The unemployment rate has dropped to 6.1%, and yet we still read about a shortage of skilled workers. Brookings Senior Fellow Gary Burtless is a little skeptical of the "skills mismatch" narrative, so he looked a little more closely at some of the data. Here is an excerpt:
To an economist, the most accessible and persuasive evidence demonstrating a skills shortage should be found in wage data. If employers urgently need workers with skills in short supply, we expect them to offer higher pay to prospective new employees who possess the skills. When workers with crucial skills are offered better wages by expanding employers, they are in a strong position to demand better pay from their current employers, even if their own employer is not expanding. Current employers must match the wage offers of growing employers or risk losing their key employees.
Where is the evidence of soaring pay for workers whose skills are in short supply? We frequently read anecdotal reports informing us some employers find it tough to fill job openings. What is harder to find is support for the skills mismatch hypothesis in the wage data. Last week the BLS released its quarterly report on the pay of full-time wage and salary workers. The median full-time worker earned $782 a week in spring 2014 (see Charts 1 and 2). That wage was $6, or 0.8%, more than the median earnings received by workers one year ago. While other wage series show modestly faster gains in pay, there is little evidence wages or compensation are increasing much faster than 2% a year. Even though unemployment has declined, there are still 2.5 times as many active job seekers as there are job vacancies. At the same time, there are between 3 and 3½ million potential workers outside the labor force who would become job seekers if they believed it were easier to find a job. The excess of job seekers over job openings continues to limit wage gains, notwithstanding the complaints of businesses that cannot fill vacancies.
It is cheap for employers to claim qualified workers are in short supply. It is a bit more expensive for them to do something to boost supply. Unless managers have forgotten everything they learned in Econ 101, they should recognize that one way to fill a vacancy is to offer qualified job seekers a compelling reason to take the job. Higher pay, better benefits, and more accommodating work hours are usually good reasons for job applicants to prefer one employment offer over another. When employers are unwilling to offer better compensation to fill their skill needs, it is reasonable to ask how urgently those skills are really needed.
Read the full article here.
Real Gross Domestic Product expanded at an annual rate of 4.0% in the second quarter of 2014, according to the Commerce Department's advance estimate. This was almost double the rate of growth in the first quarter. From the Bureau of Economic Analysis report:
The upturn in real GDP growth was mainly driven by upturns in exports and in private nonfarm inventory investment as well as an acceleration in consumer spending, notably for durable goods.
In addition, state and local government spending and residential investment turned up, and business investment accelerated.
In contrast to these contributions, imports (a sub- traction in the calculation of GDP) were higher in the second quarter than in the first quarter.
Here is a look at the trend:
Read the BEA release here.
Reuters' Lucia Mutikani writes that the economy accelerated at a faster clip than economists expected.
Home prices rose at a slower pace in May, according to the latest Case-Shiller Home Price Indices release. Year-over-year growth in the 10-city composite came in at 9.4%. Growth was 9.3% for the 20-city composite. This was down from 10.9% and 10.8%, respectively, in April. On the good side of the ledger, all 20 metros saw increases in May, as the 10 and 20-city composites "posted gains of 1.1%."
From the release:
“Home prices rose at their slowest pace since February of last year,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “The 10- and 20-City Composites posted just over 9%, well below expectations. Month-to-month, all cities are posting gains before seasonal adjustment; after seasonal adjustment 14 of 20 were lower.
“Year-over-year, nine cities – Las Vegas (16.9%), San Francisco (15.4%), Miami (13.2%), San Diego (12.4%), Los Angeles (12.3%), Detroit (11.9%), Atlanta (11.2%), Tampa (10.2%) and Portland (10.0%) – posted double-digit increases in May 2014. The Sun Belt continues to lead with seven of the top eight performing cities. Eighteen of 20 cities had lower year-over-year numbers than last month; San Francisco and San Diego saw their year-over-year figures decelerate by about three percentage points.
“Housing has been turning in mixed economic numbers in the last few months. Prices and sales of existing homes have shown improvement while construction and sales of new homes continue to lag. At the same time, the broader economy and especially employment are showing larger improvements and substantial gains.”
Read the full release here.
