200 Year Supply of Oil in Green River Formation

The Green River Formation, the world's largest oil shale deposit, is located in a largely vacant region of mostly federal land on the western edge of the Rocky Mountains that includes portions of Wyoming, Utah, and Colorado (see map above).

Here's an excerpt from testimony about the Green River Formation that was provided on Thursday by Anu K. Mittal, Government Accountability Office (GAO) Director of Natural Resources and Environment, to the House Subcommittee on Energy and Environment, Committee on Science, Space, and Technology titled "Unconventional Oil and Gas Production: Opportunities and Challenges of Oil Shale Development":

"The Green River Formation—an assemblage of over 1,000 feet of sedimentary rocks that lie beneath parts of Colorado, Utah, and Wyoming—contains the world’s largest deposits of oil shale. USGS estimates that the Green River Formation contains about 3 trillion barrels of oil, and about half of this may be recoverable, depending on available technology and economic conditions. The Rand Corporation, a nonprofit research organization, estimates that 30 to 60 percent of the oil shale in the Green River Formation can be recovered. At the midpoint of this estimate, almost half of the 3 trillion barrels of oil would be recoverable. This is an amount about equal to the entire world’s proven oil reserves."

MP: Surprisingly, this testimony got almost no press coverage, here's one exception from CNS News.  Shouldn't it be newsworthy that the U.S. has 1.5 trillion barrels of recoverable oil in  the Green River Formation, an amount even greater than this estimate of 1.392 trillion barrels of proven oil reserves in the entire world?  The GAO did issue a study in October 2010 that may have already identified the vast resources in the Green River area, so maybe this is old news and not worth reporting.    

But with current U.S. daily oil consumption running at about 19.5 million barrels, the staggering amount of Green River reserves would by itself supply domestic oil consumption for more than 200 years! The testimony also mentioned that industry experts estimate future development of Green River to be 15-20 years away, but it's not clear if that's due to federal regulatory issues or limitations of current drilling technology. 

Even if development is 15-20 years away, the vast untapped energy resources of Green River, the largest oil shale deposit in the world, provide additional support for the idea that "peak oil" is "peak idiocy" (Mike Munger explains here).    

North Dakota's Amazing Economic Success; It's Not Just About Oil, A Pro-Business Climate Gets Credit. Let's Call it the "Dakota Model" of Job Creation

The "Dakota Model"of Economic Development and Job Creation

It's been widely reported here and elsewhere that North Dakota's economy is booming, thanks largely to the energy-related prosperity in the western part of the state.  The Peace Garden State's jobless rate is the lowest in the country at 3% for March, more than five percentage points below the national average of 8.1%.  Per-capita personal income in North Dakota increased more than 78% since 2000, more than double the 37.4% increase in per-capita income nationally.

The chart above displays monthly payroll employment levels for North Dakota and the U.S. back to January 2000 with both series expressed as indexes equal to 100 in January 2000.  Overall employment in North Dakota has been growing steadily over the last decade, with a sharp acceleration over the last four years.  Even the Great Recession that crippled the national labor market, barely slowed job creation in North Dakota.  While the national economy is still 3.6% and five million jobs below December 2007 levels, North Dakota's payrolls are 15% above pre-recession levels (see chart).

A recent news report highlights the fact that North Dakota's economic success is not only due to oil prosperity, but also because of its pro-business climate and amazingly well-diversified economy, with many booming sectors including manufacturing, tourism, advanced manufacturing, information technology and agriculture. According to North Dakota Commerce Commissioner Alan Anderson, “Oil is just one piece of our economic success and our economy is much bigger and more diverse than ever before.” In fact, the oil industry is responsible for only 25% of the state's revenue collections. Mr. Anderson highlights some of North Dakota's diversified economic success:

1. The state's technology sector has gained national recognition and its information technology job growth has been triple that of the nation. Microsoft and Amazon have both recently expanded in the state. Amazon added a 30,000-square-foot facility that will expand its customer service operations in Grand Forks and create 200 full-time jobs. Microsoft’s Fargo campus is one of the larger Microsoft locations worldwide, and its three buildings house over 1,500 employees, vendors and contingent staff.

2. Manufacturing continues to grow in North Dakota. One example is the recent expansion announcement by Caterpillar in West Fargo. Construction has started on a $50 million project that will create about 250 new jobs during the next three years, nearly doubling the plant’s current workforce. Caterpillar officials told us that North Dakota’s pro-business climate was a major factor in its decision to expand in West Fargo. Phoenix International, a company that manufactures electronics for John Deere, recently broke ground on a $22 million expansion project that will include 90,000 additional square feet in Fargo for an expanded work force. Other industrial expansions include WCCO Belting in Wahpeton, Harris Manufacturing in Oakes, and at the Monsanto and Cargill facilities in the Fargo area. Cargill recently started a $50-million expansion project and Monsanto has completed a $17.5 million expansion that has created 20 new jobs.

3. Tourism is another area that continues to drive North Dakota’s economy as the third-largest contributor to gross state product. The tourism industry growth is visible by looking at the number of new hotels constructed across the state. In the past two years, 21 new hotels have opened, adding 1,474 sleeping rooms in 11 communities. Another 24 hotels are under development and are expected to add another 1,800 rooms by later this year.

MP: It's interesting to know that North Dakota's economic success goes beyond its energy sector. The state's pro-business climate gets some of the credit for the impressive job growth over the last five years. Whatever North Dakota is doing, it's working, and the state should be a nationwide model for economic development and job growth - call it the "Dakota Model" (HT: Eagle Eye, see comments). 

HT: BakkenBlog News

Oil Prices Have Fallen $10 per Barrel Since May 1, Proving That Prices Are "Stubbornly Flexible"

From Delta Airlines CEO Richard Anderson writing in Delta's Sky Magazine (May issue):

"Why do gasoline prices remain stubbornly high? The reason is that the commodity futures markets have become the new stock market for the 21st century. No matter what we do as energy consumers and producers in the United States, there is little direct effect on what we pay for barrels of crude oil.

Passive futures investments on the part of large commodities traders, commodity funds and passive investors have led the oil futures market to become disconnected from the true fundamentals of the market. The increase in the oil futures markets is largely due to speculation, which has undermined the historical relationship between supply and demand on one hand, and oil prices on the other.

Record high fuel prices increase our costs, constrict our flying and ultimately increase the fare you pay. To dampen the speculative inflation of oil prices, we’d like to see rules in place that would limit trading to the companies that actually intend to use the oil they trade. It is clear that market forces are not at work here."

