http://economix.blogs.nytimes.com/2012/12/14/the-trade-off-between-economic-growth-and-deficit-reduction/?ref=business
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"No leader, however great, can long continue unless he wins victories" (Bernard Law Montgomery)
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Laura Tyson is a professor at the Haas School of Business at UC Berkeley, and served as chairwoman of the Council of Economic Advisers during President Bill Clinton's administration.
Her perspective on this "recovery" from the deepest recession since the Great Depression is that the "pace" is frustratingly slow. Since 2010, annual growth of gross domestic product has averaged about 2.1%. This is less than half the pace of previous recoveries since WW II.
Tyson points out that most economists see weak aggregate demand as the primary reason for this weak GDP growth. Growth in the two components of private demand - consumption and residential investment - has been especially slow.
Residential investment is still depressed as a result of overbuilding during the 2004-2008 housing boom. Business investment has been slow because of lackluster customer demand and weak sales prospects.
So, the cutbacks to spending into the economy implied by doing nothing about the "fiscal cliff" (ie. letting it happen) would have large negative effects on demand, output and employment. There would be 3.4 million fewer jobs by the end of 2013 if Congress allows the "fiscal cliff" to happen.
So, Tyson is another voice, along with Krugman and Buffet, for spending into a weak recovery or we could just watch a recession return.
According to the Dallas Fed's forecast released yesterday, Texas job growth will continue in 2013 but at a slightly slower pace than for this year. According to the report, "Energy, exports and construction have driven Texas employment above its pre-recession level in 2012..." but that employment has slowed lately. Low natural gas prices have led to a decline in well permits and drilling.
The weak global economy has hurt Texas exports to China and the European Union. But Texas construction jobs lead the U.S. in growth: 46,900 jobs in the 12 months thru October. Last month, existing home sales were up 29% FROM A YEAR EARLIER! That can only be good news - no qualifiers.
What looms large in the background here is big business which has been sitting on (by various measures) at least $2 trillion in cash since 2010. CEOs that have been interviewed by those with "access" have continuously said that they're reluctant to invest in the U.S. because of the uncertain economic environment. That involves regulation, taxation and various combinations thereof.
Let's see what happens when the smoke clears.
Merry XMAS and Happy Holidays!
Friday, December 14, 2012
Thursday, December 13, 2012
Skills That Don't Pay the Bills II
http://economix.blogs.nytimes.com/2012/12/07/comparing-recessions-and-recoveries-2/
***************
"Where success is concerned, people are not measured in inches, or pounds, or college degrees, or family background; they are measured by the size of their thinking." (David Schwartz)
***************
One of the guest commentators at yesterday's "DealBook" (NY Times) business conference in Manhattan was Paul Krugman. I'm always interested in what he has to say so I listened in. Aside from the usual issues about the "fiscal cliff," China, etc., Krugman mentioned Adam Davidson's commentary in the New York Times Magazine on the hue and cry about "skilled jobs."
As I quoted Davidson in my prior post:
"Deep Thoughts"
(1) There is no skills gap.
(2) Who wants to operate a highly sophisticated machine for $10 per hour?
(3) Not a lot of people.
(4) As a result, there is going to be a skills gap.
Krugman's point was that, of course, there's going to be a "skills gap" if you're going to pay $10 per hour for skilled people. Krugman pointed out yesterday, as he did in his column last week, that "...there is a whole industry built around the promotion of deficit panic. Lavishly funded corporate groups keep hyping the danger of government debt and the urgency of deficit reduction now now now - except that these same groups are suddenly warning against too much deficit reduction. No wonder the public is confused."
Krugman is much more concerned about "mass unemployment." While he accepts that there has been some progress on this issue over the past year, he points out that long-term unemployment remains at levels not see since the Great Depression: "...as of October, 4.9 million Americans had been unemployed for more than six months, and 3.6 million had been out of work for more than a year."
I keep track of the overall unemployment picture by following Catherine Rampell's recession trend lines (see her post attached): Job Changes in Recent Recessions/Recoveries, as a Share of Employment at Previous Peak. That's a long title but a picture is worth a thousand words as the old saying says. Her color trend lines depicting the 5 previous recessions/recoveries versus the recession that initiated in 2007 make it easy to see where we "aren't." As she points out, for the 26th straight month, the country has added jobs: 146,000 nonfarm payroll jobs in November but employment still has a long way to go before returning to pre-recession levels: "Getting the economy to 5% unemployment within two years - a return to the rate that prevailed when the recession began - would require job growth of closer to 270,000 per month."
Rampell goes on to point out: "There are now 12 million workers looking for work who cannot find it. The tally of those who are "underemployed" - that is, adding in those workers who are part time but want to be employed full time, and workers who want to work but are not looking - is an even larger 22.7 million."
While Rampell's 2007-present trend line is headed back up toward where it started, if you project the "slope" of it, just by "eye," (and, of course, I'm going off her chart) my guess is that it doesn't return to its start point until 2014 to 2017.
Maybe this is one of the reasons why the Fed has announced that it plans to hold short-term interest rates near zero as long as the unemployment rate remains above 6.5%.
***************
"Where success is concerned, people are not measured in inches, or pounds, or college degrees, or family background; they are measured by the size of their thinking." (David Schwartz)
***************
One of the guest commentators at yesterday's "DealBook" (NY Times) business conference in Manhattan was Paul Krugman. I'm always interested in what he has to say so I listened in. Aside from the usual issues about the "fiscal cliff," China, etc., Krugman mentioned Adam Davidson's commentary in the New York Times Magazine on the hue and cry about "skilled jobs."
As I quoted Davidson in my prior post:
"Deep Thoughts"
(1) There is no skills gap.
(2) Who wants to operate a highly sophisticated machine for $10 per hour?
(3) Not a lot of people.
(4) As a result, there is going to be a skills gap.
Krugman's point was that, of course, there's going to be a "skills gap" if you're going to pay $10 per hour for skilled people. Krugman pointed out yesterday, as he did in his column last week, that "...there is a whole industry built around the promotion of deficit panic. Lavishly funded corporate groups keep hyping the danger of government debt and the urgency of deficit reduction now now now - except that these same groups are suddenly warning against too much deficit reduction. No wonder the public is confused."
Krugman is much more concerned about "mass unemployment." While he accepts that there has been some progress on this issue over the past year, he points out that long-term unemployment remains at levels not see since the Great Depression: "...as of October, 4.9 million Americans had been unemployed for more than six months, and 3.6 million had been out of work for more than a year."
I keep track of the overall unemployment picture by following Catherine Rampell's recession trend lines (see her post attached): Job Changes in Recent Recessions/Recoveries, as a Share of Employment at Previous Peak. That's a long title but a picture is worth a thousand words as the old saying says. Her color trend lines depicting the 5 previous recessions/recoveries versus the recession that initiated in 2007 make it easy to see where we "aren't." As she points out, for the 26th straight month, the country has added jobs: 146,000 nonfarm payroll jobs in November but employment still has a long way to go before returning to pre-recession levels: "Getting the economy to 5% unemployment within two years - a return to the rate that prevailed when the recession began - would require job growth of closer to 270,000 per month."
Rampell goes on to point out: "There are now 12 million workers looking for work who cannot find it. The tally of those who are "underemployed" - that is, adding in those workers who are part time but want to be employed full time, and workers who want to work but are not looking - is an even larger 22.7 million."
While Rampell's 2007-present trend line is headed back up toward where it started, if you project the "slope" of it, just by "eye," (and, of course, I'm going off her chart) my guess is that it doesn't return to its start point until 2014 to 2017.
Maybe this is one of the reasons why the Fed has announced that it plans to hold short-term interest rates near zero as long as the unemployment rate remains above 6.5%.
Friday, November 30, 2012
Skills Don't Pay the Bills
http://www.nytimes.com/2012/11/25/magazine/skills-dont-pay-the-bills.html?pagewanted=all
***************
"Bottom line thinking makes it possible for you to measure outcomes more quickly and easily." (John C. Maxwell)
***************
Adam Davidson's "Deep Thoughts This Week:"
1. There is no skills gap.
2. Who wants to operate a highly sophisticated machine for $10 an hour?
3. Not a lot of people.
4. As a result, there is going to be a skills gap.
Nearly 6 million factory jobs, almost a third of the entire manufacturing industry, have disappeared since 2000. And, while many of these jobs were lost to competition with low-wage countries, even more vanished because of computer-driven machinery that can do the work of 10, or in some cases, 100 workers. Those jobs are not coming back, but many believe that the industry's future (and, to some extent, the future of the American economy) lies in training a new generation for highly skilled manufacturing jobs -- the ones that require people who know how to run the computer that runs the machine.
According to Adam Davidson, the secret behind the skills gap is that there is not a skills gap at all. In a recent study by the Boston Consulting Group: "...outside of a few small cities that rely on the oil industry, there weren't many places where manufacturing wages were going up and employers still couldn't find enough workers. Trying to hire high-skilled workers at rock-bottom rates is not a skills gap." (starting pay at a metal fabricating manufacturer: $10 per hour; starting pay as a shift manager at McDonald's: $14 per hour.). "Many skilled workers have simply chosen to apply their skills elsewhere rather than work for less, and few young people choose to invest in training for jobs that pay fast food wages."
So, manufacturers, who face increasing competition from low-wage countries, feel they can't afford to pay higher wages. Potential workers choose more promising career paths. According to Howard Wial, an economist at the Brookings Institution who specializes in manufacturing employment: "It's individually rational. But it's not socially optimal."
If that isn't bad enough, it's hard to train people who are willing to learn these manufacturing skills (even at low pay rates) when they graduate from high school without the basic skills in math and science that these companies need to compete.
So: "The so-called skills gap is really a gap in education, and that effects all of us." (Adam Davidson)
***************
"Bottom line thinking makes it possible for you to measure outcomes more quickly and easily." (John C. Maxwell)
***************
Adam Davidson's "Deep Thoughts This Week:"
1. There is no skills gap.
2. Who wants to operate a highly sophisticated machine for $10 an hour?
3. Not a lot of people.
4. As a result, there is going to be a skills gap.
Nearly 6 million factory jobs, almost a third of the entire manufacturing industry, have disappeared since 2000. And, while many of these jobs were lost to competition with low-wage countries, even more vanished because of computer-driven machinery that can do the work of 10, or in some cases, 100 workers. Those jobs are not coming back, but many believe that the industry's future (and, to some extent, the future of the American economy) lies in training a new generation for highly skilled manufacturing jobs -- the ones that require people who know how to run the computer that runs the machine.
According to Adam Davidson, the secret behind the skills gap is that there is not a skills gap at all. In a recent study by the Boston Consulting Group: "...outside of a few small cities that rely on the oil industry, there weren't many places where manufacturing wages were going up and employers still couldn't find enough workers. Trying to hire high-skilled workers at rock-bottom rates is not a skills gap." (starting pay at a metal fabricating manufacturer: $10 per hour; starting pay as a shift manager at McDonald's: $14 per hour.). "Many skilled workers have simply chosen to apply their skills elsewhere rather than work for less, and few young people choose to invest in training for jobs that pay fast food wages."
So, manufacturers, who face increasing competition from low-wage countries, feel they can't afford to pay higher wages. Potential workers choose more promising career paths. According to Howard Wial, an economist at the Brookings Institution who specializes in manufacturing employment: "It's individually rational. But it's not socially optimal."
If that isn't bad enough, it's hard to train people who are willing to learn these manufacturing skills (even at low pay rates) when they graduate from high school without the basic skills in math and science that these companies need to compete.
So: "The so-called skills gap is really a gap in education, and that effects all of us." (Adam Davidson)
How the Tax Burden Has Changed
http://www.nytimes.com/2012/11/30/us/most-americans-face-lower-tax-burden-than-in-the-80s.html?adxnnl=1&emc=eta1&adxnnlx=1354303994-qkpQ9uKXVj2vzfYK5Otlfg
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"Think of the bottom line as the end, the takeaway, the desired result." (John C. Maxwell)
***************
With some of the best graphics I've seen, the Times has come up with a set of charts picturing how the our taxes have changed over the years. All of this relates to the current negotiations going on about the "fiscal cliff."
According to the charts, most Americans paid less in taxes in 2010 than people with the same inflation-adjusted incomes did in 1980, because of cuts in federal income taxes. At lower income levels, however, much of the savings was offset by increases in federal payroll taxes, state sales taxes and local property taxes. About half the households making less than $25,000 saved nothing at all.
Now that we may be reaching the end of an era of tax cuts, what's next? The "mortgage interest expense" deduction is on the table. That will alienate everybody that owns a house.
Spending by federal, state and local governments makes up a growing share of U.S. economic activity. While state and local taxes have increased, federal revenues have declined to the lowest level in decades. This results in annual deficits and increasing long term debt. And then, we wonder why we have problems.
It will be interesting to see what happens.
***************
"Think of the bottom line as the end, the takeaway, the desired result." (John C. Maxwell)
***************
With some of the best graphics I've seen, the Times has come up with a set of charts picturing how the our taxes have changed over the years. All of this relates to the current negotiations going on about the "fiscal cliff."
According to the charts, most Americans paid less in taxes in 2010 than people with the same inflation-adjusted incomes did in 1980, because of cuts in federal income taxes. At lower income levels, however, much of the savings was offset by increases in federal payroll taxes, state sales taxes and local property taxes. About half the households making less than $25,000 saved nothing at all.
Now that we may be reaching the end of an era of tax cuts, what's next? The "mortgage interest expense" deduction is on the table. That will alienate everybody that owns a house.
Spending by federal, state and local governments makes up a growing share of U.S. economic activity. While state and local taxes have increased, federal revenues have declined to the lowest level in decades. This results in annual deficits and increasing long term debt. And then, we wonder why we have problems.
It will be interesting to see what happens.
Thursday, November 29, 2012
HP and the Big Four
http://www.nytimes.com/2012/11/30/business/auditors-clash-in-hp-deal-for-autonomy.html?ref=business
***************
"Learn, earn, return -- these are the three phases of life." (Jack Belousek)
***************
So HP is crying "foul" because they spent big money on a company that had been "audited" before they bought it. Where were the auditors? Well, according to Floyd Norris, they were everywhere: "They were consulting. They were advising ... on strategies for optimizing revenue. They were investigating whether books were cooked, and they were signing off on audits approving the books that are now alleged to have been cooked. They were offering advice on executive pay. There are four major accounting firms, and each has some involvement."
The Autonomy dispute (and HP's $8.8 billion write-down of that "asset") breaks down into:
* HP buys Autonomy for $11 billion in October, 2011;
* Last week, HP says Autonomy has been cooking the books in a variety of ways;
* Autonomy was audited by the British arm of Deloitte. HP, which is audited by Ernst &
Young, hired KPMG to perform due diligence in connection with the acquisition.
* That's three of the big four. So, it should be no surprise that PricewaterhouseCoopers
was brought in to do a forensic investigation because of a "whistle-blower." And,
PWC found bad things.
So, unless Floyd Norris has it wrong, that makes the Big Four tally two for Autonomy and two for HP. For me, if that is the case, why do we have Sarbanes and why do we have international accounting principles? And, what do the "Big Four" do?
I like the Floyd Norris perspective: "To an outsider, making sense of the brouhaha is not easy. In a normal accounting scandal, if there is such a thing, the company restates its earnings and details how revenue was inflated or costs hidden. That has not happened here and may never happen ..." HP took an $8.8 billion write-off for a company that never earned more than $1 billion in a year. The write-off represents much of the good will that HP booked when it made the deal. In other words, HP paid way too much and should have known better.
So what we have here is: "Two of the Big Four were fooled, at least according to the other two. Perhaps coincidentally, the firms tended to reach conclusions desired by those who paid them."
I could go on but the "Big Four" don't look so big right now and I'll leave it at that.
***************
"Learn, earn, return -- these are the three phases of life." (Jack Belousek)
***************
So HP is crying "foul" because they spent big money on a company that had been "audited" before they bought it. Where were the auditors? Well, according to Floyd Norris, they were everywhere: "They were consulting. They were advising ... on strategies for optimizing revenue. They were investigating whether books were cooked, and they were signing off on audits approving the books that are now alleged to have been cooked. They were offering advice on executive pay. There are four major accounting firms, and each has some involvement."
The Autonomy dispute (and HP's $8.8 billion write-down of that "asset") breaks down into:
* HP buys Autonomy for $11 billion in October, 2011;
* Last week, HP says Autonomy has been cooking the books in a variety of ways;
* Autonomy was audited by the British arm of Deloitte. HP, which is audited by Ernst &
Young, hired KPMG to perform due diligence in connection with the acquisition.
* That's three of the big four. So, it should be no surprise that PricewaterhouseCoopers
was brought in to do a forensic investigation because of a "whistle-blower." And,
PWC found bad things.
So, unless Floyd Norris has it wrong, that makes the Big Four tally two for Autonomy and two for HP. For me, if that is the case, why do we have Sarbanes and why do we have international accounting principles? And, what do the "Big Four" do?
I like the Floyd Norris perspective: "To an outsider, making sense of the brouhaha is not easy. In a normal accounting scandal, if there is such a thing, the company restates its earnings and details how revenue was inflated or costs hidden. That has not happened here and may never happen ..." HP took an $8.8 billion write-off for a company that never earned more than $1 billion in a year. The write-off represents much of the good will that HP booked when it made the deal. In other words, HP paid way too much and should have known better.
So what we have here is: "Two of the Big Four were fooled, at least according to the other two. Perhaps coincidentally, the firms tended to reach conclusions desired by those who paid them."
I could go on but the "Big Four" don't look so big right now and I'll leave it at that.
