Nice resource on trade balance in the US. Or I should say trade imbalance.

If you are teaching or learning about trade here is a nice concise resource for the year 2013.

It shows the dollar values of exports and imports from and to the US.  It also shows the general categories of goods that the US trades in with the rest of the world.

I highlighted Exports in yellow, Imports in red and the overall trade numbers in green.

The US had a merchandise (this DOES not include trade in services) trade deficit $650.857 Billion with the rest of the world. In other words, we bought $650.857 Billion dollars more in "stuff" than we sold to the rest of the world.

We love foreign made stuff!  Is this a good thing, bad thing, or just a thing?

We all know "education pays" in terms of income but it also pays in employment consistency. Interesting graphs here that make this important point.

It is clear that "education pays" in terms of absolute income people earn over their lifetime---the more you learn the more you earn.

But another benefit of more education is the likely-hood of having gainful employment on a continual basis.  If you lose your job you are more likely to find another one in a relatively short period of time.

This graph from the Census Bureaus American Community Survey illustrates this nicely.

I inserted a RED line at the age of 60 to show the difference between years of work experience a person would have at the various levels of education.

You can see clearly someone with less than a high school diploma fares the worst by far with only about 27 years of work experience on average. Those with a college degree (or more) and those with some college trend together with 40 years of experience.  High school graduates lag by less than 5 years.

Stay in school, kids...

For more support here is a graph from the same American Community Survey that shows median monthly income by education level and years of experience.  I put a RED line at the end of the data lines at 35+ years of experience. Dramatic, is it not?

I repeat. Stay in school, kids!

Inflation is not a boring topic. It is a thief in the night and the root cause of rebellion around the world. Can't get more exciting than that! See here why...

When I introduce the concept of  inflation in class I teach it from two angles. 

I tell students it is like a thief in the night.  It does not actually take money away from you but it makes the money in your pocket worth less (not to be confused with worthless) than it was worth yesterday.

Example:  A bottle of water costs $1.00 today.  I exchange one dollar for the water. Assume tomorrow the water is $2.00.  We certainly can say that the price has increased by a dollar, but I think it is more powerful and meaningful to say yesterdays dollar is worth half of what it was 24 hours earlier. I now have to give up two one dollar bills to get the bottle of water OR I can only buy half a bottle!

Another point I like to make is inflation creates social instability, especially for people in poorer, developing countries where a higher proportion of cash money is spent on "needs"---food, water, shelter, etc.

In many places where social instability or outright rebellion is happening if you rewind the events to the root cause it often started with rising prices on basic staples in the marketplace.

You can get students and other young people to protest in the streets for "democracy, freedom, etc" BUT you can get moms, dads and grandparents to join them if prices rise unexpectedly.  Movies are made about fights for freedom from oppression. Not so much about the real cause--loss of purchasing power due to inflation.

Do the research.  I think you will find this is true.  Look for it going forward.

Oh, wait, you don't have to!  Just read about this VERY THING here in the WSJ:

Inflation may lead to social unrest in developing countries because rising prices are especially painful for households that rely heavily on cash as a store of wealth, according to recent research from the Federal Reserve Bank of St. Louis. 

Yi Wen, an assistant vice president in the St. Louis Fed’s research division, wrote in a new working paper that in developing nations, “liquid money [cash and checking accounts] is the major form of household financial wealth and a vital tool of self-insurance [precautionary saving] to buffer idiosyncratic shocks because of the lack of the well-developed financial system.” 

Mr. Wen also noted “historical evidence” that “moderate inflation [around 10% to 20% a year] may be significant enough to cause widespread social and political unrest in developing countries.”

My salute to "Multiple Job Holders" in the US. Their numbers have increased significantly over the last year. This can't be good, can it??

The monthly jobs report has a lot of interesting data on employment/unemployment that is seldom reported on in the general media.

Here is one I find interesting: "Multiple Jobholders".

Highlighted in YELLOW are people whose primary and secondary jobs are BOTH part time.  There are 1.892million of them in January 2014.  That is a 6% increase over January of 2013.

Highlighted in RED are people whose primary and secondary jobs are BOTH full-time! There are 236,000 of them.  That is a 12% increase over January of 2013.