MP: Where to start?  

1. Obviously gas and oil prices don't "remain stubbornly high," they remain "stubbornly flexible" or "stubbornly volatile" maybe, but "stubbornly high"?  I don't think so.  Gas prices at the pump change almost daily, reflecting the reality that they are market-determined, and have been falling now almost daily for the last month. "Stubbornly high" would mean retail gas prices would still be at mid-April peak levels of $3.90 per gallon, but instead they've fallen steadily to the current average price of $3.73. 

2. Likewise, oil prices are now at year-to-date lows and crude is selling below $96 per barrel for the first time since last December (see chart above).  In just the last 8 trading days, oil has fallen more than $10 per barrel from $106.17 on May 1 to $95.83 in late afternoon trading today.  How can oil prices be "stubbornly high" and yet fall by almost 10% in less than two weeks?   

3. And now that oil prices have plummeted 10% in the first two weeks of May, are those price declines due to speculative trading? Or have market fundamentals suddenly re-appeared after disappearing for some time?

Bottom Line: Delta's CEO should know better, and he can't have it both ways. If speculators get the blame for rising prices, they should also get the credit for falling prices.  It would be inconsistent to claim that rising oil prices are "disconnected from true market fundamentals" due to speculators, but that falling prices result from market forces?  Do speculators only appear occasionally and create havoc by forcing prices higher, but then disappear when prices are falling? 

The logic of the "speculators cause high prices" crowd is so inconsistent and flawed that I think they would have a more convincing case if they instead took the "speculators cause price volatility" position, which is also a refutable and flawed position, but at least it's plausibly more consistent and convincing. And at least that way the speculators get the credit/blame for falling prices, not just rising prices.

Cartoon of the Day

Producer Price Inflation Eases in April to 1.9%

The BLS reported today on producer prices for April, here are some highlights:

1. Prices for finished goods increased annually by 1.9% through April, the seventh straight month of slowing year-over-year inflation rates following a 7% increase for the 12 months through September 2011.  It was the smallest annual increase in producer price inflation for finished goods since October 2009 (see brown line in chart above). 

2. Intermediate goods increased by only 1.1% on an annual basis through April, the smallest yearly increase since June 2010 (see red line in chart).

3. Prices for crude goods fell by 7.3% from April last year, led by sharp declines in food and energy prices (see blue line).

MP: Overall, the declining inflation rates for producer prices in April should ease some of the fears of inflationary pressures at the consumer level. Falling raw material costs for producers means that there won't be incentives to raise prices on consumer goods, and we can expect low and stable consumer inflation this year.     

Signs of Nationwide Real Estate Recovery in April? Double-Digit Gains in Sales and/or Prices Have Now Been Reported in 17 Metro Markets

Real estate sales reports for the month of April are just starting to be released by local realtor associations, and the reports out today are showing some strong signs of recovery with double-digit gains in unit sales and/or home prices for April in Minneapolis-St. Paul, Nashville, Des Moines, the D.C. area, Baltimore and Reno. 

1. "Twin Cities home prices bounced up in April with the largest jump since before the housing market meltdown. The median sales price leaped 12.4% from last April to $163,000, the largest jump since January 2004, the Minneapolis Area Association of Realtors found in their monthly report, released today.  The number of closed sales was up 7.1 percent in April, to 3,730. Year-to-date, sales are up nearly 15 percent from last year. Pending sales were up strongly compared to last April, 26.4 percent."

2.  "Monthly home sales rose 25 percent in the Nashville area last month compared to a year ago, with the median price of a single-family home up 3.8 percent to $165,120, reflecting a further stabilizing of the market." 

3. "Home sales jumped nearly 20% in the Des Moines area in April over a year ago, and climbed 5% over March. Pending home sales were about 23% higher last month over April 2011, and inched 2% higher than March. The average home sale price was $164,847 in April, nearly 6% higher than a year earlier, the report shows.

"This is what recovery looks like in the Des Moines market," said Les Sulgrove, general manager of Re/Max Opportunities in Ankeny."

4.  "D.C. home prices increased by the greatest amount over the past year since 2006, according to a report released Thursday by Real Estate Business Intelligence.  “Pricing in the D.C. metro area continued recent positive trends with a year-over-year median sale price gain of 11.2%, the highest annual gain in more than six years,” the firm reported.  Prices increased in every jurisdiction in the D.C. metro area, with the greatest gains occurring in Arlington, with 27.7% and Falls Church City, with 19.8%."

5. "The Baltimore region saw a double-digit gain in average home sale prices in April, the most in six years — driven by a shrunken supply of cheap foreclosures rather than by homes seeing a rapid resurgence in value.  The average price for a home sold in April was $281,000, a 10 percent increase over the year."

6. "April home sales in the Reno Nevada area saw double-digit gains over the previous year, according to a report released today by the Reno/Sparks Association of Realtors. Sales of existing single-family homes rose 17% from April 2011."

Updates:

7.  "April home sales in the greater Milwaukee area increased 44.2% with 1,541 houses sold, 472 more than in April 2011, according to the Greater Milwaukee Association of Realtors.  With the boost in April, home sales for the first four months of 2012 were 29.6% higher than in 2011 and 10.1% higher than in 2010." 

8. "Home sales across the Birmingham area rose 21 percent in April, a positive sign for the market as it heads into the typically busy summer selling season.  The Birmingham Association of Realtors said today that 973 homes were sold last month, compared to 805 in April 2011. The average price of $170,945 represented a 2 percent uptick from a year ago."

9. The median home price for the Phoenix area increased in April to $137,611, up 25% from $110,000 last year.

10. "A rebound in high-end home sales helped propel April home sales in Champaign County IL — and prospects look good for a strong May. April sales were up 19 percent from a year ago in terms of the number of homes sold. They were up 38 percent in terms of sales volume in dollars.

"The high end has finally awoken after a very long hibernation," said Matt Difanis, president of the Champaign County Association of Realtors."

11. "Home sales in the Lehigh Valley increased 33.2% over the same time last year with 445 homes sold in April 2012 compared with 334 sold in April 2011."

12. "Fewer listings and a deep well of buyers helped spark an unusually high number of multiple offers during April, bolstering home prices and the notion that the housing market is on the mend. Throughout the Chicago metro area, the number of closed sales last month rose 7.1 percent compared with last year, while the median price of those deals jumped 12.4 percent to $163,000 -- marking the second consecutive month of year-over-year price increases."

