Take Me Out to the Ball Game!

With opening day beginning tomorrow, the summer season kicks off with the return of baseball, "America's" sport. With the stock market continuing to impress and the economy continuing to improve, does this mean more consumers are going to head out to the ballpark?

In a study done by analysts at ConvergEX Group at opening day of 2012, they found an interesting correlation: history shows that Major League Baseball attendance mirrors that of consumer confidence. In other words, if the numbers of people attending the ball games are rising, consumer confidence is high- an indicator that the economy is doing well.

Up until 2012, the attendance at baseball games had been declining since 2007. Numbers have not reached the all-time high attendance of 32,770 people set in 2007.

Looking at the teams with the highest ranked attendance at home (Philadelphia Phillies, New York Yankees, and San Francisco Giants), in 2011 their average attendance were as follows: 45,440, 45,107, and 41,818 respectively.

In 2012, the Phillies attendance average at home declined to 44,021, the Yankees dropped to 43,733, and San Francisco actually dropped to fourth place, but only slightly dipped with an average of 41,695 attendants at home games.

From 2011 to 2012, the average number of attendants dropped, but then again, consumer confidence had declined in March 2012 due to lower employment expectations and a less favorable short-term outlook.

So what does that foreshadow about baseball season attendance for 2013?

The Conference Board released the new Consumer Confidence Index on March 26 and although consumer confidence rose in February, the Board reports it has since declined.

The index has dipped 8.5 points.

Lynn Franco, the Director of Economic Indicators at the Conference Board, says the reason for the decline comes from a decline in expectations. Expectations with, for example, the recent sequester in Washington. It has created uncertainty regarding the economic outlook, thus making consumers more uneasy about their spending.

This decrease in consumer confidence does not bode well for the upcoming baseball season. If consumer's are not confident in spending on pastimes, baseball attendance will again decline further.

Looks like we will all be Root Root Root-ing for the home teams from our nice (and way cheaper) living rooms until we feel better about our economy. Sorry Derek Jeter, but you're on your own.

-Katie Ackell

SOURCES:
http://www.conference-board.org/data/consumerconfidence.cfm
http://espn.go.com/mlb/attendance/_/year/2012
http://articles.marketwatch.com/2012-03-27/economy/31243075_1_consumer-confidence-confidence-readings-lynn-franco
http://usatoday30.usatoday.com/money/story/2012-04-14/baseball-economy/54168920/1

Easter Indulgence

Easter is, not surprisingly, the second biggest holiday in terms of sales volume of candy. 77 percent of Americans identify themselves as Christian, and an even larger 88 percent of parents make Easter baskets for their children, as 9 out of 10 people who celebrate the holiday purchase candy. 

The Easter-candy association is a relatively new one, in comparison to the age of the holiday.  It dates back to the 1800s, when European candy-makers first started making chocolate eggs for the occasion.  In the 1900s, industrialization allowed for manufacturers to mass-produce novelty candy.

In 1998, candy sales totaled $940 million.  In 2000, that amount skyrocketed to $1.9 billion.  In 2012, the number was slightly higher at $2.1 billion.

It is estimated that the average American celebrating Easter spends $145.13.  A whopping 180 million eggs were purchased for dying and decorating in 2012, and an estimated $17.2 billion are estimated will be spent in the United States on Easter in 2013.

2012 was declared to be the best financial year for the always-popular Peeps brand.  Over 700 million candies were sold in 2012, making them the most popular non-chocolate holiday candy.  Owned by Just Born Inc., 2 million Peeps are made everyday, each batch taking only seven minutes to make.  The brand has expanded into other holidays, making festive Valentine’s Day and Halloween shapes, along with their bright pastel sugarcoated marshmallow bunnies and chicks.

Another holiday staple, 90 million chocolate bunnies are produced every year.  Americans down 16 billion jelly beans too during the spring Easter season, enough to either circle the Earth three times if lined side-by-side or to fill a nine-story office building.  And who could forget the Cadbury Crème Egg—300 million of Cadbury’s 12 varieties will be produced this year.

Emily Spanyer

http://www.cnn.com/2013/03/29/living/easter-by-the-numbers/

http://www.saveur.com/article/Kitchen/The-History-of-Easter-Candy

http://www.examiner.com/article/peeps-celebrates-easter-with-news-of-most-profitable-sales-year-yet

http://www.forbes.com/sites/nadiaarumugam/2013/03/27/jelly-beans-which-color-is-most-popular-at-easter-why-we-love-colored-foods/

Some Economics of Gay Marriage

The Supreme Court's decision on whether or not to uphold Proposition 8 has been at the forefront of many American minds over the past few days.  As the debate rages in Washington, citizens across the country are mulling their own philosophical and moral views as they relate to gay marriage, neither of which can be grounded in any true "facts."