The rules of management have changed. Much of what worked 2, 3, and most definitely 4 decades ago is irrelevant in today's workplace. What works now may not work in a few years. Heck, it may not even work from meeting to meeting. This is why Jane Hyun argues for a management style that is based on being flexibility. In this Big Think interview, Hyun explains the value of being a "fluent leader":
We are all getting very close to the day where we have as much connectivity in the car as we do at home or in the office. And, much to the chagrin of those who have invested heavily in expensive auto-based platforms, users may be happier doing exactly what they do at home and the office--access the digital world through handheld devices. At this stage, it seems we still need automakers to help us with some of the hardware. If consumers don't want to pay extra to have a high[er]er-tech interface between their mobile devices and their old school mobile machines, is there incentive for automakers to provide it? Quartz's Leo Mirani says yes:
But even if car buyers don’t want to shell out for fancy connectivity, putting cars online may prove to be an unexpected boon to automakers’ bottom lines, says Samuel Loyson, the head of the connected car program for Orange, a large European telecommunications company that works with Renault on its connected car offerings. Today’s cars already have sophisticated computers that can gauge with precision how their cogs and sprockets are functioning. Connecting those computers to the internet would provide car companies with a huge amount of useful data.
One example is the warranty process. With diagnostics from connected cars, carmakers will be able to decide whether they really need to honor a warranty claim or whether the problem was the customer’s fault. With access to the car’s computer, it’s possible that they could even fix minor problems remotely, bypassing the dealership altogether.
Another big benefit will be customer relationship management. For example, there is generally a glut of requests for servicing in the summer, when families go on holiday and know they will be driving several hundred miles. Being directly plugged in to the car’s computer systems will give automakers the ability to manage schedules better. Already, car companies can monitor usage and remind customers a service is due. “With connected cars, you finally have a way to talk to your users,” says Loyson.
Finally, Loyson foresees another revenue stream from sharing the data that connected cars collect. Companies could sell information about driving behavior to telematics-based insurance providers (which Quartz wrote about here), allowing smaller firms to gather the vast amounts of data necessary to run such a program. Or companies could tie up with cities to create real-time parking availability databases, doing away with the need to install hardware in city streets (which Quartz covered here).
Read the full article here.
In 2012 California voters approved some tax increases that opponents argued would hurt employment in the state. Now, 18 months after the increases were put into effect, David Cay Johnston points out that the rate of job growth in California is outpacing the national average. There are, of course, many variables at play, but Johnston, writing at the Sacramento Bee, notes that California may be experiencing something that is not at all unprecedented, no matter how counterintuitive it sounds to people who follow the political debates over economic policy:
These results may surprise those who have heard that tax increases are job killers. Taxes can do that – if what is being taxed directly applies to job creation. For example, a 10 percent increase in payroll taxes (Social Security, Medicare and state disability) would probably hamper job growth, said David Neumark, chancellor’s professor of economics and director of the Center for Economics & Public Policy at the University of California, Irvine.
Neumark said he asks his students, “Does raising income tax rates reduce hiring?”
“The answer is no. What firms care about when deciding how many workers to hire is the marginal product of workers and the marginal cost of those workers. So if you are an employer and your personal income tax rate is increased, that does not raise the marginal cost of your workers, but it may encourage you to work a little less hard,” Neumark noted, applying standard economic theory.
Some research into tax rates indicates that high rates have the opposite effect: People may work harder, trying to make more money to achieve a desired after-tax income and may slough off if tax rates are lowered. This is known to be the case for people who have a savings target for money to leave their children and are subject to estate taxes – they save more to leave the after-tax sum they prefer, but save less when the tax is lowered or no longer applies to them.
The empirical evidence also shows that the best-paying jobs tend to be clustered in states (and countries) with high taxes. The same tends to be true of wealth creators, including the most money-motivated among scientists, and existing wealth holders not actively engaged in business.
Manhattan, home to the highest taxes in America, is also home to many centimillionaires and billionaires drawn by the proximity of other dealmakers, as well as taxpayer-supported amenities such as museums and performing arts halls.
(Hat tip Brad DeLong)
Facebook had a nice earnings report this week, and it seems inevitable the company will pass the $200 billion mark. That is, the company's market cap will pass that mark. The numbers are always impressive with Facebook (or at least they have been for the last 9 earnings reports or so). The Wall Street Journal's Steven Russolillo helps us understand why they are impressive, and the company Facebook is now keeping in the stock market's elite clubhouse:
In a new Economic Letter for the San Francisco Fed, Bart Hobjin and Leila Bengali look at the "wage growth gap for recent college grads." This time may in fact be a bit different. Starting wages for college grads have not recovered post recession at the pace history might have predicted they would. And it seems to have little to do with the type of work that is available in today's world.
