Category Archives: Business and Economy

An argument for why we should be hearing more about falling home prices

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The last several years have seen many stories published and produced about homes and home values. But Dan Froomkin argues that we should be hearing even more about how home values continue to fall:

You might not know it from reading the news, but the nation’s housing prices are in free fall again…

Despite the fact that the nation is officially in a period of economic recovery, the latest data show that home prices are diving. One recent survey pegged the decline at 0.7 percent per month; another found prices down 5.8 percent between August and October.

One analysis found  home values will likely drop more than $1.7 trillion this year, on top of the $1.05 trillion drop in 2009. That would bring the loss in wealth to $9 trillion since the June 2006 market peak, when the housing stock was valued at about $24 trillion…

Dean Baker, co-director of the liberal Center for Economic and Policy Research, tells me the story isn’t getting nearly as much coverage as it should — if nothing else because “as you see a drop in home equity, you also see a drop in consumption.”…

What that means is that another trillion-dollar loss in housing wealth — something that could easily happen by next fall — translates to $50 billion to $70 billion less consumption; sort of an anti-stimulus.

This is obviously not good news. I wonder what Froomkin would say the value is in having Americans hear this story more often and with more emphasis: would people be moved to act in certain ways, like making requests of politicians to do something or trying to get out of homeownership?

A link is made in this story between home values, consumption, and jobs. So if this is a vicious cycle that involves these three factors, where do we begin in trying to reverse the trend? With tax cuts – or extensions of tax cuts? It sounds like the one issue that would help out the others is jobs. If more people had good-paying and stable jobs, they would spend more overall and some of these issues of home values wouldn’t be as much of a concern.

h/t Instapundit

Rationale for ban against future fast-food restaurants in South LA

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Earlier this week, Los Angeles developed some new restrictions for new fast-food restaurants:

New fast-food restaurants in South Los Angeles will be banned within a half mile of existing ones under an ordinance approved Wednesday by the City Council.

The law includes other restrictions on stand-alone eateries, the Los Angeles Times reported. They include guidelines on landscaping, trash storage and other aesthetic issues.

Similar limits are in place in other LA neighborhoods. The council imposed a moratorium two years ago in southern Los Angeles.

Is this an example of the government telling people what they can or cannot eat? Is this example of a government limiting business or jobs opportunities? The rationale for these new regulations is interesting:

The goal of the restrictions is to encourage the development of stand-alone restaurants and grocery stores.

“For a community to thrive, it is important to have balance, a full variety of food, retail and service providers,” said Councilman Bernard C. Parks, one of the sponsors of the ordinance.

The ordinance includes exemptions for fast-food restaurants in mixed-use developments and shopping malls and for existing restaurants planning to expand.

These sorts of rules are not unusual in communities. How does this differ from a suburban community that decides it won’t allow any more banks in its downtown? Or communities that have restrictions against tattoo parlors? Both banks and tattoo parlors create jobs and bring in some sort of tax dollars. If the City of LA wants to promote other kinds of development, this seems like a reasonable rule that doesn’t force out already existing stores but limits their future growth.

At the same time, the issue of fast food seems to bring out passionate arguments from people. Do we have a “right” to fast food restaurants? A lot of critics of sprawl argue that fast food restaurants represent the worst of sprawl: they are completely dependent on the automobile, the food is cheap, mass-produced, and not healthy, and the restaurants and their signs are garish advertisements for multi-national corporations who couldn’t care less about local communities. Others argue that we should be able to eat what we want when we want.

In Los Angeles, they seem to have made a decision about promoting other kinds of development. Communities make decisions like this all the time, depending on factors like tax revenue and what goals or values they wish to promote.

Conference on colleges and universities as critical part of regional development

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A recent conference suggested that colleges and communities could cooperate more closely in order to foster economic development:

Colleges must play a greater, and more deliberate, role in helping regions innovate and thrive in an increasingly competitive and globalized economy, speakers urged this week at a conference on higher education and economic development.

Economic development is “no longer about attracting businesses,” said Sam M. Cordes, co-director of the Purdue Center for Regional Development. “It’s about attracting people, about attracting talent.”

Participants in the two-day conference, “Providing a Uniquely American Solution to Global Innovation Challenges: Unleashing Universities in Regions,” delved into the various ways colleges can help build stronger local economies, including acting as conveners for conversations about regional development, aligning their curricula with local elementary and secondary schools, and producing and retaining well-educated workers.

This is a popular topic these days, particularly in difficult economic times. People like Richard Florida have linked the presence of research universities and their graduates with cities that have a larger concentration of the “creative class,” which then leads to more development. There are a lot of cities and communities that hope they can tap the local college in order to boost the local economy. It looks easy: the local university has a bunch of PhDs and eager students.