Third Quarter GDP Growth Revised
http://www.nytimes.com/2012/11/30/business/economy/third-quarter-gdp-growth-is-revised-up-to-2-7.html?hp
***************
"The person with a plan, a picture, will go after thoughts that add value to their thinking." (John C. Maxwell)
***************
After initially saying output increased at an annual rate of 2%, the Commerce Department revised its estimate to show growth at 2.7% in the three months ended September 30.
Consumer spending is up and housing is coming back in several regions. This is good news and I don't want to put a damper on it by pointing out that several prominent economists have predicted 1% or flat GDP growth for the fourth quarter if nothing is done about the "fiscal cliff." Frankly, some have predicted a direct correlation between the fiscal cliff and another U.S. recession. "Dr. Doom" (Nouriel Roubini, economist and rock star) has consistently predicted over several quarters that GDP growth is at "stall speed."
Warren Buffet was on the "Today" show this week and indicated that he thinks the economy is coming back. He also said his companies will be spending $9 billion in capital on plant and equipment in the coming year or years. That was his answer to the "fiscal cliff" issue.
According to the Federal Reserve's Beige Book Survey released Wednesday, growth improved in 9 of the Fed's 12 regional banking districts. Growth was weaker in New York, Philadelphia and Boston - not unexpected based on the problems Sandy caused. The Fed noted that growth was better despite nervousness about the fiscal cliff.
The Fed's Beige Book covers economic conditions around the U.S. from October thru November 14th and will be used for the Fed's December 11-12 meeting. In the Fed's Dallas region, the economy expanded modestly, with reports on manufacturing and transportation services mixed. Auto sales were flat. Home sales and construction increased and energy production continued to be strong.
Here's a quote from Robert Williams who is a senior fellow at the Tax Policy Center: "If we go over the fiscal cliff, revenues will rise, even though the economy will likely fall back into recession. If President Obama and Congress reach a compromise, taxes will likely rise less. In either case, the government will need more revenue to balance its budget."
In spite of Warren Buffet's confidence, the pent up capital spending in Top 500 companies is still there. Once the fiscal cliff issue is resolved, let's see what happens with pent up capital.
***************
"The person with a plan, a picture, will go after thoughts that add value to their thinking." (John C. Maxwell)
***************
After initially saying output increased at an annual rate of 2%, the Commerce Department revised its estimate to show growth at 2.7% in the three months ended September 30.
Consumer spending is up and housing is coming back in several regions. This is good news and I don't want to put a damper on it by pointing out that several prominent economists have predicted 1% or flat GDP growth for the fourth quarter if nothing is done about the "fiscal cliff." Frankly, some have predicted a direct correlation between the fiscal cliff and another U.S. recession. "Dr. Doom" (Nouriel Roubini, economist and rock star) has consistently predicted over several quarters that GDP growth is at "stall speed."
Warren Buffet was on the "Today" show this week and indicated that he thinks the economy is coming back. He also said his companies will be spending $9 billion in capital on plant and equipment in the coming year or years. That was his answer to the "fiscal cliff" issue.
According to the Federal Reserve's Beige Book Survey released Wednesday, growth improved in 9 of the Fed's 12 regional banking districts. Growth was weaker in New York, Philadelphia and Boston - not unexpected based on the problems Sandy caused. The Fed noted that growth was better despite nervousness about the fiscal cliff.
The Fed's Beige Book covers economic conditions around the U.S. from October thru November 14th and will be used for the Fed's December 11-12 meeting. In the Fed's Dallas region, the economy expanded modestly, with reports on manufacturing and transportation services mixed. Auto sales were flat. Home sales and construction increased and energy production continued to be strong.
Here's a quote from Robert Williams who is a senior fellow at the Tax Policy Center: "If we go over the fiscal cliff, revenues will rise, even though the economy will likely fall back into recession. If President Obama and Congress reach a compromise, taxes will likely rise less. In either case, the government will need more revenue to balance its budget."
In spite of Warren Buffet's confidence, the pent up capital spending in Top 500 companies is still there. Once the fiscal cliff issue is resolved, let's see what happens with pent up capital.
Friday, November 9, 2012
So, What Do We Do Now?
http://knowledge.wharton.upenn.edu/article.cfm?articleid=3111#.UJ1veStQ1MQ.email
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"Most people spend more time planning their summer vacation than planning their lives." (Source Unknown - John C. Maxwell)
***************
While I'm not sure what the economy is doing (and, I don't think anybody else is either), it looks like "housing" is finally beginning to move up. For me, that's one of the two indicators I look at (the other is "employment").
So, what should President Obama push for over the next 4 years? Well, it's nice to have a Wharton faculty summary of what they think he ought to be doing. According to Franklin Allen, the first thing he needs to do is solve the "fiscal cliff" problem. That would appear to be what President Obama is doing. According to Allen, the second thing he needs to be doing is reform Medicare. I don't see lots of people clamoring for that one.
Another voice of the Wharton faculty argues that the top priority should be getting the economy going again - Robert P. Inman, professor of business economics and public policy. He favors another round of fiscal stimulus (probably because the first round wasn't enough): his method would be broad-based tax cuts.
There is a general consensus that if the fiscal cliff problem is not solved, the overall economy will go back into recession. That would be as opposed to what it's in now - something Nouriel Roubini calls "stall speed."
Another faculty member sees the fiscal cliff crisis as long term opportunity to reform the tax code and spend a little smarter. Not bad. The problem is, as I told somebody recently, we are becoming Italy: members of Congress can't agree on what time it is. Or, as one member of the Wharton faculty puts it: "You used to have grown ups in the Senate...The grown ups just aren't there anymore. It's becoming so fragmented."
Susan Wachter, a Wharton real estate professor, feels the fragile housing market could falter without a fiscal cliff solution. This, just as that housing market appears to be coming back! Wachter defines "weak" as construction starts at 600,000 which is well below the 1.6 million peak before the recession.
There are so many considerations but it's interesting to see what one faculty thinks about an immediate need to do "something!"
***************
"Most people spend more time planning their summer vacation than planning their lives." (Source Unknown - John C. Maxwell)
***************
While I'm not sure what the economy is doing (and, I don't think anybody else is either), it looks like "housing" is finally beginning to move up. For me, that's one of the two indicators I look at (the other is "employment").
So, what should President Obama push for over the next 4 years? Well, it's nice to have a Wharton faculty summary of what they think he ought to be doing. According to Franklin Allen, the first thing he needs to do is solve the "fiscal cliff" problem. That would appear to be what President Obama is doing. According to Allen, the second thing he needs to be doing is reform Medicare. I don't see lots of people clamoring for that one.
Another voice of the Wharton faculty argues that the top priority should be getting the economy going again - Robert P. Inman, professor of business economics and public policy. He favors another round of fiscal stimulus (probably because the first round wasn't enough): his method would be broad-based tax cuts.
There is a general consensus that if the fiscal cliff problem is not solved, the overall economy will go back into recession. That would be as opposed to what it's in now - something Nouriel Roubini calls "stall speed."
Another faculty member sees the fiscal cliff crisis as long term opportunity to reform the tax code and spend a little smarter. Not bad. The problem is, as I told somebody recently, we are becoming Italy: members of Congress can't agree on what time it is. Or, as one member of the Wharton faculty puts it: "You used to have grown ups in the Senate...The grown ups just aren't there anymore. It's becoming so fragmented."
Susan Wachter, a Wharton real estate professor, feels the fragile housing market could falter without a fiscal cliff solution. This, just as that housing market appears to be coming back! Wachter defines "weak" as construction starts at 600,000 which is well below the 1.6 million peak before the recession.
There are so many considerations but it's interesting to see what one faculty thinks about an immediate need to do "something!"
Saturday, October 27, 2012
The Fiscal Cliff
http://www.washingtonpost.com/business/economy/fiscal-cliff-already-hampering-us-economy-report-says/2012/10/25/45730250-1ecf-11e2-ba31-3083ca97c314_story.html?wpisrc=emailtoafriend
***************
"Yard by yard, life is hard; but inch by inch, it's a cinch." (Robert Schuller)
***************
Lori Montgomery reminds us in the Washington Post that, while the "Fiscal Cliff" is two months away, there is damage being caused now by it's prospect. She cites a new report out Friday from the National Association of Manufacturers that predicts that nearly 6 million jobs will be destroyed thru 2014 if Congress takes no action. Predicted unemployment rate: 12%.
But, right now, companies are bracing for the fallout by laying off workers, letting jobs go vacant, and postponing major purchases: "Commerce Department data released Thursday show business investment stalled in September, as orders for core capital goods such as machinery and equipment plateaued at $60.3 billion."
Mark Zandi, an economists whose testimony before both houses of Congress has been highly valued in the past, supports the double digit unemployment scenario if nothing is done to fix the situation.
My problem with all this is that "doing nothing" would appear to be something that "Congress" is very good at!
I hope for the best but I'm bracing for the worst!
***************
"Yard by yard, life is hard; but inch by inch, it's a cinch." (Robert Schuller)
***************
Lori Montgomery reminds us in the Washington Post that, while the "Fiscal Cliff" is two months away, there is damage being caused now by it's prospect. She cites a new report out Friday from the National Association of Manufacturers that predicts that nearly 6 million jobs will be destroyed thru 2014 if Congress takes no action. Predicted unemployment rate: 12%.
But, right now, companies are bracing for the fallout by laying off workers, letting jobs go vacant, and postponing major purchases: "Commerce Department data released Thursday show business investment stalled in September, as orders for core capital goods such as machinery and equipment plateaued at $60.3 billion."
Mark Zandi, an economists whose testimony before both houses of Congress has been highly valued in the past, supports the double digit unemployment scenario if nothing is done to fix the situation.
My problem with all this is that "doing nothing" would appear to be something that "Congress" is very good at!
I hope for the best but I'm bracing for the worst!
Friday, October 26, 2012
Pointing Toward Prosperity
http://www.nytimes.com/2012/10/26/opinion/krugman-pointing-toward-prosperity.html
***************
"One of the best ways to cultivate a possibility mind-set is to prompt yourself to dream one size bigger than you normally do." (John C. Maxwell)
***************
So Paul Krugman tells us in the Times today that Mitt Romney has been barnstorming the country, telling the voters that he has a five-point plan to restore prosperity: "And some voters, alas, seem to believe what he's saying. So, President Obama has now responded with his own plan, a little blue booklet containing 27 policy proposals."
How to these plans stack up? According to Krugman, Mr. Romney's plan is a "sham." It's just a list of what Romney says he'll do without any policies to back it up: "We will cut the deficit and put America back on track to a balanced budget" but, as Krugman points out, Romney refuses to specify which tax loopholes he will close to offset his $5 trillion in tax cuts.
Here's a quote: "So Mr. Romney is faking it. His real plan seems to be to foster economic recovery through magic, inspiring business confidence through his personal awesomeness."
So, what about President Obama? Krugman: "Where Mr. Romney says he'll achieve energy independence, never mind how, Mr. Obama calls for concrete steps like raising fuel efficiency standards."
I am not a Republican or a Democrat and I keep politics out of my classroom, but my final Krugman quote covers what concerns me: "And you should never forget the broader policy context. Mr. Obama may not have an exciting economic plan, but, if he is re-elected, he will get to implement a health reform that is the biggest improvement in America's safety net since Medicare. Mr. Romney doesn't have an economic plan at all, but he is determined not just to repeal Obamacare but to impose savage cuts in Medicaid. So, never mind all those bullet points. Think instead about the 45 million Americans who either will or won't receive essential health care, depending on who wins on Nov. 6."
I'm hoping we all win on Nov. 6.
***************
"One of the best ways to cultivate a possibility mind-set is to prompt yourself to dream one size bigger than you normally do." (John C. Maxwell)
***************
So Paul Krugman tells us in the Times today that Mitt Romney has been barnstorming the country, telling the voters that he has a five-point plan to restore prosperity: "And some voters, alas, seem to believe what he's saying. So, President Obama has now responded with his own plan, a little blue booklet containing 27 policy proposals."
How to these plans stack up? According to Krugman, Mr. Romney's plan is a "sham." It's just a list of what Romney says he'll do without any policies to back it up: "We will cut the deficit and put America back on track to a balanced budget" but, as Krugman points out, Romney refuses to specify which tax loopholes he will close to offset his $5 trillion in tax cuts.
Here's a quote: "So Mr. Romney is faking it. His real plan seems to be to foster economic recovery through magic, inspiring business confidence through his personal awesomeness."
So, what about President Obama? Krugman: "Where Mr. Romney says he'll achieve energy independence, never mind how, Mr. Obama calls for concrete steps like raising fuel efficiency standards."
I am not a Republican or a Democrat and I keep politics out of my classroom, but my final Krugman quote covers what concerns me: "And you should never forget the broader policy context. Mr. Obama may not have an exciting economic plan, but, if he is re-elected, he will get to implement a health reform that is the biggest improvement in America's safety net since Medicare. Mr. Romney doesn't have an economic plan at all, but he is determined not just to repeal Obamacare but to impose savage cuts in Medicaid. So, never mind all those bullet points. Think instead about the 45 million Americans who either will or won't receive essential health care, depending on who wins on Nov. 6."
I'm hoping we all win on Nov. 6.
Thursday, October 18, 2012
Good News For Residential Construction
http://online.wsj.com/article/SB10000872396390444868204578062310255566972.html?mod=WSJ_hps_sections_news
***************
"The will to win is worthless if you do not have the will to prepare." (Thane Yost)
***************
According to the "experts," yesterday's strong housing report helped push the stock market mostly higher while weak reports from IBM and Intel were subtractions against the Dow.
There are many who believe that housing is the last key indicator that needs to climb if the GDP growth rate in the U.S. is to be sustainable. Since U.S. builders started construction on homes in September at the fastest rate since July 2008, this looks like good news.
Builders started work in September on new houses and apartments at a seasonally adjusted annual rate that is up 15% from August and 34.8% from September a year ago. The National Association of Home Builders estimates that each home built generates three full-time jobs and $90,000 in new tax revenue.
According to Michael Feroli, chief U.S. economist at J.P. Morgan Chase, a sustainable pace of home building should add up to two percentage points to gross domestic product. Between 2007 and 2011, more than 2.1 million construction workers lost their jobs and, since then, only 273,000 have been hired back. So, from an employment point of view, that "sustainable pace" means a lot.
Some people think the pop in home building suggests a "divide" between consumers and industry in terms of how they look at a potential economic recovery. While businesses continue to hold back on big investments because of uncertainty surrounding the coming elections and changes in the tax code, consumers' attitudes are positive, pushing up spending on goods like new houses.
CoreLogic announced this month that the "shadow inventory" (the pending supply of homes that are delinquent or in foreclosure and could ultimately be listed for sale) fell to 2.3 million units in July, or a supply of 6.0 months, down 10.2% from a year earlier.
Let's hope the news continues to be good.
***************
"The will to win is worthless if you do not have the will to prepare." (Thane Yost)
***************
According to the "experts," yesterday's strong housing report helped push the stock market mostly higher while weak reports from IBM and Intel were subtractions against the Dow.
There are many who believe that housing is the last key indicator that needs to climb if the GDP growth rate in the U.S. is to be sustainable. Since U.S. builders started construction on homes in September at the fastest rate since July 2008, this looks like good news.
Builders started work in September on new houses and apartments at a seasonally adjusted annual rate that is up 15% from August and 34.8% from September a year ago. The National Association of Home Builders estimates that each home built generates three full-time jobs and $90,000 in new tax revenue.
According to Michael Feroli, chief U.S. economist at J.P. Morgan Chase, a sustainable pace of home building should add up to two percentage points to gross domestic product. Between 2007 and 2011, more than 2.1 million construction workers lost their jobs and, since then, only 273,000 have been hired back. So, from an employment point of view, that "sustainable pace" means a lot.
Some people think the pop in home building suggests a "divide" between consumers and industry in terms of how they look at a potential economic recovery. While businesses continue to hold back on big investments because of uncertainty surrounding the coming elections and changes in the tax code, consumers' attitudes are positive, pushing up spending on goods like new houses.
CoreLogic announced this month that the "shadow inventory" (the pending supply of homes that are delinquent or in foreclosure and could ultimately be listed for sale) fell to 2.3 million units in July, or a supply of 6.0 months, down 10.2% from a year earlier.
Let's hope the news continues to be good.
Saturday, October 6, 2012
The BLS & a Conspiracy Theory
http://economix.blogs.nytimes.com/2012/10/05/from-jack-welch-a-conspiracy-theory/?emc=eta1
http://economix.blogs.nytimes.com/2012/10/05/explaining-the-big-gain-in-job-getters/?emc=eta1
***************
"The wise man questions himself, the fool others." (Henri Arnold)
***************
So Jack Welch has once again shared his unlimited prowess in smelling out a political conspiracy that relates to unemployment. He probably feels he has some expertise in this area since he laid off 200,000 of the 400,000 people working at GE when he took over as CEO in the 80s. His nickname back then was "Neutron John." It's amazing what getting rid of people will do to your "profit-per-employee" ratios.
So, Welch shot out after the positive jobs news: "Unbelievable jobs numbers...these Chicago guys will do anything...can't debate so change numbers."
Fortunately, nobody who knows how those jobs numbers are put together, takes the Welch observation seriously. Frankly, I'm beginning to think that nobody takes most of Welch's observations seriously. It seems that he's part of a long line of retired CEOs who want to continue to be "heard."
Catherine Rampell does an excellent job in her post in "Economix" of both explaining how the "jobs" numbers work and giving us an overall perspective: "The numbers are tremendously volatile, but the reasons are "STATISTICAL" not "POLITICAL." And she goes on to prove it while emphasizing the plight of the 20 to 24 year old age group.
Rampell points out that there are no political appointees running the BLS and that their same systems they always use produced the current numbers/estimates.
