Billion with B! Santa Monica Sued for $1.7 Billion.

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CREDIT: POM 

Before I get to the plaintiff's claim, let's think what $1.7 billion is.  It's $1,700 million.  $1,700,000,000.   Consider spending $1000 a day.  It would take 4,657 and 1/2 years to spend it all.  Santa Monica's total expenditures for fiscal year 2010-2011 was $521.7 million, one-third of what the plaintiff is asking. 
On to the claim.  The plaintiff, Denise Barton, alleges that the city's new parking meters are "causing ringing in her ears, ear infections and tightness on the back, left side of her neck."
Hmmm. Maybe Bob Dylan was right in his Subterranean Homesick Blues, "…watch your parking meters."
What could a parking meter do to cause these ailments?  She asserts it's the wireless signals from these new advanced parking meters the city has installed.
It's the old power lines cause cancer that was updated to cell phones cause cancer a few years ago.  Now it's parking meters.  On September 11, 2011, I dealt with the physics of electromagnetic radiation (light) and how it cannot cause chemical changes.  Microwaves cannot cause atoms and molecules to ionize.
Furthermore, these parking meters are about 1000 times less powerful than your cell phone.  Your cell phone must communicate with a cell tower that can be miles away.  These parking meters send signals to a sensor 5 to 8 feet away according to a city official.
So I'll repeat what I wrote last November:

The World Health Organization (WHO) reports that "[a] large number of studies have been performed over the last two decades to assess whether mobile phones pose a potential health risk. To date, no adverse health effects have been established as being caused by mobile phone use."

The National Cancer Institute at the National Institutes of Health says "there is no evidence from studies of cells, animals, or humans that radiofrequency energy can cause cancer."
 

Thanks to Josh Hibbard for tipping me off to the Santa Monica Daily Press article.

Poetry

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Every once in awhile, students will show their appreciation by giving me a present.  I discourage this; a thank you is more than sufficient, and even this I don't expect.  
But as I wrote, every once in awhile someone will give me a souvenir bat (St. Louis Cardinals even though I grew up a Cubs fan), some small forks from Cambodia, a decorative vase, a Galilean thermometer, and even a fossil fish.  You can see these displayed in my office.  
Last week, I received my first poem.  The author is Selene Ramirez.

A Sharply Increasing Trend in U.S. Layoffs

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The BLS' report on the number of new jobless claims filed in the week ending 15 September 2012 indicates that the pace of layoffs in the United States is accelerating at the fastest pace since the 2007 recession began.

At present, the average rate of increase in the number of initial unemployment insurance benefit claims filed each week since the most recent trend began on 7 July 2012 has reached 2,800 per week. That figure is greater than the average rate of increase of 1,641 layoffs per week that was recorded as the U.S. entered into recession in December 2007. That figure held through 26 July 2008, when high oil and gasoline prices accelerated the recession into high gear, increasing the rate of new layoffs in the U.S. to 7,599 per week.

You can see how today's rate of increase in the rate of new jobless claims being filed compares with those observed in the 2007 recession in our chart showing the residual distribution of the major trends for layoffs since the beginning of 2006 (see here for a description of the primary trends indicated on our chart below):

Like the sharp increase in 2008, we believe that today's high oil and gasoline prices are driving the sharp increase in the trend for U.S. layoffs.

Unlike previous situations when the price of gasoline increased beyond the $3.50 per gallon threshold that we've observed seems to mark the level for "high" gasoline prices in the United States, it appears that employers did not react as suddenly to the onset of these prices as they have in the past.

Instead, following the sudden decrease in oil and gasoline prices in late June 2012, which marked the beginning of a sudden improvement in the U.S. economy, it appears that employers have ridden the boomlet that followed instead of suddenly reacting to the spike in gas prices to high levels as they have in the past, with the result being a relatively steady increase in the trend for new jobless claims, rather than a sudden upward adjustment.

