While all sorts of people are doing victory laps over last week’s feeble employment situation report I find myself growing increasingly alarmed at the state of the economy. Read this advisory from John Mauldin as a gauge of why. Incomes have been flat for a decade, GDP (exclusive of government spending) flat for a decade, millions remain unemployed, we’re 18 months into a recovery, and recoveries don’t last forever.

I’m also concerned that birth-death ratio adjustment, a sort of fudge factor, is such a high proportion of total private sector jobs reported. I can’t reconcile that with this from John Robertson of the Atlanta Fed:

The QCEW data also showed that the number of business establishments with payrolls in the United States has remained stuck at around 9 million since late 2007. By comparison, in the early 1990s there were about 6.5 million establishments, a number that rose to close to 8 million in 2000 before peaking at 9 million 2007.

The net creation of business establishments—that is, physical locations for conducting business such as manufacturing plants, retail stores and business offices—has in the past been a key ingredient in job growth in the United States. This growth is driven partly by demand from newly created businesses and by mature firms expanding their footprint by opening additional locations. The demand for physical space is also clearly important to the commercial real estate industry, which has been burdened by elevated vacancy rates in many markets and generally low demand for new space.

Another trend from the QCEW data is striking—the number of employees per establishment is much lower than it used to be.

Doesn’t this also call the birth-death ratio adjustment into serious question? Things just ain’t what they used to be and, consequently, past history is no indicator of future performance.

Established businesses rarely do a lot of new hiring (over the last couple of decades it’s been more the other way around). If new businesses aren’t hiring the way they used to or aren’t being created at all, where will new jobs come from?

Make no mistake: total U. S. healthcare spending bears no resemblance to that of any other country in the world. Consider the chart above. Do you see that bar sticking way above the others on the far left side of the chart? That’s U. S. healthcare spending as a proportion of GDP. We spend more as a proportion of GDP, overall, and per capita than any other country in the world and by a substantial margin. And it’s growing fast.

The obvious retort to that is that, as people grow wealthier, since healthcare is a superior good they will, naturally, spend more money on healthcare. Unfortunately, income hasn’t grown for a decade but healthcare costs keep growing up.

My main gripe about the rapid growth of healthcare spending is that it’s underwritten by tax dollars with 3/5s or more of healthcare spending is from tax dollars. I believe that attracts investment into healthcare and away from other sectors of the economy.

Why is healthcare spending rising so fast? As has been the case at several points in the past, e.g. 1976-1980, costs are rising because providers are charging more. It’s not technology or utilization or improved quality. As Uwe Reinhardt put it, it’s the prices stupid.

“Vampire squid” is the evocative description Matt Tabibi gave to Goldman Sachs. Others have since applied it to the whole banking system. This should give you the general idea:

It ain’t just the banks. Healthcare spending accounted for 12% of GDP in 1992 and 8.8%R of GDP in 1980. Growing by 10% a year in 1980 was one thing. In 2011 it’s something entirely different and it’s sucking the life out of the economy.

I sorely felt the need for good news so I set out to find some. This post is the first of several today that highlights what I’ve found. Scroll down for more.

The Cherry Blossom Festival has started in Washington, DC. The picture above is of the cherries blooming, framing the Washington Monument.

It’s worth mentioning that next year will be the centennial of the arrival of the cherry trees in Washington. About 2,000 trees were gifts from the city of Tokyo to Washington. After a false start the planting of the trees got underway a century ago next year.

As with most stories of heroism this one has grown in the telling. I went back and checked the sources and the basics of this remarkable story appear to be true.

When disaster strikes some people are frozen in place. Some are unable to do anything but mourn. Some feel just surviving is enough. Not Hideaki Akaiwa.

A true-life action hero. However, I think he’s less Rambo and more the Lone Ranger.

The tuberculosis rates have fallen to their lowest level since 1953 when we began keeping records here:

There were 3.9% fewer reported cases of TB (tuberculosis) in the USA in 2010 than in 2009, according to data published by the Centers for Disease Control and Prevention (CDC). The authors say that although the average drop in TB rates was 3.8% annually during 2000-2008, the target of less than 0.1 case per 100,000 people was not met by 2010. In 2010 there were 3.6 cases per 100,000 people.

