Comments on economics, mystery fiction, drama, and art.

Thursday, April 24, 2008

The outstanding ground for cheerfulness

"The outstanding ground for cheerfulness lies, I think, in this -- that the system has shown already its capacity to stand an almost inconceivable strain. If anyone had prophesied to us a year or two ago the actual state of affairs which exists to-day, could we have believed that the world could continue to maintain even that degree of normality which we actually have? This remarkable capacity of the system to take punishment is the best reason for hoping that we still have time to rally the constructive forces of the world."

Yet one more remarkable piece of writing by J. M. Keynes.

Found at Richard's Real Estate and Urban Economics Blog; he found it on Brad Delong’s blog, and Brad found it in The Atlantic’s archives.

Tuesday, April 22, 2008

Markets in Everything (TM)

Stealing the "Markets in Everything" label from Tyler Cowen and linking to a story I found at Management R&D:

Time shares in dogs.

Wednesday, April 16, 2008

The "Debate"

Based on what I saw and heard, and on the comments I've read about what I missed, I sure wish this had happened:

Sen. Clinton: I have a question for Sen. Obama. Senator, I've reached the conclusion that the questions we're being asked tonight will do little to help voters reach a decision in the Pennsylvania primary, or in the general election. I wondered how you felt.

Se. Obama: Senator, I completely agree. I believe that we are doing a dis-service to the American people by continuing to deal with the questions we are being asked. What I would propose is that we leave, find a quiet place to have a conversation about the real issues facing the American people, and invite to join us any members of the press who wish to accompany us.

Sen. Clinton: Perfect. And let's ask one of the camera operators to join us as well.

Sens. Clinton and Obama: Good-night, panel, and no thank you for your questions.

In my dreams, I'm afraid.

Friday, April 11, 2008


The University of Southern California's decision (paywall; less detail but free here) to close its undergraduate program in German has generated a substantial amount of criticism among the students and faculty at USC:

"We were given absolutely no prior warning," said Eve Lee, a lecturer in the German department, who learned about the proposed dissolution last week from the department's secretary. The university's faculty and lecturers, she said, had developed several strong programs to introduce undergraduates to German language and culture. "We can't do this without a department," she said.

Students have registered outrage at a Facebook group called "Save the USC German department," in letters to university administrators, and in calls to news-media outlets.

"I'm just appalled that a university of this size and caliber would even think of eliminating the department," said a junior German major, Jennifer E. Appleby. German departments, she observes, are standard features of most research and liberal-arts institutions, even ones much smaller than Southern California.

I look at this as an economist. Why should all or almost all research and liberal arts institutions have programs in German? For any academic program to achieve a sufficient level of quality, it needs both a critical mass of faculty and of students. The program needs enough faculty to cover, in enough depth, the critical areas of the field and to provide in-depth study and research opportunities for students. With only three faculty members, I don't see how the USC German department could manage that. The program needs enough students to allow for interactions among students, to create opportunities for students to learn from each other. With only 5 undergraduate degrees granted in 2007 (down from 9 in 2003--9--at a school with 16,500 undergraduates, granting 4,676 undergraduate degrees in 2007), the existence of a critical mass of students is also not something one could take for granted.

In 2006, US colleges and universities granted 1,106 undergraduate degrees in German, down, fairly steadily, from a peak of 2,600 in the late 1960s. With more than 2000 schools granting undergraduate degrees, this makes it faily clear that not every institution can, should, or will have a program in German. My own guess would be that a school needs to graduate 15 - 20 students a year in a program for it to have sufficient enrollments to support enough student interaction and enough faculty to be viable.

So institutions will inevitably have to consider how to specialize, and what to specialize in. This will be painful, especially for programs, like German, that are declining nationwide. But that does not mean the decisions can be avoided.

Sunday, April 06, 2008

The evidence for a recession grows stronger

I think the best way to deal with the Bureau of Labor Statistics report on the labor market situation in March is simply to reprint the BLS release, with some comments at the end:


The unemployment rate rose from 4.8 to 5.1 percent in March, and nonfarm payroll employment continued to trend down (-80,000), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Over the past 3 months, payroll employment has declined by 232,000. In March, employment continued to fall in construction, manufacturing, and employment services,while health care, food services, and mining added jobs. Average hourly earnings rose by 5 cents, or 0.3 percent, over the month.

