Carpe Diem

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

Carpe Diem

The US auto industry is booming and is about to go on a hiring spree: It plans a major expansion to meet rising demand

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In a post on Friday on the May jobs report, I wrote: “In the area durable manufacturing, jobs in the auto industry (“Motor Vehicles and Parts”) increased by 2,400 in May and by 26,300 over the last year, which is an annual employment increase of 3.4% and more than twice the overall growth of 1.6% for all US payrolls over that period. US automakers have been hiring at a pace of more than 100 new workers every day over the last year.”

In a related article, “American auto industry about to go on hiring spree, plans expansion to meet rising demand,” the Associated Press is reporting today that:

The auto industry is about to go on a hiring spree as car makers and parts suppliers race to find engineers, technicians and factory workers to build the next generation of vehicles. The new employees will be part of a larger, busier workforce. From coast to coast, the industry is in top gear. Factories are operating at about 95 percent of capacity, and many are already running three shifts. As a result, some auto and parts companies are doing something they’ve been reluctant to consider since the recession: Adding floor space and spending millions of dollars on new equipment.

The auto industry’s stepped-up hiring will help sustain the nation’s job growth and help fuel consumer spending. The auto industry’s outlook is bright. Vehicle sales for 2013 could reach 15.5 million, the highest in six years. To meet that demand, automakers must find more people. Hundreds of companies that make parts for automakers have to hire, too, just to keep up.

Among the hiring planned for this year:

  • Chrysler will add more than 3,500 workers this year at factories in Indiana, Ohio and Michigan to make transmissions and to build Jeeps and Ram pickups.
  • Ford expects to hire 2,200 salaried workers in information technology, product development and manufacturing. Plus the company is hiring 1,400 factory workers and recalling another 2,000 laid-off employees, in Michigan and Missouri.
  • GM is hiring 4,000 engineers and computer professionals at four technical centers in Arizona, Georgia, Michigan and Texas to develop software and other innovations.
  • Honda is adding at least 500 jobs this year at factories in Ohio, Indiana and Alabama as it moves more production to North America.
  • At TRW Automotive, recruiters are looking for 50 engineers in the Detroit area to work on new safety features such as a system that warns drivers when large animals are in their path.
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Carpe Diem

Chart of the day: US breweries have exploded, from 89 in the late 1970s to more than 2,400 today, a 2,600% increase

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125-Brewery-Count_hrBeer drinkers rejoice: There are now more breweries in the US than ever before – 2,416 as of March 2013 (including 2,360 craft breweries) – according to the Brewers Association (“A Passionate Voice for Craft Brewers). Compared to the low of 89 US breweries in the late 1970s, there’s been a 2,600% increase in US breweries, primarily because of craft breweries.

Great Stagnation? Not for US beer drinkers – there’s never been a better time to be alive than today, and it keeps getting better all the time.

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Carpe Diem

Video: How ‘rapid prototyping’ (3-D printing) was used to design the new 2014 Chevrolet Malibu

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On Friday, Chevrolet unveiled the 2014 Malibu — a roomier, more refined and more efficient version of its midsize sedan. Updated styling, a revised interior, a new 2.5L standard engine and suspension enhancements highlight the changes. It goes on sale this fall.

MP: The video above explains how “rapid prototyping” (3-D printing) was used extensively to design, change, and update the 2014 Chevy Malibu. It’s a great example of how 3-D printing is starting to revolutionize US manufacturing.

HT: Hitssquad

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Carpe Diem

Saturday morning links

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1. May home sales reports are starting to come out, and the real estate recovery continues, with double-digit, year-over-year percent increase in May home sales and median home prices in San Diego, Seattle, Nashville and Denver.

2. Five myths about legalizing weeds, including: 1) If weeds were legal, more people will smoke them, and 2) Law enforcement officials oppose legalization of weeds. Neither are true.

3. More on the insanely racist and insanely expensive War on Weeds: 1) Even though marijuana is used at similar rates across racial groups, African-Americans accounted for 78% of those arrested in Chicago, 89% of those convicted, and 92% of those jailed for low-level possession. 2) In 2010, marijuana-possession arrests cost Illinois taxpayers $221 million.