Jim Hamilton describes why the employer response to high gas prices may be playing out so differently this time:

It's also interesting to look at how the response of consumer sentiment to gasoline prices has changed over time. The blue line in the graph below shows the same real gasoline price series plotted in Figure 1 above, except now drawn on a negative scale (shown on the right-hand axis); that is, the lower the blue line, the higher the price of gasoline. I plot it this way to highlight its relation to consumer sentiment, shown in black and labeled on the left-hand axis. When real gasoline prices first reached $3.50/gallon in 2005, consumer sentiment plunged sharply. When it happened again in 2006, the response was more modest, and on the third time in 2007, it didn't seem to faze consumers. It was only when gasoline prices went on from there to make new highs in 2008 that we saw sentiment plunge again.

[...]

By the second time gas threatened $4/gallon in the spring of 2011, the memory of 2008 had receded somewhat, and consumer sentiment fell sharply. It was much more muted when the same thing happened again just one year later. And right at the moment? Consumers seem to be shrugging it off. Nobody is surprised this time, having seen the same thing twice before over the last year and a half. Many of the adjustments people are making today were in fact set in motion 4 years ago.

There is quite a bit of empirical support for the claim that the second or third time oil prices move back near a previous high, the economic disruption is significantly less than the first time; see for example the evidence and literature reviewed in my 2003 Journal of Econometrics paper (ungated version here) and two recent surveys [1], [2].

$4/gallon? Been there, done that.

And though the adjustment of employers to high gasoline prices in the U.S. would indeed appear to be different this time, with a steady rather than a sudden adjustment, the outcome is still the same: an increasing number of layoffs each week in the U.S.

We've been there and done that too!

The Present According to Dividends: U.S. Entering Recession

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Last month, we stumbled across a unique potential indicator for measuring the current health of the U.S. economy: the number of publicly-traded U.S. companies acting to cut their dividend payments each month.

Since then, we now have data for two additional months, July and August 2012. Our chart below, focusing on the number of U.S. companies declaring that they will acto to decrease their dividends in each month since January 2004:

The chart represents data collected and published by Standard and Poor for U.S. companies whose common stock is traded on the American Stock Exchange, the New York Stock Exchange and various Nasdaq stock exchanges. Since January 2004, the data reported by S&P covers the information for anywhere from a low of 2,148 companies (January 2010) to a high of 3,716 companies (December 2011) in any given month.

In the chart, we've identified recession territory as being consistent with more than 10 U.S. companies per month acting to cut their dividend payments to investors. We observe that when the number of companies cutting their dividends in any given month is below that level, the U.S. economy would appear to be in relatively good health.

In August 2012, we find there were 17 U.S. companies that acted to cut their dividends, suggesting that recessionary forces are presently at work in the U.S. economy.

The Zero Deficit Line in 2012

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Now that the U.S. Census has released its newest estimate of median household income in the United States, it's time to consider where the U.S. federal government spending per U.S. household stands with respect to the Zero Deficit Line, which is the amount of spending that the typical American household can actually afford. The chart below shows those two measures for each year since 1967, when the Census first began reporting its median household income figure:

Looking at the chart, we see that for the third year in a row, the amount of U.S. federal government spending per household is hovering just below $30,000 per U.S. household. Our tool below will reveal how much spending can actually be supported by the typical American household given its annual income of $50,054 (or whatever median household income level you might choose to enter!)

Median Household Income Data
Input Data	Values
Median Household Income

How Much Federal Spending Per Household Can the U.S. Really Afford?
Estimated Results	Values
Federal Spending per U.S. Household

Using our tool, we find that in reality, the typical American household can only afford to have the federal government spend no more than $21,059.

On a side note, do you remember the old Warner Brothers' Road Runner cartoons? The ones where Wile E. Coyote would be chasing after the bird, then suddenly find himself suspended in mid-air beyond the edge of a cliff, until he looked down and finally crashed back to earth?

The level of federal spending per household since 2008 and the lack of meaningful growth in the incomes of U.S. households under President Obama, combined with all the talk these days of the approaching "fiscal cliff" suggests that there is one giant "splat" sound in the near future for the U.S.

