Deposits Skyrocket at Eagle Ford-Area Banks

Houston Chronicle --  "South Texas landowners getting fat checks from energy companies for drilling on their land have been a boon to banks based in the Eagle Ford Shale. Deposits at most of those banks have surged. The influx of deposits has left the Eagle Ford-area banks with something of a challenge: how to deploy that money.

For example, Karnes County National Bank's deposits rocketed 110 percent to almost $168 million from the end of 2009 through the first quarter of this year. Eleven other institutions registered jumps in deposits that ranged from 46.8 percent to 82.7 percent. By comparison, domestic deposits at U.S. banks increased 14.7 percent during that time.

 

"It's a problem, but it's a good problem," said H.B. "Trip" Ruckman III, president and chairman of the Karnes County National Bank in Karnes City. Its deposits rose by $88 million from the end of 2009 to March 31, while its loans rose by $19 million.

"We have had depositors come in with more than a million dollars at a whack. So it is a challenge to keep the money invested, he added."

HT: Stephen Taylor

Unfamiliar Feeling for Housing: Optimism, as 11 Markets Report Double-Digit Gains in May Sales

1. From today's Seattle Times:

"The small businesses that drive the housing market are reporting signs that the industry may be experiencing a real comeback.

At the beginning of the spring selling season, real-estate agents and homebuilders were optimistic about the growing number of prospective buyers showing up at open houses and calling to inquire about listings. Now, it appears that interest has translated into sales.

"We had a terrific March, better April, and May is going to be the best closing month since 2006," says Mark Prather, whose real-estate agency, ERA Buy America Real Estate Services is in La Palma, Calif. Closings are up 50 percent this year from the same period of 2011.

It's a similar story across the country. Business is being driven by pent-up demand — many people had put off buying since before the recession. Prices are lower after plunging during the housing crisis. Rising rents are making buying more attractive.

On top of all of that, financing is cheap. Mortgage rates are at record lows — 3.75 percent for a 30-year fixed mortgage as of last week. In some areas, people are even saying it's becoming a sellers' market.

The Seattle area has shared in the rebound. More than 2,000 houses sold in King County in May; the last time that happened was August 2007. And the median sale price was up nearly 5 percent from May 2011, the biggest year-over-year increase since the market crashed."

2. The number of metro areas (and states) reporting double-digit increases in May home sales is now up to 11 (most with gains at 20% or higher), with Birmingham reporting a 21% increase in May sales, and statewide sales in Iowa increasing by 14%, along with a 7.2% increase in median home prices.   

New Book: "Back from Serfdom: Restoring American Prosperity with a Pro-Market New Deal"

New book now available from Amazon "Back from Serfdom: Restoring American Prosperity with a Pro-Market New Deal," by Robert Dell (and just a little help from Mark J. Perry), here's a description:

"Government is essential to our well-being. But most government expansion since the Coolidge era has been shown to be politically motivated and economically counterproductive. Even a large number of progressive economists find no sound economic or moral basis for many important federal policies and would drastically restructure the ones whose ends they favor. U.S. citizens, including conservatives, do not appreciate the nature and extent of government failure or the toll it imposes on the general prosperity.

Combining business, economics, history and politics, Back from Serfdom aims to empower citizens in their civic and political discourse by deepening their understanding of the most problematic government policies. A modern antithesis to A New Deal, the popular 1932 polemic that served as a public blueprint for government growth under the Roosevelt Administration, this book argues for market-based banking, health care, federal downsizing and tax reforms by appealing to classical liberal, egalitarian and pragmatic concerns."

Thomas Sowell Illustrates "Ceteris Paribus"

Thomas Sowell's recent column about the "Fair Pay Act":

"The old -- and repeatedly discredited -- game of citing women's incomes as some percentage of men's incomes is being played once again, as part of the "war on women" theme.

Since women average fewer hours of work per year, and fewer years of consecutive full-time employment than men, among other differences, comparisons of male and female annual earnings are comparisons of apples and oranges, as various female economists have pointed out. 

When you compare women and men in the same occupations with the same skills, education, hours of work, and many other factors that go into determining pay, the differences in incomes shrink to the vanishing point -- and, in some cases, the women earn more than comparable men."

How Sweatshops Help The Poor Escape Poverty

Here's a new Learn Liberty video featuring Professor Matt Zwolinski from the University of San Diego.

Update:

Prosperity from U.S. Shale Revolution Spreads to Poor Indian Farmers Growing Beans for Fracking

WSJ -- "From its place on humble Indian tables, a little-known Indian bean called “guar” is making the fortunes of poor farmers. The demand for guar has soared since gum made from guar seeds started being used to extract shale gas late last year.

Mostly grown in the heart of India’s desert lands, the price of the vegetable has jumped from about 40 rupees ($0.70) a kilogram at the time of the September-October harvest to around 300 rupees ($5.40) per kilogram today. As a result, barefoot farmers who until recently struggled to make a living are now riding cars and motorbikes and carefully locking the seeds away.

Around 80% of the 1.2 million tons of guar that were harvested last season were snapped up for oil and gas drilling. India produces 80% of the global guar crop. Pakistan and the U.S. are a distant second and third, and all are trying to increase production."

HTs: Marginal Revolution and Energy-in-Depth

Bakken and Eagle Ford Oil Help Push U.S. Crude Oil Production in Q1 2012 to the Highest in 14 Years

As I reported recently on CD, U.S. crude oil production is booming and reached a 14-year high in the month of March, see chart above.  The EIA is now also reporting this today as its "Today in Energy" feature:

"Strong growth in U.S. crude oil production since the fourth quarter of 2011 is due mainly to higher output from North Dakota, Texas,and federal leases in the Gulf of Mexico, with total U.S. production during the first quarter of 2012 topping 6 million barrels per day (bbl/d) for the first time in 14 years.

After remaining steady between 5.5 million and 5.6 million bbl/d during each of the first three quarters of 2011, EIA estimates that U.S. average quarterly oil production grew to over 5.9 million bbl/d during the fourth quarter and then surpassed 6 million bbl/d during the first quarter of 2012, according to the latest output estimates from EIA's May Petroleum Supply Monthly report (see chart below). The last time U.S. quarterly oil production was above 6 million bbl/d was during October-December 1998."

