American Economy News & Updates

[Transhumanist]

Hmm, not sure if this is the right place. It only passingly deals with the US energy situation, but even so, it shows solar is a viable alternative for the US that costs an equal amount when compared to other energy production methods.

It's also underutilized in the US. Expansion can bring down costs even further.

Solar energy enjoys a glowing outlook

According Deutsche Bank’s recent bullish report on solar power, unsubsidized rooftop solar power costs $0.08 – $0.13 per kilowatthour (kWh) globally, which can be as much as 40 percent below retail electricity prices. As this Reuters graphic shows, Australia’s rate for solar power is $0.15/kWh, less than one-third of electricity’s average price there, making the country an exemplar of grid parity. Meanwhile, in oil-rich countries like Saudi Arabia and the United Arab Emirates, solar is still more expensive than the overall electricity price.

In the United States, the levelized cost of solar energy is $0.17 per kWh, a penny cheaper than electricity’s average price. But solar sees just a faint shadow of the popularity that other power sources enjoy, with solar projects adding up to less than one half of one percent of the megawatthours generated in the U.S.

But proponents of solar energy have reason for optimism according to that Deutsche Bank report: “In markets heavily dependent on coal for electricity generation, the ratio of coal based wholesale electricity to solar electricity cost was 7:1 four years ago. This ratio is now less than 2:1 and could likely approach 1:1 over the next 12-18 months.”

 

[Transhumanist]

America’s Oil Drilling Boom Is Sputtering Back to Life

The oil boom isn’t dead after all.

For the first time in five months, a rig in the Williston Basin, where North Dakota’s Bakken shale formation lies, sputtered back to life and started drilling for crude once again. And then one returned to the Permian Basin, the nation’s biggest oil play, field services contractor Baker Hughes Inc. said Friday.

Shale explorers including EOG Resources Inc. and Pioneer Natural Resources Co. say they’re preparing to bounce back from the deepest and most prolonged slowdown in U.S. oil drilling on record. The country has lost more than half its rigs since October, casualties of a 49 percent slide in crude prices during the last half of 2014. Futures rallied above $60 a barrel earlier this week, and a sudden return to oil fields would threaten to end this fragile recovery.


“You’re inviting a lot of pent-up supply to come back into the market -- not only do you have people drilling again, but you have this fracklog of over 4,000 uncompleted wells,” Harry Tchilinguirian, the head of commodity markets strategy at BNP Paribas SA in London, said by phone. “And then we’re in a situation where the market could easily go back into the mid- $50’s.”

While rigs are returning to some fields, the total U.S. count has continued to decline, falling 11 this week to a four-year low on Friday. The drilling slowdown won’t reach a real bottom for about another month, James Williams, president of energy consultant WTRG Economics, said by phone from London, Arkansas.

Nearing End
“This is an indicator that we’re nearing the end of the bust,” he said. “What we’re going to see now are mixed signals from the different basins as we near the bottom of the cycle.”

Carrizo Oil & Gas Inc., Devon Energy Corp. and Chesapeake Energy Corp. all lifted their full-year production outlooks this week. EOG said on May 5 that it plans to increase drilling as soon as crude stabilizes around $65 a barrel, while Pioneer has said it is preparing to deploy more rigs as soon as July.

Morgan Stanley said underlying data show drilling is already picking up in some counties within Texas’s Eagle Ford shale formation and the Permian Basin of Texas and New Mexico.

“Prices are triggering activity that could undermine the U.S. recovery, especially in 2016,” Morgan Stanley analysts including Adam Longson said in an April 27 research note.

The U.S. benchmark West Texas Intermediate oil for June delivery rose 45 cents on Friday to settle at $59.39 a barrel on the New York Mercantile Exchange. Prices advanced 25 percent in April alone, the biggest monthly gain since May 2009.

Permian Basin
The Permian will probably be the first basin to bounce back because it’s home to multiple producing zones stacked on top of each other, allowing drillers to tap oil at different depths with the same well, said David Zusman, managing director at Talara Capital Management, which handles $400 million in energy investments.

“There are multistacked pay zones and sweet spots across the basin that make economic sense,” he said by phone. “There’s more optionality associated with the Permian and more likelihood of completing those wells.”

The U.S. rig count may recover to 1,200 to 1,300 should prices rally past $70 a barrel, Allen Gilmer, chief executive officer of the Austin-based energy data provider Drillinginfo, said by phone on May 1. The total rose for three straight days in late April, he said.

“The service companies have responded very quickly in regards to dropping prices, and it has become very attractive, especially for companies with hedged positions, to come back right now before those hedges fall off,” Gilmer said. “We’re a few weeks from the bottom now. You’ll start seeing it build up.”

From America’s Oil Drilling Boom Is Sputtering Back to Life - Bloomberg Business

 

[Azizam]

Economic Suicide: Chasing Away The Job-Creating Immigrant Entrepreneurs

Written by Samantha Huang, a research assistant at Stanford Law School. She is also completing a degree at Berkeley Law School–where she focuses on the promotion of technology entrepreneurship and innovation through law. This this article represents the views of the author and not necessarily those of Singularity University.

At the immigration law firm where I worked during graduate school, I saw case after case of extremely talented individuals who, despite their many contributions to the U.S., faced the threat of returning home because of their immigration status. One such case involved the immigration struggles of a highly successful postdoctoral fellow from a top-five university whose work had led to a patent for a medical treatment for metastatic cancer. Another client, the founder of a multimillion dollar high-tech startup, had fallen out of legal status because immigration law lacked clear-cut visa categories for early-stage entrepreneurs. After working on such cases, I periodically would joke to clients that I wasn’t sure if the law firm could help them, as the immigration agency would not even allow cancer curers to remain in the country.