13. April home sales in Tucson were 11% above last year, following a 18.6% gain in March.

14.  The 389 Madison-area (Dane County) home sales recorded in April were 22.7% higher than the 317 home sales in April of 2011, representing the second highest total for any April over the last 5 years. 

15.  Central Indiana home sales in April were up 12 percent over April of last year.

16. "For Long Island realtors, the spring market has sprung. There were 16 percent more homes sold in Nassau and Suffolk counties last month than were sold in April 2011. In fact, last month’s numbers represent the fifth straight month of year-over-year sales gains."

17.  "Metro-Denver home sales climbed in April as the spring home-selling season kicked off. Buyers placed 5,681 homes under contract in April, up 7 percent from March and up 20 percent from April 2011." 

Oil Prices Are Falling, Do Speculators Get Credit?

July 2012 crude oil futures prices.

Crude oil spot prices.

The top chart above displays the daily CME July futures contract prices for light crude oil back to late January, and shows the price increase in February from $98 to $111 per barrel, and the subsequent decrease to below $97 in recent trading, including the 9% decrease just during the month of May, from $106.50 to $96.50 per barrel.  The bottom chart displays the spot price of crude oil over the same period, which follows the exact same pattern as prices for crude oil futures contracts.

Question: Since oil speculators got the blame for rising prices in February, do they now get the credit for falling oil prices in May?  How exactly does the "speculators cause high oil prices"crowd now explain the falling oil prices?  Do speculators somehow contribute to only rising prices, but not to falling prices?  Do speculators only trade when prices are rising, but somehow exit the market suddenly when prices are falling?  To be fair to speculators, it seems like the popular press should be giving them credit now for the falling oil and gas prices.

Markets in Everything: Home Rental REITs

WSJ -- "Investors can buy stakes in malls, apartment towers, timber forests and even cellphone towers through real-estate investment trusts. Now, add to the list: single-family homes transformed into rental properties. 

Beazer Homes USA Inc., one of the nation's top home builders, has formed a REIT that will buy and then rent single-family homes, one of the largest and most talked-about asset classes in the real-estate business. The Atlanta-based company last week announced that it was joining with buyout firm Kohlberg Kravis Roberts & Co. to form the REIT, which eventually plans to go public."

Interesting Fact of the Day: Plastic Surgery

The top three countries in the world for cosmetic plastic surgery procedures: Brazil, China and U.S., but in which order?  Find out here.  Just the fact that Brazil and China are in the top three is evidence that "free market capitalism is the best path to prosperity."  

Mortgage Rates Fall to Record Lows This Week

Mortgage rates fell to fresh lows this week, according to data released today by mortgage-buyer Freddie Mac, with the 30-year rate falling to 3.83% (see chart above) and the 15-year rate dropping to 3.05%.  The 30-year (15-year) rates are the lowest since at least 1971 (1991) when Freddie Mac's records start.  

Total U.S. Trade Sets New Record High in March

Total U.S. international trade (exports + imports) set a new monthly record of $425.3 billion in March (see chart above), as both monthly exports ($186.7 billion) and imports ($238.6 billion) reached record high levels in March, according to today's BEA report.

Other highlights include:

1. Total international trade increased in March 2012 by about 8% compared to March 2011 ($394 billion), and was 53% above the recession-related cyclical low of $277.5 billion in April 2009.  Adjusted for inflation, the increases were 5.2% vs. March 2011 and 42% vs. April 2009.

2. Compared to the previous cyclical highs in July 2008, total trade for the U.S. last month was above that previous peak by 7% in nominal terms and by 2.3% adjusted for inflation (see chart). 

3. Foreign consumers and businesses set a new monthly record by purchasing $187 billion of consumer and industrial products that were "Made in the USA" in March, which was an increase of 7.4% from purchases in March 2011 and 50% above the recession-related cyclical low in 2009. 

4. U.S. consumers and businesses purchased a new record high volume of $238.6 billion worth of consumer products, raw materials and inputs from the rest of the world, which was an increase of 8.4% from last year, and 58% more than the cyclical low in 2009.

Bottom Line: What is already getting the most media attention about today's trade report is the "bad news" that the "trade deficit" widened/rose/jumped in March.  

What won't receive much (any?) media attention is the good news that total U.S. international trade activity (Exports + Imports) set a record high in March and is now well above pre-recession levels in both nominal and real terms.  Foreign consumers and producers purchased a record volume of "Made in the USA" exports in March, and American consumers and producers purchased a record volume of "Made Outside the USA" imports, which is a positive sign of worldwide economic strength and vibrancy. 

As former Cato trade analyst Dan Griswold pointed out last year on his blog:

"Politicians and commentators love to focus on the deficit, as though it were a scorecard of who is winning in global trade, but the real measure is the total volume of trade. As economies expand, so does trade, both imports and exports. Exports help us reach new markets and expand economies of scale, while imports bless consumers with lower prices and more choices, while stoking competition, innovation, and efficiency gains among producers."

Related: See "Made on Earth: How Global Economic Integration Renders Trade Policy Obsolete," by Cato's Dan Ikenson, and also Don Boudreaux's post "Made on Earth."

Booming Eagle Ford Shale: 47k "Shale-Ready Jobs" and $25 Billion in Economic Development in 2011

The Eagle Ford Shale in Texas is the "economic opportunity of a lifetime" and will potentially create 117,000 "shale-ready" full-time jobs by 2021.

From the Center for Community and Business Research at University of Texas-San Antonio:

"Development of oil and natural gas in the Eagle Ford Shale contributed $25 billion in total economic output to the region in 2011, according to a study released today by the Center for Community and Business Research.

"The Eagle Ford Shale has proven to be one of the most important economic engines in the state," said Dr. Thomas Tunstall, director of the UTSA Center for Community & Business Research, and the study’s principal investigator.  "In 2011 alone, the play generated over $25 billion in revenue, supported 47,000 full-time jobs in the area, and provided $257 million in local government revenue."

The study also concluded that in 2011 shale development:

• Paid $3.1 billion in salaries and benefits to workers;
• Provided more than $12.6 billion in gross regional product;
• Added more than $358 million in state revenues, including $120.4 million in severance taxes;
• And spurred a triple-digit sales tax revenue increase in various local counties.

"We view the Eagle Ford activity as an economic opportunity of a lifetime," said Mario Hernandez, president of the San Antonio Economic Development Foundation.  "The key goal is the increase in investment and jobs. And if the communities will partner with the private companies that are creating these jobs, it can be a win-win for everybody."