MP: The chart below shows how the strong growth in oil production in North Dakota and  Texas is translating into strong growth in "shovel ready" jobs in the oil and gas industries in those states (blue line is Texas and red line is North Dakota), and these are just the direct jobs in "natural resources and mining," and don't include all of the indirect jobs being created in the Bakken and Eagle Ford Shale areas.   

To Close the Gender Pay Gap, How About an "Equal Workweek Act" or a "Workweek Fairness Act"

It's been well-documented that one factor that explains the "gender-pay gap" is the existence of a "gender-hours gap."  According to the BLS, men worked on average about five more hours per week in 2009 (40.2 hours) than women on average (35.3 hours), and that "gender-hours gap" has persisted over time.   

Two recent academic research studies have found evidence of significant "gender-hours gaps" in both the legal profession and the medical profession.

1.  In the article "Are Women Overinvesting in Education? Evidence from the Medical Profession" two professors in the Yale School of Management find that:

"In our data, the median male physician with 10 years of experience works 11 hours per week more than the median female physician in our sample with 10 years of experience. Simply put, the majority of women physicians do not appear to work enough hours earning the physician-wage premium to amortize that profession’s higher upfront investments."

2. In another research paper, "Gender Gaps in Performance: Evidence from Young Lawyers," the authors find that some of the gender wage gap for young lawyers is explained by the fact that male lawyers in the group studied worked an average of more than 54 hours per week compared to their female counterparts, who worked less than 49 hours per week on average. 

MP: Despite many empirical studies showing that the large majority of gender differences in pay can be explained by hours worked and individual career and family choices made by men and women, the myth of a gender wage gap due to systematic workplace discrimination persists.  Even though the Equal Pay Act of 1963 prohibits sex-based wage discrimination, new legislation in the form of the Democratic-sponsored Paycheck Fairness Act was passed in the House of Representatives in 2008 was considered in the Senate this week.  The legislation failed to generate enough votes in the Senate on Tuesday, and so its future is now uncertain.

Maybe another approach should be considered.  Since some of the gender wage gap results from differences in hours worked, perhaps federal legislation could be introduced to eliminate the unfair "gender-hours gap," e.g. what about the "Equal Workweek Act" or the "Workweek Fairness Act"?  Closing the "gender-hours gap" by forcing women to work longer hours (or men to work fewer hours) would go a long way towards closing the "gender pay gap."

Big Farm Raked in Record Profits of Almost $100B in 2011, But They Harvested $20B from Taxpayers' Pockets, Isn't It Time To End This Crony Capitalism?

According to the USDA, the net income from U.S. farms set a new record last year of almost $100 billion on record cash receipts of $363 billion.  The record-high farm income last year was 24% above income in 2010.  The USDA is also reporting that the total value of farm real estate (and total farm equity) exceeded $2 trillion last year for the first time, and increased by 6% from the previous year.  Even with record-level income, revenues and farm land values, U.S. farmers also "harvested" more than $21 billion in subsidies last year from the pockets of U.S. taxpayers, including more than $10 billion in direct government taxpayer payments according to the USDA.  Next year, the USDA is forecasting another "bumper crop" of taxpayer money for wealthy U.S. farmers, who are scheduled to harvest almost $22 billion from the pockets of Americans in 2012.       

Whenever oil prices and "Big Oil" profits are high, politicians call for imposing "windfall profits taxes" and ending oil subsidies (even though oil companies don't actually get any direct government payments from taxpayers and generally only get the same tax deductions and cost recovery allowances that are available to all U.S. manufacturers), so maybe it's time for equal treatment of Big Farm.  Well, that's not likely to happen, is it?  

Farmers have been a protected political class going back to when farm subsidies started during the Great Depression, and they will apparently continue to be the recipients of crony capitalism and generous corporate welfare payments extracted coercively from the pockets of taxpayers, no matter how wealthy and profitable they become.   

Mercatus Center economist Veronique de Rugy argues in today's Washington Examiner that it's time to end Depression-era farm subsidies, here are the opening and closing paragraphs:

"Cronyism is the practice by which government officials provide preferential treatment (such as loans, subsidies or regulatory preferences) to handpicked firms or industries. It is a bipartisan practice, as we may once again find out if lawmakers reauthorize most of the farm bill currently moving through Congress. There is no justification for extending our current regime of agricultural subsidies -- a clear example of cronyism.

But this cronyism isn't good for taxpayers. Nor is it good, in the long run, for the industry it supports. Congress must put an end to farm subsidies and all other preferential treatments that farmers have been receiving for years."

Markets in Everything: Books of Blog Posts

You can turn your blog into a book here, here and here.

Darrell Issa Explores the Administration's Definition of "Green Jobs" at the House Oversight Committee

It turns out that according to the administration, “green jobs” include: college professors teaching classes on environmental studies, clerks at bicycle repair shops, antique dealer employees, Salvation Army workers because they are selling used clothing, stores selling rare books and manuscripts, consignment shop workers, used record shop employees, garbage disposal workers, and even oil lobbyists if they are engaged in advocacy related to environmental issues.

Household Wealth Increases in Q1 By $2.8T

The Federal Reserve reported today that U.S. household net worth increased in the first quarter of 2012 to $62.85 trillion, the highest quarterly level since the last quarter of 2007 when the recession started.  Household wealth increased $2.82 trillion during the January to March period this year, which was the largest quarterly increase in more than five years, going back to the last quarter of 2004.

Here are news reports from Bloomberg and Fortune.  

Early Reports: May Real Estate Market is Hot; 17 Major Metro Areas Reporting 20+% Sales Gains

Early reports are just starting to come in for May real estate sales, and it's already starting to look like a blockbuster sales month.