Even though the recent slow wage growth is not unprecedented, its apparent persistence raises the question of why it has remained so slow for so long. We explore two potential explanations. One is that recent graduates are now getting different types of jobs than they were before the recession, particularly jobs typically associated with lower wages and thus lower earnings. If this were true, comparing the occupational distribution of recent graduates before and after the recession should reveal a shift towards low-paid occupations and away from high-paid occupations, with reasonably stable earnings in each group. Another possibility is that recent college graduates are getting jobs in similar occupations as they did before the recession, but within each occupation, growth of starting wages has been slow. If this were the case, we would expect to see similar percentages of recent graduates in each occupation over time, but little wage growth within each occupation. Note that more recent graduates taking part-time jobs, which may generate lower weekly earnings, would not explain the gap in wage growth in Figure 1, which shows only full-time workers.
To explore our two potential explanations, we use the information about each respondent’s major occupation as reported in the CPS. For this and subsequent analysis, we redefine years as May of the prior year through April of the current year; this is to make the groups correspond more closely to annual cohorts of college graduates, who likely graduate starting in May. For example, 2014 runs from May 2013 to April 2014. We report data for three points in time: 2007, a year before the start of the recession; 2011, around the start of the recovery; and 2014, the most recent year of data available.
Table 1 presents the shares of recent college graduates employed in major occupations and according to labor market status. Occupational categories for full-time employment are rather broad, but they show recent college graduates were employed in a similar distribution of occupations before and after the recession. Notably, some of the changes between 2007 and 2011 were at least partially reversed by 2014, such as in the categories for professional and related occupations; management, business, and finance; office and administrative occupations; and “other” occupational skill groups, classified roughly according to Autor (2010). Although there have been some notable shifts towards a few categories such as service occupations, occupational distributions have remained generally stable. Next we turn to our second explanation, that recent college graduates are getting the same kinds of jobs, but at lower wages. The right side of the table presents median weekly earnings for recent college graduates. For 2007 the table shows the level of earnings, and the columns for 2011 and 2014 list the percent change relative to 2007. Also shown are overall earnings and earnings for recent graduates working part-time. With few exceptions, wage growth has been limited in all occupational groups for recent graduates. Note that professional and related occupations and management, business, and finance, which are the two most popular categories for recent graduates, have seen particularly low wage growth. The table also shows that earnings for recent graduates working part-time have fallen since the start of the recession, due to a combination of fewer hours worked and lower hourly wage growth.
Thus, while comparing occupational distributions across years indicates some stability, there is a clear pattern of low earnings growth for most categories. In fact, for almost all occupations and skill groups for which we have enough data to compare recent graduates to all others, we find that recent graduates experienced lower wage growth than other workers.
It turns out that the sluggish wage growth of recent college graduates is fully accounted for by the slowdown in wage growth across occupations. When we calculate a change in wages by keeping the types of jobs held by recent graduates fixed at their 2007 occupational composition, we find that wage growth is exactly the same as when we use the actual distribution.
Read the full post here.
It probably doesn't take a lot to convince anyone that being attractive has its benefits. But this Vox animated video does a good job of showing just how much of an economic advantage the beautiful people have over the rest of us:
If there is one country that values the global push back into cities, it is China. While the push for migration from rural China into cities is well documented, we have not paid as close attention to Chinese investment in U.S. cities. As far as foreign investment in U.S. real estate is concerned, only Canada is ahead of China. Now a Chinese company is betting on the recovery of Detroit. The Guardian's Jonathan Kaiman has the story:
In September, the Shanghai-based developer Dongdu International (DDI) made its first move. In an online auction, it snapped up three iconic downtown properties, all built during the city’s early 20th-century heyday as an industrial powerhouse. DDI purchased the David Stott building, a 38-storey art-deco skyscraper built in 1929, and the former Detroit Free Press newspaper headquarters, a T-shaped edifice adorned with bas-relief sculptures of biplanes and locomotives. Later, it acquired the 10-storey Clark Lofts, an inconspicuous residential building with a manual, pre-second world war elevator – the oldest in Detroit.