When Vivek Wadhwa invited me to become a researcher for his study on immigrant entrepreneurship, I already had experienced my fair share of visa horror stories faced by talented foreign-born innovators. I consequently came to the project with my own suspicions that immigrants were forgoing the U.S. for other opportunities abroad as the result of the U.S.’s restrictive immigration policy and the weakened state of the economy.

Our research team, supported by Duke University, Stanford University, and the UC Berkeley School of Information, found that for the first time in decades, the rate of expansion of immigrant entrepreneurship has plateaued and even started to decline.Of technology and engineering companies established from 2006 to 2012, the proportion of such companies with at least one founder who was foreign-born has decreased from 25.3% to 24.3%. These findings suggest that high-skilled immigrants have begun to leave the United States for other countries, taking their business with them.

Most alarming are the results from our special analysis of the high-tech hub of Silicon Valley. From the 1970s to early 2000s, the region boasted the greatest growth rates of immigrant entrepreneurship. However, since 2005, the rate of growth of immigrant-founded tech companies in the region has dramatically decreased eight and a half percentage points to 43.9%. As the economic health of Silicon Valley often serves as a litmus test for determining the strength of the U.S. economy, such an astonishing drop in immigrant entrepreneurship may also mean trouble for the nationwide tech industry, which has relied extensively on the contributions of foreign-born innovators.

Notably, not all our findings paint such a bleak picture. While most immigrant groups demonstrated a decline in entrepreneurship rates, Indian and Chinese founders are establishing engineering and technology companies in the U.S. at a higher rate than before. Both groups historically have exhibited a nearly unparalleled level of participation in the U.S. technology industry, and Indians have dominated the Silicon Valley tech scene since the 1990s. Of the total of immigrant-founded companies surveyed in our study, 33.2% possessed Indian founders, compared with 26.0% in 2005. The proportion of Chinese-founded startups increased from 6.9% to 8.1%. Chinese and Indians, the two most visible immigrant groups in the tech industry, appear to have resisted the general trend of stagnation of the rate of immigrant entrepreneurship in the U.S.

However, beyond India and China, the top two immigrant-founder-sending countries, our findings become increasingly complex. The case study of Taiwanese founders is illustrative. In 2005, Taiwanese founders comprised the fourth largest immigrant-founder group. Today they rank twenty-second. This drastic drop in entrepreneurship by Taiwanese immigrants is especially alarming in light of the influential role they have played in the advancement of the U.S.’s component technology field. While we may only speculate about the causes of the decline in Taiwanese entrepreneurs, one compelling explanation is that as Taiwan becomes an increasingly attractive forum for entrepreneurship and innovation, high-skilled Taiwanese have begun to seek out the opportunities available in their home country. The efforts by the Taiwanese government beginning in the 1980s to create the supportive infrastructure necessary for entrepreneurial development finally seem to have stemmed the “brain drain” problem that had once debilitated the country throughout the 1970s and 1980s.

Today the Kauffman Foundation releases the findings of our study, which was headed by Berkeley School of Information Dean AnnaLee Saxenian, Stanford Law School Professor Daniel Siciliano, and Stanford University Rock Center Fellow Vivek Wadhwa. The report shows that we sit on the brink of a historically unprecedented decline in immigrant entrepreneurship. As high-skilled immigrants leave the U.S. for increased opportunities at home, they take their specialized knowledge and businesses elsewhere. In failing to retain them, the U.S. loses many valuable entrepreneurs and innovators. As our study demonstrates, the maintenance and expansion of the
U.S. economy and tech industry require a serious commitment to immigration law reform. With the process of the reverse brain drain already under way, legislative change must occur sooner rather than later to stop the further loss of tech talent from the U.S.

Vivek Wadhwa has also published a book on this subject, The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent which suggests ways to fix the problem.


Why So Many Spelling Bee Champions Are Indian-Americans | Psychology Today


---------------------

Anyone, care to explain the reason?

 

[F-22Raptor]

Is the U.S. Economy Actually Leaving China Behind?

There is a debate over which country has the world's largest economy. One side cites gross domestic product adjusted for purchasing power parity and puts China on top, while various other indicators show the United States ahead. The claims are used to gauge China's importance, highlight Sino-American competition, and sometimes identify China as a threat.

What is almost never in dispute is that China is rising economically relative to the United States. If China is not ahead yet, it is said, the day is coming when it will be. However, at least one vital indicator casts doubt on that thesis: national wealth. From the beginning of 2008 through the middle of 2014, China may have lost ground to the United States in total wealth.

Despite a slowdown, China is still reporting GDP growth about three times faster than that of the United States, and is thus catching up in annual GDP. Why use wealth and not GDP? To be concise, we have forgotten what GDP is.

Gross Domestic Product is a measure of transactions, whereas the goal of economic development is not more transactions, but more wealth. On Jan. 2 of each year, GDP is tiny, but the economy is not. Economic activity can be measured by GDP, but the size of an economy cannot be - wealth is a far better measure.

Credit Suisse has been measuring net household wealth in most countries since 2000. This is a difficult task, and errors are unavoidable. Nonetheless, Credit Suisse has found consistent numbers from applying comparable methodology over the past 15 years. Further, their figures for the United States are fairly close to the Federal Reserve series on American net private wealth.

