Tuesday, September 21, 2010

Important Distinction: Giving People Tax Cuts Is NOT Giving People Money; It's ***THEIR*** Money

HT: Paul Ringstrom

Temporary Help Index Continues to Improve

The American Staffing Association (ASA) Staffing Index for temporary and contract employment activity improved by 24.7% for Week 37, the first week of September (data here). This marks the 21st week in a row with percentage gains in the staffing index above 20% compared to the same week in 2009 and the 30th straight week of double-digit percent increases vs. 2009.

The ongoing gains in the ASA Staffing Index in every single week this year compared to 2009 for this leading labor market indicator predict future broader-based, full-time permanent employment growth. 

California Business Exodus: If You Tax Something...

From Joseph Vranich:

"California is in serious trouble because many people refuse to admit to one of our big problems - the flight of businesses, capital and jobs to other states and nations. Businesses are shrinking their California footprint because high taxes and intense regulation damage their ability to compete.

Good information about the phenomena is hard to come by. Hence, out of frustration, a year ago I began compiling a list of what I call "California Disinvestment Events." The new compilation shows that 144 companies have fully or partially engaged in such events during the first three quarters of 2010, nearly triple the 51 companies discovered for all last year. You can see the list of companies that disinvest along with explanatory context here.

Such events are found in public documents. The real exodus is incalculable because so many are carried out without public notice. I think that for every one that becomes public knowledge, another dozen or more occur. Of course, many are small companies, but as they grow the economic benefits will be reaped elsewhere.

The top states gaining our businesses since January 2009 show Texas in the top spot, followed by Arizona, Colorado, Nevada, Virginia and Utah. Also, companies have moved functions to Taiwan, Mexico, Brazil and Chile. The jobs include R&D, which used to be a California hallmark. Now we're seeing unusual losses."

MP: More evidence of the anti-business, anti-growth effects of high taxes and onerous regulations, and companies voting with their feet.  

U-Haul Update: The cost for a one-way 26-foot truck rental from LA to Houston is $2,279, more than 2.5 times the cost for a truck going in the opposite direction ($892), suggesting that there are a lot more people moving out of California to Texas, than from Texas to California.    

The Daily Show: Working Stiffed

The Daily Show With Jon StewartMon - Thurs 11p / 10c
Working Stiffed
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The United Food and Commercial Workers of Nevada pays temporary, non-union workers minimum wage (with no benefits) to protest and demand fair treatment and wages from Wal-Mart.

Monday, September 20, 2010

Cartoon of the Day

HT: Junkyard Hawg1985

U.S. Poverty Rate: 1959 to 2009

According to the recent Census Bureau report (historical data here), the poverty rate in the U.S. increased to 14.3% in 2009 from 13.2% in 2008 and 12.5% in 2007 (see chart above).  A few items of interest:

1. The poverty rate in 2009 (14.3%) was below the poverty rates in 1992 (14.8%), 1993 (15.1%) and 1994 (14.5%) following the 1990-1991 recession.  

2. The poverty rate in 2009 was below the rate in 1982 (15%), 1983 (15.2%) and 1984 (14.4%) following the 1980 and 1981-1982 recessions. 

3. The increase in the poverty rate (Table 5 in the report) associated with the recessions of the early 1980s was 3.8 percentage points (11.4% in 1978 to 15.2% in 1983), which is more than twice the 1.8 percentage point increase from 2007 (12.5%) to 2009 (14.3%).    

4. The poverty rates in recent years, and even the 15-year high of 14.3% rate in 2009, have been below the rates from the late 1950s to the mid-1960s. 

Forget Obamacare, Here Comes Wal-MartCare

"Local hospitals or hospital systems are extending their reach by agreeing to run retail clinics at Walmarts (NYSE: WMT) in their communities.  Hospital officials see the clinic as a way to reach customers who need affordable care during extended hours and give those who do not have a family physician access to care."


Traffic Volume Reaches 21-Month High in July; Highest July Travel Volume on Record

The Federal Highway Administration reported today that travel on all roads and streets in the U.S. increased by +0.8% in July 2010 compared to the same month last year. Total travel for the month of July was an estimated 270 billion vehicle miles, the highest travel volume for the month of July on record. On a moving 12-month total basis, the annual vehicle-distance traveled through July was 2,983 billion miles, the highest 12-month total since September 2008, 22 months ago (see chart above).

Following a sharp decline in traffic volume that coincided almost perfectly with the recession that started in December 2007 and ended in June 2009 (it's now official, see shaded area in chart), the economic recovery that started last summer has been accompanied by a gradual increase in traffic volume as both personal and commercial travel on U.S. roads and highways have rebounded.

Forced Government Recycling is Garbage; It Wastes Scarce, Valuable Resources and Lowers Our Wealth

From Jeff Jacoby:

"Unlike commercial and industrial recycling — a thriving voluntary market that annually salvages tens of millions of tons of metal, paper, glass, and plastic — mandatory household recycling is a money loser. Cost studies show that curbside recycling can cost, on average, 60 percent more per ton than conventional garbage disposal. In 2004, an analysis by New York’s Independent Budget Office concluded, according to The New York Times, that “it cost anywhere from $34 to $48 a ton more to recycle material, than to send it off to landfills or incinerators.’’

“There is not a community curbside recycling program in the United States that covers its cost,’’ says Jay Lehr, science director at the Heartland Institute and author of a handbook on environmental science. They exist primarily to make people “feel warm and fuzzy about what they are doing for the environment.’’

Mandatory recycling programs “force people to squander valuable resources in a quixotic quest to save what they would sensibly discard,’’ writes Clemson University economist Daniel K. Benjamin. “On balance, recycling programs lower our wealth.’’

Don Boudreaux responds:

"When materials are worth recycling, markets for their reuse naturally arise. For materials with no natural markets for their reuse, the benefits of recycling are less than its costs – and, therefore, government efforts to promote such recycling waste resources.

