Ellison Chair in International Floriculture
Ellison Chair in International FloricultureTeaching, Research, Extension and Service

The latest consumer news

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There has been some relatively good news regarding consumer spending lately…consider these tidbits:

  • The Conference Board Consumer Confidence Index which had declined in July, improved moderately in August — source.
  • We did not see a significant decrease in back-to-school spending despite the continued concerns over the economy — source.
  • There is strong evidence that firms who are focused on their core customers continue to prosper — source.
  • The demand for lawn and garden consumables like fertilizers, pesticides, growing media, seeds, mulch, etc. are expected to increase by 3.4 percent per year through 2014 — source.

Reducing future deficits while stimulating today's economy

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How can Congress reduce future deficits while stimulating today’s economy?  University of Delaware economist Laurence Seidman argues that legislators should enact a budget that maintains balance under normal unemployment levels, and a fiscal stimulus package with a clause that phases out the package as the economy returns to full employment. Want to read more? Click here.

Is the U.S. facing an inevitable tax crisis?

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Is shifting demography moving the United States closer and closer to a state, federal and municipal tax crisis? The Bureau of Labor Statistics makes it clear that the heavy lifting in both personal earnings and consumption in the United States peaks in a bell shaped curve right at about age fifty. That is when our consumer spending and earnings are at their height. It would follow then that the Internal Revenue Service would depend heavily on folks forty to sixty years old.  You might even narrow it down more to forty-five to fifty-five years old.  The same would follow for states that are dependent on sales and consumption taxes and local governments that get big revenue from big houses.  It is also interesting that the peak birth years for the huge Baby Boomer Generation were 1957 through1964 when United States live birth numbers exceeded four million per year. This super-imposes the very top of the Boomer birth bubble directly over the most productive tax paying years in the age continuum at this writing.  You could consider it serendipitous that the current financial crisis in the United States occurred at exactly the time when we had a huge block of high rolling Baby Boomer tax payers to pay into the system and bail us out. As the Baby Boomers age out of their premium tax paying years Generation X ages in. Generation X was born 1965 to 1984 and is currently aged 26 to 45 years old. Generation X is 11% smaller than the Baby Boomers with about nine million fewer people. It simply does not have the critical mass to produce or consume at the level of the Baby Boomers and will not be able to pay taxes at the level of the Baby Boomers. Can you see where this is going?

There are stages in our lives when different things are expected of us and understanding what is expected of us is very important. When we are born we are totally reliant on others. We eat a lot and produce nothing. If we were left alone we would die. We gradually become more and more self-reliant as we age. In theory at least when we are in our twenties we begin to make our own way. We can provide for ourselves. What we eat is on par with what we produce. As we age through our thirties we begin to produce more than we eat so we provide for others who are producing less than they eat. As we age through our forties the dependence of others, both young and old, on our ability to produce a lot more than we eat becomes very great and peaks at age fifty when we are at the height of our producing. Between fifty and sixty our production begins to diminish as does the reliance of others on our ability to provide. Between sixty and eighty we tend to be self reliant, meeting our own needs. After eighty the total dependence starts all over again. We can no longer effectively produce but we still eat and require care. This principal of reliance and provision can be found in families, cultures and countries throughout the world. It is a very old principal that dates back to early man. It is a natural balance. This principal is so powerful it drives economies and provides health to nations.

So what does Generation X have to do with this principal? Generation X is small owing in large part to the reduced fertility in the U.S. between 1965 and 1984. It has about nine million fewer people in its ranks than the Baby Boomer Generation it follows and about eleven million fewer people than Generation Y right behind it. Generation X, now twenty six to forty-five years old, is taking over the role of the Nation’s provider and it can’t possibly succeed because it doesn’t have the critical mass. As a nation we will begin to feel this phenomenon intensify over the next ten years as we try to tax this generation to meet our needs. Federal, state and local taxes will all suffer-big time. Democrats and Republicans will point fingers at each other for over spending but the real issue will be tax revenues will drop like a stone when Generation X is expected to do the heavy lifting.

So are we headed for a tax crisis here in the United States? It looks that way. But wait, before you fall on a sword there are a few bright demographic facts that could save the day. One is the fact that most of the millions of Latino immigrants that poured into our country to fill the entry level labor demand unmet by Generation X are about the same age as Generation X. If they advance socio-economically at an accelerated pace it could be problem solved. In addition, according to Pew Research in a October 2009 study, the African American culture in the United States is experiencing unprecedented economic growth in recent years. Latinos and African Americans make up close to thirty percent of the total United States population. Their collective contribution to state, federal and local taxes could be significant. Lastly, Generation Y born from 1985 to 2004 is beginning to flood the workforce and because they are facing fifty percent unemployment many are starting their own businesses out of necessity. Baby Boomers did the same thing in the seventies. Small businesses are the building blocks for a healthy economy.

