Sunday, March 25, 2012

Why Socialist Cuba Prohibits Internet Access and Social Media: The Regime Couldn't Survive It

Marco Rubio in a WSJ interview with Mary Anastasia O'Grady:

"There's a reason the people in Cuba don't have access to the Internet. It is because the government couldn't survive it. 

It isn't communication with the outside world that the regime fears the most, but Cuban-to-Cuban chatter.  I think Raúl Castro clearly understands that his regime cannot survive a Cuban reality where individual Cubans can communicate with each other in an unfettered manner.  Unfiltered access to the Internet and social media is Cuba's best hope of avoiding a stagnated dictatorship for the next 50 years....."

Intrade Update

Current Odds for:

1. Romney to be nominee: 93.1%

2. Obama to be re-elected: 60%

3.  Marco Rubio to be Republican VP (highest odds): 31.2%

4. Chris Christie to be Republican VP: 11.3%

Bottom Line: Intrade odds are currently predicting that the most likely outcome in November is an Obama victory over a Romney-Rubio ticket, obviously subject to change....

Commercial Loan Growth Improves This Year

The annual growth in commercial and industrial loans at large U.S. commercial banks has been trending upward since early 2010, and has been above 16% for the last seven weeks starting in late January, see chart above.  The last time C&I loan growth was above 16% for that many consecutive weeks was the summer of 2008.     

Saturday, March 24, 2012

Watch the Growth of Walmart and Sam's Club

From FlowingData, watch the amazing growth of Walmart and Sam's Club across America from 1964-2010.   Starts off a little slow in the 1960s, but speeds up in the 1970s.   

Traffic Volume Rises in January by 1.6%, Largest Gain in 15 Months, But Gas Consumption is Falling?

Steve Hayward and Charles Hugh Smith have recently pointed to falling gasoline consumption, based on these EIA data that show a steep drop in retail gasoline sales in November and December. Some are saying that this drop in gas consumption signals a decline in economic activity with the possibility that we're headed towards a sharp contraction and double-dip recession. 

But the recent Federal Highway Administration report on monthly traffic volume is telling a much different story of fairly large increases in monthly vehicle miles for the months of December (1.3%) and January (1.6%) compared to their year-ago levels (see chart above).  The 1.6% increase in January to 224.8 billion vehicle-miles from 221.3 billion a year ago is the largest monthly increase since October 2010.  Further, the moving 12-month total of vehicle travel increased in both December and January, following 9 straight months of decline. 

I'm not sure how to reconcile these two completely different stories of falling gas consumption but rising travel volume - how can that happen?  Perhaps the January gasoline consumption data (not yet available) will show a rise?  

Friday, March 23, 2012

Markets In Everything: Selling Comedy Online

"A handful of top-tier performers have begun producing stand-up specials on their own, posting them online and selling them directly through their personal Web sites, eliminating the editorial control of broadcasters and the perceived taint of corporate endorsements. 

The turning point arrived in December, when the comedian Louis C. K. released a stand-up special, “Live at the Beacon Theater,” that was sold only as a $5 download, without electronic copy protection, from his Web site. Louis C. K., who stars in the FX series “Louie” and has performed in comedy specials on HBO, Showtime and Epix, said that he was seeking minimal outside interference and maximum ease for his audience. 

The experiment worked: produced at a cost of $250,000, “Live at the Beacon Theater” sold more than 220,000 downloads and grossed over $1.1 million — enough for Louis C. K. to give $250,000 in bonuses to his crew and donate a further $280,000 to charities. Other comedians following Louis C. K.’s online trail say that they have been contemplating Internet-only projects for several months."

How Advances in Drilling Technology Are Creating a Revolution and Turnaround for U.S. Oil Output

"Just a decade ago, complete wells were fracked at the same time with millions of gallons of water, sand and chemical gels. Now the wells are fracked in stages, with various kinds of plugs and balls used to isolate the bursting of rock one section at a time, allowing for longer-reaching, more productive horizontal wells. A well that once took two days to drill can now be drilled in seven hours.

For instance, when the Apache Corporation began drilling in the 100,000-acre Deadwood field in the West Texas Permian basin in 2010, there had only been a trickle of production there. The deep shale, limestone and other hard rocks had potential, but for years they had not been considered economically viable. The rocks were so hard, they would have likely sheared off the usual diamond cutters on the blade of any drill bit attempting to cut through.

But new adhesives and harder alloys have made diamond cutters and drill bits tougher in recent years. Meanwhile, Apache experimented with powerful underground motors to rotate drilling bits at a faster rate. Now, a well that might have taken 30 days to drill can be drilled in just 10, for a savings of $500,000 a well.

“By saving that money, you can spend more on fracking, which translates into more sand and more stages and better productivity,” said John J. Christmann, the Apache vice president in charge of Permian basin operations.

Apache has already drilled 213 wells in the field, producing 9,000 barrels a day. With 13 rigs running, it hopes to eventually drill more than 1,000 wells, and produce 20,000 barrels a day there. “We’re having a revolution,” said Steve Farris, Apache’s chief executive. “And we’re just scratching the surface.”

HT: Dan Greller

Thursday, March 22, 2012

January Jobless Rate Falls to 0.8% in ND Oil Patch

According to data just released by the state of North Dakota, the unemployment rates both for the city of Williston and the surrounding Williams County fell to 0.8% in January, the lowest jobless rates ever recorded in North Dakota, and possibly for the entire United States. 

Wind Energy Fact Sheet

Manufacturing’s Declining Share of GDP is Inevitable, Global, and Something to Celebrate

In a new study from the Innovation Technology and Innovation Foundation (ITIF), (“Worse Than the Great Depression: What Experts Are Missing About American Manufacturing Decline”) the authors make this statement in the introduction:

“Even if economic policy experts acknowledge that manufacturing’s share of output has declined, many comfort themselves with a narrative that such decline comes as the inevitable result of market forces. “Manufacturing is in decline everywhere, even in China,” they argue. They would be wise to consult actual data, for they would find that while manufacturing has declined as a share of GDP in some nations (notably Canada, Italy, Spain, the United Kingdom, and the United States), it is stable or even growing in many others (including Austria, China, Finland, Germany, Japan, Korea, the Netherlands, and Switzerland).”

