Business interruption damages come in many different shapes and sizes

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Business interruption cases come in many different shapes and sizes. In some business interruption cases the allegation is that the defendants’ actions increased the operating cost of the plaintiff.
For instance and one recent business interruption case the defendant’s drill and on-going construction activity unknowingly interfered with the plaintiffs’ fiber optic lines  drilling.
After the damaged lines were discovered by the plaintiff, the plaintiff spent a number of months fixing and creating new fiber optic lines. In addition to the out-of-pocket expense associated with the with the punctured fiber-optic lines, the plaintiffs also allege that they also incurred a correlated expense of having to use some of their existing employees to help mitigate the damage.
For instance, the plaintiff indicated that the mitigation of the damage caused by the defendant caused them to require substantial overtime hours from its employees to reestablish the lines and to maintain their service. The plaintiff after about eight months was able to get back up to speed and back to where there were prior to the incident.
In this case the alleged out-of-pocket expenses were relatively easy to determine. The company had to purchase more fiber optic and faced of the increased cost associated with installing those lines.
However the plaintiff also alleged that they experienced increased operating expenses, especially in terms of employee expenses.
Increased employee operating expenses is not always as straightforward to calculate. In this instance, employer did not necessarily hire more employees. Instead,  the employer used their existing employees at a higher level, required overtime, and shifted employees from one job or project to another. In these types of instances the employee expenses associated with the disruption is not so clear.
One way to determine damages in this case is to look at up is to use financial ratios. Financial ratios such as the employee expense to revenue ratio determine show how the company employs its employees.
For instance, a high employee expense ratio to revenue indicates that the company uses a lot of employees relevant relative to their revenue. A company with a high expense to revenue ratio is a relatively labor intensive company. Conversely, a company with a relatively low expense to revenue ratio is a relatively less employee intensive employer or company.
In a business interruption case, one approach is to look at the changes in these ratios both before and after the incident. Changes in these ratios can indicate the impact of the alleged actions. For instance the employee expense to revenue ratio could change dramatically following the alleged incident.
Other useful financial expense ratios include the full-time employee equivalent (FTE) ratios. FTE ratios are ratios that show how many full-time employees the company typically utilizes.  FTE measures take into account the part time work, overtime, and the different compensation structures that the company may utilize in its business.

Texas innovation job openings decreased from July 2014 to August 2014

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The number of job openings in Texas for “Innovation Type Jobs” decreased from 13,218 in July 2014 to 12,762 in August 2014. The searcher-to-job opening ratio also decreased from 0.97 to 0.94 in the same span.

Innovation jobs definition: http://www.employstats.com/blog/2014/09/26/1233/

innovation_2014_08

Source: BLS

Image source: http://www.americas.gecapital.com/insight-and-ideas/capital-perspectives/innovation-secrets-of-steve-jobs

Texas STEM job openings decreased from July 2014 to August 2014

STEM logoThe number of job openings in Texas for STEM (science, technology, engineering, math) jobs decreased from 44,105 in July 2014 to 43,210 in August 2014. The searcher-to-job opening ratio also decreased from 1.30 to 1.24 in the same span.

Our definition of STEM jobs: http://www.employstats.com/blog/2014/09/19/growing-national-interest-in-stem-fields-has-focused-our-research/

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Source: BLS

Image source: http://projecttomorrowblog.blogspot.com/2013/11/i-am-scientist.html

California STEM job openings decreased from July 2014 to August 2014

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The number of job openings in California for STEM (science, technology, engineering, math) jobs decreased from 73,005 in July 2014 to 71,821 in August 2014. The searcher-to-job opening ratio also decreased from 1.69 to 1.57 in the same span.

Our definition of STEM jobs: http://www.employstats.com/blog/2014/09/19/growing-national-interest-in-stem-fields-has-focused-our-research/

STEM_2014_08

Source: BLS

Image source: http://fairmountinc.com/help-wanted-1-2-million-good-paying-jobs-available/

Veteran’s wait time at VA hospital: A summary of our findings

Summary of our preliminary research of VA hospital wait times

VA hospital wait times have become an important issue in the U.S. as more and more Vets re-enter civilian life.  In our study, which we co-author with Economics Professor,  Dr. Peter Claeys of Universitat de Barcelona, we found the following preliminary results:

Overall, across established and new patients, VA wait times are actually not that out of line with other types of hospitals

The really long wait times for established and new patients are concentrated at a few hospitals

The major problem is getting enrolled

VA staffing levels matters 

In our upcoming posts we will expand on each of these points and make our data and program files available to interested researchers.