Hopefully, the BLS numbers are another positive sign. I would prefer to look at it that way.
http://economix.blogs.nytimes.com/2012/10/05/explaining-the-big-gain-in-job-getters/?emc=eta1
***************
"The wise man questions himself, the fool others." (Henri Arnold)
***************
So Jack Welch has once again shared his unlimited prowess in smelling out a political conspiracy that relates to unemployment. He probably feels he has some expertise in this area since he laid off 200,000 of the 400,000 people working at GE when he took over as CEO in the 80s. His nickname back then was "Neutron John." It's amazing what getting rid of people will do to your "profit-per-employee" ratios.
So, Welch shot out after the positive jobs news: "Unbelievable jobs numbers...these Chicago guys will do anything...can't debate so change numbers."
Fortunately, nobody who knows how those jobs numbers are put together, takes the Welch observation seriously. Frankly, I'm beginning to think that nobody takes most of Welch's observations seriously. It seems that he's part of a long line of retired CEOs who want to continue to be "heard."
Catherine Rampell does an excellent job in her post in "Economix" of both explaining how the "jobs" numbers work and giving us an overall perspective: "The numbers are tremendously volatile, but the reasons are "STATISTICAL" not "POLITICAL." And she goes on to prove it while emphasizing the plight of the 20 to 24 year old age group.
Rampell points out that there are no political appointees running the BLS and that their same systems they always use produced the current numbers/estimates.
Hopefully, the BLS numbers are another positive sign. I would prefer to look at it that way.
Thursday, October 4, 2012
Former Students With Great Perspectives
http://behindcompanies.com/2012/10/how-to-find-a-job-after-college/
http://www.nytimes.com/2012/10/04/opinion/an-unhelpful-presidential-debate.html?emc=eta1
***************
"One's philosophy is NOT best expressed in words; it is expressed in the choices one makes. In the long run, we shape our lives and we shape ourselves." (Eleanor Roosevelt)
***************
The great gift that you get when you have the opportunity to share your thoughts with excellent students is that they "energize" you and continue to inspire you even after they've graduated from your class or your school.
Marcelo Somers comes back to talk to my classes and he posts on his blog and, all the while, he gives me energy transfusions! My students like him because he's close enough in age to have them "feel" he is still one of them. He's gone out in the big bad job market and done something creative and relevant with his bachelor's degree - that would be the degree that I think is now the equivalent of a high school diploma - and he takes the time to come back and talk to others about what they could do.
His blog posts talk to the issues that surround business competition and challenge all of us to think about them. His current post (attached) is a classic and a "must read."
*****
I try to stay away from politics in my classes (where I think I'm pretty successful at doing so) and in this blog but I have to comment on the NY Times take (attached) on last night's presidential debate.
First of all, I don't watch "presidential debates" because they'd cause me to fall asleep. But, I was interested this morning in the reaction of many supporters of President Obama that he was not really that good. I'm being kind here. When even your supporters don't think you did well, there's a problem. Chris Mathews (NBC), who admits to being and enthusiastic supporter of President Obama, was beside himself! I must admit that I was more concerned about the Yankees.
I have to say that I liked the NY Times characterization of "The Mitt Romney who appeared on the stage at the University of Denver seemed to be fleeing from the one who won the Republican nomination on a hard-right platform of tax cuts, budget slashing and indifference to those at the bottom of the economic ladder. And Mr. Obama's competitive edge from 2008 clearly dulled, as he missed repeated opportunities to challenge Mr. Romney on his falsehoods and turnabouts."
Evidently, the moderator, Jim Lehrer, didn't help much either. So, three people trying to look good on TV and no real facts exchanged. It would appear that President Obama could have done better but chose not to. Maybe he thinks he can win anyway. Somebody should tell him that no U.S. president has ever been re-elected with an unemployment rate above 6%.
http://www.nytimes.com/2012/10/04/opinion/an-unhelpful-presidential-debate.html?emc=eta1
***************
"One's philosophy is NOT best expressed in words; it is expressed in the choices one makes. In the long run, we shape our lives and we shape ourselves." (Eleanor Roosevelt)
***************
The great gift that you get when you have the opportunity to share your thoughts with excellent students is that they "energize" you and continue to inspire you even after they've graduated from your class or your school.
Marcelo Somers comes back to talk to my classes and he posts on his blog and, all the while, he gives me energy transfusions! My students like him because he's close enough in age to have them "feel" he is still one of them. He's gone out in the big bad job market and done something creative and relevant with his bachelor's degree - that would be the degree that I think is now the equivalent of a high school diploma - and he takes the time to come back and talk to others about what they could do.
His blog posts talk to the issues that surround business competition and challenge all of us to think about them. His current post (attached) is a classic and a "must read."
*****
I try to stay away from politics in my classes (where I think I'm pretty successful at doing so) and in this blog but I have to comment on the NY Times take (attached) on last night's presidential debate.
First of all, I don't watch "presidential debates" because they'd cause me to fall asleep. But, I was interested this morning in the reaction of many supporters of President Obama that he was not really that good. I'm being kind here. When even your supporters don't think you did well, there's a problem. Chris Mathews (NBC), who admits to being and enthusiastic supporter of President Obama, was beside himself! I must admit that I was more concerned about the Yankees.
I have to say that I liked the NY Times characterization of "The Mitt Romney who appeared on the stage at the University of Denver seemed to be fleeing from the one who won the Republican nomination on a hard-right platform of tax cuts, budget slashing and indifference to those at the bottom of the economic ladder. And Mr. Obama's competitive edge from 2008 clearly dulled, as he missed repeated opportunities to challenge Mr. Romney on his falsehoods and turnabouts."
Evidently, the moderator, Jim Lehrer, didn't help much either. So, three people trying to look good on TV and no real facts exchanged. It would appear that President Obama could have done better but chose not to. Maybe he thinks he can win anyway. Somebody should tell him that no U.S. president has ever been re-elected with an unemployment rate above 6%.
Thursday, September 27, 2012
Re-shoring Manufacturing Jobs
http://knowledge.wharton.upenn.edu/article.cfm?articleid=3082
***************
"Everyone thinks of changing the world, but no one thinks of changing himself." (Leo Tolstoy)
***************
In an article published this week in "K@W," Hal Sirkin (senior partner and managing director of the Boston Consulting Group) is quoted as saying that, during this decade, two to 3 million manufacturing jobs will come back to the U.S. "because of the fundamental shift in economics between China and the United States." Sirkin sees this as adding "100 billion" in economic growth to the U.S. by 2020.
And what is the "fuel" for that process? Answer: "...the rapidly declining divide between Chinese manufacturing wages and those in the U.S." In 2000, U.S. wages were 22 times higher than those in China "but by 2015, wages in the U.S. will only be 4 times higher."
K@W and Sirkin note further: "Adjusted for productivity, the differential shrinks even more...In the Yangtze River Delta, the epicenter of China's skilled manufacturing workforce, the effective wage rate will be 61% of U.S. wages by 2015. At those levels, it makes sense to return manufacturing of a wide range of goods, with moderate levels of labor content and high logistics costs to the U.S. Sirkin argues that, because Chinese wages are rising so rapidly, the U.S. will not only win back those jobs, but it will also be able to retain a lot of the jobs even after U.S. wage rates rise in the future."
Overall, re-shoring has a tendency to make sense for "bulky goods" which naturally incur higher transportation costs: "As manufacturers extend their supply chains ever deeper into remote areas - such as inland China and more remote parts of Southeast Asia - they struggle to overcome the inefficiencies and gaps that raise the cost and uncertainty of importing finished goods to the United States in a timely manner."
What I like are the numbers. GE has put the concept together so it works for them and this K@W article highlights what they've done.
***************
"Everyone thinks of changing the world, but no one thinks of changing himself." (Leo Tolstoy)
***************
In an article published this week in "K@W," Hal Sirkin (senior partner and managing director of the Boston Consulting Group) is quoted as saying that, during this decade, two to 3 million manufacturing jobs will come back to the U.S. "because of the fundamental shift in economics between China and the United States." Sirkin sees this as adding "100 billion" in economic growth to the U.S. by 2020.
And what is the "fuel" for that process? Answer: "...the rapidly declining divide between Chinese manufacturing wages and those in the U.S." In 2000, U.S. wages were 22 times higher than those in China "but by 2015, wages in the U.S. will only be 4 times higher."
K@W and Sirkin note further: "Adjusted for productivity, the differential shrinks even more...In the Yangtze River Delta, the epicenter of China's skilled manufacturing workforce, the effective wage rate will be 61% of U.S. wages by 2015. At those levels, it makes sense to return manufacturing of a wide range of goods, with moderate levels of labor content and high logistics costs to the U.S. Sirkin argues that, because Chinese wages are rising so rapidly, the U.S. will not only win back those jobs, but it will also be able to retain a lot of the jobs even after U.S. wage rates rise in the future."
Overall, re-shoring has a tendency to make sense for "bulky goods" which naturally incur higher transportation costs: "As manufacturers extend their supply chains ever deeper into remote areas - such as inland China and more remote parts of Southeast Asia - they struggle to overcome the inefficiencies and gaps that raise the cost and uncertainty of importing finished goods to the United States in a timely manner."
What I like are the numbers. GE has put the concept together so it works for them and this K@W article highlights what they've done.
Wednesday, September 19, 2012
The Kalamazoo Promise
http://www.nytimes.com/2012/09/16/magazine/kalamazoo-mich-the-city-that-pays-for-college.html?nl=todaysheadlines&emc=edit_th_20120916&moc.semityn.www
***************
"When the crunch comes, people cling to those they know they can trust - those who are not detached, but involved." (James Stockdale)
***************
If you're a baseball fan, you know that Derek Jeter is from Kalamazoo, Michigan. He has been the New York Yankee shortstop for 17 years. He is, by all accounts, a class act.
There is a (true) story about the Yankees scouting Jeter when he was at Kalamazoo Central High: the Yankee general manager asked the the head scout evaluating Jeter if the rumors were true that Jeter would be headed for the University of Michigan in the fall (after graduation). The head scout's response: the only place Jeter is headed is Cooperstown (The Baseball Hall of Fame).
Now Kalamazoo has come up with a Hall of Fame - level program for their kids: "The Kalamazoo Promise." The program stipulates that unnamed donors were pledging to pay the tuition at Michigan's public colleges, universities and community colleges for every student that graduated from the district's high schools. The program is blind to family income levels, to pupil's grades and even to disciplinary and criminal records.
Every one of those kids gets to have a life!
According to the census data, 39% of Kalamazoo's students are white and 44% are African-American. One of every three students in the Kalamazoo district falls below the national poverty level. One in 12 is homeless. Many of them are the first in their families to finish high school; many come from single parent homes.
From the very beginning of this program (November, 2005), Janice Brown, who was at that time the superintendent of schools, has suggested that the program is supposed to do more than just pay college bills: it is primarily meant to boost Kalamazoo's economy. This wonderful social experiment is, indeed, supposed to boost the "economy" of the town these kids grew up in. To use educational and economic theory, "The program tests how placed-based development might work when education is the first investment."
Janice Brown is now the Promise Executive Director and the grand experiment appears to be working. Janice Brown is the only person that communicates with the unnamed donors and all are satisfied with that arrangement.
Not only are the educational policy makers looking at this but some are adding to the concept by advocating that "...their is an emerging consensus in economics that the biggest bang for the economic-development buck comes from investing in quality pre-school education rather than higher education." This thinking draws heavily on the thoughts of James Heckman, a Nobel Prize winning economist at the University of Chicago.
Whatever the advanced thought, something wonderful happened in Kalamazoo and it continues to work.
***************
"When the crunch comes, people cling to those they know they can trust - those who are not detached, but involved." (James Stockdale)
***************
If you're a baseball fan, you know that Derek Jeter is from Kalamazoo, Michigan. He has been the New York Yankee shortstop for 17 years. He is, by all accounts, a class act.
There is a (true) story about the Yankees scouting Jeter when he was at Kalamazoo Central High: the Yankee general manager asked the the head scout evaluating Jeter if the rumors were true that Jeter would be headed for the University of Michigan in the fall (after graduation). The head scout's response: the only place Jeter is headed is Cooperstown (The Baseball Hall of Fame).
Now Kalamazoo has come up with a Hall of Fame - level program for their kids: "The Kalamazoo Promise." The program stipulates that unnamed donors were pledging to pay the tuition at Michigan's public colleges, universities and community colleges for every student that graduated from the district's high schools. The program is blind to family income levels, to pupil's grades and even to disciplinary and criminal records.
Every one of those kids gets to have a life!
According to the census data, 39% of Kalamazoo's students are white and 44% are African-American. One of every three students in the Kalamazoo district falls below the national poverty level. One in 12 is homeless. Many of them are the first in their families to finish high school; many come from single parent homes.
From the very beginning of this program (November, 2005), Janice Brown, who was at that time the superintendent of schools, has suggested that the program is supposed to do more than just pay college bills: it is primarily meant to boost Kalamazoo's economy. This wonderful social experiment is, indeed, supposed to boost the "economy" of the town these kids grew up in. To use educational and economic theory, "The program tests how placed-based development might work when education is the first investment."
Janice Brown is now the Promise Executive Director and the grand experiment appears to be working. Janice Brown is the only person that communicates with the unnamed donors and all are satisfied with that arrangement.
Not only are the educational policy makers looking at this but some are adding to the concept by advocating that "...their is an emerging consensus in economics that the biggest bang for the economic-development buck comes from investing in quality pre-school education rather than higher education." This thinking draws heavily on the thoughts of James Heckman, a Nobel Prize winning economist at the University of Chicago.
Whatever the advanced thought, something wonderful happened in Kalamazoo and it continues to work.
Thursday, September 6, 2012
U.S. Decline In Global Competitiveness
http://economix.blogs.nytimes.com/2012/09/06/a-look-behind-the-u-s-decline-in-global-competitiveness/?ref=business
***************
"Concentration is the secret of strength in politics, in war, in trade, in short in all management of human affairs." (Ralph Waldo Emerson)
***************
The World Economic Forum (WEF) which sponsors the annual week-long cocktail party in Davos, Switzerland - a cocktail party which has come to be known simply as "Davos," has published its annual study of country "competitiveness." So, if you're one of the 144 countries evaluated, you can plug into the study and actually click on a worldwide map to see where you rank.
Actually, I wouldn't want to try to figure out how to rank the various countries and their economies. But Catherine Rampell has been kind enough to sort thru the study and supply us with the study "click-on" so we can understand with her what's going on.
It would appear that the U.S. has "fallen" in the rankings to 7th in the world. According to Rampell, this is because of "...worsening criticism of the American government." The WEF defines competitiveness as "the set of institutions, policies, and factors that determine the level of productivity of a country" and thereby lead to sustainable growth. Again, according Rampell, "The report graded economies based on an index of categories like over-regulation, property rights, tax burdens, transparency and trustworthiness of both the government and the financial sector, infrastructure, inflation conditions, the health and education attainment of the population, access to technology, and research and development."
(Further) "The main reasons the United States has been slipping in the rankings appear related to distrust of and lack of confidence in government leadership."
Rampell goes on to discuss where the U.S. ranks in various categories but I found myself most impressed, or rather "unimpressed," with the the U.S. ranking of 111th in "macroeconomic stability." It would seem that we have learned nothing from what we teach or "preach" at the great institutions where the best economists reside.
So, who's ahead of the U.S.? Well, "Switzerland" comes in 1st! Should we be "shocked?" This report is, after all, produced by an organization headquartered in "Switzerland." So, who else is ahead of "us?" Well, Singapore is #2. My perspective on them is that they are a highly controlled "city-state" where they've created an economic miracle that can only be admired. #3 thru #5 are Finland, Sweden and the Netherlands. Hard to argue there. And, last ahead of us: Germany at #6. Again, hard to argue.
The problem with all of this is "size." How many oceans do their (the six countries ahead of us) navies control? When you have a big economy and a worldwide "footprint," it's difficult to compare. Incidentally, the answer to the "navies" question is that the U.S. controls them all. That's expensive.
For those economies that play ball in our (the U.S.) league, Japan (which used to be the second largest economy in the world) ranks 10th. And, China, which now is the second largest economy in the world, ranks 29th.
How about if we "weight" everything by size of economy? I'm guessing the U.S. would still have no idea what it was doing "macro economically" but so what? I'm guessing China doesn't either - China has its own rules. And, sadly, Japan is descending rapidly for demographic and deflationary reasons. So, there you go.
I applaud what the WEF is doing each year for its sophistication and the care with which it is put together. But, it's probably a better "scorecard" for countries that are trying to improve and grow. Russia, for example, should probably pay attention. They've just been accepted into the World Trade Organization (WTO). Russia ranks 67th in the WEF overall competitiveness index. I'm surprised they're that high. Let's see if membership in the WTO helps Russia be more "competitive."
***************
"Concentration is the secret of strength in politics, in war, in trade, in short in all management of human affairs." (Ralph Waldo Emerson)
***************
The World Economic Forum (WEF) which sponsors the annual week-long cocktail party in Davos, Switzerland - a cocktail party which has come to be known simply as "Davos," has published its annual study of country "competitiveness." So, if you're one of the 144 countries evaluated, you can plug into the study and actually click on a worldwide map to see where you rank.
Actually, I wouldn't want to try to figure out how to rank the various countries and their economies. But Catherine Rampell has been kind enough to sort thru the study and supply us with the study "click-on" so we can understand with her what's going on.
It would appear that the U.S. has "fallen" in the rankings to 7th in the world. According to Rampell, this is because of "...worsening criticism of the American government." The WEF defines competitiveness as "the set of institutions, policies, and factors that determine the level of productivity of a country" and thereby lead to sustainable growth. Again, according Rampell, "The report graded economies based on an index of categories like over-regulation, property rights, tax burdens, transparency and trustworthiness of both the government and the financial sector, infrastructure, inflation conditions, the health and education attainment of the population, access to technology, and research and development."
(Further) "The main reasons the United States has been slipping in the rankings appear related to distrust of and lack of confidence in government leadership."