Unemployment (Household Survey Data)
The number of unemployed persons increased by 434,000 to 7.8 million in March, and the unemployment rate rose by 0.3 percentage point to 5.1 per-cent. Since March 2007, the number of unemployed persons has increased by1.1 million, and the unemployment rate has risen by 0.7 percentage point.(See table A-1.)

Over the month, unemployment rates rose for adult men (to 4.6 percent), adult women (4.6 percent), and Hispanics (6.9 percent). The jobless rates edged up for blacks (to 9.0 percent) and whites (4.5 percent), while the rate for teenagers (15.8 percent) was essentially unchanged. The unemployment rate for Asians was 3.6 percent, not seasonally adjusted. (See tablesA-1, A-2, and A-3.)

In March, the number of persons unemployed because they lost jobs increasedby 300,000 to 4.2 million. Over the past 12 months, the number of unemployedjob losers has increased by 914,000. (See table A-8.)

Total Employment and the Labor Force (Household Survey Data)
The civilian labor force rose to 153.8 million over the month, offsetting a decline in the prior month. The labor force participation rate was 66.0 percent in March and has remained at or near that level since last spring. Total employment held at 146.0 million. The employment-population ratio was little changed over the month at 62.6 percent. The ratio was down from its most recent peak of 63.4 percent in December 2006. (See table A-1.)

The number of persons who worked part time for economic reasons, at 4.9 million in March, was little changed over the month, but has risen by 629,000 over the past12 months. This category includes persons who indicated that they were working part time because their hours had been cut back or because they were unable to find full-time jobs. (See table A-5.)

Persons Not in the Labor Force (Household Survey Data)
About 1.4 million persons (not seasonally adjusted) were marginally attached to the labor force in March. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Among the marginally attached, there were 401,000 discouraged workers in March, about the same as a year earlier. Discouraged workers are defined as persons not currently looking for work specifically because they believed no jobs were available for them. The other 951,000 persons classified as marginally attached to the labor force in March cited reasons such as school attendance or family responsibilities. (See table A-13.)

Industry Payroll Employment (Establishment Survey Data)
Total nonfarm payroll employment continued to trend down in March (-80,000), and has fallen by 232,000 over the past 3 months. In March, job losses occurred in con-struction, manufacturing, and employment services. Employment in health care, foodservices, and mining remained on an upward trend. (See table B-1.)

Employment in construction declined by 51,000 in March and has fallen by 394,000 since its peak in September 2006. Most of the March decrease in employment occurred among specialty trade contractors (-42,000), with both residential and nonresidential contractors contributing to the decline.

Manufacturing employment fell by 48,000 in March and by 310,000 over the past12 months. Employment in motor vehicles and parts was down by 24,000 over the month, largely reflecting the impact of a strike in auto parts manufacturing. The strike resulted in a parts shortage that led to plant shutdowns elsewhere in the auto industry. During the 12 months ending in February, the motor vehicle and parts industry lost an average of 6,000 jobs per month.

In March, factory employment also fell inseveral construction-related industries, including wood products (-5,000), nonmetallicmineral products (-5,000), and furniture and related products (-5,000). Plastics and rubber products and textile mills also lost jobs over the month. Professional and business services employment edged down in March (-35,000). The number of jobs in the employment services component declined by 42,000 over the month;about half of the decline occurred in the temporary help services industry. Employment services has lost 210,000 jobs since its most recent peak in August 2006. In March, employment in professional and technical services showed little change for the third month in a row. This industry had added an average of 27,000 jobs per month in 2007.

In March, employment in retail trade was little changed. Job losses continued inbuilding material and garden supply stores (-9,000), furniture and home furnishings stores (-5,000), and department stores (-5,000). Over the past 12 months, retail trade has lost 107,000 jobs. Employment in financial activities changed little in March. Credit intermediation employment edged down over the month and has fallen by 120,000 since its most recent peak in October 2006.

