Economics of Thanksgiving Dinner

                                Comments due by Nov . 29, 2014      

From negotiating family politics at the dinner table to managing the misery of holiday travel, the entire Thanksgiving enterprise is fraught with challenges for which we're supposed to be grateful. (And, of course, we are.)

Even the annual traditions, like the constant of the Thanksgiving dinner, is subject to the whims of the universe. On Thursday, for example, the American Farm Bureau Federation announced that the price of Thanksgiving dinner is going slightly up this year. Using an informal survey of typical Thanksgiving offerings, the group determined that "the average cost of this year’s feast for 10 is $49.41, a 37-cent increase from last year’s average of $49.04."

And while price increases seem to be a steady part of the tradition too, this year's presumptive Thanksgiving feast offers an interesting insight into how the economy is functioning. According to the U.S. Bureau of Statistics, turkey is actually 13 percent cheaper this year, despite the rising cost of most other meats. As the Columbus Dispatch noted, "at $1.58 a pound for a frozen bird at retail in September, the latest data available, turkey was 24 cents per pound cheaper than at the same time in 2013."

The greater trend though, it adds, snaps the wishbone less in favor of the consumer: In 10 years, the per-pound price of turkey has risen 50 cents.

So if falling fuel prices are dovetailing with a drop in corn and soybean prices (making turkey a bit cheaper), why is the overall cost of Thanksgiving dinner going up? The AFBF says prices for other staples like "sweet potatoes, dairy products and pumpkin pie mix" all jumped up in price.

Meanwhile, in terms of actually getting to the table, driving seems to be the way to go. As the AP reported:

Amtrak says its ticket prices have increased an average of 2 percent over last year. Same goes for flying. The average price of an airline ticket for travel this Thanksgiving is $307.52, not including an average $51 in taxes and fees, according to the Airlines Reporting Corp.

The secret may be out though. According to AAA estimates, over 46 million Americans will drive 50 miles or more to their Thanksgiving gatherings. That's 4.2 percent increase from last year and the highest number since 2007. (The Atlantic)

The Economics of Thanksgiving Dinner

Apple e book settlement.

                                                  Comments by Nov 28, 2014
A federal judge on Friday approved a settlement in which Apple could begin
paying $400 million to as many as 23 million consumers related to charges
that it violated antitrust law by conspiring with publishers to raise e-book
prices and thwart efforts by Amazon.

In the hearing on Friday, Judge Denise L. Cote of Federal District Court
in Manhattan approved an unusual settlement reached this summer in
which Apple agreed to pay $400 million to consumers in cash and e-book
credits, and $50 million to lawyers.

Those figures could still change, however, if an appeals court overturns
a 2013 verdict in the case, in which Apple was found to have conspired with
five major publishers to fix the price of e-books. The court, which will hear
Apple’s challenge on Dec. 15, is not expected to change its previous ruling.
In the event the court overturns the verdict and returns the case to
Judge Cote, Apple would pay $50 million to consumers and $20 million to
the lawyers.

Apple initially agreed to pay up to $400 million to settle the class action
in June, ahead of a damages trial set for two months later in which attorneys
general in 33 states and class-action lawyers were expected to seek up to
$840 million.

In the hearing, Judge Cote called the deal an “unusually structured
settlement, especially for one arrived at on the eve of trial.” The Justice
Department initiated the suit in 2012.

The settlement appeared to reflect fatigue by Apple, the Justice
Department, state attorneys general and class-action lawyers eager to
conclude a case that has dragged on, largely because of delays by Apple.
An Apple spokeswoman declined to comment on the deal.

The suit accused Apple of being a “ringmaster” of a conspiracy with the
five major publishers to raise the average price of e-books from the $9.99
price that Amazon had made standard for new e-book releases. Simon &
Schuster, HarperCollins and the Hachette Book Group settled the day the
case was filed; Penguin and Macmillan settled months later.

The $400 million will be paid on top of earlier settlements with
publishers in the case, which provided $166 million in damages for
consumers of e-books.

The government’s lawsuit focused on 2010, when Apple entered the
digital book industry with the introduction of the iPad and the iBookstore.
At that time, publishers’ agreements to sell e-books were made under the
so-called wholesale model of print books; publishers charged retailers about
half the cover price for a book, and the retailers then set their own prices.
But with the iPad and iBookstore, Apple offered publishers a new
business model. The government said Apple’s co-founder and then chief,
Steve Jobs, persuaded publishers to agree to the so-called agency model for
selling books, which let publishers set their own prices for e-books.