Actually, that's not really accurate. The chart above shows the manufacturing shares of GDP for the U.S., the entire world economy and four of the countries cited in the study (Japan, Germany, Finland and the Netherlands) as having a "stable or growing" shares of GDP using United Nations data here for the years 1970 to 2010. For all five countries and for the world economy, the manufacturing shares of GDP fell to historic all-time lows in 2009, before increasing slightly in all cases in 2010. Like the U.S., manufacturing's share of GDP has fallen in Germany, Japan, Finland and the Netherlands.

It’s also interesting to note that the decline in manufacturing’s share of U.S. GDP over the last forty years (from 24% to 13%) is nearly identical to the decline in world manufacturing as a share of world GDP, which fell from 27% in 1970 to 16% in 2010. Therefore, we can conclude that the declining share of manufacturing’s contribution to GDP is not unique to America, but reflects a global trend as the world moves from a traditional manufacturing-intensive Machine Age economy to more a services-intensive Information Age economy.

The authors of the ITIF study come to a much different conclusion:

“The loss of U.S. manufacturing is not due to some inexorable shift to a post-industrial economy; it is due to a failure of U.S. policies (for example, underinvestment in manufacturing technology support policies and a corporate tax rate that is increasingly uncompetitive) and the expansion of other nations’ mercantilist policies.”

An alternative explanation is that we really are experiencing an inevitable shift to a post-industrial, Information Age economy where manufacturing’s importance to output and jobs is declining, similar to the trend in agriculture over the last century.

Manufacturing’s declining share of output isn’t a sign of economic weakness - it’s just the opposite. It’s a sign that advances in manufacturing productivity and efficiency translate into lower prices for consumers when they purchase goods like cars, food, clothing, appliances, furniture, and electronic goods. In the U.S., the price of goods relative to services fell by 52 percent between 1970 and 2010, so it’s not surprising that manufacturing’s importance in the economy has fallen significantly.

As spending on manufactured goods as a share of household income declines, it raises our standard of living, and for that “decline in manufacturing” we should celebrate, not complain.

A longer version of this post appears today at the National Chamber Foundation blog.

More on Domestic Energy Boom and New Industrial Revolution as N. America Becomes New Middle East

Larry Kudlow interviewed Ed Morse last night on The Kudlow Report, watch the segment above, where Citigroup's head of global commodities says the United States is on the verge of a new industrial revolution as the result of a domestic energy boom. 

“There’s no doubt that we’re seeing an industrial revolution — a reindustrialization of the United States — taking place because of the shale revolution taking place lowest, because we have the lowest natural gas prices in the world,” Ed Morse told Larry Kudlow. “We will for one or two or three generations.” 

In a WSJ editorial yesterday titled "Move Over OPEC, Here We Come," Ed Morse wrote that North America already has become the most important marginal source of oil and gas globally, and is quickly becoming the new Middle East for energy production:

"The United States has become the fastest-growing oil and gas producer in the world, and it is likely to remain so for the rest of this decade and into the 2020s. Add to this output the steadily growing Canadian production and a likely reversal of Mexico's recent production decline, and theoretically total oil production from the three countries could rise by 11.2 million barrels per day by 2020, or to 26.6 million barrels per day from around 15.4 million per day at the end of 2011.

 On top of this, the U.S. and Canada could see natural gas output rise by 22 billion cubic feet per day by 2020, with 14 billion of it coming from the Lower 48 states, four billion from Alaska and four billion from Canada. That's an increase of one-third, catapulting this continent into the ranks of significant exporters of liquefied natural gas.

We estimate that as many as 3.6 million new jobs may be created on net by 2020. Some 600,000 jobs would be in the oil and gas extraction sector, another 1.1 million jobs in related industrial and manufacturing activity, and the remainder in ancillary job sectors. Overall, the national unemployment rate could decline by as much as 1.1 percentage points from what it otherwise would be in 2020."

Leading Economic Index Improves in February

"The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.7 percent in February to 95.5 (2004 = 100), following a 0.2 percent increase in January and a 0.5 percent increase in December (see chart above)."

Said Ataman Ozyildirim, economist at The Conference Board: “Continued broad-based gains in the LEI for the United States confirm a more positive outlook for general economic activity in the first half of 2012, although still subdued consumer expectations and the purchasing managers’ index for new orders held the LEI back in February. The Coincident Economic Index for the United States, a measure of current economic conditions, has also been rising as employment, income, and sales data all continue to improve. Industrial production, however, has not yet picked up strongly.”

Meanwhile, the ECRI is still maintaining its recession call.   

A New Industrial Revolution from Oil and Gas Production in North America: The New Middle East

The U.S. could soon surpass Russia and Saudi Arabia in oil production according to Citi report
Business Insider -- "Oil and gas production in the United States and North America is going to skyrocket in the next 8 years due to strides in natural resource extraction, write Citi analysts in a report published yesterday. In fact, they went so far as to call North America "the new Middle East," at least in terms of oil production.

This—as well as a trend towards declining U.S. energy consumption—will completely transform both the domestic economy and the threats the U.S. will face in the future.

Indeed, Citi economists expect total liquids production to as much as double for the continent in the next decade, and predict that the U.S. could overtake both Russia and Saudi Arabia in oil production by 2020 (see chart above). 

That's because there is incredible potential to extract and refine energy products on domestic soil, see map above.  

This energy boom would have a transformative effect on the domestic economy. Here are just a few of the most astonishing consequences in a "good-case" scenario:
  • Citi analysts expect real GDP to increase by 2.0 to 3.3 percent—$370 to $624 billion—as a consequence of new production, a decline in energy consumption, and the economic activity generated along with this.
  • 3.6 million new jobs could be created by 2020 as a consequence of increased energy production. Of those new jobs, some 600,000 would probably be devoted to oil and gas extraction while 1.1 million would be generated to meet demand in related industrial and manufacturing sectors. National unemployment could subsequently decline by up to 1.1 percent.
  • What's more, risks to the U.S.—in particular, geopolitical risks—would dramatically decrease. A domestic or continental energy boom would diminish the importance of conflict within and tensions involving the Middle East, as the U.S. would become significantly more energy independent.
  • Finally, Citi analysts note that this could lead to a considerable decline in oil prices."