This means over the past 12 months there are 131,000 more people who gained at least one additional job (or both of them).  That is equivalent to the number of jobs created in the month of March of 2013.

Payin' the bills....

Your first look at January's Jobs Report. 113,000 new jobs created. Way below estimates from Left AND Right economists. Tepid at best.

Businesses created a total of 113,000 new jobs in January.  This is way below the general consensus of economists on the Left AND Right that about 185,000 were expected.

Highlighted in YELLOW are the areas where the jobs created in January 2014 were above the past two months level and higher than one year ago (Jan 2013).

Highlighted in RED are the areas where the the jobs created are below the past two month level and lower than one year ago.]

Highlighted in GREEN are the total for the overall "Goods Producing" sector which is higher than in prior periods, and "Private Service Producing" sector which is much lower than in prior periods.

"Government" at the bottom is down significantly.  This category includes Federal, State and Local employment.  The BLS reports that 9,000 of the job losses come from the US Postal service alone.

Source: BLS

US Gross State Product vs a Nations Gross Domestic Product.

A neat map that matches a US States Gross State Product (GSP) with the Gross Domestic Product (GDP) of country that with a similar dollar value of the production of goods and services.

For instance, the dollar value of output produced by Texas alone is roughly the same as the dollar value of output produced by ALL of Canada.

A nice perspective on the just how the US is STILL a powerhouse in producing "stuff".

If educated people marry other educated people and it makes income inequality worse is it a problem that needs a solution? Nice graph here that illustrates one piece of the income inequality puzzle

When the government collects and reports data on "Household Income" it includes the income of all the people living in a particular household.  Two people living separately will be counted as two household units and their income counted separately.

However, if they marry (or co-habitat) then they will have one combined household income. Half the households, double the income on a per household basis (no more total income, however).

As households are formed over time their characteristics based on several factors will affect total household income.

Education is one such variable that has been identified as one of the primary drivers of income inequality. Not the only one but significant enough to note

New data provided by the Census Bureau and interpreted by the Pew Research Center (graph below) shows that the rate of household formation by marriage has decreased overall since 2008 by an average of 11.4%.  However, the decrease is not evenly spread over educational attainment levels.

As you can see, those with a college degree get married at a higher rate than people with lower levels of educational attainment, and even though they have decreased they have decreased at a slower rate than the other categories (7.8% is significantly below the average).

Additionally, those with a degree have seen an uptick from 2011 to 2012 (brown bars to the extreme right) in family formation by marriage.

If income gains are going to those with more education and educated people are pairing up at a higher rate than other groups, then income inequality as measured by "Household Income" can only get wider.

I don't know how to fix this.  I just thought it was interesting and I don't think it is something that is talked enough about at a policy making level.

Should it???

My encounter with a "Snow Roller". You won't believe what happened next.

I live just north of Columbus, Ohio.  We had a unique weather event the night before last that produced a "Snow Roller". These are "natural" snowballs of various sizes that were formed with just the right conditions, temperature and wind.  I have never seen them before and apparently they are a rare occurrence.   A large soccer complex I live near has hundreds of them.  They have a very unique "swirl" pattern to them in the center.

Here is my daughter holding one just to give you a idea of the scale and scope of one.

Here is me holding one AND wearing it as a hat.  The kid in me required I do this.

It is difficult to see but this is the soccer field that is covered with them.  It is amazing to see these.  Glad I got the opportunity.  :)

Incentives: How much the Long Term unemployed used to earn when they worked and how much they now receive in cash benefits. This is difficult but numbers don't lie (or do they?)

I used this graph in a prior posting to ask why are the bulk of the long term unemployed in industries that have been employing the MOST people since the official end of the recession in June of 2009 (except manufacturing and construction)

I was curious as to what might be lost wages from work were and how much in cash (unemployment compensation) and near cash (SNAP, or "food stamps" benefits).

I used BLS data (see that below) for the average weekly wages, which I inserted in the graphic for the appropriate job category.

I used the national average for unemployment compensation and SNAP Benefits. Note there will be differences State by State in terms of unemployment compensation amounts--some higher, some lower.