Rampell goes on to discuss where the U.S. ranks in various categories but I found myself most impressed, or rather "unimpressed," with the the U.S. ranking of 111th in "macroeconomic stability." It would seem that we have learned nothing from what we teach or "preach" at the great institutions where the best economists reside.
So, who's ahead of the U.S.? Well, "Switzerland" comes in 1st! Should we be "shocked?" This report is, after all, produced by an organization headquartered in "Switzerland." So, who else is ahead of "us?" Well, Singapore is #2. My perspective on them is that they are a highly controlled "city-state" where they've created an economic miracle that can only be admired. #3 thru #5 are Finland, Sweden and the Netherlands. Hard to argue there. And, last ahead of us: Germany at #6. Again, hard to argue.
The problem with all of this is "size." How many oceans do their (the six countries ahead of us) navies control? When you have a big economy and a worldwide "footprint," it's difficult to compare. Incidentally, the answer to the "navies" question is that the U.S. controls them all. That's expensive.
For those economies that play ball in our (the U.S.) league, Japan (which used to be the second largest economy in the world) ranks 10th. And, China, which now is the second largest economy in the world, ranks 29th.
How about if we "weight" everything by size of economy? I'm guessing the U.S. would still have no idea what it was doing "macro economically" but so what? I'm guessing China doesn't either - China has its own rules. And, sadly, Japan is descending rapidly for demographic and deflationary reasons. So, there you go.
I applaud what the WEF is doing each year for its sophistication and the care with which it is put together. But, it's probably a better "scorecard" for countries that are trying to improve and grow. Russia, for example, should probably pay attention. They've just been accepted into the World Trade Organization (WTO). Russia ranks 67th in the WEF overall competitiveness index. I'm surprised they're that high. Let's see if membership in the WTO helps Russia be more "competitive."
Tuesday, September 4, 2012
U.S. Factory Activity Shrinks
http://www.nytimes.com/2012/09/05/business/economy/us-factory-output-shrinks.html?_r=1&ref=business
***************
"The optimist looks at a glass and says the glass is half full. A pessimist looks at a glass and says it's half empty. An engineer looks at a glass and says that the glass is twice as big as it needs to be." (John C. Maxwell)
***************
So, factory activity in the U.S. shrank for the third consecutive month in August as new orders, production and employment all fell.
The Institute for Supply Management (ISM) said its index of manufacturing activity ticked down to 49.6 points. That's down from July and the lowest reading in three years. A reading below 50 indicates contraction.
The ISM index is very closely watched in manufacturing (it's a trade group of purchasing managers) as an indicator of where the economy is going. China's version of this indicator is doing the same thing. The ISM survey showed that factories kept hiring in July but at a slower pace.
This would probably be consistent with a 1.7% GDP growth rate for the most recent U.S. quarter and totally inconsistent with anything one might call a "recovery."
I am reminded of Alan Greenspan's now famous statement in the face of the impending worldwide financial crisis: "The financial markets are self-policing." Certainly Greenspan is the most famous central banker of the last 50 years but Paul Volcker has been the most influential. Right up to today, as Congress fills in the blanks of Dodd-Frank with important language to "clarify" the "Volcker Rule," Paul Volcker has the distinction of being appointed as Federal Reserve Chairman by both Jimmy Carter and Ronald Reagan - two people who, at that time, couldn't agree on what time it was!
Volcker's biography, just published, is reviewed in the current "Economist" ("The Triumph of Persistence" - William Silber). The review itself is worthy of note.
What we do about GDP growth at "stall speed" involves priming the pump to get demand going again. Volcker knows that but he probably understands that U.S. companies are reluctant to invest in this economy not knowing what the tax and regulatory environment will be. This is something that politicians don't get.
***************
"The optimist looks at a glass and says the glass is half full. A pessimist looks at a glass and says it's half empty. An engineer looks at a glass and says that the glass is twice as big as it needs to be." (John C. Maxwell)
***************
So, factory activity in the U.S. shrank for the third consecutive month in August as new orders, production and employment all fell.
The Institute for Supply Management (ISM) said its index of manufacturing activity ticked down to 49.6 points. That's down from July and the lowest reading in three years. A reading below 50 indicates contraction.
The ISM index is very closely watched in manufacturing (it's a trade group of purchasing managers) as an indicator of where the economy is going. China's version of this indicator is doing the same thing. The ISM survey showed that factories kept hiring in July but at a slower pace.
This would probably be consistent with a 1.7% GDP growth rate for the most recent U.S. quarter and totally inconsistent with anything one might call a "recovery."
I am reminded of Alan Greenspan's now famous statement in the face of the impending worldwide financial crisis: "The financial markets are self-policing." Certainly Greenspan is the most famous central banker of the last 50 years but Paul Volcker has been the most influential. Right up to today, as Congress fills in the blanks of Dodd-Frank with important language to "clarify" the "Volcker Rule," Paul Volcker has the distinction of being appointed as Federal Reserve Chairman by both Jimmy Carter and Ronald Reagan - two people who, at that time, couldn't agree on what time it was!
Volcker's biography, just published, is reviewed in the current "Economist" ("The Triumph of Persistence" - William Silber). The review itself is worthy of note.
What we do about GDP growth at "stall speed" involves priming the pump to get demand going again. Volcker knows that but he probably understands that U.S. companies are reluctant to invest in this economy not knowing what the tax and regulatory environment will be. This is something that politicians don't get.
Saturday, September 1, 2012
It's the Economy Stupid
http://www.nytimes.com/2012/09/01/business/economy/fed-chairman-pushes-hard-for-new-steps-to-spur-growth.html?_r=1&nl=todaysheadlines&emc=edit_th_20120901
***************
"We tend to think of great thinkers and innovators as soloists, but the truth is that the greatest innovative thinking doesn't occur in a vacuum." (John C. Maxwell)
***************
The NY Times reports today: "The Federal Reserve chairman ... delivered a detailed and forceful argument on Friday for new steps to stimulate the economy, reinforcing earlier indications that the Fed is on the verge of action." They go on to say that Mr. Bernanke's use of the term "grave concern" about the current rate of U.S. unemployment is "unusually strong."
Well, he's right. The pace of U.S. GDP growth (second quarter 1.7%) isn't enough for job growth. The generally accepted figure for the U.S. economy just to stay even with new people becoming available to get jobs (high school, college graduates, etc.) is 2.5%. And, that says nothing about the 13 million people who are currently unemployed.
I'm all for whatever the Fed wants to do to help (more) but I don't think they can do it alone (because whatever they've done hasn't helped enough). The Fed has "tools." But that hasn't been enough.
There wasn't enough real "stimulus" back when the recession hit. As I've pointed out before here, both Paul Krugman and Warren Buffet said then that the "stimulus" would not be enough. Here's a quote from Krugman's new book ("End This Depression Now"/ W.W. Norton and Company/ 2012): "So what did (President) Obama do? The American Recovery and Reinvestment Act (ARRA), the official name of the stimulus plan, had a headline price tag of $787 billion, although some of that was tax cuts that would have taken place anyway. Indeed, almost 40% of the total consisted of tax cuts, which were probably only half or less as effective in stimulating demand as actual increases in government spending."
(Krugman continued) "Of the rest, a large chunk consisted of funds to extend unemployment benefits, another chunk consisted of aid to help extend Medicaid, and a further chunk was aid to state and local governments to help them avoid spending cuts as their revenues fell. Only a fairly small piece was for the kind of spending - building and fixing roads, and so on - that we normally think of when we talk of stimulus. There was nothing resembling an FDR-style Works progress Administration. (At its peak, the WPA employed three million Americans, or about 10% of the workforce. An equivalent-sized program today would employ 13 million workers.)"
So, Krugman, in talking about why we're where we are now (GDP growth at 1.7%), goes back to the inadequate stimulus that was passed years back. Inadequate demand, inadequate investment, growth at "stall speed" (to use a term from Roubini) all prove that we never spent enough to get the economy going again. Obviously, inadequate job creation follows that.
While I applaud the attitude of the Fed, I'm not sure what it's going to do to help. Evidently, Mitt Romney plans to fire Bernanke if he's elected. Of course, that's a big "if."
***************
"We tend to think of great thinkers and innovators as soloists, but the truth is that the greatest innovative thinking doesn't occur in a vacuum." (John C. Maxwell)
***************
The NY Times reports today: "The Federal Reserve chairman ... delivered a detailed and forceful argument on Friday for new steps to stimulate the economy, reinforcing earlier indications that the Fed is on the verge of action." They go on to say that Mr. Bernanke's use of the term "grave concern" about the current rate of U.S. unemployment is "unusually strong."
Well, he's right. The pace of U.S. GDP growth (second quarter 1.7%) isn't enough for job growth. The generally accepted figure for the U.S. economy just to stay even with new people becoming available to get jobs (high school, college graduates, etc.) is 2.5%. And, that says nothing about the 13 million people who are currently unemployed.
I'm all for whatever the Fed wants to do to help (more) but I don't think they can do it alone (because whatever they've done hasn't helped enough). The Fed has "tools." But that hasn't been enough.
There wasn't enough real "stimulus" back when the recession hit. As I've pointed out before here, both Paul Krugman and Warren Buffet said then that the "stimulus" would not be enough. Here's a quote from Krugman's new book ("End This Depression Now"/ W.W. Norton and Company/ 2012): "So what did (President) Obama do? The American Recovery and Reinvestment Act (ARRA), the official name of the stimulus plan, had a headline price tag of $787 billion, although some of that was tax cuts that would have taken place anyway. Indeed, almost 40% of the total consisted of tax cuts, which were probably only half or less as effective in stimulating demand as actual increases in government spending."
(Krugman continued) "Of the rest, a large chunk consisted of funds to extend unemployment benefits, another chunk consisted of aid to help extend Medicaid, and a further chunk was aid to state and local governments to help them avoid spending cuts as their revenues fell. Only a fairly small piece was for the kind of spending - building and fixing roads, and so on - that we normally think of when we talk of stimulus. There was nothing resembling an FDR-style Works progress Administration. (At its peak, the WPA employed three million Americans, or about 10% of the workforce. An equivalent-sized program today would employ 13 million workers.)"
So, Krugman, in talking about why we're where we are now (GDP growth at 1.7%), goes back to the inadequate stimulus that was passed years back. Inadequate demand, inadequate investment, growth at "stall speed" (to use a term from Roubini) all prove that we never spent enough to get the economy going again. Obviously, inadequate job creation follows that.
While I applaud the attitude of the Fed, I'm not sure what it's going to do to help. Evidently, Mitt Romney plans to fire Bernanke if he's elected. Of course, that's a big "if."
Tuesday, August 21, 2012
Court Voids EPA Cross-State Pollution Rule
http://online.wsj.com/article/SB10000872396390443855804577603302771584214.html?mod=WSJ_hp_LEFTWhatsNewsCollection
***************
"Little did I realize that my desire to add value to others would be the thing that added value to me." (John C. Maxwell)
***************
Today a federal appeals court vacated the EPA's latest rule limiting soot and smog-forming air pollution that crosses state lines.
The U.S. Court of Appeals in the District of Columbia said the rule affecting power plants "exceeds the agency's statutory authority" and remanded the rule for the EPA to revise.
The court was scrutinizing the EPA's Cross-State Air Pollution Rule which sets state-by-state limits on pollution that blows across state lines.
This has to be a blow to the EPA bureaucrats that are trying to shut down coal-fired power plants in Texas.
Note to the EPA: how about "negotiating" something with the states that constitutes a long term solution benefiting all sides and preserving (instead of threatening) power for the people who use it?
What a concept!
***************
"Little did I realize that my desire to add value to others would be the thing that added value to me." (John C. Maxwell)
***************
Today a federal appeals court vacated the EPA's latest rule limiting soot and smog-forming air pollution that crosses state lines.
The U.S. Court of Appeals in the District of Columbia said the rule affecting power plants "exceeds the agency's statutory authority" and remanded the rule for the EPA to revise.
The court was scrutinizing the EPA's Cross-State Air Pollution Rule which sets state-by-state limits on pollution that blows across state lines.
This has to be a blow to the EPA bureaucrats that are trying to shut down coal-fired power plants in Texas.
Note to the EPA: how about "negotiating" something with the states that constitutes a long term solution benefiting all sides and preserving (instead of threatening) power for the people who use it?
What a concept!
Monday, August 20, 2012
Zakaria's Mistake
http://www.nytimes.com/2012/08/20/business/media/scandal-threatens-fareed-zakarias-image-as-media-star.html?_r=1&ref=business
***************
"People with humility don't think less of themselves; they just think of themselves less." (Ken Blanchard and Norman Vincent Peale)
***************
Fareed Zakaria's "The Post-American World" was, for many reasons, the best non-fiction book written in 2008. He defined the world as he saw it then with the great story of our times being "the rise of the rest:" the growth of countries like China, India, Brazil, Russia, South Africa and many more. He made it interesting: I don't think many of us knew that Chinese Admiral Zheng He began expeditions to explore the world 87 years before Christopher Columbus in ships that were much larger and better constructed. On his first sailing, in 1405, he took 317 vessels and 28,000 men (compared with Columbus 4 boats and 150 sailors). The largest vessels in the Chinese fleet were over 400 feet! Each ship required so much wood that 300 acres of forest were felled to build a single one.
China was "ahead" (my term) before Western Europe and was charging to get "ahead" again. China's GDP growth over the last 30/40 years has been nothing short of exceptional.
To Zakaria (and his book editors), the challenge for America was/is political decline, "...for as others grow in importance, the central role of the United States has to shrink." While Zakaria may not have intended to put it this way, he was/is saying that the 21st century will be China's century and the U.S. needs to move over.
Between his books, feature articles in Time Magazine, and his television show, where he had(has) the power to "get" any world or business leader "on," Zakaria could frame any issue.
My problem, as a teacher, was to try to balance Zakaria's view (some people would call he and other well known economist/political scientists "declinists."), which students should hear, with other views which contradict Zakaria's vision. So, for example, George Friedman asks what "ocean" China controls? Like it or not, America controls "all" of them. Or, for example, several voices who ask what about China's "demographic?" Will China stall because it has lost a generation (or more) to the "one child policy?"
So, with this in mind, it was quite surprising to me that Zakaria was "suspended" last week for "plagiarism." Suddenly there was no "Fareed Zakaria: GPS" (Global Public Square) on CNN - his show is weekly and I (along with 25 million other people around the world) watch. He was suspended from Time, CNN and The Washington Post simultaneously. All parties investigated and restored him within a week (or, after his suspension ends). I don't think anybody thought his plagiarism was intentional but I do think he's doing what, even for him, is too many things at once.
Zakaria is a "brand." But, he's been given a message that he's taken on too much and he either needs help or needs to do less.
Zakaria is as good as it gets but he needs to be careful.
***************
"People with humility don't think less of themselves; they just think of themselves less." (Ken Blanchard and Norman Vincent Peale)
***************
Fareed Zakaria's "The Post-American World" was, for many reasons, the best non-fiction book written in 2008. He defined the world as he saw it then with the great story of our times being "the rise of the rest:" the growth of countries like China, India, Brazil, Russia, South Africa and many more. He made it interesting: I don't think many of us knew that Chinese Admiral Zheng He began expeditions to explore the world 87 years before Christopher Columbus in ships that were much larger and better constructed. On his first sailing, in 1405, he took 317 vessels and 28,000 men (compared with Columbus 4 boats and 150 sailors). The largest vessels in the Chinese fleet were over 400 feet! Each ship required so much wood that 300 acres of forest were felled to build a single one.
China was "ahead" (my term) before Western Europe and was charging to get "ahead" again. China's GDP growth over the last 30/40 years has been nothing short of exceptional.
To Zakaria (and his book editors), the challenge for America was/is political decline, "...for as others grow in importance, the central role of the United States has to shrink." While Zakaria may not have intended to put it this way, he was/is saying that the 21st century will be China's century and the U.S. needs to move over.
Between his books, feature articles in Time Magazine, and his television show, where he had(has) the power to "get" any world or business leader "on," Zakaria could frame any issue.
My problem, as a teacher, was to try to balance Zakaria's view (some people would call he and other well known economist/political scientists "declinists."), which students should hear, with other views which contradict Zakaria's vision. So, for example, George Friedman asks what "ocean" China controls? Like it or not, America controls "all" of them. Or, for example, several voices who ask what about China's "demographic?" Will China stall because it has lost a generation (or more) to the "one child policy?"
So, with this in mind, it was quite surprising to me that Zakaria was "suspended" last week for "plagiarism." Suddenly there was no "Fareed Zakaria: GPS" (Global Public Square) on CNN - his show is weekly and I (along with 25 million other people around the world) watch. He was suspended from Time, CNN and The Washington Post simultaneously. All parties investigated and restored him within a week (or, after his suspension ends). I don't think anybody thought his plagiarism was intentional but I do think he's doing what, even for him, is too many things at once.
Zakaria is a "brand." But, he's been given a message that he's taken on too much and he either needs help or needs to do less.
Zakaria is as good as it gets but he needs to be careful.
Friday, August 17, 2012
Coal & Climate Change
http://online.wsj.com/article/SB10000872396390444508504577591212039656948.html?mod=WSJ_Opinion_LEFTSecondBucket
***************
"Always be on the lookout for ideas. Be completely indiscriminate as to the source ... It doesn't matter who thought of an idea." (Jeffrey J. Fox)
***************
Robert Bryce wrote an excellent article in the "City Journal" that was picked up by the editors of wsj.com. It's about "coal." Coal appears to be the "villain of the piece" today because the EPA believes that coal plants, "... by emitting carbon dioxide in profusion, contribute to global warming." I have the impression that the EPA would just as soon shut down all the coal plants in Texas. Since they (the EPA bureaucrats) wouldn't suffer the electricity shortages that would play havoc with air conditioning, refrigeration, etc, in Texas, they'd (the EPA) feel they'd done their duty in the fight against global warming without any discomfort to themselves. Sad.
