Case-Shiller October Numbers Show Continued Weakness in Housing

Including Portland and Seattle.  Here is the Wall Street Journal's table.

Home Prices, by Metro Area

Metro Area	October 2010	Change from September	Year-over-year change
Atlanta	103.30	-2.9%	-6.2%
Boston	154.35	-1.2%	-0.2%
Charlotte	114.06	-1.1%	-4.2%
Chicago	122.28	-2.0%	-6.5%
Cleveland	102.20	-1.5%	-2.6%
Dallas	116.16	-1.1%	-3.1%
Denver	126.59	-0.6%	-1.8%
Detroit	68.86	-2.5%	-5.5%
Las Vegas	100.97	-0.2%	-3.6%
Los Angeles	174.05	-0.7%	3.3%
Miami	144.03	-1.1%	-3.4%
Minneapolis	121.30	-1.9%	-2.8%
New York	171.50	-1.6%	-1.7%
Phoenix	105.97	-1.1%	-4.3%
Portland	142.16	-1.5%	-5.2%
San Diego	159.99	-1.5%	3.0%
San Francisco	138.84	-1.9%	2.2%
Seattle	143.13	-1.3%	-4.1%
Tampa	135.21	-0.9%	-3.6%
Washington	186.67	-0.2%	3.7%

Source: Standard & Poor’s and FiservData

Oregon's Exports and Trade Weighted Exchange Rates

In the wake of my little post on Oregon's trade weighted dollar index, Josh Lehner at the Oregon Office of Economic Analysis' Blog discusses it in depth and points us to the index that his office keeps. Here is an excerpt:

Given Oregon’s industrial makeup (the state’s manufacturing location quotient for 2009 was 1.143, with durable goods registering a 1.309) and geographic location, the state has long been a major exporter and international trade is a pillar of the state’s economy. According to research, Oregon is the fifth most trade-dependent state in the U.S. and a recent Brookings Institute report (see page 15) shows that the Portland-Vancouver MSA is the second most trade-dependent metro in the country behind only Wichita, KS. (Wichita is the “Air Capital of the World” and has long been a major player in the aircraft industry with operations by Boeing, Airbus, Leerjet and Cessna, among others.) Seeing that exports play a major role in Oregon’s economy and international trade is influenced by exchange rates, tracking the international competitiveness of Oregon’s exports is important to determine the economic health of the state and also to help gauge future trends. It also stands to reason that for a trade-dependent state, such as Oregon, a dollar index is a leading indicator for local employment. As the dollar becomes more competitive, it will boost Oregon exports, which in turn will lead to increased employment as the exporting firms need to hire additional workers to fill orders and the ports will hire additional workers to load/unload the products onto ships, barges and airplanes.

Generally speaking, what the Dallas Fed is now undertaking follows the methodology of our office’s Oregon dollar index, however there are a few differences that lead to slightly different outcomes. First, the graph below illustrates our office’s Oregon dollar index and the Major Currency dollar index from the Federal Reserve over the past 15 years.

***

The fact that the Dallas Fed uses the Top 25 trading partner countries and our office uses just the Top 15 countries may seem like a potentially large difference, however, based on data over the past 15 years, it is not. On average, the Dallas Fed notes that their indexes cover 89 percent of all exports for each state. That means, the Top 25 trading partners account for 89 percent of each states’ exports. In Oregon, the Top 15 trading partners account for an average of 84 percent of all exports and depending upon the year, the exact percentage falls within the 82-88 percent range. With such a small difference between using the Top 15 compared to the Top 25, the overall dollar index for the state would not be changed significantly.

Overall, the continued depreciation of the U.S. dollar and also the Oregon Dollar Index, is good news for exports (and manufacturers of export goods), which should continue to increase as the global expansion continues.

Go read the rest of the post there.