At the end of 2000, Credit Suisse put net private American wealth at $42.9 trillion, compared to $4.7 trillion for China: a ratio of more than 9:1. The Credit Suisse numbers do capture China's rise. By 2007, the figures sat at $64.5 trillion and $15.4 trillion, respectively. China's net private wealth had more than tripled, and the size ratio of the two economies had fallen sharply, to well under 5:1.

In 2008, of course, the financial crisis hit. It was seen as speeding up America's decline and paving the way for China's rise. Closing on seven years later, the outcome looks quite different.

The latest Credit Suisse figures are from the middle of 2014. Chinese private wealth stands at $21.4 trillion, and American wealth at $83.7 trillion. It would have obviously been unreasonable to expect Chinese wealth to triple again, but the absolute increase from 2007 to mid-2014 was only $6 trillion, versus $8.75 trillion from 2000 through 2007. China grew only 40 percent over this period.

The financial crisis certainly affected the United States as well. American private wealth growth dropped to 30 percent from 2007 to mid-2014. But the pace at which China is overtaking the United States slowed dramatically, and the size ratio barely budged. From 2007 to mid-2014, the private Chinese economy moved only from 24 percent to 26 percent of the size of the private American economy.

Moreover, the slightly shrinking ratio may be trumped by the absolute wealth gap. This gap rose from $49 trillion to $62 trillion, a bigger expansion than that seen from 2000 to 2007. On this score, China is not catching up - it is losing ground by the trillions.

The world's fixation on GDP, which even China is renouncing, is not a good rebuttal to this point. A better one involves public wealth, as Credit Suisse (and the Fed) only measure private wealth.

Public wealth is much more difficult to measure. American federal debt is well tracked, while state and local debt has ranged from $1.5 trillion to $3 trillion over this period.

But a precise figure for U.S. public sector assets is out of reach. Federal land holdings are a full 28 percent of total U.S. acreage. Depending on how land would be sold and the value of embedded resources, it could be worth less than $2 trillion (land only), or more than $100 trillion (if resource prices stay high for a long time). Land owned by U.S. states adds to that total. Federal and state-owned physical property, primarily buildings, may be worth another $2 trillion.

At the end of 2000, U.S. public debt exceeded $7 trillion. A conservative and very rough estimate of the value of U.S. public assets in 2000 was $5 trillion, putting net U.S. public wealth at about -$2 trillion and total U.S. wealth near $41 trillion. The same rough calculations put total U.S. wealth at approximately $59 trillion in 2007 and close to $72 trillion by mid-2014.

Chinese public debt is not easy to evaluate, beyond the fact that it has grown very rapidly. In 2000, most debt took the form of bank loans, but non-bank finance, known as shadow lending, has since expanded. State-owned enterprises and local governments receive disproportionate credit, though obviously not all. Less important until recently was the central government's fiscal debt.

The Chinese government owns all rural and some urban land, though the value of the land is far lower than its equivalent in the United States, due to land quality and resource depletion. The Chinese state also owns trillions in assets through state-owned enterprises. Combined, gross assets were reportedly worth more than $14 trillion in 2011, and also had been growing. Assets net of debt exceeded $6 trillion in 2013.

Using official data on debt and a very round estimate for public assets in 2000, China's total wealth measured above $7 trillion in 2000, $19 trillion in 2007, and near $28 trillion in mid-2014.

While mixing in the public sector definitely reduces the precision of the estimates, it does take them in the right direction. The gap between the full American and Chinese economies has never been as large as the private sector taken alone indicates.

The revised numbers show China climbing from almost 18 percent of American wealth in 2000 to over 32 percent in 2007 - a truly impressive gain in only seven years. By mid-2014 the figure stood at 39 percent, showing gains that are much slower, but gains nevertheless.

The argument that the United States is pulling away therefore rests on the absolute gap, which rose from $34 trillion, to $40 trillion, to $44 trillion by mid-2014. Here China is not catching up, but rather falling behind at a slower pace. This has enormous practical implications, with the United States still adding trillions more to its national wealth than is China; additional wealth that enables greater economic prosperity, military spending, and global leadership.

Considering GDP in this light actually makes the claim sharper. Which is preferable for policymakers and ordinary people: catching up in the value of economic transactions per year, or having several trillion dollars in additional national wealth? The former is a fairly good sign for economic development, but the latter is the true goal.

The stock market boom in China will accelerate private wealth gains. On the other hand, U.S. debt accumulation is now slower than China's. Looking further down the road, China's economy is plainly slowing (by any measure), while the U.S. outlook is uncertain. The absolute wealth gap rose despite very rapid Chinese expansion from 2000 to 2007. It is $10 trillion larger than it was in 2000. China has done surprising things, but closing this gap with the United States by more than $10 trillion would be one of the most surprising.

There are certainly economic measurements on which China is catching or has caught the United States. But on arguably the most important one, total national wealth, China does not look to be catching up and does not seem to have much prospect of doing so.

Is the U.S. Economy Actually Leaving China Behind? | RealClearWorld

 

[Transhumanist]

How the Crazy Cost of NYC and Bay Area Housing Hurts the US Economy

The cost of housing in New York and San Francisco has long since transcended into the realm of absurdity. But all those quaint, astronomically pricey brownstones and single family homes are part of a healthy national economy, right? Not exactly.

