Economics

A Fly-Over State Change of Mind

DeloreZ — Sat, 02 Feb 2013 11:35:10 -0500

Google the phrase “fly-over state.” You will find some unkind and a few nasty characterizations of the states that occupy the middle of the country. Nobody goes to these boring, unremarkable places with their ignorant people, uncultured lifestyles and awful weather. "Fly-over states" are where people never actually go but just fly over to get from the East Coast to the West Coast where the interesting places are.

Now I don't want to disparage the coastal states or their “cool” cities because I have many friends living and working there that I would never dream of offending. But the truth is that the middle of the country is doing quite well and can look forward to a bright future with unaccustomed, uncharacteristic optimism.

The Great Plains turnabout is robust and pervasive, according to “The Rise of the Great Plains,” a report on the future of the American Great Plains recently released by Texas Tech University. Joel Kotkin, Praxis Strategy Group and Kevin Mulligan of TTU’s Center of Geospatial Technology authored the report, which is accompanied by an interactive online atlas of economic, demographic and geographic data.

Instead of being passed over, the region has surpassed the national norms in everything from population increase to income and job growth during the last decade. After generations of net out-migration, the entire region now enjoys a net in-migration from other states, as well as increased immigration from around the world. Contrary to perceptions of the area as a wind-swept, old-age home, the vast majority of the newcomers are between the ages of 20 and 35.

“The Rise of the Great Plains” concludes that three critical factors will propel the region’s future in the 21st century.

First, the region’s vast resources places it in an excellent position to take advantage of worldwide increases in demand for food, fiber and fuel. The region’s manufacturing prowess and increasing trade savvy can propel it into more global markets.

Second, the hyper-evolution and adoption of advanced technologies has enhanced the development of precision agriculture and energy resources, notably oil and gas previously considered impractical to tap. So, too, the Internet and advanced communications have reduced many of the barriers — socio-economic and cultural — which have isolated the Plains from the rest of the country and the world.

Third, and perhaps most significantly, are demographic changes. The reversal of out-migration means that the region is again becoming attractive to people with ambition and talent. This is particularly true of leading cities, many of which now enjoy positive net migration not only from their own rural hinterlands, but from metropolitan areas such as Los Angeles, Minneapolis, the San Francisco Bay Area, New York and Chicago.

Fly-over states forever? Certainly some of the economic realities and perceptions of the Great Plains will persist. Yet, we can accelerate their demise by choosing to make prudent, generative investments in our infrastructure, businesses, institutions, communities and people. By doing so, we ourselves will be empowered to fly over to opportunities wherever they might be found throughout the world.

Delore Zimmerman is the President of Praxis Strategy Group and Publisher of NewGeography.com. This piece originally appeared in Prairie Business Magazine, January 31, 2013.

Interactive Data Visualization: The Connection Between Manufacturing Jobs and Exports

Rob Sentz — Fri, 21 Oct 2011 17:55:35 -0400

By Hank Robison and Rob Sentz

We recently observed that there are only about 50 manufacturing sectors out of 472 (6-digit NAICS) that actually gained jobs over the past 10 years. This made us wonder because we keep hearing that manufacturing output is actually improving. Politicians and policymakers tend to assume that an uptick in output would naturally result in an uptick in employment. So we investigated.

What we found

We placed national export data on top of job totals for each of the 472 manufacturing sectors, and found that manufacturing exports (inflation-adjusted) actually grew by 56% from 02-10 while manufacturing jobs contracted by 23%. Growth in exports have clearly not resulted in more domestic jobs. See the interactive graphic at the bottom of this post for a visualization.

Across the manufacturing sectors we are actually seeing a predominantly inverse relationship between jobs and exports. To explore this further, we placed each of the 472 industries into one of four categories (again see the graphic):
1) Those that gained both exports and jobs,
2) Those that gained exports but lost jobs,
3) Those that lost exports but gained jobs, and
4) Those that lost both exports and jobs.

Some observations

Those advocating for increased exports as a way of resuscitating jobs in manufacturing need to look at this data. Only 11% of all manufacturing sectors showed gains in jobs and exports, which is not a huge surprise given manufacturing decline. 19% lost jobs AND exports at the same time. Now here is the stat really worth noting — 71% of all manufacturing sectors increased their exports while decreasing their domestic workforce.

There are some political ramifications here. The Obama Administration has proposed exports as a key to kick-starting the U.S. labor market (see this post from Brookings). Economists and policy experts as well as all of us here at EMSI are huge fans of improving exports. Exports are a principal source of foreign exchange and an important driver for U.S. goods. Export industries also tend to pay higher wages and connect with the rest of the economy through greater multiplier effects, which mean they are key for income and job formation.