Bryce went to the most prolific coal mine in North America to see what they do and discovered that they load one coal train per hour (roughly) so by noon in a single day, they had loaded 11 trains, each with 16,000 tons of coal. That particular mine is probably good for another 5 decades. It produces 3 tons of coal per second.
Nobody wants global warming and it looks like progress is being made with sequestering carbon dioxide during coal-fired electricity generation (see my prior post). So, why can't the EPA and the Department of Energy, which seems to be taking the "sequestration" process seriously, get together on what they're doing? The Texas Clean Energy Project might be a good way to do that. But, of course, all that is just too logical.
From Robert Bryce: "There's no denying that coal has earned its reputation as a relatively dirty fuel. But those concerned about CO2 emissions and climate change should realize that the administration's attack on coal is little more than a token gesture. The rest of the world will continue to burn coal, and lots of it. Reducing the domestic use of coal may force Americans to pay higher prices for electricity, but it will have nearly NO EFFECT ON GLOBAL EMISSIONS (my emphasis)."
Bryce again: "But even if the EPA and the Obama administration succeed in prohibiting new coal-fired electricity generation in the United States, they will leave global coal demand and CO2 emissions almost unchanged. Over the past decade or so, American coal consumption fell by 5%, but global coal consumption soared, growing by about the same amount as the growth in oil, natural gas, and nuclear combined. Coal now fuels about 40% of global electricity production. Coal's dominance helps explain why global CO2 emissions rose by 28.5% between 2001 and 2010, even as American CO2 emissions fell by 1.7%. Over the past decade, even if American emissions had dropped to zero, global emissions would still have increased."
Bryce points out that ExxonMobil's current energy forecast predicts that in 2030, the cheapest form of electricity production will remain coal-fired generation units. This means that, even at that point in time, electricity produced by coal would be cheaper than electricity produced by natural gas, nuclear, wind, or solar photovoltaic panels.
So, wouldn't it make sense to follow projects that seem to work with more and more investment in things like carbon dioxide sequestration during coal-fired energy generation? So, Japan and Germany, which are shutting down all of their nuclear reactors, have to look at coal. German utilities are already placing their bets on coal. Coal will be used. The question is, can the world come up with a way to deal the emissions question?
China, where CO2 emissions have gone up 123% between 2001 and 2010, is investing $1 billion in a Texas sequestering project, while the U.S. EPA is threatening to shut down Texas coal-fired power plants. How ironic!
*****
According to "wire reports" and the Dallas Morning News today (8/17/12), the amount of carbon dioxide being released into the atmosphere in the U.S. has fallen dramatically to its lowest level in 20 years, and government officials say the biggest reason is that cheap and plentiful natural gas has led many power plant operators to switch from "dirtier-burning" coal.
According to this report: "Many of the world's leading climate scientists didn't see the drop coming, in large part because it happened as a result of market forces rather than direct government action against carbon dioxide ..."
Market Forces! What a concept!
***************
"Always be on the lookout for ideas. Be completely indiscriminate as to the source ... It doesn't matter who thought of an idea." (Jeffrey J. Fox)
***************
Robert Bryce wrote an excellent article in the "City Journal" that was picked up by the editors of wsj.com. It's about "coal." Coal appears to be the "villain of the piece" today because the EPA believes that coal plants, "... by emitting carbon dioxide in profusion, contribute to global warming." I have the impression that the EPA would just as soon shut down all the coal plants in Texas. Since they (the EPA bureaucrats) wouldn't suffer the electricity shortages that would play havoc with air conditioning, refrigeration, etc, in Texas, they'd (the EPA) feel they'd done their duty in the fight against global warming without any discomfort to themselves. Sad.
Bryce went to the most prolific coal mine in North America to see what they do and discovered that they load one coal train per hour (roughly) so by noon in a single day, they had loaded 11 trains, each with 16,000 tons of coal. That particular mine is probably good for another 5 decades. It produces 3 tons of coal per second.
Nobody wants global warming and it looks like progress is being made with sequestering carbon dioxide during coal-fired electricity generation (see my prior post). So, why can't the EPA and the Department of Energy, which seems to be taking the "sequestration" process seriously, get together on what they're doing? The Texas Clean Energy Project might be a good way to do that. But, of course, all that is just too logical.
From Robert Bryce: "There's no denying that coal has earned its reputation as a relatively dirty fuel. But those concerned about CO2 emissions and climate change should realize that the administration's attack on coal is little more than a token gesture. The rest of the world will continue to burn coal, and lots of it. Reducing the domestic use of coal may force Americans to pay higher prices for electricity, but it will have nearly NO EFFECT ON GLOBAL EMISSIONS (my emphasis)."
Bryce again: "But even if the EPA and the Obama administration succeed in prohibiting new coal-fired electricity generation in the United States, they will leave global coal demand and CO2 emissions almost unchanged. Over the past decade or so, American coal consumption fell by 5%, but global coal consumption soared, growing by about the same amount as the growth in oil, natural gas, and nuclear combined. Coal now fuels about 40% of global electricity production. Coal's dominance helps explain why global CO2 emissions rose by 28.5% between 2001 and 2010, even as American CO2 emissions fell by 1.7%. Over the past decade, even if American emissions had dropped to zero, global emissions would still have increased."
Bryce points out that ExxonMobil's current energy forecast predicts that in 2030, the cheapest form of electricity production will remain coal-fired generation units. This means that, even at that point in time, electricity produced by coal would be cheaper than electricity produced by natural gas, nuclear, wind, or solar photovoltaic panels.
So, wouldn't it make sense to follow projects that seem to work with more and more investment in things like carbon dioxide sequestration during coal-fired energy generation? So, Japan and Germany, which are shutting down all of their nuclear reactors, have to look at coal. German utilities are already placing their bets on coal. Coal will be used. The question is, can the world come up with a way to deal the emissions question?
China, where CO2 emissions have gone up 123% between 2001 and 2010, is investing $1 billion in a Texas sequestering project, while the U.S. EPA is threatening to shut down Texas coal-fired power plants. How ironic!
*****
According to "wire reports" and the Dallas Morning News today (8/17/12), the amount of carbon dioxide being released into the atmosphere in the U.S. has fallen dramatically to its lowest level in 20 years, and government officials say the biggest reason is that cheap and plentiful natural gas has led many power plant operators to switch from "dirtier-burning" coal.
According to this report: "Many of the world's leading climate scientists didn't see the drop coming, in large part because it happened as a result of market forces rather than direct government action against carbon dioxide ..."
Market Forces! What a concept!
Wednesday, August 15, 2012
Sinopec Investing In Texas Clean Energy
http://online.wsj.com/article/SB10000872396390444042704577589092360345550.html?mod=WSJ_hp_LEFTWhatsNewsCollection
***************
"An invasion of armies can be resisted, but not an invasion of ideas." (Victor Hugo)
***************
According to wsj.com, a Chinese group that includes Sinopec is in advanced talks to put up to $1 billion in a Texas clean energy project. This would be one of the biggest investments by a Chinese company in the U.S. power sector. Sinopec would do this (together with Chinese banks) by acquiring an equity stake in and provide financing to the roughly $2.5 billion Texas Energy Project. The project has already secured $450 million in grants from the U.S. Department of Energy, in addition to tax benefits. It also has the necessary permits and contracts, including a contract with San Antonio to buy its electricity for 25 years.
This project is about sequestering carbon dioxide from coal plants. As the coal is burned, carbon dioxide is trapped through one of several processes. Then it is stored underground and piped for use in oil recovery and other industrial uses.
Sinopec is looking to build "favor" in the U.S. as it aggressively acquires energy reserves. At the same time, Chinese oil-industry officials "...remain wary that Chinese energy investment in the U.S. will be criticized, especially following a deal by Sinopec rival Cnooc Ltd for Canada's Nexen inc. that includes some Gulf of Mexico properties."
To me, this is good news on several fronts. I have the impression that the U.S. EPA is on a mission to shut down coal-fired power plants in Texas. Elizabeth Souder pointed out in a July Dallas Morning News article that Luminant is being accused by the EPA of violating the Clean Air Act at two of the company's coal-fired power plants. Now, I'm just guessing that those Washington bureaucrats don't have to worry about "interrupted power" here in Texas when it's 100 degrees. But we do.
Fortunately, a different U.S. government department has come up with a way to support a Texas project to reduce carbon emissions: The Texas Energy Project. And China has come up with a way to spend money on that project in order to show good intent as its companies look to buy oil reserves.
Elizabeth Souder went on to point out in another article that same day that Panda Power managed to get "rare financing" for a natural gas-fired power plant that will ease concerns about the "lights going out in Texas." According to Souder, "The company expects the plant to begin making electricity in 2014, just as Texas' tight power supply problem becomes acute. State electricity regulators included the Panda plant in forecasts of future power supply, but it is comforting for a planned plant to actually get financing."
Maybe there's hope for coal plants and electric power in Texas because gas and oil are plentiful again.
***************
"An invasion of armies can be resisted, but not an invasion of ideas." (Victor Hugo)
***************
According to wsj.com, a Chinese group that includes Sinopec is in advanced talks to put up to $1 billion in a Texas clean energy project. This would be one of the biggest investments by a Chinese company in the U.S. power sector. Sinopec would do this (together with Chinese banks) by acquiring an equity stake in and provide financing to the roughly $2.5 billion Texas Energy Project. The project has already secured $450 million in grants from the U.S. Department of Energy, in addition to tax benefits. It also has the necessary permits and contracts, including a contract with San Antonio to buy its electricity for 25 years.
This project is about sequestering carbon dioxide from coal plants. As the coal is burned, carbon dioxide is trapped through one of several processes. Then it is stored underground and piped for use in oil recovery and other industrial uses.
Sinopec is looking to build "favor" in the U.S. as it aggressively acquires energy reserves. At the same time, Chinese oil-industry officials "...remain wary that Chinese energy investment in the U.S. will be criticized, especially following a deal by Sinopec rival Cnooc Ltd for Canada's Nexen inc. that includes some Gulf of Mexico properties."
To me, this is good news on several fronts. I have the impression that the U.S. EPA is on a mission to shut down coal-fired power plants in Texas. Elizabeth Souder pointed out in a July Dallas Morning News article that Luminant is being accused by the EPA of violating the Clean Air Act at two of the company's coal-fired power plants. Now, I'm just guessing that those Washington bureaucrats don't have to worry about "interrupted power" here in Texas when it's 100 degrees. But we do.
Fortunately, a different U.S. government department has come up with a way to support a Texas project to reduce carbon emissions: The Texas Energy Project. And China has come up with a way to spend money on that project in order to show good intent as its companies look to buy oil reserves.
Elizabeth Souder went on to point out in another article that same day that Panda Power managed to get "rare financing" for a natural gas-fired power plant that will ease concerns about the "lights going out in Texas." According to Souder, "The company expects the plant to begin making electricity in 2014, just as Texas' tight power supply problem becomes acute. State electricity regulators included the Panda plant in forecasts of future power supply, but it is comforting for a planned plant to actually get financing."
Maybe there's hope for coal plants and electric power in Texas because gas and oil are plentiful again.
Tuesday, August 14, 2012
HCA's Growing Profit
http://www.nytimes.com/2012/08/15/business/hca-giant-hospital-chain-creates-a-windfall-for-private-equity.html?_r=1&ref=business
***************
"It takes 2 to speak the truth - one to speak and one to hear." (Henry David Thoreau)
***************
Today's nytimes.com has a heavily researched article on how the HCA hospital system has achieved dramatic profit growth. According to the Times, HCA controls 163 hospitals from New Hampshire to California.
The article attaches excellent graphics depicting "Total Margin" (total margin is defined as total revenue minus total costs, divided by total costs) for HCA vs competitors. Since 2006, when it was taken private in a leveraged buyout, profits at its acute-care hospitals are up substantially. Essentially, three private equity firms made the buyout possible: Bain Capital, Kohlberg Kravis Roberts, and Merrill Private Equity (now owned by BOA).
Without getting into all of the detail, in 2008 HCA changed all of the billing codes it assigned to emergency room patients. As a result, many more patients began to be coded at the highest levels of emergency care which are reimbursed by Medicare at higher rates.
So, I'm probably just old fashioned (or just "old") but I think I'm seeing profit-oriented management looking to game the system - in this case, Medicare - for improved profits. This is the difficulty I have with "for profit" hospitals. If "profit" comes first, where's patient care on the list?
Here, I have to insert a quote: "Several years ago, digital billboards began popping up along highways throughout Florida, featuring the image of a painter falling from a ladder and the message: 'Accidents happen fast. Emergency care should too.' Like highway signs that list the travel times to various destinations, the billboards flashed in real time the emergency room wait times - 17 minutes for example, or 45 minutes - at nearby HCA hospitals."
Continuing the Times quote: "HCA wanted to attract more patients to its emergency rooms, and it did. Annual visits climbed 20% between 2007 and 2011." Emergency rooms "...are frequently money-losers because many patients do not have insurance. HCA found a solution: it figured out how to be paid more for the patients it was seeing." Its new billing codes charged more using higher level Medicare codes.
I could go on but what really causes me some heartburn is that HCA is simply charging more for what they do and charging it to Medicare which is at the heart of what needs to be fixed as part of the U.S. social safety net. And, just like Social Security, doesn't Medicare come out of our U.S. tax base?
***************
"It takes 2 to speak the truth - one to speak and one to hear." (Henry David Thoreau)
***************
Today's nytimes.com has a heavily researched article on how the HCA hospital system has achieved dramatic profit growth. According to the Times, HCA controls 163 hospitals from New Hampshire to California.
The article attaches excellent graphics depicting "Total Margin" (total margin is defined as total revenue minus total costs, divided by total costs) for HCA vs competitors. Since 2006, when it was taken private in a leveraged buyout, profits at its acute-care hospitals are up substantially. Essentially, three private equity firms made the buyout possible: Bain Capital, Kohlberg Kravis Roberts, and Merrill Private Equity (now owned by BOA).
Without getting into all of the detail, in 2008 HCA changed all of the billing codes it assigned to emergency room patients. As a result, many more patients began to be coded at the highest levels of emergency care which are reimbursed by Medicare at higher rates.
So, I'm probably just old fashioned (or just "old") but I think I'm seeing profit-oriented management looking to game the system - in this case, Medicare - for improved profits. This is the difficulty I have with "for profit" hospitals. If "profit" comes first, where's patient care on the list?
Here, I have to insert a quote: "Several years ago, digital billboards began popping up along highways throughout Florida, featuring the image of a painter falling from a ladder and the message: 'Accidents happen fast. Emergency care should too.' Like highway signs that list the travel times to various destinations, the billboards flashed in real time the emergency room wait times - 17 minutes for example, or 45 minutes - at nearby HCA hospitals."
Continuing the Times quote: "HCA wanted to attract more patients to its emergency rooms, and it did. Annual visits climbed 20% between 2007 and 2011." Emergency rooms "...are frequently money-losers because many patients do not have insurance. HCA found a solution: it figured out how to be paid more for the patients it was seeing." Its new billing codes charged more using higher level Medicare codes.
I could go on but what really causes me some heartburn is that HCA is simply charging more for what they do and charging it to Medicare which is at the heart of what needs to be fixed as part of the U.S. social safety net. And, just like Social Security, doesn't Medicare come out of our U.S. tax base?
Tuesday, July 24, 2012
Their Great Depression
http://online.wsj.com/article/SB10000872396390444873204577537232812750926.html?mod=WSJ_Opinion_LEFTTopOpinion
***************
"The word impossible is not in my dictionary." (Napoleon Bonaparte)
***************
Mort Zuckerman kicks off his "Opinion Journal" article (7/23/12) by quoting Ben Bernanke (Federal Reserve Chairman) that the U.S. economy is "stuck in the mud."
Zuckerman's interpretation of that remark is the same as mine: "...there has been no recovery since the theoretical ending of the recession in June of 2009."
I am part of a very small generation of babies born during WW II. As a child and adult, I have experienced (or read about) pretty much everything that has happened in the U.S. since WW II. So, I can relate to Zuckerman when he says that "For the 80% of Americans born after WW II, this is the Great Depression."
If you don't think so, check the numbers. Again Zuckerman: "The most recent signal of a weakening economy comes from the U.S. consumer, with the Commerce Department reporting last week that retail sales fell 0.5% in June, far below the expected 0.2% increase. A stunning 70% of U.S. retailers missed their sales targets in June, the third consecutive month that sales have weakened and the worst showing since November 2009."
So many numbers get thrown around by so many people (and there will be more since this is an election year) that it's almost impossible to look at the subject of what I call "true unemployment". But, let's go with Zuckerman: "...official unemployment rate - 8.2%," add "discouraged workers" (who have dropped out since the recession began in early 2008 - nearly 8 million) - 12%," add "part- time workers" who would like to be full time - 14.9%. So, true unemployment is 15%.
One of the most stunning statistics I've ever read is Zuckerman's statement that "Fewer Americans are working today than in the year 2000, despite the fact that our population has grown by 31 million (!) and our labor force by 11.4 million." He goes on: "Today, a record number of Americans have been out of work for more than 6 months, and a record number of households have at least one member looking for a job."
Unfortunately, all of these numbers get politicized but facts are facts. I have pointed out for years now that getting Paul Krugman (a decorated economist whose blog has been the most widely read in the world) and Warren Buffet (a dedicated and highly successful capitalist) to agree on what time it is would be an achievement. Yet, they both agreed at the start of the U.S. recession, and since, that not enough money was spent to get the economy back to life. Spending on infrastructure (as Mark Zandi has continuously pointed out to Congress and anyone else who would listen) here in the U.S. is much needed (roads and bridges) and creates jobs where the spending from those workers adds more jobs (or, as Zandi calls it, a 1.5 multiple). That spending should be larger than it was and could have supplied taxable income to support municipalities currently facing bankruptcy.