Just four states, California, Florida, New York and Texas, account for about half the cases. This is probably explained by the high rates of immigration in these states—foreign-born individuals are significantly more likely to be diagnosed with the disease.

I recall getting TB patch tests when I was in grade school. There’s a large campus of a tuberculosis sanitarium within walking distance of where I set. It’s now used for a combination civic center, park, and elder housing.

When you consider that a little over a century ago, tuberculosis was a sure killer and within living memory people were still being isolated as a method of controlling the disease, dropping the rate of infection as low as it is is a major accomplishment.

A significant find of 15,000 year old artifacts in a cave in Texas has pushed the estimates of the earliest settlement of the Americas back about 2,500 years:

A massive cache of 15,500-year-old artifacts from a Texas flood plain is providing what archaeologists are calling the first unequivocal evidence that the people of the well-known Clovis culture, long thought to be the first humans to inhabit North America, were not.

Archaeologists had previously found several sites, such as the Meadowcroft Rockshelter in Pennsylvania and the Paisley Caves in Oregon, that appeared to predate the Clovis culture and its distinctive fluted spear points, but the paucity of artifacts from those sites made such a conclusion highly controversial.

All of those sites together produced perhaps 800 artifacts total, but the new Buttermilk Creek site north of Austin has produced nearly 16,000 pieces — all of them buried beneath Clovis remains and thus older.

While I’m on the subject of open letters the hacker group Anonymous has published an open letter to the citizens of the U. S. seeking support (I wonder if they give out tote bags?). I believe that this is the group that recently released a collection of internal emails from the Bank of America.

In looking at their grievances and demands I found myself in agreement with them on many. Not all of course. I doubt that I agree with anybody on everything. I suspect that they might mean something different by “uphold the Constitution” than, say, the Supreme Court of the United States does.

To remarkably little fanfare chairmen of the President’s Council of Economic Advisors

Martin N. Baily
Martin S. Feldstein
R. Glenn Hubbard
Edward P. Lazear
N. Gregory Mankiw
Christina D. Romer
Harvey S. Rosen
Charles L. Schultze
Laura D. Tyson
Murray L. Weidenbaum

representing every administration from the Carter Administration forward including the present administration have published an open letter to the Congress and the president urging that action be taken to get the nation’s fiscal house in order:

Divided government is no excuse for inaction. The bipartisan National Commission on Fiscal Responsibility and Reform, under co-chairmen Erskine Bowles and Alan Simpson, issued a report on the problem in December supported by 11 Democrats and Republicans — a clear majority of the panel’s 18 members.

As former chairmen and chairwomen of the Council of Economic Advisers, who have served in Republican and Democratic administrations, we urge that the Bowles-Simpson report, “The Moment of Truth,” be the starting point of an active legislative process that involves intense negotiations between both parties.

My guess is that about as much attention will be paid to this by the addressees as was paid to the Bowles-Simpson Report which is to say little or none.

I know, I know. We’re getting the government we deserve (a view with which I disagree vehemently). Would things have been better if, on an administration by administration basis, the other guy had been elected? I don’t see it.

Please take a look at this post from Mike Mandel on job growth over the last decade:

I divide the economy into two parts. On the one side are the combined public and quasi-public sectors, and on the other side is the rest of the economy. Public, of course, refers to government employees. ‘Quasi-public’, a term I just invented, includes the nominal private-sector education, healthcare, and social assistance industries. I call them ’quasi-public’ because these industries depend very heavily on government funding. For example, social assistance includes ‘child and youth services’ and ‘services for the elderly and disabled’, which are often provided under government contract.

As should surprise no one public and quasi-public employment has grown enormously over the past decade while fully private employment has dwindled. The attendant graph highlights my concerns.

The key problem here is that public and quasi-public jobs are funded by the fully private sector and by borrowing. The quasi-public sector is largely financed through payroll taxes. As fully private sector employment contracts less money will be available to fund the quasi-public sector and, in the absence of the will to change the formula by which these expenses are funded and a lack of will to reducing their funding, the only alternative is more borrowing.