index for February is up 18 percent compared to its July 2009 cyclical low.

“Following a four point increase in January, our Index continued to surge in February,” said Dana Johnson, Chief Economist at Comerica Bank. “February’s reading was driven by strong steel production and natural gas sales, with seven out of nine Index components reflecting positive growth overall. Even as the weather effects that likely pushed natural gas sales higher in the early part of the year fade, our Index should continue to trend higher over the course of the year, reflecting an ongoing recovery in Michigan.”

Kudlow: The V-Shaped Recovery

Based on this Enterprise Blog post on the "10 Reasons the Economic Recovery is Real."

Friday, April 09, 2010

Global Economic Boom

"Throughout much of the world, businesses are reporting a continuing surge in new orders, providing an indication that economies are growing (see chart above, click to enlarge). In most countries, orders received by manufacturing businesses turned up sooner than orders to service businesses. But even service providers are now reporting increases in new business."

~Floyd Norris in today's NY Times

Milton Friedman on the Future of America

Record Low Rating for Dems 41% vs. 42% for Reps

PRINCETON, NJ -- "Americans' favorable rating of the Democratic Party dropped to 41% in a late March USA Today/Gallup poll, the lowest point in the 18-year history of this measure. Favorable impressions of the Republican Party are now at 42%, thus closing the gap between the two parties' images that has prevailed for the past four years."

UK Gas Hits $9.19/Gallon and It's Headed Higher

"Unleaded hit an average of 119.9p a litre for the first time ever, breaking the previous July 2008 record of 119.7p. But some forecourts are already charging 131.9p a litre – just a penny short of the £6 gallon ($9.19).

This is a dark day for Britain’s hard-pressed motorists,” said the RAC. And there is worse to come, warned experts last night. A ­perfect storm of rising wholesale costs, the weak pound and more Government tax hikes will propel fuel costs even higher. Drivers were warned to brace themselves for a 5p-a-litre surge in the next three months, pushing unleaded prices to a 125p a litre average by the summer holidays."

HT: Paul Kedrosky

Wal-Mart Guilty of Currency Manipulation? Its New Low Prices Make the Dollar Artificially High

"Wal-Mart Stores is cutting prices on thousands of products in an aggressive campaign to reinforce its reputation as a discount leader, as the company seeks to reverse months of slowing U.S. sales. The company says it believes that, despite increasing consumer optimism, many Americans will continue to struggle in the months ahead. So, it is cutting prices this week on roughly 10,000 items, mostly food and other staples."

MP: In other words, Wal-Mart is engaging in a new round of currency manipulation by cutting its retail prices, which makes the U.S. dollar artificially overvalued in relation to Wal-Mart's goods. This attempt to manipulate the currency and lure customers into buying more of its products with an overvalued dollar will create job losses at Target and other retailers, and should be investigated by the government. If found guilty, Wal-Mart should be forced to stop manipulating the U.S. dollar, and should be pressured to raise its prices back to the pre-price cutting campaign levels.

Thursday, April 08, 2010

Watch the Growth of Wal-Mart and Sam's Club

Click on the map.
From one store in 1962 to 4,393 stores in 2010.

Adjusted Jobless Claims Fall 12th Straight Month

I haven't featured jobless claims adjusted for the size of labor force for a few months, so here's the new chart above (BLS data here and here). Jobless claims averaged 459,187.5 in March, which is 0.3306% of the March labor force of 138,905,000, and represents an 18-month low (lowest since September 2008). For each of the last 12 months starting in April of last year, jobless claims as a percent of the labor force have declined.

This measure of initial jobless claims, adjusted for the increasing size of the U.S. labor force over time, 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. The sharp reduction in adjusted jobless claims from the March 2009 high follows the same pattern of sharp reductions at the end of each of the last five recessions.
See a very similar analysis here from the always-excellent 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).

