Some Good Economic News

As a card carrying dismal scientist, I should not display optimism. But Google business news had 4 positive stories listed. Here they are:

S&P 500 Heads for Best First Quarter Since 1998. It is up 12% for the year!

Texas Unemployment Rate Down To 7.1 Percent. Excerpt:

"The state's jobless rate was down from 7.3 percent in January and has dropped a full percentage point since August, the Texas Workforce Commission said. February's unemployment rate is the lowest since March 2009." (The U. S. unemployment rate was 8.3% for February)

US consumer spending rises as unemployment falls. Excerpt:

"Consumer spending climbed 0.8pc in February, the Commerce Department said on Friday, following a 0.4pc increase in January.

The figure was better than the 0.6pc Wall Street economists had expected, and came as a separate survey put consumer confidence at its highest level since February last year."

Consumer sentiment index at highest rate since late 2007. Excerpt:

"High oil prices or not, American consumers are feeling more confident about conditions than at any time since the recession began in late 2007.

That's according to the latest survey by Thomson Reuters/University of Michigan, which reported Friday that its March consumer sentiment index climbed to 76.2 from 75.3 a month ago. That pushed up the average reading for the first quarter to the highest level since the fourth quarter of 2007.

What's been boosting sentiment? In a word, jobs.

The last three months have seen an acceleration of job growth, and the Reuters/Michigan survey found that more people heard news about employment gains than at any other time in the 60-year history of the survey. And only 19% said they thought the jobless rate would increase in the year ahead."

Economists see more reasons for optimism this year.

"Economists are increasingly confident that some pillars of the U.S. economy will improve this year, but they still remain cautious in their expectations on the overall pace of economic growth.

The National Association for Business Economics said Monday that forecasters have raised their expectations for employment, new home construction and business spending this year. But they held on to their average prediction that America's gross domestic product, or GDP, will grow at a rate of 2.4 percent. That's a slight improvement from 2011, when economists believe the economy grew 1.6 percent. Final economic growth numbers for 2011 are due out Wednesday.

GDP reflects the economy's total output of goods and services. The latest forecast is in line with one issued by the group in November that called for the economy to grow 2.4 percent this year. Forecasters predict growth will be stronger in the second half of 2012 than it will be through June."

I think this guy captures the excitement:

How can an economy that is growing so slowly produce such big declines in unemployment?

See Piecing Together the Job-Picture Puzzle by Jon Hilsenrath of The Wall Street Journal. Excerpts:

"Back in 1962, Yale University economist Arthur Okun described a long-running relationship between economic growth and jobs. When the economy grew faster than its long-run trend, the unemployment rate tended to fall by about half as much as the additional growth in percentage terms. So growth of 3.5% in a year—one percentage point above a long-run trend of 2.5%—would bring down the unemployment rate by a half percentage point in that year. And it worked the same way in reverse. Growth one percentage point below trend would push the unemployment rate up half a percentage point.

Economists called the relationship "Okun's Law." Forecasters still depend on this principle to make predictions about the future. But the law has been unreliable lately. Under the old rule of thumb, it would take growth between 4% and 5% to explain the improvements in unemployment in the past year—much more than the recovery has actually delivered."

"...Okun's Law also broke down in the other direction a few years ago..."

"Some of the miss was because the downturn turned out worse than expected and much of it was because unemployment rose more than Okun's Law predicted."

Why might Okun's Law not be working?

"...company managers were so shocked by the financial crisis in 2008 and 2009 that they fired workers more aggressively than they would in a conventional downturn."

"Over the past six months ... as fear and uncertainty have dissipated, firms appear to have reversed course and gone back toward more normal staffing levels."

One economist said

"these overshoots might soon run their course and that Okun's Law will reassert itself. When it does ... the unemployment rate could stall out at high levels because the economy isn't growing fast enough to justify more hiring.

"The only way unemployment will keep coming down is if GDP growth picks up substantially,"

But there are other potential sides to the story:

"Other story lines could be at play. The government's growth data are always a work in progress. Government statisticians regularly revise it as more information—such as more complete tax returns from businesses and households—becomes available. Revisions to the data could someday show the economy is actually growing more robustly than the data currently show. It is also possible that companies are on to something and they are hiring aggressively because they anticipate more growth than the data currently show.

A less sanguine explanation could be a dangerous productivity slowdown. It might be the case that the workers being hired aren't improving their productivity as much as workers had before. If they aren't as productive, companies need more of them."

Click here to read an earlier post about Okun's Law

Click here to read "Is Okun’s Law Really Broken?" by Justin Wolfers. It from 2010. A little on the technical side but very interesting.

Do Looks Help In The Job Market?

Maybe it is unfair, but it seems so. See The Beauty Premium by Christopher Shea of The Wall Street Journal. It describes a study done in Argentina where it is common for job applicants to include a picture with their resume. Here are excerpts:

"... attractive job candidates get called back 36% more often than unattractive ones,....