An interesting study titled Why Do Cities Matter?, published today on the National Bureau of Economic Research and pointed out by New York Mag, looks at how three cities—New York, San Francisco, and San Jose—impact the overall health of the US economy. The authors studied how these three cities have changed since the mid-1960s, tracking how the increasing demand for workers has contributed to the health of the US economy at large.

Thanks a lot, Brooklyn Heights

What they found was startling: Even though the trio of cities had tons of local growth, they’re not contributing to the national economy as much as other smaller cities, like those in the Rust Belt and the South.

According to authors Chang-Tai Hsieh and Enrico Moretti, there’s a fairly simple reason for that: The high price of housing. Even though there’s plenty of demand for workers, there’s essentially no place for them to live, since each of these three cities have strict land-use regulations that have prevented density-enhancing development in key areas.

Take suburban San Jose, for example. It’s near Silicon Valley and San Francisco, and housing is in high demand. But land use restrictions have prevented growth. “In a region with some of the most expensive real estate in the world, surface parking lots, 1-story buildings and underutilized pieces of land are still remarkably common due to land use restrictions,” write the authors.

That lack of housing has effectively placed a stranglehold on the growth of these three cities—which, though they’ve exploded as high value areas, could have contributed much, much more to the health of the US economy if they had more housing.

How much more? The study actually does the math, setting up a scenario where strict land-use regulations were relaxed to the level similar to those in the rest of the country. Such a change would boost growth in the US by a staggering 9.7 percent. We’d all be making more money.

“In levels, U.S. GDP in 2009 would be 13.5% or $1.95 trillion higher. This amounts to an annual wage increase of $8775 for the average worker,” the authors write.

So Should We Just Go Wild?

Such huge numbers lead us to wonder why on Earth these cities haven’t eased up on their land-use laws. On New York Mag, Annie Lowrey aptly describes the adorable townhouses and low-rise architecture of desirable neighborhoods like Park Slope as a “total economic disaster,” which is tough to argue with given the evidence presented in the study.

It’s still worth pointing out that easing up on land-use laws could have multiple unintended consequences for our cities, though. The debate over how deregulation would affect New York’s housing market, for example, has raged since the 1980s. Some critics argue that getting rid of land use regulation would be negative for the poor who benefit from low-income housing in cities and create pockets of extremely poor-quality housing, even if it is more dense. Others say that land-use regulation in the city would actually make housing more fair.

In short, it’s a way, way more complex issue than the binary “build nothing or build anything” argument the study tempts us to set up. Cities are complex organisms, and in the end, studying their evolution in retrospect is far easier than predicting it in advance.

 

[Transhumanist]

The U.S. Is About to Change the Way It Calculates GDP

The way some parts of U.S. gross domestic product are calculated are about to change in the wake of the debate over persistently depressed first-quarter growth.

In a blog post published Friday, the Bureau of Economic Analysis listed a series of alterations it will make in seasonally adjusting data used to calculate economic growth. The changes will be implemented with the release of the initial second-quarter GDP estimate on July 30, the BEA said.

Although the agency adjusts its figures for seasonal variations, growth in any given first quarter still tends to be weaker than in the remaining three, economists have found, a sign there may be some bias in the data. It’s a phenomenon economists call “residual seasonality.”

“BEA is aware of the potential for residual seasonality in GDP and its components, and the agency is looking for ways to minimize this phenomenon,” the division said in the post. More information will be available in a BEA Survey of Current Business report scheduled for mid-June publication.

The agency is exploring ways to address possible issues in measures of federal government defense spending, where research has shown that first- and fourth-quarter growth rates are lower on average, the BEA said, reiterating a statement given to Bloomberg published May 18.

It will also start seasonally adjusting some inventory components that currently aren’t, and also some data from the U.S. Census Bureau’s quarterly services survey, it said. The latter should boost the accuracy of consumer spending estimates, it said. The changes to the calculations will cover the period from 2012 to the present.

Additionally, the BEA is reviewing all series that figure into the GDP calculations to find and fix any leftover biases that exist within its current methodology.

From The U.S. Is About to Change the Way It Calculates GDP - Bloomberg Business

 

[Transhumanist]

I hate to be the bearer of bad news, but a balanced perspective is important.

Persistent first quarter weakness seems to be a new trend for the US economy, fortunately it rarely lingers into the next three, though this year a strong Dollar is exacerbating the problems. Still, growth is expected to pickup.

Economy in U.S. Shrinks for Third Time Since Expansion Began

For the third time since the expansion began in June 2009, the U.S. economy suffered a setback.

Gross domestic product shrank at a 0.7 percent annualized rate in the first quarter, revised from a previously reported 0.2 percent gain, according to Commerce Department figures issued Friday in Washington. That’s the weakest reading since frigid winter temperatures derailed growth at the start of 2014.

While bad weather once again probably contributed to last quarter’s slump, other impediments were also at work -- including a swelling trade deficit caused by a strong dollar and plunging investment in oil exploration following the drop in fuel prices. Federal Reserve officials are among those who believe the slowdown will be temporary, helping explain why they are considering raising interest rates later this year.


“The economy slowed in the first quarter but we’ll see an acceleration in the second quarter,” said Michael Gapen, New York-based chief U.S. economist for Barclays Plc. “It keeps the Fed in line for a rate hike in September.”

Other reports Friday showed consumer sentiment fell less than previously estimated this month, while manufacturing in the Chicago region unexpectedly slumped.