Everyday experience should teach us this fact. The benefits of recycling clothing, for example, are large enough to prompt us to buy costly clothes-recycling machines that we routinely use to recycle for tomorrow the clothes we wear today. We call these machines “washers and dryers.” And when American families no longer want their clothing, organizations such as Goodwill come by to gather the discarded garments to recycle them for use by poor people.

People also recycle their homes. The one I own and live in was previously owned by a family who recycled it – which included refurbishing it – rather than simply discarding it when they moved to another town. Many people also drive recycled (“used”) cars, stock their homes with recycled (“antique”) furniture, listen to recycled (“used”) CDs, and read recycled (“used”) books.

Markets promote conservation when it’s worthwhile; government promotes it when it’s wasteful."

MP: Remember that "time" is our most valuable and scarce resource, and that is usually one of the biggest costs of recycling (as Clarence "Gatemouth" Brown reminds us in a classic blues song: "My time is expensive, I gotta make it last"); but it almost never gets accounted for in most cost-benefit analyses of recycling.

Rising Income Inequality Has Been Exaggerated: 2X

From the paper "The Welfare Implications of Rising Price Dispersion" by Chicago economists Christian Broda and John Romalis:

"This paper uncovers a new fact: non-durable inflation for poorer households has been substantially lower than for richer households.

Using scanner data on household consumption of non-durable goods between 1994 and 2005, we document that the relative prices of low-quality products that are consumed disproportionately by low-income households were falling over this period. This implies that non-durable inflation for the 10th percentile of the income distribution has only been 4.3 percent between 1994 and 2005 (0.4 percent per annum), while the non-durable inflation for the 90th percentile has been 11.9 percent (1.0 percent annually), and 13.4 percent (1.2 percent annually) for the richest 5 percent of households in the sample (see chart above)."

The authors conclude that:

"A large literature has focused on the rising inequality observed in official statistics, but have mostly abstracted from the fact that these official measures are based on a single price index for a representative consumer. This assumption is not crucial in a world with a stationary relative price distribution or where an identical basket of goods is consumed by different income groups. However, using household data on non-durable consumption, we document that the relative prices of low-quality products that are consumed disproportionately by low-income consumers have been falling over this period.

This fact implies that measured against the prices of products that poorer consumers actually buy, their “real” incomes have been rising steadily. As a consequence, we find that around half of the increase in conventional inequality measures during 1994–2005 is the result of using the same price index for non-durable goods across different income groups. Moreover, given that the increase in price dispersion does not seem to be specific to our sample or time period, the overstatement in the increases in inequality from official measures can be even more significant, changing our view of how progress has been distributed in recent decades substantially."

MP: In other words, by using a single price index to adjust incomes for inflation, the findings of rising income inequality have been exaggerated. Because non-durable inflation (food, clothing, fuel, cosmetics, paper, etc.) for consumers in the 10th percentile was 7.6 percent lower than inflation for the 90th percentile between 1994-2005, and 9.2% lower than for the 95th percentile, about half of the increase in income inequality during this period was the result of using the same price index for all income groups.

Sunday, September 19, 2010

Women Are Not WorthLess

According to this video, "Women today make just 77 cents for every dollar a man makes — that's an average of $10,622 in lost wages every year. For many women and their families, ending the wage gap would buy a year's supply of groceries, three months of child care, or six months of health insurance. It's time to stop discounting women's voices and paychecks."

I guess that means that every business in America could save 23% on its wage costs starting tomorrow by firing all male workers and simply replacing them with equally-qualified women at wages of 23% less.  But wait a minute, that's illegal according the Equal Pay Act of 1963. 
Thanks to Christina Sommers for the link to the video.

Will Higher Inflation Help the Economy?

In today's NY Times, Tyler Cowen presents a case for monetary expansion as a way to help the economy recover:

"The Federal Reserve, pondering what to do to stimulate the economy, has a number of tools at its disposal. But if it could just convince Americans that it was committed to monetary expansion and economic growth, it would help the economy pick up speed.

Yet that is easier said than done. Here’s the problem: The economy needs help, but monetary policy, which is the Fed’s responsibility, has not been very expansionary. This is true even though the Fed has increased the monetary base enormously since the onset of the financial crisis.

How can this be? Supplying more money did not actually result in enough additional spending. The debilitating financial shock of the last few years convinced many consumers and businesses that they needed to save more. So they are holding on to much of the new money.

Given this problem, there is a logical and seemingly simple move available to the Fed: just make people believe that it is seriously committed to increasing the rate of inflation.

As high unemployment continues, more and more people, including top economists, are asking the Fed to promise a credible commitment to a more expansionary monetary policy. This approach will work only if the Fed finds a way to be bold — and if we find a way to believe in it."
MP: The graph above shows that we may be getting some of the monetary expansion Tyler is advocating.  In the first week of September, M2 grew at an annual rate of 3.2%, the highest growth  in the money supply since mid-December of last year (data).  Given the low growth in real output (1.6% in QII 2010), we might have the ingredients necessary for some inflationary pressures, and according to Tyler an improvement in economic growth. 

Ten Reasons to Buy a Home: Houses Are Cheap

Enough with the doom and gloom about homeownership. Brett Arends in the WSJ presents  10 reasons why it's a good time to buy a home.  Reason #1 is that you can get a great deal and Reason #2 is that mortgages are cheap.  In other words, relative to income levels, housing affordability remains at historically high levels (see chart above).  In July, a potential home buyer with the median family income of $60,498 had about 161% of the qualifying income necessary ($37,392) to qualify for a 30-year fixed rate mortgage at 4.9% and purchase the median priced existing single-family home at $183,400, with a 20% down payment.  Monthly payments for that hypothetical home would be only $779 (principal and interest), see details here.    

Saturday, September 18, 2010

Word of the Day


ND's Record-Setting Oil Production Fuels Economic Boom with Record Employment, 3.6% Jobless Rate

Following an ongoing pattern that I have reported previously, North Dakota set more new records in July for monthly oil production (see top chart above, data here) and employment (see bottom chart above, data here).

