Carpe Diem

Professor Mark J. Perry’s blog for economics and finance

Carpe Diem

Midland, Texas: The most economically successful MSA in the country, thanks to the shale oil boom in Permian Basin

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midlandAs a direct result of all the shale oil and gas activity in the Permian Basin area of West Texas, the economy of Midland, Texas is booming. The April unemployment rate in Midland fell to 3%, which is the lowest jobless rate in the nation for any of the 372 metropolitan areas. During just the month of April, 1,000 jobs were added to local payrolls in Midland (50 per day), and 400 of those jobs (20 per day) were in the booming “construction, natural resources and mining” sector. Over the last year, total employment in Midland has increased by almost 7% (and by 5,500 jobs) to a new all-time high of 85,400, and energy and construction related jobs increased by 14.4% (and by 3,100 jobs), also to a new all-time high (see chart above).

Along with the oil and gas boom, there’s an unprecedented construction boom taking place in Midland, and building permits in March skyrocketed to 347, which was a 580% increase from the level a year ago and established a new all-time record high.

Jobless recovery? Middle-class stagnation? Declining household income? Sub-par economic growth? Construction slowdown?  None of that applies to Midland, Texas, the most economically successful metropolitan area in the country, thanks to the shale revolution.

See related news story here.

 

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Carpe Diem

Art Laffer: Obama scandals are phenomenal for stocks

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From The Kudlow Report last night:

Larry Kudlow: Are the Obama scandals good for stocks?

Are Laffer: They’re terrific for stocks, Larry. We need a change in economic policy, and there is no better change than if we take the Senate in 2014, and then the presidency in 2016 – that would be phenomenal for stocks. This administration is bad for the economy, and it’s bad for stocks. When they trip, especially at the IRS, it just doesn’t get any better than that for the future of the country.

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Carpe Diem

Quotation of the day: From jerky to dirty

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“We are in the midst of the worst Washington scandal since Watergate. The reputation of the Obama White House has, among conservatives, gone from sketchy to sinister, and, among liberals, from unsatisfying to dangerous. No one likes what they’re seeing. The Justice Department assault on the Associated Press and the ugly politicization of the Internal Revenue Service have left the administration’s credibility deeply, probably irretrievably damaged. They don’t look jerky now, they look dirty. The patina of high-mindedness the president enjoyed is gone.”

~Peggy Noonan writing in today’s WSJ, “This is No Ordinary Scandal“

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Carpe Diem

Friday afternoon links

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1. The U.S.-Colombia Trade Agreement on Its First Anniversary:  Between May 2012 and March 2013, U.S. merchandise exports to Colombia grew to $15.9 billion — a 20% increase from the same period a year earlier. More here.

2. TED TALK: Hans Rosling and the magic washing machine (2010) – the greatest invention of the Industrial Revolution.

3. Unfortunately, the magic washing machine hasn’t yet reached Cuba in large numbers. Blogger Yoani Sanchez reports that “Cuba’s Supposedly ‘Emancipated’ Women Are Still Boiling Their Babies’ Diapers Over Fires,” and that washing machines, when available in Cuba, cost an entire year’s salary (versus about 2.5 days’ earnings for the average American).

4. In a victory today for free trade and common sense, the Energy Department Authorized a Second Facility to Export Liquefied Natural Gas. Let’s hope there’s a lot more.

5. The Reuters/Univ. of Michigan Consumer Sentiment Index rose to 83.7 in May – the highest level in almost six years – as rising real estate values and record stock prices boosted household wealth.

6. The Conference Board reported today that its Leading Economic Index increased 0.6% in April to the highest level since June 2008, reflecting underlying strength in the US economy moving forward.

7. From today’s BLS report on state employment and unemployment: Oil-rich North Dakota led the US with the highest year-over-year job growth in April at 3.74%, and oil-rich Texas wasn’t far behind at 3.01%. Once again, North Dakota had the lowest state jobless rate in the country at 3.3% in April.

8. Video from Reason.TV: Parents, Pot, and Prohibition: Daisy Bram’s Story. Grow some weeds not approved of by the government, and they might just come and take your children away.

9. 2013 Drug War Killings Update: California man becomes the 13th person to die in US domestic drug law enforcement operations so far this year. 

10. From NPR: In the Cape Cod community of Falmouth, voters will decide if two, town-owned wind turbines will be taken down. Dozens have complained of headaches, insomnia and other issues since the first turbine started spinning in 2010.

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Carpe Diem

The shipping container – a market-based innovation – has been more important for globalization and world trade than all free-trade agreements negotiated by governments combined

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ContainerFrom The Economist:

The humble shipping container is a powerful antidote to economic pessimism and fears of slowing innovation. Although only a simple metal box, it has transformed global trade. In fact, new research suggests that the container has been more of a driver of globalisation than all trade agreements in the past 50 years taken together.