The increased revenue from the Eagle Ford Shale is rebuilding local communities.  New schools and new hospitals are being built, and new training programs have been launched to maximize hiring from the local workforce.  The study projects the creation of approximately 117,000 full-time jobs by 2021."

Here's a link to the full study. 

Interesting Fact of the Day: NYC Food Trucks

The number of food trucks and carts in NYC?  Find the amazing answer here.

The New Digital Oil Field: How Information Technology is Helping to Boost Oil Production

Mission control: Chevron's new real-time drilling optimization center in Texas.

From MIT's Technology Review: "Big Oil Goes Mining for Big Data: As petroleum production gets trickier, digital innovation becomes more crucial":

"The world isn't running out of oil and natural gas. It is running out of easy oil and gas. And as energy companies drill deeper and hunt in more remote regions and difficult deposits, they're banking on information technology to boost production.

Data, in this case, really is the new oil. "It's pretty sweeping," says Paul Siegele, president of the Energy Technology Company at Chevron. "Information technology is enabling us to get more barrels of each asset."

Oil companies are using distributed sensors, high-speed communications, and data-mining techniques to monitor and fine-tune remote drilling operations. The aim is to use real-time data to make better decisions and predict glitches.

The companies began to employ such technologies more than a decade ago, partly to help its aging workforce multitask remotely. But the technologies have gained speed along with the underlying trends: cheaper computing and communications technology, and a proliferation of data sensors and analytical software."

MP: This is another reason why "peak oil" is "peak idiocy."

HT: Gary Lyle

Chronicle of Higher Education Fires a Blogger

From a Chronicle of Higher Education (paid subscription required) article highlighting the first cohort of students graduating from Northwestern University's doctoral program in black studies, including Ph.D. candidate La TaSha B. Levy:

"Ms. Levy is interested in examining the long tradition of black Republicanism, especially the rightward ideological shift it took in the 1980s after the election of Ronald Reagan. Ms. Levy's dissertation argues that conservatives like Thomas Sowell, Clarence Thomas, John McWhorter, and others have "played one of the most-significant roles in the assault on the civil-rights legacy that benefited them." Ms. Levy says that with patronage from what she calls white conservative think tanks like the Manhattan Institute and the Heritage Foundation, black conservatives are now being "used to legitimize a larger discourse around racial progress that delegitimizes civil-rights policies." 

Naomi Schaefer Riley, author, editor and blogger, responding in the Chronicle of Higher Education's blog "Brainstorm: Ideas and Culture":

"The assault on civil rights? Because they don’t favor affirmative action they are assaulting civil rights? Because they believe there are some fundamental problems in black culture that cannot be blamed on white people they are assaulting civil rights?"

 Seriously, folks, there are legitimate debates about the problems that plague the black community from high incarceration rates to low graduation rates to high out-of-wedlock birth rates. But it’s clear that they’re not happening in black-studies departments. If these young scholars are the future of the discipline, I think they can just as well leave their calendars at 1963 and let some legitimate scholars find solutions to the problems of blacks in America. Solutions that don’t begin and end with blame the white man."

For that response, Ms. Riley was fired by the Chronicle of Higher Education, here's some commentary below from today's WSJ.

From Naomi Schafer Riley:

"My longtime familiarity with the absurdities of higher education did not, I confess, prepare me for this most absurd of results. The content of my post, after all, is hardly shocking; the same thing could have been written 30 years ago. And perhaps that's the most depressing part of all this. Despite the real social and economic advancement that has been made by blacks in this country, the American faculty is still stuck in the 1960s."

From a WSJ staff editorial:

"Now more than ever, too many college graduates discover that their expensive higher educations send them into a modern workplace with skills that few employers want or need. The graduates sit home, unemployed and unemployable. Meanwhile, back inside the school walls, the Chronicle of Higher Education stands ready to eliminate any writer who causes distress to the modern generation of scholars who teach these students."

 From James Taranto:

"[This situation] encapsulates the intellectual corruption of academia, a profession that ought to encourage intellectual adventurousness, not pander to those who are unable to withstand the "distress" of having their ideas challenged."

Keystone XL Update: Obama is Losing Battle

The map above (click to enlarge) shows the existing, extensive network of energy pipelines in the U.S. with the following code: green for oil, red for gas, and blue for products such as gasoline, propane and ethylene.  As I pointed out last November:

It's important to understand that: a) the United States already has a huge, safe network of existing pipelines for oil, natural gas and gasoline illustrated in the map above, b) pipelines have been used successfully and safely in the U.S. for more than 100 years, and c) pipelines are an integral part of our domestic energy system.   In other words, we live safely with energy pipelines every day and the Keystone XL pipeline would simply become one new segment of an existing and extensive pipeline network that makes a significant contribution to America's dependable and affordable energy.

Reason science correspondent Ronald Bailey has an excellent update on the Keystone XL pipeline, here are some excerpts from his article "Obama Is Losing the Keystone Pipeline Battle":

The Keystone pipeline became a defining issue for political environmentalists who dramatized their opposition during protests outside the White House by getting themselves arrested. The activists claimed that pipeline leaks could threaten the Ogallala aquifer in the Sand Hills region of Nebraska and would exacerbate man-made global warming by enabling consumers to burn fuel produced from Canada’s oilsands.

Meanwhile the labor union wing of the Democratic Party was eagerly lobbying the Obama administration on behalf of the jobs that constructing and operating the pipeline would create. In November, Obama bravely announced that he was putting off any decision on allowing the construction of the pipeline until after the 2012 presidential election. That's real leadership! Clearly in his electoral calculations, the Green faction won out over the union vote.

In a March trip to oil country, Obama reiterated his support for building the southern leg of the Keystone pipeline, assuring audiences that it is a “priority” for his administration. Perhaps recent poll numbers showing that 57 percent of Americans approve of the pipeline and that only 29 percent oppose it is prompting the president to do a bit of recalculating with regard to his electoral math. Meanwhile the clock is ticking because TransCanada’s February southern leg application triggered a 45-day deadline by which the Army Corps of Engineers must deny construction permits, or they are automatically approved by default. We will soon find out just how expeditiously helpful the Obama administration means to be.

And if that isn’t bad enough for Obama, TransCanada’s new application is raising tensions among the interest groups that generally support the Democratic Party. Over the weekend, AFL-CIO President Richard Trumka told C-SPAN that labor unions favor building the pipeline. On the other hand, environmental activists who thought they had succeeded in killing off the pipeline only to see it rise from the grave are near apoplectic. Finally, if the transportation bill emerges from Congress with a provision mandating the construction of the Keystone pipeline, will the president really risk vetoing a bill that promises to create a total of three million jobs in order to satisfy the demands of the environmentalists? It’s not like they are going to vote for Romney anyway."