Source: Demographic Journal

Hold the date: 2011 National Floriculture Forum

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The National Floriculture Forum (NFF) is an educational meeting of university professors, graduate students, government scientists, and industry leaders in floriculture that has been held annually for over a decade.  This meeting brings together the floricultural community to: (1) address issues of importance to the floriculture industry, (2) form collaborative relationships, and (3) learn more about the floriculture industry and from each other.  This meeting is the only one of its kind and continues to bring more members of the floriculture community together each year.  The importance of the NFF has increased recently as the number of horticulture departments and associated funding levels have decreased.

Texas A&M University is hosting the next NFF on March 10-11, 2011 in Dallas, Texas. This will provide exposure to a wide range of floriculture crops, production facilities, and climatic conditions in the Southwestern region of the U.S.  The impacts of the meeting are far-reaching:  influencing undergraduate and graduate programs at participating universities, strengthening relationships between industry and academia, and bolstering the identity of floriculture.

Forecasting retail sales via satellite

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From Mark Perry’s blog Carpe Diem:

“As part of a growing trend among hedge funds and Wall Street firms, Cold War-style satellite surveillance is being used to gather market-moving information.  The surveillance pictures are often provided by private- sector companies like DigitalGlobe in Colorado and GeoEye in Virginia, which build and launch satellites and take pictures for US government intelligence agency clients and private-sector satellite analysis firms.

That means there are two links in the chain before the satellite data gets to Wall Street—a satellite firm takes the pictures and sells them to an analysis firm, which scrutinizes the images and sells the aggregated data to hedge funds and Wall Street analysts.

UBS analyst Neil Currie had been looking at satellite data on Wal-Mart during each month of 2010, and he’d concluded that there was enough correlation between what he was seeing in the satellite pictures of Wal-Mart’s parking lots to the big-box chain’s quarterly earnings, that he was ready to incorporate that data into UBS’ report on Wal-Mart, which releases its earnings on Tuesday.

Currie purchased his analysis from a small two-year old Chicago-based firm called Remote Sensing Metrics LLC, which had scoured satellite images of more than 100 Wal-Mart stores chosen as a representative sample. By counting the cars in Wal-Mart’s parking lots month in and month out, Remote Sensing Metrics analysts were able to get a fix on the company’s customer flow. From there, they worked up a mathematical regression to come up with a prediction of the company’s quarterly revenue each month.

UBS predicts that Wal-Mart’s second quarter sales will be up from the first quarter, but down a percent against the same period a year ago. But the satellite analysts figure that the number will come in 0.7 percent higher—not lower—based on the traffic surge they saw in the parking lots.”

Read more here.

Labor Outlook

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In its annual Labor Day outlook, global outplacement consultancy Challenger, Gray & Christmas reports that the U.S. job market is well on the road to recovery and is actually rebounding sooner and faster compared to the jobless recoveries that followed the previous two recessions (1990-1991 and 2001).  Here are some highlights:

1. At this point in the previous two recoveries – following the 1990-1991 and 2001 recessions – the job market was actually getting worse. Many people are so caught up looking at the weekly and monthly numbers, that they fail to look at the bigger trends, which indicate just how much the job market has improved over the last 12 months.  The statistics indicate that the job market has made great strides over the last 12 months and appears to be rebounding sooner compared to the previous two recessions.

2. Monthly job cuts have numbered fewer than 100,000 for 14 consecutive months, a streak that has not been achieved since 1999-2000.  The current 12-month moving average, which stands at 52,778 as of the end of July, is already well below the lowest annual average achieved during the last period of economic expansion, when the moving average bottomed out around 64,000.

3. Job losses due to the recession turned to gains as of January 2010, with payrolls experiencing five consecutive months of net growth that saw more than one million new jobs added to the economy. The gains slowed in June and July as the government shed tens of thousands of temporary Census workers, resulting in overall total non-farm job losses of 352,000 over the two-month period. Despite those losses, payrolls have still seen net growth totaling 654,000 jobs so far this year, due in large part to steady job gains in the private sector. The private sector has had seven consecutive months of job gains, adding a net total of 630,000 new jobs to the economy since January 1.  While the payroll gains remain weak, they are occurring much sooner when compared to the 2001 recession, when it took 21 months before the economy began to add jobs on a consistent basis.