Top 10 Reasons the Economic Recovery is Real

Overwhelming evidence has been gathering recently that a widespread economic recovery is underway in both the U.S. and around the world. At the Enterprise Blog, I summarize the ten major economic factors that indicate that the U.S. economy has emerged from the Great Recession and entered a period of solid and sustained economic expansion.

Should China Revalue Its Currency? Becker: NO

Nobel economist Gary Becker on China's currency policy:

"I doubt the wisdom of the US for complaining against China's currency policy and of China for its response. On the whole, I believe most Americans benefit rather than being hurt by China's long-standing policy of keeping the yuan at an artificially low exchange value. The policy makes the goods imported from China, such as clothes, furniture and small electronic devices, much cheaper than they would have been if China revaluated its currency substantially. The main beneficiaries of China's current policy are poor and lower middle class Americans and people in other countries who buy made-in-China goods at remarkably cheap prices in stores such as Wal-Mart that cater to cost-conscious families.

US companies that would like to export more to China have indeed been hurt by China's currency policy. They employ fewer people than their capacity and thus contribute to the high rate of unemployment in the US. But I believe the benefits to American consumers far outweigh any losses in jobs, especially because the US economy continues its recovery.

Since the opposite effects hold for China, I cannot justify the country's policies from the viewpoint of its interests. Its consumers and importers are hurt because the government has kept the cost of foreign goods artificially high for them. Their exporters gain, but as in the US, that gain is likely to be considerably smaller than the negative effects on the well-being of the average Chinese family.

So my conclusion is that the US in its own interest should not urge China to revaluate its currency."

Thanks to Dennis Gartman of "The Gartman Letter."

Wednesday, April 07, 2010

50% of Americans Get Something for Nothing; Income Taxes Are Somebody Else's Problem

WASHINGTON (AP) -- "Tax Day is a dreaded deadline for millions, but for nearly half of U.S. households it's simply somebody else's problem. About 47 percent will pay no federal income taxes at all for 2009 (see chart above, data here). Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center.

In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 will owe no federal income tax for 2009, as long as there are two children younger than 17.

Tax cuts enacted in the past decade have been generous to wealthy taxpayers, too, making them a target for President Barack Obama and Democrats in Congress. Less noticed were tax cuts for low- and middle-income families, which were expanded when Obama signed the massive economic recovery package last year. The result is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10 percent of earners -- households making an average of $366,400 in 2006 -- paid about 73 percent of the income taxes collected by the federal government.

The bottom 40 percent, on average, make a profit from the federal income tax, meaning they get more money in tax credits than they would otherwise owe in taxes. For those people, the government sends them a payment. "We have 50 percent of people who are getting something for nothing," said Curtis Dubay, senior tax policy analyst at the Heritage Foundation."

The Rich Can Pay Higher Taxes Right Now. Today.

Click to enlarge.

From Dana Milbank in today's Washington Post:

"Tea partiers, eat your hearts out: A group of liberals got together Tuesday and proved that they, too, can have a tax rebellion. But theirs is a little bit different: They want to pay more taxes.

"I'm in favor of higher taxes on people like me," declared Eric Schoenberg, who is sitting on an investment banking fortune. He complained about "my absurdly low tax rates." "We're calling on other wealthy taxpayers to join us," said paper-mill heir Mike Lapham, "to send the message to Congress and President Obama that it's time to roll back the tax cuts on upper-income taxpayers."

MP: For any of the wealthy who are anxious to pay more taxes, they don't have to wait for the Bush tax cuts to expire, they can pay more right now. Here are some ways:

1. They can make a gift to the U.S. Treasury at any time (why not today?), here is the website with instructions. (Dana Milbank mentions this option, but doesn't provide the website.)

2. They can pay their 2009 taxes at the higher Clinton tax rates of 2000, instead of the current lower rates (see chart above).

3. They don't have to itemize deductions on their 2009 taxes; instead they can take the standard deduction of $5,700 for singles and married individuals filing separate, or $11,400 for married couples, which would typically result in a much higher tax liability for rich people.