HT: Warren Smith

Quarterly Punctuation Rant on It's vs. Its

Some recent examples of the misuse of it's for its:

The dollar has lost 22% of it's value since late 2008.

GM has recognized it's mistake…..

Why wouldn't China's manipulation of it's currency….

Good proof of the adage “Don’t judge a book by it’s cover."

Social Security law has a mechanism which is supposed to prevent it's insolvency.

Other demonstrators claim DTE is not paying it's fair share of taxes and it's time that changed.

No industrialized country leaves it's elders fortunes to the free market.

MP: Sorry, it actually hasn't even been quite a quarter since my last rant in February, so I apologize for my obsession with this simple, but grossly overlooked grammar/punctuation rule.

Tuesday Night Energy Links

1. Mark Green at the Energy Tomorrow blog points to the video above about the resurgence of jobs, hope and opportunity that has come recently to the Ohio steeltown of Lorain, thanks to the shale/hydraulic fracturing revolution. 

2. The shale "gold rush-like" revolution is spreading prosperity all over the country and bringing jobs and production to other states like Pennsylvania and Texas, based on this report from Plastics News:

"The [shale] discoveries have prompted several firms — including Dow Chemical Co. and Shell Oil — to announce plans to build new North American ethylene crackers, with Shell making the almost-unheard-of decision to place its new cracker in western Pennsylvania, near the gas-rich Marcellus Shale. Other companies, including Chevron Phillips Chemical and Formosa Plastics, have announced plans to increase their North American polyethylene output as a result of the shale gas wave.

“It’s like the gold rush,” Dow executive Mauro Gregorio said of the shale boom. “The discovery of shale gas is one of the most important events in the U.S. in a long time.  It will be a winner for North America as a region,” added Gregorio, commercial vice president for Dow’s Performance Plastics unit in North America. 

Dow officials confirmed April 19 that their new ethylene cracker will be built at the company’s massive site in Freeport, Texas. The cracker is expected to open in 2017 and will have annual production of 3.3 billion pounds.

Shale discoveries “have given North America really inexpensive access to raw materials,” said PolyOne Chairman, President and CEO Stephen Newlin. “It’s made us more competitive."

3. And of course North Dakota leads the country in shale-related prosperity, with the lowest state jobless rate at 3% for March, and the highest growth in state per-capita personal income since 2000 at 78.7%, more than twice the national average of 37.4%.  An IBD editorial suggests that North Dakota's oil boom should inspire our federal energy policy, and they ask us to "Imagine the impact at the national level if Washington stopped blocking energy development."

Anti-Keynesian Supply Side Tax and Spending Cuts in Sweden, and the Finance Minister Behind It

From the U.K. Spectator's report on the amazing success of supply-side economics in Sweden, and finance minister Anders Borg, the man behind it:

"When Europe’s finance ministers meet for a group photo, it’s easy to spot the rebel — Anders Borg (pictured above) has a ponytail and earring. What actually marks him out, though, is how he responded to the crash. While most countries in Europe borrowed massively, Borg did not. Since becoming Sweden’s finance minister, his mission has been to pare back government. His ‘stimulus’ was a permanent tax cut. To critics, this was fiscal lunacy. Borg, on the other hand, thought lunacy meant repeating the economics of the 1970s and expecting a different result.

Three years on, it’s pretty clear who was right. "Look at Spain, Portugal or the UK, whose governments were arguing for large temporary stimulus," he says. "Well, we can see that very little of the stimulus went to the economy. But they are stuck with the debt." Tax-cutting Sweden, by contrast, had the fastest growth in Europe last year, when it also celebrated the abolition of its deficit. The recovery started just in time for the 2010 Swedish election, in which the Conservatives were re-elected for the first time in history.

All this has taken Borg from curiosity to celebrity. The Financial Times recently declared him the most effective finance minister in Europe.

"Everybody was told 'stimulus, stimulus, stimulus'," he says — referring to the EU, IMF and the alphabet soup of agencies urging a global, debt-fueled spending splurge. Borg, an economist, couldn’t work out how this would help. "It was surprising that Europe, given what we experienced in the 1970s and 80s with structural unemployment, believed that short-term Keynesianism could solve the problem." Non-economists, he says, "might have a tendency to fall for those kinds of messages."

He continued to cut taxes and cut welfare-spending to pay for it; he even cut property taxes for the rich to lure entrepreneurs back to Sweden. The last bit was the most unpopular, but for Borg, economic recovery starts with entrepreneurs. If cutting taxes for the rich encouraged risk-taking, then it had to be done. "In most cases, the company would not have been created without the owner," he says. "There would be no Ikea without [Ingvar] Kamprad. We would not have Tetra-Pak without [Ruben] Rausing. They are probably the foremost entrepreneurs we have had in the last few decades, and both moved out of Sweden."

But they were not rich, I say, when they were starting out. "No, but they were becoming rich. If you have a high wealth tax and an inheritance tax, people emigrate because it becomes too costly to own a company. Ownership is a production factor. Entrepreneurs are a production factor. Yes, these people are rich and you can obviously argue that we want to encourage social cohesion. But it is also problematic if you drive out entrepreneurs from your country, because they are the source of job creation."

Update: The chart below displays constant dollar GDP growth rates for Sweden vs. the U.S. from 2002 to 2011, and shows that Sweden's economy has outperformed the U.S. economy over the last ten years by 0.8% per year on average (OECD data here).  Over the last two years (2010 and 2011), Sweden's real GDP growth has averaged 5%, or more than twice the U.S. average of 2.35%, and provides evidence that Sweden's supply-side approach to the 2007-2009 recession has been more successful than the demand-side Keynesian approach in the U.S.

Signs of a Real Estate Recovery in Las Vegas

Las Vegas Review-Journal -- "Home prices rose for the third straight month in April and the inventory of listings shrank to a five-week supply, the Greater Las Vegas Association of Realtors reported Monday. The median price for 3,185 single-family houses sold in April was $127,900, up 4 percent from the previous month and up 2.3 percent from April 2011.

