Monday, May 18, 2009

Unemployment, Oil, Iron, China, Health Care, and Misers

It's a big picture Smörgåsbord!

May 18, 2009

Health Care Cost Inflation Appears to Slow, but Statistics Can Be Misleading

Three years ago, when costs were increasing by 9.6 percent, employers shouldered most of the burden. Costs went up, but they went up less for employees, who saw the amount coming out of their paycheck to pay for health care costs increase 5.4 percent.

Today, the trend has reversed.

According to Milliman’s data, employer costs in 2009 will rise 5.4 percent; employees, meanwhile, will see nearly a 15 percent increase in the amount of money that comes out of their paycheck to pay for health care. Then add another 5.4 percent increase in the amount employees pay out of pocket (and already taxed) for other health care expenses.


Behold the hidden "benefits" of rising unemployment. Businesses no longer feel the need to shoulder as much of the burden of rising health care costs.

That isn't what truly concerns me though. It's what's on the horizon.

April 27, 2009

Obama and Bernanke Weigh in on the Economy

The road to recovery still looks bumpy, but Obama and Bernanke say the view on the horizon is going to be better in many ways. And Texas may be on the forefront of that changing economic landscape, as sectors such as construction and retail shrink but energy and education continue to grow.

How could one be possibly pessimistic with higher long-term oil prices and a glut of future college graduates? *sarcasm*

May 18, 2009

China's College Graduates Are Moving On To Unemployment

Back in 2002, China's universities graduated 1.5 million students. That number has now quadrupled, with some six million out looking for a good job come the summer. But job offers are in decline. In fact, graduate unemployment was even an issue three years ago during those heady days of double digit growth rates. So what hope now for the class of 2009? There's a perfect Chinese storm.

May 15, 2009
Chinese Dealers Hoard Iron Ore and Bet on Price Rebound

Despite the global steel industry's drastic decline, and serious production surpluses in China's steel industry, China's iron ore imports in April rose 9.45%, month on month, and 33%, year on year, to set a record high. In the first four months of 2009, China imported 188.46 million tons of iron ore, up 22.9%, year on year, most of which was imported not by steel makers but by iron ore dealers. After entry into China, it was promptly arranged into piles in China's ports, where it sits.

This doesn't exactly inspire me to hoard iron right now as a way to protect myself from rising health care costs, and I am yet somehow drawn to lumps of coal. Am I a stagflationist? Am I an deflationist? Am I an inflationist? All of the above! Let's just say that the Ghost of Christmas Past, Ghost of Christmas Present, and Ghost of Christmas Yet to Come all visit me daily.

Bah, humbug!
Here's what I like about Ebenezer Scrooge: His meager lodgings were dark because darkness is cheap, and barely heated because coal is not free.

8 comments:

mab said...

Stag,

Your post is reMarkably timely.

I had actually started to CONvince myself that I was experiencing deflation for the first time in my life. :) And then, we got hit with a big medical insurance increase last week. :(

One thing I find interesting is how little the CPI actually increased during/after our recent commodity boom. I would have thought that sustained $70-$100 oil would have resulted in a much higher CPI. This gives me cause for hope and despair. On the one hand, maybe we won't be able to inflate. On the other hand, maybe it will just take $300 oil to get the "desired" inflation. D'oh!

The age of moderation hasn't exactly hit "home" with me. However, based on the foreclosure rate, I'd say the age of moderation has hit home for millions - like a pun of bricks.

BTW, I'm a big fan of Dickens. ANd somehow, I don't think quantitative (dis)easing would have made Scrooge spend more.

Bah, homebug!

Stagflationary Mark said...

mab,

I too underestimated the effect of rising oil prices on the cpi. That being said, we didn't sustain oil prices at near $150 for long. As you imply, the powers that be seem inclined to give it another chance though.

I can't speak for Scrooge, but I'm just about out of hoarding ideas. I'm really starting to wonder if I even needed to. This week...