But how exactly this is supposed to happen is less clear.  I remember the battle that took place in South Bend in the last five years. The University of Notre Dame wanted to expand and partner with the community to construct an “innovation center” that would blend the university and businesses. However, this became controversial as it involved bulldozing a number of houses, bringing up some of the old issues between the wealthy school and less wealthy city.

It sounds like this conference offered more specific ideas of how the university can partner with local communities and businesses in order to prompt growth. Since each school and community offers unique advantages (and disadvantages), such partnerships are likely to take a good amount of work. Both the school and community need to feel that they will benefit from the time and hard work that is necessary to put something together.

Innovative (or strange) mall designs

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Many shopping malls are not that exciting to look at: they are functional in providing retail space and enough amenities to keep shoppers coming back. When critics talk about the blandness or homogeneity of suburbs, shopping malls are often included in the analysis: if you have been in one shopping mall, you have been in them all. But what if architects and designers took the shopping mall in a new direction? Popular Mechanics highlights “the world’s 18 strangest shopping malls.”

Some questions: do these different designs increase retail sales? Do shoppers have a better overall experience in these places?

h/t Instapundit

Considering workplace flexibility

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Some jobs offer more flexibility than others where a worker has an opportunity to structure their own schedule or make it to other important events in life that are held during typical work hours. Sociologist Alfred Young has looked into the issue of workplace flexibility and recently made a report to a conference:

When an assembly-line worker at a Midwestern auto-parts plant studied by Alford A. Young Jr. , a sociology professor at the University of Michigan, left work without permission to coach his son’s football team in a championship game, he paid a high price, Young told about 200 researchers, government officials and employers Tuesday at a Washington, D.C. conference on flexibility.

The story sprang from a study of the means employees use to resolve work-family conflicts–collaborating with the boss vs. sneaking around. The worker, whom Dr. Young called James, had committed to coaching his son’s team, and when the team made the championship round he asked to take a Saturday afternoon off to be present. The boss said no.

When the day arrived, James left work for lunch and later called his boss to say that his car had broken down, saying “ ‘I called Triple-A but I don’t know if I can make it back,’ ” Young says. James got to coach the game, but he also got written up by his supervisor and busted to a lower seniority level.

Such disruptions can be avoided, Young says, if supervisors bend a little, perhaps even breaking a rule or two, to try to find a solution within the work team, perhaps by allowing a shift trade; this benefits employers by motivating employees to go the extra mile and remain loyal to the company.  While this happens routinely at many workplaces, about 80% of all workers still lack the workplace flexibility they want, according to the Alfred P. Sloan Foundation, the conference sponsor. What doesn’t work, his study found, allowing to develop the kind of clash that encompassed James.

I feel like a lot of the talk about telecommuting and the changes that might come to the workplace due to changing technology might really be about increasing the flexibility of workers. If the main concern is that a job gets done, perhaps it doesn’t matter as much whether an employee keeps certain office hours. Younger workers also seem to like the idea of flexibility, to not be completely tied down because of a job. But perhaps even the American small business spirit could be tied to this issue – some people enjoy being able to set their own hours and agenda.  But this may not apply in the same way to areas like manufacturing.

If 80% of workers desire more flexibility, is this something more businesses and organizations should address? I would be interested in knowing what holds businesses back from being more flexible with workers. Profits? Appearances? A certain workplace culture? Directives from higher-ups?

$1 for your trouble

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How much is a technical trespass worth?  Apparently $1. That’s the amount just granted to a couple who had their home photographed by Google as part of its Street View service:

over two and a half years after the case got started, a judge has handed down her consent judgement, ruling that that Google was indeed guilty of Count II Trespass. [The plaintiffs] are getting a grand total of $1 for their trouble. Ouch.

Ouch indeed.  It’s not quite Bleak House, but 2.5 years of litigation is an awful lot of trouble for $1, any way you measure it.

The long process of foreclosure: an average of 492 days

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Even though Black Friday sales may have been decent, housing is still lagging. Another indicator: “the number of days since the average borrower in foreclosure last made a mortgage payment” is 492 days. The Wall Street Journal adds more about this figure:

In recent months, the number of borrowers entering severe delinquency — meaning they missed their third monthly mortgage payment — has been on the decline, falling to about 700,000 in October, according to mortgage-data provider LPS Applied Analytics. But it’s still more than double the number of foreclosure processes started.

As a result, banks are taking progressively longer to foreclose. The average borrower in the foreclosure process hadn’t made a payment in 492 days as of the end of October, according to LPS. That compares to 382 days a year ago and a low of 244 days in August 2007…

Speeding up the process won’t be easy, as demonstrated by the banks’ continuing legal troubles related to robo-signers, bank employees who signed foreclosure affidavits without properly checking the required loan documentation.

Millions of Americans still are paying their mortgages even though they owe more than their homes are worth. The more banks’ backlog grows, the more likely they are to join it, adding to the already giant pile of foreclosures weighing on the housing market.

