Update: Lemonade Stands Get Reprieve

"Multnomah County's top elected official apologized Thursday for health inspectors who forced a 7-year-old girl to shut down her stand last week because she didn't have a food-safety permit."

HT: Ron H.

Day 550: Obama vs. Carter

At around day 550, according to Gallup:

Barack Obama
Disapprove: 53%
Approve: 41%
Spread: -12%

Jimmy Carter
Disapprove: 44%
Approve: 39%
Spread: -5%

Markets in Everything: Divorce Insurance

NY Times -- "Here’s a new option for those worried they’ll end up on the wrong side of the statistics that show so many marriages ending over time: divorce insurance.  SafeGuard Guaranty Corp., an insurance start-up based in North Carolina, recently released what it’s billing as the world’s first divorce insurance product.

Here’s how its WedLock product works.  The casualty insurance is designed to provide financial assistance in the form of cash to cover the costs of a divorce, such as legal proceedings or setting up a new apartment or house. It is sold in “units of protection.” Each unit costs $15.99 per month and provides $1,250 in coverage. So, if you bought 10 units, your initial coverage would be $12,500 and you’d be paying $15.99 per month for each of those units. In addition, every year, the company adds $250 in coverage for each unit.

Then, if you get divorced and your policy has matured (see below for the maturation rules), you would send WedLock proof of your divorce. In return, you’d receive a lump sum of cash equivalent to the amount of coverage you had purchased."

HT: Joe Armendariz

Markets in Everything, or Not: Lemonade Stand

Government officials shut down a 7-year old's lemonade stand in Portland, Oregon.

Container Traffic Surges at Indian Ports in First Four Months of Fiscal Year (April to July)

Journal of Commerce -- "Container traffic at major ports in India for the April-July period increased 14 percent over the same period last year, the Indian Ports Association (IPA) said in a statement on Wednesday.  IPA estimated total volume for the first four months of fiscal 2010-11 at 2.5 million 20-foot equivalent units."

Weekly Rail Traffic Sets Record for 2009 and 2010

WASHINGTON, D.C. – Aug. 5, 2010 – "The Association of American Railroads reported today that for the week ending July 31, 2010, U.S. railroads reported the highest traffic levels of 2010 for both carload and intermodal traffic. U.S. railroads originated 300,292 carloads for the week, up 9.4 percent compared with the same week in 2009, but down 10.6 percent from the same week in 2008.

Intermodal traffic totaled 232,895 trailers and containers, up 20.2 percent from the same week in 2009, and up 0.9 percent compared with 2008. Compared with the same week in 2009, container volume increased 21.9 percent and trailer volume rose 11.7 percent. Compared with the same week in 2008, container volume increased 9 percent and trailer volume dropped 28.9 percent.

Eighteen of the 19 carload commodity groups increased from the comparable week in 2009 with only waste and scrap, down 1.9 percent, posting a decline. Metallic ores, up 73 percent, and metals and products, up 35.2 percent, were the commodities posting the most significant increases."

MP: Both the carload freight loadings and intermodal rail volumes for the last week of July were at their highest level for both 2009 and 2010 (see top chart above).  Compared to 2009, carload traffic has improved in almost every week since late February, and for intermodal rail, the positive trend started back in January, and has experienced double-digit gains in most weeks since April.  According to Warren Buffett's favorite economic indicator (rail freight), it looks like the economy has been doing better recently than at any time since 2008, and the recovery continues to gain momemtum almost weekly. 

European Safety Net = European Unemployment?

Following the post in yesterday's NY Times Economix blog "Eurosclerosis Comes to America" by Casey Mulligan (U. Chicago economist) the chart above shows monthly payroll employment and monthly job openings (both from BLS) from January 2004 to May 2010 (job openings for June are not yet available).  Casey Mulligan wrote:

"This recession has been unique in terms of the multitude of public policies that dull incentives to work and earn income. Best known are unemployment benefits, which are paid only to people who have not yet accepted a new job. But the mortgage modification programs, begun by the Bush administration and tweaked by the Obama administration, offer mortgage forgiveness to borrowers with low incomes while offering nothing to those with high incomes.

The new home-buyer tax credit, the enhanced food-stamp program and many other programs in President Obama’s stimulus bill are much the same: people without low incomes need not apply. People accepting jobs in this economy see their various safety-net benefits reduced or eliminated.