March Pending Home Sales Surge 72% in Miami; Foreigners Account for 30% of Sales Activity

Miami Herald -- "Pending home sales in Miami-Dade and Broward counties continued to rise in March as Realtors said both local and international buyers are being lured by cheap properties and bargain-basement interest rates. In Miami-Dade, the number of people who agreed to purchase a home in March was up 6.4 percent versus February at 9,751 homes and condos. Compared to year-ago levels, the number of pending home sales was up 71.7 percent, the Realtor Association of Greater Miami and the Beaches reported Monday. Combined with home sales that inched higher in February, the data paints a picture of a market on the mend.

The Realtor Association of Greater Miami and the Beaches said about 30 percent of the activity can be attributed to foreign buyers. While Europeans seem to be making most of their purchases along the beaches, Latin American buyers -- particularly Venezuelans and Colombians -- tend to look for single-family homes in gated communities."

MP: A clear example of how markets work - falling home prices eventually bring buyers (both domestic and foreign) back into the market, home sales increase, and real estate markets like Miami recover. The best part is that it happens automatically - no legislation or state intervention required - rather, it's part of the natural market process and "spontaneous order."

Tuesday, April 06, 2010

A Lesson About Manufacturing Jobs from Farming

There is a lot hand-wringing about the loss of manufacturing jobs. For example, a Google search for the term "loss of manufacturing jobs" shows 308,000 results. We have lost eight million factory jobs since 1979, and manufacturing employment is now at the lowest level since 1941. As a percent of the U.S. labor force, manufacturing jobs have fallen to only 8.92% of total jobs in 2010, which is about one-third of the 28% manufacturing share of all jobs as recently as the 1960s (see chart above). And yet manufacturing output is close to an all-time high.

People don't seem too concerned, at least not any more, about the loss of farming jobs. Do a Google search for "loss of farming jobs" and you'll only get about 171 results. And yet the loss of farming jobs in the U.S. economy has been much greater than the loss of manufacturing jobs, measured as a share of total jobs.

It happened over a long period of time, but farming jobs as a share of the U.S. workforce went from 90% in 1790 to only 2.6% by 1990 (see chart below, data here). Because of advances in farm technology and increases in farmer productivity, we can now produce more food than ever before with only 2.6% of our labor force working on farms. Just the single invention of the tractor eliminated something like 10 million farm jobs.

Bottom Line: The trend in manufacturing in the U.S. is following the same pattern as farming: we're able to produce more and more output in both sectors with fewer and fewer workers, due to technological advances and significant increases in worker productivity. We're much better off as a country with only 2.6% of our workforce in farming compared to having 90% of our population involved in farming, and we're also much better off as a country with only 9% of our workforce toiling in factories compared to having 20 or 30% of our workers employed in manufacturing.

EPA Policies: It's Like Driving a Car With One Foot on the Gas, and The Other Foot on the Brake

April 1 - Obama administration’s EPA issued final rules forcing automakers to increase their vehicles’ fuel economy by 40% in five years. By 2015, the new 35.5 mpg EPA mandate goes into effect.

April 2 - The very same EPA favorably reviewed an ethanol fuel mandate that would force autos to get up to 5 percent worse fuel economy. By 2015, oil companies are mandated by Congress to double the amount of corn ethanol use to 15 billion gallons. The current mandate of a 10 percent ethanol mix in fuel won’t get us there, so the powerful corn lobby is demanding EPA increase the mandate to a 15% ethanol mix. Trouble is, a gallon of ethanol is 30% less efficient than a gallon of gas meaning that the more ethanol you mix in, the worse your gas mileage.

So while automakers are sweating under the federal gun to make increasingly fuel-efficient engines, the government is mandating they do it with less-efficient fuel.

~Henry Payne in NRO

HT: Matt B.