There was a new record high of 321,042 barrels per day produced in July, which was a 1.83% increase from the previous record in June, and a 41% increase from July 2009.  From 156,420 barrels per day level in May 2008, daily oil production in North Dakota has now doubled to more than 321,000 barrels. 

As a direct result of the ongoing North Dakota oil boom, the state's economy is booming as well, with the lowest state jobless rate in the country of 3.6% in July, and recent jobs gains that completely offset all of the jobs lost during the recession, bringing North Dakota's employment to a record high in July of 373,500 (see bottom chart above).  July marks the fifth straight month of job growth in North Dakota, which totals to a cumulative gain of 7,700 jobs since February.     

BULLISH: Tea Party Economics and Political Revolt

From Larry Kudlow:

"Free-market capitalism is on the comeback trail. That’s one of the key tea-party messages. And make no mistake about it: The free-market power of the tea-party political revolt is totally bullish for stocks and the economy. In short, this is a revolution.

The political elites in both parties don’t get it. Nor do the mainstream media. But the tea-party movement is stopping Obamanomics dead in its tracks. And it will overturn the Keynesian big-government planning effort now in full force in our nation’s capital. The tea parties are Reaganism reincarnate, and then some.

Limited government, individual liberty, economic freedom. Defund Obamacare. No tax-and-nationalize energy scheme. Stop the tax hikes and move to a flat-tax system. No special favors and subsidies. No crony capitalism.  No runaway government spending and debt-creation. No TARP. No stimulus. No Obamacare. No Bailout Nation for GM, Fannie, Freddie, and AIG. Instead of federal spending running up to 25, 26, or 27 percent of GDP, look for our new tea-party representatives to move it back to 20 percent of the economy, or even less.

In other words, this is not going to be your father’s Congress. Nor is it going to be your father’s Republican party. The party of George W. Bush and George H. W. Bush is about to be totally transformed (see cartoon by Michael Ramirez above). Constitutional spending limits. Low flat-tax rates. Slam-downs on budget baselines. Pitchforks maybe, but not pork.

The new tea-party breed in Washington will unleash entrepreneurship and capitalism by holding back the government tide. In other words, folks, tea-party economics are very bullish."

West Coast Shipping Boom in August

The Port of Portland reported that shipping totalled 1,256,980 short tons in August, which was the highest monthly shipping volume in almost two years, since the 1,268,216 short tons in October 2008 (see chart above), and the highest shipping volume ever for the month of August at the Portland port.  Compared to August of last year, shipping volume was up by 27.8%, and the cumulative year-to-date volume is up by 39.5%.  

The Port of Portland is a major shipping point for grains harvested as far east as the Great Plains (Source: New York Times), and monthly grain tonnage in August set an all-time record high of 557,042 short tons (more than a billion pounds), due to an increase in demand for U.S. grains as the world economy recovers.

Shipping at the Port of Seattle also showed a significant 38.9% improvement in August compared to last year, following strong double-digit gains of 22% or higher in every month this year versus 2009 (see chart below).

Finally, shipping at the Port of Long Beach in August was the highest monthly volume yet for 2010, and was 23.9% above volume for the same month last year.  Total shipping for the fiscal year (October 1 to September 30) is 10.7% above last year. 

See previous post on LA Port shipping being back to pre-recession levels. 

Unadjusted Jobless Claims Fall to 2-Year Low

The chart above shows weekly initial jobless claims, both unadjusted (data here) and on a seasonally-adjusted, and four-week moving average basis (data here).  As Scott Grannis pointed out several days ago: "Actual claims have been falling steadily since early July, and have now reached a two-year low (see chart above). Claims are actually lower now than they were for the same week two years ago."

Further, actual initial jobless claims have fallen for the last five weeks starting in mid-August, and you have to go all the way back to the spring of 2003, more than seven years ago, to find a similar period of five consecutive weekly declines in initial jobless claims.  As Scott predicts, "If this keeps up, claims could prove to be a nasty surprise for the bears."

Rail Traffic Continues to Improve This Year vs. 2009

From this week's report from the American Association of Railroads:

1. Rail carload volume increased by 5.1% in the week ending September 11 (week 36) compared to the same week last year (see chart above).

2. Intermodal traffic increased up 18.1% from the same week in 2009 (see chart above), which was also the 9th straight week of a double-digit gain above 17%.   

3. This marks the 35th straight week of improvements in intermodal rail traffic compared to the same week in 2009. Except for a holiday-related decline in July, carload volume has increased for the last 29 weeks compared to the same week last year.

4. For the first 36 weeks of 2010, cumulative carload volume on U.S. railroads is up 7 percent from 2009 and intermodal rail volume has improved by 14.5 percent from 2009.

5. For all of North America, cumulative carload volume is up by 9.9% and intermodal volume by 15.1% in 2010 compared to last year.

Friday, September 17, 2010

4 Out of 10 Uninsured Americans: a) Live in Households Making More Than $50,000 Per Year, and b) Are Between the Ages of 18 and 34

According to this new Census Bureau report "Income, Poverty, and Health Insurance Coverage in the United States: 2009," there were 50.67 million uninsured Americans in 2009, up from 46.34 million in 2008.

The chart above shows the household income levels of those 50.67 million uninsured Americans. There were 10.6 million uninsured Americans living in households making $75,000 per year or more, and this group represents more than 1 out of every 5 uninsured (20.8% of the total number of uninsured). There were about 9.4 million Americans without health insurance in households making between $50,000 and $75,000, representing 18.5% of the uninsured. For those two groups combined, 39.3% of Americans without health insurance (20 million people) were living in households last year with $50,000 or more of household income in 2009 (see Table 8 in the Census report for these data).