Economically speaking, however, there are arguments to be made that do rely on concrete numbers.  So, let's have a look at what it could mean for the economy if same-sex marriage is recognized by the government.

Perhaps the most direct and immediate consequence would be a massive windfall for the marriage and divorce industry.  Forbes predicts that the 800,000 same-sex couples who already live together could add as much as $9.5 billion to those industries from things like wedding gifts, receptions and catering, and honeymooning.

Cities and states could also find some benefits.  New York City reported a revenue increase of $250 million when gay marriage was first allowed there.

Many companies have already seen and embraced the economic realities of gay partnership.  Many of the world's biggest companies know they must find the best talent for their companies.  As far as they are concerned, one's sexual orientation has nothing to do with their ability to be a competent employee.  Many of the HR packages and company benefits at firms are already extended to gay partnerships where gay marriage is still banned.

This may be the most compelling economic argument of all, as companies are only worried about their bottom line.  Economically speaking, it is in a company's best interest to attract the best and brightest, regardless of their sexual status.

Other changes include the benefits that traditional marriages enjoy now.  These include joint insurance plans and social security benefits.  Both of these would benefit gay couples, leading to more available disposable income.  And disposable income is often considered a driving force of the economy.

As the Supreme Court justices deliberate over their decision, which is scheduled to be handed down sometime this summer, they will be considering constitutional precedent over bottom lines.  But, many in the world of economics (which is really all of us...) may be looking forward to another positive jolt if Proposition 8 is struck down.

- Harrison Tucker



Sources:
http://finance.yahoo.com/blogs/daily-ticker/why-gay-marriage-good-economy-132309024.html
http://www.forbes.com/2009/06/15/same-sex-marriage-entrepreneurs-finance-windfall.html

Unpaid internships: A raw deal?

By Courtney Ridenhour

I recently stumbled across a year-old series of articles in The Atlantic critiquing the merit of unpaid internships and laying out the economics behind them. Given the time of year, it seemed an appropriate topic.

In the articles, the author, Derek Thompson, asked readers to share their opinions on the subject. The first article focused on the negative, underlining several key ideas: the effects of family income on ability to work, the economic inefficiencies of unpaid internships, an inflated labor supply and the resulting lower wages, and the implications of free labor.

In the second article, those who responded called unpaid internships “better than college.” The primary takeaways were the following: unpaid jobs are like free training, they are an economic reality, and the agreement is, ultimately, economically sound.

I agree with the point that unpaid internships inherently limit the field of applicants – without grant money, a fair number of people cannot afford to accept an unpaid internship, in spite of the experience gained.

Experience, in this case, is the currency. Thompson pointed out quite correctly that the economics of unpaid internships is not a market failure. Students want experience; they are willing to exchange their labor for nothing (monetarily, of course).

I would argue experience is a non-market good. Sure, it is a bit of a raw deal to not make a dime for all your work, but you still maximize your utility, as does the firm.

I too have done an unpaid internship – one reader referred to them as a “rite of passage.” What did I get out of the deal? Real world experience – something no undergraduate program can perfectly imitate (although they may get very, very close). Did I wish I were getting a paycheck? Of course, who wouldn’t? But, at the end of the day, the payoff was much greater.

Read the articles here: The Atlantic

Natural Gas Engines- An Economic and Environmental Fix

Cars running on oil not only use up this natural resource, but also produce significant greenhouse gases.  So what's the fix? Natural gas engines. Natural gas would save auto owners money while simultaneously reducing the negative environmental impact of driving. Many trucks and delivery companies have already began to switch, but the trend needs to continue.

 If natural gas is cheaper and more environmentally friendly, then what's holding people back? The steep price tag of a car running on natural gas. These cars are thousands of dollars more expensive up front, and especially in this economy, people are hesitant to make that commitment, even if they will benefit in the future. Public policy incentives could help fix this problem and give consumers the encouragement they need to make this change. Economists believe this will decrease recessions based on changing oil prices, while reducing emissions and pollutants. 

