Relax, its Cinco de Mayo!

It’s a great time of year; the weather is finally starting to cooperate.   What better way to end a long day than being able to sit outside and enjoy a nice cool drink.  Wouldn’t it be great if we had a really good excuse to sit around and do nothing all day, like they do in Spain with their long lunch siestas?  If we could actually live by the epic mantra of Bruno Mars’ “The Lazy Song?”  Look no further, today is Cinco de Mayo, a fantastic (U.S.-borrowed-from-Mexico-as-an-excuse-to-do-nothing) holiday where we can sit back, have a beer (or Margarita for you more sophisticated types) and do what we love doing best – nothing.

Sitting around and doing nothing may be fun, but it is unfortunately not sustainable for long periods of time (even unemployment runs out eventually, nice try).  Contrary to our wildest dreams (or to what people who appear on Judge Judy may believe), money does not grow on trees.   We have to make a living to support ourselves (at the very least, buy drinks to be lazy comfortably) and keep our communities successfully functioning.  If we didn’t work (i.e., produce goods or provide services that generate value) our country would cease to function.  We wouldn’t have any money to buy necessities or provide for our families (or to pay for your unemployment checks).  Our quality of living would decline dramatically (that is a bad thing).

So, while being lazy isn’t great for our wallets, sometimes we just can’t help it.  Just how lazy are we?  Not very, according to one measure.  Nationally, the average worker is generating more value in their job over time (maybe we are worried for our jobs and want to be invaluable, or maybe there is a new technology that lets us do more than we used to in a workday), a trend that has continued for every quarter (3 month period) on a year over year basis for the last 2 years.  According to data released today, we were 1.3% more “productive” in the first 3 months of this year compared to the same time last year, and 1.6% more “productive” than in the last 3 months of 2010.  “Productivity” measures how much value (“output”) people generate for every hour worked. 

You may interpret this to be another excuse to be lazy – after all we are creating more value working the same number of hours compared to last year so why not work a little less and call it even.  Actually we already have to some extent.  The rate at which we are increasing our productivity is less this year than last year – meaning our productivity in the first 3 months of 2010 was 7% higher in 2010 than in 2009, compared to 1.3% higher in the first 3 months of 2011 over 2010.  Plus there are real benefits to being a more efficient worker.  Generating more value with the same resources keeps costs (and prices) down and it helps us stay competitive with the rest of the world – the more value we create the better off we are.  Just look at what happened to Spain (in case you missed it, they aren’t doing so well).    Now they are doing away with the siesta to require a full work day (sad, I know). 

In other words, we’ve worked hard and we’ve earned that beer (or margarita) we plan to sit outside and enjoy this evening.  But let’s be sure to keep up the good work.  Feliz Cinco de Mayo! 

(Bureau of Labor Statistics)

"Fast Five"...Hundred

Apparently, there is something about the never ending “The Fast and the Furious” franchise that keeps us interested (the first one came out 10 years ago, normally we don’t have that type of attention span).  According to “the man Stephen Colbert says is the greatest man in America” (Stephen Colbert), “Fast Five” opened to the largest box office weekend in April ever.  Why?  It could have something to do with Paul Walker or Vin Diesel (or Jordana Brewster).  It could also have something to do with our love of stuff we can’t afford and isn’t practical, like fast sport cars – especially the kind that have a lot of horsepower, short turning radius, and can miraculously come out of a dangerous, nerve-wracking car chases relatively unscratched (sport cars defy nature!). 

Who are we kidding, we love cars of all shapes and sizes.  Disney made a movie just about cars (aptly called “Cars”) and we loved it.   And you know when Disney gets involved it’s pretty serious (“Cars2” is coming out soon).   Disney’s Hollywood Studios even has an “Extreme Stunt Show” devoted to the depiction of a speeding car chase sequence seen in movies. 

Just like most things, our love of cars – new, used, U.S., or international – can be measured.  Data released late yesterday shows in April Americans bought cars and utility trucks (“light vehicles”) at an annual rate of 13.2 million vehicles per month.  This is up 17% from the annual rate last April (11.3 million vehicles per month), meaning Americans have bought more cars over the last year (a further sign the economic recovery is taking hold, good news).  In fact, our spending (“personal consumption expenditures”) on motor vehicles and parts was 17% more during the first 3 months of this year than in the same period last year, after adjusting for price changes, compared to a 2.8% spending increase for all goods and services. 

Our purchasing habits also reveal Americans buy more U.S. made vehicles than foreign made, by a large margin.  Of the 13.2 million vehicles sold last month, 10.1 million were U.S. made.  Further, of the U.S. made vehicles, Americans prefer trucks to cars.  Over the last year, trucks made up between 52% - 60% of all U.S. made vehicles sold each month.  Data on our spending patterns complements this: “real” spending (after adjusting for price inflation) on new trucks overtook new cars in 1997, and real spending on used trucks overtook used cars in 2002 (yes, trucks can cost more).  As 80% of all truck purchases in the last year were U.S. made, it seems that if Americans are going truck they go American (must be those Dennis Leary Ford commercials). 