Another "Green Shoot" of Economic Recovery

April 6 (Bloomberg) -- Home Depot, the largest U.S. home-improvement retailer, is adding store jobs for the first time in four years in anticipation of a rebound in sales.

HT: Paul Kedrosky

Rail Freight Traffic Show Solid Signs of Recovery

"Freight traffic on U.S. railroads is continuing to show solid signs of recovery with carload freight volume hitting its highest level since November 2008 during the week ended March 27, 2010, according to the weekly report from the Association of American Railroads. U.S. railroads originated 293,114 carloads during the week, up 16.5 percent from the comparable week in 2009, and the highest weekly carload total since the week ended November 29, 2008.

Combined North American rail volume for the first 12 weeks of 2010 on 13 reporting U.S., Canadian and Mexican railroads totaled 4,324,920 carloads, up 4.8 percent from last year, and 3,036,161 trailers and containers, up 9 percent from last year."

Monday, April 05, 2010

Technology and Manufacturing Productivity Improvements Have Destroyed 6 Million Jobs

Update: This BEA link shows that real manufacturing output (in billions of chained 2000 dollars) almost doubled in the 20 years between 1987 and 2007, from $866 billion in 1987 to $1,618 billion in 2007.

Update: Real output per worker (2007 dollars).

According to BEA data on manufacturing output (value added) and manufacturing employment, there has been a decline of more than six million manufacturing jobs from the peak of 20 million in 1979 to fewer than 14 million jobs in 2007 (see blue line in top chart above). During that same period, manufacturing output (value added) has increased by more than three times, from $544 billion in 1979 to $1.63 trillion in 2007 (see red line in top chart), not adjusted for inflation.

Because of the significant increase in manufacturing output accompanied by the huge decline in employment, the manufacturing output per worker increased more than four times, from $27,175 in 1979 to $115,750. The increase in worker productivity is one of the main contributing factors to the elimination of six million manufacturing jobs in the U.S. Simply put, we're producing more and more manufacturing output with fewer and fewer workers.

With that in mind, consider this re-write of a recent news story about China:

"The continuing trade imbalance with China increases in worker productivity has have contributed to the loss of over 5.3 million U.S. manufacturing jobs in the last decade, 300,000 of those in New York State. The Capital District manufacturing sector has declined by 28 percent during that same period, losing approximately 10,000 jobs, and 2,000 last year," said Sen. Charles Schumer, D-N.Y.

“There is no bigger step we can take to promote U.S. job creation, particularly in the manufacturing sector, than to confront China’s currency manipulation, our productivity improvements due to advances in technology like roboticsSchumer said. “This is not about China technology or productivity bashing. It’s about defending the people of New York and the United States from the ongoing increases in worker productivity taking place in America's factories that have contributed to the loss of millions of manufacturing jobs.”

“We have a job crisis in upstate New York and in America,” Schumer said. “China Technology and increased worker productivity is are fanning the flames.” The legislation Schumer proposes would impose new penalties on countries who manipulate their currency, manufacturers who introduce productivity-enhancing technologies as a way to increase output with fewer workers.

Bottom Line: There's really no difference between: a) being able to produce more manufacturing output in the U.S. due to productivity increases that allow us to take advantage of technology advances and employ fewer workers, and b) being able to increase our manufacturing output in the U.S. by taking advantage of low-cost labor in China and employing fewer American workers.

The first example substitutes more efficient capital for labor, and the second substitutes low-cost labor for high-cost labor, but the net result is the same: more output with fewer workers. Imposing penalties on low-cost Chinese manufacturers because some U.S. jobs are eliminated makes as much sense as imposing penalties on American companies that introduce technology (e.g. robotics) and in the process eliminate some U.S. jobs.

756 Bad Things Attributed To Global Warming

Complete list here (includes "global cooling.") (HT: IBD)

Computers Then and Now

From 4-Block World. Happy 5th Anniversary to one of the best sites on the Internet, it's one of my favorites - I check it daily!