Stocks fell as major indexes pared gains for the month. The Standard & Poor’s 500 declined 0.3 percent to 2,114.98 at 12:43 p.m. in New York.

Survey Results
The median forecast of 84 economists surveyed by Bloomberg projected GDP would drop at a 0.9 percent rate. Estimates ranged from a decline of 1.2 percent to an increase of 0.2 percent. The economy grew at a 2.2 percent pace from October through December.

Last quarter’s contraction was smaller than the 2.1 percent fall at the start of 2014, when a prolonged patch of bitterly cold temperatures held back the economy. GDP also shrank at a 1.5 percent pace in the first three months of 2011 during the early stages of the recovery from the worst recession since the Great Depression.

Such declines in GDP are rare in economic expansions, pointing to the fragile nature of the current rebound. The economy hasn’t contracted in three different quarters during good times since the 1950s.

The tendency of the first quarter to be persistently weak in recent years has sparked a debate in the economic profession, with the Fed and its regional banks, including San Francisco, jumping into the fray.

GDP Controversy
The various research results indicate first-quarter growth has underperformed the rest of the year by about 1.6 percentage points to 1.7 percentage points on average. To some, that suggests there is a statistical bias at work. The Bureau of Economic Analysis this month said it’ll make changes to try to minimize the issue, and take this into account when reporting annual benchmark revisions in July.

The contrast to gains in earnings is only adding fuel to the controversy. Gross domestic income, which shows the money earned by the people, businesses and government agencies whose purchases go into calculating growth, expanded at a 1.4 percent annualized rate in the first quarter, Friday’s report showed.

GDI is seen by some researchers, including a few at the Fed, as a better gauge of the strength of the economy. While income and GDP should theoretically match, the different methods used in calculating the numbers cause them to diverge occasionally.

GDI, GDP
“The increase in GDI is pretty consistent with an economy that’s better than the GDP side,” said Aneta Markowska, New York-based chief U.S. economist at Societe Generale, who correctly projected the first-quarter contraction in GDP. “We expect to see a pretty significant bounce-back in the second quarter.”

As part of the benchmark revisions in July, the BEA will issue an additional growth measure taking the average of GDP and GDI.

The revisions to first-quarter GDP issued Friday showed the trade gap widened more than previously estimated, while inventories and consumer spending climbed at a slower pace. That was partly offset by a bigger gain in home building.

While poor weather and merchandise delays due to a labor dispute at West Coast ports were temporary restraints, the damage caused by the plunge in fuel prices and stronger dollar may be longer-lasting.

Trade Gap
A widening trade deficit subtracted 1.9 percentage points from growth, the most since 1985, compared with the previously estimated drag of 1.25 points, according to the Commerce Department’s data.

Business investment on wells and mines slumped at a 48.6 percent annualized rate last quarter, the biggest decrease since 2009.

A regional reading on manufacturing Friday raises concern that those headwinds remain. The Institute for Supply Management-Chicago Inc.’s business barometer fell to 46.2 in May from 52.3 the prior month. Readings lower than 50 indicate contraction.

The Commerce Department’s report showed consumer spending was also a little slower than initially calculated, growing at a 1.8 percent annualized rate compared with an initial estimate of 1.9 percent. That followed a 4.4 percent jump in the fourth quarter.

Revisions to incomes showed wages and salaries rose even more than last reported and the saving rate was the highest since the end of 2012, indicating households can unleash some pent-up demand.

Consumer Sentiment
Consumer confidence firmed at the end of May, another report showed Friday. The University of Michigan’s final sentiment index for the month came in at 90.7 compared with a preliminary reading of 88.6. Still, it marked the weakest reading in six months.

“The index is still quite high,” Richard Curtin, director of the Michigan Survey of Consumers, said on a conference call after the figures were released. During the latter half of the month, “I expected confidence to inch upward and I still think that is likely over the months ahead.”

The economy is poised to pick up this quarter. A Bloomberg survey of economists in May predicted growth will accelerate to a 2.7 percent pace in April through June, with household consumption expanding 3.2 percent.

Job Market
An improving labor market is among reasons consumers may be more willing to spend. Payrolls rebounded in April, as employers added 223,000 jobs after an 85,000 gain in March. The unemployment rate fell to 5.4 percent, the lowest since May 2008. Weekly applications for jobless benefits are hovering just above a 15-year low reached at the end of April.

“The U.S. economy seems well-positioned for continued growth,” Fed Chair Janet Yellen said in a May 22 speech in Providence, Rhode Island. “Households are seeing the benefits of the improving jobs situation.”

If the economy continues to improve as she expects, “it will be appropriate at some point this year” to start raising rates, Yellen said.

The GDP estimate is the second of three for the quarter, with the third release scheduled for June, when more information becomes available.

From Economy in U.S. Shrinks for Third Time Since Expansion Began - Bloomberg Business

 

[Transhumanist]

The May Jobs Report in Six Charts

The economy got some good news today, with a strong Nonfarm Payrolls report for the month of May. Here's a quick rundown of the most important numbers from Bureau of Labor Statistics.

The U.S. economy added 280,000 jobs last month, beating forecasts with a big improvement over April.

However, the unemployment rate did tick back up to 5.5 percent.

(My speculation: Perhaps an increase in the number of recent grads entering the labor force? That would show a confidence in the US economy, and would be reflect on the higher unemployment rate, which counts people who are looking for work but not yet employed.)

But the Labor Force Participation Rate also ticked up, so that's good news.

