Is Economic Recovery Just Around the Corner????

Are we at the bottom of the fall in employment?  Hard to say for sure but a net loss of "only" 11,000 jobs is significant given the situation for the last 9 months or so.  We are still going to behind the 8-ball for a long time, however.  It is estimated that the US economy must created at least 125,000 rto 150,000 net NEW jobs EVERY month to keep up with population increases (immigrants/birth rate) AND new entrants into the job market (yes, that is you graduating high school student and/or graduating college student!).  So when we start the economic recovery we will still be behind, technically, by 1 to 2 million jobs. There are a couple of charts in the WSJ today that are informational.  This one...

has a couple of interesting points. The number of temporary workers hired helped stem an increase in the unemployment rate.  Businesses are hesitant to hire permanent workers right now for a couple of reasons.  One, the spike in GDP (demand for new goods and services) is encouraging to businesses, but there is uncertainty as to the sustainability of that demand.  Statistically, few businesses are going to add to their workforce if they are unsure that new orders for their products/services are going to be demanded longer-term.  What they will tend to do is hire temporary workers, if needed, to fill in labor gap they may be experiencing in production.  Second, perhaps along with, or before, hiring temporary workers, businesses will give "extra" hours to workers who had their hours cut because of lack of demand for their good/service.  As you can see from the chart, the average work week increased slightly.  There is still under-utilized capacity in most businesses so, the prudent business owner is going to try to get the most out of the trimmed down workforce as possible (and the workers may be greatful for the increased hours/overtime) before realizing it will be more cost effective to hire additional workers as they reach/surpass capacity.  Only then will "new" (NOT jobs that were lost then the SAME job re-filled --that is NOT job creation!!)  jobs be actually created. 

The second chart shows where the jobs were lost and where gained...

We know 7,000 of the "new" jobs were created in the public sector and most (I assume) of the Education AND  probably a good portion of the healthcare jobs (approx half of all healthcare spending originates from government, Fed/State).  These jobs are ALL taxpayer financed and are made possible by revenues from individuals, business, or borrowing (since revenues are falling and these plans are not already budgeted, I am guessing they are paid for with borrowed money).  I am sure a good number are residuals of the fiscal stimulus that makes its way through the bureaucracy and necessitates the hiring of people to oversee the vast sums of money going to designated "shovel-ready" projects.  My question is, will these jobs disappear when the stimulus money runs out or are they going to be so embedded that they will be impossible to eliminate?  Does this lead to a permanently enlarged public sector?  Is this good? Bad? or will the economic growth resulting from it be so significant that these jobs will eventually pay for themselves?  Whaddaya think???

America as Texas vs. California

How does Texas stack up against California as a place to do business?? Texas gets criticized for being "stingy" in the area of social services and the environment, and it is an area for improvement.  However, there is something to be said for not being over-extended in fiscal obligations, when in good economic times are relatively easy to fund, but when there is a down-turn in the business cycle those same programs that people come to rely on get funding cuts and people "suffer".  For better or worse, we tend to be on an even keel in terms of the size of state government and what we promise in future financial obligations.

Past Recessions Explained---GREAT interactive graphic

Click HERE for an excellent graphic and short 2 minute explanations of recessions since 1960...Highly recommended!!

Food Stamp Usage Across the Country

Automatic Stablizer at work...Food stamps(Link to NYTimes article) are a Non-Discretionary Fiscal Policy that "kicks in" whenever the state of the economy demands it...Govt spending will INCREASE to meet the need...

Supply is GREATER than Demand---Should we SUBSIDIZE Apple Growers???

Becaue of a bumper crop of apples (for story click HERE), the price that apples growers are getting in the market are at their lowest levels in a long time.  In fact it is a money losing propostion to even pick the apples off the tree (lots of wasted apples).  What is the opportunity cost of picking the apples? Of NOT picking the apples?  Because this may cause some growers to go out of busines, should the Federal Govt offer subsidies to the farmers so they can stay in business and assure a future supply of apples? (Link courtesy of Mankiw)

@###%#%%*&#^^^#%^^+# BLASTED ETHANOL!!!!!!!!

More fall-out from Ethanol Mandates..URGGGHHH!!!

What If Buying Food was JUST LIKE The Way We Buy HealthCare in the US...See Video!!!

As a student you are probably dont know how we actually purchase Healthcare in the US. It is a system violates one of the basic tenets of Economics---Lack of CLEAR PRICES!!  Click HERE for a 45 second video that pretty well sums up how we price health insurance here...

Ummmm...Happy Thanksgiving???

Children Age 12 Have To Use A Booster Seat While in a Car....

Well, sort of...Part of a chapter in the new book by Levitt and Dubner "SuperFreakonomics" is about child seats and how the data show that if a child is over 2 years of age their is no significant safety advantages of a car seat versus just wearing a regular seat belt (for Levitt's research, click HERE)...This is a link they provided to a BBC article reporting that in 2006 the British government passed a law requiring children up to 12 (yes, 12!!) years old, or UNDER  4' 5" to be in a booster seat...Can you imagine telling your 12 year old son/daughter/brother/sister to get into the booster seat?  Also, why the height requirement?  Why, if they are concerned about safety, does this not apply to adults who happen to be shorter than 4' 5"??  Seems excessive to me...What do you think?