It is the first time prices have increased on a year-over-year basis since August 2010, said Kolleen Kelley, president of the Realtors association. "Of course, this has a lot to do with our shrinking housing inventory," she said. "Based on current demand, our housing supply is down to about four to six weeks." Total inventory of homes on the Multiple Listing Service decreased 20.3 percent from a year ago to 17,884 in April, while only 4,162 units are available without pending or contingent offers, down 63.4 percent from a year ago.

Housing inventory already was tightening throughout 2011, and it began to contract more rapidly when Assembly Bill 284 - known as the robo-signing law - took effect in October. It requires lenders to prove they have all the necessary documents in place before proceeding with a foreclosure. Notices of default, which begin the foreclosure process, have plummeted from about 3,000 a month to a few hundred, and the number of bank-owned homes on the market has dwindled to about 800.

Even with fewer houses to sell, existing home sales remain ahead of the record pace set in 2011, when Realtors sold 48,186 houses in Southern Nevada. April sales were up 3.3 percent from the same month a year ago."

HT: Gary Lyle

Update: No Wage-Price Spiral if Wages Don't Spiral

The graph above shows two monthly series back to 1965 (data here): a) annual wage increases in the BLS series "Average Hourly Earnings of Production and Nonsupervisory Employees: Total Private" (blue line), and b) annual inflation calculated from the Consumer Price Index (red line).  Here are some observations:

1. There has been a downward trend in annual wage increases since 2007, and wage increases have been below 2% for the last six months starting in October 2011.  

2. These are actual market-based hourly wages, and therefore not subject to the measurement issues that are frequently cited by those who think the CPI significantly overstates or understates actual inflation.

3. The chart also shows that the inflationary episode of the 1970s and early 1980s in the U.S. was accompanied by both rising wages and rising consumers prices, which both peaked in 1980-1981; CPI inflation peaked at 14.6% in 1980 and wages in 1981 at 9.4%.  Since wages are simply the price of labor, and because inflation is a general overall increase in most prices, it would follow that rising inflationary pressures would generally have to also include rising inflationary wage increases, which we obviously haven't seen yet.  In fact, wage increases have been falling since 2007 as the graph and data indicate. 

Bottom Line: As I concluded about a year ago, it would be historically unprecedented to experience rising inflation in 2012 with stagnant wages, and therefore we can assume that unless and until we start seeing rising wages on the order of 5%, we won't see higher inflation this year.  That is, we can't have a 1970s-style inflationary "wage-price spiral" if wages are stagnant.  

Markets in Everything: College Degree for < $10k

ODESSA, TX — "Five bachelor’s degrees at the University of Texas of the Permian Basin got a new price tag of $10,000 last Wednesday when the UT System board of regents approved the Texas Science Scholar Program.  The program was developed in response to Gov. Rick Perry’s challenge for a “$10,000 degree” during his 2011 State of the State address. 

One year of study currently costs students in these majors $6,452, totaling $25,808 for four years. Beginning in August, UTPB students interested in studying chemistry, computer science, geology, information systems or mathematics can work toward a bachelor’s degree for only $2,500 a year."

MP: Is this part of the hissing sound from the college tuition bubble starting to deflate? 

March Job Openings and Quits Highest Since 2008, Manufacturing Job Openings Highest Since 2007

Highlights from today's Job Openings and Labor Turnover report from the BLS:

1. There were 3.74 million job openings on the last business day of March, up from 3.565 million in February. The number of job openings has trended upward since the end of the recession in June 2009 (see top chart above).

2. The overall number of seasonally adjusted job openings in March increased over the year by 17.2% and for total private openings by 17.3%.  Openings for government jobs fell by 12.8% over the year.

3. Private job openings in March were at their highest levels in almost four years, since May 2008, and total March job openings were the highest since July 2008. 

4. For manufacturing, there were 326,000 job openings in March, which was the highest level since the pre-recessionary period in the fall of 2007 (see middle chart above).  The increase of 55,000 manufacturing job openings in March was the largest monthly increase in more than six years, going back to November 2005. 

5. In another sign that the labor market is slowly recovering, the number of private workers voluntarily quitting their jobs has been steadily increasing (see bottom chart above). In March, more than 2 million Americans working in the private sector quit their jobs, which was the highest number of monthly quits since October 2008, more than three years ago.

Should You Need a Government Permission Slip Before You're Allowed to Earn an Honest Living?

New from the Institute for Justice:

"License to Work: A National Study of Burdens from Occupational Licensing is the first national study to measure how burdensome occupational licensing laws are for lower-income workers and aspiring entrepreneurs. The report documents the license requirements for 102 low- and moderate-income occupations — such as barber, massage therapist and preschool teacher — across all 50 states and the District of Columbia.  It finds that occupational licensing is not only widespread, but also overly burdensome and frequently irrational.

On average, these licenses force aspiring workers to spend nine months in education or training, pass one exam and pay more than $200 in fees.  One third of the licenses take more than a year to earn.  At least one exam is required for 79 of the occupations. Barriers like these make it harder for people to find jobs and build new businesses that create jobs, particularly minorities, those of lesser means and those with less education.

License to Work recommends reducing or removing needless licensing barriers.  The report’s rankings of states and occupations by severity of licensure burdens make it easy to compare laws and identify those most in need of reform."

Executive summary here, full report here and IJ's License to Work website here.

Markets in Everything: Wantologists

NY Times -- "Originally intended to help business managers make purchasing decisions, wantology is the brainchild of Kevin Kreitman, an industrial engineer who set up a two-day class to train life coaches to apply this method to individuals in private life." 

HT: Mike LaFaive

Monday Night Links

1. The Eagle Ford shale formation will put out 500,000 barrels of crude oil a day by the end of the year, Valero Energy Chief Executive Officer Bill Klesse said after the company’s annual meeting in San Antonio. Producers have told him output from the South Texas formation may rise to 1 million barrels a day in the next few years. Production in 2011 averaged 60,000 barrels a day.

2.  North Dakota oil man Harold Hamm says that  “North Dakota Needs To Shake The Culture of Negativism" about its Bakken oil boom. 

3. A new cryogenic natural gas processing plant is in place in the Texas Eagle Ford shale, adding yet another tangible indicator of the shale boom in South Texas. Enterprise Products Partners is in the start-up process of the processing plant in Yoakum. The processing plant is designed to process up to 300 million cubic feet per day of natural gas and extract up to 37,000 barrels per day of natural gas liquids.

4. Marcellus shale gas wells in Pennsylvania generated about $3.5 billion in gross revenues for drillers in 2011, along with about $1.2 billion in West Virginia. But experts say that a sharp drop in wholesale prices over the last year means that in the future much more money will be made — and more jobs created —by petrochemical companies that process the gas into other industrial and consumer compounds.