I have no fear of this type of spending "causing" inflation. Once the spending (large and careful) starts up again, jobs and taxes will support what's needed without inflation (there's way too much slack in the economy - just watch the "Fed" - they're promising to hold interest rates down thru 2014, or is it thru 2016, or later than that?). Once the GDP growth rate is back up around 4% to 5% again, cut back wherever it's appropriate in big government - nobody will object.
Spending on infrastructure worldwide in a public/private partnership is a recommendation from one of the most respected economists in the world: Justin Yifu Lin, chief economist of the World Bank and one of the architects of China's dramatic economic growth. Lin, a University of Chicago PhD in economics suggests that infrastructure spending in developing economies circles back to demand for the products made by developed economies (like construction equipment, etc.). I simplify, but to read more, read "Bridges to Somewhere" by Lin in "Foreign Policy" (September 1, 2011).
Every idea and every hope has to start somewhere. We need to do something.
***************
"The word impossible is not in my dictionary." (Napoleon Bonaparte)
***************
Mort Zuckerman kicks off his "Opinion Journal" article (7/23/12) by quoting Ben Bernanke (Federal Reserve Chairman) that the U.S. economy is "stuck in the mud."
Zuckerman's interpretation of that remark is the same as mine: "...there has been no recovery since the theoretical ending of the recession in June of 2009."
I am part of a very small generation of babies born during WW II. As a child and adult, I have experienced (or read about) pretty much everything that has happened in the U.S. since WW II. So, I can relate to Zuckerman when he says that "For the 80% of Americans born after WW II, this is the Great Depression."
If you don't think so, check the numbers. Again Zuckerman: "The most recent signal of a weakening economy comes from the U.S. consumer, with the Commerce Department reporting last week that retail sales fell 0.5% in June, far below the expected 0.2% increase. A stunning 70% of U.S. retailers missed their sales targets in June, the third consecutive month that sales have weakened and the worst showing since November 2009."
So many numbers get thrown around by so many people (and there will be more since this is an election year) that it's almost impossible to look at the subject of what I call "true unemployment". But, let's go with Zuckerman: "...official unemployment rate - 8.2%," add "discouraged workers" (who have dropped out since the recession began in early 2008 - nearly 8 million) - 12%," add "part- time workers" who would like to be full time - 14.9%. So, true unemployment is 15%.
One of the most stunning statistics I've ever read is Zuckerman's statement that "Fewer Americans are working today than in the year 2000, despite the fact that our population has grown by 31 million (!) and our labor force by 11.4 million." He goes on: "Today, a record number of Americans have been out of work for more than 6 months, and a record number of households have at least one member looking for a job."
Unfortunately, all of these numbers get politicized but facts are facts. I have pointed out for years now that getting Paul Krugman (a decorated economist whose blog has been the most widely read in the world) and Warren Buffet (a dedicated and highly successful capitalist) to agree on what time it is would be an achievement. Yet, they both agreed at the start of the U.S. recession, and since, that not enough money was spent to get the economy back to life. Spending on infrastructure (as Mark Zandi has continuously pointed out to Congress and anyone else who would listen) here in the U.S. is much needed (roads and bridges) and creates jobs where the spending from those workers adds more jobs (or, as Zandi calls it, a 1.5 multiple). That spending should be larger than it was and could have supplied taxable income to support municipalities currently facing bankruptcy.
I have no fear of this type of spending "causing" inflation. Once the spending (large and careful) starts up again, jobs and taxes will support what's needed without inflation (there's way too much slack in the economy - just watch the "Fed" - they're promising to hold interest rates down thru 2014, or is it thru 2016, or later than that?). Once the GDP growth rate is back up around 4% to 5% again, cut back wherever it's appropriate in big government - nobody will object.
Spending on infrastructure worldwide in a public/private partnership is a recommendation from one of the most respected economists in the world: Justin Yifu Lin, chief economist of the World Bank and one of the architects of China's dramatic economic growth. Lin, a University of Chicago PhD in economics suggests that infrastructure spending in developing economies circles back to demand for the products made by developed economies (like construction equipment, etc.). I simplify, but to read more, read "Bridges to Somewhere" by Lin in "Foreign Policy" (September 1, 2011).
Every idea and every hope has to start somewhere. We need to do something.
Friday, July 20, 2012
Law School
http://www.nytimes.com/2012/07/15/opinion/sunday/an-existential-crisis-for-law-schools.html?scp=1&sq=An%20Existential%20Crisis%20For%20Law%20Schools&st=Search
***************
"The uncreative mind can spot wrong answers, but it takes a creative mind to spot wrong questions." (Antony Jay)
***************
In a study reported on in the NY Times on Sunday, only 55% of 2011 law school graduates had a law-related job within 9 months after graduation. These are jobs that require passing the bar exam. If you include "jobs helped by a law degree" and "professional non-legal jobs," that number jumps to 67%.
This data was from a study by William Henderson of the Indiana University School of Law, who analyzed recent data from the American Bar Association.
28% were unemployed or underemployed: "And at the 20 law schools with the highest employment, 83% were working as lawyers. At the bottom 20, it was a dismal 31%."
Here's another quote: "These numbers are far worse than jobs data going back a generation and should be a deep embarrassment to law schools, which have been churning out more graduates than the economy can employ, indulging themselves in copious revenues that higher tuitions and bigger classes bring in. A growing list of deans acknowledge that legal education is facing an existential crisis, but the transition to a more sustainable model will be difficult and messy."
The article goes on to point out that, in 2009, twice as many people passed bar exams as there were legal openings and that this could go on for years.
Not everyone can go to medical school - by that I mean that, if an undergraduate student wants to go on to get a professional certification that sets them up to better compete for employment, medical schools have stayed exclusive and preparation to get into them had to start back in high school. The "law profession" hasn't been that smart. Consequently, if a student wants to go to law school now in order to better compete for professional employment, it better be to a Top 10 (or Top 15) law school.
When I'm asked by students about "grad school," I always encourage them to go because one more degree can do nothing but help (especially if it's an MBA, if you're a business student, etc.). But, with law school, I now have to tell them that too much depends on LSAT scores that probably are out of reach for even currently very successful lawyers in the generation ahead of them.
So, for the class of 2010, the average law school debt was $98,500 (or $1,200 per month in loan payments over 10 years). How many of those students are even in an employment situation to pay that kind of money back?
The law profession is letting itself down.
***************
"The uncreative mind can spot wrong answers, but it takes a creative mind to spot wrong questions." (Antony Jay)
***************
In a study reported on in the NY Times on Sunday, only 55% of 2011 law school graduates had a law-related job within 9 months after graduation. These are jobs that require passing the bar exam. If you include "jobs helped by a law degree" and "professional non-legal jobs," that number jumps to 67%.
This data was from a study by William Henderson of the Indiana University School of Law, who analyzed recent data from the American Bar Association.
28% were unemployed or underemployed: "And at the 20 law schools with the highest employment, 83% were working as lawyers. At the bottom 20, it was a dismal 31%."
Here's another quote: "These numbers are far worse than jobs data going back a generation and should be a deep embarrassment to law schools, which have been churning out more graduates than the economy can employ, indulging themselves in copious revenues that higher tuitions and bigger classes bring in. A growing list of deans acknowledge that legal education is facing an existential crisis, but the transition to a more sustainable model will be difficult and messy."
The article goes on to point out that, in 2009, twice as many people passed bar exams as there were legal openings and that this could go on for years.
Not everyone can go to medical school - by that I mean that, if an undergraduate student wants to go on to get a professional certification that sets them up to better compete for employment, medical schools have stayed exclusive and preparation to get into them had to start back in high school. The "law profession" hasn't been that smart. Consequently, if a student wants to go to law school now in order to better compete for professional employment, it better be to a Top 10 (or Top 15) law school.
When I'm asked by students about "grad school," I always encourage them to go because one more degree can do nothing but help (especially if it's an MBA, if you're a business student, etc.). But, with law school, I now have to tell them that too much depends on LSAT scores that probably are out of reach for even currently very successful lawyers in the generation ahead of them.
So, for the class of 2010, the average law school debt was $98,500 (or $1,200 per month in loan payments over 10 years). How many of those students are even in an employment situation to pay that kind of money back?
The law profession is letting itself down.
Thursday, July 5, 2012
Positive Reports On Jobs
http://www.nytimes.com/2012/07/06/business/economy/positive-reports-on-us-jobs.html?_r=1&ref=business
***************
"It takes two to speak the truth: one to speak and one to hear." (Henry David Thoreau)
***************
So, the NY Times reports this morning that: "The number of people seeking unemployment aid in the U.S. fell last week to its lowest level since mid-May, suggesting layoffs are easing and hiring could pick up."
They also reported that the "four-week average" (for unemployment applications), which smooths out weekly fluctuations, dipped 1,500 to 385,750. And that, when weekly benefit applications consistently fall below 375,000 "... it generally suggests hiring is strong enough to reduce the unemployment rate."
That's the good news. The Times also pointed out that the manufacturing sector contracted for the first time in three years based on data from the Institute for Supply Management which was reported on Monday. That's a closely watched statistic that I've referred to before here.
The Times also pointed out that "...consumer confidence fell for the fourth straight month based on June figures." To me, that's counter-intuitive to lower gas prices (which are always rising at this time of year) and improved housing market figures.
But, this is short term data. Elsewhere, there's a headline in today's Dallas Morning News business section: "Experts See High Jobless Rates Lasting Years." It basically refers to the fact that economists in the latest Associated Press Economy Survey expect the national unemployment rate to stay above 6% - the upper bounds of what's considered healthy - for at least four more years: "If the economists are correct, the job market will still be unhealthy seven years after the recession officially ended in June, 2009. That would be the longest stretch of high unemployment since the end of World War II."
Further: "Those in the survey expect unemployment to still be 8% on Election Day, and a majority predict it won't fall into normal range until 2015, or later."
This group opinion would be hard to argue with unless something were to happen that stimulated GDP growth more than what is currently anticipated.
***************
"It takes two to speak the truth: one to speak and one to hear." (Henry David Thoreau)
***************
So, the NY Times reports this morning that: "The number of people seeking unemployment aid in the U.S. fell last week to its lowest level since mid-May, suggesting layoffs are easing and hiring could pick up."
They also reported that the "four-week average" (for unemployment applications), which smooths out weekly fluctuations, dipped 1,500 to 385,750. And that, when weekly benefit applications consistently fall below 375,000 "... it generally suggests hiring is strong enough to reduce the unemployment rate."
That's the good news. The Times also pointed out that the manufacturing sector contracted for the first time in three years based on data from the Institute for Supply Management which was reported on Monday. That's a closely watched statistic that I've referred to before here.
The Times also pointed out that "...consumer confidence fell for the fourth straight month based on June figures." To me, that's counter-intuitive to lower gas prices (which are always rising at this time of year) and improved housing market figures.
But, this is short term data. Elsewhere, there's a headline in today's Dallas Morning News business section: "Experts See High Jobless Rates Lasting Years." It basically refers to the fact that economists in the latest Associated Press Economy Survey expect the national unemployment rate to stay above 6% - the upper bounds of what's considered healthy - for at least four more years: "If the economists are correct, the job market will still be unhealthy seven years after the recession officially ended in June, 2009. That would be the longest stretch of high unemployment since the end of World War II."
Further: "Those in the survey expect unemployment to still be 8% on Election Day, and a majority predict it won't fall into normal range until 2015, or later."
This group opinion would be hard to argue with unless something were to happen that stimulated GDP growth more than what is currently anticipated.
Monday, July 2, 2012
U.S. Manufacturing Shrinks
http://money.msn.com/business-news/article.aspx?feed=AP&date=20120702&id=15289567
***************
"It is not our job to protect the people from the consequences of their political choices." (Chief Justice John G. Roberts, Jr. on the Supreme Court's health care ruling)
***************
The headline here is that U.S. manufacturing has shrunk in June for the first time in nearly three years. The Institute for Supply Management (ISM) index has been closely watched by those of us in business for the last 30 years. This is essentially a trade group of purchasing managers that puts out a number each month which gauges manufacturing activity very accurately. When the number is above "50," things are good. Below 50, not so much.
The ISM index number for May was 53.5. The index for June was 49.7. It's not just that the number was below 50. It's that it was going in the wrong direction and had dropped 4 points month-to-month. It's the lowest reading since July, 2009 - a month after the Great Recession "officially" ended.
Economists said the index was consistent with GDP growth of 1.5%. There are many economists that feel it takes 2.5% GDP growth to keep the unemployment rate from going up.
China keeps an ISM index which is computed the same way. While I don't know the "number" for June, I do know that their number "grew" in June by the slowest pace in seven months.
The saddest part of the U.S. number is that it overshadowed more positive news on housing where U.S. construction spending rose for the second month in a row. And gas at the pump, where prices are usually going up at this time of year, has literally dropped 60 cents a gallon from its 2012 peak.
But, the ISM number is consistent with the overall hiring numbers where employers have added an average of 73,000 jobs per month in April and May. Dreadful. The first three months of 2012 averaged 226,000 jobs per month added to payrolls.
Maybe the only positive sign here is that there are some good numbers mixed with the bad!
***************
"It is not our job to protect the people from the consequences of their political choices." (Chief Justice John G. Roberts, Jr. on the Supreme Court's health care ruling)
***************
The headline here is that U.S. manufacturing has shrunk in June for the first time in nearly three years. The Institute for Supply Management (ISM) index has been closely watched by those of us in business for the last 30 years. This is essentially a trade group of purchasing managers that puts out a number each month which gauges manufacturing activity very accurately. When the number is above "50," things are good. Below 50, not so much.
The ISM index number for May was 53.5. The index for June was 49.7. It's not just that the number was below 50. It's that it was going in the wrong direction and had dropped 4 points month-to-month. It's the lowest reading since July, 2009 - a month after the Great Recession "officially" ended.
Economists said the index was consistent with GDP growth of 1.5%. There are many economists that feel it takes 2.5% GDP growth to keep the unemployment rate from going up.
China keeps an ISM index which is computed the same way. While I don't know the "number" for June, I do know that their number "grew" in June by the slowest pace in seven months.
The saddest part of the U.S. number is that it overshadowed more positive news on housing where U.S. construction spending rose for the second month in a row. And gas at the pump, where prices are usually going up at this time of year, has literally dropped 60 cents a gallon from its 2012 peak.
But, the ISM number is consistent with the overall hiring numbers where employers have added an average of 73,000 jobs per month in April and May. Dreadful. The first three months of 2012 averaged 226,000 jobs per month added to payrolls.
Maybe the only positive sign here is that there are some good numbers mixed with the bad!
Tuesday, June 26, 2012
Blinder On Stimulus
http://online.wsj.com/article/SB10001424052702304765304577478561041473358.html?mod=WSJ_Opinion_LEADTop
***************
"Example is not the main thing in influencing others ... it is the only thing." (Albert Schweitzer)
***************
Alan Blinder is an economics professor at Princeton and has served as Vice Chairman of the Federal Reserve. In his article published last night, he suggests that, with legions of construction workers remaining unemployed while we all drive over roads and bridges that need repair, just does not make sense.
He's right but we appear to have a "political economics" (my term) dividing line between the Democrats who want to help state and local governments maintain their level of spending (which has dropped 6.4% since its 2008 peak). According to Blinder, most Republicans reject this idea "...even when it saves the jobs of teachers, fire fighters and police officers."
Blinder has some solid ideas about what to do about this problem that he hopes will avoid "partisan ideology."
One of those ideas is on budget policy: "...we need a two-pronged fiscal package. In the near term, we need modest stimulus, focused tightly on creating jobs. But that stimulus should be paired with a vastly larger dose of long run deficit reduction - perhaps ten to twenty times larger than the stimulus - over the ten year budget window.
Blinder's ideas on public investment and education are important and also doable. I strongly recommend reading them. And, Congress should read them too!
***************
"Example is not the main thing in influencing others ... it is the only thing." (Albert Schweitzer)
***************
Alan Blinder is an economics professor at Princeton and has served as Vice Chairman of the Federal Reserve. In his article published last night, he suggests that, with legions of construction workers remaining unemployed while we all drive over roads and bridges that need repair, just does not make sense.
He's right but we appear to have a "political economics" (my term) dividing line between the Democrats who want to help state and local governments maintain their level of spending (which has dropped 6.4% since its 2008 peak). According to Blinder, most Republicans reject this idea "...even when it saves the jobs of teachers, fire fighters and police officers."
Blinder has some solid ideas about what to do about this problem that he hopes will avoid "partisan ideology."
One of those ideas is on budget policy: "...we need a two-pronged fiscal package. In the near term, we need modest stimulus, focused tightly on creating jobs. But that stimulus should be paired with a vastly larger dose of long run deficit reduction - perhaps ten to twenty times larger than the stimulus - over the ten year budget window.
Blinder's ideas on public investment and education are important and also doable. I strongly recommend reading them. And, Congress should read them too!
Monday, June 18, 2012
Schumpter On Dishonesty
http://www.economist.com/node/21556548/print
***************
"All human development, no matter what form it takes, must be outside the rules; otherwise, we would never have anything new." (Charles Kettering)
***************
Looking at the "Schumpeter" blog section of "The Economist," there's a post ("A tissue of lies") that features a social psychologist looking at why people lie and cheat in business (and even business school).
I didn't realize that I could have gotten my MBA (at least, over recent years) at Concordia College in the US Virgin Islands. In that particular institution, Mark Howard an attorney for BSkyB, a broadcaster, proved in a cross-examination that his pet schnauzer got very high grades having completed his MBA (in what appears to be record time).