The case was first tried before Judge Cote in July 2013. In her guilty
verdict, she concluded that Apple had been fully aware of the publishers’
frustration with Amazon’s pricing of $9.99 for new releases because it was
eroding the perceived value of their books. She said Apple used that
leverage, combined with a tight deadline for the introduction of the iPad, to
pressure publishers into agreeing to sell their books through Apple’s
iBookstore.

“Apple seized the moment and brilliantly played its hand,” Judge Cote
wrote in that ruling.Mr. Jobs’s words were resurrected throughout the trial
 and ultimately proved to be the most damning. The Justice Department presented his
statements and emails as crucial evidence of a conspiracy.
In one instance, Mr. Jobs made comments to a reporter after he
introduced the iPad and the iBookstore in January 2010. When asked why
consumers would buy an e-book from Apple’s bookstore instead of
Amazon.com, Mr. Jobs replied, “The prices will be the same"

The Economics of Thanksgiving Dinner

                  Comments due by Nov 28, 2014

From negotiating family politics at the dinner table to managing the misery of holiday travel, the entire Thanksgiving enterprise is fraught with challenges for which we're supposed to be grateful. (And, of course, we are.)

Even the annual traditions, like the constant of the Thanksgiving dinner, is subject to the whims of the universe. On Thursday, for example, the American Farm Bureau Federation announced that the price of Thanksgiving dinner is going slightly up this year. Using an informal survey of typical Thanksgiving offerings, the group determined that "the average cost of this year’s feast for 10 is $49.41, a 37-cent increase from last year’s average of $49.04."

And while price increases seem to be a steady part of the tradition too, this year's presumptive Thanksgiving feast offers an interesting insight into how the economy is functioning. According to the U.S. Bureau of Statistics, turkey is actually 13 percent cheaper this year, despite the rising cost of most other meats. As the Columbus Dispatch noted, "at $1.58 a pound for a frozen bird at retail in September, the latest data available, turkey was 24 cents per pound cheaper than at the same time in 2013."

The greater trend though, it adds, snaps the wishbone less in favor of the consumer: In 10 years, the per-pound price of turkey has risen 50 cents.

So if falling fuel prices are dovetailing with a drop in corn and soybean prices (making turkey a bit cheaper), why is the overall cost of Thanksgiving dinner going up? The AFBF says prices for other staples like "sweet potatoes, dairy products and pumpkin pie mix" all jumped up in price.

Meanwhile, in terms of actually getting to the table, driving seems to be the way to go. As the AP reported:

Amtrak says its ticket prices have increased an average of 2 percent over last year. Same goes for flying. The average price of an airline ticket for travel this Thanksgiving is $307.52, not including an average $51 in taxes and fees, according to the Airlines Reporting Corp.

The secret may be out though. According to AAA estimates, over 46 million Americans will drive 50 miles or more to their Thanksgiving gatherings. That's 4.2 percent increase from last year and the highest number since 2007.

Would this proposed merger be allowed to proceed?

                                   Comments due by Nov.22, 2014

Halliburton is in talks to buy Baker Hughes, a potential acquisition that would unite two of the biggest oil field services providers in what would be one of the largest energy deals in years, Baker Hughes confirmed on Thursday.

It is not clear what price Halliburton is considering, but Baker Hughes ended trading on Wednesday with a market value of about $25 billion. Its shares surged 20 percent in late afternoon trading on Thursday once The Wall Street Journal reported on the negotiations.

After the market closed, Baker Hughes issued a news releaseconfirming that it had engaged in preliminary discussions with Halliburton about a deal. “These discussions may or may not lead to any transaction,” it said. “Baker Hughes does not intend to comment further on market speculation or disclose any developments unless and until it otherwise deems further disclosure is appropriate or required.”

Both companies have been affected by a slump in crude oil prices this year, caused in part by a boom in domestic energy production that has flooded the market with oil and natural gas.

The drop has been a boon for American consumers, who are paying lower prices at the pump, but it has caused some hand-wringing in the energy industry. Investors fear that service providers like Baker Hughes and Halliburton may be forced to cut their prices, straining profitability. Shares of both companies have been falling since the summer, when crude oil prices peaked.

