Articles by: admin

Opening Gambits

There seems to be a consensus that the high level of job openings—September’s reading of 6.5% of employment is off from March’s all-time high of 7.3%, but it’s still at the 95th percentile of all months since December 2000—has contributed to inflationary pressures. We’ve long been skeptical about what the openings component of the JOLTS program measures, wondering whether it’s boosted by employers who say, “sure would like an app programmer for $10 an hour but I can’t find anyone!” And a lot of us wouldn’t mind being 35 again either.

We thought a look at recent state openings data might be clarifying. (We used three-month averages to smooth some of the volatility, which is greater at the state level than nationally.) It was clarifying all right: openings bear no relationship to wages.

That point is made by the maps below. The states are shaded so that high, medium, and low openings and high, medium, and low wage growth are represented by the same colors. If openings and wage growth were tightly correlated, the maps would look a lot more similar than they do.

Another way of making the same argument is with the scattergram below. Here too, there’s no relationship at all. The eye doesn’t want to add a trendline because there is none.

The lack-of-trendline point can also be made with a simple regression of average hourly earnings growth on openings. That yields an r2 of 0.02, meaning that the openings explain all of 2% of the variation in earnings growth. Worse, there’s a 15% chance that the relationship is entirely random. And the relationship is flattered by the two outliers (DC and Alaska, labeled in the scatter). Take them out and the r2 falls to 0.00 and the chance of randomness rises to 87%.

Aside from the fact that this has never looked like a wage-driven inflation, these opening stats explain nothing.

by admin· · 0 comments · Uncategorized

State university systems or collapsing bridges? Our choice

It’s been a while since we looked at net investment in the US, and we weren’t surprised to learn that the basic story hasn’t changed. Private investment is only a bit ahead of depreciation, and public investment even less so. So far in 2022, net fixed investment by the private sector has been 2.1% of GDP, which is also its average so far for the decade. As the graph on below shows, that’s about half what it was from the 1960s through the 1980s and is only slightly above what it was in the 1940s, the decade when civilian investment was squeezed to supply war needs:

Low levels of net private investment aren’t driven by declines in gross investment, which has been pretty stable. Instead, the major reasons for the decline are a shift towards shorter-lived equipment and the immateriality of intellectual property (IP) and a shift away from buildings. From 1950–1999, net fixed private investment averaged 32% of gross; since 2000, it’s averaged 20%—and 16% since 2020. Every asset category has seen that shift. Net equipment investment went from 24% of gross from 1950–1999 to 15% since 2020. Even nonresidential structures aren’t being built for the ages; they went from 49% of gross to 16%. (Are they just building self-storage units these days?) And IP isn’t what it used to be either; its net went from 23% of gross in the earlier period to 16% in the most recent.

Residential net investment isn’t doing too great either: it went from an average of 2.8% of GDP from 1950 to 1999 to 1.7% in the 2020s. Unlike the mid-2000s housing bubble, which took net residential investment up to 3.8%, the highest since the post-World War II decade, the latest bubble took net housing investment up to just 1.9% of GDP last year. It’s fallen back to 1.4% in 2022. That’s not the way to meet a housing deficit estimated by Freddie Mac at 3.8 million units.

For the public sector, the decline in net investment has been more dramatic, falling from around 2% of GDP in the early decades on the graph to 0.4% since 2020. (It’s 0.3% so far in 2022.) Like the private sector, we’ve seen a shift towards shorter-lived assets, but unlike the private sector, we’ve also seen a decline in gross investment, which fell by almost half between the 1960s and 2020s. Net federal civilian investment is just 0.1% of GDP so far this decade, a third its 1950–1999 average. State and local investment has fallen harder, down by almost three quarters from that 50-year average to 0.5% in the 2020s (0.3% so far this year).