Jobless Claims Adjusted for the Employment Level

The Labor Department reported today that seasonally-adjusted initial jobless claims fell to a four-year low of 348,000 for the week ending 348,000, the lowest level since early March 2008.

One problem comparing weekly jobless claims over time is that they are not adjusted for the increasing size of the economy, population, or labor force over time.  For example, following the 1981-1982 recession, jobless claims fell below 350,000 for the first time in January 1984 since before the recession. But civilian employment then was only about 103 million, compared to 142 million today.  Adjusted for the employment level, 350,000 initial claims in 1984 was about 0.34% of employed workers, while today it's only about 0.25% of employment, see chart above showing initial jobless claims as a percent of civilian employment on a monthly basis back to 1968.

Bottom Line: Adjusted jobless claims in recent months are at about the exact same levels as during the last two post-recession expansions in 1992-1993 and 2002-2003, and are below comparable post-recession periods in the 1970s and 1980s.  Conditions in today's labor market are actually better than the unadjusted claims would suggest.

Wednesday, March 21, 2012

Markets In Everything: Vibrating Tattoos

BBC -- "Vibrating magnetic tattoos may one day be used to alert mobile phone users to phone calls and text messages if Nokia follows up a patent application."

More details here.  

HT: Robert Kuehl

Drop Paternalism, Sell The Pill Over-the-Counter

Canadian columnist Margaret Wente writes:

"Virginia Postrel, the American political and cultural writer, has an idea for de-escalating the birth-control controversy that’s sweeping the United States: Sell the Pill over the counter.

After all, that’s the way it works with condoms. Anyone can walk into a drugstore and buy a three-month supply of Trojans for under $30, no questions asked. Nobody argues about who should pay, who’s morally entitled to them or whether they should be covered by health insurance or the government. Make the Pill as convenient and cheap as condoms and the fight would be over. Besides, the Pill is far more effective."

From Virginia Postrel's original Bloomberg column:

"Anyone -- a local teenager, a traveling businessman, a married mother of four, an illegal immigrant, even a student at a Jesuit university -- can walk into my neighborhood CVS any time, day or night, and, for less than $30, buy a 36-count “value pack” of Trojan condoms.

That’s enough to last most Americans at least three months, according to Kinsey Institute surveys. If you want more, you can buy out the store’s entire stock. There’s no limit, and you don’t need to see a doctor for permission and a prescription.

Contrary to widespread belief, there’s no good reason that oral contraceptives -- a far more effective form of birth control -- can’t be equally convenient."

5 Leading Indexes Improve in Jan., 2 Unchanged

The Conference Board reports that its Leading Economic Indexes increased in January for the U.K. (0.9%), Japan (0.3%),  Spain (0.5%), Australia (1.1%), Germany (0.3%), and remain unchanged in January for Korea  and France.  The U.S. Leading Economic Index for February will be released tomorrow.

World Trade and Output Set New Records in Jan.

The CPB Netherlands Bureau for Economic Policy Analysis released its monthly report this week on world trade and world industrial production for the month of January 2012.  Here are some of the highlights:

1. World trade volume increased in January by 0.9% on a monthly basis and by 2.8% on an annual basis, bringing the global trade index to a new all-time record high of 167.5 (see blue line in chart).  World trade is now 4.6% above the previous April 2008 peak of 160.2 in the early part of the U.S. and global recessions.  

2. By region, annual export growth was led by the United States at 10%, followed by 9% export growth for Latin America and 9% for Central and Eastern Europe.

3. World industrial output increased by 0.8% in January from the previous month and by 3.6% on an annual basis, reaching a new all-time high of 146.2 (see red line in chart), with especially strong annual output growth in Asia (8.2%) and emerging economies (6.3%).   Output declined in Europe (-0.9%), Latin America (0.4%), and Japan (-1.0%) on an annual basis, and increased by 3.5% in the United States.

4. World output is now 8.3% above its pre-recession level in February 2008 (135.0) and 24% above the recessionary low in February 2009.  

Bottom Line:  Both world trade volume and world industrial output reached fresh record monthly high levels in January.  Trade and output are now far above their pre-recession levels, providing evidence that the global economy has made a complete recovery from the 2008-2009 recession.  For the U.S., the annual growth rates for exports (10%) and industrial output (3.5%) reflect the underlying strength in America's manufacturing sector. 

Markets In Everything: Talk to a Celebrity

The new website claims that it is the only place you can talk directly to a TRUE Celebrity on the phone.   

Sample rates:

Danielle Staub: $18 per minute ($1,080 per hour)
Tila Tequila: $20 per minute ($1,200 per hour)
Dina Lohan: $18 per minute ($1,080 per hour)
Nadya Suleman (OctoMom): $12 per minute ($720 per hour)
Michael Lohan: $10 per minute ($600 per hour)

Tuesday, March 20, 2012

February Architecture Index for New Project Inquires Reaches the Highest Level Since July 2007

"Led by the commercial sector, the Architecture Billings Index (ABI) has remained in positive territory four months in a row. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the February ABI score was 51.0, following a mark of 50.9 in January. This score reflects a slight increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 63.4, up from mark of 61.2 the previous month and its highest reading since July 2007.

“This is more good news for the design and construction industry that continues to see improving business conditions,” said AIA chief economist Kermit Baker. “The factors that are preventing a more accelerated recovery are persistent caution from clients to move ahead with new projects, and a continued difficulty in accessing financing for projects that developers have decided to pursue.”

MP: More data to suggest that the construction market is showing gradual, but steady signs of improvement.  And because the architecture indexes are leading indicators of future construction spending, we can expected ongoing gains in construction activity through the rest of the year.  

Cartoon of the Day

Another great one from the best in the business, Michael Ramirez of Investor's Business Daily.

Number of LSAT Tests Drop to an 11-Year Low

Chronicle of Higher Education -- "The number of Law School Admission Tests administered this year declined by 16.2%, the largest drop in more than a decade, the Law School Admission Council reported. The numbers reflect widespread pessimism about the value of a legal education today as education debts soar and job prospects remain dim.