Energy analysts said a combined service company would probably not have the power to raise prices for drilling, cementing and hydraulic fracturing because of the great amount of competition around the world, especially with new service companies growing in places like China, South Korea and India.

The exception would be in areas requiring the highest levels of technology like the Arctic or the deepest offshore oil fields, where only the industry leader, Schlumberger, competes with Halliburton and Baker Hughes. Those areas may become less appealing for drilling anyway if oil prices continue to drop.

“They won’t have the market power to raise prices, especially now,” said Michael C. Lynch, president of Strategic Energy and Economic Research, a consulting firm. Nevertheless, he said that a purchase of Baker Hughes by Halliburton would be a big deal, adding, “It’s something like the 500-pound gorilla swallowing the 300-pound gorilla.’’

Still, a merger could help Halliburton and Baker Hughes compete against Schlumberger, which is much bigger than either company. Schlumberger, which was founded in 1926 by two French brothers who invented a geological mapping technique that became the industry standard, employs 126,000 people and has offices in Paris, Houston, London and the Hague.

Photo

Halliburton workers dismantle a gas rig near Pinedale, Wyo., in 2006.Credit Kevin Moloney for The New York Times

Halliburton, the No. 2 player, was a pioneer of hydraulic fracturing, or fracking, the drilling technique that has propelled the United States energy boom. Founded in 1919, and with 80,000 employees, Halliburton is now a leading supplier of fracking equipment.

Baker Hughes, which has 60,000 employees, was formed in the 1987 merger of Baker International and Hughes Tool Company, two petroleum companies dating to the early 20th century. The founder of Hughes Tools, Howard R. Hughes Sr., had invented a rotary bit for drilling oil wells through rock. His company became the basis of the fortune of his famous son, the reclusive billionaire Howard R. Hughes Jr.

A spokeswoman for Halliburton declined to comment.

What Democrats Don't Understand About Minimum Wage.

                                               
                                                       Comments due Nov. 15, 2014


Democrats have greatly misunderstood the politics of the minimum wage in
a way that hurt them in the 2014 elections.
They’re right about one big thing: Minimum wage increases are
popular, at least to modest levels under $10, even in red states where
Republican lawmakers have blocked them. Voters in four red states voted on
minimum wage increases Tuesday and they all passed, three of them by
wide margins. If what Democrats want is a higher minimum wage, they can
keep putting the issue on ballots and most likely keep getting their wish.
What fights over the minimum wage did not do is deliver any advantage
to Democratic candidates for office. Perhaps the best example of this comes
from Illinois. The state has a Democratic governor and a Democratic-held
legislature. If Democrats wanted to raise the minimum wage to $10 an hour
from its current $8.25, they could have.

Instead, they put an advisory question on the ballot, asking voters for
nonbinding guidance about whether the minimum wage should be $10. The
idea was to fire up liberal voters by asking about popular Democratic
positions; the ballot also included nonbinding questions about taxing
millionaires to pay for education and requiring health plans to cover
contraception.

All the nonbinding questions passed by wide margins. And the
electorate that voted with liberals on the issue questions simultaneously
rejected Gov. Pat Quinn, a Democrat, in favor of his Republican challenger,
Bruce Rauner, who has mused about cutting the state’s minimum wage. (Mr.
Rauner also opposes a millionaire’s tax.)

Here’s the thing about the minimum wage: Most voters don’t live in
households where anyone earns it, or are even close enough to it to get a
raise when it goes up. If you ask people whether they favor a higher
minimum wage, most will say yes, and even vote that way on a binding
referendum. But if a politician opposes raising it, middle-class voters won’t
necessarily get angry, and their votes may not be moved.

The lesson of Tuesday’s minimum wage votes is that Democrats can do
more on the minimum wage, not that they can help themselves politically by
talking about it more. Just because a proposal is popular does not mean it
can be a keystone in your economic agenda. As Kevin Drum of Mother Jones
has noted, Democrats have an economic agenda that is heavily attuned to
the poor; it’s much less clear what they would do for the middle class.
Many policies that help the poor are favored by the middle class. But if
politicians want to win the votes of the middle class, they have to campaign
on issues that affect them directly. Minimum wage increases do not serve
that political end. (The Upshot NYT)

Underemployment among college grads

                                                      Comments due by Nov.8, 2014

Federal Reserve policymakers are missing important information as they assess the health of the labor market: data that might answer whether those employed full-time are overqualified for their jobs or would like to work more hours. As a result, the slack in the labor market that Fed officials on Oct. 29 said is “gradually diminishing” is probably still greater than estimated.