Average hourly earnings also saw a slight gain. They were up 0.3 percent, another improvement over April's 0.1 percent.

And in yet another slice of good news, the number of long-term unemployed people dipped once gain, down to 28.6 from 29.0 percent.

Finally, here's another break down of the NFP number by industry, since the start of 2008.

From The May Jobs Report in Six Charts - Bloomberg Business

 

[Transhumanist]

The Do-It-Yourself Economy Just Hired 1 Million American Entrepreneurs

Animal spirits are returning to the American workforce.

The number of self-employed workers surged by 370,000 in May, according to the U.S. Labor Department's survey of households released Friday. And nearly 1 million workers have gone to work for themselves since just February.

The report is the latest sign that entrepreneurial activity is on the rise. The number of business startups rose in 32 of the 50 U.S. states last year, the Kansas City, Missouri-based Kauffman Foundation reported Thursday. The Kauffman Index of Startup Activity, which is an indicator of new business creation, had the biggest increase in the past two decades.


"It is evidence of a growing do-it-yourself economy," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ. "The market for self-employed workers is booming and this is a sign of a pickup in entrepreneurial activity."

Most big companies are focused on cost cutting to lift profits, even in good economic times, so many workers are choosing to go out on their own, Rupkey said.

Every month, the Labor Department puts out two surveys: the establishment survey, which gets most of the attention including the headline number of jobs created, and the household survey, from which the unemployment rate is derived.

Self-employment can mean lots of things: someone who works as a consultant while looking for more stable employment, or a freelance writer, or someone who starts a business with hopes of creating the next Facebook.

The more widely followed establishment survey could be "understating things because new business formation is rising" and some new firms aren't included, said Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC in New York.

There is reason for some caution in interpreting the data.

"That is a very volatile series," noted Daniel Silver, a JPMorgan Chase & Co. economist in New York.

And some of the strength could be a reversal from losses during a cold winter, said Jesse Rothstein, a former Labor Department chief economist now at the University of California at Berkeley.

Still, "if it reflects a resurgence in U.S. entrepreneurship, that would be terrific," said Gary Burtless, a Brookings Institution economist in Washington who previously was with the Labor Department. "That is one thing that has been conspicuously missing not only in the current recession, but for even a bit longer."

From The Do-It-Yourself Economy Just Hired 1 Million American Entrepreneurs - Bloomberg Business

 

[Echo_419]

I hate to be the bearer of bad news, but a balanced perspective is important.

Persistent first quarter weakness seems to be a new trend for the US economy, fortunately it rarely lingers into the next three, though this year a strong Dollar is exacerbating the problems. Still, growth is expected to pickup.

Economy in U.S. Shrinks for Third Time Since Expansion Began

For the third time since the expansion began in June 2009, the U.S. economy suffered a setback.

Gross domestic product shrank at a 0.7 percent annualized rate in the first quarter, revised from a previously reported 0.2 percent gain, according to Commerce Department figures issued Friday in Washington. That’s the weakest reading since frigid winter temperatures derailed growth at the start of 2014.

While bad weather once again probably contributed to last quarter’s slump, other impediments were also at work -- including a swelling trade deficit caused by a strong dollar and plunging investment in oil exploration following the drop in fuel prices. Federal Reserve officials are among those who believe the slowdown will be temporary, helping explain why they are considering raising interest rates later this year.


“The economy slowed in the first quarter but we’ll see an acceleration in the second quarter,” said Michael Gapen, New York-based chief U.S. economist for Barclays Plc. “It keeps the Fed in line for a rate hike in September.”

Other reports Friday showed consumer sentiment fell less than previously estimated this month, while manufacturing in the Chicago region unexpectedly slumped.

Stocks fell as major indexes pared gains for the month. The Standard & Poor’s 500 declined 0.3 percent to 2,114.98 at 12:43 p.m. in New York.

Survey Results
The median forecast of 84 economists surveyed by Bloomberg projected GDP would drop at a 0.9 percent rate. Estimates ranged from a decline of 1.2 percent to an increase of 0.2 percent. The economy grew at a 2.2 percent pace from October through December.

Last quarter’s contraction was smaller than the 2.1 percent fall at the start of 2014, when a prolonged patch of bitterly cold temperatures held back the economy. GDP also shrank at a 1.5 percent pace in the first three months of 2011 during the early stages of the recovery from the worst recession since the Great Depression.

Such declines in GDP are rare in economic expansions, pointing to the fragile nature of the current rebound. The economy hasn’t contracted in three different quarters during good times since the 1950s.

The tendency of the first quarter to be persistently weak in recent years has sparked a debate in the economic profession, with the Fed and its regional banks, including San Francisco, jumping into the fray.

GDP Controversy
The various research results indicate first-quarter growth has underperformed the rest of the year by about 1.6 percentage points to 1.7 percentage points on average. To some, that suggests there is a statistical bias at work. The Bureau of Economic Analysis this month said it’ll make changes to try to minimize the issue, and take this into account when reporting annual benchmark revisions in July.

The contrast to gains in earnings is only adding fuel to the controversy. Gross domestic income, which shows the money earned by the people, businesses and government agencies whose purchases go into calculating growth, expanded at a 1.4 percent annualized rate in the first quarter, Friday’s report showed.

GDI is seen by some researchers, including a few at the Fed, as a better gauge of the strength of the economy. While income and GDP should theoretically match, the different methods used in calculating the numbers cause them to diverge occasionally.