Q: With $50,000 or more in household income, wouldn't many or most of those 20 million Americans be without insurance voluntarily? That is, couldn't many of those households afford health insurance? Alternatively, with those income levels (especially the 10.6 million with household income above $75,000), couldn't many of those households choose to forego health insurance in favor of being "self-insured," at least for routine health procedures? Given the widespread availability of more than a thousand convenient and affordable retail health clinics around the country at Wal-Mart, Target, Meijers, CVS and Walgreen, these households could easily be on the "pay-as-you-go" model of self-insurance for health care, at least for routine medical services.

It's also the case that more than 4 out of 10 uninsured Americans (41.8%) in 2009 were between the ages of 18 and 34 years, and the young people in that age group may also voluntarily choose not to be insured, and be "self-insured," because they are young and healthy and elect not to spend money on health insurance.  

As Thomas Sowell wrote last year:

"As for those uninsured Americans who are supposedly the reason for all this sound and fury, there is remarkably little interest in why they are uninsured, despite the incessant repetition of the fact that they are. The endless repetition serves a political purpose but digging into the underlying facts might undermine that purpose. Many find it sufficient to say that the uninsured cannot "afford" medical insurance. But what you can afford depends not only on how much money you have but also on what your priorities are. Many people who are uninsured have incomes from which medical insurance premiums could readily be paid without any undue strain (see chart above)."

Thursday, September 16, 2010

The Case for China's Currency "Manipulation" Policy, with Some Help from Scott Grannis

Thanks to Scott Grannis for his excellent post today on China's alleged "manipulation" of its currency, and claims that China's currency policy harms the U.S. economy.  Scott makes the following key points (and provides the charts above):

1. China's currency has in fact appreciated, by 23%, since it began pegging the yuan in 1994 (see top chart above). 

2. Scott writes, "China's monetary policy has been successful at delivering relatively low and stable inflation: since 1996, in fact, Chinese inflation has been substantially similar to that of the U.S. (see bottom chart above).  This fact alone is almost proof that they haven't been keeping the currency artificially weak. In other words, our price level has risen about the same as the Chinese price level for the past 15 years. If the yuan had been chronically undervalued during that time, then Chinese inflation would most likely have been higher."

3. And here's Scott's main point: "Even if the yuan were chronically "too weak," what's the problem anyway? If the Chinese want to sell us cheap goods, that's to our advantage. True, some manufacturers here might go out of business as a result, but all consumers would benefit. Why should we pursue a policy—forcing the Chinese to appreciate their currency even more than they already have—that would disadvantage every single one of us—because a stronger yuan/weaker dollar would make Chinese imports more expensive—in order to protect a small number of businesses that are forced to compete with Chinese imports?"

MP: Scott's final point is a key one because it illustrates the special-interest influence on trade policy. If China's currency policy keeps the U.S. dollar "artificially high" due to "manipulation," it potentially bestows widespread benefits on millions of American consumers and thousands of American businesses that benefit when they purchase low-priced Chinese imports. Some U.S. companies that compete against Chinese producers might be worse off, but the harm they suffer is far less than the gain to the entire U.S. economy.

Likewise, if China is forced by the U.S. government to appreciate the yuan and depreciate the dollar, only a small group of American producers will benefit from this form of protectionism, but it will be at the expense of harming all consumers and many businesses.  And the total gain to the now-protected U.S. producers will be far less than the loss to millions of American consumers and companies who will pay higher prices and be worse off.

Unfortunately, the small, concentrated group of domestic producers (sellers) seeking protectionism through tariffs, quotas or currency re-valuation are usually much better organized, have better lobbyists and more political influence than the millions of disorganized consumers (buyers), so it's not hard to predict who usually prevails in the political process.  But that doesn't change the economic reality that we're worse off as a country when a small group of sellers prevails politically and imposes the significant costs of protectionism on millions of consumers.  Thanks to Scott Grannis for another great post.

Wednesday, September 15, 2010

Interesting Fact of the Day - Coincidence?

As I reported yesterday, according to the Council of Graduate Schools' latest report (Table 2.13), there are four out of 11 graduate fields of study where men are over-represented by enrollment: Business, Engineering, Mathematics and Computer Science, and Physical and Earth Sciences, seven fields where women are over-represented: Arts and Humanities, Biology, Education, Health Sciences, Public Administration, Social and Behavioral Sciences, and Other Fields.  

For the four most math-intensive graduate fields of study, which are the fields where men are over-represented, the male-female ratio for enrolled graduate students is 1.70 to 1 (322,516 males to 189,372 females).  

Interestingly, according to College Board data released this week, the male-female ratio for 2010 SAT math scores of 700 or above is 1.69 to 1 (65,606 males to 38,728 females). 


Update: More women (827,197) than men (720,793) took the SAT test in 2010.  At the highest test score of 800, the male-female ratio was 2.08 to 1 (8,072 males had perfect scores vs. 3,997 females). 

The Real Conundrum: Why the Hell Do We Care if China Manipulates Its Currency in Our Favor?

Here's a little editing fun of Harold Meyerson's article in today's Washington Post:

"This week, committees on both sides of Capitol Hill will plumb the conundrum of Chinese currency manipulation. The conundrum isn't that -- or why -- China is manipulating its currency: By undervaluing it, China is systematically able to underprice its exports, putting American (and other nations') manufacturing consumers and businesses that purchase China’ cheap imports at a significant disadvantage. The conundrum is why the hell the United States isn't doing thinks it should do anything about it.

There are certainly plenty of senators and congressmen -- and Main Street Americans U.S. producers that compete with China -- who'd like to see the White House place some tariffs taxes on American consumers and businesses who purchase the underpriced low-priced Chinese imports. If the administration doesn't act, Congress may just consider mandating some tariffs punitive taxes against American consumers and business on its own."

Industrial Production Increases 13 of Last 14 Mos.

The Federal Reserve reported today that U.S. industrial production increased in August for the sixth straight month, and for the 13th time in the last 14 months (see top chart above, data here).  From the most recent trough of 88.5 in June 2009, output at America's factories, mines and utilities has increased by more than 9%, and over the last 12 months by 6.2% (see bottom chart above).  August marks the 8th consecutive month of year-over-year growth in industrial production (every month this year), following 21 straight months of year-over-year declines going back to April of 2008. 