4. 22 Maps That Show How Americans Speak English Totally Differently From Each Other, e.g. a) you say “car-ml” and I say “cara-mel;” b) you say “you all” and I say “you guys” and c) you say “soda,” and I say “pop,” etc. Pretty interesting.

5. The cell phone is the fastest-adopted device in history – 91% of adults, and almost 97% of those under the age of 44, now own one.

6. 11 Shocking Facts About the North Dakota Oil Boom including this one: A new well costs about $10 million dollars to build in the Bakken region, and each well is expected to generate $20 million in profits, about $4.4 million in taxes, $1.6 million in salaries and wages, and $7.6 million in royalties.

7. State Personal Income Tax Revenues Rose 17.6% in Q1 2013 from a year earlier; Strongest Growth in More Than 6 Years.

8. Video: Domino’s DomiCopter takes pizza delivery airborne.

9. Amazon Plans a Major Move Into the Online Grocery Business.

10. Starbucks stores per capita, DC is #1 and Arkansas is #51.

11. Airbnb Vows to Fight NYC Ruling Against Room Sharing.

12. Research shows that reading comprehension just as good using a Kindle as with paper. 

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Carpe Diem

‘Waiter and waitress nation’ might not be so bad if it means we’re becoming more of an ‘eating out at restaurants nation’

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restaurant1

restaurantIn a post today “Waiter and waitress nation: The May payrolls report shows the US creating jobs, just not many good ones,” Jimmy P quotes Dean Baker of the Center for Economic and Policy Research:

Job growth was again narrowly concentrated, with the restaurant sector, retail trade and temporary employment accounting for more than half of the job growth in May. These are all low-paying sectors. It is worth noting that the job growth reported in these sectors is more an indication of the weakness of the labor market than the type of jobs being generated by the economy. The economy always creates bad jobs, but in a strong labor market workers don’t take them.

Jimmy adds: “Indeed, restaurant jobs make up just under a tenth of total US nonfarm jobs, but they accounted for more than a fifth of the jobs created last month. Another sign of internal labor market weakness: the underemployment rate of 13.8%..”

MP: Here’s an alternative explanation for the increase in restaurant jobs last month to a new record high of 10.26 million that might not necessarily reflect labor market weakness – Americans are eating out more often, and spending more at restaurants than ever before in history. In both nominal and inflation-adjusted dollars, Americans spent more in April (most recent month available) at “food services and drinking places” — $45.85 billion – than in any previous month in history (see top chart above), and that increased restaurant spending requires more restaurant workers.

And as a share of total monthly retail sales, Americans have gradually increased their spending at restaurants as a share of total retail spending, from 9.1% in January 2000, to just under 11% in April of this year (see blue line in bottom chart). During that same period, employment in the restaurant industry has increased, from slightly more than 8 million workers in January 2000 to the record high last month of 10.26 million. As a share of total private employment, restaurant workers have increased from 7.36% of all private payrolls in January 2000 to just over 9% of private payrolls last month (see red line in bottom chart).

As the bottom chart above shows, the increasing number of restaurant workers as a share of US payrolls over the last 12 years has accompanied the increase in consumer spending at restaurants as a share of total retail spending over that period. More spending at restaurants = more restaurant employees.

Bottom Line: The increase in restaurant workers (which likely includes salaried managers and chefs, and restaurant owners, in addition to lower-paid hourly workers) in recent months isn’t necessarily by itself a sign of labor market weakness. Rather, it’s just a continuation of a long-term trend that has existed for more than a decade. And the long-term trend reflects an increasing ability and willingness on behalf of US consumers to allocate an ever greater share of their retail spending eating out at restaurants. In that case, becoming a “waiter and waitress nation” might not be such a bad thing at all because it means that we’re becoming more of an “eating out at restaurants” nation.