Work-Sharing Works for Germany, Netherlands

Economists Kevin Hassett and Dean Baker make the case for "work-sharing" in today's LA Times:
The idea of work-sharing is simple. Currently, firms mostly respond to weak demand by laying off workers. Under a work-sharing program, firms are encouraged by government policy to spread a small amount of the pain across many workers.

In Germany, for example, which has used work-sharing aggressively in this downturn, a typical company might reduce the hours of 50 workers by 20% rather than laying off 10 workers. The government would then provide a tax credit to make up for most of the lost pay, with the employer kicking in some as well. In a typical arrangement, a worker might see his weekly hours go down by 20%, and his salary go down by about 4%.

This policy has kept the unemployment rate in Germany from rising even though the country has seen a sharper decline in GDP than the United States (see chart above). The Netherlands, which also uses work-sharing, has managed to keep its unemployment rate near 4% even though its GDP also has fallen more steeply than in the United States.

The cost to the government of going this route would be roughly the same as with the current unemployment insurance program. The big difference is that instead of unemployment benefits that effectively pay people for not working, we would be paying people for working shorter hours.

March ISM Business Activity Reaches 4-Year High

From today's Non-Manufacturing ISM report:

"ISM's Non-Manufacturing Business Activity Index in March registered 60 percent, an increase of 5.2 percentage points when compared to the seasonally adjusted 54.8 percent in February (see chart above). Thirteen industries reported increased business activity (Utilities; Information; Mining; Retail Trade; Construction; Finance & Insurance; Management of Companies & Support Services; Wholesale Trade; Accommodation & Food Services; Other Services; Professional, Scientific & Technical Services; Public Administration; and Health Care & Social Assistance) and three industries reported decreased activity for the month of March (Real Estate, Rental & Leasing; Educational Services; and Transportation & Warehousing).

Comments from respondents include: "Seeing an increase in business. Our customers are feeling more optimistic"; and "New year budgets, as well as replacing inventories depleted during 2009."

MP: The ISM Business Activity Index for non-manufacturing industries has now been in expansion (index > 50) for seven out of the last eight months, and for four straight months, both for the first time in almost two years. The last time the Business Activity Index was at 60 or higher was April 2006, almost four years ago. Finally, as the red circles in the graph indicate, the current level of business activity (index = 60) is equal to: a) the index level in 2002 that signalled the end of the 2001 recession, and b) the index level in the summer of 2007 in the pre-recessionary period of economic expansion. Along with the economic momentum gaining strength in the manufacturing sector, this strong rebound in the non-manufacturing sector provides further evidence that a strong, unmistakable V-shaped economic recovery is underway.

Markets in Everything: Outsourced Grading

From today's Chronicle of Higher Education, "Some Papers Are Uploaded to Bangalore to Be Graded":

"Lori Whisenant knows that one way to improve the writing skills of undergraduates is to make them write more. But as each student in her course in business law and ethics at the University of Houston began to crank out—often awkwardly—nearly 5,000 words a semester, it became clear to her that what would really help them was consistent, detailed feedback.

Her seven teaching assistants, some of whom did not have much experience, couldn't deliver. Their workload was staggering: About 1,000 juniors and seniors enroll in the course each year. "Our graders were great," she says, "but they were not experts in providing feedback."

That shortcoming led Ms. Whisenant, director of business law and ethics studies at Houston, to a novel solution last fall. She outsourced assignment grading to a company whose employees are mostly in Asia.
Virtual-TA, a service of a company called EduMetry Inc., took over. The goal of the service is to relieve professors and teaching assistants of a traditional and sometimes tiresome task—and even, the company says, to do it better than TA's can."

Tax Deadline Approaches: Bring Us Back to 1913

Page 1 of the original IRS 1040 income tax form from 1913 appears above. There were only four pages in the original 1040 form, including two pages of worksheets, the actual 1040 form above, and only one page of instructions, view all four pages here. In contrast, just the current 1040 instructions, without any forms, runs 175 pages.