Payments to the unemployed are compassionate, and maybe even the best government reaction to a deep recession. But previous economic research has shown that this compassion has a cost: programs like these make it more difficult for employers to fill their job openings. It is no surprise that adopting a European safety net is giving us a European unemployment problem."

MP: Casey shows a graph of job openings and jobless rates to support his conclusions (similar to the bottom chart above), and the chart above of job openings and payroll employment tells the same story. Since the end of last year, payroll employment has only increased by an anemic .77% while job openings have increased by a much healthier 26.6%. Over the last year, job openings have increased by almost 29%, while the unemployment rate has barely moved, as Casey's graph and data show, possibly due to all of the generous jobless benefits and the many extensions to those benefits. 

The chart above shows that the historically close relationship between payroll employment and job openings has not held up very well over the last year, for the reasons that Casey outlines.  And the huge increases in online job availability as documented by the Monster Employment Index also lends some support to the fact that job openings are showing strong gains, which have not yet shown up in employment gains and jobless rate decreases.       

July Monster Employment Index Grows 21% vs. Last Year, 6th Consecutive Month of Positive Growth

From today's Monster Employment report for July:

1. July's year-over-year growth rate of 21% held steady from the 20.5% annual growth in June, suggesting no significant change in underlying demand for labor nationwide.

2. July was the sixth consecutive month of annual growth in online job availability, and the 21% annual growth rate in July was the highest since July 2006 (see chart). 

3. The Index dropped 3 points in July from June as online job availability eased with a decrease in summer hiring activity.

4. Education and public administration saw large growth in online job demand following relatively tempered springtime hiring activity.

5. Manufacturing and transportation and warehousing industries rose in July, adding to longer-term trends that reflect continued growth in overall production and commerce.

6. Amongst occupations, demand increased in some professional categories, including architecture and engineering; and life, physical, and social sciences.

7. All 28 metro markets tracked by the Index exhibited positive annual growth.

Random Roundup

1. Intrade odds for the Republicans to control the House after the November elections is now up to a contract-high of 60%.

2. China: Mobile phone users top 805 million in June.

3. Eurosclerosis Comes to America (NYT, with great graph)- "This recession has been unique in terms of the multitude of public policies that dull incentives to work and earn income."

4. Rethinking Socialized Medicine in Canada (IBD).

5. When you think of quality healthcare at lower costs, think Brazil.

6. Foreign-trained MDs As Good As Those Trained in U.S.

7. Android Beats iPhone With New Subscribers.

Even If Deflation Is Bad, We Know How to Solve It

"Even if deflation is a bad thing, we know how to solve it. Print enough new money and people will eventually start spending it. It’s alleged that no matter how much you print, it can all just fall into the liquidity trap, and it’s alleged that this is what happened in Japan over the past decade. But I am sure the Japanese just didn’t try hard enough. Liquidity trap or not, I guarantee you there’s a central banker in Zimbabwe who knows how to fight deflation. If we really get into trouble, all we have to do is hire him."

~Steven Landsburg

Dow Jones ESI Hits Highest Level Since June 2008

NEW YORK, August 2, 2010 –"The Dow Jones Economic Sentiment Indicator (ESI) has given an upbeat signal on the economy, registering its biggest rise since October and a return to the level of June 2008.  The ESI rose to 42.3 in July (see chart above), two points higher than the 40.3 tracked in June 2010. The rise is modest, but it is an acceleration from the slender gains of recent months and implies some recent pessimism about the economy may be misplaced."

U.S. Car Buyers Are Bullish on the U.S. Economy

Car sales rebounded in July to the highest level since last August, as consumers purchased more than 12 million new vehicles last month at a seasonally adjusted annual rate (see chart above, data here). On a cumulative year-to-date basis, vehicle sales are 14.7% ahead of last year at this time.  Compared to the month of July last year, total vehicle sales are up by 5.1% this year, boosted by a whopping 17.6% increase in light trucks versus last July (see related CD post "The Pickup Indicator"). 

