Economy

The Fading Dream of Home Ownership

Washington Post: “The housing bust turned a lot of homeowners into renters … As a result, the national homeownership rate has dropped since the peak of the bubble in 2005, by about five percentage points. That decline, though, has been notably concentrated among certain groups: Hispanics, men, older millennials, and people living in certain unlucky corners of the country.”

“These demographics are the most likely to have ‘lost the American dream,’ as an analysis by housing website Trulia puts it. The renter rate is up in every large metropolitan area in the country since 2006, according to American Community Survey data (the study looked at the 50 largest metros, minus a handful with insufficient data). Within those metros, it’s risen the most for these groups. The Hispanic renter rate rose by 8.7 percentage points … For 26-to-34 year-olds, it rose by nearly 11 percentage points.”

Which Residents Are Positive About Their State Economy?

Gallup: “Residents of the U.S. states show wide variation in their evaluations of their state economies, with Utah residents the most positive and Illinois residents the most negative. Those living in North Dakota, Texas, Nebraska, Colorado and Minnesota are also very positive about economic conditions in their state.”

Confidence in State's Economy, 2015

“Americans are much more positive about their state economies than they are about the national economy, and in no state are they more positive about their state economy than in Utah … Residents in several energy-producing states are upbeat about the current state of their economy, but harbor doubts about whether the good times will continue.”

“Illinois, Rhode Island, West Virginia and Connecticut are the four states in which residents are more pessimistic than optimistic about the state economy. Residents’ views of the economy in these states are not necessarily just a reflection of how the state is doing economically. For example, West Virginia has one of the higher unemployment rates in the nation, but Illinois, Rhode Island and Connecticut are closer to the national average. And all but West Virginia saw economic growth in the early part of 2015, with Connecticut and Rhode Island growing faster than the national average. Other factors, such as frustration with the government and real or perceived tax burden, may also color the way residents in these states view their state’s economy.”

Is the Solar Boom Real?

MIT Technology Review: “By all accounts, 2016 should be a great year for solar power providers.”

“But investors are not feeling the love. This week shares of U.S. solar leader SolarCity tumbled to a new low, while several other solar companies also took a pounding. Last month Nevada introduced sharp cutbacks in its program for net metering—the fees paid to homeowners with rooftop solar installations for excess power they send back to the grid …. Across the country, as many as 20 other states are considering such changes, which would dramatically alter the economics of rooftop solar.”

“The rosier projections for grid parity usually assume that both net metering fees from utilities and government subsidies will continue … Without subsidies, the picture looks a lot bleaker. If each state added a $50 per month fixed charge to solar owners’ bills—a change that many big utilities are fighting for—solar would be at grid parity in only two states.”

“All the recent turbulence aside, it’s likely that solar’s longer-term future in the U.S. remains bright. Renewable portfolio standards, the state-level mandates that establish minimum renewable-energy requirements, will drive the addition of 89 gigawatts of new solar capacity over the next 10 years … Solar prices will continue to fall; a study by Oxford University researchers, published last month in Research Policy, found that annual price declines of 10 percent will continue well into the next decade, enabling solar to supply 20 percent of global energy needs by 2027. And falling costs and wider availability of solar systems coupled with energy storage will enable solar households to store energy for later use, making rooftop solar more economical on its own—regardless of whether it ever reaches true grid parity.”

Solar Energy is Ballooning Across the U.S.

Think Progress: “Solar energy is ballooning across the United States with California and Massachusetts leading the way, according to a Solar Foundation report unveiled Wednesday. The U.S. solar industry now employs slightly over 200,000 workers, representing a growth of 20 percent since November of 2014. What’s more, last year the industry added workers at a rate nearly 12 times faster than the overall economy.”

Total solar jobs by state.

Total solar jobs by state. Credit: The solar foundation

“’We are seeing solar in Arkansas, Virginia, Kentucky, all over the place. Arkansas in fact just broke ground on their first community solar project,’ said Andrea Luecke, president and executive director of the Solar Foundation.”

“California has five times more solar jobs than Massachusetts, the second highest ranking state. That’s not surprising to Luecke, ‘but for the first time Massachusetts hit the 15,000 mark. Between the two of them they have 50 percent of all the solar jobs.’”

“Solar companies expect to expand nearly 15 percent this year, and hire about 240,000 new workers. According to the report, that job growth is 13 times faster than the U.S. workforce as a whole. The exponential growth of solar energy is happening as coal use declined 25 percent in the United States since 2005. Moreover, solar technology is becoming cheaper. Since 2010, U.S. average installation costs declined 35 percent for residential use, and 67 percent for utility-scale installation.”