Economist's Notebook: The Free-Rider Problem

When economists talk about the problem of the provision of public goods they generally talk about the free-rider problem.  This is the private incentive to shirk contributions for such good in the belief that it will be provided anyway through the contribution of others.

This is a perfect example.

Brent Wojahn/The Oregonian/2007

Oregon and World Exchange Rates

The Federal Reserve Bank of Dallas has issued a report that creates a real trade weighted value of the dollar for each state.  This is weighted by the specific countries where the state exports to and imports from and by how much they do so.  The point is that national exchange rate indices do not always give an accurate impression of how exchange rates are affecting individual states.  Oregon, for instance, trades relatively heavily with East Asia and relatively little with South America.

First, how important is trade for Oregon?  Well, the statistic I always cite is old, but the most recent we have and shows that in 2006, Oregon was the 5th highest state in terms of the importance of exports to jobs.

As for the importance of trade with East Asia, here is a look at how the East Asian crisis of the late 90s really impacted trade with Western states.

Which is why, of course, when people ask me about Oregon's economic prospects I always point to what is going on in East Asia, which right now is great for us.  But, of course, the prospects of a major real estate bubble, social tension and a manipulated Yuan are all worrisome. 

Printing Money

HT: Greg Mankiw

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Economist's Notebook: Are Holiday Catalogs Good for the Economy?

'Tis the season of the catalog in my mailbox.  This despite the fact that I never use catalogs anymore, as I can do it all on my computer.  Over at the New York Times' Green blog there is a complaint about the waste that all this junk mail represents.

So is it entirely wasteful, given my total disregard for them?  Perhaps not.  Clearly the companies that sell via mail-order still see considerable value in catalogs, they get to passive consumers rather than active ones that seek them out on the web, and yes even I, the rational economist, have flipped though a catalog and found something that I didn't know existed and later purchased.  So they are clearly seeing value from their mailings, and an essential part of markets maximizing social surplus is creating it from where it was not previously (buyers and sellers coming together and making mutually beneficial trades).  The postal service likes them as it represents business for the USPS, as do the producers of paper and the printers.

So the question is, does the disutility from having to deal with catalogs I don't want, plus the environmental cost, outweigh the gain to society from the millions of catalogs being delivered daily to American homes?  Probably not, is my thinking, especially with my free curbside recycling.  They represent information about products and services to American consumers and in general in economics, information is a good thing and leads to more efficient outcomes.  So though I sigh when another stack ends up in my mailbox, I must admit that they are probably a net positive for the economy.

What do you think?

Oregon November Unemployment: Rate Steady at 10.6% but Another Good Month for Jobs

You may remember that the national employment numbers for November were a huge disappointment - very few new jobs were added, when a big gain was expected.  Well in Oregon, largely because of the disappointing national numbers, I expected a very low job gain number and have been surprised again, this time pleasantly so.  6,300 jobs were added in Oregon in November, following 6,700 in October.  Two back to back healthy job gains is good news in this horrible economy.  The unemployment rate is essentially the same at 10.6%

Why the job gains and no budge in the unemployment rate?  Well, Oregon's workforce continues to grow, in fact for the first time ever, Oregon's civilian labor force has eclipsed two million people.  This is most likely due to population growth as Oregon is still a net in-migrtation state.

So it is good news but to give a healthy does of perspective here is a look at the employment numbers from the last decade:

Let's hope that this time we can keep the momentum going.

As for which sectors showed growth and which didn't the good folks at the Oregon Employment Department made this nice graphic:

Construction is still hurting badly, but trade and transport showed robust growth. 

Soccer Shirt Sponsors

While we are on the topic of soccer shirts, for a long time now European clubs have had sponsors names on their shirts.  For the first few years, MLS forbid the practice but over time, like many other things (the clock that used to count down, the shoot-out in the case of a tie, and so on) MLS has slowly converged to the world standard and now allows sponsors on shirt fronts.  Not all have them yet, but the Timbers scored a good one in Alaska Airlines.

Despite the near universality of the practice there was one club that stood out: Barcelona.  Until a few years ago their shirt was beautifully free of commercial messages.  Recently they have put UNICEF on their shirts but actually donate to UNICEF rather than take a payment.  However, apparently even Barcelona has bowed to the economic pressure and will now have a shirt sponsor.  Sad.

Reminds me of the first time a stadium naming right was sold: Candlestick Park in SF became 3COM park.  Seemed crass and ridiculous at the time, but very very quickly the naming rights were sold to just about every other stadium - even iconic ones like Mile High Stadium (though it was a new stadium).

Of course in Oregon we have our own anachronism: The Rose Garden.  I hope this does not go the same way Barcelona has gone, but I don't have a lot of faith that it won't.

HT: Freakonomics

Friday Nonsense: Timbers Edition

I am back from Brazil and facing a ton of work, chores, holiday preparation and on top of it all my 9 year old broke his nose on Wednesday playing soccer.  Sigh.  So thus commences the superfluous blogging!

And since we have mentioned it, let's talk about my favorite pet subject: soccer.  This time the Timbers new uniforms (I refrained from saying kit for you anglophobes).  In a word: nice.  Classy, elegant, with some cute touches and I like the Arsenal style white sleeves.

Also big props for the alternate jerseys.  A lot of MLS teams just go with their color on one and white on the other mimicking other American pro sports, but soccer tradition is a lot different: alternate kits are generally some totally different color scheme and change every few years.  There are a few teams like Arsenal that have a traditional alternate color (in Arsenal's case it is yellow), perhaps we'll see the Timbers follow this tradition - let's hope so, the red for the rose city is inspired.  And there is no doubt in my mind where this came from: looking ahead to games at the Sounders, where the Timbers will have to change from the green, what better way to go than to have bright rose red for the Rose City team in Seattle?  Awesome.    

I have only one quibble about the whole thing: the Timbers crest should never, ever change, it should be green, even on the alternate jerseys, this is how every club does it.  But, then again, who cares, man?  Lets get winter over and the season started.  RCTID.

Portland's Economic Performance

This report, prepared by ECONorthwest has been getting a lot of press.  The Oregonian made it the banner headline yesterday and today makes it the subject of the main editorial.  The problem is, as evidenced by the meandering and confused editorial, is that it is simply a bunch of facts and figures and it is not at all clear what it means and what should be done.

This passage from the Oregonian editorial today is priceless:

Nevertheless, the study provides a useful starting point for discussions about economic development, tax policy and other issues that elected officials concern themselves with. It should remind them of the overarching truth about jobs and income at the urban center of the region: Jobs have been disappearing and wage-earners have lost ground.

The solution to these trends is straightforward: Portland and Multnomah County need more jobs with good wages. Cultivate them and every public service will benefit from the additional income tax revenue they bring.

This illustrates beautifully my point: government needs to cultivate jobs! Don't forget that you need jobs to get taxes! C'mon, we need to make jobs!

Great, thanks for that, so just exactly what is government supposed to do and what has it done wrong? Silence.

To me, all this is a lot of hay about a bunch of old facts. Well, at least thouse fasts that are legible, for a professional consultancy, the report is embarrasingly shoddy, with many tables almost completely illegible.

There are also quite a few instances of pretty shocking comparisons for folks who consider themselves economists - wage comparisons not normed by productivity, singling out Multnomah county instead of looking at the metro region. In fact, my favorite table that is used as a special condemnation of Multnomah County is this one (and a good example of the shoddy report - almost impossible to read):

Notice that Multnomah County is just above some place called Santa Clara County in California.  This is, of course, the epicenter of Silicon Valley - what a disaster of an economy Silicon Valley is - let's be sure not to emulate them!

Of course both of these are just examples of equilibrium effects as jobs have been added in Washington County and Clark County, just economic theory would predict, as the core area of Mult. Co. becomes dense and relatively expensive.  The same process is happening in the San Francisco Bay Area.