Ignoring last August when sales were artificially high due to the "cash for clunkers" program July auto sales were the highest in almost two years, since September 2008 when 12.52 million units were sold (on annual basis).  The American consumers must be pretty bullish on the American economy based on their willingness to buy new vehicles, despite all of the gloom and doom and talk of a "double dip."    

West Coast Container Volume Jumps 15 Percent

Journal of Commerce -- "Container volume at West Coast ports increased 15 percent in the first six months of 2010 compared to the same period in 2009, according to the Pacific Maritime Association. The tally reflects all loaded containers, both inbound and outbound. Containerized imports on the West Coast increased 17 percent while exports were up 11 percent."

More From the "You Just Can't Make This Stuff Up" File: Universities That Use Kindles vs. the ADA

From today's Washington Examiner:

"The Justice Department threatened several universities with legal action because they took part in an experimental program to allow students to use the Amazon Kindle for textbooks. Last year, Princeton, Arizona State and Case Western Reserve wanted to know if e-book readers would be more convenient and less costly than traditional textbooks. The environmentally conscious educators also wanted to reduce the huge amount of paper students use to print files from their laptops.

It seemed like a promising idea until the universities got a letter from the Justice Department's Civil Rights Division, now under an aggressive new chief, Thomas Perez, telling them they were under investigation for possible violations of the ADA.

The Civil Rights Division informed the schools they were under investigation. In subsequent talks, the Justice Department demanded the universities stop distributing the Kindle; if blind students couldn't use the device, then nobody could. The Federation made the same demand in a separate lawsuit against Arizona State."

HT: Colin Grabow

ASA Staffing Index Reaches 91-Week High in July

The American Staffing Association (ASA) Staffing Index for temporary and contract employment activity reached a 91-week high of 92 for the week of July 19, the highest level since a reading of 93 for the week of October 20, 2008 (see chart above, data here).  Compared to the same week last year, the latest ASA Staffing Index has improved by 24.3% for Week 30 (see bottom chart above). This marks the 14th week in a row with percentage gains above 20% compared to the same month in 2009, the 23nd straight week of double-digit percent increases vs. 2009, and the 29th consecutive week for the ASA being above the same level in the previous year (ever week this year).

The ongoing gains in the ASA Staffing Index every week this year to a new 91-week high hopefully translate eventually into more broad-based, permanent job creation as we move forward.

Real Consumption Growth Highest Since 2007

From Table 10 in today's BEA report on Personal Income and Outlays, the graph above shows the percent change from a year earlier in Real Personal Consumption Expenditures, monthly from December 2006 to June 2010.  Most of the news reporting focuses more on month-to-month changes, with the resulting "gloom and doom" headlines like "Flat consumer spending adds to recovery worries," with commentary like "Consumer spending and incomes were unexpectedly flat in June implying an anemic economic recovery for the remainder of this year."

Looking at real consumer spending over a longer period of time like a year, the picture is not quite so gloomy.  The graph above shows that consumer spending (percent change from a year earlier) slowed consistently through 2007 and 2008, reached a bottom in the spring of 2009, and has been improving consistently since last summer, when the recession most likely ended.  The growth in real consumer spending has been positive for the last seven months on an annual basis, and reached a 31-month high in June of 1.7%, the highest growth rate in real consumer spending since November 2007.   

The Seen vs. The Unseen

"The heart of the case against the Detroit bailout is that it saps the life-blood of entrepreneurial capitalism. The bailout reinforces the debilitating precedent of protecting firms deemed ‘too big to fail.’ Capital and other resources are thus kept glued by politics to familiar lines of production, thus impeding entrepreneurial initiative that would have otherwise redeployed these resources into newer, more-dynamic, and more productive industries.

The ‘success’ of the bailout is all too easy to engineer and to see. The cost of the bailout – the industries, the jobs, and the outputs that are never created – is impossible to see, but nevertheless real."

~Don Boudreaux at Cafe Hayek responding to Paul Ingrassia's defense of the auto bailout in yesterday's WSJ ("Two Cheers for the Detroit Bailout").

See also "What Is Seen and What Is Not Seen" by Bastiat who wrote in 1848: "There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil."

ISM Reporting: Upbeat vs. "Gloom and Doom"

The upbeat version from Scott Grannis: "The ISM manufacturing index (above) was stronger than expected, and as my chart suggests, this is fully consistent with the 3-4% economic growth rate (if not more) that I've been expecting to see for the past year. It's a bit weaker than the fabulously strong levels that were showing up recently, but it is not supporting the popular "new normal" economy theory, in which growth registers a feeble 2-3%.