Kathryn Klaber, president of the Marcellus Shale Coalition, said the current low natural gas prices benefit consumers throughout the state: “Every single Pennsylvanian has more money in their pocket today — to save, invest and help make ends meet — as a result of plentiful natural gas development from the Marcellus Shale."

5. China’s Purchasing Managers’ Index (PMI) rose 0.2 percentage points to 53.3 in April, above its level a year earlier. It was the index’s fifth straight monthly increase, indicating that the country’s economic activity is picking up steadily.  

6. Baker-Hughes reported last Friday that the share of rigs drilling for natural gas fell to 30.8% for the week ending May 4, the lowest share ever for natural gas since Baker-Hughes started tracking the oil/gas drilling split back in 1987.

 7.  After 154 years, Canada stopped producing pennies last week.

8.  The shale gas revolution is doing a lot more than just making renewables seem more expensive: it’s actually closing coal plants as well. That is, it is significantly reducing CO2 emissions.

Question: How Many Gallons of Gasoline Would it Take to Charge an iPhone?

"This may seem like a strange question to ask, considering iPhones obviously are charged with electricity, not gasoline. But the answer speaks to why gasoline and other liquid fuels will remain an important part of the energy mix in the future.

In ExxonMobil’s recently released Outlook for Energy, we predict that by 2040, about 90 percent of the global transportation fleet will still be powered by liquid petroleum fuels – that is, gasoline, diesel, and jet fuel. When asked why that’s the case, Bill Colton, ExxonMobil’s vice president for Corporate Strategic Planning, often starts the discussion using this fact to put it in perspective:

All of the energy concentrated in one gallon of gasoline is enough to charge an iPhone once a day for almost 20 years.

Clearly, there’s a lot of energy in a gallon of gasoline. And energy density is one of the key factors behind the reliability, affordability, versatility and convenience of any fuel. These are key elements that drive consumer choices today and will continue to drive consumer choices in the future."

~Ken Cohen writing on the Exxon Mobil blog on Dec. 14, 2011

MP: Despite Obama's dismissal of oil as the "fuel of the past," the scientific and economic realities are that fossil fuels will play an important role in our energy future and will be the "fuels of the future" for many generations to come.  

HT: Joe and Mark Lais

Update: Here's some independent analysis that supports XOM's claim that one gallon of gasoline can charge an iPhone for at least 20 years, maybe longer. 

April Employment Trends Index at 44-Month High

The Conference Board Employment Trends Index increased 0.8 percent in April to 108.04, up from the revised figure of 107.18 in March (see chart above).  The April figure is 7.1 percent higher than a year ago.

“The growth in the Employment Trends Index in recent months is signaling moderate improvements in employment,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board. “We did not expect employment growth in December to February, averaging almost 250,000 a month, to continue. However, the disappointing job gain in April (115,000) is probably below the current trend and should pick up to about 150,000 - 175,000 jobs a month through the summer.”

April’s increase in the ETI was driven by positive contributions from five of the eight components. The improving indicators – beginning with the largest positive contributor – were Percentage of Firms with Positions Not Able to Fill Right Now, Percentage of Respondents Who Say They Find “Jobs Hard to Get,” Industrial Production, Number of Employees Hired by the Temporary-Help Industry and Real Manufacturing and Trade Sales. The Employment Trends Index aggregates eight labor-market indicators, each of which has proven accurate in its own area. Aggregating individual indicators into a composite index filters out “noise” to show underlying trends more clearly."

MP: The Employment Trends Index in April was at the highest level in 44 months, since August 2008, and the 12-month gain of 7.1% last month was the highest annual increase in more than a year.  This is more evidence that the labor market is gradually healing, and we can expect improvements in employment going forward. 

Real Question: Are Corporations Economically Distinct from the People Who Comprise Them?

Mitt Romney in this video states that: "Corporations are people."

Barack Obama responded: “I don’t care how many times you try to explain it – Corporations aren’t people. People are people," getting huge applause from a crowd in Columbus, Ohio on Saturday.

In this video below from LearnLiberty.org, economics professor Steve Horwitz answers the really important and relevant question: "Are corporations economically distinct from the people who comprise them?"

Demographics Account for 50% of Decline in LFPR

As an update to yesterday's post about the possible contribution of demographic effects on the recent decline in the U.S. Labor Force Participation Rate (see chart above), here are excerpts from two Federal Reserve research reports on the topic.

1. From the conclusion of "Interpreting the Recent Decline in Labor Force Participation," by Willem Van Zandweghe at the KC Fed (emphasis mine):

"The sharp decline of the LFPR since the onset of the recent recession is due to long-term shifts related to demographic trends and to the cyclical downturn in the labor market. A variety of evidence indicates that, on balance, trend factors account for about half of the decline in labor force participation from 2007 to 2011, with cyclical factors accounting for the other half."

2. From the conclusion of "Explaining the decline in the U.S. labor force participation rate," by Daniel Aaronson, Jonathan Davis and Luojia Hu of the Chicago Fed (emphasis mine):

"Labor force participation has fallen significantly over the past decade. At least some of this decline is due to the recent deep recession and lackluster recovery. Additionally, for quite some time, economists have forecasted that shifting demographics, particularly in the age structure of the population, would put downward pressure on labor force activity. We estimate that just under half of the decline in LFPR since 2000 is due to such factors. We expect these demographic patterns to continue for at least the next decade, and likely far beyond, as the large baby boom cohort continues the transition into retirement. Therefore, standard labor market measures used to compute gaps in resource utilization, such as the employment-to-population ratio and the LFPR, should reflect these long-running patterns."

Bottom Line: Both research reports come to the same conclusion that about half of the decline in the LFPR in recent years is due to long-term demographic trends and the other half of the decline is from the cyclical factors relating to the 2007-2009 recession.    

HT: Marmico

Phoenix-Area Home Prices Rise for Fourth Month

DQ News -- "Phoenix-area home sales dipped in March compared with a year earlier as buyers faced a dwindling supply of foreclosures and other sub-$100,000 properties on the market. With foreclosure resales at a nearly four-year low, the median sale price shot up 13.3% from March last year, marking the fourth consecutive month in which the median has risen year-over-year.

A total of 10,005 new and resale houses and condos closed escrow during March in the combined Maricopa-Pinal counties metro area. That was up 22.2 percent from the month before and down 2.7 percent from a year earlier.