Altogether, DDI spent $16.4m (£9.6m) on the properties, slightly more than a top-market apartment in Shanghai. The company plans to transform the buildings into vibrant offices and upscale apartments, according to the CEO of DDI’s leisure branch, Peter Wood. “Once we’ve shown to the locals in Detroit that we’re deadly serious, then other things will happen,” Wood says, sitting in his corner office on the 10th floor of a Shanghai skyscraper, a dozen or so Chinese employees typing diligently in cubicles outside. “Detroit is planning for this area to come back. It’s all about rejuvenation.”
China has in recent years become the second largest foreign investor in US real estate after Canada – the dollar is weak, the yuan is strong, and the country’s own real estate market is cooling down after years of explosive growth. While most buyers – individuals as well as companies – focus on reliable investments in cities such as San Francisco, Los Angeles and New York, others are seeking new frontiers. Many have family in the US and degrees from US universities; they are attracted to complex, high-risk projects which require a deep understanding of local real estate markets, politics and laws.
Read Does multimillion dollar Chinese investment signal Detroit’s rebirth? here.
If your boss asks you to pick her up a sandwich for lunch, you aren't going to stop at the Chipotle. A burrito is not a sandwich, right? Well, if you are in New York, it is. Just how that happened is an interesting story. Steve Henn and friends at Planet Money walk us through that story, and in the process they teach us about how tax policy affects more than just our wallets and government funding.
Realtors are starting to find reasons to smile again. Existing-home sales continue to climb as inventories reach new heights (well, new heights for the last year). Sales rose 2.6% in June, the third month in a row of sales increasing. While sales were still below June 2013 levels, seasonally adjusted sales did cross over the 5 million mark, according to the National Association of Realtors. From the release:
Lawrence Yun, NAR chief economist, said housing fundamentals are moving in the right direction. “Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country. This bodes well for rising home sales in the upcoming months as consumers are provided with more choices,” he said. “On the contrary, new home construction needs to rise by at least 50 percent for a complete return to a balanced market because supply shortages – particularly in the West – are still putting upward pressure on prices.”
Yun also noted that stagnant wage growth is holding back what should be a stronger pace of sales. “Hiring has been a bright spot in the economy this year, adding an average of 230,000 jobs each month,” he said. “However, the lack of wage increases is leaving a large pool of potential homebuyers on the sidelines who otherwise would be taking advantage of low interest rates. Income growth below price appreciation will hurt affordability.”
Total housing inventory at the end of June rose 2.2 percent to 2.30 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace, unchanged from May. Unsold inventory is 6.5 percent higher than a year ago, when there were 2.16 million existing homes available for sale.
The median existing-home price for all housing types in June was $223,300, which is 4.3 percent above June 2013. This marks the 28th consecutive month of year-over-year price gains.
The Consumer Price Index for All Urban Consumers rose 0.3% in June (seasonally adjusted), according to the Bureau of Labor Statistics. The CPI-U has grown every month over the last year except for October 2013. The all items index has grown 2.1% over the last 12 months. From the Bureau of Labor Statistics release:
In contrast to the broad-based increase last month, the June seasonally adjusted increase in the all items index was primarily driven by the gasoline index. It rose 3.3 percent and accounted for two-thirds of the all items increase. Other energy indexes were mixed, with the electricity index rising, but the indexes for natural gas and fuel oil declining. The food index decelerated in June, rising only slightly, with the food at home index flat after recent increases.
The index for all items less food and energy also decelerated in June, increasing 0.1 percent after a 0.3 percent increase in May. The indexes for shelter, apparel, medical care, and tobacco all increased in June, and the index for household furnishings and operations rose for the first time in a year. However, the index for new vehicles declined after recent increases, and the index for used cars and trucks also fell.
The all items index increased 2.1 percent over the last 12 months, the same figure as for the 12 months ending May. The index for all items less food and energy rose 1.9 percent over the last 12 months, a slight decline from the 2.0 percent figure last month. The index for energy increased 3.2 percent over the span, and the food index rose 2.3 percent.
Here's a look at the CPI for All Urban Consumers over the last year:
Meanwhile, Real Earnings were unchanged from May to June, as the growth in CPI-U offset gains in average hourly earnings. Real Average Hourly Earnings dropped 0.1%. Here is the trend for Real Average Hourly Earnings:
Read the release on earnings here.