Most encouraging was the employment index (bottom chart above) which is still at very strong levels that have been seen only rarely in the past several decades. This is very good news, since the weakest part of the recovery so far has been jobs and business investment, and the ISM index suggests that the manufacturing sector has shrugged off this malaise quite nicely.

My thesis is still in place: this economy is growing at a 3-4% pace, which is not very impressive given the extent of the recent recession, but it is stronger than the market has been expecting, and that is enough to drive equity prices higher and corporate spreads lower.

The "gloom and doom" version of the exact same ISM report from FT.com:

"The ISM Survey of the US manufacturing sector (published on Monday) offers the first reliable glimpse of activity in the US economy in the third quarter of the year. It is not encouraging.

Although the headline reading was rather better than widely anticipated (an out-turn of 55.5 compared to 56.2 in June), the details of the survey showed that new orders are now slowing markedly, and inventories have started to rise more rapidly than companies may be intending. Taken together with the GDP data for Q2 (discussed in an earlier blog), the ISM survey points to a significant danger that the US economy will continue to slow sharply in the months ahead.  Although this can be a somewhat volatile series on a monthly basis, the underlying trend in the series (also shown in the graph) is now definitely headed downwards.

It is surprising to me that the stock market has so far been so resilient in the face of the mounting weight of evidence that growth rate in the US economy has dipped below trend, with no knowing where this will end."

Markets in Everything: Condos Cheaper Than Cars

Get a 1BR, 1.5 bath condo in the complex pictured above in Deerfield Beach, Florida (near Ft. Lauderdale) for just $24,999 (details here), about the same price as a Toyota Camry LE ($26,125 MSRP), or choose from 25 other Deerfield Beach condos for $28,000 or less, starting at just $19,500.

Or check here for 33 Las Vegas condos for only $20,000 or less, starting at $10,000; and here you'll find 31 condos in the Phoenix area (Glendale) for $28,000 or less, starting at $12,500. 

You'll probably never get a better deal on U.S. real estate than right now, especially with mortgage rates at historical lows.  So if you've been thinking about a Florida condo, vacation home, rental property, or a first home, now's the time - everything's on sale.  

Miami Home Sales Increase in June for 16th Month

According to DQ News, "Miami area home sales rose sharply in June, the result of low prices, low mortgage rates and what was likely the final big boost from the federal home buyer tax credits." Other highlights include:

1. Sales of existing condos rose to a five-year high in June, and total escrow closings were the highest for any June since 2007. 

2. In June 9,296 new and resale houses and condos closed escrow in the Miami metro area, up by 18.3 percent from May and up 20.4 percent from June 2009 (see chart above).

3. Miami-area home sales have increased on a year-over-year basis for 16 consecutive months, starting in March 2009.

4. June resales (excludes new homes) of single-family detached houses and condos combined were the highest for the month of June since 2006, and rose in June year-over-year for the 19th consecutive months. 

5.  The median home price for the Miami region in June was $150,000, up 1.4% from $148,000 in May but down 6.3% from $160,000 in June 2009. The Miami area's median price has fallen on a year-over-year basis for 33 consecutive months.

Chart of the Day: Record Corporate Profits in Q1

 

According to BEA data via the St. Louis Fed, after-tax corporate profits reached an all-time record high of $1.369 trillion in the first quarter of 2010 (see chart above). 

House Dems Will Take a Thumping in November

Intrade odds for Republicans to control the House after the November elections rose today  to the highest level in the contract's history: 58.6% (see chart above).  When Obama took office in January 2009, the Intrade odds were only 15% that the Republicans would control the House in 2010, and those odds have consistently risen and have been trading above 50% since late June. 

In Michael Barone's latest column, he surveys the most recent polling data and writes that "most signs suggest Democrats will take a thumping this year."  Michael concludes that:

"These metrics -- the generic ballot results and polls in individual districts -- suggest that House Democrats are headed toward historic losses. Quite a swing in 18 months."

In addition to the polling data, the "pay-to-play" futures contracts at Intrade support Barone's conclusion.