U.S. Commerce Department data show Internet retail sales continue to grow

Retail sales over the internet continue to increase in the U.S.

Internet sales, or as the Commerce department puts it:  sales of goods and services where an order is placed by the buyer or price and terms of sale are negotiated over an Internet, extranet, Electronic Data Interchange (EDI) network electronic mail, or other online system, have increased over 15% each year of the last three years.

E-Commerce now makes up about 6% of all retail sales in the U.S.

Internetsales

Source: http://www2.census.gov/retail/releases/historical/ecomm/

Time Period E-commerce Sales Change from previous year
2013 Q4                83,709 17.0%
2012 Q4                71,554 15.8%
2011 Q4                61,789 17.5%
2010 Q4                52,567

 

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Median rent and housing prices on average fell for three largest Eagle Ford Shale MSAs

housing

Median rent rose in San Antonio from July 2014 to August 2014; it fell in both Laredo and Corpus Christi during the same span.

rent_2014_08

Median house prices for all three MSAs (metropolitan statistical areas) fell from July 2014 to August 2014.

house_2014_08

Image source: http://www.asemooni.com/news/economic-news/the-president-agreed-with-the-increase-in-housing

What is the value of the contract? Calculating the value of a partially executed business contract

In this case, the charging party, the plaintiff, alleges that that the defendant unlawfully suspended a work contract.  The plaintiffs had a $10.5 million, 3 year contract with the defendant to install and maintain machinery at a pipe manufacturing facility.

The plaintiff alleges that after the defendant unlawfully solicited and hired its key employee to come and work for the defendant, the defendant then terminated the contract.  The plaintiff further alleges that the defendant used the former employees of the plaintiff, and the confidential knowledge that they possessed, to complete the install and maintenance of the multimillion dollar pipe making machinery. The plaintiffs financial records indicated that had performed about 1/3 of the work spelled out in the business contract.

In this instance, the value of the remaining portion of the contract is calculated under two different ‘but-for’ contract breach scenarios.  The but-for scenario calculates the profits that the plaintiff would have received but-for the defendant’s alleged breach of contract.

In the first but-for scenario, the profit from the remaining portion of the business contract is calculated as the lost profit from the remaining items of spelled out in the contract.  The lost profit is determined by calculating the estimated revenue from the remaining items and subtracting the expected incremental cost associated with the performance of the contract.

In the second but-for scenario, the after-incremental expense profits are calculated based on the items that were actually installed by the vendors that the defendant utilized following the termination of the contract with the plaintiff.

Medical care commodities inflate at a lower rate than general inflation from July to August

cpigeneral_inflation_2014_08

The consumer price index (CPI) went down from 37.909 in July 2014 to 237.428 in August 2014, an annualized rate of 1.79%.

medical_commodities_2014_08medical_services_2014_08

The price index for medical care commodities went up at an annualized rate of 1.45% from July 2014 to August 2014. During the same period, the price index for hospital and related services went up at an annualized rate of 1.32%, whereas medical care services and professional services went down at an annualized rate of 0.46% and 3.04%, respectively.

Source: BLS

Image source: http://www.shutterstock.com/pic-54762670/stock-photo-background-concept-illustration-consumer-price-index.html

Crude oil prices decreased while natural gas prices increased from July to August

prices_2014_08

Crude oil price decreased from $98.23 per barrel in July 2014 to $97.86 per barrel in August 2014. Natural gas price went up from $3.78 per million BTU (one million BTU is approximately 974 cubic feet) in July 2014 to $4.04 per million BTU in August 2014.

production_2014_07

Texas crude oil production for July 2014 was 69,573,013 barrels, down from 70,108,403 barrels reported in April 2014. Texas natural gas production was 632,494,096 Mcf (thousand cubic feet) of gas in July 2014, down from the June 2014 gas production total of 639,345,631 Mcf.

Sources: eia.gov, rrc.state.tx.us