The decline, from 155,050 tests in 2010-11 to 129,925 this year, follows the previous year's 9.6-percent fall (see chart above, data here).

The drop comes at a difficult time for the nation's law schools. A team of lawyers representing disgruntled law-school graduates has filed 15 lawsuits against law schools for allegedly publishing inflated data on the jobs and salaries of their graduates. The lawyers recently announced plans to sue 20 more schools if they round up enough plaintiffs to pursue class-action lawsuits, and to continue cranking out batches of suits every few months.

In the meantime, unhappy graduates have taken to so-called "scam blogs" to decry what they see as deceptive reporting on jobs and salary data."

Related: "Pop, Goes the Law School Bubble"

Monday, March 19, 2012

Walmart Adds 125 New Jobs Every Day in March

In just the first 19 days of March, Walmart has announced new 13 stores openings or expansions, which will bring 2,380 new jobs to those retail locations all across the country from Reno to Philadelphia. 

Some Food Prices Have Been Falling Over Last Year

Item% Change Feb. 2011-Feb. 2012
Potatoes, Frozen-7.7%
Round Roast-3.4%
Chicken Breast-2.2%

For the food items listed above (data here), the average retail prices have fallen over the 12-month period from February 2011 to February 2012, and for about half of the items the deflation has been in double-digits. 

Law of Unintended Consquences

Here's an interesting Crain's New York Business article that illustrates the "Law of Unintended Consequences."

Residents and politicians on the Upper West Side of Manhattan are trying to protect small businesses and mom and pop shops, and prevent big box stores, banks, and drug stores from taking over huge storefront spaces (think "Walmart").  There are new zoning laws being proposed that would restrict new ground-floor retail storefronts on Columbus and Amsterdam to 40 feet and limit the frontage of banks on Amsterdam, Columbus and Broadway to 25 feet.  From the article:
The zoning proposal, backed by local politicians and the Bloomberg administration, would limit the size of new storefronts. But more than two dozen large (and beloved) mom-and-pops could face skyrocketing rents when their outsize footprints are grandfathered and become coveted by the very chain businesses that rezoning supporters want to curtail.

Unintended victims could include Upper West Side institutions like Barney Greengrass and Albee Baby Carriage Co., which have been in business on Amsterdam Avenue for 100 and 80 years, respectively; longtime cafés, funeral homes and hardware stores; and Mediterranean- inspired mainstays such as Columbus Avenue's Isabella's and Amsterdam's Gennaro.

“They'd all become targets instantly,” said Rafe Evans of Walker Malloy & Co., a local brokerage. “Their landlords would be sitting on gold mines.”
So the new zoning law will solve one problem, yet may drive out some of the neighborhood’s longtime popular local businesses.

HT: Adam Librot

Quote of the Day on Emerging Technology

Regarding energy policy.....

"I prefer the "old" approach to emerging technology: We adopt new technology when it is better and cheaper than the old technology, not when it is worse and more expensive, forced to convert over by a government demanding we pay more for less -- so we can reap all these speculative benefits in a hypothetical future."

~ Ace of Spades HQ

Shift in Fracking Workers Will Boost Oil Production in the "Fastest Growing Oil Frontier in the World"

NEW YORK (Reuters) - "Collapsing natural gas prices have yielded an unexpected boon for North Dakota's shale oil bonanza, easing a shortage of fracking crews that had tempered the biggest U.S. oil boom in a generation.  Energy companies in the Bakken shale patch have boosted activity recently thanks to an exceptionally mild winter and an influx of oil workers trained in the specialized tasks required to prepare wells for production, principally the controversial technique of hydraulic fracturing.

State data released this month showed energy companies in January fracked more wells than they drilled for the first time in five months, suggesting oil output could grow even faster than last year's 35% surge as a year-long shortage of workers and equipment finally begins to subside.

As output accelerates, North Dakota should overtake Alaska as the second-largest U.S. producer within months, extending an unexpected oil rush that has already upended the global crude market, clipped U.S. oil imports, and made the state's economy the fastest-growing in the union.

The number of idle wells waiting to be completed in the state reached a record 908 last June, the result of a new drilling rush and heavy spring floods. Only 733 wells were idle in August as crews caught up, but the figure crept steadily higher until the start of this year. Now, the industry may be turning a corner in North Dakota, the fastest-growing oil frontier in the world.

"Both rig count and hydraulic fracturing crews are limiting factors. Should they continue to rise together, production will not only increase, it will accelerate," said Lynn Helms, director of the state Industrial Commission's Oil and Gas Division."

MP: The chart above illustrates the nationwide shift from drilling for natural gas to drilling for oil over the last several years.  The shift in capital equipment and labor towards oil will allow production in North Dakota -the "fastest-growing oil frontier in the world" - to grow even faster.

Real Estate Market Gradually Improves

1. MLIVE -- "Michigan home sales surged 14% in February compared to one year earlier, while the average sale price dropped nearly 3%, according to data from the Michigan Association of Realtors (MAR).

 An improved economy and low interest rates have boosted Michigan’s housing market after years of turmoil. There were 8,284 homes sold in February, up 14% from 7,245 sold in February 2011, according to MAR. A 14% increase is “pretty remarkable,” said Bill Martin, CEO of the trade group."

2. DQ News -- An estimated 29,630 new and resale houses and condos were sold across California last month. That was up 5.4% from 28,111 in January, and up 8.5% from 27,320 in February 2011.  Last month's sales were the strongest for a February since 31,228 homes were sold in 2007. On a year-over-year basis, sales have increased the past seven months.

3. DQ News -- "A total of 5,702 new and resale houses and condos sold in the nine-county Bay Area in February. That was up 4.1% from 5,479 in January, and up 14.2% from 4,991 in February 2011. The year-over-year sales increase was the eighth in a row. Last month’s sales count, which got a lift from an extra business day thanks to the leap year, was the highest for a February since 6,305 were sold in 2007.

4. Over the last six months, the SPDR S&P Homebuilders ETF is up by about 50% compared to about an 18% gain for the S&P500 Index.