The OECD released a report on global trade for the G20 meetings in Austrailia. The focus of the report is on Global Value Chains. If your economy wants to keep up a healthy growth rate, you better be participating in the right global trade via the right supply chains. The report argues that the benefits of global trade today remain high, but the report argues that the right policies need to be in place for countries to see those benefits. OECD Secretary General Josê Ângel Gurrîa introduced the report at the start of the meetings, and he outlined a few reasons the report is relevant to the leaders at the meeting:
First, inefficient customs and other border procedures impose unnecessary costs on traders every time an import or an export crosses a border – OECD estimates that a 1% reduction in these trade costs would generate benefits of about 40 billion USD. The WTO Trade Facilitation Agreement offers an immediate opportunity to reduce unnecessary costs; G20 Trade Ministers can demonstrate leadership and realize these benefits through speedy implementation of this Agreement.
Second, our work on TiVA-GVCs shows very clearly how much firms rely on access to world class inputs in order to increase their productivity growth – in other words, they import in order to export successfully. It is important to continue to avoid introducing new forms of protectionism, but it is time now to do more, to begin to wind back restrictive measures that prevent firms from importing and exporting. Doing so can stimulate business activity and lead to higher growth and jobs.
Third, our analysis also shows that services sectors play a vital role in well-functioning GVCs. Services are not just important contributors to economic growth and jobs in their own right, they also provide essential contributors to competitive manufacturing sectors. The new OECD Services Trade Restrictiveness Indices allow the world’s major services suppliers to benchmark their performance and to identify opportunities to perform better.
Fourth, participation in GVCs is not automatic and some less developed countries and smaller firms are at risk of being left behind. Even in more developed economies widespread and inclusive growth is not automatic. Effective flanking policies to accompany trade and investment opening are essential. The nature of these policies varies by country, its stage of development, its resource endowments, and so on. But there is at least one common element: investments in people, in education and skills, in active labour market policies that match labour supply with demand, and in adequate social safety nets for those facing difficulties in adjusting.
Read the full report here.
Alana Muller has written the book on networking. Well, she has written A book on networking--Coffee Lunch Coffee: A Practical Field Guide for Master Networking. Muller, President of Kauffman FastTrac, sees networking as an essential part of entrepreneurship. It is not enough to have a great idea and tireless dedication to getting a business off the ground. Your idea is going to succeed or fail in a marketplace made up of many different types of people, so an entrepreneur needs to start engaging with others early in the process. Muller shares some of her findings about networking in this Kauffman Sketchbook video:
If you were to assume that economies with labor shortages would not have high unemployment, and places with high unemployment would not have significant labor shortages, you would have a lot of company. And yet, China appears to be struggling with both high unemployment and not enough workers. At Vox, Yang Liu takes a look at this confusing situation, and ultimately she concludes that this is a "matching efficiency" problem and that solutions like more employment agencies should be initiated:
Although a nationwide labour survey did not include unemployment rates, we will look at the Chinese labour market using statistics from job placement services.1 According to the latest statistics on job offers and applications, as of the January-March quarter of 2014, there were 1.293 million young job seekers who graduated in the last year or earlier but had yet to find a job through employment agencies in 102 major cities (MHRSS 2014). As the population of these major cities accounts for approximately 46.7% of the total population of large and mid-size Chinese cities, we can estimate that the number of young job seekers who have graduated, but have yet to find a job, totals more than two million.
Using data from the survey, I also tried to estimate the unemployment rate in those 102 major cities. I employed data on the working population in major cities and the number of job seekers who have not found employment (newly graduated unemployed persons and rural immigrant job seekers) based on the international standard set by the International Labour Organisation (see Figure 1).
The unemployment rate, including rural migrants in major cities in the first quarter of 2014, is 8.7%, while that excluding them is 6.9%. Unemployment rates before the first quarter of 2014 are also close to these numbers, suggesting that the high unemployment rate has continued.