The ongoing gains in industrial output suggests that the manufacturing sector will continue to be one of the main economic drivers of growth in the U.S.

Tuesday, September 14, 2010

LA Port Shipping Is Back to Pre-Recession '07 Level

I reported yesterday that global trade reached a 26-month high in June, and today's report from the Port of Los Angeles provides additional statistical evidence of an ongoing boom in international trade activity. Shipping volume reached a 46-month high in August of 763,837 Twenty-foot Equivalent Units (TEUs), the highest monthly shipping activity since October of 2006 (see chart above), and the fourth highest monthly volume in history. 

Other highlights include:

1. Compared to August 2009, shipping volume at the LA Port this year gained 24.7%, marking the fifth straight double-digit, year-over-year percentage increase in TEUs.

2. On a year-to-date basis, shipping activity at the LA Port is up by almost 18% compared to the first eight months of last year.

3. August marked the third month in a row where total shipping volume exceeded 730,000 TEUs, which was the first time since a three month period from September to November 2007 before the recession started. 

4. For the month of August, this year's shipping activity was the highest in four years since August of 2006, which was also the case for July (highest for that month since 2006).  For June of this year, it was the highest June shipping volume ever in history at 730,317 TEUs.

Bottom Line: Shipping volumes for the last three months at the LA Port are back to the pre-recession levels of 2007, suggesting that there has been a full recovery in global trade from the 2008-2009 recession.   

142 Women Enrolled in Grad School Per 100 Men, and Women Outnumber Men in 7 Out Of 11 Fields

Click charts to enlarge.

The Council of Graduate Schools released its annual report today, here are links to the press release and full report.  What has been getting the most attention from this year's report is the fact that women earned a majority of doctoral degrees in 2009 (50.4%) for the first time ever, see top chart above. By field of study, women earning doctoral degrees outnumbered men in six of the eleven graduate fields: Arts and Humanities, Biology, Education, Health Sciences, Public Administration and Social/Behavioral Studies.  Men still outnumber women earning doctoral degrees in fields like Engineering (78.4%), Math and Computer Science (73.2%) and Physical Sciences (66.6%).  See related stories today by the Washington Post and Inside Higher Ed.    

The bottom chart below shows total graduate student enrollment in 2009 by gender and field for all graduate programs (Master's and Doctoral).  By this measure, it's not even close; women enrolled in graduate programs at all levels far outnumber men.  Women represent 58.9% of all graduate students in the U.S., meaning that there are now 142.3 women enrolled in graduate school for every 100 men.  In certain fields like Education (75% female), Health Sciences (79% female) and Public Administration (74.4%), women outnumber men by a factor of 3-4 times.  Overall, women enrolled in graduate school outnumber men in 7 out of the 11 graduate fields of study, all except for business (45.7% female), engineering (22.3% female), math and computer science (29% female) and physical sciences (37.3% female).    

This is more evidence that men have become the second sex in higher education.  And here's a prediction: The fact that men are underrepresented in graduate school enrollment overall (100 men for every 142 women), and underrepresented in 7 out of 11 graduate fields of study will get almost no media attention at all.  Additionally, there will be no calls for government studies, or increased government funding to address the problem, and nobody will refer to this gender graduate school enrollment gap as a "crisis."  But what will get media attention is the fact that women are underrepresented in four of the 11 fields of graduate study like engineering and computer science, which can likely be traced to some kind of overt or unexamined gender discrimination.     

Markets in Everything: The Jesus Toaster

I'm not making this up, check it out here, only $39.95.

Monday, September 13, 2010

The Fatal Political Obsession with Homeownership

From a letter sent to President Bush by Barney Frank, Nancy Pelosi, Maxine Waters and 73 other Congressional Democrats on June 28, 2004:

"We urge you to reconsider your Administration's criticisms of the housing-related government sponsored enterprises (the GSEs) and instead work with Congress to strengthen the mission and oversight of the GSEs. We write as members of the House of Representatives who continually press the GSEs to do more in affordable housing.

Until recently, we have been disappointed that the Administration has not been more supportive of our efforts to press the GSEs to do more. We have been concerned that the Administration's legislative proposal regarding the GSEs would weaken affordable housing performance by the GSEs, by emphasizing only safety and soundness. While the GSEs' affordable housing mission is not in any way incompatible with their safety and soundness, an exclusive focus on safety and soundness is likely to come, in practice, at the expense of affordable housing.

Our position is not based on institutional loyalty, but on concern for the GSE's affordable housing function. We appeal to you to agree to work on legislative proposals that foster sound oversight and vigorous affordable housing efforts instead of mounting assaults in the press. We also ask you to support our efforts to push the GSEs to do more affordable housing. Specifically, join us in advocating for more innovative loan products and programs for people who desire to buy manufactured housing, similar products to preserve as affordable and rehabilitate aging affordable housing, and more meaningful GSE affordable housing goals from HUD.

In closing, we reiterate that an exclusive emphasis on safety and soundness, without an appropriate balance in focus on the affordable housing mission of the GSEs, is misplaced."

MP: The graph above helps to explain the housing environment in June 2004 when the letter was sent to President Bush:

1. The homeownership rate was at an all-time historical high of 69.2% in the second quarter of 2004, and had increased by more than 5% from 63.9% in the first quarter of 1991.

2. Home prices had been inflating at a rate far greater than the general price level for almost a decade, as the unsustainable housing bubble was on its way to the 2007 peak in home prices.  At the time the letter was written in 2004, home prices had appreciated by 85.4% since 1991, which was more than twice the 39.6% increase in the CPI over that period (see chart above). 

So at the same time that homeownership was peaking and home prices were close to peaking, both at unsustainable levels, the Democrats in 2004 were still pushing for all of the policies that eventually caused the global financial crisis, mortgage tsunami, and housing bubble: affordable housing through lower down payments, looser underwriting standards and higher leverage.      