The total in cash and near cash benefits an eligible unemployed worker is eligible for is $832.00 per week.
That is combing the two benefits and assuming for SNAP benefits a family of 4. So, the total could be more or less depending on the number of family members.

Compare the total in eligible weekly benefits to the total in average weekly earnings in each job category.

I believe economists would look at this and see---Incentive(s).

I am neutral on this. What do you think?

Source: NPR

Note: Here is where I found the average weekly wages. I used Dec 2013 weekly wage.

Source: BLS

The President spoke of the Long Term unemployed in the SOTU address but did he tell you what these people used to do for work? No? Ok, I will here...

What particular part of the economy did the currently Long Term Unemployed separate from when they lost their job?

I have to tell you I am VERY shocked by this. I assumed they would be part of an industry segment that was lagging in new job creation so there would be little opportunity to find work doing what they did before.

I would have expected Manufacturing and Construction to have much higher rates of long term unemployed as these industries have been disproportionately negatively impacted by the recession and are still lagging.

Source: NPR

The Top 3 and the 4th one are areas where job growth has been notably strong since the US officially exited the recession in June of 2010.

These job categories, except for "Professional and Business Services"(for the most part) are predominantly lower wage, lower skilled positions.

How do these people with no significant long term skills (just being honest) get absorbed back into the economy in a meaningful way?

What possible SPECIFIC policies can target these folks for gainful employment?

I am guessing the Minimum Wage will be mentioned as well.

So, we have lots of low skilled, low wage workers (don't look at me, look at the graph) on long term unemployment and the solution is to increase the cost of hiring these people (if they can get hired)?

Help me out with this, please...

Video (with sound inserted) of San Francisco 4 Days before the earthquake of 1906. So many historical, sociological, economic, and cultural observations one can glean from this.

Here is a great video that is chocked full of learning possibilities.  It is actual video footage taken 4 days before the 1906 Earthquake that leveled San Francisco.  Of course it did not originally have sound BUT someone edited it and insert sounds that would be typical of the activity taking place.

So cool. Not to be missed!!

You MUST watch to the end when they insert photos of the SAME street in the aftermath of the quake. Chilling.

Source: Gizmodo

My take on the Big Mac Index---the Big Mac Inflation Index. Am I onto something???

The Economist is out with its latest update on the Big Mac Index.  It is a playful illustration of the exchange rates and Purchasing Power Parity given just one commodity--McDonald's Big Mac.  Find out more about it HERE.

When I looked at the historical data available with the index I noticed in some countries the price of a Big Mac had changed quite a bit.

So I took the posted prices in the countries own currency from January 2012 (3rd column) and January 2014 (2nd column) and calculated the percent change in price of Big Mac (4th column).

The numbers are in descending order, from highest to lowest change in price.

I highlighted in RED the countries where the percentage price change was higher than the world wide average change in price of 9.28%.

Here is an assignment for you.  Check a few of the countries ACTUAL inflation rates and see how they correlate to the change in prices of Big Macs.   Maybe we have discovered a new fun measure of inflation---The Big Mac Inflation Index.  Just  send me some royalties. That's all I ask for.  :)

I compare the cost of a cook-out in 2013 with one in 1968 at average hourly wages and minimum wages for the two time periods. You won't believe the results!

I came across this grocery store advertisement from 1968 and decided to use it for a lesson on purchasing power. It is nice to have actual prices from a primary source.

In the red square I isolate the meat products.  Let's assume we are stocking up for a killer cook-out!

To simplify assume we will purchase 5 pounds of each meat (a 20 pound turkey is the exception AND I won't buy oysters as they are not a meat).

Now I shop...I buy all the other items and put them in my "market basket" and pay for them. You are going to have to take my word that I did the math correctly OR feel free to double check me.

Total:  $61.95 in nominal dollars in 1968.

Source HERE

According to the Bureau of Labor Statistics and its measure of the Consumer Price Index, the broad category of meat has increased in price by 6.3 times.

That means to purchase the same meat items today would cost about ($61.95 X 6.3) $390.00.

In 1968 the average hourly wage for a production worker in December 1968 was $3.11.

That means it took that worker 19.9 hours at $3.11 (pre-tax) to earn enough to purchase the market basket.