5.  The U.S. homebuilder outlook was unchanged this month, but remained near a 4-year high. 

P.J. O'Rourke on Cato's "Family Feud"

From the Weekly Standard:

"Cato has aided me with almost everything I’ve written about politics. Maybe saying so will lower the institution’s prestige enough that the Koch brothers will leave it alone. If they prevail they’ll lose Cato’s H.L. Mencken Research Fellow. (The position—unpaid and worth it—was conferred on me by Crane back when the insensitive language in Mencken’s diary was shocking the kind of people who’d later forget to be shocked by Bill Clinton and Monica Lewinsky.)

More to the point, the Koch brothers will lose the think tank’s impressive roster of thinkers and scholars. I haven’t polled them as to who would stay and who would go under a Koch regime. But, as I said, I know libertarians. If the Kochs win the pot, they’ll have to piss in it. It will be empty otherwise."

HT: Fred Dent

New Restaurant Index Suggests Improving Economy

From Floyd Norris in the NY Times last Friday:

"Have you been eating more at restaurants with waiters rather than fast-food joints? If so, you are not alone, and that in fact is an indication that the American economy is improving.

Over the 12 months through January, sales at what the government calls full-service restaurants were 8.7 percent higher than in the previous 12 months. That was the fastest pace of growth since the late 1990s, when the economy was booming. Moreover, as is seen in the chart above, that rate was much greater than the rate of growth in sales at limited-service restaurants. 

Since those numbers became available 20 years ago, that difference has been a reliable indicator of how the economy is going. In tough times, people may still eat out, but they cut back."

Related: The National Restaurant Association's "Restaurant Performance Indexes" also point to strength in national restaurant activity, and that growth is expected to continue according to the association's "Expectations Index," which measure restaurant owners' six-month outlook for the industry.   

Chicago Fed: Midwest Manufacturing Is Booming

The ChicagoFederal Reserve reported today that its Midwest Manufacturing Index (CFMMI) increased 1.3% in January, to a seasonally adjusted level of 90.1 (2007 = 100).  Here are some highlights of manufacturing activity in the 7th Federal Reserve district that covers Illinois, Indiana, Iowa, Michigan, and Wisconsin:

1. Manufacturing output in the Midwest region rose 9.1% from a year earlier in January, almost twice the 4.7% increase in national manufacturing output over the same period (see chart).
2. Regional machinery output in January was up 11.1% from its year-earlier level, compared to a 4.6% increase in machinery output at the national level. 

3. Regional steel output was up 13.4% from its January 2010 level, compared to an 8.7% increase in national steel output over that period.

4. The Midwest’s automotive output was up 17.5% in January from its year-ago level, compared to a 12.1% gain in national automotive output. 

MP: The manufacturing sector of the U.S. economy grew at 4% last year, or more than twice the 1.7% growth in overall GDP, so it's pretty clear that American manufacturing is at the forefront of the economic recovery as has been frequently reported here and elsewhere.  And given the growth in Midwest manufacturing activity over the last year (+9.1%) compared to output at the national level (4.7%) as reported today by the Chicago Fed, I think we can say that it's "Midwest manufacturing" that's at the forefront of the economic recovery.  The Rust Belt is coming back.  

Sunday, March 18, 2012

Invoking the Coase Theorem for Fracking Noise

From Kevin Williamson's excellent article in National Review "The Truth About Fracking":

"There are other workaday environmental problems endemic to fracking: For the three to five days a frack lasts, it’s loud — really, really loud, because it’s basically a construction site, with a vast array of pumps and compressors and giant margarita mixers blending sand into the water, and a big battery of generators to run it all. There’s not much to be done about the noise, though you’re typically not fracking real close to densely populated areas.  

A few firms have hit upon the novel approach of simply offering nearby homeowners money to go away for the week, expenses paid, or at least putting them up in a hotel for the duration. (An idled fracking rig might cost you $1 million a week — you can afford to pay a lot of HoJo bills to keep that from happening.)

This is a good example of the Coase theorem, which predicts that bargaining can lead to economically efficient outcomes when externalities (like noise in this case) are present and transaction costs are low.   

HT: Gayle Pooley

True March Madness: $2.7B in Taxpayer Subsidies

March Madness showcases some of the best athletes and most exciting games in college sports. Unfortunately, the Men's NCAA Basketball Tournament also highlights the worst in wasteful government spending, according to this press release from the Taxpayers Protection Alliance (TPA).  

The taxpayer watchdog group found that all 13 arenas hosting games for this year's tournament have received millions of dollars from local, state and federal taxpayers, totaling to a whopping $2.7 billion. 

Here's an article by Taxpayer Protection Alliance senior fellow Drew Johnson about how the venues hosting March Madness games are costing taxpayers billions of dollars in handouts, with the conclusion that:

"Given the $2.7 billion in tax money used to subsidize NCAA tournament venues, “March Madness” may soon have a whole new meaning for taxpayers."

Mfg. Jobless Rate: Below National Avg. for 9 Mos.

In February, the jobless rate for manufacturing was 8.4% (not seasonally adjusted) compared to the 8.7% national rate for all industries (not seasonally adjusted).  That marks the ninth consecutive month starting last June that the jobless rate for the manufacturing sector of the U.S. economy has been below the national jobless rate, and reverses a 32-month period from October 2008 to May 2011 when the manufacturing jobless rate was equal to or higher than the national average rate.  The gap during that period was at its highest in April 2009 when the manufacturing jobless rate was almost 4 points higher (at 12.4%) than the national average rate of 8.6%.  

There has never been a comparable 9-month period going back to when the BLS started tracking jobless rates by industry that manufacturing unemployment was below the national average for that many consecutive months.  As reported previously, U.S. manufacturing has been leading the recovery on many economic measures including job creation, output growth and profits. 

Markets in Everything: Cave Homes in China

LA Times -- "More than 30 million Chinese people live in caves, many of them in Shaanxi province where the Loess plateau, with its distinctive cliffs of yellow, porous soil, makes digging easy and cave dwelling a reasonable option (see photo above).