Further, I find that in a survey of American graduate students, 56% of those pursuing an MBA admitted to having cheated in the previous year, compared with 47% of other students.
Schumpeter points out that the Sarbanes provision that makes misstated financials a criminally liable act for a CEO or CFO is a step in the right direction.
Schumpeter suggests that Dan Ariely's new book "The (Honest) Truth about Dishonesty," will reinvigorate the discussion. As a social psychologist who has spent years studying cheating (and teaching at the Duke Fuqua School of Business), Ariely contends that the vast majority of people are prone to cheating. He gets to a "vast majority" by including the "fudging" category: forgetting to put a few coins in an honesty box, etc.
Ariely has some interesting examples of fudging but his bottom line is: nudge people to police themselves by making it harder for them to rationalize their sins.
Some good thoughts.
***************
"All human development, no matter what form it takes, must be outside the rules; otherwise, we would never have anything new." (Charles Kettering)
***************
Looking at the "Schumpeter" blog section of "The Economist," there's a post ("A tissue of lies") that features a social psychologist looking at why people lie and cheat in business (and even business school).
I didn't realize that I could have gotten my MBA (at least, over recent years) at Concordia College in the US Virgin Islands. In that particular institution, Mark Howard an attorney for BSkyB, a broadcaster, proved in a cross-examination that his pet schnauzer got very high grades having completed his MBA (in what appears to be record time).
Further, I find that in a survey of American graduate students, 56% of those pursuing an MBA admitted to having cheated in the previous year, compared with 47% of other students.
Schumpeter points out that the Sarbanes provision that makes misstated financials a criminally liable act for a CEO or CFO is a step in the right direction.
Schumpeter suggests that Dan Ariely's new book "The (Honest) Truth about Dishonesty," will reinvigorate the discussion. As a social psychologist who has spent years studying cheating (and teaching at the Duke Fuqua School of Business), Ariely contends that the vast majority of people are prone to cheating. He gets to a "vast majority" by including the "fudging" category: forgetting to put a few coins in an honesty box, etc.
Ariely has some interesting examples of fudging but his bottom line is: nudge people to police themselves by making it harder for them to rationalize their sins.
Some good thoughts.
Wednesday, June 6, 2012
Deflation
http://www.businessweek.com/articles/2012-06-05/five-charts-that-show-deflation-is-a-growing-threat
***************
"There ain't no rules around here. We're trying to accomplish something." (Thomas Edison, Inventor)
***************
So, three years after the U.S. recession technically ended (June, 2009), there's still the threat of deflation. The consumer price index rose zero percent in April from March because falling energy prices made up for any other rising prices.
According to Peter Coy (article attached), "With slow growth and [weak] job creation, there's a risk...that the general price level will actually start to fall, as it did for several months at the end of 2008 in the teeth of the financial crisis. Deflation is good for shoppers but it's terrible for people who owe money because their incomes shrink while their debts don't. It's also bad for workers because it's a sign of economic weakness, pay cuts, and layoffs."
I like what Coy has done with his "5 Charts" depicting the deflationary forces at work. The first is crude oil price per barrel: dramatic and it's showing up at the pump. Number 2 is the "Commodity Price Index" which tracks 22 basic commodities (butter, steel scrap, rubber, sugar, corn, etc.), is down 7% since March 1.
The third deflationary chart is the "output gap" which traces the difference between what the economy is able to produce "...if it's running at top manageable speed and what it's actually producing." According to the CBO (Congressional Budget Office - an organization that has no political axe to grind), the output gap is around 5.5% of GDP. Obviously, excess capacity, at whatever level, puts downward pressure on the price of labor and equipment.
The fourth chart "10 Year Treasury Yield" ("...canaries in the inflation coal mine..."), has fallen to 1.5%. That's the lowest in the last 50 years.
The fifth chart (Number employed at all levels of government) shows government employment falling. This chart shows all levels of government employment actually falling 2.7% since June 2009, really offsetting some of the growth the private sector has managed to show during that period.
Not surprisingly, it was reported this week that both Paul Krugman and Larry Summers were advocating for more "stimulus" in the face of weak economic growth indicators. Krugman has been consistent about this since the original stimulus happened: he said it wasn't enough then and now he sees that being proven out. Summers was there as the original (President) Obama economic "czar" so, in his case, whatever he advocated then, he's saying now was not enough. Of course, this is the same Larry Summers who was defrocked as president of Harvard and carped about "...no adults being in charge..." while still working for (President) Obama as the economic czar.
So, "deflation," we'll see.
***************
"There ain't no rules around here. We're trying to accomplish something." (Thomas Edison, Inventor)
***************
So, three years after the U.S. recession technically ended (June, 2009), there's still the threat of deflation. The consumer price index rose zero percent in April from March because falling energy prices made up for any other rising prices.
According to Peter Coy (article attached), "With slow growth and [weak] job creation, there's a risk...that the general price level will actually start to fall, as it did for several months at the end of 2008 in the teeth of the financial crisis. Deflation is good for shoppers but it's terrible for people who owe money because their incomes shrink while their debts don't. It's also bad for workers because it's a sign of economic weakness, pay cuts, and layoffs."
I like what Coy has done with his "5 Charts" depicting the deflationary forces at work. The first is crude oil price per barrel: dramatic and it's showing up at the pump. Number 2 is the "Commodity Price Index" which tracks 22 basic commodities (butter, steel scrap, rubber, sugar, corn, etc.), is down 7% since March 1.
The third deflationary chart is the "output gap" which traces the difference between what the economy is able to produce "...if it's running at top manageable speed and what it's actually producing." According to the CBO (Congressional Budget Office - an organization that has no political axe to grind), the output gap is around 5.5% of GDP. Obviously, excess capacity, at whatever level, puts downward pressure on the price of labor and equipment.
The fourth chart "10 Year Treasury Yield" ("...canaries in the inflation coal mine..."), has fallen to 1.5%. That's the lowest in the last 50 years.
The fifth chart (Number employed at all levels of government) shows government employment falling. This chart shows all levels of government employment actually falling 2.7% since June 2009, really offsetting some of the growth the private sector has managed to show during that period.
Not surprisingly, it was reported this week that both Paul Krugman and Larry Summers were advocating for more "stimulus" in the face of weak economic growth indicators. Krugman has been consistent about this since the original stimulus happened: he said it wasn't enough then and now he sees that being proven out. Summers was there as the original (President) Obama economic "czar" so, in his case, whatever he advocated then, he's saying now was not enough. Of course, this is the same Larry Summers who was defrocked as president of Harvard and carped about "...no adults being in charge..." while still working for (President) Obama as the economic czar.
So, "deflation," we'll see.
Tuesday, June 5, 2012
Slow Recovery = No Recovery
http://online.wsj.com/article/SB10001424052702303918204577444222179044362.html?mod=WSJ_Opinion_LEADTop
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"Don't ever be too impressed with goal setting. Be impressed with goal getting." (John C. Maxwell)
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Robert Barro has articulated in today's wsj.com what many of us feel: there is no economic recovery. His numbers key on the growth rate of "real gross domestic product."
Barro points out that the average annual growth rate of U.S. GDP since 1948 has been 3.1% while, in 12/07 to 6/09 recession, GDP fell by 5%: "But this decline is 10% relative to trend - that is, after factoring in normal growth. To make up for this shortfall, the subsequent recovery has to attain growth rates averaging above 3% for several years."
Yet, Barro points out, in the current "recovery," growth has averaged only 2.4% per year and 1.8% in the first quarter of 2012. And, here is his point: "This low growth means that the U.S. economy has actually been falling further and further behind the normal trend. Therefore, it is not a recovery at all."
Unfortunately, professor Barro's ending points out that Keynesian-style demand stimulus has not worked for the past three years so we need to do something different like "... individual incentives to work, produce and invest." What Barro misses is that we didn't do enough infrastructure spending which would have created more jobs and more tax receipts for government.
That's OK. He's defined the problem - he just has the wrong "solution."
***************
"Don't ever be too impressed with goal setting. Be impressed with goal getting." (John C. Maxwell)
***************
Robert Barro has articulated in today's wsj.com what many of us feel: there is no economic recovery. His numbers key on the growth rate of "real gross domestic product."
Barro points out that the average annual growth rate of U.S. GDP since 1948 has been 3.1% while, in 12/07 to 6/09 recession, GDP fell by 5%: "But this decline is 10% relative to trend - that is, after factoring in normal growth. To make up for this shortfall, the subsequent recovery has to attain growth rates averaging above 3% for several years."
Yet, Barro points out, in the current "recovery," growth has averaged only 2.4% per year and 1.8% in the first quarter of 2012. And, here is his point: "This low growth means that the U.S. economy has actually been falling further and further behind the normal trend. Therefore, it is not a recovery at all."
Unfortunately, professor Barro's ending points out that Keynesian-style demand stimulus has not worked for the past three years so we need to do something different like "... individual incentives to work, produce and invest." What Barro misses is that we didn't do enough infrastructure spending which would have created more jobs and more tax receipts for government.
That's OK. He's defined the problem - he just has the wrong "solution."
Friday, June 1, 2012
Job Market Performance
http://www.nytimes.com/2012/06/02/business/economy/us-added-69000-jobs-in-may-jobless-rate-at-8-2.html?ref=business
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"The greatest enemy to tomorrow's success is sometimes today's success." (John C. Maxwell)
***************
Today's jobs report is no better than the last two that preceded it. The Labor Department said that the economy gained a net 69,000 jobs in May. The unemployment rate rose to 8.2% (from 8.1% in April) which is certainly not the direction anyone is looking for.
The Labor Department also revised April's gain in jobs, estimated in last month's report at 115,000, down to an increase of 77,000.
There's a general consensus that the economy needs to grow by about 125,000 jobs each month to just maintain the current unemployment rate. Yesterday, the estimate of overall growth for the U.S. for the first three months of 2012 was revised downward to a 1.9% annual rate from 2.2%. A rate of 2.5% GDP growth is the generally accepted equivalent for keeping job growth at 125,000 per month.
The U.S. auto industry has been a bright spot and that's usually a sign of flow thru impact on spending/jobs in the economy. It was reported this morning that Ford's U.S. sales rose 13% in May on strong demand for its F-Series pickups and SUVs. Importantly, Ford says demand for trucks has followed in increase in new home construction since the start of this year.
Let's hope that the rest of the economy starts to look like Ford and the auto industry.
***************
"The greatest enemy to tomorrow's success is sometimes today's success." (John C. Maxwell)
***************
Today's jobs report is no better than the last two that preceded it. The Labor Department said that the economy gained a net 69,000 jobs in May. The unemployment rate rose to 8.2% (from 8.1% in April) which is certainly not the direction anyone is looking for.
The Labor Department also revised April's gain in jobs, estimated in last month's report at 115,000, down to an increase of 77,000.
There's a general consensus that the economy needs to grow by about 125,000 jobs each month to just maintain the current unemployment rate. Yesterday, the estimate of overall growth for the U.S. for the first three months of 2012 was revised downward to a 1.9% annual rate from 2.2%. A rate of 2.5% GDP growth is the generally accepted equivalent for keeping job growth at 125,000 per month.
The U.S. auto industry has been a bright spot and that's usually a sign of flow thru impact on spending/jobs in the economy. It was reported this morning that Ford's U.S. sales rose 13% in May on strong demand for its F-Series pickups and SUVs. Importantly, Ford says demand for trucks has followed in increase in new home construction since the start of this year.
Let's hope that the rest of the economy starts to look like Ford and the auto industry.
Wednesday, May 23, 2012
A Weak Recovery
http://online.wsj.com/article/SB10001424052702304019404577418311631098508.html?mod=WSJ_Opinion_LEADTop
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"For the Flower to blossom, you need the right soil as well as the right seed. The same is true to cultivate good thinking." (William Bernbach)
***************
I'm continually annoyed with economists who call what we're in right now a "recovery." Just because it's not a recession doesn't mean it's a recovery. So, I'm going to call it a "non-recovery."
Harvey Golub has done a nice job of defining the non-recovery: the Minneapolis Fed tracks the economic performance of each recovery and compares gross domestic product (GDP) growth and job growth, "... the two most important indicators of economic performance."
So, over the last 60 years, there have been 11 recessions and 11 recoveries. This non-recovery is at the bottom of all 11. Cumulative non-farm job growth is just 1.9% 34 months into the post-recession period: that's the 9th worst of the 11 and well below the average job growth of 6.5%. Cumulative GDP growth is just 6.8% 11 quarters into the non-recovery, less than half the average (15.2%) and the "WORST" of all 11.
So, what did all that "stimulus" money accomplish? I should probably separate my use of the term "money." The "monetary policy" of the Fed has resulted in low interest rates - almost zero for the past 3 years. The thought here was to increase borrowing by individuals and businesses, generating "increased economic activity." It's positive effects in this non-recovery have mainly been to help the government borrow more cheaply, large banks recapitalize more quickly, and homeowners refinance at low rates. Quoting Golub: "Uncertainty regarding ObamaCare and higher taxes on businesses and individuals has discouraged the type of borrowing and lending that low rates generally encourage. Near-zero interest rates have also resulted in historically low yields on savings and encouraged riskier investments. In effect, we have subsidized increased spending by penalizing savings."
"Fiscal policy which, according to Golub, is under the control of the President and his party, increased expenditures by roughly $700 billion per year since 2008 and launched a spending package of about $800 billion (along with various temporary tax deductions), all of which resulted in an increase in national debt of over $5 trillion. Golub again: "In other words, we borrowed $5 trillion, for which we will pay interest for who knows how long, in order to stimulate the economy now."
(Here, Golub is basically defining what both Warren Buffet and Paul Krugman said back in 2008 wasn't enough. Alan Blinder (Princeton University economist and former Fed vice chairman) has recently joined that view. )
So, what did we get? Golub's perspective is that the money was spent poorly and we will get very little future value from it. I'm shocked, shocked! "Billions were spent to reward favored constituencies like government employees and the auto industry. Billions more were spent on training programs that don't work." Not enough went to infrastructure or other assets that will help the U.S. create wealth over time.
If you don't know what the regulatory environment is going to be, or, if you suspect it's going to be negative toward the business community, do you invest? Did the National Labor Relations Board recently tell Boeing that they could NOT build the new plant they had already built in South Carolina to double their production of new 787s? That's a government agency, put in place to protect the rights on union workers so they won't get taken advantage of, telling a state that they can't approve a new factory coming in to add a large number of jobs and capital investment to it's economy. I could go on.
Bottom line. Golub has a point: "The massive costs of the stimulus have been wasted because of the heavy counterweight put on the economy by the administration's anti-business and pro-redistribution policies."
***************
"For the Flower to blossom, you need the right soil as well as the right seed. The same is true to cultivate good thinking." (William Bernbach)
***************
I'm continually annoyed with economists who call what we're in right now a "recovery." Just because it's not a recession doesn't mean it's a recovery. So, I'm going to call it a "non-recovery."
Harvey Golub has done a nice job of defining the non-recovery: the Minneapolis Fed tracks the economic performance of each recovery and compares gross domestic product (GDP) growth and job growth, "... the two most important indicators of economic performance."
So, over the last 60 years, there have been 11 recessions and 11 recoveries. This non-recovery is at the bottom of all 11. Cumulative non-farm job growth is just 1.9% 34 months into the post-recession period: that's the 9th worst of the 11 and well below the average job growth of 6.5%. Cumulative GDP growth is just 6.8% 11 quarters into the non-recovery, less than half the average (15.2%) and the "WORST" of all 11.
So, what did all that "stimulus" money accomplish? I should probably separate my use of the term "money." The "monetary policy" of the Fed has resulted in low interest rates - almost zero for the past 3 years. The thought here was to increase borrowing by individuals and businesses, generating "increased economic activity." It's positive effects in this non-recovery have mainly been to help the government borrow more cheaply, large banks recapitalize more quickly, and homeowners refinance at low rates. Quoting Golub: "Uncertainty regarding ObamaCare and higher taxes on businesses and individuals has discouraged the type of borrowing and lending that low rates generally encourage. Near-zero interest rates have also resulted in historically low yields on savings and encouraged riskier investments. In effect, we have subsidized increased spending by penalizing savings."
"Fiscal policy which, according to Golub, is under the control of the President and his party, increased expenditures by roughly $700 billion per year since 2008 and launched a spending package of about $800 billion (along with various temporary tax deductions), all of which resulted in an increase in national debt of over $5 trillion. Golub again: "In other words, we borrowed $5 trillion, for which we will pay interest for who knows how long, in order to stimulate the economy now."
(Here, Golub is basically defining what both Warren Buffet and Paul Krugman said back in 2008 wasn't enough. Alan Blinder (Princeton University economist and former Fed vice chairman) has recently joined that view. )
So, what did we get? Golub's perspective is that the money was spent poorly and we will get very little future value from it. I'm shocked, shocked! "Billions were spent to reward favored constituencies like government employees and the auto industry. Billions more were spent on training programs that don't work." Not enough went to infrastructure or other assets that will help the U.S. create wealth over time.
If you don't know what the regulatory environment is going to be, or, if you suspect it's going to be negative toward the business community, do you invest? Did the National Labor Relations Board recently tell Boeing that they could NOT build the new plant they had already built in South Carolina to double their production of new 787s? That's a government agency, put in place to protect the rights on union workers so they won't get taken advantage of, telling a state that they can't approve a new factory coming in to add a large number of jobs and capital investment to it's economy. I could go on.
Bottom line. Golub has a point: "The massive costs of the stimulus have been wasted because of the heavy counterweight put on the economy by the administration's anti-business and pro-redistribution policies."