However, as the data suggests things are not that simple. Domestic manufacturers appear to be outsourcing large parts of their work to foreign suppliers. In the process, they employ fewer domestic workers but become more competitive in foreign markets. As a result, exports go up while employment goes down. This is something that policymakers need to consider before pinning too much hope on exports as a way of reviving manufacturing sector employment.

Conclusion

There may be a conflict of goals here. On one hand we want high-wage, high-benefit jobs; on the other, “full employment.” But in manufacturing can we have both? If wages, and benefits are pushing producers to outsource then either wages go down (an unattractive prospect), or we adopt policies that spawn productivity growth needed to support high-wages. Are there any other choices?

Data Graphic

In this interactive graphic, you can explore EMSI’s data on manufacturing jobs and exports. The data is based on 4-digit NAICS manufacturing sectors. NOTE: 6-digit data was used in the previous analyis.

Click on the chart to highlight an industry or use the drop-down box. Data in the top half of the graphic shows percentage change in jobs (on the y-axis) and exports (on the x-axis). The bottom line graph simply compares manufacturing jobs and exports over time.

As we highlighted above, 71% of all manufacturing sectors increased their exports while decreasing their domestic workforce from 2002 to 2010.

For more information, email Rob Sentz.

Wind Energy is Not Just Hot Air

Shashi Parulekar — Mon, 06 Jun 2011 21:05:49 -0400

Anaheim Convention Center, Southern California, last week was a hot bed of one of the ultimate forms of renewable energy. The “fuel” used by wind turbines (really the wind) is free for the 30 year life span of the windmill installation, is considered inflation proof, and is 100 % domestically available.

Just a brief walk through the trade exhibition convinces any visitor of European as well as Chinese commitment to wind energy. One guest speaker, Ted Turner put it: “Just do not look at the next 30 years, look for at least a few hundred years of human energy needs.”

Conventional energy lobbyists claim that wind is unreliable and will harm operation of the grids. However, grid operators have observed that wind power is more reliable and predictable.

There are rumors that sound of operating wind will cause a variety of dangerous health effects, including headaches and disturbed sleep. The studies have shown that wind turbines at a distance of 2,000 feet (normal building codes for Wind Mills) have a dB rating close to 45 (comparing that to 55 in an average home in the USA). Normally, two people can carry on a conversation on any wind mill farm. Please remember: this energy source has no side effects such as air or water polluting emissions, no hazardous waste, and has a direct impact on reducing the public health impact of any other energy generation.

Are birds get affected by wind energy? A very legitimate question by the American Bird Conservancy needs to be addressed with honesty. The bird loss caused by buildings is about 550 million, by power lines 130 million, vehicles 80 million, poisoning by pesticide 67 million, and radio and TV towers close to 4 million. The tabulated loss by wind is under 150,000. Special attention is being paid to bats: The bats and wind energy coalition was formed in 2003 by Bat Conservation International, the U.S. Fish and wild life Service, and the National Renewable Energy Laboratory.
The view of a wind energy facility or the distance of a home from a wind mill farm had no consistent, measurable or significant impact on home values.

The current worldwide installed capacity gives a snap shot of Wind energy penetration in a given region. By 2010, the European Union was leading the world with 84,000 MW, China with 42,000 MW and the USA was at 40,000 MW. However, Denmark leads the world as percentage of total power needs fulfilled by Wind Energy: close to 20 % in 2010.

The potential of up to 20 % electricity generation that can be derived from Wind Energy is feasible, both technically as well as financially by 2030. Most land used to construct wind farms can be used for its original purpose of harvesting, grazing and farming. The actual foot print of turbine farms, roads and generating and transmitting facilities is under 3 percent of total land taken out of commission.

Wind Energy should be debated in the public forum with both energy independence and long term sustainability for our planet beyond the next election cycle.

Transportation Infrastructure: Yankee Ingenuity Keeps California Moving

Susanne Trimbath — Sun, 05 Jun 2011 08:38:46 -0400

A friend was explaining some philosophy to me the other day and he used an analogy to make his point: If you can get a cannibal to use a knife and fork, is that progress? Of course, the answer is "no". So when I heard the next day that transportation infrastructure performance in the US improved significantly at the height of the worst recession since the great depression I had to ask: is that progress?

We do not want to stop all economic progress just so that a privileged few with access to resources may enjoy an easier ride on the I-95 interstate highway between Wall Street and Congress. Stopping economic growth is not a solution to the problem of crumbling infrastructure in America.