"It's like living in a villa. Caves in our villages are as comfortable as posh apartments in the city," said Cheng Wei, 43, a Communist Party official who lives in one of the cave houses in Zaoyuan village on the outskirts of Yanan. "A lot of people come here looking to rent our caves, but nobody wants to move out."

The thriving market around Yanan means a cave with three rooms and a bathroom (a total of 750 square feet) can be advertised for sale at $46,000. A simple one-room cave without plumbing rents for $30 a month, with some people relying on outhouses or potties that they empty outside."

What Isn't For Sale?..... But Maybe Should Be?

In The Atlantic Magazine article "What Isn't For Sale?", Harvard political philosopher Michael Sandel points to some interesting "markets in everything": 
  • paying for a prison cell upgrade in California
  • dynamic market-based toll roads for solo drivers in some cities like Minneapolis
  • Indian surrogate mothers who charge one-third the going rate in the U.S.
  • commercial game hunting in South Africa for endangered species like the black rhino ($250,000 fee)
  • concierge doctors charging patients for access to their cell phone number
  • selling advertising space on your forehead
  • paying somebody to stand in line overnight
But the author isn't exactly celebrating the efficiency or welfare-increasing features of the market economy with these examples, he's actually questioning whether markets have gone a little bit too far when "everything is up for sale":

"The most fateful change that unfolded during the past three decades was not an increase in greed. It was the reach of markets, and of market values, into spheres of life traditionally governed by nonmarket norms. To contend with this condition, we need to do more than inveigh against greed; we need to have a public debate about where markets belong—and where they don’t. 

Why worry that we are moving toward a society in which everything is up for sale? 

For two reasons. First, consider inequality. In a society where everything is for sale, life is harder for those of modest means. The more money can buy, the more affluence—or the lack of it—matters. If the only advantage of affluence were the ability to afford yachts, sports cars, and fancy vacations, inequalities of income and wealth would matter less than they do today. But as money comes to buy more and more, the distribution of income and wealth looms larger. 

The second reason we should hesitate to put everything up for sale is more difficult to describe. Putting a price on the good things in life can corrupt them. That’s because markets don’t only allocate goods; they express and promote certain attitudes toward the goods being exchanged.

A debate about the moral limits of markets would enable us to decide, as a society, where markets serve the public good and where they do not belong. Thinking through the appropriate place of markets requires that we reason together, in public, about the right way to value the social goods we prize. It would be folly to expect that a more morally robust public discourse, even at its best, would lead to agreement on every contested question. But it would make for a healthier public life. And it would make us more aware of the price we pay for living in a society where everything is up for sale."

MP: A few comments:

1.  "In a society where everything is for sale, life is harder for those of modest means." And yet several of the examples provided contradict that statement: those of modest means can improve their lives with access to the markets for surrogate mothers, standing in line overnight and selling advertising space on their foreheads. 

2. "A debate about the moral limits of markets would enable us government to decide, as a society, where markets serve the public good and where they do not belong." 

It seems like the author is basically advocating greater government control and intervention over markets (us = government), which would necessarily limit or restrict voluntary transactions at market prices, e.g. making it illegal to sell bone marrow or a kidney.  In other words, it's the standard "markets fail, use government" approach, in which case we would have to be very concerned about "government failure."

3. Maybe the question should be: "What isn't currently for sale now because of government legislation that really should be for sale?" Like raw milk, kidneys, bone marrow, lemonade stands, etc.

HT: Warren Smith

Saturday, March 17, 2012

February Industrial Production: Strong Gains for Business Equipment, Manufacturing, Durables

In yesterday's report on industrial production, the Federal Reserve reported that the production of business equipment increased in February for the tenth straight month and reached a new record high of 104.9 (see chart above).  Compared to February of 2011, business equipment output was 11% higher this year, and for the last two months has been above the previous record high of 104.2 set in March 2008 during the early months of the recession. 

Another highlight of the report:

Manufacturing output in February was 5.2% above its year-earlier level, led by a 8.5% increase in durable manufacturing, with strong gains in durable goods industries like motor vehicles and parts (+13.4%), aerospace and transportation equipment (+14.3%) and fabricated metal products (+10.8%).   More evidence that the manufacturing sector continues to be at the forefront of the economic recovery.

Happy St. Patrick's Day from Guinness

St. Patrick's Day Sheep Dog Trials

In the video above, watch how a highly trained border collie rounds up some mates to ensure they get to the pub on St. Patrick's Day and enjoy a GUINNESS.

Intrade Update: 88.5% Romney, 60.2% for Obama

Odds for Romney to be the Republican nominee remain steady and are close to an all-time high of 88.5%, while Obama's odds to get re-elected remain steady at 60.2%.

Saturday Morning Links

1. Minnesota Moves Forward on a Right-to-Work Ballot Proposal for November, Taps Michigan's Mackinac Center for Bill Wording. 

2. New ADA Rules for Disabled Access to Swimming Pools Go Into Effect, and May Force Some Hotels to Close Their Pools.  (ht/Peter Parlapiano)

3. Manufacturing renaissance: Cheap, abundant natural gas will allow U.S. steelmakers to cut costs and lower selling prices at home, and could help drive greater U.S. steel exports.

4. Larry Kudlow reports that a new Joint Economic Committee study shows that a 10-15% appreciation of the dollar to pre-recession levels would lower gas prices by 42 cents per gallon. 

5. "This American Life" retracts its radio story on the production of Apple's iPad and iPhone in China using outsourcing giant Foxconn, for “significant fabrications.”

Friday, March 16, 2012

Today's Reports on Inflation, Inflation Expectations

Highlights from today's reports on inflation:

1. The BLS reported an annual inflation rate of 2.9% through February, matching the rate from January.  The annual core inflation rate was 2.2%, slightly lower than the 2.3% rate in January.

2. Gasoline prices rose by 6% for the month of February and by 12.6% over the last year.  Partly offsetting those increases were decreases in natural gas prices: -3.4% for the month, and -9.8% for the last year. 