Cars running on natural gas are so much more expensive because they have a much heavier engine. The only natural gas passenger car in the U.S. is made by Honda and costs more than $5,000 more than the basic model. With these hefty prices people are wondering if this is even a realistic option, or if it's simply idealistic. Some countries, including Pakistan and Iran have made the switch, so it is possible, but most likely won't happen in the U.S. anytime soon. Companies such as 3M Corporation and Chesapeake Energy Corporation are working to bring down costs, and if successful, more of these vehicles would sell and according to the economies of scale theory, the prices would decrease. 

Even if prices are decreased, there will still be a consumer fear of the unknown and safety concerns. We are definitely only in the beginning stages of this idea, but it could provide huge economic advantages and help decrease the damaging pollutants our cars are now releasing into the environment. 

Annie Howard

Sources: http://online.wsj.com/article/SB10001424052702304192704577406431047638416.html?mod=hp_jrmodule

Breaking from the Narrative

Steve Hagey, the Bank of America executive, made a good point during his talk to our class. He spoke of an incident in which a reporter took some comments out of context, and spun them in a negative way. Mr. Hagey noted that reporters often do not want to “break from the narrative.”

With regards to the financial crisis, the narrative is that the big banks are villains that drove our country into recession. And while the large investment banks did take unwise risks that lead to large losses, the cause of the financial crisis is much more complex, with many more players involved. Policies stemming from both the Clinton and Bush administrations facilitated financial deregulation and encouraged too many people to pursue homeownership. Mortgage companies were giving out loans without proof of assets or income, and individuals were taking out mortgages they could not afford. But the banks were by far the most vilified throughout the crisis; the steps they took to rectify the situation were seldom reported on because journalists were hesitant to break the narrative that the banks were the villains.

While it is troubling that the causes of the financial crisis were not fully and accurately reported on a wide scale, this instance of not wanting to break from the narrative highlights a larger problem. The public can sometimes rely too much on what they hear from the mainstream media and take it as absolute fact. The backlash against the banks, and the failure to recognize larger systemic problems, has illustrated a degree of ignorance in the American public. I think it’s important that the American public understand the full story,

Actually educating the American public on complex matters like these is difficult; for most people, their main source of information is the mainstream media, and most people do not have the free time to extensively research these topics on their own. It then becomes imperative that journalists report stories without bias or spin. As we known, that is often difficult.

In highly publicized and controversial stories, journalists face a dilemma. On one hand, there seems to be pressure to paint a certain picture, to establish a narrative. This makes for a good series of stories. On the other hand, journalists have a responsibility to the public to provide the most complete and accurate information. This can often take the edge out of stories, and put more pressure on the public to come to their own conclusion. It seems that this responsibility is often at odds with the pressure to establish a certain narrative.

There is no easy solution to reconcile these conflicting pressures. The responsibility falls on both sides; the American public must hold journalists to a high standard and demand an unbiased approach to stories. Journalists must recognize and respect their duty of accurate reporting. But actually reaching this resolution is easier said than done.

Alex Gannon

The end of cruising?

Though the issues on board the Carnival Triumph last month received more publicity, three other Carnival cruise ships, the Dream, Elation, and Legend, have had issues in the past few weeks. The Legend is currently having technical difficulties that are affecting its sailing speed, the Dream lost power on Wednesday in St. Maarten and all passengers are being flown back to Florida, and the Elation had a malfunction in its steering system on Saturday.
While the crisis communication team for Carnival was able to hold off on many reporter's questions two weeks ago about the Triumph, could they do the same now given the new incidents? There would obviously be the same cookie-cutter answers about an 'ongoing investigation', but since the issues seem much more wide spread now, it begs the question, will Carnival have to make drastic changes to its fleet of ships and the way it operates?

Economically, Carnival must be prepared to take a hit. Cruise takers might have been nervous, but not completely turned off by the idea of a cruise vacation, after the nightmare situation aboard the Triumph. But after this string of technical issues and power losses on the ships, will people still consider going out to sea with Carnival? Or for that matter, any cruise company?

Carnival shares fell 2% on Friday after the company announced a bleak outlook for sales and profits this year. Carnival is now down 5% this year, though the stock market seems to be soaring. Carnival's competitor, Royal Caribbean, also saw a fall in stock on Friday after the company announced that more than 100 people were suffering from norovirus on one of its ships.

If a cruise vacation starts to be seen as a gamble, I wonder if other relatively inexpensive vacation destinations, like Florida or Myrtle Beach, will start to see more visitors and more profit.

-Emily Mosh

Only Time Will Tell

Ten days ago the Dow Industrial Average closed at its highest level since 2007, 14,127.82—mere points away from the record close at 14,164 on Oct. 9, 2007. 