In December 2013 the average hourly wage for a production worker was $20.35.

That means it took a 19.16 hours at $20.35 (pre-tax) to earn enough to purchase the market basket.

Conclusion?  I suppose we can say that in terms of the purchase of meat for a cook-out, the purchasing power of a worker earning the average wage in 1968 and in 2013 was roughly the same.

How about applying the same analysis to the respective minimum wages?

In 1968 the minimum wage was $1.60. It would take a minimum wage worker 38.72 hours to earn enough for the meat.

In 2013 the minimum wage is $7.25.  It would take a minimum wage worker 53.79 hours to earn enough.

WOW!  That is pretty dramatic.  At least in terms of purchasing power, the minimum wage worker in 1968 was better off than his or her counterpart in 2013.

Maybe that is why I remember having so many more cook outs in the neighborhood when I was a young lad (born in 1960).

Note: Here are the price index information for 1968 and 2013 that I used.  I divided 237.576 by 37.8 to get the 6.3 times increase in the price of meats.

My small contribution: Something to make you think about "Privilege" as we mark MLK Day...

At church yesterday we had a visiting pastor and his topic was Injustice.  Apropos on this day we reflect on the life of MLK Jr.

He quoted some passages for a book by Andy Crouch: Playing God: Redeeming the Gift of Power.

The two passages below are secular and define the concept of "privilege" in terms even I could understand. I have been thinking about them since yesterday.  So I bought the book on Kindle and re-read the passages the pastor quoted and then some.

"Privilege is a special kind of power. It is a form of power that requires no effort. Indeed, only in unusual circumstances do we become conscious of it at all. Most of the time, privilege just works on behalf of those who have it, never making the slightest demands of them. The best way I know to define privilege is the ongoing benefits of past successful exercises of power. Privilege is the name for all the good things we do not need to try to acquire, because they simply flow to us as a result of past exercises of power.' (underlining mine)

This next one relates to an incident Mr Crouch had at the airport in Mumbai. where an airport worker moved him to the front of the line ahead of a group of men who were going to Saudi Arabia to work as laborers. It explicitly put the esoterica of privilege in front of him and required him ponder how much of his life, by virtue of who he is and what he looks like, is predicated on a privilege never earned.

"And privilege is dangerous because of how easily it becomes invisible. The incident in the Mumbai airport has haunted me ever since. There was nothing I had ever done to deserve to be put in line in front of these hard-working men. If anything, quite the reverse. I was simply the beneficiary of privilege, of rent— a free pass in excess of anything I deserved or even wanted. But what really has haunted me is this question: How many times have I been put at the front of the line without even knowing there was a line? How many times have I walked through a door that opened, invisibly and silently, for me, but slammed shut for others ? How many lines have I cut in a life of privilege?"

What was interesting about this encounter is the reaction of the men in line.  This is what they expected to happen.

"But as I walked off toward the boarding gate, flushed with surprise and embarrassment, I could not detect the slightest surprise or discomfort in that line of men. It gradually dawned on me that not only were they not surprised that I had been ushered to the front of the line— they had expected it the moment I arrived. They had understood what was happening long before I did. They knew about something I was only beginning to understand: the power of privilege."

As you go about your day look for explicit and implicit examples of the power of privilege and whether you (or others) are the grantee or the grantor of that privilege.

Book source:   Crouch, Andy (2013-09-09). Playing God: Redeeming the Gift of Power (p. 154). InterVarsity Press. Kindle Edition.

Inequality down on the farm. This explain a lot regarding the power of Big Agriculture.

Big versus Small Agriculture in one graph.

Look at the 2 left most dark and light blue bars.  Approximately 50% of US farms are between 1 and 49 acres in size, representing about 4% of cropland in the US.

Look at the 2 right most dark and light blue bars. Approximately 5.6% of US farms are 1,000 acres or more in size, representing 53.7% of US cropland.

Source: USDA ERS

The data below from the US Census puts a broader face on the graph above even though it is from 2007.  The numbers are different but that could be because of the way each agency measures the data or from 2007 to 2011 the market could have changed.  Probably a little of both explains the different numbers.

However, the point remains the same:  There is a huge gap between small(ish) and Big Agriculture.

Source: US Census