The median price paid in March for all new and resale houses and condos sold in the Phoenix region was $135,900, which is the highest for any month since June 2010, when the median was $139,900. March's median rose 6.2% from the month before and rose 13.3% from a year earlier. The median's year-over-year increase in March followed annual gains of 7.5% in December last year and 6.7% in both January and February of this year. March's median stood 48.5% below the all-time peak of $264,100 in June 2006, but it was 14.8% above the median’s post-peak trough of $118,347 in August 2011."

April Job Gains Could Range from 15k to 215k

As Dennis Gartman reported in The Gartman Letter last Thursday, here's how the BLS describes in a Technical Note how sampling error affects the monthly estimates of changes in nonfarm employment levels (emphasis added):

"Statistics based on the household and establishment surveys are subject to both sampling and nonsampling error. When a sample rather than the entire population is surveyed, there is a chance that the sample estimates may differ from the "true" population values they represent. The exact difference, or sampling error, varies depending on the particular sample selected, and this variability is measured by the standard error of the estimate. There is about a 90-percent chance, or level of confidence, that an estimate based on a sample will differ by no more than 1.6 standard errors from the "true" population value because of sampling error. BLS analyses are generally conducted at the 90-percent level of confidence.

For example, the confidence interval for the monthly change in total nonfarm employment from the establishment survey is on the order of plus or minus 100,000. Suppose the estimate of nonfarm employment increases by 50,000 from one month to the next. The 90-percent confidence interval on the monthly change would range from -50,000 to +150,000 (50,000 +/- 100,000). These figures do not mean that the sample results are off by these magnitudes, but rather that there is about a 90-percent chance that the "true" over-the-month change lies within this interval. Since this range includes values of less than zero, we could not say with confidence that nonfarm employment had, in fact, increased that month. If, however, the reported nonfarm employment rise was 250,000, then all of the values within the 90-percent confidence interval would be greater than zero. In this case, it is likely (at least a 90-percent chance) that nonfarm employment had, in fact, risen that month."

MP: Last Friday, the BLS estimated a payroll job gain of 115,000 in April, but the actual employment gain could be anywhere between 15,000 and 215,000.   Dennis Gartman questions why we should pay attention to these employment reports when they have such a huge margin of sampling error?  

Decline in Labor Force Participation Reflects Demographics, May Not Be as Bad as Reported

The data in the top two charts above, courtesy of Zero Hedge (linked at The Drudge Report today with the headline "Labor Force Participation Rate Lowest Since 1981"), have been getting a lot of attention.  Here's some recent commentary:

1. Tyler Durden at Zero Hedge: "It is just getting sad now. In April the number of people not in the labor force rose by a whopping 522,000 from 87,897,000 to 88,419,000 (see second chart above).  This is the highest on record. The flip side, and the reason why the unemployment dropped to 8.1% is that the labor force participation rate just dipped to a new 30-year low of 64.3% (see top chart above). 

2.  John Merline at IBD: "In April, the labor force was 365,000 smaller than it was in June 2009 — the month the economic recovery officially started. That's in stark contrast to every other post-World War II expansion, which saw the labor force climb by the millions at this point in their recoveries, even as unemployment rates were driven down. Combined with the growing working-age population, this has pushed the labor force participation rate — those working or looking for a job compared with the working-age population — down to 63.6% in April from 65.7% in mid-2009, and the lowest since 1981."

3.  Wall Street Journal: "The economy turned in another lackluster month for job creation in April, with 115,000 net new jobs, 130,000 in private business (less 15,000 fewer in government). The unemployment rate fell a tick to 8.1%, albeit mainly because the labor force shrank by 342,000. This relates to what is arguably the most troubling trend in the April jobs report, which is the continuing decline in the share of working-age Americans who are in the labor force.

The civilian labor participation rate, as it's known, fell again in April to 63.6%. That's the second decline in a row and the lowest rate since December 1981. That's right—more than 30 years ago, longer than Mark Zuckerberg has been alive. The nearby chart shows the disturbing round trip the workforce participation rate has taken since 1980 and the precipitous drop in the last three years."

MP:  Some comments:

1. An important point of clarification: The civilian labor force participation rate (LFPR) as calculated by the BLS is the Civilian Labor Force (employed + unemployed) divided by the Civilian Noninstitutional Population (16 years and over).  This can be verified by the current BLS employment report, which calculates the April Labor Force Participation Rate of 63.6% as 154,365 (labor force) DIVIDED BY 242,784,000 (the TOTAL ADULT POPULATION).  The total adult population is alternatively referred to as the "working-age population," which can sometimes includes the entire adult population and sometimes includes only those between the ages of 15-64 (see OECD definition here).  For the LFPR in the U.S., the calculation does include the entire adult population (including retirees), and not just those in the "working-age" range of 15-64 years old.

2. One reason that the LFPR can be going down over time is that the civilian population can be increasing relative to the labor force, and that's exactly what has been happening to the Male Labor Force Participation Rate, since at least 1948 (see third chart above).  From a post-war high of 87.4% in 1949, the male LFPR has been consistently declining and reached a low of 70% in April.  Perhaps the decline accelerated in recent years, and the graph would indicate that's the case, but the decline in male LFPR is part of long-term, secular demographic trend that has been going on since the 1940s, and has been declining even during all economic expansions since WWII. Reason? Increasing life expectancy over time will lead to increases in the adult population relative to men in the labor force.  

3. As the bottom chart helps illustrate, the dramatic increase in female LFPR from 50% to 60% between 1980 and 2000 more than offset the 2.5% decline in male LFPR during that period, from 77.5% to 75%, causing the overall LFPR to increase.  The female LFPR peaked at 60.3% in 2000, and was starting to decline slightly even during the 2002-2007 expansion, again probably because of increased life expectancy leading to greater increases in population relative to the labor force.  

4. The third chart also shows that the "sad trend" since 2007 of those counted as "not in the labor force" referred to by Zero Hedge is really just a continuation of a long-term demographic trend going back to at least 1975 (first year BLS has data available).   Again, this is probably just a statistical reality resulting from increased life expectancy and an aging population.  

Bottom Line: The overall LFPR was in decline after peaking in 2000 reflecting long-term demographic trends even during the expansion of 2002-2007, and probably would have continued to decline even without the Great Recession.  Although it's certainly likely that the Great Recession accelerated the decline since 2007, it's important to realize with increased life expectancy, we can expect continued increases over time in those counted as "not in the labor force" and a continuation of the decline in the LFPR that started in 2000.