But the general story of Oregon being less prosperous as our neighbors is true.  This is neither new nor surprising: Oregon with its resource extractive past, its over emphasis on blue collar, manufacturing jobs and its relatively poor education system and support is both burdened by its history and hampered by its present.

What is government doing wrong?  Well, this is hard to pinpoint.  Sure it would be good to have a more stable and well-funded education system, but a lot of the instability in education funding is due to national economic forces and the choices Oregon voters made to give us our present tax structure.

As someone who started living in Portland in 1982, my personal perception is much different than the negative one portrayed in the report.  I view Oregon is a place that has long had to struggle with the fact that its comparative advantage is in resource extraction and low-skilled activities.  These are deeply entrenched economic forces and not easy to change. To see the Portland of the 21st century and compare it to the Portland of the 1980s, to me illustrates the remarkable transformation of the regional economy in a short thirty years from a blue collar manufacturing based economy to a much more diverse and vibrant economy with a healthy professional class.  Unfortunately, this has been achieved through the successful importation of human capital from elsewhere.  What is going to hold the metro region and state back going forward is our continued inability to create human capital on our own.

Which brings us to what government should be doing.  As I have said all along government has limited ability to 'create' jobs (as the editorial suggests) - if they could, they would, and life would be so simple.  What changes the forces of comparative advantage are investments in education, R&D and infrastructure.  These are slow to show effects and don't make a lot of good political theater because the results don't become evident two years later.

It is disappointing that the report doesn't even try to begin to examine the causal links, rather they are satisfied to make a lot of noise about general comparisons that really don't tell us anything about policy.

Education around the World

One thing that really struck me, as I was sitting in a conference on education in São Paulo, was how similar is the debate about education reform in low, middle and high income countries.  Questions of accountability, standardized testing, incentives are just as relevant there as here and we are all struggling to find the right way forward.

For the US, the problem is clear:

The answers are not.

World Cup 2022 - Qatar

Well, now that the World Cup 2022 was awarded to Qatar (disappointing the USA which looked like the favorite), we begin to think of what this World Cup might look like.  And so the NY Times' Economix blog points us to a site about buying alcohol in Qatar.  The general idea is it is very hard.

Perhaps they'll make it easier during the cup, or perhaps England will fail to qualify, which should solve the problem.

Leapfrogging in Brazil

Leapfrogging is a term that development economists, such as myself, use to describe situations in which less developed countries can simply jump over technology that they have been slow in developing.  The best example of this is perhaps telephones.  Old telephone systems required extensive networks of wire and relays that were expensive to construct and maintain.  It used to be in order to 'catch-up' to more developed countries in communications, less developed countries had to spend a lot of time and money to create these networks.  But not any more.  Technology has advanced making wireless telephony a much better and cheaper way to connect a country.  It is no surprise that some of the most explosive growth in cell phone use has been in developing countries and some of the slowest has been in places like the US.

I was reminded of this today when my friend suddenly remembered a bill he had that was due to be paid today.  Off he went to the bank where the ATM machines will read a standardized barcode printed on most bills and then allow you to instantaneously pay the bill with funds from your account.  Yes, you can do on-line bill pay as in the US, but as many Brazilians don't have access to computers or the internet, so the ATM solution is a useful option.  Wow, I said, I am from a backward country, we can't do this.

But then I got to thinking about why this has been developed here and not in the US.  My best guess is the expense and reliability of the US Postal Service.  Paying bills through the mail here is safe and reliable - perhaps this is different in Brazil.  I don't know, but it would not surprise me if mail service in Brazil has, at least in the past been slow, unreliable and expensive.  Rather than spending a lot of money trying to improve the postal service in Brazil, the market is figuring ways to use technology to get around it.

By the way, ATMs here do a lot of other things, like print checks when you need them and read biometric data from the palm of your hand - this to improve security.  The US is so backward.