Poptart 12-pack: $1.50 (Albertsons)
Green Giant Broccoli & Cheese: $1.00
1 gallon milk: $1.99 (QFC)
26 oz Hunts Spaghetti Sauce: $1.00 (QFC)

The grocery store sales continue, and I have no problem adapting to the current bargains (the hoarded sauce will go nicely with my spaghetti hoard). You'd think a trillion dollars here and a trillion dollars there would eventually trickle into food and stick. You'd think? Right? I'm not crazy, am I? Maybe I am. If so, better a crazy hoarder with excess frozen Green Giant than an insane speculator stuck with frozen green shoots. Just a hunch.

I'm sitting on many pounds of Costco imported spaghetti. It hasn't gone up in price in years. How do they do it? Chinese workers powering Italian treadmills?

mab said...

Stag,

but I'm just about out of hoarding ideas.Somehow, I doubt the lack of ideas is from a lack of effort. And that doesn't sound inflationary.

Much of the excessive (debt induced) consumption spending we've seen over the past decade could be considered hoarding too. You'd think by now Americans would have enough stuff.

Much as with oil, one would have thought that history's greatest consumption boom would have caused much higher inflation. It didn't happen though. Thanks to OER and billions of Asians.

I see deflation and/or low inflation ahead. At least for a few years. It seems Bernanke is conducting his helicopter drops with surgical precision. Of course the holes in the bank balance sheets are huge and hard to miss. Whether it's inflation or deflation, I see tough times ahead for many.

Besides already having enough stuff, there's no way I'm going on a spending binge with so much economic and financial uncertainty.

Stagflationary Mark said...

mab,

"I see deflation and/or low inflation ahead. At least for a few years."

Microsoft is finding that out the hard way with me. I'm still using Windows 2000 and Office 2000. I don't know what I'd do without a decent spreadsheet program (nerd alert!). Last night I was looking into Google Spreadsheets when the time comes to upgrade. It's 100% free. Oh oh.

I'm still a believer in Peak Oil but I'm no longer a believer that even that will create much inflation.

It's amazing how much less fuel I use these days, and I've always been frugal. I'm just more frugal now, that's all. Our society in general is still quite wasteful. Perhaps that's a good thing. It is much easier to cut back if one is wasteful than it is if one is extremely frugal. (This helps even the frugal people though, since prices come down for everyone.)

At some point people are going to figure out that buying twice as much stuff (say at Costco) but only half as often can create substantial savings. It doesn't hurt Costco. It doesn't hurt the consumer. It really only hurts those in the oil business. Since we're fighting a war in the Middle East, that's probably not such a bad thing.

People will cut back on driving due to the sticker shock of higher gasoline prices. We've already seen it. There's a side benefit though. Money is saved on maintenance costs too, as their cars wear out at a slower pace. In other words, higher gas prices can actually save some wasteful people both time and money (not everyone of course, but some).

I was swayed by a recent comment somewhere that offered a simple solution to the world's higher oil prices. Drive 10% less and get a car that's 10% more fuel efficient once it's time to upgrade. That reduces demand nearly 20% and it's certainly doable. I'm guessing that we're so wasteful that we could easily do it more than once.

Anonymous said...

I own a small business. We're still using Office 2000 premium. I bought several brand new copies on eBay for $100 a piece some years ago. We're using XP with Small Business Server 2003. I'll be buying some used copies of XP pro on eBay soon. I don't plan on upgrading; I figure we're still good for about 5 more years... I recently snatched up a clone of my server motherboard on eBay expecting to stretch what I have to the limit. Brand new. Got it for $65. Was once $200. The 2 vehicles I own date back to 97. They've both been hit and I've been driving them that way. Maybe I can get 5 more years out of those those as well...

Stagflationary Mark said...

Anonymous,

My car is a 96! I think we're both part of the economy's problem. Too bad. I doubt either of us will change. At best, the economy better hope we don't infect others with our frugal ways.

flin said...
This comment has been removed by a blog administrator.
Stagflationary Mark said...

Spam deleted.