10.3 % of the attractive fictional candidates got called, compared with 7.6% of the unattractive candidates — and attractive people got called sooner. Attractive member of both sexes benefited from the beauty advantage."

Here are two earlier posts on related topics:

Do looks matter? (Yes, good looking workers get paid more even when taking other factors into account)

From The Life Is Not Fair Category: Better Looking, Tall, Thin People Make More Money

Bolivians fight over quinoa land

Not much I can add to this story. Click here to read it.

"LA PAZ, Bolivia (AP) — Bolivian authorities say at least 30 people have been injured in a fight between two communities over land for growing quinoa, the Andean "supergrain" whose popularity with worldwide foodies has caused its price to soar.

Oruro state police chief Ramon Sepulveda says combatants used rocks and dynamite against each other Wednesday and Thursday. A government commission was dispatched to the two high plains communities south of La Paz.

Farmland in the region is owned not by individuals but communities.

Authorities say the dispute is related to climate change because quinoa can now be cultivated in areas previously subject to frequents frosts.

Bolivia produces 46 percent of the world's quinoa, which has nearly tripled in price in the past five years."

Supply And Demand And Comic Books

See Man's childhood comic collection fetches $3.5M by Jamie Stengle of the Associated Press. Excerpts:

"A copy of Detective Comics No. 27, which sold for 10 cents in 1939 and features the debut of Batman, got the top bid at the New York City auction Wednesday. It sold for about $523,000..."

"Action Comics No. 1, a 1938 issue featuring the first appearance of Superman, sold for about $299,000..."

Why would a 10 cent comic from 1938 sell for so much now? There must be a great demand and it looks like there is not much of a supply since

"Of the 200,000 copies of Action Comics No. 1 produced, about 130,000 were sold and the about 70,000 that didn't sell were pulped. Today, experts believe only about 100 copies are left in the world..."

And barring fakes or forgeries or specially marked reprints, more copies of Action Comics #1 cannot be produced. So the price is not likely to fall very much.

DC Comics did issue some reprints in the 1970s, but they were over-sized and clearly marked as reprints. Click here to see some of them.

The CPI is about 16 times higher today than in 1939. That would make the price of Detective Comics #27 $1.60 instead of 10 cents. If you put $1.60 in an investment in 1939 and if it grew 19.29% per year for 72 years, it would end up being about $523,000 in 2011. If you put the $1.60 in the stock market and if it grew 10% per year for the 72 years, it would only end up being about $1,529 in 2011.

The Future Is Better Than You Think

That is the subtitle of a book recently reviewed in The Wall Street Journal. See Defying the Doomsayers: "Abundance" argues that growing technologies have the potential not only to spread information but to solve some of humanity's most vexing problems. The review mentions that some optimism might be good in these negative times although it discusses how over-optimism can be damaging. Perhaps the human race is always searching for the right or optimal amount of optimism.

The book they reviewed is called Abundance: The Future Is Better Than You Think by Peter H. Diamandis and Steven Kotler.

Here are excerpts from the review:

"Mr. Diamandis is the chairman and chief executive of the X Prize Foundation and the founder of more than a dozen high-tech companies. With his journalist co-author, he has produced a manifesto for the future that is grounded in practical solutions addressing the world's most pressing concerns: overpopulation, food, water, energy, education, health care and freedom. The authors suggest that "humanity is now entering a period of radical transformation where technology has the potential to significantly raise the basic standard of living for every man, woman, and child on the planet.""

"Given all the talk nowadays about income inequality, the authors' discussion of poverty is especially instructive. The number of people in the world living in absolute poverty has fallen by more than half since the 1950s. At the current rate of decline it will reach zero by around 2035. Groceries today cost 13 times less than 150 years ago in inflation-adjusted dollars. In short, the standard of living has improved: 95% of Americans now living below the poverty line have not only electricity and running water but also Internet access, a refrigerator and a television—luxuries that Andrew Carnegie's millions couldn't have bought at any price a century ago."

"Predictions of a rosy future have a way of sounding as unrealistic as end-is-nigh forecasts. But Messrs. Diamandis and Kotler are not just dreamers. They lay out a plausible road map, discussing, among other things, the benefits of do-it-yourself tinkering—like the work by geneticist J. Craig Venter in beating the U.S. government in the race to sequence the human genome—and the growing willingness of techno-philanthropists like Bill Gates to tackle real-world problems.

The biggest hurdles, however, are not scientific or technological but political. There are still too many corrupt dictators and backward-looking governments keeping millions in penury. But as we have seen lately, the misruled have a way of throwing off despotic governments. With ever more people reaching for freedom, countless millions are tacitly embracing the Diamandis motto: "The best way to predict the future is to create it yourself.""

Another book coming out now with a similar theme is The Coming Prosperity: How Entrepreneurs Are Transforming the Global Economy by Philip Auerswald.