US Share of GDP Constant Over Last 40 Years---MUST Be A Bad Thing...RIGHT???

 No, not necessarily...I analyzed the graph wrong (yes, I can make a mistake)...I looked at it as GDP growth as opposed to SHARE of World GDP...A fellow AP Economics teacher Jason Welker, set me straight.  His explanation below clarifies what this graph REALLY says....

"I'm not sure we should be so troubled by the flat trend lines for Latin America and Africa. Keep in mind, this is not GDP, this is share of world's GDP. Unlike total output, which is NOT a zero sum concept, share of total output IS a zero-sum concept. A gain made by one part of the world is only possible by a loss made in another part of the world. The decline of the EU 15's share of world GDP does not mean that the EU 15 experienced a decline in output. In fact, the EU 15 have grown steadily over the last 40 years. Their downward sloping curve indicates that they have grown more slowly than the rest of the world, that's all. So the flat lines for Africa and Latin America in fact indicate that those two regions have grown more rapidly than Europe. Although it doesn't look like it on this graph, the "poor south" is actually catching up with the "rich north" as average growth in Europe lags behind that in the south.
It's a bit misleading to interpret the graph in this way, but the gains in Asia have in a way come at the expense of gains in Europe, but only in that they now have a larger share of a MUCH larger pie! All regions have grown, and Latin America and Africa have grown AS quickly as the US, and MORE quickly than Europe. Good news!"

Bar Graph of Pres. Adiministrations and Cabinet Member experience in the Private Sector...

Is having private sector experience important for Cabinet Members to have?  Many times Members who do are too close to the industry they perhaps have to regulate/make rules, creating potential moral hazzards.  On the flip-side, if one is going to regulate/make rules for an industry, should they have some experience with the industry itself??

The Natural Rate of Unemployment---Europe vs. US

Here is Labour peer and happiness economist Lord Layard on the cause of long-term unemployment in Europe:

"Europe has a notorious unemployment problem. But if you break down unemployment into short-term (under a year) and long-term, you find that short-term unemployment is almost the same in Europe as in the U.S. – around 4% of the workforce. But in Europe there are another 4% who have been out of work for over a year, compared with almost none in the United States. The most obvious explanation for this is that in the U.S. unemployment benefits run out after 6 months, while in most of Europe they continue for many years or indefinitely."

Hat tip to the Tim Worstall at the Adam Smith Institute.

Seeing is Believing (in the free market)

"Everywhere we look it seems that health care is more expensive: prescription drug prices are increasing, costs to visit the doctor are up, the price of health insurance is rising. But look closer, even closer, closer still. Don’t see it yet? Perhaps you should have your eyes corrected at a Lasik vision center.
Laser eye surgery has the highest patient satisfaction ratings of any surgery, it has been performed more than 3 million times in the past decade, it is new, it is high-tech, it has gotten better over time and… laser eye surgery has fallen in price. In 1998 the average price of laser eye surgery was about $2200 per eye. Today the average price is $1350, that’s a decline of 38 percent in nominal terms and slightly more than that after taking into account inflation.
Why the price decline in this market and not others? Could it have something to do with the fact that laser eye surgery is not covered by insurance, not covered by Medicaid or Medicare, and not heavily regulated? Laser eye surgery is one of the few health procedures sold in a free market with price advertising, competition and consumer driven purchases. I’m seeing things more clearly already."

From HERE

Tire inflation: tariffs, demand push up prices

UPDATE: As a result of tariffs imposed on tires imported from China the following has resulted:

1. The domestic price of tires (mainly low to mid-range price) has INCREASED because of the tariff (cash off the top going to the Federal coffers)
2. The domestic supply of tires has DECREASE because of fewer tires are imported to the US from China which INCREASES the price of tires
3. Chinese manufacturers of tires are quickly moving production of tires to other countries to avoid the tariffs imposed on them.
4. Domestic (US) manufacturers of tires are NOT ramping up production because, (1) they are a minor player in the US market for inexpensive tires, and (2) if they are in the market they know that the supply will INCREASE in the near future when the production from countries other than China makes it ways to our shores. They will simply take advantage of the higher prices and not expand production in a meaningful way and will NOT add employees in a meaningful way either.
5. NO permanent jobs will be created by this tariff, however jobs will be lost (perhaps only temporarily) by (1)people who work in at the disembarkation point of the tires,(2) truckers who move the tires around the country, (3) employees at tire retailers (epecially ones who specialize in the inexpensive tire business) because the higher prices will reduce demand for the tires.
6. People who can least afford the tires will be disproportionally hurt---the tariff along with seasonal increase in demand puts upward pressure on the price of tires.

My question (because I have been SO negative): Who WINS in this situation?? Please post your answer...I know some of the winners but believe I can learn from you!! :)

If you want to read an excellent book on trade and tariffs that is written in the form of a fictional narrative, please check out "THE CHOICE"...

Brain Teaser---See if you can figure it out!!! :)

Brainteaser...Try to work it out then go HERE for the solution... Be honest and post in the comment section if you got it rght or not....:)

Jack is looking at Anne, but Anne is looking at George. Jack is married, but George is not. Is a married person looking at an unmarried person?

(a) Yes
(b) No
(c) Can not be determined