Update: Here are some interesting comments and emails about this post:

1. The truth is unless you are a surly sociopath working in a some dive or are completely unwilling to make any real effort in a job you feel is beneath you, you ought to be able to bring home nearly a median hourly wage waiting tables. And if you can land a gig in one of the more upscale places, which seem much more numerous than they were “back in the day,” you can probably do better than some of the numbers I’ve seen for recent law school grads.

2. More restaurant meals mean not only more waiters and waitresses, it also means more positions in food production and distribution, equipment sales, installation and maintenance, design and construction, advertising, etc. A restaurant industry isn’t just food servers.

3. I’ve always been surprised at this insistence that restaurant jobs are low paid. I’ve been a waiter in the US myself and it was a thoroughly well paid job. The problem is, I think, that everyone looks at “wages,” and ignores “compensation.” From your post: “Americans spent more in April at Food Services and Drinking places” – $45.85 billion….” Around 10% of that $45 billion will have been spent in tips. Add $4.5 billion to the income of restaurant staff in that period and it’ll not be a “low paid occupation.” Fast food work, yes, that’s low paid. But restaurant work isn’t.

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Carpe Diem

From today’s employment report: Temporary help, oil and gas, construction, and motor vehicles show strong job growth

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tempA few bright spots in today’s BLS Employment Situation report:

1. Temporary help services employment increased by 25,600 jobs in May, following increases of 26,400 in April and 19,500 in March and 27,500 in February, bringing the total number of temporary jobs last month to a new record high of 2.68 million (see chart). Compared to May last year, temporary help employment has increased by 186,000 jobs and by 7.5%, which is almost five times the overall payroll growth of 1.6% over the last 12 months. On a daily basis, US employers have been hiring an average of more than 715 temporary workers every business day over the last year. Since the recession ended and temporary help employment fell to a cyclical low, US employers hired almost one million temporary workers over the last four years.

As a leading indicator of overall US labor market demand, the ongoing positive trend in temporary hiring is a sign that the labor market is showing some gradual signs of improvement, and suggests an increased pace of broader-based hiring for workers going forward in 2013. It’s also likely that many employees who initially get hired on a temporary or contract basis will be offered employment on a full-time, permanent basis as the economy continues to improve.

2. Construction employment in May increased by 7,000 jobs to an employment level of 5.79 million, the highest construction payroll level since August 2009, more than four years ago. Over the last year, construction employment has increased by 189,000 jobs and by 3.4%, more than twice the overall 1.6% national rate of payroll growth. Except for a slightly higher annual increase of 3.6% in January 2012, the 3.4% year-over-year gain in construction payrolls was the highest yearly percentage increase since September 2006. Since May of last year, construction companies nationwide have been hiring at a pace of 727 new construction workers every business day. The increased demand for construction workers reflects the housing rebound that took hold last year, and which is starting to gain momentum this year.

3. Along with an increased demand for construction workers, there has also been a strong increase in the hiring of workers for “Architectural and Engineering Services.” In May, payrolls for Architects and Engineers increased by 4,900 jobs, bringing total employment for those workers to 1.35 million, which is the highest employment level since March 2009, more than four years ago.

4. In the area durable manufacturing, jobs in the auto industry (“Motor Vehicles and Parts”) increased by 2,400 in May and by 26,300 over the last year, which is an annual employment increase of 3.4% and more than twice the overall growth of 1.6% for all US payrolls over that period. US automakers have been hiring at a pace of more than 100 new workers every day over the last year.

5. Reflecting America’s shale revolution, oil and gas extraction payrolls increased in May to 193,800 — the highest employment level for those jobs since August 1988, more than 24 years ago. Over the last year, oil and gas companies have hired 8,600 new employees at a rate of 33 every day, and payrolls have increased by 4.4% from May 2012 to May 2013, more than three times the national average increase in payrolls of 1.6% over that period.