Five years later in 2009, the U.S. House of Representatives Committee on Oversight and Government Reform concluded that: "The consequences of these policies [the political obsession with homeownership] have brought the entire global financial system to the brink of collapse, destroying trillions in equity and untold numbers of lives. It is essential to reexamine the borrow-and-spend, high-leverage policies that became prevalent in the mortgage market as a result of well-intentioned-but-reckless decisions made by elected officials on behalf of the American people."

HT: Alex Pollock

2010 SAT Math Test: Huge Gender Gap Persists With a 34 Point Advantage for High School Boys

The College Board released data today on SAT scores for college-bound seniors in 2010, here are some highlights of the results relating to the 2010 SAT Mathematics test:

1. Continuing a trend that has persisted for many decades, high school boys continued to score significantly higher on the 2010 SAT Math test than their female counterparts, by 34 points this year: the average male score this year was 534 vs. the average female score of 500, see chart above.  The male advantage in the SAT Math test has ranged narrowly between 33 and 36 points since 1994, which is slightly lower than the 40+ point advantage for high school boys from 1976 to 1987.  

2. The gender differences in SAT Math test scores prevailed for all ethnic groups in 2010, with the following male-female point differences: American Indian (29 points), Asian (28 points), Black (14 points), Mexican-American (35 points), Puerto Rican (30 points) and white (36 points). 

3. For perfect scores of 800 points, there were 8,072 males and 3,887 females achieving at the highest possible level, for a male:female ratio of 2.08 to 1.  However, there were almost 15% more female high school students (827,197) taking the SAT in 2010 than male students (720,793), and to adjust for these differences in the number of test takers, we can calculate that 1.12% of male test takers scored perfect 800 scores, versus 0.47% of female test takers, for a male:female ratio 2.38:1, which is even higher than the unadjusted male:female ratio of 2.08:1.  By either calculation, there were more than twice as many male high school students getting a perfect score on the SAT Math test than female students. 

4. In contrast to the male high school students' superior performance on the SAT Math test, female high schools students are generally better students overall, and equally or better prepared for the SAT Math test than their male counterparts:

a. Females outnumbered males in the top 10% of their 2010 classes - there were 127 female students in the top 10% of high schools for every 100 male students (56% female to 44% male).

b. Nationwide, there were 144 female high school students with GPAs of A+ for every 100 males (59% female vs. 41% male). 

c. Females had a higher mean GPA of 3.40 than male students at 3.26. 

d. More than half (51%) of female high students took more than 4 years of mathematics, compared to 49% of male students.

e. There were 117 female high school seniors who took AP or Honors Math for every 100 male students (54% female vs. 46% male). 
Bottom Line: Female high school students are better students on average compared to male high school students, and they are equally or better prepared than males for the math SAT exam based on the number and level of math classes taken in high school. And yet, male students score significantly higher on the SAT math test than females, and the statistically significant male-female test score gap of more than 30 points persists over time.

Based on the statistical evidence, is there any other conclusion than this obvious one: In general and on average, male high school students in the U.S. are just plain better at math than female high school students?

And yet, we hear statements like this: "There just aren't gender differences anymore in math performance," says University of Wisconsin-Madison psychology professor Janet Hyde, "So parents and teachers need to revise their thoughts about this.  Stereotypes are very, very resistant to change, but as a scientist I have to challenge them with data."

Given the huge and persistent differences in SAT Math tests that persist over many generations, and are found among all ethnic groups, the scientific data about gender differences in math performance seem to be challenging Professor Hyde's fact-resistant stereotypes. 

Global Output Reaches All-Time High in June; World Economy in New Cycle of Economic Growth

According to the Netherlands Bureau for Economic Policy Analysis, world industrial production increased in June for the 15th straight month after declining in 11 out of 12 months between April 2008 and March 2009 (see chart above).  Compared to last June, world output has improved by 10.4% year-over-year, and June was the sixth consecutive month of double-digit percentage increase over the same month in 2009.  For the last two months, world production levels (135.1 in May and 135.3 in June) have been above the previous peak of 134.4 reached in March 2008, suggesting that there has been a complete recovery in world output from the global recession in 2008 and 2009. 

The same group also reported that the volume of merchandise world trade continued to show signs of improvements in June, following gains in 7 out of the previous 8 months (see chart below).  On a year-over-year basis, June's increase of 21.5% in merchandise world trade was the sixth straight double-digit percentage increase, and overall world trade in June (index = 159.3) is just 1.72% below the March 2008 peak of 162.1.  The world trade volume in June was at the highest level in 26 months, since April 2008.
Bottom Line: Based on the ongoing improvements in global production and world trade, especially the fact that global industrial production is now at an all-time historical high, I think we can safely say that that the world economy has made a complete recovery from the global slowdown in 2008 and 2009, and we're now in a new period of economic growth and expansion.   

Consumer Sovereignty By Daily Marketplace Ballot

1. "When we call a capitalist society a consumers’ democracy we mean that the power to dispose of the means of production, which belongs to the entrepreneurs and capitalists, can only be acquired by means of the consumers’ ballot, held daily in the marketplace.”

~Ludwig von Mises in "Socialism: An Economic and Sociological Analysis," 1951, page 21. 

2. “Consumers are the kings and queens of the market economy, and ultimately they reign supreme over corporations and their employees. … In a market economy, it is consumers, not businesses, who ultimately make all of the decisions. When they vote in the marketplace with their dollars, consumers decide which products, businesses, and industries survive — and which ones fail.”

~“Consumer, Not Corporate, ‘Greed’ Is Ultimately Behind Layoffs.”