Double-digit sales gains have been reported so far in:

1) Seattle by 23% vs. last year ("The most dramatic we’ve seen in at least five years. While home sales have been on the rise for months, the previous gains in homes prices had been minor. May’s real estate statistics have solidified the trend and pushed it into overdrive."),

2) Pittsburgh by 20%,

3) Albuquerque by 29%,

4) the Denver-area by 24%,

5) the Memphis area by 25%,

6) Chicago by 19.2%,

7) Nashville by 28.5%,

8) Boston by 28%,

9) Charlotte by 18.2,

10) Iowa by 14%,

11) Birmingham by 21%,

12) Milwaukee by 30%, 

13) Charleston by 24%,

14) Baltimore by 13%,

15) Minneapolis by 20.5%,

16) Des Moines by 18%,

17) Champaign County (IL) by 26%.

And land sales in the Las Vegas Valley hit a two-year high in the first quarter with $40.3 million in total sales volume, a 38 percent increase from $29.1 million in the year-ago quarter.

It's starting to look like there might actually be a housing recovery underway; we're certainly past the bottom of the market.   

Unintended Consequences/Perverse Incentives

Some great examples of unintended consequences from the Wikipedia listing for "Perverse Incentives":

1. In Hanoi, under French colonial rule, a program paying people a bounty for each rat pelt handed in was intended to exterminate rats. Instead, it led to the farming of rats.

2. 19th century palaeontologists traveling to China used to pay peasants for each fragment of dinosaur bone (dinosaur fossils) that they produced. They later discovered that the peasants dug up the bones and then smashed them into many pieces, greatly reducing their scientific value, to maximize their payments.

3. Opponents of the Endangered Species Act in the US argue that it may encourage preemptive habitat destruction by landowners who fear losing the use of their land because of the presence of an endangered species, known as "shoot, shovel, and shut up."

Update: Here's another example from one of James Gwartney's books:

4. In the former Soviet Union, managers and employees of glass plants were at one time rewarded according to the tons of sheet glass produced. Not surprisingly, most plants produced sheet glass so thick that one could hardly see through it. The rules were changed so that the managers were rewarded according to the square meters of glass produced. The results were predictable. Under the new rules, Soviet firms produced glass so thin that it was easily broken. 

And here's another:

5. Private companies were paid to transport convicts/prisoners from the U.K. to Australia during the late 1700s and the early 1800s.  The first payment schedule was based on the number of prisoners who boarded ships in the U.K.  As you might imagine, there was no incentive to deliver living prisoners to Australia, and many of them died during the trip, due to overcrowding, lack of food and water, unsanitary and unsafe conditions, untreated diseases, etc.  The payment schedule later changed, and was subsequently based on the number of living prisoners delivered to Australia. Result?  Fewer prisoners died during transport.

Climate Change Stunner: U.S. Leads the World in CO2 Reductions Since 2006, Thanks to Natural Gas

The Vancouver Observer reports: 

"The Americans? Really? Every year the International Energy Agency (IEA) calculates humanity's CO2 pollution from burning fossil fuels. And once again, the overall story line is one of ever-increasing emissions:

"Global carbon-dioxide emissions from fossil-fuel combustion reached a record high of 31.6 gigatons in 2011."

The world has yet to figure out how to stop the relentless increase in climate pollution. But mixed in with all the bad news there was one shining ray of hope. One of the biggest obstacles to climate action may be shifting. As the IEA highlighted:

"US emissions have now fallen by 430 Mt (7.7%) since 2006, the largest reduction of all countries or regions. This development has arisen from lower oil use in the transport sector … and a substantial shift from coal to gas in the power sector."

How big is a cut of 430 million tons of CO2? It's equal to eliminating the combined emissions of ten western states: Alaska, Washington, Oregon, Idaho, Montana, North Dakota, South Dakota, Wyoming, Utah and Nevada.

It seems the planet's biggest all-time CO2 polluter is finally reducing its emissions. Not only that, but as the chart above shows, US CO2 emissions are falling even faster than what President Obama pledged in the global Copenhagen Accord.

Here is the biggest shocker of all: the average American's CO2 emissions are down to levels not seen since 1964 -- almost half a century ago."

Top 400 Taxpayers Paid Almost As Much in Federal Income Taxes in 2009 as the Entire Bottom 50%

We hear all the time that the "rich don't pay their fair share of taxes" (123,000 Google search results for that phrase).  Here's an analysis using recent IRS data that suggests otherwise.

1. In 2009, the top 400 taxpayers based on Adjusted Gross Income earned $81 billion as a group, and paid $16.1 billion in federal income taxes (see chart above).

2. In 2009, the bottom 50% of taxpayers, a group totaling 69 million, earned collectively more than $1 trillion and paid $19.5 billion in federal income taxes (see chart above).

Bottom Line: A small group of 400 of America's most successful earners in 2009, about the number of residents living in a typical apartment building in Washington, D.C., paid almost as much in federal income taxes as the entire bottom half of America's 138 million tax filers, which is a population equivalent to the combined number of residents living in America's 29 least populated states, plus the District of Columbia.  What makes this disparity possible is the fact that an estimated 47% of individual income tax returns filed in 2009 had a zero or negative tax liability.

When you have only 400 Americans paying almost as much in federal income taxes as the entire bottom 50% of American filing income tax returns, I think we can dismiss any notion of the rich not paying their fair share of taxes.  In fact, the IRS should publish the names and addresses of the Top 400 (or to protect anonymity, agree to provide a forwarding service), so that we can all send them "Thank You" letters to express our gratitude for shouldering such a disproportionate share of our collective tax burden.

Significant Turnover in the Top 400 U.S. Earners; From 1992-2009, 85% Were in Just 1 or 2 Years

Number of Years in Top 400	Number of Taxpayers in Group	Percent of Taxpayers Represented by Each Group	Number of Returns in total Top 400 over 18-year Period	Percent of Returns Represented by Each Group
1	2,824	72.99%	2,824	39.22%
2	458	11.84	916	12.72
3	181	4.68	543	7.54
4	113	2.92	452	6.26
5	67	1.73	335	4.65
6	55	1.42	330	4.58
7	37	0.96	259	3.6
8	29	0.75	232	3.22
9	18	0.47	162	2.55
10 or more	87	2.25	1,147	15.93
Total	3,869	100%	7,200	100%

The IRS has a new report on the 400 taxpayers reporting the highest adjusted gross incomes (AGI) from 1992 to 2009, and the table above shows the frequency of appearing the "Fortunate 400" over the entire period (Table 4 in the IRS report). The 7,200 tax returns (400 highest earners x 18 years) from 1992 to 2009 represented 3,869 unique, individual taxpayers, since some taxpayers made it into the top 400 earner group more than one year. The data show that:

1. Of the group of 3,869 top earners from 1992-2009, 2,824 individuals made it into the "Fortunate 400" only one time during the 18-year period. Those 2,824 one-timers represent about 73% of the total (3,869), so only about one out of every four, or 27% of the total, made it into the top 400 more than once between 1992 and 2009 (see columns 2 and 3 above).