MP: Although overall US job growth continues to be weak, we are seeing strong job growth in some sectors of the economy – temporary help services, construction, architectural and engineering services, motor vehicles, and oil and gas extraction.  Together, those five sectors added 40,600 jobs in May, which represents more than 23% of the overall increase in US payrolls last month of 175,000. Looking forward, we can expect increased hiring in those sectors, as America’s energy revolution continues, the housing recovery gains momentum, and auto production and sales continue on an upward trajectory.

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Carpe Diem

Rising stock market and housing recovery bring US household net worth to a new record high in Q1 2013

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nwThe Federal Reserve released data today for the net worth of US households in Q1 2013. Here are some highlights:

1. The net worth of US households - the value of homes, stocks, bonds, savings accounts, and other investments minus household debt – increased to $70.35 trillion in the first quarter, which was an increase of $6.2 trillion, and 9.6%, from the same quarter in 2012 (see chart).

2. Household net worth in Q1 of $70.35 trillion established a new all-time record high (in nominal dollars), and was $3.1 trillion, and 4.5%, above the previous high of $67.3 trillion in Q3 2007 before the Great Recession started and caused household net worth to collapse by $16.1 trillion (and by 24%) to a cyclical low of $51.2 trillion in the first quarter of 2009.

3. As a result of rising home prices in the first quarter of this year by about 10% (according to CoreLogic’s repeat-sales home price index), the value of real estate owned by US households increased to $18.45 trillion during the January-March period, up by $1.86 trillion and 11.2% from the same quarter a year earlier when home values totaled $16.59 trillion. Household real estate values are now at their highest level since 2007. With about 78 million US households owning homes, the $1.86 trillion in real estate appreciation over the last year through Q1 2013 would translate into an average gain in home value of almost $24,000 per household.

4. The value of equities and mutual funds owned by US households increased by more than $2 trillion over the last year, and by 14.0%, from $14.93 trillion in Q1 2012 to $17.02 trillion in Q1 this year.

5. The total value of all financial assets owned by US households increased by $4 trillion over the last year, from $53.7 trillion in Q1 2012 to $57.7 trillion in Q4 2012.

MP: In nominal terms, US households have not only gained back all of the $16 trillion of net worth that was lost during the Great Recession, financial crisis, and collapse of housing values in 2008-2009, but they are now $3 trillion ahead of the previous pre-recession peak in 2007. At $70.35 trillion, household net worth (an average of almost $600,000 per household) set a new record high in the first quarter of this year. With  further gains during the second quarter of 2013 in: a) stock prices – the S&P is up year-to-date by 13.5%; - and b) home prices – the CoreLogic home price index was up 12% in April and its pending home price index predicts a 13.2% gain in May home prices, we can expect further gains in household net worth in the second quarter of this year.

Related: On his blog today, Scott Grannis commented that the increase of household net worth to a new record high is ”a testament to the dynamic nature of the U.S. economy, which in turn reflects the ability of businesses, workers, and consumers to overcome adversity and forge ahead. In my experience, it never pays to underestimate the inherent dynamism of the U.S. economy. It only took four years to recover from the most devastating recession in modern times, and the near-collapse of the global financial system. The recovery has been painfully slow, but there is no reason to think it won’t continue.”

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Carpe Diem

Energy milestone: US pumped more domestic oil out of the ground last week than it imported, for first time since 1995

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oilFrom today’s Dallas Observer:

Buried in an unheralded weekly U.S. petroleum balance sheet released yesterday was a milestone that not so long ago seemed unimaginable: We pumped more oil out of the ground than we imported for the week ending May 31 (see chart above).

The difference between domestic oil production (7,300,000 barrels per day) and imports (7,220,000 barrels per day) wasn’t huge — about 80,000 barrels per day. But it’s the first time the balance has shifted in this direction since February 1995, according to the U.S. Energy Information Administration.

What’s driving the change, of course, is the combination of hydraulic fracturing and horizontal drilling, pioneered here in Texas. Tight oil formations in the Eagle Ford Shale of South Texas and the Permian Basin — along with production in North Dakota — allowed the country to meet 88 percent of its energy requirements this spring, Bloomberg reports. That hasn’t happened since 1986.

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