U.S. Economy – Page 12 – Economic Thinking In Action

Just move already…geographic mobility and economic opportunity

In Chapter 6 of Moretti’s book ‘Geography of Jobs’, he argues that geographic mobility is a key to economic prosperity. The ability and willingness to move from an economically depressed area to a more robust one benefits not only the individual who moves but also the individuals and businesses in both areass.

Prof. Moretti points out that a number of countries that have low geographic mobility rates also have low economic activity measures. He uses his home country Italy as an example of a country where people do not move. Most interesting he makes the case for national mobility voucher program in the U.S.. The idea is that subsidizing a person’s move will help equalize economic opportunities across the nation. He closes the chapter discussing gentrification which he views as a good thing given all the pluses that arise from it.

Statistical analysis of VA wait times on the way

The number of military Veterans requesting care from the VA is at a historic high.

In the coming weeks, we will be publishing a series of post describing the work we have performed on VA wait times data obtained from the LA Times.

The underlying VA data was obtained from the June 2014 government audit of the VA. In our study we look at:

– The different types of wait times experienced by military veterans

– Socio-economic factors related to VA times such as percentage of vets and poverty rates in the surrounding area

– Detailed look at vets receiving mental health care and the wait times that they experience

Both Crude Oil and Natural Gas Prices Decreased from June 2014 to July 2014

prices_2014_07

Crude oil price decreased from $106.07 per barrel in June 2014 to $98.23 per barrel in July 2014. Natural gas price went down from $4.39 per million BTU (one million BTU is approximately 974 cubic feet) in June 2014 to $3.78 per million BTU in July 2014.

production_2014_05

Texas crude oil production for May 2014 was 66,235,787 barrels, down from 66,731,327 barrels reported in April 2014. Texas natural gas production was 617,988,757 Mcf (thousand cubic feet) of gas in May 2014, up from the April 2014 gas production total of 624,551,008 Mcf.

Medical Care Commodities Inflate at a Higher Rate than General Inflation from May 2014 to June 2014

The consumer price index (CPI) went up from 37.083 in May 2014 to 237.693 in June 2014, an annualized rate of 3.09%.

The price index for medical care commodities went up at an annualized rate of 8.36% from May 2014 to June 2014. During the same period, the price index for medical care services and professional services went down at an annualized rate of 0.16% and 1.31%, respectively, whereas hospital and related services went up at 2.06%.

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

Significant new government compensation data reporting requirements on the way from the OFCCP

Seyfarth Shaw LLP and a number of other OFCCP watchers reported recently on Office of Federal Contract Compliance Programs (“OFCCP”) notice of proposed rulemaking (“NPRM”) that would require most Federal contractors and first-tier subcontractors to submit compensation data to the OFCCP through a web-based filing system on an annual basis. The stated goal of the new data is to provide the OFCCP better data to monitor and analyze the pay of men and women in the workforce.

According to Federal Register, Vol. 79, No. 153, August 8, 2014, the OFCCP’s new data requirement will require contractors and subcontractors to provide:

The total number of workers within a specific EEO-1 job category by race, ethnicity and sex;
Total W-2 wages for all workers in the EEO-1 job category by race, ethnicity and sex; and
Total hours worked by all employees in the EEO-1 job category by race, ethnicity and sex.

The Department of Labor estimates that the the total cost of the rule change is $50,009,885, $46,250,189 will be first year cost.

Median Rent Rises in Three Largest MSAs Near Eagle Ford Shale from April 2014 to May 2014

Median rent rose in all three MSAs (metropolitan statistical areas) from April 2014 to May 2014.

Median house prices for San Antonio and Laredo rose from April 2014 to May 2014. Median house prices for Corpus Christi fell from March 2014 to April 2014.

Moretti’s economic tale of two cites: where Microsoft is now and Albuquerque

In Moretti’s book, he provides a detail study of how innovation jobs can be economic driver and dictate the economic future of a town, city or region.

Moretti discusses where Microsoft (MSFT) is now , Seattle, and Albuquerque, NM. These two cities embody the natural experiment that he suggest shows the impact of innovation jobs. In short he shows how one town has grown and blossomed and the other has not.

He points to three factors that have lead to the drastic divergence.

1 Job Creation. The sheer number of innovation jobs created by Microsoft both directly and the tradition jobs that were created indirectly.

2. The MSFT millionaires. These millionairies changed the landscape of Seattle as they started their own companies in around the city (and the industry).

3. The Hubs. According to Moretti cities like Seattle have become ‘Hubs’ that attract other businesses. Many businesses find that the existence of other companies both in their industry (competitors) and related companies attracts other companies and makes it easier for them to do business

What’s the latest on the economic impact of outsourcing?

Outsourcing

According to Moretti, economic studies have generally found that outsourcing is a net good for the U.S. economy.

According to Moretti, many of the outsourced services are complements and not substitutes for the services that we use locally in the U.S.

In addition to citing several economic studies on the topic, Moretti uses the case study of Oracle. According to Moretti, In 2000 Oracle had 22,008 U.S. workers and 20,919 workers abroad. In 2014, as the company grew the number of jobs outsourced also grew.. By 2014, Oracle had 40,000 in the U.S. and 60,000 abroad.

According to Moretti, this was a net gain for the U.S. even though clearly outsourcing has increased for Oracle. Many of the U.S. jobs created by Oracle jobs are high paying jobs. Also, he further shoes that many of the jobs, like routine computer software programmers, were jobs that helped U.S. workers do their jobs better as opposed to replacing the work of native U.S. workers. Further the multiplier effect resulted in many support jobs being created in the U.S.

U.S. and Texas Rig Counts Rise While Eagle Ford Shale Rig Counts Fall from June 2014 to July 2014

The U.S. rig count was 1,875 in July 2014, up from 1861 in June 2014; Texas rig count was 897 in July 2014, up from 891 in June 2014; The Eagle Ford Shale rig count was 212 in July 2014, down from 214 in June 2014.

Why is the innovation job sector so important? Because 5 > 1.6 (Moretti)

Why it is import?

Moretti argues that innovation jobs, like software jobs, make intensive use of human capital and human ingenuity are big economic drivers.

Based on his calculations from 320 Metro areas and approximately 11 million employee and previous studies, Moretti estimates that one innovation job creates five supporting jobs.

In contrast, Moretti estimates that traditional jobs create about 1.6 for every job. This is based on 320 metro areas and 11 million employees.