The graphs below give a yearly view since 1950. They tell the same story: steady decline, with cyclical oscillations around the trend. The burst of net private investment in the late 1990s gave us a major productivity acceleration, but it was not to last. And the burst in civilian public investment from the early 1950s through the late 1960s gave us interstate highways, schools, and state university systems. The long declines in net investment, both private and public, have given us stagnant productivity growth and a collapsing infrastructure.

by admin· · 0 comments · Employment & Productivity

Swans of Our Waters

The tundra swans that breed in the western arctic migrate thousands of miles to our west coast, gracing the skies and waters of California and scattered inland regions of Montana, Idaho and Utah. Close to two hundred of them were counted gliding on the Bear River wetlands near the Great Salt Lake last week. Other times, counts are in the thousands. The populations that breed in the eastern arctic travel to the Great Lakes and, mostly, the midAtlantic coast, some stopping over at the Harriet Tubman Underground Railroad National Park in Maryland these days, and are iconic on the Chesapeake Bay.

Our other native swan, the larger trumpeter, far more local, was brought back from the brink of extinction beginning in the early 1900s, when, after three centuries of overhunting, only a few dozen remained. Damage to muskrat and beaver populations also affected swan populations who nest on their dams and dens, and as these industrious rodents recovered, swan habitats improved as well.

There is another swan in the United States, the mute swan, introduced in the late 1800s largely as an ornament on wealthy estates. With few natural predators, and impressive survival agility, mute swan populations have grown, and in some coastal regions nesting species may have reached carrying capacity. Hudsonia, the small ecological research institute I work with, recently put together a round-up of current knowledge to help inform the ongoing debate on how to handle this charismatic, but potentially problematic, species, excerpted here.

As is often the case with introduced species, impacts of mute swans may be assumed rather than documented, raising the possibility that these birds are the subject of an ecological narrative, to borrow Robert Shiller’s well detailed economic narratives, those partial truths we repeat sometimes without much of a fact check. Sometimes those narratives are amusing, sometimes annoying, but in fact they drive policy decisions often with poor outcomes. Managing swan populations either by addling eggs or culling the birds themselves is an expensive long-term commitment, with no guarantee of success. Our conservation resources are limited.

Mute swans are accused of harassing other nesting waterbirds, depleting aquatic vegetation, attacking humans, and polluting bodies of water. Sometimes they are guilty as charged. And they aggressively defend their nests, as do our native swans who fend off many predators, including foxes. In the popular press, a mute swan defending his nest may come across as aggressive, a tundra swan, valiant.

And, like most birds, they eat a lot. Some ecologists and hunters are concerned that their habit of uprooting more than they eat could deplete submergent aquatic vegetation (SAV), the nursery grounds of fish and crustaceans, thereby reducing duck populations. And on their loafing sites, funny concept, apparently they have inadvertently trampled the nests of rare shorebirds. However, to Hudsonia’s knowledge there have been no species-specific studies of other birds’ nesting success in the presence of mute swans, and most aggression is directed toward also burgeoning year-round populations of Canada geese. Other than isolated accounts, there is “no evidence to support nesting disruption of marsh-nesting birds.”

The primary factor in the widespread declines in SAV beds, documented in coastal, estuarine and lacustrine habitats around the world, is reduced water clarity caused by inorganic sediment, nutrient additions, and eutrophication. For example, sediment that comes into the Hudson River during heavy rains persists for years and even decades, resuspended by recurrent rain storms. Exposed agricultural soils, point sources like treatment plants, and impermeable urban and residential surfaces all contribute, their effects tending to be exacerbated by the warming effects of climate change. There is evidence that animal herbivory is more damaging in areas already over-stressed by those effects.

We already have developed methods to improve water quality ready at hand, identified by the science as the driving factor in restoring and preserving SAV beds, and such projects create entry-level jobs in science and conservation work, sectors that look weak in Bureau of Labor Statistics’ projections. Managing runoff would potentially be of greater value than managing mute swans on many levels.

Focusing on one introduced species, here mute swans, also detracts attention from coming up with integrated solutions that treat the many stressors, including alien species, as part of a web to be rewoven as best we can.

Photograph of mute swans in New York, P. Dunne

by admin· · 0 comments · Employment & Productivity

Bring on the Solopreneur

Details on establishment formation from yesterday’s Quarterly Census of Employment and Wages show an acceleration beginning in 2020Q3, accompanied by a drop-off in the number of employees per establishment. As the graphs below show, between 2017 and 2019 average establishment growth ran at 1.7%, and from 2020Q3 onward at 3.8%, while the number of employees per establishment slipped from 14.5 to 13.2.

And a new term is born: the solopreneur.

Another take on this comes from applications for new businesses. Census statistics show they stumbled in March and April of 2020, and quickly recovered, rising from 3.5 million in 2019, to 4.4 million in 2020, and 5.4 million in 2021, a 54% increase over two years.

Venture Forward, a collaboration among GoDaddy and several universities to learn more about new business formations, estimates there are 45 million microbusinesses in the US, of which 90% have fewer than 10 employees. Many of these have been formed out of necessity, and 63% of those formed since March 2020 required less than $5,000.00 in funding.

The Kauffman Foundation reports that in 2020 the share of opportunity entrepreneurs, those who were not unemployed when they started a new business, fell from 87% in 2019 to 70% in 2020, and then rose to 81% in 2021, so that clouds the picture a bit. But small and growing businesses are drivers of employment, and it’s very good news that new businesses formed by blacks rose from 15% before March 2020, to 26% through July 2021, by women from 48% to 57%, and by those without a college degree from 36% to 44%. The share started by whites slipping from 70% to 60%.

National Bureau of Economic Research found that zip codes with higher numbers of black residents, especially with higher median incomes, were associated with higher startup rates. UC Santa Cruz’s Robert Farlie reported that between 2020Q1 and 2021Q3 black male business ownership rose by 33%, the largest by demographic, followed by a 22% increase among black female entrepreneurs.

The Harvard Business Review recently reported that 17% of black women were in the process of starting a business, compared to 10% of white women, and 15% of white men.

by admin· · 0 comments · Employment & Productivity

We’re Not All Theme Parks

Regional Economic Models Inc. recently hosted two webinars showcasing uses of their models in valuating two specific resources in Florida. In The Bridge to Space the SR 405 bridge that links the Kennedy Center and Patrick Air Force base to the mainland was under the ‘scope, and another focused on the Wekiva River, one of Central Florida’s few near-pristine river systems, a National Wild and Scenic River comprising over 110 square miles, including 42 miles of flowing water, and 34 named springs.

Years ago damage to the SR405 bridge, from age, hurricanes and water rise, made it increasingly hazardous for “heavy aero-space payloads,” and Luis Nieves-Ruiz, of the East Central Florida Regional Planning Council, was called in to assist local planners on the pros and cons of replacement using models, some that his team developed. Replacement turned out to be a true no-brainer: annual spending by tourists alone was found to be twice the replacement cost, even without the big assist from U.S. DOT. Permitting is now underway, securing over $300 million in annual tourist spending, and billions in corporate sales and GDP, not to mention big science.

Although the price tags on the Wekiva River are much lower, it is also crucial to its region. Nieves-Ruiz’s estimates run to 429 jobs, $51 million in output sales, $19 million in personal income, and a $30 million add to GDP. And property values. (As that old California joke goes, prices on the Pacific Coast Highway are much higher for even-numbered addresses.) A degraded river system puts minus signs before those numbers.

Photograph from Florida State Parks

According to Nieves-Ruiz, Florida’s springs are developing some issues with algae, brought on in part by water being transferred to development and away from stream flow, a particularly dangerous situation since Florida’s water supply is almost entirely reliant on aquifers. Nieves-Ruiz notes that remediation is more expensive than protection.

And we’ll add not always possible, and we’re still in the early stages of understanding our natural water systems. For example, it was only in 2013 that the aquifers under Australia, North America, China and South Africa’s continental shelves, holding something like half a million cubic kilometers of low-saline water, came to light. And we now understand that, remediation efforts notwithstanding, the deep organic soils in our water-systems take thousands of years to develop.

Local, targeted work, such as these studies, that reprices the unpriceable, our natural jewels as Nieves-Ruiz put it, shows us the many paths to a sustainable economy. Although he didn’t say it like so, Nieves-Ruiz corrected the local practice of applying the much higher daily spending of theme-park visitors, with their full-service hotels and high-ticket prices, to visitors to the Wekiva system, with their “primitive camping” and canoe rentals.

And that’s kind of the point. Keeping these lower priced activities whole is part of the critical local netwok that safeguards the entire state’s water supply.

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