Health care employment continued to expand in March, rising by 23,000. Hospitals added 14,000 jobs. Over the past 12 months, health care has added 363,000 jobs. Social assistance employment edged up over the month (11,000).

In March, food services employment continued to trend upward (23,000). Employment in the industry has increased by 288,000 over the past 12 months. Employment in mining rose by 6,000 in March. Support activities for mining, particularly those related to oil and gas extraction, accounted for about two-thirds of the increase.

Weekly Hours (Establishment Survey Data)
In March, the average workweek for production and nonsupervisory workers on private nonfarm payrolls rose by 0.1 hour to 33.8 hours, seasonally adjusted. Both the manufacturing workweek, at 41.3 hours, and factory overtime, at 4.1 hours, rose by 0.1 hour over the month. (See table B-2.)

The index of aggregate weekly hours of production and nonsupervisory workers on non-farm payrolls rose by 0.2 percent in March to 107.5 (2002=100). The manufacturing indexwas unchanged at 93.4. (See table B-5.)

Hourly and Weekly Earnings (Establishment Survey Data)

In March, average hourly earnings of production and nonsupervisory workers on private nonfarm payrolls rose by 5 cents, or 0.3 percent, to $17.86, seasonally adjusted. This followed gains of 5 cents in January and 6 cents in February. Average weekly earnings rose by 0.6 percent in March to $603.67. Over the past 12 months, average hourly earnings increased by 3.6 percent and average weekly earnings rose by 3.3 per-cent. (See table B-3.)

Comments: The employment decline, measured by the establishment employment data, is nearly 1 million jobs over the past year, and is widespread. Construction (down by 700,000, or nearly 9%), manufacturing (down by about 400,000, or about 3%), and retail jobs (down by 320,000, about 2%) are well below March 2007 levels. Financial services has lost 140,000 jobs (1.6%).

Only employment in health care (+330,000, a little over 2%), and in government (+600,000, a little less than 3%, of which 2/3 is in local government--up a little over 3%) has shown anything like robust growth. Given the projected budget situation of state and local government, this rate of employment growth is unlikely to continue.

The increases in weekly earnings (+3.6%) and in hourly earnings (+3.3%) have both lagged the increases in consumer prices (+4.3%) over the past year. This is unsurprising. In weak labor markets, real wages are unlikely to rise.

Over the past year, the labor force participation rate has continued to fall (down 0.5 percentage points), as has the employment-population ratio (down 1 percentage point). And the (seasonally unadjusted) unemployment rate has increased from 4.4% in March 2007 to 5.2% in March 2008.

If the economy is not currently in a recession, it's doing a very good job of pretending.

Thursday, April 03, 2008

Today's good economic news, Indiana edition

According to BusinessWeek (April 7, 2008, p. 17, or online), Indiana had the 9th highest rate of mortgage foreclosures in the US for the December 2007 - February 2008 period, with about 14 foreclosures per 10,000 households. Colorado and Nevada led the way (about 36), and, in the midwest, Ohio (23) and Michigan (21) also out-performed the Hoosier state.

And I'm about to buy a condo in Indiana?

Tuesday, April 01, 2008

Reading the Wall Street Journal on April Fool's Day

Not that I think either of these stories is a joke.

On p. B-7, in an article headlined "Prices Tumble for Memory Products:"

"Global semiconductor sales rose 1.5% in February from a year earlier, according the the Semiconductor Industry Association, which said prices continued to tumble for memory products despite a rise in total units sold." (My ephasis.)

Looks to me like the Semiconductor Industry Association has forgotten the Law of Demand.

And on p. B-3, in an article headlined "Retailers' Lawsuits Accuse Candy Makers of Fixing Prices:"

"In the latest lawsuit, Giant Eagle claims it purchased more than $200 million worth of chocolate from Hershey, Mars, and Nestle between 2002 and 2007, during which time the companies instituted several price increases...Hershey increased its 17%...Nestle increased its 17%...Mars increased its prices by almost 16%."

Now, I am not an advocate of eliminating anti-trust laws, but when all the evidence you have of illegal behavior is a set of similar price increases spaced over three months? Please.