3. The Cleveland Fed's median CPI inflation increased by 2.3% over the year, down slightly from 2.4% in January.

4. The Cleveland Fed also reported that its latest estimate of 10-year expected inflation is 1.38%, up just slightly from 1.34% last month (see chart above).  The Cleveland Fed provides monthly estimates of expected inflation over time horizons from 1 to 30 years, see its methodology here.  Over the next year, inflation expectations are 1.2% and over the next 30 years only 1.95%.

Bottom Line: Except for gasoline prices, there don't appear to be any widespread inflationary pressures building in the economy, and expectations of future inflation according to the Cleveland Fed's model are falling.

Markets in Everything: College Degree for < $10k

Texas Tribune -- "Officials from a few Texas community colleges and universities said that $10,000 bachelor's degrees are available now — and more will be within the year.  At Texas A&M-San Antonio, a bachelor's in information technology with an emphasis on cyber security will cost about $9,700. Starting in 2013, a bachelor's of applied science in organizational leadership will be available for under $10,000 in South Texas College."

With Rising Wages in China, Production is Moving

1. From the WSJ on Wednesday:

"Global companies already have been facing higher labor prices in China over the past year, despite a weak global economy, as workers demand a greater share of the country's economic boom. In recent months, the pressure also has intensified in countries across Southeast Asia that have marketed themselves as alternatives for companies seeking to escape China's rising costs, leaving those companies now with fewer places to move.

Over the past year, for example, U.S. menswear retailer Jos. A. Banks Clothiers has moved some manufacturing from China to cheaper locations in Asia such as Indonesia, as the price of labor and goods increased."

2. And now even Chinese bicycle manufacturers are started to move production overseas:

"Chinese bike manufacturers are beginning to look at expanding into new markets in Southeast Asia in the face of rising labor costs and restrictive export duties to Europe.

Manufacturing has already begun shifting inland from China’s coastal cities as labor costs have risen, and now producers are beginning to look overseas to keep prices competitive on low-end mass production."

HT: Mike Henne

Markets in Everything: Trade Your Car for a Bike

"With gas prices soaring again, car buyers are looking for more fuel-efficient vehicles. The Santa Monica Mountains Cyclery (SMMC), a bike shop in Woodland Hills near Los Angeles, has a different idea – drivers should opt for bicycles instead. And, to facilitate the transition, for a limited time they will accept cars as trade-ins toward new bicycle purchases.

For a limited time from March 19-25, SMMC will work with a local auto dealer, Vista Ford, and accept cars and SUVs in trade toward the purchase of a new bicycle. Consumers will head to SMMC and pick out their new, fuel-efficient bicycle. Then, they’ll go across the street to Vista Ford to have their vehicle evaluated and appraised. They trade the car to Vista Ford and return to SMMC to ride home on their new, truly carbon-friendly ride."

HT: Mike Henne

Thursday, March 15, 2012

Fossil Fuel Production (Coal, Oil, Gas) on Federal Lands Falls to Lowest Level in 9 Years, Since 2003

The EIA released data this week on the "Sales of Fossil Fuels Produced from Federal and Indian Lands, FY 2003 through FY 2011," with the following highlights summarized by the Institute for Energy Research:
  • Fossil fuel (coal, oil, and natural gas) production on Federal and Indian lands is the lowest in the 9 years EIA reports data and is 6 percent less than in fiscal year 2010 (see chart above).
  • Crude oil and lease condensate production on Federal and Indian lands is 13 percent lower than in fiscal year 2010.
  • Natural gas production on Federal and Indian lands is the lowest in the 9 years that EIA reports data and is 10 percent lower than in fiscal year 2010.
  • Natural gas plant liquids production on Federal and Indian lands is 3 percent lower than in fiscal year 2010.
  • Coal production on Federal and Indian lands is the lowest in the 9 years of data that EIA reported and is 2 percent lower than in fiscal year 2010.

Markets in Everything: Homeless Hotspots

More from the America Blog -- 

"A PR firm is working with local homeless advocates to help homeless people in Austin make some money by carrying around their own personal mi-fi boxes that they use to sell a few minutes of wireless access to people on the street.  Mi-fi is a kind of portable wi-fi emitter that creates a small bubble of wi-fi that you can use on the go (basically the same way that people can use their cell phones to create a small bubble of wifi for their ipads or their laptops).  It's a small electronic box, maybe the size of a cigarette box but thinner, and it can pick up an Internet signal via the air and emit it as wi-fi for up to 20 or 30 feet or something.  A number of the homeless are walking around Austin with these emitters, and charging people to get the password for 15 minutes or whatever."

HT: Tom Dilling

Cartoon of the Day

Thursday Morning Links

1. World crude steel production rose to a new record high in 2011 of 1,527 megatonnes, a 6.8% increase from 2010.  China produced more than 45% of world steel output in 2011 (695.5 megatonnes), while the U.S. ranked No. 3 with 86.2 megatonnes.

2. Excellent 6-minute animation of hydraulic fracturing and horizontal drilling. HT: Mike Carlson

3. Website that helps you find out which licenses and permits your business needs. 

4. Natural gas is expected to take another 14% of coal's market share in 2012, bringing coal's market share down to 36%.

5. Don Boudreaux's latest letter-writing brilliance about greedy speculators, including consumers who fill up with gas when their tank is more than half full, in anticipation of higher prices later. 

6. New drilling technologies and rising oil prices have generated a boom in drilling - and lots of high-paying jobs.

7.  The Myth of Scarce Oil in America - The U.S. May Have 60 Times More Oil Than Obama Claims, according to John Merline in yesterday's IBD. 

8. A History of U.S. Income Taxes, from Turbotax. 

Today's Economic Reports

1. Seasonally-adjusted weekly initial claims for unemployment fell to 351,000 for the week ending March 10, which is the lowest level in four years, since 347,000 claims for the week ending March 8, 2008. 

2. Year-over-year Producer Price inflation for finished goods was 3.3% for the year ending in February, which was the lowest annual inflation rate since August 2010, and less than half of the 7% average inflation rate for finished goods from May through September last year.

3. Manufacturing activity in New York state continued to expand at a healthy pace and manufacturers in the state remain highly optimistic about activity over the next six months, according to today's Empire State Manufacturing Survey from the NY Fed. 

More evidence of an economy making gradual, but ongoing improvements.  