4. While the unemployment rate remains historically high and the decline is not occurring fast enough for most, it definitely appears to be heading in the right direction. If the economy were following the same pattern as the early 1990s recession or the 2001 recession, we would be facing another three to six months of rising unemployment.

5. When you look at any of the employment statistics on a month-to-month or week-to-week basis, there are going to be ups and downs; particularly at this stage of the recovery. However, when you look at the overall trend since June 2009, everything is headed in a positive direction.

6. Hiring will accelerate in the coming months, but not before employers maximize the productivity of their existing workers by adding new technology and increasing hours. In the meantime, the job market will remain fiercely competitive as the recently unemployed square off against the long-term unemployed as well as with job seekers re-entering the labor pool after abandoning it out of frustration.  Job seekers should view Labor Day as the beginning of the workplace New Year and make a resolution to abandon all passive job-search strategies for ones that are far more aggressive.

The Case for Optimism

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From today’s Wall Street Journal article “The Case for Optimism” by Ross Devol, executive director of economic research at the Milken Institute:

Gloom and doom is the hallmark of the current economic debate, as the most recent congressional testimony from Federal Reserve Chairman Ben Bernanke demonstrates. Despite Mr. Bernanke’s generally upbeat message on the Fed’s official forecast, which calls for moderate economic growth of somewhere between 3.0% to 3.5% this year, the market and the media fixated on his acknowledgment that the outlook was “unusually uncertain.” Those words have only reverberated in the past few weeks, bolstering economic pessimists.

There’s a point at which pessimism becomes a self-fulfilling prophesy, scaring businesses away from investing or hiring. The dark tone of today’s discourse is at risk of doing just that.

The Milken Institute’s new study, “From Recession to Recovery: Analyzing America’s Return to Growth” is based on extensive and dispassionate econometric analysis. It concludes that the U.S. economy remains more flexible and resilient—and has more underlying momentum—than is generally acknowledged. In fact, our projections show cause for measured optimism: A return to modest but sustainable growth is close at hand.

America’s businesses are capable of navigating around policy uncertainty and the twists and turns of a volatile global economy. While slow private-sector job growth is to be expected in the early stages of a recovery, the U.S. should add 1.5 million jobs in 2010, 3.1 million in 2011, and 2.6 million in 2012. That will translate into real GDP growth of 3.3% in 2010, 3.7% in 2011, and 3.8% in 2012.

In this pessimistic climate, this forecast will likely be considered contrarian. So why is our economic outlook more sanguine than the current consensus? For one, robust (albeit moderating) economic growth in developing countries, particularly in Asia, will provide support for U.S. exports. Look no further than Caterpillar, which reported a doubling of its earnings in the second quarter of 2010 and whose product line is sold out for the rest of the year.

Improved business confidence is already spurring strong investment in equipment and software. Record-low U.S. long-term interest rates are supporting the recovery. And the benign inflationary environment allows the Fed to keep short-term interest rates near zero until late this year, or even into 2011 if it desires.

Historical context offers further reason to expect a rebound. The peak-to-trough decline in real GDP during this recession was 4.1%, making it the most severe downturn since World War II. But throughout the postwar period, the rate of economic recovery from past recessions has been proportional to the depth of the decline experienced. While this relationship has been somewhat variable, it is well-established. Our projections for GDP growth are above consensus but are substantially below a normal rate of recovery after a recession of this severity.

The naysayers are right that there’s a “new normal” economy, but it’s not that the potential long-term growth rate of the U.S. is substantially diminished, as they say. It’s that this time, the fulfillment of pent-up demand will be subdued because consumers were living so far above their means during the bubble years. Nevertheless, consumer durables and business investment in equipment will see some previously postponed purchases finally happen—if not this year, certainly by 2011 and 2012.

What needs to happen on the policy front in order to build momentum?

In the first place, small businesses need access to more bank credit to create jobs. Banks feel conflicted by calls from the Obama administration to increase lending while regulators are instructing them to add to their reserves. Regulators need to be reminded that some risk is necessary in a market economy.

The White House also should press Congress to pass legislation modernizing Cold War–era restrictions on exports of technology products and services that are already commercially available from our allies. This would boost U.S. exports and reduce the deficit. And if the White House is serious about doubling exports by 2015, it needs to push trade deals with South Korea, Colombia and Costa Rica through Congress.

For its part, Congress must move immediately to restore the lapsed R&D tax credit. Even better, it should expand the credit and make it permanent.