Containerisation is a testament to the power of process innovation. In the 1950s the world’s ports still did business much as they had for centuries. When ships moored, hordes of longshoremen unloaded “break bulk” cargo crammed into the hold. They then squeezed outbound cargo in as efficiently as possible in a game of maritime Tetris. The process was expensive and slow; most ships spent much more time tied up than plying the seas. And theft was rampant: a dock worker was said to earn “$20 a day and all the Scotch you could carry home.”

Containerisation changed everything. It was the brainchild of Malcom McLean, an American trucking magnate. He reckoned that big savings could be had by packing goods in uniform containers that could easily be moved between lorry and ship. When he tallied the costs from the inaugural journey of his first prototype container ship in 1956, he found that they came in at just $0.16 per tonne to load—compared with $5.83 per tonne for loose cargo on a standard ship. Containerisation quickly conquered the world: between 1966 and 1983 the share of countries with container ports rose from about 1% to nearly 90%, coinciding with a take-off in global trade (see chart above).

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Carpe Diem

Thursday evening links

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1. The St. Louis Fed Financial Stress Index Fell This Week to the Lowest Level Since July 20, 2007, Almost Six Years Ago.

2. VIDEO: Caught on camera, California police break into a couple’s home and taser them. Is this kind of police state really allowed in America?

3. Inflation’s dead: Federal Reserve Bank of Cleveland reports that its latest estimate of expected annual inflation over the next ten years is only 1.42%.

4. Orlando home prices spike 24% in April versus last year, that’s the largest annual gain in home prices since January 2006, more than seven years ago. More than 25% of homes sold for more than the asking price last month.

5. Weekly rail traffic report today from the Association of American Railroads: Oil shipments were up by +50.8% versus last year (and by +54.1% year to date), and motor vehicle shipments were up +8% versus last year.

6. Customer satisfaction with US airlines is at the highest level in seven years.

7. Builder confidence in May for the market for newly built, single-family homes improved three points to a 44 reading on the National Association of Home Builders/Wells Fargo Housing Market Index.

8. Christina Sommers – Let’s Not Oversell the Financial Benefits of Having Women on Corporate Boards. Studies show that there’s zero positive correlation—and sometimes even negative correlation—between female board members and business success.

9. Professors across the U.S. are criticizing a rush to offer free online college courses.

10. Why Renting Cars Could Soon Be Easier Than Hailing a Taxi.

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Carpe Diem

In Venezuela, government price controls create economic chaos, so don’t minimum wage laws do the same in the US?

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Image Credit: Shutterstock

Image Credit: Shutterstock

Government price controls continue to create economic chaos and chronic shortages of basic household items in Venezuela. Here’s a news report about the latest price-control-caused shortage:

First milk, butter, coffee and cornmeal ran short. Now Venezuela is running out of the most basic of necessities – toilet paper. Blaming political opponents for the shortfall, as it does for other shortages, the government says it will import 50m rolls to boost supplies. That was little comfort to consumers struggling to find toilet paper on Wednesday.

Commerce minister Alejandro Fleming blamed the shortage of toilet tissue on “excessive demand” built up as a result of “a media campaign that has been generated to disrupt the country.”

MP: As frequently happens, the government imposes mandated price ceilings below the market price, which then lead predictably and inevitably to shortages, which the government then blames on “excessive demand” or “speculators” or ”hoarding” or anything besides the real culprit — the price controls themselves.

Opponents of minimum wage laws correctly anticipate the economic chaos and chronic surpluses of low-skilled workers that inevitably result from artificial, government-mandated wages (prices) above the market-clearing wage. Proponents of minimum wage laws deny any resulting economic chaos or chronic surpluses, or assume the distortions are minimal.

Q: To be logically consistent, shouldn’t advocates of minimum wage laws also support the price controls in Venezuela?

Or stated differently, how is it possible that price controls in Venezuela obviously cause economic chaos and shortages, but minimum wages laws don’t have the same negative effects?  What kind of contorted “logic” would it take for somebody to support minimum wage laws in the US but reject price controls in Venezuela? For consistency, it would seem like you would have to either: a) support both the price controls in Venezuela and minimum wage laws in the US, or b) reject the price/wage controls in both countries, no?

HT: Jon Murphy

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Carpe Diem

Do lower fertility rates = lower interest rates?

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Eddy Elfenbein, editor of Crossing Wall Street, poses an interesting question in a post titled “Does Lower Fertility = Lower Interest Rates?” in response to a recent CD post: 

Economists have been puzzled by the persistence of low interest rates. Several years ago, Ben Bernanke talked about a “global savings glut” as one possible reason. Kenneth Rogoff recently discussed some of the competing theories which includes factors such as emerging economies and increased long-term uncertainty.

I want to advance one heretical idea: Are long-term interest rates being held down by lower fertility rates? Mark Perry highlights the dramatic plunge in global fertility rates. In 50 years, women are having half the number of children they used to.

How does this effect interest rates? For most of human history, your retirement plan was your kids. Having a lot of children and raising them was your savings account. With modernity, people are trading in their metaphorical savings account for real ones.

This is just a speculative question on my part, but I wonder if these two phenomena are related.

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