GDI, GDP
“The increase in GDI is pretty consistent with an economy that’s better than the GDP side,” said Aneta Markowska, New York-based chief U.S. economist at Societe Generale, who correctly projected the first-quarter contraction in GDP. “We expect to see a pretty significant bounce-back in the second quarter.”

As part of the benchmark revisions in July, the BEA will issue an additional growth measure taking the average of GDP and GDI.

The revisions to first-quarter GDP issued Friday showed the trade gap widened more than previously estimated, while inventories and consumer spending climbed at a slower pace. That was partly offset by a bigger gain in home building.

While poor weather and merchandise delays due to a labor dispute at West Coast ports were temporary restraints, the damage caused by the plunge in fuel prices and stronger dollar may be longer-lasting.

Trade Gap
A widening trade deficit subtracted 1.9 percentage points from growth, the most since 1985, compared with the previously estimated drag of 1.25 points, according to the Commerce Department’s data.

Business investment on wells and mines slumped at a 48.6 percent annualized rate last quarter, the biggest decrease since 2009.

A regional reading on manufacturing Friday raises concern that those headwinds remain. The Institute for Supply Management-Chicago Inc.’s business barometer fell to 46.2 in May from 52.3 the prior month. Readings lower than 50 indicate contraction.

The Commerce Department’s report showed consumer spending was also a little slower than initially calculated, growing at a 1.8 percent annualized rate compared with an initial estimate of 1.9 percent. That followed a 4.4 percent jump in the fourth quarter.

Revisions to incomes showed wages and salaries rose even more than last reported and the saving rate was the highest since the end of 2012, indicating households can unleash some pent-up demand.

Consumer Sentiment
Consumer confidence firmed at the end of May, another report showed Friday. The University of Michigan’s final sentiment index for the month came in at 90.7 compared with a preliminary reading of 88.6. Still, it marked the weakest reading in six months.

“The index is still quite high,” Richard Curtin, director of the Michigan Survey of Consumers, said on a conference call after the figures were released. During the latter half of the month, “I expected confidence to inch upward and I still think that is likely over the months ahead.”

The economy is poised to pick up this quarter. A Bloomberg survey of economists in May predicted growth will accelerate to a 2.7 percent pace in April through June, with household consumption expanding 3.2 percent.

Job Market
An improving labor market is among reasons consumers may be more willing to spend. Payrolls rebounded in April, as employers added 223,000 jobs after an 85,000 gain in March. The unemployment rate fell to 5.4 percent, the lowest since May 2008. Weekly applications for jobless benefits are hovering just above a 15-year low reached at the end of April.

“The U.S. economy seems well-positioned for continued growth,” Fed Chair Janet Yellen said in a May 22 speech in Providence, Rhode Island. “Households are seeing the benefits of the improving jobs situation.”

If the economy continues to improve as she expects, “it will be appropriate at some point this year” to start raising rates, Yellen said.

The GDP estimate is the second of three for the quarter, with the third release scheduled for June, when more information becomes available.

From Economy in U.S. Shrinks for Third Time Since Expansion Began - Bloomberg Business

Sad

 

[AMDR]

Housing boomlet furnishes U.S. economy with fresh source of growth
Housing boomlet furnishes U.S. economy with fresh source of growth - MarketWatch

WASHINGTON (MarketWatch)—The U.S. economy has reached halftime in 2015 and it’s been a low-scoring affair. But the second half of the year could show more razzle-dazzle.

After contracting 0.2% in the first three months of 2015, the economy is on track to grow a solid 2.5% or a bit higher in the second quarter stretching from April to June. And economists polled by MarketWatch predict comfortable 3% growth in the remaining two quarters of the year.

If that’s going to happen, the U.S. housing market probably has to keep setting postrecession highs. Construction of new homes in June was almost 27% higher compared with a year earlier and permits to build additional properties hit an eight-year peak.

“The housing market rebound is showing no signs of slowing down,” said Scott Anderson, chief economist of Bank of the West. “Home builders are in the catbird seat right now.”

Fresh sales figures this week on new and previously owned homes in June will shed more light on the health of the housing industry. The market continues to recover from its worse bust in modern times, with sales still far below their prerecession high.

The current mini-boomlet, if you can call it that, has been driven by a combination of rising urban demand for rental units such as townhouses and apartments and as well as a drop in national vacancy rates to a two-decade low.

Younger millennials have gravitated toward cities and many prefer to rent instead of owning their own homes, a trend hastened in part by tighter mortgage-lending standards. They are also forming more families to create additional demand for housing.

At the same time, strong job creation over the past few years that has shrunk the unemployment rate has allowed more people to set out on their own. Many young people, for example, were forced by financial circumstances to move back in with their parents after the Great Recession. Only recently has the so-called boomerang trend started to reverse.

The benefits of a robust housing market are widespread. Home buyers and renters have to furnish their new living spaces with couches, TVs, beds and the like. Suppliers of building materials such as brick, wood and tiles see an uptick in demand. And home builders, lured by the prospect of higher profits, have to hire more workers. It’s a virtuous cycle.

“Residential construction will provide a big boost to GDP growth in the second quarter, and through the rest of 2015,” said Stuart Hoffman, chief economist at PNC Financial Services.

One obstacle to an improving housing market, surprisingly enough, is a shortage of skilled labor. Many people who used to work in housing industry moved on to other lines of work during the long lean years following the 2006 housing bust. Nor can builders rely as much on immigration given tighter rules and a drop-off in the number of foreigners with construction skills entering the country.