Individual income tax rates started at 1% in 1913, and the maximum marginal income tax rate was only 6% on incomes above $500,000 ($11 million in today's dollars). The personal exemption was $3,000 for individuals ($66,000 in today's dollars) and $4,000 for married couples ($87,500 in today's dollars), meaning that very few Americans had to pay federal income tax since the average income in 1913 was only about $750.

Sunday, April 04, 2010

Economic Lessons on Free Trade from the Auto Industry: How Cheap Imports Create U.S. Jobs

From Popular Mechanics: "6 New Cars Under $20K From the New York Auto Show:"

"If you’re looking for a car with no secret history, a warranty and decent gas mileage—but you don’t want to spend a lot—there are plenty of options. From the floor of the 2010 New York Auto Show, we bring you the top 6 cars you can buy for under $20,000."

1. Low labor costs in Cuautitlán, Mexico make the feisty Ford Fiesta affordable to the masses (see photo above). With a base price of around $13,320, the subcompact is available as a hatchback or sedan. Made in Mexico.

2. Nissan Juke, base price of $18,000. Made in Japan.

3. Mazda2, base price of $14,000. Made in Japan.

4. Scion IQ, base price to be announced. Made in Japan.

5. Chevy Cruze, base price of $15,000. Made in USA.

6. Kia Sportage, base price of $18,000. Made in South Korea.

A couple important points here:

1. Of the six cars featured, only one is made in America - Chevy Cruze, all the others are imports.

2. Even though most of these affordable cars are imports, they still create thousands of jobs in America since they are sold and serviced at dealerships around the country staffed by thousands of Americans, they are insured by U.S. insurance companies that employ thousands of Americans, financed by U.S. banks and credit unions, registered and taxed by state governments across the country, etc. Some manufacturing jobs might be displaced, but many other are created.

3. In the same way that Wal-Mart provides cost-saving benefits even to consumers who shop at Target, Costco, Walgreens, Safeway, Home Depot, and Best Buy because of the competitive discipline Wal-Mart imposes on its competitors, the super-efficient, low-cost foreign auto companies impose cost savings for Americans who buy U.S.-built vehicles because of the competitive discipline Mazda, Kia and Nissan impose on Ford and GM.

For example, consider the graph below that compares the monthly CPI for all items (data here) to the CPI for New Cars (data here) back to 1995. The CPI for new cars has been flat for the last 15 years, while the CPI for all items has increased by about 45% since 1995. If new vehicles had increased at the same average rate as all consumer items, new cars would be 45% more expensive than they are today (adjusted for quality). Stated differently, the price of new cars, adjusted for quality and inflation, have been falling every year by -2.50% on average.

Q: If the Big Three had continued with their 90% market share and been completely protected from foreign competitors like Toyota and Honda, would the real, quality adjusted price of cars have collapsed over the last 15 years? Not a chance.

Bottom Line: The market for new vehicles has never been more competitive than it is today, and foreign competition has played a major role in both improving the overall quality of both domestic and foreign vehicles, and contributing to falling vehicle prices in real terms. When it comes to selection, price, dependability, service and quality, American car consumers have never had it as good as they do today - there has never been a better time to buy a new car. And because of the incredible affordability of today's new cars, American consumers have saved millions of dollars that can be spent on other goods and services, which indirectly creates millions of U.S. jobs.

U.S. politicians like Rep. Tim Ryan (D-OH) claim that China's currency policy puts "a lot of Americans out of work." That's absolutely true. But it's only half the story. China's policy also creates millions of U.S. jobs, by saving U.S. consumers and companies millions of dollars every year, which helps U.S. firms buying Chinese inputs operate more efficiently and potentially hire more workers, and which also puts millions of extra dollars in the pockets of American consumers from the cost savings that can then be spent on other goods and services, which are frequently provided by U.S. producers, restaurants, retailers, etc. There are indirect benefits as well from the competitive discipline imposed on American companies by low-cost Chinese products.