2. Moreover, 2,824 earners made it into the top 400 once (73%), and another 458 ( about 12%) made it into the top group twice. So 85% made it into the "Fortunate 400" group either once or twice, and only about 15% made it into the top group more than twice.

3. There were only 87 taxpayers out of the 3,869 total taxpayers in the group (2.25%) who were in the top 400 in 10 or more years.

4. Of the 7,200 total returns filed over the 18-year period, 2,824 represent one-timers, so on average in any given year, about 40% of the returns are filed by taxpayers who are not in the "Fortunate 400" in any of the other 17 years (see last two columns).  And more than half of the total 7,200 "Fortunate 400" returns between 1992-2009 (3,740 and 52%) were filed by taxpayers whose returns only appeared in one or two of the 17 years.  

According to the IRS, "The data reveal a mostly changing group of taxpayers over time. In fact, there were 3,869 different taxpayers represented in total for the 18-year period. Of these, a little more than 27 percent appear more than once and slightly more than 2 percent were represented in 10 or more years."

MP: Whenever we hear commentary about the top or bottom income quintiles, or the top or bottom X% by income, or the top 400 taxpayers, a common assumption is that those are static, closed, private clubs with very little turnover - once you get into a top or bottom quintile, or a certain income percent, or the top 400, you stay there for decades. 

But reality is very different - people move up and down the income quintiles and percentage groups throughout their careers and lives. The top or bottom 1/5/10%, just like the top or bottom quintiles, are never the same people from year to year, because there is constant, dynamic turnover as we move up and down the income categories.  As the new IRS data show, almost three out of every four members of the ever-changing, dynamic "Fortunate 400" over the last 18 years were only "members" of that group for a single year.    

Stocks Predict Presidential Elections @ 88%

The chart above displays the S&P 500 Index and Intrade odds for Obama to be re-elected, on a daily basis back to December 2010. The two series have moved pretty closely together over the last 18 months, with a correlation coefficient of 0.78.

Business Insider featured a similar graph as its Chart of the Day on Monday (ht/Craig Newmark), and also linked to this article about the relationship between the stock market and presidential elections, featuring Sam Stovall, chief investment strategist for Standard & Poor's Equity Research Services, who wrote this in a recent S&P newsletter:

"The S&P 500's price performance during the three calendar months leading up to the presidential election has been a good predictor of whether the president or his party would be re-elected or replaced. An S&P 500 price rise from July 31 through October 31 traditionally has predicted the reelection of the incumbent person or party, while a price decline during this period has pointed to a replacement. Since 1948, this election-prognostication technique did an excellent job, in our view, recording an 88% accuracy rate in predicting the re-election of the party in power (it failed in 1968). 

What's more, it recorded an 86% accuracy rate of identifying when the party in power would be replaced (it failed in 1956). Therefore, pay attention to the market's performance in the three months leading up to the presidential election, as it will probably do a better job than the plethora of political pundits prognosticating on the presidency."

The View from Houston: The U.S. Energy Industry Will Lead the U.S. Into a New Era of Prosperity

From a staff editorial in today's Houston Chronicle:

"The term of art widely used to describe today's struggling economy is that it's "facing headwinds."

It's good to be in Houston, where a dynamic energy industry is successfully navigating these headwinds and actually tacking ahead to a future where fairer winds may prevail. The latest example is Exxon Mobil's decision to expand its petrochemical complex in Baytown, creating 10,000 construction jobs and 350 permanent jobs at the plant. This follows similar recent decisions by Chevron Phillips and Dow Chemical to expand at Old Ocean and Freeport in Brazoria County and elsewhere along the Gulf Coast.

The common denominator driving these projects is the abundance of natural gas from shale rock that has dramatically changed the nation's energy picture over the past several years. The availability of cheap natural gas has also made possible the export of liquefied natural gas from domestic gas reserves.

These decisions to push ahead not only reflect positive changes in the natural gas sector, but the kind of boldness and calculated risk-taking for which the oil patch has long been known. As Houstonians, we applaud these choices, not only for the benefits they bring to the regional economy, but for the larger benefit they will bring to a recovering national economy.

It seems clear to us that the energy industry is positioning itself to lead the United States out of economic quagmire and into a new era of prosperity built on the wise use of abundant domestic fuel resources.  The industry deserves support for this bold approach, not the political pillorying it regularly receives."

The Twisted World of Kidney Harvesting

From ABC Good Morning America: 

"The severe shortage of viable organs for transplantation in the U.S. has led a transplant surgeon to propose harvesting kidneys from people who are not dead yet. Dr. Paul Morrissey, an associate professor of surgery at Brown University's Alpert Medical School, wrote in The American Journal of Bioethics that the protocol known as donation after cardiac death -- meaning death as a result of irreversible damage to the cardiovascular system -- has increased the number of organs available for transplant, but has a number of limitations, including the need to wait until the heart stops. 

Because of the waiting time, Morrissey said that about one-third of potential donors end up not being able to donate, and many organs turn out to not be viable as a result. Instead, he argues in favor of procuring kidneys from patients with severe irreversible brain injury whose families consent to kidney removal before their cardiac and respiratory systems stop functioning."