Housing Affordability Reaches Record High in Jan.

The National Association of Realtors' Housing Affordability Index exceeded 200 in January for the first time ever and reached a new record high of 206.1, meaning that the typical American household has more than double the income needed to qualify for the purchase of a median-priced home.  Based on the hypothetical purchase of the median-priced home of $154,400 in January, financed at the average mortgage rate of 4.37% (with a 20% down payment), the median family income of $60,944 was 206.1% of the $29,568 income required to qualify for the financing and the $616 monthly payments (principal and interest).   

Housing has never been more affordable in U.S. history than it is today, which should translate into robust home sales and an improving real estate market this spring and summer.   

Wednesday, March 14, 2012

So. California Home Sales for Feb. Highest Since 2007; Avg. Payments of $998 vs. $2,800 at Peak

DQ News -- "The Southland housing market posted the highest number of February home sales in five years as record levels of investor and cash buyers helped spur robust activity under $300,000. The median price paid for homes across the six-county region inched up from January but dropped below the year-earlier level for the 12th consecutive month. 

A total of 15,573 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 7.2 percent from 14,523 in January, and up 8.4 percent from 14,369 in February 2011. 

Here are some interesting highlights:

1. Sales did not rise across the price spectrum last month. Transactions below $300,000 rose 9.5 percent from a year earlier, while the number of $300,000-$800,000 deals dipped 0.8 percent year-over-year and sales above $800,000 fell 12.6 percent. 

2. Distressed sales continued to make up more than half of the resale market. Foreclosure resales – properties foreclosed on in the prior 12 months – accounted for 32.5 percent of the resale market last month, down from a revised 32.6 percent in January and down from 37.0 percent a year earlier. Foreclosure resales hit a high for the current cycle of 56.7 percent in February 2009 and a low of 31.6 percent last November. 

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 20.5 percent of Southland resales last month. That compares with 21.1 percent in January, which was a high point for the current real estate cycle, and 19.7 percent in February 2011. 

3.  Absentee buyers – mostly investors and some second-home purchasers – bought a record 29.7 percent of the Southland homes sold in February, up from a revised 28.0 percent in January and 26.4 percent a year earlier.

4. The typical monthly mortgage payment that Southland buyers committed themselves to paying was $998 last month, compared with $983 in January, which when adjusted for inflation was the lowest in DataQuick’s records back to 1988. Last month’s figure was down from $1,174 for the same month last year. Adjusted for inflation, current payments are 56.9 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 64.7 percent below the current cycle’s peak in July 2007 [of $2,827].

Michigan: Most Improved Economy Since 2010

The chart above shows the monthly difference between the Michigan jobless rate and the national unemployment rate from January 2002 to January 2012.  In January, the monthly difference dropped to 0.70% as Michigan's jobless rate fell to 9% (lowest since September 2008) compared to the national rate of 8.3%.  That's the lowest Michigan-U.S. jobless rate spread since December of 2002, slightly more than nine years ago (see chart).

Over the last year from January 2011 to January 2012, Michigan's jobless rate has dropped by 1.9%, from 10.9% to 9%, which was the largest 12-month decrease among all of the U.S. states over that period.  And Michigan has gone from having the highest state jobless rate, or being among the top three states for most of the 2007-2009 recession, down to a rank of #40 out of #51 states and the District of Columbia in January.

I nominate Michigan as the most improved state economy since the recession ended. 

Chart of the Day: Rig Count Reversal Since 2010

The chart above displays updated data from Baker Hughes on rig counts for oil  and natural gas drilling in the U.S.  Over the last two years, there's been a complete reversal of the share of rigs drilling for oil vs. gas.  In March 2010, there were almost two rigs drilling for oil (926 rigs out of 1,392 total, or 66%) for every rig drilling for natural gas (466 rigs, or 34%), and now that's completely reversed, with 1,296 rigs drilling for oil out of 1,973 total rigs (66% of total) and 670 rigs drilling for natural gas (34% of total), for a ratio of almost 2:1 in favor of oil.

Overall, the number of drilling rigs has increased by 581 over the last two years from 1,392 to 1973, which is an increase of 42%.   

North Dakota Now No. 3 State for Oil Production

The EIA released monthly oil production data today by state through the end of 2011, confirming that for the first time ever, North Dakota's oil production in December (535,000 barrels per day) surpassed California  (531,000 barrels per day).  Based on December production, North Dakota is now the country's third-largest oil producing state behind Alaska and Texas.   

Markets in Everything: College Price Discrimination

Santa Monica College to offer two-tier course pricing"The school's governing board has approved a plan to offer certain high-demand classes for a higher price when the regular classes have filled up. It's believed to be the first such scheme in the nation.

Faced with deep funding cuts and strong student demand, Santa Monica College is pursuing a plan to offer a selection of higher-cost classes to students who need them, provoking protests from some who question the fairness of such a two-tiered education system.

Under the plan, approved by the governing board and believed to be the first of its kind in the nation, the two-year college would create a nonprofit foundation to offer such in-demand classes as English and math at a cost of about $200 per unit. Currently, fees are $36 per unit, set by the Legislature for California community college students. That fee will rise to $46 this summer."

HT: Mike LaFaive

With Car Sales Surging, Auto Parts Suppliers in Michigan Are Booming, Adding Thousands of Jobs

From Michigan Public Radio:

"Detroit automakers are creating thousands of new jobs amid a sales boom. And as they expand, their suppliers are racing to keep up, adding tens of thousands of new jobs.  In a dramatic reversal, many suppliers, after improving efficiency — through downsizing and buyouts — find themselves short-handed.

With the memory of the Great Recession still so fresh, companies are still wary about hiring too freely. But Sean McAlinden, economist with the Center for Automotive Research, says there actually is a danger of having a shortage of parts and workers. He says the supplier industry will need 174,000 additional workers by 2015, and the pace of hiring right now appears to be too slow.

Even when suppliers intend to hire right away, it's not easy. When all those supply companies went dark, many skilled tradesmen, machinists and engineers moved on." 

MP: Quite a reversal from a few years ago that auto parts suppliers in Michigan might now be facing a worker shortage