The main lesson here about international trade, whether it involves foreign vehicles or Chinese imports, is that we only hear half the story when politicians, unions and domestic producers focus on the jobs lost from trade. What we don't hear is the story that involves the significant benefits and millions of dollars of cost-savings for American consumers and businesses, and the millions of jobs created from international trade - directly by the American firms using foreign inputs that operate more efficiently and competitively with low-cost inputs and thereby expand output and hire more workers, directly by the American suppliers, retailers and dealers who distribute and sell imported goods like Japanese vehicles, and indirectly by the American firms that benefit from increased output, sales and employment because of the significant cost-savings from cheaper imports that translate into increased demand for other goods and services.

The Biggest Fiscal Issue in America Today: More Public Sector Unionization = More State Debt

From the Washington Examiner article "Public Sector Unions and State Debt Go Hand in Hand" by David Fredosso:

"The states with the highest per-capita debt all have something in common: Robust public-sector unions that have, over the years, cut sweetheart deals with politicians -- usually, but not always, Democrats. In the graph above, each blue square represents a state, plotted by its per-capita debt and the percentage of state and municipal workers in public sector unions.

The numbers for unionization run from 2006 through 2009, and the numbers for debt are 2007, before the current crisis. If anything, this presents a rosier picture for most states than the current one. A rigorous study would control for dozens of factors, but this chart demonstrates the correlation between state unionism and debt. As you can see in the graph, the states coalesce into three main groups:

•Among states whose government workers are less than 40 percent unionized, median per capita state debt is $2,238.
•Among states with between 40 and 60 percent of their government workers in public sector unions, the average debt is $3,609.
•Among states with more than 60 percent of the government workforce unionized, the average (median) per capita debt is $6,380.

As you keep an eye on the fiscal collapse of California, and New Jersey Gov. Chris Christie's (R) efforts to rein in the unions' power next year, bear in mind that this is quickly becoming the biggest fiscal issue in America today.

Do public sector unions really protect workers from exploitation, or do they merely bankrupt the treasuries of states nationwide? And more immediately, will the states that made poor fiscal choices get a second bailout from the federal taxpayer after the 2009 stimulus package?"

MP: Using the data provided in the links in the article, my chart above replicates the original chart in the article, and the OLS regression results are provided below the chart. The OLS results indicate that:

1. There is a statistically significant positive relationship between: a) the unionization of a state's government workforce, and b) the per capita public debt of a state (prob = 0.0000).

2. On average, for every one percent increase in a state's government workforce, per capita state debt increases by $64.42, or $64.42 million per 1,000,000 population.

Happy Easter: Enjoy the Cheap Eggs and Food!

The chart above shows the real, inflation-adjusted wholesale prices of eggs (in 2009 dollars), annually back to 1890. The wholesale price we're paying today for eggs (about $1 per dozen) is about 1/10 of the price 100 years ago ($10 per dozen in today's dollars), a decline of 90% compared to the price American consumers paid in the early 1900s.

And it's not just egg prices that have fallen over the last 100 years. Food (both at home and away from home) as a share of disposable income has never been more affordable, see the chart below using USDA data through 2008. Food expenditures as a percent of disposable income were in double-digits for the entire 20th century, and were above 20% for most of the 1929-1952 period. It's only been since 2000 that spending on food has fallen below 10% of disposable income, and it reached an all-time historical low of 9.6% in 2008.

And compared to other countries, Americans are the luckiest consumers on the planet when it comes to the affordability of food, measured as a share of income (data here). Most European consumers spend twice as much on food consumed at home as a share of income (e.g. 13.7% in France, 14.5% in Italy) as Americans (5.7%), and consumers in Mexico (24.2%), Chile (23.4%) and Brazil (24.6%) spend about three times as much as we do.

Happy Easter, enjoy your cheap eggs and food and be thankful for your status as one of the luckiest consumers in the world.