Economic Growth Decouples From Energy Consumption

Think Progress: “In a stunning trend with broad implications, the U.S. economy has grown significantly since 2007, while electricity consumption has been flat, and total energy demand actually dropped.

“The U.S. economy has now grown by 10% since 2007, while primary energy consumption has fallen by 2.4%,” reports Bloomberg New Energy Finance (BNEF) in its newly-released 2016 Sustainable Energy in America Factbook.”

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“The decoupling of GDP growth from energy and electricity consumption has been a key reason the United States has been able to reduce its overall greenhouse gas emissions since 2005. In particular, flat electricity demand has meant that the explosive growth in renewables and natural gas power has come directly at the expense of dirty coal.”

“The key driver of the decoupling of electricity use and GDP growth is energy efficiency policy and investment. BNEF notes that in 2014 (the most recent year we have data for), ‘Natural gas and electric utility spending on efficiency reached $6.7bn, up 8.1% from the $6.2bn seen in 2013; Energy Savings Performance Contracting (ESPC) investment topped $6.4bn.’ The ESPC funding is generally distinct from the utility funding and ‘mainly focused on public buildings.’”

“Largely unheralded, ‘The key policy story of the past decade has been the uptake of EERS [Energy Efficiency Resource Standards] in US state targets and decoupling legislation among US states.'”

Colorado’s Legal Marijuana Industry Soars to $1 Billion

Quartz: “The 2015 figures are in, and the number is huge—legal marijuana sales in Colorado were $996 million in 2015, according to Colorado Department of Revenue figures, the Denver Post’s marijuana website the Cannabist reports.”

“Colorado collected more than $135 million in taxes from marijuana sales in 2015. Of that, about $35 million will be put to school construction projects, the Cannabist reports. Since Colorado made it legal to use marijuana for recreational purposes state-wide in early 2014, taxes collected from marijuana sales have increased rapidly, and now far surpass taxes from alcohol.”

“To put the 2015 overall sales figure in some sort of perspective, in 2014—in the entire US—mustard sales hit about $430 million (paywall), and Advil sales were below $500 million.” reports Daily CBD.

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‘Structural’ Unemployment Debunked

Paul Krugman exposes the fallacy behind “structural unemployment.”

“When the Great Recession struck … it took no time at all for a strange consensus to develop in elite opinion, to the effect that a large part of the rise in unemployment was ‘structural,’ and could not be reversed simply by a recovery in demand. Workers just didn’t have the right skills, you see. Many of us argued at length that this was foolish. If skills were the problem, where were the occupations with rapidly rising wages? I pointed out that people said the same thing during the Great Depression, only to see it disproved when we finally got a big fiscal stimulus called World War II.”

“But the doctrine somehow just got stronger and stronger in elite circles, because it sounded serious and judicious, unlike the seemingly flighty proposition that all we needed was more spending. In fact, the notion that our unemployment problem was mainly structural began to be presented as a simple fact rather than as a hypothesis most professional economists rejected. And here we are.”

An Uneven Economic Recovery Among the States

Washington Post: “For most states in the U.S., last year ended on a strong note. But there are a few places in the U.S. that are struggling. Recently released data from the Philadelphia Fed indicates that seven states — North Dakota, Wyoming, Wisconsin, Illinois, Mississippi, Louisiana and Alaska — likely saw their economies contract during the last three months of 2015.”

Federal Reserve Bank of Philadelphia

“The country is clearly doing far better in 2015 than it was in 2009, when most states were struggling. Yet in the years after 2009, the picture looks more mixed. The economy in Dec. 2015 doesn’t look as strong as it did in Dec. 2014, when all states were seeing economic growth.”

“In total, 41 states saw their economies grow. The states with the strongest growth — over 1 percent in the three-month period, according to the estimates — include Oregon, Idaho, Arizona, Colorado, Kansas, Georgia, West Virginia, New Jersey and Maine. Michigan and Oklahoma weren’t fairing too well either at the end of 2015 — the Philadelphia Fed’s data shows that their economic growth was unchanged from three months before.”

‘Redistribution’ is no Longer a Dirty Word

Vox: “Bernie Sanders wants a political revolution. And most Americans think one might be necessary, according to a new poll conducted by Morning Consult and Vox.”

“Fifty-four percent of respondents to our online poll — which reached a sample of 1,884 registered voters nationally from Friday, January 29, through Sunday, January 31, 2016 — agreed that a ‘political revolution might be necessary to redistribute money from the wealthiest Americans to the middle class.’ Just 30 percent said they disagreed.”

“Liberals and liberal-leaning demographics were most likely to agree with the statement. But majorities of independents, white voters, evangelicals, and even Tea Party supporters in our sample agreed too — showing that redistribution may no longer be a dirty word in American politics.”