The article was sent to me by frequent CD commenter Methinks, who provided these insightful comments by email about kidneys:

"It strikes me as odd that it's okay for the unwitting donor's family and his doctor to make the decision to remove his kidneys (both, as it turns out) without his consent, but it is not okay for the donor to decide to sell his own organs. If nothing else, it illustrates the desperate need for organs, but the obvious solution still eludes them. For some reason, theft is considered ethical, but a voluntary sale of one's organs is not. It is ethical for other people to decide for you what should be done with your vital organs when you are incapacitated, but it is not okay for you to decide for yourself when you are in command of your faculties. It's a twisted world."

Shale Play in Siberia 80X Bigger than Bakken

OilPrice.com -- "The Bakken shale play is one of the biggest in the U.S., but is absolutely dwarfed by a shale play in Russia. The Bazhenov is located in Western Siberia, and according to Oswals Clint, Sanford Bernstein’s lead international oil analyst, it “covers 2.3 million square kilometers or 570 million acres, which is the size of Texas and the Gulf of Mexico combined;” an area 80 times bigger than the Bakken.

News of the Bazhenov may be new to many of us, but geologists have actually been studying it for at least 20 years, however it is only in the last few years that the technology and expertise necessary to drill the oil has been developed.

ExxonMobil and Statoil have agreed to start joint venture operations in the region with the Russian, state-owned Rosneft in an attempt to secure access to the Bazhenov. Exxon made a recent statement which confirmed the agreement “to jointly develop tight oil production technologies in Western Siberia.”

Visualization of Real GDP by State in 2011

Powered by Tableau

The custom, interactive graphic above comes courtesy of the folks at Tableau Software, using the "Real GDP by State" data released today by the BEA and featured earlier today on CD. 

The contributors to real GDP in 2011 are ranked in the top part of the graphic, showing that "durable goods manufacturing" was the largest positive contributor to real output growth in 2011 at 0.5% (more empirical support that manufacturing has been leading the economic recovery), and real estate was the largest negative contributor at -0.2%.  The color-coded map shows real GDP growth by state, from No. 1 North Dakota in dark grey at 7.6% growth in 2011 to No. 50 Wyoming at -1.5% growth, in dark pink.  

  

If you click on a sector above, like durable-goods manufacturing, the map changes to show state rankings for that sector's contribution to state output growth, with Oregon ranked No. 1 at 3.94% (towards 4.7% state growth), followed by Michigan at 1.2% (towards 2.3% overall growth), etc.  Click on mining, and you'll see West Virginia ranked No. 1, at 3.9% growth towards 4.5% overall state growth, followed by North Dakota's mining growth of 2.81% towards 7.6% overall growth, etc.  

Thanks to Tableau Software for contributing a great interactive graphic to Carpe Diem! 

More on the Midwest Manufacturing Renaissance

From Chmura Economics, an analysis of the Midwest manufacturing boom, with lots of good micro-level data, here's the opening:

"Last year may well mark the beginning of a welcome, several-year expansion in the manufacturing sector. This manufacturing expansion has driven a good portion of the improving jobs picture across the Midwest over the past year. In 2011, manufacturers in the Midwest added over 113,000 jobs. In the same year, more than 63 separate manufacturing industries expanded employment, of which more than 30 added 1,000 or more jobs. Food-oriented manufacturers in the Midwest fared better than national counterparts, expanding employment over the past five years despite the Great Recession. A premier site selection group, Biggins Lacy Shapiro & Company, and Moody’s Analytics have found that the Midwest has improved cost competitiveness compared to the rest of the U.S., according to a recent Wall Street Journal article. Overall, Midwest manufacturers seemed to be turning a corner and positioned for further expansion."

Why We Should Keep Tax "Loopholes" for Oil

Deborah Byers of Ernst & Young explains in Forbes why we should keep the current tax provisions for oil and gas companies, here's an excerpt:

"For the most part, energy companies are treated just like any other industry when it comes to taxes.  Much of what politicians call giveaways are simply timing issues related to when particular items can be expensed – governed by provisions in the tax code established decades ago to strengthen U.S. energy production.  These provisions are not tax credits, which allow for a dollar-for-dollar reduction in tax liability.

Changing the current tax code might make lawmakers happy, but it won’t achieve its hoped-for objectives and, in fact, will do the opposite:

• Integrated majors like ExxonMobil won’t be affected meaningfully
• Cash-strapped independents will be hit hard
• Domestic production will be depressed
• Job growth related to the shale boom will stall
• Tax revenue will fall

The technology advancements that are driving the shale boom, coupled with the existing tax code, have put the U.S. in a position not seen in years – one where domestic production is high and new reserves are creating economic opportunities across the country.  If we want to increase security of supply, keep retail energy prices low and create high-paying jobs, our energy policy should encourage future drilling by allowing proven tax provisions to remain in place."

Gains for Various Transportation Indexes

1. The monthly Ceridian-UCLA Pulse of Commerce Index, based on real-time fuel consumption data for over the road trucking, rose 0.8% in May following a 0.1% increase in April and a 0.3% increase in March.  Here's today's report (note that it says the May report will be the last one issued?). 

2. From today's Cass Information Systems report, based on its Cass Freight Index, a monthly measure of North American freight volumes and expenditures:

"North American freight shipments and expenditures in May both posted increases for the fourth consecutive month, with spending growth outpacing the rise in shipment volume. Total dollars spent on freight rose 2.2 percent over April. The number of freight movements was up 1.8 percent in May. Cumulatively for the year, freight dollars are up 7.8 percent year over year, while number shipments volume is 8.5 percent higher than in 2011."

3. The Federal Highway Administration reported recently that monthly vehicle-miles of travel in March increased by 0.9% compared to a year earlier, marking the fourth consecutive monthly increase in vehicle-miles on a year-over-year basis.  Traffic volume increased in previous months by 1.8% in February, 1.6% in January and 1.3% in December.  What makes those gains in traffic volume noteworthy is that they were happening at a time when gas prices were rising, from $3.23 per gallon in mid-December to almost $4.00 by the end of March.

Good Spelling Still Matters, Doesn't It?

From USA Today last week around the time of the National Spelling Bee:

"Louisa Moats, author of several textbooks about language, said good spelling, in a word, means credibility."If a paper or an application or a report or even an e-mail contains spelling errors, people who read it judge it harshly," she said. Research even shows that people with misspellings on job applications and résumés are less likely to get interviews. 