Seven days ago 17 of the United States’ 18 biggest banks passed the Federal Reserve’s latest stress test.  The 17 were deemed strong enough to survive a serious market crash or an economic recession.

Six days ago the US Bureau of Labor Statistics released the February unemployment rate—it dropped to 7.7 percent from 7.9 percent in January, the lowest level since December 2008.  The Labor Department also revealed that 236,000 jobs were created.

This morning, numerous business news sites released stories stating that home foreclosures were down a dramatic 25 percent in February 2013 in comparison to February 2012.

Minutes ago, the S&P 500 closed at its second-highest rate, 1,563—only two points behind its all-time closing high.  Similarly, Nasdaq closed at its highest level since November 7, 2000 at 3,259.

All of these factors beg the question—is the economy doing better?  Are we out of the woods?

The overwhelming answer seems to be “yes, but…”.  Consumers and businesses remain cautious but optimistic about the future of the American economy.  These factors combined indicate an economy that is bouncing back in earnest, since the recession of 2008.  However, the severe ways in which families were hurt when the housing bubble occurred causes most Americans to be cautious.

At the end of February, Dow Jones released the results of its Economic Sentiment Indicator.  Scored on a scale of 0 to 100 (higher numbers revealing more positive sentiment) and based off of a selection of 15 newspapers reporting original reporting on economic issues, the score increased in February to 49—its highest score since December 2007.

Ann Battle Macheras, Vice President of the Research Department for the Richmond Federal Reserve Bank, expressed this sentiment well, in an interview in January.  She thought that Americans saw the growth occurring in recent months.  They were, however, still cautious.  Although all of these indexes and statistics point to growth, there are still other factors to take in to account—the unknown impact of sequestration that just went into effect, for example.

The growth since the recession in the late 2000s has been slow, so it seems that only time will bring further growth and greater confidence in the American economy.

Emily Spanyer 

http://www.nasdaq.com/article/economic-sentiment-index-gain-projects-solid-if-unexceptional-recovery-20130228-01125#.UUJrgrvLi5I

http://money.msn.com/top-stocks/post.aspx?post=6cd1863c-366d-4f1b-a30a-19151c98eb80

Student debt: The next economic bubble?

Move over real estate, there's a new debt issue in town: student loans. 

Over the past ten years, tuition at private, nonprofit, four-year colleges has risen 60 percent. It only gets worse at public four-year colleges; the average cost here over the past 10 years has risen 104 percent.  The overall price for a college education for the 2012-13 school year rose to an all-time high: on average, in-state public college tuition costs $22,261. 

These rising costs, paired with a floundering economy, high new graduate unemployment rates, and increased costs of living all spell one thing for the average student: debt, and plenty of it. 

Three quarters of graduates leave college with $25,000 worth of debt. 16.5 percent have close to $50,000 in debt. The numbers continue to escalate, until you come to the uppermost bracket: 2 percent of borrowers with $150,000 or more in student loans debt. 

It's not just students who are taking on these debts, either. Parent borrowing is up 75 percent in the last seven years, with each family taking on an average of $34,000 in loans per child, according to a 2012 study by the National Association of Bankruptcy Attorneys. 

With all of these debts, families and new graduates are having to allot major portions of their salaries to make monthly payments. It's recommended that you take out no more in student loans that you will make in the first year of employment. Given that the average new graduate makes $44,259, that means that a full quarter of students have taken on an overwhelming amount of debt. 

It's possible that they will manage to make those payments, cutting down on cost of living in myriad ways to save money. It's also possible, though, that they will follow the new trend: delinquent payments.

Delinquent, or late, payments are becoming the new normal. Student loans taken out after October 2010 have a delinquency rate of 15.1 percent, a 22 percent increase over the last five years, according to a recent FICO study. On average, these payments are more than 90 days late, indicating that this delinquency may soon turn into bankruptcy.  

Delinquency has an adverse affect on credit scores, which are crucial to receive other loans, make big-ticket purchases like cars or homes, or start businesses. Graduates' inability to pay now will affect their future, as well as that of the entire economy. While the full effect of these loans has yet to be felt, the magnitude of the problem will only increase as average student debt continues to rise. 

Ashley Astolfi

Sources:

Tuition at public colleges rises 4.8%

How much student loan debt is too much?

Good news at last for new graduates

More evidence on the student debt crisis

Student debt and the economy

Low unemployment rate is not satisfactory enough

February's jobs report surprised everyone: amid the chaos of sequestration, U.S. employers still added 236,000 jobs and the unemployment rate dropped to 7.7 percent. It was the third time in four months that payroll growth exceeded 200,000 and the unemployment rate reached its lowest level in four years.  