The information gap about slack—the number of workers who aren’t realizing their full potential in the labor market—means the central bank may have more difficulty gauging the right moment to raise rates. “Because it’s difficult to measure underutilization, there’s still a lot of uncertainty as to how much slack remains,” says Michelle Meyer, a Bank of America (BAC) economist, “which means there’s uncertainty as to the appropriate stance of monetary policy.” If the Federal Reserve raises borrowing costs too soon, it risks slowing growth before it has wrung all the labor market slack out of the system. Already the Fed has ended its program of quantitative easing.

The U.S. Department of Labor can put its finger on how many people are working part-time because full-time jobs aren’t available, and how many Americans of working age are so discouraged that they’re not even looking for a job. Other forms of underemployment—the college graduate with an English degree who’s working as a barista, for example—are harder to pinpoint, though they’re just as important in trying to measure whether the labor market has improved.

In a survey of 1,000 workers who graduated from college in 2012 or 2013, released in May by Accenture, 46 percent said they were in a job that didn’t require their degree. That’s a 5 percentage point increase from the 2013 survey, the management consultant reported. Earlier this year the Federal Reserve Bank of New York found that 44 percent of working recent grads were underemployed in 2012. The bank defined underemployed for these workers as holding a job that doesn’t require a bachelor’s degree. That was up from 34 percent in 2001 and near levels last seen during the 1990-91 recession.The data shortfall sparked a discussion at a Peterson Institute for International Economics conference on Sept. 24 in Washington. Erica Groshen, commissioner of the Bureau of Labor Statistics, asked what additional data would be needed to measure labor market slack more accurately. Betsey Stevenson, a member of President Obama’s Council of Economic Advisers, pointed out that it was possible with current data to determine whether people working fewer than 35 hours a week are underused: The Census Bureau survey simply asks if the worker would prefer to be working full-time. Those putting in a longer workweek fall off the radar. The BLS considers anyone working at least 35 hours a week to be full-time. The Census Bureau, which surveys households to get the information the Labor Department needs to crunch the monthly jobs data, doesn’t ask full-timers whether they’d prefer a different job or more hours. As far as anyone knows, those workers are fully employed and content. “If you’re a college graduate working at Starbucks, and you work 32 hours, we know you’re in the wrong job,” Stevenson said at the conference. “If you work 35 hours, we don’t know.”

Mario Mendoza says he works as many as 70 hours a week driving a taxi in Miami. The 34-year-old has a bachelor’s in sociology and anthropology and a master’s in global sociocultural studies from Florida International University. He says finding an entry-level job where he could do social or market research would put his driving days behind him. “I’ve applied for many of those jobs. I just haven’t been called up for the position,” Mendoza says. “If you spend so many years in school preparing yourself and studying, you want to use those skills to work, not do something like be a waiter or drive a cab or work at Starbucks.”

Another sign of slack may be the number of full-time workers who want more hours, says David Blanchflower, a professor of economics at Dartmouth College and a former member of the Bank of England’s Monetary Policy Committee. The U.K.’s Labour Force Survey asks those who aren’t seeking different or additional jobs whether they’d like to work longer hours at their current wage if given the chance. In the U.K., 6.3 percent of full-time workers said they’d like more hours, Blanchflower and David Bell, an economics professor at the University of Stirling in Britain, wrote in a paper published last year.

Employees’ willingness to work longer for the same pay also explains stagnant wages. Bosses know they can extend hours for current staff without bidding up salaries to lure more help. Hourly earnings in the U.S. rose 2 percent in September from the year before, compared with a 3.1 percent increase in 2007, when the last recession began. In time, an improving economy will take up some of the slack. “You have square pegs in round holes,” Blanchflower says. But as conditions get better, “people can move where they want.”

Rob Newton, 25 and living with his parents in Rhode Island, says he’d happily exchange his full-time landscaping job for one where he can apply his degree in occupational health and safety from Keene State College in New Hampshire. As winter approaches, he faces the prospect of seasonal unemployment. “I really don’t want to get to the point where I’m 28 or 29 and still not finding work,” Newton says. “I don’t want to be living in my parents’ basement for that much longer—for their sake and for mine.”

The bottom line: The Federal Reserve Bank of New York estimates that in 2012, 44 percent of working recent grads were underemployed.