So we shouldn’t be surprised if the next car-themed movie or speed chase video game is truck-themed.   Maybe the sixth installment of “The Fast” franchise will be “the Bigger and the Furious” (and bigger is better).  Perhaps the “Cars” franchise can live on, with the third installment aptly named “Trucks”.  That may keep our attention.

(Auto manufacturers and Autodata Corporation, Commerce Dept., Stephen Colbert, IMDB)

A Few of Our Favorite Things

I’m not talking about American Idol or Glee (or Ryan Seacrest).  Think bigger.  (No, not Oprah.)  Things we simply cannot do without.   The lifelines I refer to are our phones and computers.  Many of us do not leave home without them.  How could we keep up with life if we cannot keep up with the Kardashians?  What life lessons can Snooki teach us?  How could we be valuable and productive members of society if we were not able to process 1,000,000 new YouTube videos per minute (or process this blog)?

What we don’t typically think about is where these items (and other “manufactured goods”) come from, or maybe we assume everything is “made in China.”  Unless you live in a cave with no clothes (or processed food, that would be a shame) your sharp observation skills have probably alerted you to the fact that the stuff we buy comes from all over the world.  Just look at pretty much any clothing tag, or the popularity of your neighborhood IKEA.  You may even believe U.S. manufacturing is dying since 1/3 of all manufacturing jobs have disappeared over the last 10 years.  

Then you’ll be surprised to hear the U.S. manufacturing sector is alive and doing rather well – especially in computers and electronics products (types of “durable goods” that include our prized iPads and Smartphones).   A measure for understanding the health of the manufacturing sector released today (called the “ISM Purchase Manager Index”) shows the manufacturing sector continued to grow in April for the 21^st consecutive month.   This measure incorporates information on employment, production, new orders, supplier deliveries, and inventories as surveyed by 300 U.S. manufacturers.  

Now you might be thinking this blogger has no clue what is going on because you just took out your phone and saw that it was not “made” in the U.S.  But what we don’t see is where all of the components that go into our essential gadgets come from.  Just because our phone was finished in another country doesn’t mean the value of the phone (the technology) was generated and manufactured in that country.  The iPhone is a good example (your “Hello Kitty” wallet is a bad example).   U.S. manufacturing is doing well because of its ability to focus on making what its good at (“comparative advantage”) and because it finds new ways to produce more with the same or less resources.  Research shows that China was the world’s largest goods manufacturer in 2010, and the U.S. followed close behind (19.8% of the world’s share vs. 19.4%).    Yet China employs 100 million workers compared to our 11.5 million – meaning the U.S. manufacturing sector is able to generate 8 times as value per worker than China.  

And it turns out the industry that allows us to know what Kim, Kourtney, and Khloe (and Lamar) did today (computer and electronic products) added value to our economy at an increasing rate despite the recession.   This bodes well for us excited about the next iPad or iPhone version 10.0.  At this rate, we will be able to read what Kim did, view the new Britney video, and play “Angry Birds” simultaneously.  It only gets better!  

(Commerce Dept. (BEA), Bureau of Labor Statistics, Institute for Supply Management, International Centre for Trade & Sustainable Development)

Can I Borrow Some Money?

So you want to treat yourself to a little something nice but when the moment arrives it seems you don’t have the money (uh-oh).  Maybe you really did “forget your wallet” or you expected your paycheck to go a bit further (damn taxes).   If this has ever happened to you, don’t worry you’re not alone.  In case you haven’t heard, Americans like to spend (we took a year and a half break in 2008 but we’re back!).  We are so good at spending that our personal spending (called “personal consumption expenditures” or “PCE” for short) makes up about 70% of the value our country generates in a given year (exports on the other hand, where people in other countries foot the bill, make up just 12%).  In other words, your communities are relying mostly on your money to survive!   Last month our spending increased by $61 billion, or 0.6% from what we spent in February.  Certainly you aren’t the only one who wants to be a part of this action yet “forgot” your wallet.  (Some of this increase was due to prices going up as opposed to actually having more stuff, since if we all go to buy more stuff then the increased demand allows stores to increase prices.)  

Every time we go to the store, go out to eat, or fill our cars up with gas we are giving companies the resources they need to cover their expenses (like the salaries of the people who work there) and have some left over, maybe to invest in ways to provide you better service the next time you go there or increase the selection of stuff they provide.  The money in a sense “multiplies” in value as your $1 went to the store, which provided money to the employee, who used it to buy something else and so on.  Our spending (as long as we aren’t spending above our means) helps our communities thrive and grow, creating more wealth for all of us.  That’s why the government gave us a giant “stimulus package” in 2008 – to “stimulate” our economy (our communities) by encouraging spending.

An added bonus:  we also have more money to spend!  Last month the money Americans had available to spend (called “personal disposable income”) increased by $64 billion, or 0.5% of the money we had in our pockets in February.  Over the last year, our spending money increased by almost 3% even after adjusting for price increases (called “real personal disposable income”).  That is 3% more money in your pocket for however you choose to use it!