“Yet Sanders supporters shouldn’t get too excited just yet. Because we also asked our entire sample: ‘Which do you think is a greater potential threat to the country’s future — Big Businesses or Big Government?’ The results weren’t as promising for his agenda on this front. Fifty-five percent of registered voters thought big government was more dangerous, compared with 29 percent who thought big business was.”

Where to Find the Good Jobs

Gallup: “For the third year in a row, North Dakota had the highest Gallup Good Jobs (GGJ) employment rate among the 50 U.S. states, at 51.5%. A cluster of states in the Northern Great Plains and Rocky Mountain regions — including Nebraska, Minnesota, Kansas, Wyoming, Colorado and Iowa — all made the top 10 on this measure. West Virginia (38.3%) had the lowest GGJ rate of all the states for the second consecutive year.”

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“The most robust labor markets in the U.S. continue to center around the northern Great Plains states and the nation’s capital, with consistently high rates of full-time employment for an employer and relatively low underemployment.”

“Underemployment remains a more serious problem for states on the coasts — California, New York, New Jersey and Florida — than for those in the interior of the country. However, full-time employment for an employer continues to lag behind in many areas of the country despite other signs of stronger labor demand.”

Slowdown in U.S. Labor Market: 151,000 Jobs Added in January

Wall Street Journal: “The U.S. labor market slowed substantially in January, a sign of employer caution that could weigh on expectations about whether the Federal Reserve will raise interest rates in March.”

“Nonfarm payrolls increased a seasonally adjusted 151,000 in January, the Labor Department said Friday. The unemployment rate, obtained through a separate survey, fell slightly to 4.9% last month. The unemployment rate was last below 5% in November 2007.”

“The report comes less than two months after Fed officials increased short-term interest rates for the first time in nearly a decade. Since that rate increase, worries about the global economy have prompted some central bankers to question the pace of further increases. Friday’s report will likely prompt concern among some officials. The central bank has made further increases in short-term interest rates partly contingent on progress in the labor market, alongside inflation and ‘financial and international developments.’”

“Meanwhile, wage gains accelerated last month. The average hourly earnings of all private-sector workers grew by 12 cents in January to $25.39. Wages rose 2.5% in January from a year earlier.”

Politico: “Analysts had predicted the creation of about 188,000 jobs, an unemployment rate of 5 percent and an increase in hourly earnings of 0.3 percent, according to a Bloomberg survey of economists.”

Obama’s Financial Reforms: Half a Loaf?

Paul Krugman: “A lot of the debate over the Sanders insurgency hinges on whether you see Obama-era reforms as trivial, utterly inadequate to the problems, or as a half loaf that’s a lot better than none.”

Krugman argues that when it comes to financial reform, “it partly depends on what you consider the problem … too-big-to-fail is not the key issue, so that the fact that big banks remain big is, um, no big deal. The real question — or so I’d argue — is leverage within the financial sector, and in particular the kind of leverage with no safety net that characterizes shadow banking.”

“So Matt O’Brien weighs in with evidence that leverage has in fact declined substantially, and continued to decline even as the economy expanded — probably because of Dodd-Frank. This is certainly right; the same decline shows up in other measures, as in the chart above showing financial sector debt securities as a percentage of GDP.”

“Dodd-Frank’s rules — especially, I think, the prospect of being classed as a SIFI, a strategically important institution subject to tighter constraints, have had a real effect in reducing risk … The reality of the Obama era, for progressives, is a series of half loaves. But after all the defeats over the previous 30 years, aren’t those achievements something to celebrate?”

Americans Hate Government — and Banks

The Atlantic: “Although divisions exist even among those within the same political parties, people seem to agree on one thing: they distrust government and banks. The most recent Allstate/National Journal Heartland Monitor poll asked Americans who they trusted most to improve economic opportunity and security for people like them. Amid the presidential election frenzy, only 18 percent of respondents said they trusted elected officials in Washington, D.C., the most to fix the economy, down from 31 percent of people in 2009. More than a third do not trust any major institution—elected officials, labor union, investment banks, major corporations, national banks—to make improvement in their lives.

“Overall more than half of Americans (61 percent) believe that most of the progress tackling the country’s major challenges is happening at the state and local level—more than double those who said it was happening at the national level. Currently, American’s overall trust in the federal government is at its lowest point in the last half century, according to a poll by the Pew Research Center.”

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“Americans still said that the government plays an important role. Democrats leaned more heavily toward government playing an active role in regulating the economy … Echoing the division among political parties, younger respondents were less likely to see opportunities in the free market, and supported agendas that invested in education and social programs. Only 36 percent of Millennials supported the more conservative agenda compared to 47 percent of Generation X and 52 percent of Baby Boomers.”