Moats and others say many public schools now give the subject short shrift in instruction. "That's the shocking thing," she said. "You can walk into many classrooms these days and there is no spelling program, there is no spelling book." Even if there is a spelling program, she said, it's "an afterthought, and it's usually just a list of words that kids are told to go and learn — there's very little instruction in how it all works, how it makes sense."

J. Richard Gentry, an educational consultant and author of the 2004 book The Science of Spelling, said the USA's reading problem is partly a spelling problem.

"Across the country we have all these fourth-graders who are failing reading tests, and we've seen this pattern for about 15 years," he said. "Guess what we stopped doing about 15 years ago? We pulled all the spelling books off the shelves and stopped teaching spelling — or at least we put it on the back burner."

Gentry said many schools still teach spelling, but that it "varies to a ridiculous degree." In many communities, he said, spelling has all but disappeared simply because it isn't tested annually on state reading exams."

Comments?

More on the Its vs. It's Confusion

It hasn't even been a month since I last posted about this.....

1. Corn subsidies have lowered the price of corn and it's sweetener, extract-high fructose corn syrup....

2. You are likely to spend more on your house and it's financing……

3. Company X has maintained it's standards despite the challenges though.

4. The cost to carry insurance for employees has to find it's way into the CPI….

5. …. contrary to notions that manufacturing is running with it's tail high.

6. You know that Policy X and it's huge impacts….

7. …over 50% of it's weighting comes....

May "Employment Trends Index" at 45-Month High

The Conference Board's Employment Trends Index (a composite index of eight individual labor-market indicators) increased in May by 0.29% to 108.34, up from April's revised reading of 108.3 (see chart above).  On a monthly basis, the Employment Trends Index (ETI) has increased in 11 out of the last 12 months.  On an annual basis, the May ETI was 7.6% above its year-ago level, following a 7% year-over-year improvement in April.

“While growth in employment has slowed significantly in recent months, the Employment Trends Index does not signal further slowing in the coming months,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board. “Employers have been very cautious in hiring in the past two months, but at the moment, economic activity in the U.S. is just strong enough to require a modestly growing workforce.”

"May’s increase in the ETI was driven by positive contributions from five of the eight components. The improving indicators – beginning with the largest positive contributor – were Percentage of Firms with Positions Not Able to Fill Right Now, Initial Claims for Unemployment Insurance, Number of Employees Hired by the Temporary-Help Industry, Job Openings and Industrial Production."

MP: The ETI in May was at the highest level in 45 months going back to August 2008, and the 12-month gain of 7.6% last month was the highest annual increase in 14 months.  The gradual, but steady increases in the ETI reflect slow, but ongoing improvements in the U.S. labor market. 

Cartoon of the Day: Obesity Czar's Newest Idea

Apple iPads for Airline Entertainment to Save Fuel

Following up on this CD post, here's another example of how high oil prices and innovation are driving companies to find substitutes for oil and gasoline, from Bloomberg:

"Singapore-based Scoot Airlines is ripping out aircraft entertainment systems weighing more than two tons to save fuel, and instead offering Apple iPads to passengers, loaded with movies, music, games and television shows. It eventually intends to have users access content via a wireless system onboard planes.

Offering iPads helped the carrier cut 7% off the weight of planes and cope with fuel prices that have jumped about 36% in two years. The budget carrier will  offer the iPads free to passengers in its business-class seat and  will charge economy passengers $17 per trip to rent the tablets." 

HT: John Sturges

The Dakota Model: Booming North Dakota Led the Country in 2011 with Real GDP Growth of 7.6%

The BEA reported today that U.S. real GDP by state grew 1.5% in 2011 after a 3.1% increase in 2010.  Not surprisingly, the "economic miracle state" of North Dakota led the country last year with a whopping growth rate in real GDP of 7.6%, more than five times the national average of 1.5%, and almost three percentage points higher than No. 2 Oregon's growth of 4.7%. On a per-capita basis, North Dakota also ranked No. 1 in the country with a 6.17% increase in its 2011 per-capita real GDP, compared to a 0.73% national average, and a 4.47% increase in No. 2 West Virginia.

 More than one-third of North Dakota's economic growth in 2011 came from its mining sector, which contributed 2.81% to the overall 7.6% growth rate last year.  Other states with booming energy sectors also experienced above-average growth in state GDP last year, including No. 3 West Virginia (4.5%), No. 4 Texas (3.3%) and No. 5 Alaska (2.5%).

In a previous release on state personal income, the BEA reported in March that North Dakota led the country in 2011 with the highest gain in state income for 2011 (8.1%), the largest increase in per-capita state income (6.7%), and the highest gain in personal income during the last quarter of 2011 (1.5%).

As I have reported previously, North Dakota's economic success goes beyond its well-publicized energy prosperity, which is being supplemented by other booming sectors including manufacturing, tourism, advanced manufacturing, information technology and agriculture. The state's pro-business climate should get some of the credit for the impressive output and job gains over the last several years, including leading the country in real GDP growth in 2011. Whatever North Dakota is doing, it's working, and the state should be a nationwide model for economic development and job growth - call it the "Dakota Model."

Related: The May 2012 cover story in the American Gas and Oil Reporter highlights how soaring oil production in North Dakota is spurring infrastructure growth: "Across North Dakota, demand is off the charts for everything from drilling rigs and pumping units to housing and office space, driven by a blistering pace of activity in the Bakken Shale play."

The Supply-Side Solution for a Real Recovery

"To achieve a real recovery, government policy should focus on individual incentives to work, produce and invest. Central here are tax rates and regulations, including especially clarity about future policies. In a successful policy package, the government would get its fiscal house in order and make meaningful long-term reforms to entitlement programs and the tax structure.

The Obama administration seems to think that individual incentives and serious fiscal reforms are of no great importance and policy should emphasize Keynesian-style demand stimulus (public works, prolonged benefits) along with bits of industrial policy (loans and grants to "green" energy companies). This approach has failed for three years."

~Harvard economist Robert Barro in today's WSJ

Julian Simon, Power of Market Prices, Why We'll Never Run Out of Oil, Why Peak Oil is Peak Idiocy

As resource economist Julian Simon taught us years ago, we never have, and never will, run out of scarce resources like oil because as a resource becomes more scarce, its price will rise, which will set in motion a series of actions that will counteract the scarcity.  For example, higher prices for oil will increase the incentives to: a) find more oil, b) conserve on the use of oil, and c) find more substitutes.  And that's exactly what's happened recently in response to higher oil prices - domestic crude oil production reached a 14-year high in March, and the share of rigs drilling for oil (vs. natural gas) set a new record high of 70% last week.  

And now an LA Times article today highlights how companies are making efforts to find substitutes for high-priced oil, here are some examples from the article:

1. Ford has eliminated 5 million pounds of petroleum annually by using soybean-based cushions in all of its North American vehicles. The company also got rid of an additional 300,000 pounds of oil-based resins a year by making door bolsters out of kenaf, a tropical plant in the cotton family.

2. BioSolar of Santa Clarita, Calif., dealt every day with the fact that solar modules are typically made with a glass front, an aluminum frame and a back sheet made out of a petroleum-based plastic or polymer.

"We saw where the price of petroleum was going," BioSolar CEO David Lee said. "We're not economists, but we knew that the price of oil was going to keep going up. The cost of photovoltaic cell manufacturing was going to skyrocket." BioSolar has changed its process to instead use castor beans.

3. Los Angeles businessman Neal Harris once relied on beads made from a petroleum-based polymer to hold fragrances for his company's products. Harris' company, Scent-Events, sells fragrances as a marketing tool to enhance movie premieres, concerts, parties and products. This year, he'll use ceramic beads 95 percent of the time. "It's saving us money, and we no longer have to keep track of oil prices," Harris said.

4. In March, McDonald's began a trial of double-walled paper hot-drink cups in 2,000 restaurants, in place of polystyrene containers, which start out as petroleum. 

5. Coca-Cola and PepsiCo are becoming bioplastics bottlers.

As Daniel Yergin, energy consultant and Pulitzer Prize author of a book on the history of the oil industry, told the LA Times, "Now there are accelerating efforts to squeeze oil out and find ways to substitute for it. That is the power of price."

Related: Duke economist and blogger Mike Munger explains here why "peak oil" is "peak idiocy" and why "Of all the idiotic things that people believe, the whole "peak oil" thing has to be right up there."

Another Example of How Abundant Shale Gas is Helping Spark a U.S. Manufacturing Renaissance

Fuel Fix -- "Exxon Mobil Corp. is planning a multibillion-dollar petrochemical expansion at its Baytown, Texas complex to take advantage of the country’s increasing supplies of natural gas.

“The proposed investment reflects Exxon Mobil’s continued confidence in the natural gas-driven revitalization of the U.S. chemical industry,” the company said in a statement.

The project would include a new ethane unit, which would provide ethylene feedstock for two new polyethylene production lines at the company’s nearby Mont Belvieu plastics plant. Polyethylene is used in a wide variety of consumer and industrial products.

Exxon Mobil joins other petrochemicals producers that have announced natural gas-fueled expansion plans in recent months. For example, Dow Chemical is expanding in Freeport and Chevron Phillips is building a new chemical plant in Baytown.

In its statement, Exxon Mobil also said the expansion could lead to significantly increased exports. “We believe the North American natural gas resource is abundant and can support both domestic energy needs as well as exports to the global market.”

The company says the project would create about 10,000 construction jobs. About 350 permanent jobs would be added to a workforce of about 6,500 full-time and contractor jobs in the Baytown area."

MP: Another example of the shale-gas-driven renaissance of energy-intensive American manufacturing.  In a March Merrill-Lynch report titled "An Industrial Revolution," the authors

listed 68 new major industrial investment projects totaling more than $200 billion that have been announced or started just since 2011 in a wide variety of manufacturing industries like petrochemicals, chemicals, steel, refining, autos, heavy equipment, aerospace, plastics and ethylene. Add Exxon Mobil's latest announcement to the growing list of planned industrial expansions in the U.S. as a result of the shale revolution.   

At the Same Time NYC Obesity Czar Wages War on Sugar, He Plans to Scale Back the War on Drugs

NY Times reports that "Bloomberg Backs Plan to Limit Arrests for Marijuana."

He just can't make up his mind about the Nanny State, can he? 

And a great comment below from Moe "NYC will be like hell for Mary Jane users. Easier to partake, yes ,but no obesity-inducing snacks?? Cruel world."

April Jobless Rate Falls to 0.7% in the ND Oil Patch

The state of North Dakota reported last week that the jobless rate in both the city of Williston and in the surrounding Williams County fell to an eye-popping low of 0.7% in April (see chart above), the lowest jobless rate ever recorded in North Dakota history, and possibly the lowest jobless rate in history for any city or county in the entire United States. Also in April, there were ten North Dakota counties with jobless rates below 2%, and all of those ten counties are on the western edge of the Peace Garden state in the oil-rich Bakken region (see map below).  If there were ever any doubts about the potential that domestic energy production has to create shovel-ready jobs, the 0.7% jobless rate in the heart of the Bakken region in North Dakota seems like pretty convincing evidence that those doubts are without any foundation.
  

Click map to enlarge.

Markets in Everything: U.S. Food Trucks in Paris

NY Times -- "In France, there is still a widespread belief that the daily diet in the United States consists of grossly large servings of fast food. But in Paris, American food is suddenly being seen as more than just restauration rapide. Among young Parisians, there is currently no greater praise for cuisine than “très Brooklyn,” a term that signifies a particularly cool combination of informality, creativity and quality. 

All three of those traits come together in the American food trucks that have just opened here [in Paris], including Cantine California, which sells tacos stuffed with organic meat (still a rarity in France), and a hugely popular burger truck called Le Camion Qui Fume (The Smoking Truck), owned by Kristin Frederick, a California native who graduated from culinary school here."

HT: Fred Dent

Can Taxpayers Control the Entitlement State?

"A single election rarely determines a democracy's fate, but some matter more than others. Tuesday's recall election of Wisconsin Governor Scott Walker is one that matters a great deal because it will test whether taxpayers have any hope of controlling the entitlement state and its dominant special interests.

Students of democracy from Alexis de Tocqueville to Mancur Olson have pointed out that the greatest threat to self-government comes from the tendency of democracies to become barnacled with special interests that vote themselves more benefits than society can afford. This is the crisis of the modern entitlement state, which is unfolding from California to Illinois, Greece, Italy and even Washington. Wisconsin is a critical test of whether democracies can reform before the crisis becomes debilitating."

~Today's WSJ 

 Related: Intrade odds for Gov. Walker to win tomorrow are currently at 92.2%.

Chart of the Day: Education Matters

One interesting perspective on the sub-par "jobless recovery" is a comparison of changes in employment since January 2008 based on education level, see chart above, here's a summary:  

1. College-educated workers have fared relatively well during and after the Great Recession, and employment levels for workers with a bachelor's degree or higher remained fairly stable even during the worst period of job losses (2008-2010).  As of May 2012, employment for college-educated is at an all-time high of 46.355 million workers, and that is 6.3%, and almost 3 million jobs, above the January 2008 level.  During the first five months of 2o12, employment of workers with a college degree has increased by more than one million jobs at an average rate of 231,000 new jobs per month. The jobless rate for this group of workers fell in May to 3.9%, the lowest rate since December of 2008.    

2. Employment for workers with some college or associate degree is 2.4%, and 837,000 jobs, below January 2008.  The jobless rate for this group in May was 7.9%, slightly below the 8.2% national average, but the highest in 7 months for workers with some college, and up from 7.2% in January.

3. Employment for workers with a high school diploma (but no college) is almost three million jobs and 8% below January 2008.  The May jobless rate for this group was 8.1%.

4. Employment for workers with less than a high school diploma is 1.36 million jobs, and 12% below the January 2008 level. The jobless rate for this group rose in May to 13% from 12.5% in April, and has remained above 12% in every month since January 2009.

Bottom Line: The workers having the most difficult time finding jobs in the "jobless recovery" are those workers with only a high school degree and those workers with less than a high school degree.  Those workers with at least some college have been faring much better, especially those with a bachelor's degree or higher.  Perhaps one explanation is that there are so many unemployed workers seeking employment (above 12 million in every month since January 2009), that many employers have the luxury of being selective and hiring college-educated workers for jobs that traditionally didn't necessarily require a college degree.

And while lacking a high school diploma has always been a liability for workers, that liability has gone from a minor liability to a major setback as we move increasingly into a knowledge-based, 21st century economy.  Comparatively, college-educated workers are doing quite well in an increasingly globalized, information-based economy, and it's the less educated workers that are struggling, and will continue to struggle, to find employment and keep a job.  Whatever the explanation, it's clear that "education matters," and having at least some college has insulated many of those workers from the worst effects of the Great Recession and the subsequent "jobless recovery."

Sunday Energy Links and Charts

1. Over the last two years, crude oil production in North Dakota has more than doubled, from 277,640 barrels per day in March 2010 to 575,490 barrels per day in March of this year.  At the same time that oil production has been skyrocketing in North Dakota, oil imports from Nigeria have been declining, to the point that for the first time ever, North Dakota oil production has exceeded oil imports from Nigeria in each of the first three months of this year (see chart, data here). And for the last five months that data are available (November - March), North Dakota oil production has also exceeded imports from Colombia (see chart).

Update: By the end of the decade, it is estimated that surging oil production in North Dakota could double again to more than one million barrels per day, putting it on par with production in Texas and imports from Mexico.  

2. "Chesapeake Energy Corp. said it drilled the largest oil gusher in the company’s 23-year history at a “significant” discovery in the Anadarko Basin of Texas and Oklahoma. The Thurman Horn 406H well in the Hogshooter formation produced 5,400 barrels of crude a day during its first eight days of operation. The output was more than twice that of some of the best performing wells in the Eagle Ford shale of south Texas, which Chesapeake counts as its most valuable holding."  [MP: Peak what?]

3. Oil and gas cash boosts PA farming -- "The oil and gas boom in western Pennsylvania has provided a much-needed infusion of capital to farmers in that area. “It’s had mostly a good impact,” said Steve Quillin, local Farm Bureau president. “Just driving around, we saw farmers making improvements and updates to their properties.”

Money from oil and gas leases has allowed agriculture to expand. The influx of cash has prompted some older farmers to retire, but their farms have been absorbed by others or have been rented."
 

4. Edward G. Rendell, governor of Pennsylvania from 2003-2011:

"Throughout my tenure as governor, I witnessed Pennsylvania become an epicenter for natural-gas development. This influx of jobs and investment spurred an unprecedented economic boom for our state and, thanks to a resource found right here in Pennsylvania, this economic revitalization continues. Cheap, clean, and abundant energy is available to heat our homes, fuel our cars and trucks, and power our state’s economy. It’s not a campaign slogan, it’s reality."

5. The Economist -- "America's “unconventional” gas boom continues to amaze. Between 2005 and 2010 the country’s shale-gas industry, which produces natural gas from shale rock by bombarding it with water and chemicals—a technique known as hydraulic fracturing, or “fracking”—grew by 45% a year. As a proportion of America’s overall gas production shale gas has increased from 4% in 2005 to 24% today. America produces more gas than it knows what to do with. Its storage facilities are rapidly filling, and its gas price has collapsed. Last month it dipped below $2 per million British thermal units: less than a sixth of the pre-boom price and too low for producers to break even.

Those are problems most European and Asian countries, which respectively pay roughly four and six times more for their gas, would relish. America’s gas boom confers a huge economic advantage. It has created hundreds of thousands of jobs, directly and indirectly. And it has rejuvenated several industries, including petrochemicals, where ethane produced from natural gas is a feedstock."

Update:

6.  The chart below shows monthly imports of crude oil from January 2000 to March 2012, on a three-month moving average basis (to smooth out monthly volatility).  U.S. imports of crude oil fell in March to an average of 10,672,670 barrels per day, the lowest level since February 2000, slightly more than 12 years ago.