The unemployment rate is high not because unemployed people lack the ability to work. Looking at the age distribution of all job seekers in these 102 major cities (of whom 96.0% are unemployed), workers aged 45 or younger account for 89.9% of the unemployed, indicating a large population of young workers. In addition, 54.7% of job seekers have specialist or vocational qualifications. Regarding the type of job, 44.1% of job seekers look for technical jobs, while 25.8% seek marketing, sales, or service jobs. There still exists abundant, high-quality labour in the Chinese labour market.
Read the full post here.
You can't be a great leader unless you can be yourself. That's one lesson we take from Bill George, former CEO of Medtronic and one of the calmest, most insightful experts on leadership we've met. In this interview with Knowledge @ Wharton's Mike Useem, George speaks of the lessons he learned at Medtronic, and on the value of "authentic leadership":
From the end of the Second World War up through the start of the Twenty-First century, global trade proved a strong wind in the sails of global economic development. So we should be excused for thinking that it will always outpace GDP, right? Well, Adair Turner wants us to consider that "slower growth in global trade may be inevitable." From Project Syndicate:
To be sure, for 65 years, rapid trade growth has played a vital role in economic development, with average advanced-economy industrial tariffs plummeting from more than 30% to below 5%. The creation of Europe’s single market facilitated increased intra-European trade. Japan, South Korea, and Taiwan achieved rapid economic catch-up on the basis of export-led growth. China has followed the same path over the last 30 years. Trade grew about twice as fast as global output from 1990 to 2008.
But there is no reason why trade should grow faster than GDP forever. Indeed, even if there were no trade barriers at all, trade might grow significantly more slowly than GDP in some periods. Several factors make it possible that we are entering such a period.
For starters, there is the changing pattern of consumption in the advanced economies. Richer people spend an increasing share of their income on services that are either impossible to trade (for example, restaurant meals) or difficult to trade (such as health services). Non-tradable sectors tend to account for a growing share of employment and economic activity.
For several decades, that tendency has been offset by ever more intensive trading of tradable goods, often passing through many countries in complex supply chains. In the future, however, the shift to non-tradable consumption may dominate.
Indeed, trade intensity may decline even for manufactured goods. Trade is partly driven by differences in labor costs. China’s dramatic manufacturing growth reflected low wages up to now. But as real wages in China and other emerging economies grow, incentives for trade will decline. The more that global incomes converge, the less trade there may be.
Read The Trade Delusion here.
Some good numbers, some less good numbers for those of you tracking the recovery of the housing market. First, the less good news: the Census Bureau is reporting that building permits, housing starts, and housing completions were all down in June compared to May (though all were up compared to June 2013). Read the report here.
The good news: according to the National Association of Home Builders, home builders are feeling more optimistic than they have in months.
What could make things pick up? First time home buyers deciding to, well, buy homes. From the Wall Street Journal's News Hub:
The Federal Reserve's Beige Book for July is out, and it provides a bit of perspective, and an understanding of why the Fed is looking to ease out of quantitative easing. While the recovery has been slow, it does remain steady, and the Fed is seeing growth in just about every category and across all twelve districts. We'll give you the headlines here, but we recommend a full read of the summary and at least a glance at some of the district chapters.
Overall consumer spending increased in every District. Retail sales grew modestly in most Districts, with increases that were generally similar to the previous reporting period. Vehicle sales remained stronger than non-auto retail sales, with Philadelphia, Richmond, Atlanta, and San Francisco indicating robust to very strong auto sales. Tourism activity expanded in all reporting Districts, with growth ranging from slight in Philadelphia to very strong in Boston. Hotel contacts described robust activity in the Boston, New York, Atlanta, and Minneapolis Districts, while Philadelphia and Richmond noted activity levels that were in line with seasonal norms.
Activity in the nonfinancial services sector continued to grow across all Districts at a modest to moderate pace. Many Districts reported positive growth for professional and business services, including healthcare consulting, advertising, engineering, accounting, and technology. Overall, transportation activity rose at a moderate pace since the previous survey period. Broad- based demand for trucking and rail services across the Districts increased, and the Richmond District reported strong growth in port container traffic, with increases in both imports and exports. Manufacturing activity expanded in all twelve Districts. Contacts in the metal and auto industries generally reported positive growth, while manufacturers in the Philadelphia, Cleveland, Richmond, and Chicago Districts reported increased demand for their products from the energy sector.