In fact, my economic analysis shows that transportation infrastructure is a “leading indicator” of economic activity. In other words, infrastructure performance has to improve for a while – and stay improved – before economic activity will pick up in an area. Alternatively, infrastructure performance would have to decline for a while before businesses would leave that location, too. Think about it this way. From the perspective of a company already in business in a particular location, they would not pack up and leave town the first day that, for example, traffic congestion slows down the delivery of products to their customers. Companies like FedEx Freight plan distribution locations 20 years in advance. For a while, they will find a way around congestion. FedEx Freight uses elaborate technology to “route trucks around huge bottlenecks, but this adds circuitous miles and costs”. Their policy is to “minimize the impact as best you can.”

We see evidence of how business finds a way to make it work even when government and infrastructure try to stand in their way. California ranked 43rd in 1995 and fell further to 47th in 2000 and 2007 among the 50 states (plus D.C.) in the U.S. Chamber of Commerce’s transportation infrastructure performance index. Although California’s infrastructure is crumbling, businesses are finding a way to work around it. California’s economy could grow faster than the rest of the US economy this year.

In economics we talk about the efficient use of resources – getting the most out of what you have to work with. In a new study getting underway at the University of Delaware, early results indicate that businesses are operating successfully in the United States despite being hampered by problems like congestion and the lack of intermodal-connectivity (that is, being able to move products from trucks to trains and from trains to ships). California, in fact, may be a benchmark state for economic efficiency. They rank at the bottom for infrastructure performance but business is finding a way to make it work.

My old pal, Larry Summers – former Economic Advisor to President Obama and subverter of all things economic – took a last final swipe at spending on transportation infrastructure in April 2011. In his first public appearance at Harvard University after leaving the White House, he talked about investment in infrastructure as a way to “…tackle high levels of unemployment, especially among the low-skilled.” He just doesn’t get it. He continues to believe that the way to stimulate the economy is to give tax breaks to business – as if they will build their own roads. He just didn’t get that infrastructure is what supports all economic activity. It’s the stuff that business does business on, not the classical economic “capital” that business brings to the table.

In fact, it costs businesses to have to work around the crumbling infrastructure. When you ask academic, government and researchers to measure that cost, you get a wide range of views about what constitutes a direct or an indirect cost to business from traffic congestion. But some of these costs are undeniable. There is a cost of computer technology for monitoring congestion; the cost of employees for communicating with drivers about alternate routes; the cost of extra fuel; driver overtime resulting from congestion; refunds to customers for missing guaranteed delivery deadlines, etc. etc.

So, there’s a benefit to business from improving the performance of transportation infrastructure. They will be saving the money that they are spending now to work-around the infrastructure. And money not spent is at least as good as a tax break.

Disclosure: Dr. Trimbath’s research on the economic impact of transportation infrastructure performance was supported by the National Chamber Foundation and sponsored in part by FedEx Freight. The 2009 Transportation Performance Index will be released on July 19, 2011 in Washington, D.C. It will show a substantial improvement over 2008.

The Tax Cut that Killed California?

Susanne Trimbath — Wed, 22 Dec 2010 10:15:51 -0500

I studied with the Austrian economists at New York University. The Austrian school of economics (as contrasted to Keynesians or Chicago school economists) work with a theory about business cycles that essentially starts from the understanding that what appear to be almost mechanical, regular ups and downs in the economy are actually caused by the periodic disappointment of the expectations of entrepreneurs. The alternative is to suggest that business owners periodically and collective wake up stupid one morning and start making a lot of bad decisions. A connection to the routine horizons of fiscal policy – for example, the 5-year funding cycle for federal highways – is a more likely cause of what appear to be “cycles”.

A current example of how government spending policy can make a disaster of the economy by confounding decision making is the changes/not-changes in US tax policy. What if you are a business owner who has a fiscal year that runs from July 1 to June 30? All of your plans for the first half of 2011 would have been based on the tax cuts expiring (which is the reasonable thing to do – don't change your plans until the law is changed). If the tax cuts are extended, then the last half of your budget is completely changed. In this case, there will be more net income. Being unable to plan for this, according to economic principal-agent theory, will put a lot of cash in the hands of managers who may not spend it in the best interests of the shareholders. The failure of managers to invest wisely when government stimulates business through unexpected and excessive free cash flow is well-documented.

Now imagine you are a state whose tax policy mirrors the federal policy. Tax cuts to businesses and individuals translate into revenue cuts for states, counties and cities. Any state that opts out of mirroring whatever Washington D.C. passes risks being cut-out of certain federal funding programs in the future. Nebraska, for example, passes a biannual budget. The last one covered the fiscal-years 2009-2011, which was based on the tax cuts expiring at the end of 2010. The difference if the tax cuts are extended will be a $200 million shortfall. Nebraska is a relatively small state, so consider what this will do to the budgets of all the states, plus counties and cities in the U.S. This could be the event that brings the global financial crisis in public debt home, especially to states like California which are already in trouble.