If home builders can’t find enough good help, that will curb construction and create bottlenecks in the busiest areas. Such an outcome could also force prices for available properties high enough to choke off demand. Rental prices have climbed 3.5% over the past year to match the highest rate since late 2008.

For now that’s a more distant worry.

“Housing activity looks set to advance at a stronger pace in the coming quarters, underpinned by stronger wage growth, slowing housing price inflation, and mortgage rates that should remain near their historic lows,” wrote Gregory Daco, head of U.S. economics at Oxford Economics.

 

[AMDR]

U.S. leading economic indicator increases solidly
U.S. leading economic indicator increases solidly| Reuters

A gauge of future U.S. economic activity increased more than expected in June, boosted by a strengthening housing market, suggesting growth will continue to gain momentum for the remainder of the year .

The Conference Board said on Thursday that its Leading Economic Index rose 0.6 percent after an upwardly revised 0.8 percent increase in May.

Economists polled by Reuters had forecast the index rising 0.2 percent last month after May's previously reported 0.7 percent increase.

"The upward trend in the U.S. LEI seems to be gaining more momentum with another large increase in June pointing to continued strength in the economic outlook for the remainder of the year," said Ataman Ozyildirim, director of business cycles and growth research at The Conference Board.

"Housing permits and the interest rate spread drove the latest gain in the LEI, while labor market indicators such as average workweek and initial claims remained unchanged."

 

[VCheng]

Over $600 million for creating cutting edge photonics devices is just the start:

Biden to announce photonics center in Greece

VP Biden announced the details in town a short while ago. Yeah!

 

[AMDR]

US economy posts solid 2.3 percent growth rate in Q2
US economy posts solid 2.3 percent growth rate in Q2 - Yahoo Finance

WASHINGTON (AP) -- After a harsh winter, the U.S. economy posted a solid rebound in the April-June quarter, led by a surge in consumer spending and a recovery in foreign trade.

The Commerce Department said Thursday that the gross domestic product, the economy's total output of goods and services, expanded at a 2.3 percent annual rate in the second quarter. Moreover, the economy didn't actually contract in the first quarter. The government now says GDP grew 0.6 percent in the first three months of the year instead of shrinking at a 0.2 percent pace.

The healthy spring rebound reflected a big jump in consumer spending and a swing in trade from a significant drag to a small positive for growth.

Economists are looking for growth to strengthen more in the second half of this year to around 3 percent as consumer spending is bolstered by sizable employment gains.

The signs of a strengthening job market and expectations of faster growth ahead help explain why the Federal Reserve appears on track to start raising interest rates this year. On Wednesday, the Fed ended its latest policy meeting by keeping a key rate at a record low near zero, where it's remained since 2008.

The Fed said it still needs to see further gains in the job market and feel reasonably confident that low inflation will move back to its 2 percent target rate.

Many economists think the first rate hike will occur in September. Others think it may take the Fed until the end of the year to conclude that the time is right to increase rates for the first time in nearly a decade.

 

[AMDR]

Solid and steady: U.S. economy gains 215,000 jobs in July
U.S. economy gains 215,000 jobs in July - Aug. 7, 2015
August 07
NEW YORK

America's economy is in good but not great shape this year.

The U.S. economy added 215,000 jobs in July. Economists surveyed by CNNMoney predicted the economy would add 216,000 jobs. Anything above 200,000 is considered very solid.

The unemployment rate stayed the same at 5.3%, which is its lowest point since April 2008, according to the Labor Department. That's considered near full employment.

"Job growth is quite strong," says Jim O'Sullivan, chief economist at High Frequency Economics, a research firm in New York. "This pace of employment growth is clearly strong enough to keep the unemployment rate trending down.

Wage growth -- the missing piece to America's economic progress -- remained sluggish in July. Average hourly earnings only rose 2.1% compared to the prior year. Wage growth is the reason many Americans haven't felt the benefits of the economy's recovery. The Federal Reserve wants to see annual wage growth closer to 3.5%.

"Wage growth numbers are still tame," says O'Sullivan.

What will the Fed do? The jobs report is extra important now because the Fed is close to raising its key interest rate for the first time in over nine years. The Fed has said it will only hike rates if it believe the economy is healthy enough, especially for workers. A rate increase would be a good sign for the economy's health, and how far it's come since the recession ended.

Many experts believe this jobs report was strong enough to justify the Fed's first rate hike taking place in September.

"It's good enough to allow the Fed to begin tightening policy," says Jeremy Lawson, senior economist at Standard Life Investments.

Although the Fed wants to see better wage growth before raising rates, wage growth isn't a requirement. The Fed raised its key interest rate in June 2004 when average weekly earnings were 1.7% compared to the prior year, according to the Labor Department. Average weekly earnings in July were 2.4%.

The takeaway: Economic growth has been okay this year -- solid but nothing to get excited about. Last year, the economy added 240,000 jobs a month on average between January and July. This year that figure is 178,000 -- a sign that job growth in isn't as stellar.

However, there were some encouraging employment signs in July. The number workers who have part-time jobs but want full-time jobs fell to 6.3 million workers. A drop in the number of these so-called involuntary part-time workersmeans more people are finding full-time (and better paying) jobs.

The black unemployment rate moved down too. It fell to 9.1%, its lowest mark since April 2008. As recently as May, the rate was over 10%. Blacks have suffered from the highest rates of unemployment. More job growth for blacks bodes well for the rest of the job market.