Sunday, September 12, 2010

RCA TV Cost 72 Hours of Work At Avg. Wage ($2.05/hr.) in 1959 = $1,350 Today @ $18.52/hour

The 1959 RCA TVs pictured above sold for $150 retail, which would be about 72 hours of work then at the average hourly manufacturing wage of $2.05.  At today's hourly wage of $18.52, that amount of work (72 hours) would be equivalent to $1,350 in today's dollars.  Today you can get a 19 inch LCD HDTV for as little as $138, which would be only 7.5 hours of work at the average hourly wage. 

Bottom Line: In 1959, the average worker had to work 9 full 8-hour days (almost two weeks) to earn enough income to purchase a 17 inch portable TV (ignoring taxes), and today's average worker would earn enough income in less than one day (7.5 hours) to purchase a 19 inch LCD HDTV.   

Your Pants are Lying to You: "Vanity Waist Sizing"

According to Esquire Magazine, many retailers are lying to consumers about waist sizes in order to make them feel thinner and more likely to buy their clothes.  The worst offenders? A pair of Old Navy pants labeled as size 36 were in fact 41 inches, a pair of size 36 Dockers were actually 39.5 inches, and Haggar and Gap were both selling 39 inch pants as size 36. CBS Sunday Morning featured a story today about the trend towards "vanity waist sizing."

Nebraska Revenue Beats Forecasts: All 4 Categories

Nebraska is now the 13th state to report an improvement in August tax revenues, thanks to the expansion of economic activity:

"For the first time in more than two years, monthly state tax revenue in Nebraska came in above forecasts in all four tax categories in August. Revenue from the four categories -- sales tax, individual income tax, corporate income tax and miscellaneous taxes -- were above the forecast for August.

The last time Nebraska's net monthly receipts (after refunds) were above forecast in all categories was September 2007, and the last time gross monthly receipts came in above forecast in all categories was June 2008.

"We needed to have a good month," to show that the state economy wasn't heading into another dip, said state Sen. Lavon Heidemann."

See the full list of 13 states here.

Saturday, September 11, 2010

$170,000 Student Loan Debt Ends Engagement

From the NY Times:

"Nobody likes unpleasant surprises, but when Allison Brooke Eastman’s fiancé found out four months ago just how high her student loan debt was, he had a particularly strong reaction: he broke off the engagement within three days.

Ms. Eastman said she had told him early on in their relationship that she had over $100,000 of debt. But, she said, even she didn’t know what the true balance was; like a car buyer who focuses on only the monthly payment, she wrote 12 checks a year for about $1,100 each, the minimum possible. She didn’t focus on the bottom line, she said, because it was so profoundly depressing.

But as the couple got closer to their wedding day, she took out all the paperwork and it became clear that her total debt was actually about $170,000. “He accused me of lying,” said Ms. Eastman, 31, a San Francisco X-ray technician and part-time photographer who had run up much of the balance studying for a bachelor’s degree in photography. “But if I was lying, I was lying to myself, not to him. I didn’t really want to know the full amount.”

At a time when even people with no graduate degrees, like Ms. Eastman, often end up six figures in the hole and people getting married for the second time have loads of debt from their earlier lives, it should come as no surprise that debt can bust up engagements. Even when couples disclose their debt in detail, it poses a series of challenges."

The Real Health Care Problem: Spending Other People's Money; From 50% to 90% in 60 Years

The graph above (Census data here) highlights the #1 reason why medical costs have risen, and will continue to rise: Out-of-pocket payments for medical costs have been falling for the last fifty years, and are projected to continue to decline, and will  fall below 10% by 2017.  By way of comparison, out-of-pocket payments accounted for almost half (46.78%) of total medical costs in 1960.  When we're spending less than 10 percent of our own money on health care costs, one outcome is almost 100% inevitable: health care costs will continue to rise, and there's nothing about Obamacare that will change that. 

Markets in Everything: $25 to Speed for 24 Hours

CARSON CITY, Nev. — "One Nevada gubernatorial hopeful sees a speedy fix to Nevada's budget crisis. Nonpartisan candidate Eugene "Gino" DiSimone believes people would pay for the privilege to drive up to 90 mph on designated highways — and fill the state's depleted coffers.

After setting up an account, anyone in a hurry could dial in, and for $25 charged to a credit card, be free to speed for 24 hours. The Nevada Highway Patrol isn't keen on the idea, saying it would lead to increased injuries and traffic deaths."

The Student Loan Bubble: Deflating Just a Bit?

The three charts below help tell part of the "higher education bubble" story by looking at student loan volume using data from the Department of Education.  The first chart shows the actual gross student loan volume from 1994 to 2007, and the projected student loan volume from 2008 to 2017.  Here's what happening:

1. Between 1994 and 2006, student loan volume expanded by almost 7 times, from $23 billion in 1994 to $156.6 billion, for an average annual increase of more than 17%.

2. From slightly less than $40 billion in 1998, student loan volume more than doubled to $80 billion in just five years by 2003 ($87.5 billion), and then almost doubled again over the next three years, reaching $156.6 billion by 2006. 

3. After decreases in student loan volume in 2007 and 2008, the Department of Education predicts ongoing increases starting this year, reaching $214 billion by 2017, which will be 10 times higher than the amount in 1994.

Part of the increase in total student loan volume is from the increase in the number of student loans, which has more than tripled from 6.5 million borrowers in 1994 to almost 20 million borrowers this academic year.  The chart below shows the actual average student loan amount from 1994 to 2007 and the projected amounts from 2008 to 2017.  

1. The average student loan amount almost doubled between 1994 to 2005, from $3,543 in 1994 to $7,311 in 2005, and reached a peak of $8,706 in 2006.  

2. Following declines in 2007 and 2008, average loan amount started increasing again in 2009, and is projected to top $8,000 again by 2015.  

Of course, the dollar amounts above have not been adjusted for inflation or compared to income levels, so the chart below shows the average student loan amount as a share of median household income, from 1994 to 2008.

1. After remaining stable at about 11-12% of median household income between 1994 and 2001, student loans as a share of income climbed to more than 18% in 2006, before declining to 15.5% in 2007 and 13.6% in 2008. 