Note: A good source for more on Austrian economic theory is the Mises Institute at Auburn University. Click this for a brief on "The Austrian Theory of the Business Cycle" from Roger Garrison – who is an expert on the subject.

Urban Economies: The Cost of Wasted Time

Wendell Cox — Mon, 07 Jun 2010 00:56:30 -0400

Much has been written in recent years about the costs of congestion, with ground breaking research by academics such as Prud'homme & Chang-Wong and Hartgen & Fields showing that the more jobs that can be accessed in a particular period of time, the greater the economic output of a metropolitan area. Greater access to jobs not only improves economic growth, but it also opens greater opportunities for people and households to fulfill their aspirations for a better quality of living.

Congestion costs are principally the cost of wasted time, which the most recent Texas Transportation Institute (TTI) Annual Mobility Report places at $15.47 per hour. It is important to understand that much of this cost is not because the car is not moving. It is rather because time that could be used more productively is being consumed.

Steve Polzin of the University of South Florida has raised a related issue that has been virtually absent from urban planning discussions in a Planetizen blog entitled "The Cost of Slow Travel." Noting that transit travel time is considerably slower than auto travel times, Polzin broadly estimates that slower travel on transit costs the nation $44 billion, which is two-thirds the $66 billion. Polzin does not suggest that this is a final, "take to the bank" lost productivity number, but does suggest attention to the issue.

Such thinking is long overdue. Wasted time is wasted time. Most wasted time occurs with respect to travel during peak periods, when most people are commuting to or from work. The $66 billion in wasted time by automobile translates into $550 per commuter per year in the United States (Based upon 2007 commuting data from the American Community Survey). The cost of wasted time for transit is 12 times as high, at $6,500 per commuter, using Polzin's estimate. Of course, as Polzin is quick to point out, these are not final figures. However, they are a starting point for important (and perhaps "inconvenient") economic research that has been largely kept off the agenda up until now.

Riding Out the Recession in the Forty Strongest Metropolitan Economies

Mark Schill — Mon, 02 Nov 2009 14:19:51 -0500

A few days ago BusinessWeek released a list of the top 40 metropolitan economies based on data compiled at the Brookings Institution's Metromonitor project. But, as many old media sites tend to do, they've locked the list behind a slow-loading slide show in a cheap attempt to drum up page views. Many of the commenters to the original article couldn't even find the list.

So, in the interest of usability, here's the top 40 in boring list format:

1	San Antonio, TX
2	Austin-Round Rock, TX
3	Oklahoma City, OK
4	Little Rock-North Little Rock-Conway, AR
5	Dallas-Fort Worth-Arlington, TX
6	Baton Rouge, LA
7	Tulsa, OK
8	Omaha-Council Bluffs, NE-IA
9	Houston-Sugar Land-Baytown, TX
10	El Paso, TX
11	Jackson, MS
12	McAllen-Edinburg-Mission, TX
13	Washington-Arlington-Alexandria, DC-VA-MD-WV
14	Columbia, SC
15	Pittsburgh, PA
16	Harrisburg-Carlisle, PA
17	Des Moines-West Des Moines, IA
18	Virginia Beach-Norfolk-Newport News, VA-NC
19	Honolulu, HI
20	Rochester, NY
21	Buffalo-Niagara Falls, NY
22	Scranton-Wilkes-Barre, PA
23	Augusta-Richmond County, GA-SC
24	Colorado Springs, CO
25	Madison, WI
26	Albuquerque, NM
27	Syracuse, NY
28	Albany-Schenectady-Troy, NY
29	Kansas City, MO-KS
30	Raleigh-Cary, NC
31	Ogden-Clearfield, UT
32	Boston-Cambridge-Quincy, MA-NH (tied)
32	New Haven-Milford, CT (tied)
33	Bridgeport-Stamford-Norwalk, CT
34	Denver-Aurora-Broomfield, CO (tied)
34	Baltimore-Towson, MD (tied)
35	Poughkeepsie-Newburgh-Middletown, NY
36	Hartford-West Hartford-East Hartford, CT
37	Indianapolis-Carmel, IN
38	Memphis, TN-MS-AR

Trends? Looks like energy economies, state capitals, university-heavy towns, generally affordable regions that avoided the housing boom, and a few old industrial centers that suffered the brunt of decline 25 years ago and now may be positioned for an up-swing.