The next time you’re at happy hour or the movies or wherever you like to go, you should get that extra something even though you didn’t bring enough cash to cover it.  When the bill comes, wow your colleagues with your knowledge on how much their fellow Americans are relying on their spending and that by covering you they are acting as true patriots.   With people like them the recession will be a distant memory in no time!  (You also heard their income is only going up so they should feel comfort in fronting the money.)  Go big or stay home.  It’s the American way.  

(Commerce Dept.)

Gaga over the Royal Wedding!

Although few outwardly admit it (minus the woman who made the news for quitting her job to attend the royal nuptials), millions of us are fascinated by the royal wedding.  Maybe this woman had the right idea.  Maybe we should consider not only quitting our jobs to go, but also sell our homes and move there.   Why not move there?  After all, they’ve got the royalty and they still knight people.  Who wouldn’t want to be knighted? 

Then it’s settled, we should all sell our houses and move to the UK.  Figures released today show pending home sales jumped 5.1% last month, a good sign in the market, thanks to “increased affordability.”   What are our homes worth these days anyway?   According a widely used housing price indicator, called the “Case-Shiller Index,” average home prices decreased 2.6% in February over last year, decreasing at a faster annual pace than in January.  This is on top of the massive home devaluations that have yet to recover since prices began to drop in 2007.  Hmmm.  On second thought, maybe we should just go for a vacation.  Really, the food and weather aren’t that great anyway.  Plus, who doesn’t like to travel?

This is perfect.  I think we should export ourselves there as tourists and be done with it.  Exports, in the traditional sense of sending goods and services to other countries, are great – they encourage us to produce what we’re good at, which allows us to use our resources better, adding more wealth and jobs to our economy while other countries foot the bill.  That translates into more money to go around for everyone – a higher quality of living.  Tourism is a sizable share of our exports too, about 5% (25% of services exports).  Plus, given the export statistics released today we could use a boost in exports.  Exports only grew by 4.9% so far this year compared to 11.4% at this time last year.  Even with this growth, we as a country continue to sell less stuff abroad than we buy from abroad, landing us with a debt (called a “trade deficit”).  This type of debt isn’t ideal for boosting economic growth, which is why you may recall hearing that President Obama’s goal is to double exports by 2015.  So every export helps!

Okay, that’s not quite how exports work.  We have to provide something to someone abroad and someone abroad has to pay in order for it to count, not the other way around.  Traveling to the U.K is actually a British export and a U.S. import.  The only way our tourism exports could increase from the Royal Wedding would be if the wedding moved to the U.S. and we convinced the British to come here.  But something tells me this is not an option.  We can let this slide this time.  God Save the Queen!   

(Commerce Dept., National Association of Realtors, S&P Case-Shiller HPI)

54 Days til Summer (Yay?)

If you’re like me, the first thing on your mind when thinking about summer is planning your summer vacation (assuming you haven’t already).  The first thought is probably your ideal dream vacation - somewhere warm with good food and total relaxation.  Then reality sets in.  “How much can I spend” is usually the second thought you have, perhaps followed by “I think I’m going to indulge in that timeless trend of ‘staying local’…again.”   Not that going anywhere is cheap: over the last year the price increase of transportation services exceeded the nationwide average price increase of all goods (3.7% vs. 2.7%), while the cost of driving your own car around increased by almost 10%.  In 2008 people spent an average 3% of their annual income on travel expenses, and let’s face it after the last few years we all deserve a nice vacation.  So is this year the right time to indulge in a big expense? 

Aside from your personal finances, you might be concerned about where the economy is heading over the next few months.  This question has an easy answer  - what do YOU think?  Literally, to get a good sense of how we might expect the economy to fare in the coming months we should do what we do with many things before we spend – get a second opinion.  In this case, its 3,000 second opinions (pretty good, huh?).  Every month there is an indicator that tells us what our peers think will happen with the economy over the next few months as it relates to jobs, spending, and prices.  Think of it as the economy being put on trial each month with a jury of 3,000 peers. 

This idea of understanding how your peers see their future ability to spend, called “consumer confidence,” can be an informative tool for assessing your own future spending ability.  Because really, who isn’t influenced by their friends?  The fact that it is closely watched by the finance world shows that what people’s expectations are has real influence over the economy.  What YOU think matters!  Generally, if people are confident in the economy they spend a larger share of their income, and in turn the economy grows – like a self-fulfilling prophecy.  In April, consumer confidence increased over March, with confidence remaining positive pretty much over the entire last year.  This means that your peers, located across the nation, believe the economy has and will continue to do well over the coming months.  If you were concerned about spending money because of uncertainty on where the economy was headed, this should help you feel a little better.  

So the next time someone asks if you’re concerned about spending the money to go away this summer you can say you’re confident in where the economy is going – along with 3,000 other people.

(Conference Board, Bureau of Labor Statistics)