Congress also should pass legislation to temporarily extend the Bush tax cuts that are set to expire at the end of this year. It’s important not to remove any economic stimulus as long as the sustainability of the recovery is in question.

Another must-do: by 2012, Congress needs a credible long-term plan in place to reduce the deficit. If it doesn’t, international financial markets might force our hand by demanding a higher rate of return on U.S. Treasurys.

Washington has to focus like a laser on helping businesses create jobs, while the rest of us should avoid talking ourselves out of a recovery by dwelling on the doom and gloom. The U.S. economy has already adapted to serious imbalances in record time: There’s ample reason to believe in its dynamism in the months and years ahead.

Mr. DeVol is executive director of economic research at the Milken Institute, a nonprofit economic think tank based in Santa Monica, CA.

See related excellent post today from Scott Grannis: “20 Bullish Charts.”

Water webinar series upcoming

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A new series of online water quality and recycling webinars begins August 18 to help growers successfully manage water quality issues and recycle irrigation water.

This education program to promote water conservation is co-sponsored by the Water Education Alliance for Horticulture (a collaborative program hosted by the University of Florida with industry partners), OFA – an Association of Horticulture Professionals, the Society of American Florists, and the Florida Nursery Growers and Landscape Association. The series of 30-minute live presentations will feature both new research and practical guidelines.

Registration is free at www.watereducationalliance.org (click on “workshops”) for this series of online presentations. Space is limited, so sign up early.

  • Water Treatment Technologies and Recycling — Paul Fisher, University of Florida — August 18 at 2pm, EST
  • Biology of Waterborne Pathogens — Rob Wick, University of Massachusetts — Sept. 17 at 2pm, EST
  • Ecological Approaches to Water Treatment — Loren Oki, University of California & Sarah White, Clemson University — Nov. 17 at 2pm, EST
  • Nutritional Aspects of Water Quality — Bill Argo, Blackmore Co. — Jan. 20 at 2pm, EST

Are we sliding back into recession?

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Robert Barr’s comments from the latest trend tracker:

Is the recovery petering out?  Are we at the onset of another dip into recession?  The latest news seems ominous, and even former Federal Reserve Chairman Greenspan said in mid-July that “the economy hit an invisible wall in early June.”

There are some hopeful signs, however, including a show of resiliency in the well-respected economic activity indexes published by the Institute of Supply Management.  And monetary policy remains in gear for economic growth, with continued low interest rates.

One issue that makes the short-term forecast particularly challenging at this point is the impact Washington is having on the economy.  At a minimum, it’s creating additional uncertainty that makes expanding businesses and hiring more workers at this point in the recovery even more an act of faith that it usually is.

The chief executive of Verizon Communications, Ivan Seidenberg, said it clearly in June: “By reaching into virtually every sector of economic life, the government is injecting uncertainty into the marketplace.”  The result?  More difficulty for business in raising capital, expanding existing businesses, and creating new businesses –the last thing this economy needs now.

Add to that the tax hike in store at the beginning of 2011 with the expiration of the 2003 Bush tax cuts, the uneasiness over the impact of the health care law, and concerns over the expanding federal debt load.  These costs will impede the economic recovery, especially a few years from now, as interest rates rise and the cost of servicing the national debt takes bigger and bigger chunks of our tax revenue.

So it’s easy to talk yourself into a lot of pessimism about the economy.  But will these concerns strangle our nascent recovery?  Will government policy push us into another round of recession over the next year?

Well, probably not, or so we’re thinking.  While we recognize the burden Washington is placing on the economy and would argue that economic growth will be measurably less in the coming year than it could have been with better federal economic policy, we don’t think it’s enough to smother the recovery.  Productivity growth and improved technology keep the recovery going.  As for the 2011 tax increases, they’ll be smaller than those imposed on the economy in the early 1990s, and nobody today speaks of the Clinton recession.  Monetary policy had a lot to do with maintaining economic growth then, and policy today is even more stimulative.

So although we think we’ll avoid a double-dip recession in 2010-11, economic growth over the next three or four years will be underwhelming, we believe.  There are several elements of the Congressional and Administration approach to the economy that are damaging the entrepreneurial climate (see, for example, the labor policies that push up wages through politics and not productivity, the treatment of Chrysler bondholders relative to the auto workers union, and threat of imposing cap-and-trade on American businesses and households) – but we think we’ll get through the next year with the recovery intact and, in fact, stronger than it appears to be now.

But we can’t escape the conclusion that the biggest economic risk may be the continued apparent antipathy toward commercial activity from Washington, coupled with the resulting increase in entrepreneurial uncertainty.

Robert Barr is an economist based in Virginia.