Friday, May 11, 2012
Easy Useless Economics
http://www.nytimes.com/2012/05/11/opinion/krugman-easy-useless-economics.html?hp#
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"A conclusion is the place where you get tired of thinking." (Edward DeBono)
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I believe the title of this post helps to describe what's wrong with economics. What I find especially nice about it is that it's the "title" of Paul Krugman's most recent blog post. Here we have a Nobel Prize winner in economics accusing his own profession of ineptitude.
Krugman's post begins in a very unique way which I won't spoil for those of you who might want to read it. Ultimately, he segues into the WW II analogy which many of us are fond of using which basically suggests that the massive military build-up for war beginning in 1939 in the U.S. produced, by 1941, a 20% increase in non-farm employment. In today's numbers, 20% would be 26 million jobs.
Since the onset of the worldwide financial crisis, and consistently thru the recession that officially began in the U.S. in December, 2007, both Krugman and Warren Buffet have said that a massive stimulus is needed. They have both continued to say that the U.S. did not provide enough stimulus.
With 12.7 to 13.7 million people "officially" unemployed, we have "...authoritative-sounding figures [that] insist that our problems are 'structural,' that they can't be fixed quickly." Krugman defines "structural unemployment" as involving the claim that American workers are stuck in the wrong industries or with the wrong skills. While certainly some of these claims can be made sector by sector, Krugman's point is that the current depression-like situation is so massive as to disprove the "structuralists" de facto.
Krugman's point is that the U.S. suffers from an overall lack of sufficient demand. This is the kind of "lack" that could and should be cured quickly with government programs designed to boost spending (the definition of what that spending is has created debate but I'll go with Mark Zandi's recommendations to Congress that involved infrastructure spending - roads/bridges - where the "jobs multiple" is the highest). I would quickly reference here China's legendary economist Justin Yifu Lin, currently chief economist of the World Bank, who advocates a global infrastructure initiative where both developed and developing countries could benefit from public-private partnerships (PPPs) which he analogizes as similar to what Eisenhower did to create the U.S. interstate highway system (see "Bridges to Somewhere," Justin Yifu Lin, "Foreign Policy," Fall, 2011).
A last great quote from Krugman: "Every time some self-important politician or pundit starts going on about how deficits are a burden on the next generation, remember that the biggest problem facing young Americans today isn't the future burden of debt - a burden, by the way, that premature spending cuts probably make worse, not better. It is, rather, the lack of jobs, which is preventing many graduates from getting started on their working lives."
I ask myself where the jobs will come from. Krugman and others have answers.
***************
"A conclusion is the place where you get tired of thinking." (Edward DeBono)
***************
I believe the title of this post helps to describe what's wrong with economics. What I find especially nice about it is that it's the "title" of Paul Krugman's most recent blog post. Here we have a Nobel Prize winner in economics accusing his own profession of ineptitude.
Krugman's post begins in a very unique way which I won't spoil for those of you who might want to read it. Ultimately, he segues into the WW II analogy which many of us are fond of using which basically suggests that the massive military build-up for war beginning in 1939 in the U.S. produced, by 1941, a 20% increase in non-farm employment. In today's numbers, 20% would be 26 million jobs.
Since the onset of the worldwide financial crisis, and consistently thru the recession that officially began in the U.S. in December, 2007, both Krugman and Warren Buffet have said that a massive stimulus is needed. They have both continued to say that the U.S. did not provide enough stimulus.
With 12.7 to 13.7 million people "officially" unemployed, we have "...authoritative-sounding figures [that] insist that our problems are 'structural,' that they can't be fixed quickly." Krugman defines "structural unemployment" as involving the claim that American workers are stuck in the wrong industries or with the wrong skills. While certainly some of these claims can be made sector by sector, Krugman's point is that the current depression-like situation is so massive as to disprove the "structuralists" de facto.
Krugman's point is that the U.S. suffers from an overall lack of sufficient demand. This is the kind of "lack" that could and should be cured quickly with government programs designed to boost spending (the definition of what that spending is has created debate but I'll go with Mark Zandi's recommendations to Congress that involved infrastructure spending - roads/bridges - where the "jobs multiple" is the highest). I would quickly reference here China's legendary economist Justin Yifu Lin, currently chief economist of the World Bank, who advocates a global infrastructure initiative where both developed and developing countries could benefit from public-private partnerships (PPPs) which he analogizes as similar to what Eisenhower did to create the U.S. interstate highway system (see "Bridges to Somewhere," Justin Yifu Lin, "Foreign Policy," Fall, 2011).
A last great quote from Krugman: "Every time some self-important politician or pundit starts going on about how deficits are a burden on the next generation, remember that the biggest problem facing young Americans today isn't the future burden of debt - a burden, by the way, that premature spending cuts probably make worse, not better. It is, rather, the lack of jobs, which is preventing many graduates from getting started on their working lives."
I ask myself where the jobs will come from. Krugman and others have answers.
Wednesday, May 9, 2012
Stabilizing Housing Market
http://www.nytimes.com/2012/05/10/business/fannie-mae-profit-signals-a-stabilizing-housing-market.html?_r=1&ref=business
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"I'm not an answering machine, I'm a questioning machine. If we have all the answers, how come we're in such a mess?" (Douglas Cardinal)
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According to Annie Lowrey,"Across the country, there are signs that the housing market is stabilizing. Home prices have continued to fall, but at a much slower pace. More Americans are buying houses than they were a year ago. Housing starts have climbed more than 10% in the last year, as home builders pick up construction of new homes and apartment buildings. Fannie and Freddie, which own or guarantee millions of home loans, lose money when borrowers default."
Locally, the rebound in the North Texas housing market continued in April with an 11% rise in pre-owned home sales over April, 2011 according to numbers released Tuesday from the Real Estate Center at Texas A&M. And, median home sale PRICES were up 9% from a year earlier.
That's the tenth month in a row that home sales were higher than in the same period of the previous year.
This has to connect back to "jobs." According to Richard Fisher, president of the Federal Reserve Bank of Dallas, as of March, the DFW metroplex had recovered about 99% of the jobs lost to the recession.
Using a slightly different methodology, the U.S. Bureau of Labor Statistics (BLS) had DFW still missing 10,100 jobs as of March. Of the 12 major metro areas tracked by the BLS, only Houston and Washington, D.C. had surpassed their past jobs peaks as of March. DFW, with a 94% recovery rate, is the closest to full recovery among the remaining 10. The next closest is Boston with a recovery rate of 69%.
Other cities in Texas have already passed their pre-recession peaks. Austin is already 4% ahead, and Houston is 34% ahead. DFW has a higher percentage of finance and insurance companies than other major Texas cities, and those two sectors were hit especially hard during the downturn.
Back in the DFW housing arena, a tighter inventory of homes listed for sale in 2012 is also causing prices to rise. In April, there were 24% fewer single-family homes for sale. And, there was only a 5.5 month supply of houses on the market. Before the recession, most economists were in agreement that a 6 month supply of homes was the norm for any housing market.
Another positive sign is job postings. The Labor Department said yesterday that U.S. companies in March posted the highest number of job openings in nearly 4 years. That would be the most since July, 2008. If we use the low number of all people unemployed as of March, 12.7 million (some people are still using 13.7 million), that means an average of 3.4 people competed for each open job. While that's far better than the nearly 7-to-1 ratio when the recession ended, in a healthy job market, the ratio would be around 2-to-1.
So, there are some positive indicators.
***************
"I'm not an answering machine, I'm a questioning machine. If we have all the answers, how come we're in such a mess?" (Douglas Cardinal)
***************
According to Annie Lowrey,"Across the country, there are signs that the housing market is stabilizing. Home prices have continued to fall, but at a much slower pace. More Americans are buying houses than they were a year ago. Housing starts have climbed more than 10% in the last year, as home builders pick up construction of new homes and apartment buildings. Fannie and Freddie, which own or guarantee millions of home loans, lose money when borrowers default."
Locally, the rebound in the North Texas housing market continued in April with an 11% rise in pre-owned home sales over April, 2011 according to numbers released Tuesday from the Real Estate Center at Texas A&M. And, median home sale PRICES were up 9% from a year earlier.
That's the tenth month in a row that home sales were higher than in the same period of the previous year.
This has to connect back to "jobs." According to Richard Fisher, president of the Federal Reserve Bank of Dallas, as of March, the DFW metroplex had recovered about 99% of the jobs lost to the recession.
Using a slightly different methodology, the U.S. Bureau of Labor Statistics (BLS) had DFW still missing 10,100 jobs as of March. Of the 12 major metro areas tracked by the BLS, only Houston and Washington, D.C. had surpassed their past jobs peaks as of March. DFW, with a 94% recovery rate, is the closest to full recovery among the remaining 10. The next closest is Boston with a recovery rate of 69%.
Other cities in Texas have already passed their pre-recession peaks. Austin is already 4% ahead, and Houston is 34% ahead. DFW has a higher percentage of finance and insurance companies than other major Texas cities, and those two sectors were hit especially hard during the downturn.
Back in the DFW housing arena, a tighter inventory of homes listed for sale in 2012 is also causing prices to rise. In April, there were 24% fewer single-family homes for sale. And, there was only a 5.5 month supply of houses on the market. Before the recession, most economists were in agreement that a 6 month supply of homes was the norm for any housing market.
Another positive sign is job postings. The Labor Department said yesterday that U.S. companies in March posted the highest number of job openings in nearly 4 years. That would be the most since July, 2008. If we use the low number of all people unemployed as of March, 12.7 million (some people are still using 13.7 million), that means an average of 3.4 people competed for each open job. While that's far better than the nearly 7-to-1 ratio when the recession ended, in a healthy job market, the ratio would be around 2-to-1.
So, there are some positive indicators.
Best Cities For Job Growth
http://www.newgeography.com/best-cities-job-growth-2012
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"Ideas have a short shelf life. You must act on them before the expiration date." (John C. Maxwell)
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Correlating the data from this year's edition of Forbes' Best Cities For Jobs survey, compiled by Pepperdine University's Michael Shires, found that small midsized metropolitan areas, with populations of 1 million or less, accounted for 27 of the 30 urban regions in the U.S. that are adding jobs at the fastest rate.
According to Wendell Cox, metropolitan areas with less than 1 million people accounted for 60% of urban growth over the last 10 years. Essentially, more Americans are moving to smaller regions than to larger ones. The trend toward smaller communities is likely to continue for several reasons: for one thing, new telecommunications technology serves to even the playing field for companies in smaller cities. You can now operate a sophisticated global business from Fargo, N.D., or Shreveport, La., in ways not possible 20 years ago.
Another reason for the trend is the predilections of two key expanding demographic groups: boomers and their offspring, the millennials. Aging boomers are NOT, in large part, hoping for the dense city life, as is often claimed. If they choose to move, they tend toward less dense and even rural areas. Young families and many better-educated workers also show signs of moving to less dense and affordable places.
A recent McKinsey study found that "middleweight" cities, many of them well under a million, have already started taking a larger percentage of the world's urban growth. McKinsey suggests that the notion that megacities will dominate the urban future constitutes "a common misconception."
My advice has always been that best search for job opportunities is to start by "sectorizing:" looking at the best business areas that continue to grow right thru recessions (health care, medical insurance, etc.). Add to that the "best cities for job growth." Midland/Odessa, Texas. Corpus Christi, Texas. San Angelo, Texas. These are cities that are growing again because of technological innovations that make events like the "shale boom" possible.
Following trends like this is like following job opportunities.
***************
"Ideas have a short shelf life. You must act on them before the expiration date." (John C. Maxwell)
***************
Correlating the data from this year's edition of Forbes' Best Cities For Jobs survey, compiled by Pepperdine University's Michael Shires, found that small midsized metropolitan areas, with populations of 1 million or less, accounted for 27 of the 30 urban regions in the U.S. that are adding jobs at the fastest rate.
According to Wendell Cox, metropolitan areas with less than 1 million people accounted for 60% of urban growth over the last 10 years. Essentially, more Americans are moving to smaller regions than to larger ones. The trend toward smaller communities is likely to continue for several reasons: for one thing, new telecommunications technology serves to even the playing field for companies in smaller cities. You can now operate a sophisticated global business from Fargo, N.D., or Shreveport, La., in ways not possible 20 years ago.
Another reason for the trend is the predilections of two key expanding demographic groups: boomers and their offspring, the millennials. Aging boomers are NOT, in large part, hoping for the dense city life, as is often claimed. If they choose to move, they tend toward less dense and even rural areas. Young families and many better-educated workers also show signs of moving to less dense and affordable places.
A recent McKinsey study found that "middleweight" cities, many of them well under a million, have already started taking a larger percentage of the world's urban growth. McKinsey suggests that the notion that megacities will dominate the urban future constitutes "a common misconception."
My advice has always been that best search for job opportunities is to start by "sectorizing:" looking at the best business areas that continue to grow right thru recessions (health care, medical insurance, etc.). Add to that the "best cities for job growth." Midland/Odessa, Texas. Corpus Christi, Texas. San Angelo, Texas. These are cities that are growing again because of technological innovations that make events like the "shale boom" possible.
Following trends like this is like following job opportunities.
Monday, May 7, 2012
Educational Volunteers vs Unions
http://www.city-journal.org/2012/cjc0504ppkk.html
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"The truth will set you free - but first it will make you angry." (John C. Maxwell)
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My mother taught 5th grade in the Huntington (NY) Union Free School District for 42 years until she retired. I never paid any attention to what the title of the "District" was ("Union Free"). But, today I am.
In what can't possibly be true, the "City Journal" reports that volunteers in the Culver City, California Unified School District are being bullied about paying union dues. In this West Los Angeles school district, the Association of Classified Employees (ACE) - a union representing non-teaching school staff - wants to force "...minimally compensated, hard-working volunteers and classroom adjuncts to unionize..." This is happening at the El Marino Language School which is a National Blue Ribbon Award winner.
In 1989, the parents at the El Marino Language School created "Advocates for Language Learning El Marino" (ALLEM), a non-profit organization that raises money to hire part-time, independent adjunct teachers for each classroom. The adjuncts work 1.5 to 3 hours per day, 5 days per week. These adjuncts are not unqualified or untrained amateurs. The money they make is supported by ALLEM's bake sales, silent auctions, pledges, etc.
The union argues (Really!) that the adjunct program is unfair to other schools that lack a similar level of parent and community involvement. Wait, there's more! The union proposes that ALLEM continue its fundraising to support higher-cost, unionized adjuncts. Here's an actual quote from the union president: "We decided as an executive board for the union that we needed to negotiate that they (the adjuncts) be brought into our unit. It's not a personal thing, it's a negotiations thing."
A spokesman for ALLEM said the group would need to raise 40% more money per year to pay for unionized employees.
The ACE's next steps include filing a grievance with the district, followed by an appeal to the union-aligned Public Employment Relations Board. According to Pete Peterson, the executive director of the Davenport Institute for Public Engagement at Pepperdine's School of Public Policy, "The union push to extort dues out of parent-funded workers is not limited to El Marino."
There are those who feel that California will never come back to what it once was as a state (or state of mind): expert economists and demographers come to mind. California citizens appear to be voting with their feet on California viability by leaving the state faster than new citizens can arrive.
If you've read this, pass the information about this situation on. I have but a small voice but, perhaps many voices can focus attention on this kind of blatant selfishness and stupidity.
My mother's school district was ultimately unionized in spite of her refusal to participate in that effort. She didn't think education should be unionized.
There are many who believe that the key to future GDP growth and/or productivity improvement in the United States is education. Education and innovation work hand-in-hand.
Could it be that situations like the one described here are what's limiting U.S. educational achievement vs other countries?
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"The truth will set you free - but first it will make you angry." (John C. Maxwell)
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My mother taught 5th grade in the Huntington (NY) Union Free School District for 42 years until she retired. I never paid any attention to what the title of the "District" was ("Union Free"). But, today I am.
In what can't possibly be true, the "City Journal" reports that volunteers in the Culver City, California Unified School District are being bullied about paying union dues. In this West Los Angeles school district, the Association of Classified Employees (ACE) - a union representing non-teaching school staff - wants to force "...minimally compensated, hard-working volunteers and classroom adjuncts to unionize..." This is happening at the El Marino Language School which is a National Blue Ribbon Award winner.
In 1989, the parents at the El Marino Language School created "Advocates for Language Learning El Marino" (ALLEM), a non-profit organization that raises money to hire part-time, independent adjunct teachers for each classroom. The adjuncts work 1.5 to 3 hours per day, 5 days per week. These adjuncts are not unqualified or untrained amateurs. The money they make is supported by ALLEM's bake sales, silent auctions, pledges, etc.
The union argues (Really!) that the adjunct program is unfair to other schools that lack a similar level of parent and community involvement. Wait, there's more! The union proposes that ALLEM continue its fundraising to support higher-cost, unionized adjuncts. Here's an actual quote from the union president: "We decided as an executive board for the union that we needed to negotiate that they (the adjuncts) be brought into our unit. It's not a personal thing, it's a negotiations thing."
A spokesman for ALLEM said the group would need to raise 40% more money per year to pay for unionized employees.
The ACE's next steps include filing a grievance with the district, followed by an appeal to the union-aligned Public Employment Relations Board. According to Pete Peterson, the executive director of the Davenport Institute for Public Engagement at Pepperdine's School of Public Policy, "The union push to extort dues out of parent-funded workers is not limited to El Marino."
There are those who feel that California will never come back to what it once was as a state (or state of mind): expert economists and demographers come to mind. California citizens appear to be voting with their feet on California viability by leaving the state faster than new citizens can arrive.
If you've read this, pass the information about this situation on. I have but a small voice but, perhaps many voices can focus attention on this kind of blatant selfishness and stupidity.
My mother's school district was ultimately unionized in spite of her refusal to participate in that effort. She didn't think education should be unionized.
There are many who believe that the key to future GDP growth and/or productivity improvement in the United States is education. Education and innovation work hand-in-hand.
Could it be that situations like the one described here are what's limiting U.S. educational achievement vs other countries?
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