In my mind, one of the issues is that we don’t really know the true state of the housing market until all of these foreclosures go through. And if the average length is more than a year, it is going to take a long time to get all of these through the system, let alone deal with new foreclosures.

I wonder if the length of foreclosure differs by location. In areas that were hard hit by foreclosures, like Las Vegas or parts of California, are the banks ahead or behind in regard to these 492 days? Are there areas of the country where it is in the banks’ interest to slow down the foreclosure process because they can’t really do anything with the houses anyway?

h/t Instapundit

Black Friday as people watching paradise

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Even if shopping for big ticket items on Black Friday does not sound like your idea of fun, why not go out just to do some people watching? One person from Wisconsin with a sociology degree suggests this very idea:

Count Carly Simon, 26, of Racine, in the second group. Simon, a graduate student, said she, her two children and her sister, Jessie Baker, start at Target, 5300 Durand Ave.

Always integrated into their plans are getting Simon’s daughters new Christmas outfits and holiday haircuts – and they love it.

“It’s like their makeover day,” Simon said.

For Simon, who has a sociology degree, Black Friday’s main attraction is people-watching. “I joked that I would do my master’s thesis on that,” she said.

What she sees in fellow Black Friday shoppers is “not only their holiday excitement, but that they’re so driven. People don’t act like they’d act normally.”

She added, “You’re dealing with group think and you’re dealing with money; those two things are driving forces in large groups.”

This student suggests “people don’t act like they’d act normally” on Black Friday, a description that could fit a lot of sociological work that tries to understand why people and groups do what they do.

If I had to pick several locations for observation on Black Friday, here is what I might suggest: Best Buy at its opening, Wal-Mart at its opening (though they are mixing this up with midnight hours this year), and a large mall relatively early in the morning, say 7 or 8 AM, to watch people scurry from store to store.

One scenario I would be interested in following up on: what happens to people who have waited for hours to get into a store like Best Buy only to find that they are the fourth person who wants the only three available special deals? How do people reconcile the time they put into this sort of excursion with the possibility that they won’t get what they really came for?

When religious faith and unions come together

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Even though unions represent a relatively small percent of today’s American workers, they tend to draw a lot of attention. A story from the Chicago Tribune adds another dimension to the discussion: what happens when unions and faith mix?

Faith and work are inextricably linked for most of the working class, said Bob Bruno, director of the Labor Education Program at the University of Illinois at Chicago.

“For a lot of these folks, if a business doesn’t provide health care, it could be characterized as not taking care of the stranger on the road. It’s a sin,” said Bruno, who interviewed hundreds of low-wage workers in Chicago for his 2008 book, “Justified by Work: Identity and the Meaning of Faith in Chicago’s Working-Class Churches.”

About 91 percent of union members believe in God, and 25 percent pray several times a day, Bruno found in a survey of union members he conducted from 2005 to 2006. Eighty percent believe God performs miracles in the world today…

Organizations like Interfaith Worker Justice work to close the gap between low-wage workers, who tend to have a more emotional connection to their faith, and corporate executives, who, he said, have been found to see religion more intellectually.

“They try to bring the argument to the modern-day pharaohs,” he said. “‘Hey, you claim to be Christian, you claim to be a Jew, you claim to be Muslim, why are you treating your people this way? You can’t hide behind your glass office.'”

This immediately brings several questions to mind:

1. What percentage of union actions or labor strikes are motivated by religious values? In other words, how often are unions motivated by religion versus other motivations?

2. What happens when a union makes a religious argument to corporate executives? Do the corporations just ignore this part of the argument? What happens when the executive or the company is also religious – does this lead to a different corporate response?

3. How would a typical evangelical, one that lives in the suburbs, works in a non-blue collar job, and is conservative, respond to these arguments? Can corporations sin? Should or can unions be making these arguments?

Trying to understand China’s economy with a lack of statistics

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Megan McArdle writes about the issue of a lack of comprehensive data to understand what is happening with China’s economy:

But central planners badly need good, comprehensive data.  Once you limit the autonomy of local nodes to make decisions, you need some sort of massive data set to overcome information loss as decisions move up the hierarchy.

Libertarians often use this to argue against any sort of central planning, but that’s not the point of this post.  All modern economies engage in some level of planning, whether it is monetary policy or infrastructure construction.  It was in response to the problems of managing production during World War I that economists first conspired to create US economic statistics.

The Chinese government is extremely enthusiastic about managing their economy, and they put a lot of thought into it.  But the lack of good statistics on economic performance makes an already near-impossible challenge even more daunting.

It is remarkable to recognize how much data there is out there these days in the United States. And even with all that data, it is often not always clear what should be done – government officials, investors, journalists, and citizens need to know how to interpret the data and figure out how to respond.

What would it take to get comprehensive data in China?

h/t Instapundit