Increase of 1 Million Private Sector Jobs This Year?

This graph and post were inspired by a recent Scott Grannis post titled "400,000 New Jobs and Counting," where Scott estimates that "new private sector jobs have increased by 400K so far this year, with 300K of those new jobs created in March alone."

The chart above shows the monthly changes in private sector employment, calculated by taking the difference between total "Civilian Employment" (
data here) from the BLS Household Survey and total "Government Employment" (data here) from the Establishment Survey.

Using that measure of private sector employment:

Private sector jobs increased by 543,000 in January, 330,000 in February and 225,000 in March, for a total increase so far this year of 1,098,000 private sector jobs - the largest three-month increase in almost five years (since the three-month period ending May 2005).

Scott points out that "the household survey can have random blips, such as the 500K drop in private sector jobs in December, and the 550K jump in January." So if we ignore December and January as random blips, there would still be 555,000 private sector jobs created in February and March.

Bottom Line: Whether the increase in private sector jobs this year is 400,000, or 555,000 or 1.098 million, any of those estimates suggest that the improvements in the private sector job market are much better than what the payroll survey is showing: a total increase of 162,000 jobs this year (data here).

Comments welcome.

Tax Fact of the Day; Good News, Bad News

"Americans pay far more in individual income taxes than residents of other wealthy nations. Nearly 37 percent of U.S. tax revenue came from personal income taxes in 2006, about 10 percentage points more, on average, than in other industrialized countries. But we pay much less in sales taxes; 17 percent of 2006 U.S. tax receipts were from taxes on goods and services, or about half the 32 percent average for rich countries."

~Washington Post

Friday, April 02, 2010

Emerging Market Stock Market Rally; 19 Mo. High

The MSCI Emerging Markets Index has increased six straight days, by a cumulative 6-day percentage increase of almost 4%, and reached a new 19-month high today of 1028.5, the highest closing value since August 1, 2008. From the lows last year of below 500, the Emerging Markets Index has more than doubled to levels now above 1,000.

Twitter Can Predict Future Movie Box Office Revenues and That Might Be Just the Beginning

From the paper "Predicting the Future With Social Media" from two researchers Hewlett-Packard's Social Computing Lab:

Abstract: In recent years, social media has become ubiquitous and important for social networking and content sharing. And yet, the content that is generated from these websites remains largely untapped. In this paper, we demonstrate how social media content can be used to predict real-world outcomes. In particular, we use the chatter from Twitter.com to forecast box-office revenues for movies. We show that a simple model built from the rate at which tweets are created about particular topics can outperform market-based predictors. We further demonstrate how sentiments extracted from Twitter can be further utilized to improve the forecasting power of social media.

Conclusion: In this article, we have shown how social media can be utilized to forecast future outcomes. Specifically, using the rate of chatter from almost 3 million tweets from the popular site Twitter, we constructed a linear regression model for predicting box-office revenues of movies in advance of their release. We then showed that the results outperformed in accuracy those of the Hollywood Stock Exchange and that there is a strong correlation between the amount of attention a given topic has (in this case a forthcoming movie) and its ranking in the future. We also analyzed the sentiments present in tweets and demonstrated their efficacy at improving predictions after a movie has released.

While in this study we focused on the problem of predicting box office revenues of movies for the sake of having a clear metric of comparison with other methods, this method can be extended to a large panoply of topics, ranging from the future rating of products to agenda setting and election outcomes. At a deeper level, this work shows how social media expresses a collective wisdom which, when properly tapped, can yield an extremely powerful and accurate indicator of future outcomes.

MP: The chart above shows the Predicted vs. Actual box office scores using the tweet-rate as a predictor of box office revenues and the Hollywood Stock Exchange (HSX), "a popular playmoney market, where the prices for movie stocks can accurately predict real box office results.... and which can be considered the gold standard." According to the authors, "the model built using the tweet rate outperforms the HSX-based model."