HOUSING AND LABOR SHORTAGE

Housing start continue to recover from the Great Recession.*

(Click on Figure to enlarge)


Meanwhile, employment of U.S. residential specialty trade contractors, which account for most home-construction labor, stands at nearly 1.8 million workers. That’s nearly 28% less than at the home-building market’s peak in 2006.*

Even so, construction labor is getting hard to find, especially because of fewer Mexican workers:*

(Click on Figure to Enlarge)

* http://blogs.wsj.com/economics/2015/09/21/how-immigration-has-contributed-to-the-construction-worker-shortage/?mod=djemRTE_h

SOLAR SYSTEM TO SCALE

The Solar System to scale.  Watch this video:

http://www.huffingtonpost.com/entry/scale-model-solar-system-desert_55fc2fa1e4b08820d91854c4?utm_hp_ref=science&ir=Science&section=science

INCOME INEQUALITY

The WSJ has an interesting article on income inequality in the U.S. and other countries related to the Pope's visit.*  Two of the figures are reproduced below, but I urge you to look at the entire article.

http://blogs.wsj.com/economics/2015/09/23/why-the-pope-likes-to-talk-about-inequality-and-the-u-s/?mod=djemRTE_h

SCOTT WALKER

WELL! So Scott Walker is the next one to withdraw from the Republican nomination race.  And here I thought he would be the nominee (so did one of the Koch brothers).*  The basis for this projection was that he destroyed the teacher's union in Wisconsin.  Union busting really appeals to Republicans and it was Reagan's busting of the Air Controller's Union that was one of his major accomplishments among Republicans and it had a major effect.

Walker also made Wisconsin a Right to Work state that I think appeals to the Republican workers who like to have the benefits of what the unions accomplish but don't want to pay for it.  This is like Reagan's "liberal" accomplishment of having Emergency Rooms accept all comers whether they could pay for it or not and left it up to the hospitals to find a way to pay for it (Ah, those that could afford it would pay for those who couldn't).  But all this did not seem to cut it for Walker so he will have to be satisfied with running for a third term as Wisconsin governor.

* http://stopcontinentaldrift.blogspot.com/2015/03/scott-walker-for-republican.html

TIME FROM FED RATE HIKE INITIATION TO RECESSION

There is an interesting article on the increase in interest rates by the Fed and the start of recessions.*  The shortest time from the beginning of Fed rate hikes to a recession was 11 mo. for the Fed rate hike periods of August 1980 to December 1980.  The longest time from the beginning of Fed rate hikes to a recession was 86 mo. for the Fed rate hike periods of May 1983 to August 1984. 1980.  For the two most recent rate hike periods, the June 1999 Fed rate hike to May 2000 recession took 21 months and the June 2004 to June 2006 Fed period took 42 months to recession.  So it may take well more than a year to go to a recession and could easily be 2 or 3 years.

(Click on table to enlarge)

* http://www.cnbc.com/2015/09/15/when-the-fed-raises-rates-heres-what-happens.html

UNEMPLOYMENT UPDATE

We have seen that jobs openings are plentiful, though they are not always in the areas of strongest unemployment and, sadly, many of the unemployed are not qualified for many of the job openings (http://stopcontinentaldrift.blogspot.com/2015/09/jobs-status-as-of-july.html).

Though the "main" unemployment rate looks looks pretty good at 5.1% (preliminary for August 2015), the total unemployment rate that includes those not looking for work and the underemployed (U-6) at 10.3% is still above the 2008 low of 7.9% in December of 2006.  Yet, this rate is remarkably below its high of 17.1% in December of 2009 and is dropping rapidly, about 1.2%/yr.*  If the current trend continues the U-6 should drop to the 2006 low in about  2 yrs.  (The figures in the source article are interactive from which the figures mentioned herein are taken.)

(Click on figures to enlarge)

http://www.cnbc.com/2015/09/04/-the-real-unemployment-rate.html

STOCK BUYBACKS

I do not like stock buybacks, but  I have bought one of the ETF that specializes in them.  I think stock buybacks are a waste of money, but many companies that do them seem to do quite well  I think it is earning that count and not Price to earnings.  A recent article on CNBC, however, agrees that buying back stock is an iffy situation.

According to Goldman Sachs, stock buybacks will surge by 18 percent in 2015, exceeding $600 billion and accounting for nearly 30 percent of total cash spending.*
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Of the four exchange-traded funds that focus on companies that heavily buy back their shares, two have beaten the S&P 500 stock index in recent years, and two have trailed it. 
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Companies that have executed the 25 biggest buybacks since the end of 2011 have risen 21 percent since, according to a CNBC.com analysis. (We assumed investors bought 100 shares of each company announcing a buyback at the closing price on the day of the announcement). That compares to 53 percent for the broader market. Of the 25 buyback stocks, just 11 have beaten the market since the repurchases were disclosed, and many have benefited from obvious macro trends.
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Buffett said in Berkshire Hathaway's 2012 shareholder letter. "But never forget: In repurchase decisions, price is all-important. Value is destroyed when purchases are made above intrinsic value." 

http://www.cnbc.com/2015/09/08/ybacks-are-killing-economic-growth.html

JOBS STATUS AS OF JULY

Job openings climbed to 5.75 million in July, according to the JOLTS report, a measure of job openings and labor turnover in the U.S. Analysts polled by Thomson Reuters forecast 5.29 million job openings in July, up from 5.32 million in June.*

July's job openings were the highest since the series began in December 2000, beating the previous record of 5.4 million job openings, set in May.*


A CNBC review of industry-level data finds that the strongest paycheck raises are hitting sectors that are posting significant job growth. Even relatively low-paying industries like retail, trade, leisure and hospitality are seeing above-average growth in worker paychecks.**

(Click on picture to enlarge)

* http://www.cnbc.com/2015/09/09/job-openings-climb-to-58-million-in-july.html
** http://www.cnbc.com/2015/09/04/after-a-long-slumber-us-wages-begin-to-perk-up.html

WHAT ARE REPUBLICANS LOOKING FOR?

(This is my 500th Post, an eclectic series that began in November of 2009 )

I'm confused about the Republicans who are upset about congress's inaction.  What is it they want?  Perhaps it is to bus illegal immigrants back to Mexico, repeal Obamacare or the ACA, build a wall on out southern border, repeal or circumvent the 14th Amendment, and outlaw abortion completely.  Do they like the constitution except for the parts they don't like and want to repeal? Actually they may think that congress has done too much and want to repeal of the few things congress has passed?

This morning on Morning Joe (09-08-2015), Joe Scarborough said that Donald Trump is appealing to the worker Republican base when he talks about increasing taxes on hedge fund manager who pay only 15% in taxes. From morning on Morning Joe (09-09-2015) perhaps a clue is that disaffected white workers are increasing in the Republican Party and may soon begin to have an affect.  These workers like Social Security, Medicare, and minimum wage, though they hate the illegal immigrants with a passion.  They also are for hedge fund managers not have a special tax break so Trump is on to something.  Perhaps we are beginning to see the success of Donald Trump.

Peggy Noonan came up with some things that Donald Trump supporters are mad about.  The big thing is illegal immigrants.*  She mentions in one article that no one even pretends that the border is secure.  Well, there are 21,000 agents down there with a fence, drones and towers so to say there nothing has been done is disingenuous.  Also we should remember that there was a bill that passed the Senate a couple years ago with votes to spare that was never even taken up by House.  In this bill was an increase of agents by 19,000 to bring the total up to 40,000!, quite an army, and there was the provision for more drones and to complete the double fence.  So it appears that the House didn't want to secure the border more.  I can believe Trump supporters are mad about this, but I suspect they are not that knowledgeable.

Supposedly the killer of the Senate bill in the House was a draconian path to citizenship that was so difficult that I doubt many would even try use it: learn English, pay a fine, and pay back taxes.  It is thought that if the House voted, the Senate bill would pass, alienating  the extreme right wing that seems to control the Republican Party these years  The fence goes only 700 mi, however, so there is a long way to go if we are to build it all the way across the Texas border, for example.  Besides, I have been told that even the double fence wouldn't slow the illegals much.  Besides, the reason they come is for low level jobs such as picking tomatoes (so called stoop labor) which Americans don't want to do.  Trump wants to build a wall, rather than the fence that he says would be impenetrable.  Can Trump spell "tunnel."  Perhaps the wall will be so high that a ladder would be impractical. For a way to build the wall, see: http://stopcontinentaldrift.blogspot.com/2015/09/how-to-build-wall.html

Many Republicans are still inflamed about Obamacare or the Affordable Care Act.  It wouldn't surprise me if many Republicans don't know they are the same thing.  The thing they hate even worse seems to be a single payer system which, so far as I know, all economists who study the matter say will really help control medical costs.  Peggy Noonan says "they" will accept expanding Medicare rather than continue with the ACA.*  Well, who wouldn't?  I suspect that Peggy Noonan is wrong on this and the many, many Republicans oppose "single Payer" as a Socialist system.  I'm sure Obama would accept it too as "single payer" is the Medicare system.  The problem is that the ACA was devised to get conservative votes in congress, but it only got DINO votes (Democrats In Name Only).  Obama wouldn't have even been able to expand Medicare and get the necessary votes in his own party.

On abortion, Trump is actually a bit more moderate than the "no exceptions" Republicans like Marco Rubio.  Trump would allow abortions for rape, incest, and to save the mother if faced with death.  Perhaps his supporters forgive him for this apostasy or maybe they agree with it?.

* http://www.wsj.com/articles/what-voters-see-in-donald-trump-1438301641

CONSTRUCTION SPENDING AT POST-RECESSION HIGH

Construction spending was really hurt in the Great Recession with workers laid off in droves. Now, however, construction spending has recovered and is at the highest level it has been since May of 2008.*

(Click on figure to enlarge)
Total construction spending climbed 0.7% from the prior month to a seasonally adjusted annual rate of $1.083 trillion, the Commerce Department said Tuesday, the highest level since May 2008.
Private building led the way, with both residential and nonresidential construction hitting new postrecession highs. State and local government spending dropped in July, but only after posting solid gains during the previous four months.

“The overall impression from the past few months is that the construction sector overall is the strongest part of the economy, with spending up at a remarkable 26% annualized rate in the three months to July,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note to clients.*

If we could put infrastructure spending on top of this, many workers would be lured back into the work force with wages increasing.**

* http://blogs.wsj.com/economics/2015/09/01/u-s-construction-spending-hits-new-postrecession-high-2/?mod=djemRTE_h
** http://stopcontinentaldrift.blogspot.com/2015/08/increasing-workers-wages.html

HOW TO BUILD "THE WALL"

Donald Trump has proposed building a wall on our Southern border with Mexico.  There are several problems to be overcome.   The estimated cost of this wall is $150 billion, a sum maybe too small.  At any rate, I doubt that the wall will be built, but , if we are serous, there are several problems to be overcome.  I am no expert at this so there may be more problems than I can think of.

For one thing, contracts used to get the property to build the 700 mi. fence may have to be renegotiated to put a wall in rather than a fence and access of ranchers to water will be even more difficult.  I will use 1,800 mi for the length of the fence for convenience in calculations.

A second problem is the remaining 1200 mi. of the border over which there is not now a fence so contracts will have to be negotiated to obtain the property for building "The Wall," plus there are no doubt difficult problems in putting the wall over the terrain encountered, as there were with the fence.

Then what materials will be used to build "The Wall?"  I've heard steel mentioned.  No doubt the steel industry would like that, but I am sure there are other materials that can be used, presumably at lower cost.  Probably the best material will be reinforced concrete, and, if so, will the wall be poured in place or will prefabricated pre-stressed concrete slabs be used?  In this event, how many factories would have to be involved? And where would they be built (I assume no factory is ready to make these slabs.)?  I suspect that the slabs would be cheaper, but I really don't know.  If the wall is to be poured-in-place, sources of concrete will have to be found reasonably close to the site being poured.  Actually to pour in place, would have the maximum effect on local industries.

Now about the cost.  When taking care of the problems mentioned above, clearly the wall will not be built in one or two years.  Besides that sum of money would be too costly, so let's stretch the building of "The Wall" over 30 years.  That would mean that there would be 1,800mi/30yrs or 60 mi. of wall be built, on average, every year, at a cost of ($150billion/30yrs)/$150 billion or $5 billion per year.  Though $5 billion/yr is a large sum, it should be able to fit easily into the Federal budget.  Oh, that's right, the Mexican government is to pay for it.  Well lots of luck with that.

Just think of the boon to employment for relatively high paying construction jobs.  Lots of new labor would be needed because the construction industry is near maximum employment so the program would decrease the unemployment figures.  To get maximum benefit from this jobs program, pretty much the same crews would have to be used for the 30 yrs to have maximum effect on the education of their children.*  Shorter periods of time would just lead to boom and bust periods of work for the workers and have no lasting effect. Also a problem would be the need for transient workers moving every two or three years.

* http://stopcontinentaldrift.blogspot.com/2015/08/increasing-workers-wages.html