2. Another way to look at student loans: In 1994, median household income ($32,264) was about 9 times the average student loan amount of $3,543, but by 2006 median household was earning income ($48,201) that was only 5.5 times the average student loan amount of $8,706. 

From Glenn Reynolds in the Washington Examiner:

"As with the housing bubble -- cheap and readily available credit has let people borrow to finance education. They're willing to do so because of: 1) consumer ignorance, as students (and, often, their parents) don't fully grasp just how harsh the impact of student loan payments will be after graduation; and 2) a belief that, whatever the cost, a college education is a necessary ticket to future prosperity.

Bubbles burst when there are no longer enough excessively optimistic and ignorant folks to fuel them. And there are signs that this is beginning to happen already.

Student loan demand, according to a recent report in the Washington Post, is going soft, and students are expressing a willingness to go to a cheaper school rather than run up debt. Things haven't collapsed yet, but they're looking shakier -- kind of like the housing market looked in 2007."

MP: The data in the charts above do support the fact that student loan demand has been going soft in both 2007 and 2008, and part of that might be the effects of the recession.  But hopefully it's also because reality is setting in, and students and their parents are becoming more cost-conscious and now less willing to run up huge amounts of student loan debt.  When just the average student loan amount (and many students have more than just one student loan) is approaching 20% of median household income, like in 2006, that seems like an unsustainable situation.  As Michael Barone wrote recently:

"Government-subsidized loans have injected money into higher education, as they did into housing, causing prices to balloon. But at some point people figure out they're not getting their money's worth, and the bubble bursts." 

Hopefully, the recent declines in student loans (the average loan declined by almost $2,000 from $8,706 in 2006 to $6,830 in 2008), means that the higher education bubble might be deflating just a little bit.  

Friday, September 10, 2010

Hotel Industry Improves for 13th Straight Week

HENDERSONVILLE, Tennessee -- "The U.S. hotel industry reported increases in all three key performance metrics during the week of 29 August-4 September 2010, according to data from STR. In year-over-year comparisons, occupancy increased 7.5 percent to 57.4 percent, average daily rate (ADR) was up 2.1 percent to $94.37, and revenue per available room rose 9.7 percent to $54.16.

This was the 13th consecutive week the U.S. reported overall ADR increases. Before this trend emerged, ADR decreased 74 of the past 76 weeks. “Thirteen consecutive weeks of ADR improvement show that the industry now trusts the positive demand trends that emerged earlier in the year,” said Chad Church, director of special services at STR. “Hoteliers have raised their rates, and the consumer continues to travel."

HT: Calculated Risk

Lumber Futures Extend Rally to A Three-Month High on Positive Outlook for the U.S. Economy

BLOOMBERG -- "Lumber prices climbed, extending a rally to a three-month high, on signs of optimism in the U.S. economy (see chart above, data here).

U.S. wholesale inventories rose in July by the most in two years as a rebound in demand spurred companies to add to stockpiles, Commerce Department data showed. The amount of goods on hand compared with sales indicated that manufacturing gains will be sustained in coming months. Lumber soared as much as 6 percent after jumping the most allowed in Chicago in the past two days.

“Some reasonably good economic news” gave confidence to lumber buyers, said Hakan Ekstrom, the president of Wood Resources International LLC in Bothell, Washington."

Adjusted for Vehicle Miles, Highway Deaths in 2009 Were the Lowest Ever Recorded, Back to 1921

"U.S. Transportation Secretary Ray LaHood yesterday released updated 2009 fatality and injury data showing that highway deaths fell to 33,808 for the year, the lowest number since 1950 (see top chart above). The record-breaking decline in traffic fatalities occurred even while estimated vehicle miles traveled in 2009 increased by 0.2 percent over 2008 levels.

In addition, 2009 saw the lowest fatality and injury rates ever recorded: 1.13 deaths per 100 million vehicle miles traveled in 2009, compared to 1.26 deaths for 2008 (see bottom chart above)."

From the Detroit News:

"Barbara Harsha, executive director of the Governors Highway Safety Association, attributed the improvement in traffic statistics "to a host of factors, including increased seat belt use, stronger enforcement of drunken driving laws, better roads, safer vehicles and an increasingly well-coordinated approach to safety."

But the automakers also claimed a share of the credit.  "What we are seeing now is the payoff from years of manufacturer-driven safety improvements, like anti-lock brakes and electronic stability control systems coupled with high visibility enforcement safety efforts by law enforcement," said Alliance of Automobile Manufacturers President and CEO Dave McCurdy."

Quote of the Day

"A man who chooses between drinking a glass of milk and a glass of a solution of potassium cyanide does not choose between two beverages; he chooses between life and death. A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society. Socialism is not an alternative to capitalism; it is an alternative to any system under which men can live as human beings."

Ludwig von Mises writing in "Human Action"

HT: Dennis Gartman in today's "The Gartman Letter"

There's One Thing We Can Always Count On in the Long-Run: 2% Growth in Per-Capita Real GDP

Over the last 200 years going back to 1809, the chart above shows that the growth in real GDP per capita in the U.S. has been amazingly constant at an average of 2% year, with fluctuations around that long-term secular trend.  The National Bureau of Economic Research has documented 33 recessions since 1857, including a few major ones that are easily identifiable in the chart above: a) three severe contractions in the 1865-1880 period following the Civil War (with the third one lasting more than five years) and accompanied by a 20-year period of below-average economic growth, and b) the Great Depression with two official recessions (August 1929 to August 1933; and May 1937 to June 1938) and a ten-year period of below trend growth in output.  

Despite the vagaries of the business cycle, unexpected periods of recessions, a civil war, two world wars, a Great Depression, etc., there's one thing we can always count on in the long-run: 2% real growth in per-capita GDP, meaning that that output per person in the U.S. doubles every 35 years, or about twice during the average person's lifetime.  There's nothing happening right now that will change that long-term trend, and for that we can be thankful.