Reports on real estate activity varied across the Districts. Many Districts reported low inventories and increasing home prices, but demand was mixed. Boston, New York, and St. Louis reported home sales were below year-ago levels, while Chicago noted a decrease in home sales since the last survey period. Home sales in other Districts remained steady or increased. Multi-family sales and leasing activity were robust in the New York and Dallas Districts. Residential construction rose for single-family homes in the Cleveland, Chicago, Kansas City, and San Francisco Districts, while New York, Richmond, Atlanta, Chicago, Minneapolis, and San Francisco reported increases for multifamily construction. Commercial construction activity generally strengthened across the Districts, due to higher demand and low vacancy rates.
Loan volumes rose across the nation, with slight to moderate increases reported in most Districts. Credit quality remained stable or improved slightly in most Districts, while San Francisco noted a slight decline. Credit standards were generally unchanged, although Richmond noted an easing of cost terms for well-qualified commercial and industrial borrowers, and Philadelphia and Chicago mentioned that competitive pressures were leading some financial institutions to take on higher credit risks.
We are guessing a lot of professors are adding Thomas Piketty's Capital in the Twenty-First Century to reading lists. Here is a short interview Piketty did recently with The Economist's Ryan Avent that may prove to be a nice in-class conversation starter. In this interview, Piketty discusses some of the key issues in his book, including the rising importance of wealth and capital in advanced economies:
The airlines are looking at a potential supply problem. It isn't about fuel or equipment. They soon may not have enough pilots. At The Atlantic, John Scott Lewinski looks into how this problem--a problem that will affect any of us who travel regularly--has come about. It is story of debt, wages, training costs, and an industry that did not seem to fully anticipate a basic need. Here is an excerpt:
The nosedive in recent years of pilot salaries resulted from a mix of common economic woes. Neil Roghair, vice president of the Allied Pilots Association, said that these issues have been slowly mounting for a couple decades.
“When you factor in airline deregulation with the reduction in the number of carriers due to mergers, pilots face fewer opportunities as they enter the industry,” Roghair said. “Since there are still men and women out there who love to fly and want to pursue that as a career, you saw a labor surplus.”
After the Airline Deregulation Act passed in 1978, the government no longer controlled the industry's fares, scheduling, or staffing. While the FAA remained in charge of flight safety, the many airlines in the consumer market were now in charge of whom they hired and how much they paid them.
“The industry expanded quickly throughout the 1980s,” Roghair explained. “That growth slowed some in the 1990s, but 9/11 was obviously devastating to the airline industry. We faced a decade of bankruptcies and mergers throughout the industry. We went from a booming labor market to a shrinking employment pool relatively quickly.”
Todd Simoneau is one pilot who rode out many of those changes. He trained at Embry-Riddle Aeronautical University before going on to serve as a pilot with seven different airlines: Northeast Express, Precision Airlines, Atlantic, TWA, North American, American Eagle and American Airlines—most of which have been absorbed into a larger airline or no longer exist.
“I was furloughed by AA in 2003 and went to work for North American Airlines, based at JFK,” Simoneau said. “After a year there I was given the opportunity to fly at American Eagle. Six years later, I was finally recalled to AA. I am now very junior again at AA, after being hired at a major airline 17 years ago.”
Read Turbulence Ahead: The Coming Pilot Shortage and How It Came to Be here.
Barney Frank was certainly not a member of Congress that most bankers wanted to deal with or listen to. But they had to. Now that he is no longer in office, they don't have to, but perhaps they are interested in his thoughts on regulation in today's world of rapidly advancing technologies in the finance sector. From Big Think:
Retail sales rose again in June, though not at the clip of the previous month. Sales came in at $439.9 billion for the month, a 0.2 percent increase over May sales (which had increased 0.5% over April), according to the Commerce Department. Sales were up 4.3% over June 2013. From the Census Bureau:
Nonetheless, Bloomberg's Michelle Jamrisko reports that the retail data again came in below expectations. But that had been true of the May data when it was first reported, and it turned out the estimates were low (the initially report came in at 0.3%, but the Census Bureau has adjusted that to 0.5%). Read the release here.
Trying to build something great? Like a company or a new product? In order to be great in today's marketplace, it has to be fresh and new and solve a problem that others have not solved quite as well. All of this requires being a "now-ist," according to Joi Ito, head of the MIT Media Lab. In this Ted Talk, Ito makes the case for the iterative process and "permissionless innovation." Take a look: