Unhappy? Move to a less densely populated state.

February 20, 2013

“CBS This Morning” reported on a survey done by the University of Vermont in which researchers searched “geo-tagged” twitter messages for words that were either “happy” or “unhappy” words, and then compiled the data by state.  Here’s a link to the results:  http://www.uvm.edu/storylab/share/papers/mitchell2013a/AppendixB.html.

The colored map caught my population density-sensitive eye.  Knowing that the eastern U.S. is more densely populated than the western U.S., I was immediately suspicious that there may be a correlation.  It’s something I’ve suspected for a long time – that people living in crowded conditions are more unhappy – but I’ve never come across any hard data, until now.  (Although one could question just how “hard” the data is that’s gathered from a twitter survey.) 

So I plotted the data state-by-state vs. each state’s population density on a scatter chart to see if any correlation emerges.  Here’s the chart:  U of Vermont Happiness Index.  There’s a lot of scatter in the data but, once a trend line is calculated and plotted by the computer (in this case, a logarithmic trend line gave the best correlation) a relationship does emerge.  For this trend line, the correlation coefficient (R2) is 0.13.  A correlation coefficient of 1.0 indicates a perfect, straight line relationship while a correlation coefficient of 0.0 indicates that no relationship exists, as you’d find in a shotgun-like scatter of the data.  So the relationship is weak, but there’s definitely one there.  Densely populated states tend to be more unhappy while more sparsely populated states tend to be happier. 

No doubt, there are many other factors involved.  Southern states seem to be less happy.  Even though Texas is below the average population density, it ranks near the bottom of the happiness index.  Perhaps oppressive heat and humidity are factors.  Having lived for five years in the Houston area, I can tell you that it was definitely a factor for me.  (I felt like I was living in hell for much of the year.)  Houston is also among the worst in terms of air pollution and traffic congestion. 

California’s happiness index holds up quite well, in spite of its population density being well above average.  Perhaps its climate and beautiful geography tend to offset its overcrowding.  Lending support to that theory, it should be no surprise that Hawaii is the happiest state in the union. 

Alaska, the least densely populated state, falls somewhere around the middle of the happiness scale.  Perhaps the happiness that would otherwise be attributed to its sparse population is offset by its bitterly cold and dark climate for much of the year.  Or, perhaps the diminished opportunities for social interaction in an extremely sparse population actually becomes a negative factor.  That is, perhaps there’s a “sweet spot” in terms of the relationship between population density and happiness.

It also struck me how similar this map was to the electoral college map in the most recent presidential election.  Republican states also tended to be western states (with some exceptions, like California), while the Democratic states tended to be eastern states.  Does this mean that Republicans are happier than Democrats?  Maybe.  If you think about it, people who are better off financially tend to be more conservative and tend to vote Republican.  The Democratic states tend to be less happy.  Does this mean that President Obama was better than George Romney at tapping into unhappy voters?  Or do his policies play better to people in densely populated (and less happy) situations, who see more of a role for government in maintaining an orderly society?  But, then again, this may also tend to relate back to population density, since unemployment is higher in densely-populated areas. 

This is all a bit beyond the scope of my economic theory based on the very real and powerful inverse relationship between population density and per capita consumption, and I don’t want to make too much of what appears to be a weak relationship, but the evidence suggests that we all might be a bit happier if the U.S. was less crowded.

Advertisements

Economist: “U.S.-China trade is almost a one-way street.”

February 15, 2013

http://blogs.reuters.com/chrystia-freeland/2013/02/15/china-technology-and-the-u-s-middle-class/

In the face of persistent, enormous, destabilizing global trade imbalances that grow worse with each passing year, is it possible that economists are beginning to acknowledge what seems obvious to everyone else – that maybe free trade doesn’t necessarily benefit both parties?  That’s what Chrystia Freeland, Reuters editor, reports in the above-linked article. 

Ms. Freeland recounts her interview with David Autor, an MIT economist and reports on the work he has done with two colleagues:  David Dorn of Harvard and Gordon Hanson of the U. of  California.  The trio of economists comes right out and admits that trade with China has cost America manufacturing jobs – lots of them.  These economists evaluated the effects of two factors on the economy – technology and trade.  They found that while technology tends to push jobs to the upper and lower ends of the spectrum, it has no impact on overall employment.  However, they found a big impact from trade:

The big surprise, at least for believers (like me) in the classic liberal economic view that trade benefits both parties, is the strong and negative impact of globalization on U.S. workers — Autor estimates it accounts for 15 to 20 percent of jobs lost.

… What is striking, and frightening, is the extent to which, at least in the U.S.-China trade relationship, the knee-jerk, populist fears intellectuals tend to deride actually turned out to be true.

“U.S.-China trade is almost a one-way street. This trade relationship doesn’t clearly give you the benefit that you can sell a lot of stuff to your trade partner,” Dorn said. “If you talk to someone who is somehow involved in the promotion of free trade, they may say that maybe the headquarters of Apple (AAPL.O) benefits. That may be true. But the first-order effect is of job loss.”

In Five Short Blasts, I wrote of a divergence of interests that takes place once a “critical” population density is breached – that point at which overcrowding begins to erode per capita consumption.  It’s in the best interest of corporations to continue to benefit from the growth in total volume that accompanies population growth, while it’s not in the best interest of those suffering the effects of diminished ability to use (and thus manufacture) products.  These economists recognize this divergence of interests:

What is challenging about both of these trends, and what makes the hollowing out of the middle class a political problem as well as an economic one, is how different they look depending on whether you own a company or work for one.

Ms. Freeland concludes with this:

Capitalism and democracy are at cross-purposes, and no one yet has a clear plan for reconciling them.

Among the cracks developing in globalization, this is a big one – when the field of economics begins to doubt the basic premises upon which it was built.  I’ve been saying for a long time that there are no solutions to be found among politicians.  It makes absolutely no difference which party, Democrat or Republican, has their hand on the helm of the economy when both take their advice from economists who, while tilting slightly left or right, adhere to the same basic principles, especially when it comes to free trade.  Nothing will change until the field of economics changes.  Perhaps that’s beginning to happen.


Rebuttal to The State of The Union

February 14, 2013

Tuesday night’s State of The Union address by President Obama will likely go down in history as one of the least inspiring – mostly a themeless chronicling of the woes we face, followed by a brief attempt at cheerleading an agenda for a brighter tomorrow, seemingly led by one who hadn’t listened to the first part of his own speech. 

It began in the usual fashion:

Fifty-one years ago, John F. Kennedy declared to this Chamber that “the Constitution makes us not rivals for power but partners for progress…It is my task,” he said, “to report the State of the Union – to improve it is the task of us all.”

Tonight, thanks to the grit and determination of the American people, there is much progress to report. After a decade of grinding war, our brave men and women in uniform are coming home.

Good.  That’s a relief.  OK, what else have you got? 

After years of grueling recession, our businesses have created over six million new jobs.

Uhhh, wait a minute, that’s just a little disingenuous.  Yes, the economy has added six million new jobs, but we’ve also added that many workers to the labor force, thanks to growing the population by twelve million.  In other words, no progress has been made in putting the unemployed back to work, and our labor force participation rate is left incrementally lower than it was four years ago.  That’s not really good news, Mr. President.  Got anything else?

We buy more American cars than we have in five years, and less foreign oil than we have in twenty.

In other words, sales of American cars hasn’t grown in five years, while our population has grown by 15 million people, so our per capita consumption of American cars has actually declined even further.  And our consumption of foreign oil has declined because people can no longer afford bigger cars.  Yeesh.  I’m still looking for some evidence of “progress” here.  Anything else?

Our housing market is healing, our stock market is rebounding, and consumers, patients, and homeowners enjoy stronger protections than ever before.

The stock market is rebounding, thanks mostly to the Fed’s quantitative easing programs to buy up treasuries and mortgage-backed securities, effectively crowding other investors out of those markets into the only market left – the stock market.  It has little to do with economic recovery.  And are you sure about that housing market part?  A rise of a few percent from a 50% decline is scant evidence of a recovery, and just yesterday morning the Mortgage Bankers’ Association announced that mortgage applications fell 10% last week, erasing much of the previous gains. 

Together, we have cleared away the rubble of crisis, and can say with renewed confidence that the state of our union is stronger.

Stronger than it was at the depths of the Great Recession, that’s for sure, but weaker than it was before the onset of the recession and, one could argue (especially based upon what’s happened to our national debt), that it’s weaker than it’s been in decades. 

And that was it.  That was the extent of the “much progress to report.”  One paragraph, the first paragraph, in a speech approximately 80 paragraphs long.  Most of the remainder of the speech dealt with slowing the growth of our national debt, raising revenue and cutting spending, sharing the burden and trying to breathe life back into the middle class.  In other words, the minutae involved in managing our decline. 

The key to reinvigorating out economy is bringing manufacturing jobs back home, and that fact isn’t lost on the president:

Our first priority is making America a magnet for new jobs and manufacturing.

After shedding jobs for more than 10 years, our manufacturers have added about 500,000 jobs over the past three. Caterpillar is bringing jobs back from Japan. Ford is bringing jobs back from Mexico. After locating plants in other countries like China, Intel is opening its most advanced plant right here at home. And this year, Apple will start making Macs in America again.

Remember the six million jobs the president boasted of adding during his first term?  Half a million – or 8.3% – were in manufacturing.  Sounds good until you realize that the manufacturing sector accounts for 12% of our economy.  So, in other words, while we’ve grown the economy by stoking it with population growth, manufacturing’s share of the economy has actually declined.  And for every example of companies bringing manufacturing jobs back home that the president cited, I could give you two examples of companies outsourcing more jobs.  For every step forward there have been two steps backward that the president doesn’t mention. 

There are things we can do, right now, to accelerate this trend. Last year, we created our first manufacturing innovation institute in Youngstown, Ohio. A once-shuttered warehouse is now a state-of-the art lab where new workers are mastering the 3D printing that has the potential to revolutionize the way we make almost everything. There’s no reason this can’t happen in other towns. So tonight, I’m announcing the launch of three more of these manufacturing hubs, where businesses will partner with the Departments of Defense and Energy to turn regions left behind by globalization into global centers of high-tech jobs. And I ask this Congress to help create a network of fifteen of these hubs and guarantee that the next revolution in manufacturing is Made in America.

Mr. President, there’s no mystery about how to revive manufacturing.  Stop importing everything we consume and leave something for us to manufacture.  Government-funded showpieces that will vanish as soon as the funding dries up (and it will dry up) isn’t the way to do it. 

The president then launched into a long laundry list of ideas for putting Americans back to work – supporting research, achieving energy independence, infrastructure modernization, support for homeowners, pre-school education, upgrading high school curriculums and making college more affordable.  All of it followed by this:

Our economy is stronger when we harness the talents and ingenuity of striving, hopeful immigrants. And right now, leaders from the business, labor, law enforcement, and faith communities all agree that the time has come to pass comprehensive immigration reform.

After rattling on for half an hour about the challenges of putting Americans back to work, the president then slaps all American workers in the face by intimating that Americans are too stupid to do the job and we need to import people who are better-equipped.  He’s falling back on economists’ age-old macroeconomic crutch:  we need more people.  In other words, what business  needs is more customers.  So much for the preceding issues of unemployment, over-dependence on foreign oil and global warming.  To hell with all of that!  Business wants more total sales volume, so we’ll give it to ’em regardless of the fact that it will exacerbates all of the overpopulation-driven problems he just spent 45 minutes addressing. 

And speaking of exacerbating our problems, then comes this:

To boost American exports, support American jobs, and level the playing field in the growing markets of Asia, we intend to complete negotiations on a Trans-Pacific Partnership. And tonight, I am announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union – because trade that is free and fair across the Atlantic supports millions of good-paying American jobs.

Mr. President, has it escaped your attention during your four years in office that, thanks to the drive toward free trade, we now have a trade deficit with the EU of $116 billion (the final tally for 2012) – a figure that’s seven times worse than it was just 15 years ago?  And you want to make it worse?  Are you nuts?

The second terms of the last two presidents both ended the same way – in recession.  Clinton left office with the stock market in a state of collapse.  Bush left office with the stock market and the global economy and financial system in a state of collapse.  Both made the mistake of attempting to cut the federal deficit without addressing the root cause of deficit spending – the trade deficit.  Now, under intense pressure to unwind the deficit spending necessary to stave off the near-depression he inherited, President Obama is headed down the exact same path.  How much worse will things be next February after he’s sucked more taxes out of the economy and put less of that money back into it, while turning us into more of a trade patsy and exploding our population with more immigrants?  How bad will things get before he finally, mericfully leaves office?


Trade Deficit Falls by $10.1 Billion in December. Good News?

February 8, 2013

The Bureau of Economic Analysis announed this morning that the U.S. trade deficit fell dramatically in December to $38.5 billion – down from $48.6 billion in November.  (See the full report.)  Exports were up and imports were down sharply.  Experts hailed this as good news – further evidence of improvement in the economy. 

Just don’t look at the report too closely.  Yes, exports were up.  Exports of manufactured products rose by $2.2 billion, but from a fairly depressed level.  Here’s a chart of how manufactured exports have tracked since President Obama set a goal in January of ’10 of doubling exports in five years:  Manf’d exports vs. goal.  The rise in exports was a step forward, but in the one-step forward and one-step-back pattern that persisted throughout 2012.  The rest of the $3.9 billion jump in exports is explained by oil exports ($0.9 billion), services exports ($0.6 billion) and a small increase in food exports ($0.1 billion). 

Imports fell a sharp $6.2 billion.  Oil imports fell by $3.8 billion.  Not a surprise, when you realize that oil stockpiles are at historically high levels – 372 million barrels (as announced by the Energy Information Administration on Wednesday).  Manufactured imports declined by $2.3 billion.  That would be good news if it could be explained by some change in trade policy that was bringing manufacturing back home.  But no such change in trade policy has taken place.  The only change in trade policy in 2012 was the enactment of a new free trade pact with South Korea.  The result?  While our overall trade deficit fell by 3.5% in 2012, our trade deficit with South Korea worsened (as I predicted, contrary to the president’s claim that this was a big win for the U.S.) by 25%. 

  A more likely explanation for the drop in imports is a slow-down in the economy, just as we saw imports decline at the onset of the recent “Great Recession.”  This drop in imports is just further evidence (on top of the 4th quarter decline in GDP followed by an up-tick in unemployment in Janaury) of an economy that’s stalled and on the brink of decline. 

Take a look at this chart of our monthly trade deficit:  Balance of Trade.   Now take a look at this chart of the balance of trade in manufactured goods:   Manf’d Goods Balance of Trade.  We’re beginning to see clear evidence of a decline in our overall trade deficit but, at the same time, the worsening trend continues in manufacturing (in spite of the slight improvement in December).  The former is evidence of a slowing economy.  The latter is a continuation of the long-term decline in manufacturing that’s been going on for decades, thanks to trade policy that doesn’t account for the role of population density disparities in driving global trade imbalances. 

By the way, we are now a full three years into President Obama’s five-year plan to double exports.  In order to meet that goal, exports need to be rising at a rate of 15% per year.  How’d we do in 2012?  Exports rose only 4.4%.  Most of that increase can be explained by inflation alone.  December marked the 17th month in a row that overall exports have lagged the president’s goal.  And it’s the 15th month in a row that manufactured exports have failed to keep pace.


Unemployment Rises in January

February 1, 2013

The January jobs report, released this morning by the Bureau of Labor Statistics (BLS), was disappointing all the way around.  Nonfarm jobs fell to 157,000 from the December upwardly-revised reading of 196,000.  Private sector jobs rose by 166,000 – short of the consensus forecast of 185,000. 

Unemployment rose by 0.1% to 7.9%.  (If the government was being honest about it, the unemployment rate actually rose to 10.5%.  If they were really, really honest about it, unemployment actually rose to 18.7%.)  The average workweek fell by 0.1 hours.  Per capita employment edged down slightly for the third month in a row – the first time that’s happened since November, 2010 when the economy was still struggling to emerge from the recession. 

On Wednesday, we learned that GDP actually contracted in the 4th quarter.  Economists shrugged it off, attributing it to a one-off plunge in defense spending.  But today’s report may begin to corroborate that the economy is, in fact, struggling once again. 

Here’s the charts of the employment data I’ve been tracking:  Unemployment Chart, Labor Force & Employment Level, Unemployed Americans, Per Capita Employment.  These four charts paint a picture of an economy that’s been stalled for the past few months.  Factor in Wednesday’s GDP report and you have an economy teetering on the brink of recession. 

Not a surprise.  As President Obama pointed out early in his administration, resuscitating American manufacturing is the key to putting the economy back on solid footing.  But here’s an excerpt from today’s report:

Manufacturing employment was essentially unchanged in January and has changed little, on net, since July 2012.

Why should it have changed?  Obama has done absolutely nothing to fix the trade policy that has largely destroyed the manufacturing sector of the economy.  He promised he would, but it was a lie. 

This stubbornly high rate of unemployment is exactly what one would expect when you understand the role our growing population has in eroding per capita consumption (and, with it, per capita employment) and the role that attempting to trade freely with badly overpopulated nations has in fueling our trade deficit. 

* * * * *

Here’s a breakdown of the change in employment reported this morning by the BLS:

  • Retail trade:  + 33,000
  • Construction:  + 28,000
  • Health care:  + 23,000
  • Wholesale trade:  + 15,000
  • Mining:  + 6,000
  • Manufacturing:  no change
  • Financial activities:  no change
  • Professional & business services:  no change
  • Leisure & hospitality:  no change
  • Government:  no change
  • Transportation & warehousing:  – 14,000