Here's an explanation of the list methodology:

The Brookings Institution ranked the 100 largest metros by averaging the ranks for four key indicators: employment change, unemployment change, gross metropolitan product, and home price change. Employment was measured by the change from the peak quarter for each metro to the second quarter of 2009. The peak was the quarter in which the metro had the most jobs during the past five years. Unemployment was ranked by measuring the percentage-point change from the first quarter of 2009 to the second quarter of 2009. Gross metropolitan product was measured from the peak quarter to the second quarter of 2009. And the ranking of home prices compared the second quarter of 2009 to the previous quarter. The employment data were provided by Moody's Economy.com, the unemployment data were collected from the U.S. Bureau of Labor Statistics, and the home price index came from the Federal Housing Finance Agency.

Source: The Brookings Institution's MetroMonitor

Mapping Industry Employment Trends by State

Mark Schill — Thu, 13 Aug 2009 10:56:26 -0400

Mark Hovind at Jobbait.com has released another fascinating set of maps and data on industry employment trends by state over the past few months. Here's a taste:

The maps below show the employment trends by state and industry sector for the 12 months ending June 2009 (July will be available August 21). Green is growing faster than the workforce. Grey is growing slower. Red is declining. Black is declining more than 8%. White is not available.

Head over to Jobbait.com for the full analysis.

Decline in Construction and its Effect on Gender

Ian Lausa — Wed, 22 Jul 2009 11:27:04 -0400

Unemployment in the construction sector increased by 79,000 in June, according to a report The Associated General Contractors of America released earlier this month. Over the past year, that number has grown to 992,000.

Even more alarming is the disparity between the construction worker unemployment rate, over 17.4 percent, and the national average for all sectors, around 9.7. Construction employment is crumbling before our eyes.

The current economic climate has not proven friendly to construction on the whole as state and local revenue continues to decline and little demand for commercial or retail facilities, as well as shrinking orders for new facilities, puts construction in a perilous zone.

Though as recent as last November, President-elect Obama had conjured up a program to rebuild the nation’s infrastructure.

The $787 billion American Recovery and Reinvestment Act would modernize roads, bridges, schools, and public transportation – among other things – and reinvigorate the floundering construction and manufacturing industries.

However, this “shovel ready” stimulus plan did not sit well with women’s groups who wanted nothing to do with a stimulus package that only created jobs for “burly men.”

These women’s groups seemed to misjudge the president-elects original plan designed to “stop the hemorrhaging in construction and manufacturing while investing in physical infrastructure that is indispensable for long-term economic growth” and instead turned the stimulus into an issue of gender politics. But from the first complaint, onward, the construction and manufacturing industries stood no chance.

Obama changed his plan, adding health, education, and “other human infrastructure components” to his proposal.

A report entitled “The Job Impact of the American Recovery and Reinvestment Plan” released on January 10, estimated that the number of jobs created that were likely to go to women was around 42%, a non-too disheartening figure when women “held only 20 percent of the jobs lost in the recession.” The report concluded that the stimulus package would now “skew job creation somewhat towards women.”

The act was signed into law on February 17 and over the past four and a half months some unfortunate figures have appeared. As noted previously, the construction industry is in a downfall, while there is a growing discrepancy between female unemployment rate (8 percent) and male unemployment rate (10.5 percent) – the highest male-female jobless rate gap in the history of the BLS [Labor Department] data back to 1948.

All this data, however, has pushed the issue of gender-politics above the issue of human need. Now which group of people should make their voices heard? Let’s hear from women in the construction industry.

Unemployment Rising in Washington, DC

Ian Lausa — Mon, 06 Jul 2009 01:30:38 -0400

In the past month, Washington D.C. has experienced both an increase in number of jobs as well as an increase in unemployment, according to the Washington Post.

The city’s unemployment rate rose from 9.9 in April to 10.7 percent in May – far surpassing the national average of 9.4 percent – despite gaining about 1,400 jobs primarily with the federal government.

The District is often considered to be immune to such job market fluctuations because of steady government employment. But as Alice Rivlin, senior fellow at the Brookings Institution, points out, “[D.C.] has plenty of jobs, mostly high-skill jobs that require education beyond high school.”

The high-paid, higher-skill jobs created within the government are often times given to those not living in the city – Virginia’s unemployment rate: 7.1 percent, Maryland’s: 7.2 percent.

Job loss has also disproportionately affected the city’s African American population. The predominately white and affluent Ward 3 had an unemployment rate of 2.5 percent in April, far better than the largely poor and black Ward 8, where the rate was 23.3 percent.