The Recovery in Housing Prices

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Housing prices in the U.S. appear to have stabilized, at least in the short term, at a level of affordability about 14-16% above the typical levels recorded in the ten years preceding the U.S. housing bubble:

To achieve that level of stability, the U.S. Federal Reserve had to push long-term interest rates below the levels the market would otherwise set to all-time low levels, which it has primarily done using its quantitative easing programs of the last several years. Since the beginning of the long-anticipated new round, QE 3.0 (or "QE Infinity" since the program would appear to not have a planned termination date), 30 year mortgage rates have fallen to 3.49%, an all-time low.

The following chart shows the relationship between U.S. median new house prices and median household income, which provides the basis by which we can measure the relative affordability of houses over time:

In a sense, U.S. housing prices are being stabilized by one of the main factors that enabled the formation of the bubble in U.S. real estate markets in the first place: the Fed's policies of holding interest rates below the levels that the market would otherwise support. Should that artificial support be removed, we would anticipate that U.S. housing prices would fall sharply in response to the higher interest rates that would follow.

Applying Technical Analysis to Employment Data

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How might a stock market technical analyst see the U.S. employment situation?

For us, that's a fun question because while we don't put much stock in technical analysis, we do consider it to be a very weak form of statistical analysis, so it's not as completely useless as astrology in divining data.

In practice, there's really not much more to technical analysis other than arbitrarily connecting the dots between the peaks and troughs of data points within a trend, combined with trying to divine patterns from the data, like the infamous "head and shoulders" pattern or the equally fun "dead cat bounce".

So to make it interesting, we've opted to apply it to the month-over-month change in the number of employed Americans counted by the Bureau of Labor Statistics in each month since the total employment level in the United States peaked in November 2007, just one month before the economy peaked before heading into recession, and specifically, we'll use it to try to answer the question: "how much of the jobs recovery can be attributed to policies implemented during President Bush's administration, and how much can be attributed to policies implemented during President Obama's reign in office?"

Here's what we find:

In the chart, we're applying Mark Thoma's effectiveness lag for determining when a particular policy to take effect after being put into place. According to Professor Thoma, once a fiscal or monetary policy has been put into place by the U.S. government or the Federal Reserve, it takes anywhere from 6 to 18 months for its effect to impact the U.S. economy.

What we find is that the recovery from the bottom of the recession in January 2009 through June 2009, the official end of the U.S. recession, can only be attributed to policies implemented during the Bush administration, as no policy implemented by the Obama administration could have had any meaningful effect upon the economy during these six months.

That trend of improvement then continued during much of the period of overlap between the times when policies implemented during either President Bush's or President Obama's tenures in office could have affected the monthly employment data. In fact, if this were a trend in a stock price, a technical analyst would have been screaming to go "all in" at the time because of its upward momentum!

However, we see that the trend of improvement established during President Bush's administration dies out toward the end of that overlap period, as the trend in the employment situation in the U.S. during the period where only policies implemented during President Obama's time in office would have a stronger and stronger effect.

Here, those policies had at first a negative impact, as they killed off the trend of improvement that had already taken root when President Obama came into office (here we note that the bottom for job loss during the recession had been postponed by a month by actions taken by President Bush, who sought to delay the largest layoffs in the automotive industry's history until after the Christmas holiday in 2008.) Since ending the trend of improvement for jobs however, they've had what might be described as a neutral effect, as the policies adopted by President Obama and the Federal Reserve since January 2009 have had little effect on the change in month-over-month employment other than to see it drift sideways in a very weak recovery - one incapable of restoring the jobs lost during the recession.

Perhaps the strong recovery they inherited explains why President Obama's economics team predicted that the U.S. unemployment rate would never exceed 8% in the four years from 2009 through 2012 - they were counting on that positive momentum to continue. Little did they know that the economic policies they adopted in the early days of President Obama's administration would prove to be so impotent, acting instead to kill off the recovery they actually inherited and leaving the nation's economy adrift in the economic doldrums in all the years since....