Especially, all segments of the private sector added jobs, now averaging more than 203,000 additional jobs per month. The wide range of added jobs across industries signals economic recovery and growth. Moreover, Phil Izzo from the Wall Street Journal said the unemployment rate without government job cuts would be even lower, at 7.1 percent, since the government has cut 750,000 jobs since June 2009.

However, some experts still hesitate to consider the 7.7 percent as a progress. Fear and uncertainty still reside behind the good news.  

According to Ben Casselman from WSJ, a part of the drop in the unemployment rate was driven by the shrink of the labor force. More job seekers gave up on job searching and long-term unemployment rose in February. Meanwhile, gains in employment were caused by part-time workers.

Being positive is not the main question, but the question is whether this trend would be sustained. What just happened would probably be another short spurt and we might have to observe sluggishness in later months, again.

In addition, the Fed won’t stop its quantitative easing anytime soon, since the labor market hasn’t seen sustained employment growth. Jon Hilsenrath from WSJ wrote, “When Federal Reserve officials next meet later this month, they no doubt will welcome recent job-market improvements, but they also will want to see more.” The central bank expects several more positive job reports before raising short-term interest rates and discontinuing the injection of $85 billion per month into the market.

Lastly, the sequestration, meaning reducing the size of the public sector, would definitely cut jobs and push up the unemployment rate in the near future. Sequestration also lowers the output growth rate: stagnant output growth hardly supports jobs growth.


So for now, we may not contemplate the job market’s success in February for long. We need to head right back to work against the sequestration and do the difficult job of sustaining the low unemployment number.

By Clara Tran

The Dangers of Gridlock

Perhaps the biggest economic story of the past several months has been the debate over the fiscal cliff and the sequestration. The fiscal cliff refers to the sudden decrease in government spending and increase in tax cuts that could have potentially gone into automatic effect on January 1, 2013. The sequestration refers to a series of automatic spending cuts that went into effect on March 1, 2013; these cuts are split evenly between defense and discretionary programs such as Social Security. The fiscal cliff and the sequestration were initially put into place as solutions to the growing concern over the large U.S. budget deficits; the cuts were deemed to be so severe that politicians would be forced to settle on lesser spending cuts and tax increases to avoid a possible economic crisis.

There has been a great deal of controversy surrounding the inability of Congress to effectively resolve these issues; the fiscal cliff was barely avoided by simply by further delaying the spending cuts and tax increases, while the sequestration was allowed to pass. Both Republicans and Democrats have been criticized for prioritizing their political agendas above the economic well being of the nation. However, I believe the fiscal cliff underlies a much more troubling issue; the government continues to tackle the tough economic issues by simply “kicking the can down the road,” a method that has effectively bankrupted southern Europe. Instead of coming up with real solutions, manufactured crises have been put in place instead.

As an economic superpower, we have the economic wherewithal to sustain such programs for a considerable period of time. However, there will come a point at which the economy will suffer severely from our mounting budget deficits, as well as the rapidly rising federal debt. The concept of living within our means seems to have disappeared; instead, each side of the debate seems to have a sense of entitlement that dangers our future. Critics on the left believe that the less fortunate deserve more federal support, and that it must come at the expense of the wealthy. Critics on the right believe that everyone is absolutely entitled to their income and should not be compelled to give it away. The reality is that there are no absolutes in this debate, and the only way to reach a solution is for both sides to make concessions. Until politicians own up to the harsh realities of our economic situation, we could very well find ourselves in the same situation as Greece.

Alex Gannon

Is the Future Bleak?

As graduation fast approaches for Washington and Lee University seniors, like myself, the impending doom of the job search continues to haunt our every dream. Although many seniors have been blessed jobs from all over the country and world, there are still many of us hoping to make those childhood dreams come true in finding the "perfect job".

But are we going to be stuck serving coffee at Starbucks or selling hot dogs at baseball stadiums for the rest of our lives? Is our college degree all of a sudden worth as much as our high school one? With the recent economic scares of "sequesters" (budget cuts) and the up and down of the stock market, nothing seems sure anymore.

Most recently, a new study has emerged revealing many Americans have now become over-educated for the jobs that are available to them outside of graduating.

In a study released Monday by The Center for College Affordability and Productivity, researchers found that an increasing number of college graduates are ending up in low-skilled jobs that in years past had been reserved for those unable to achieve higher learning.

For example, the Bureau of Labor Statistics reported that about 48 percent of employed U.S. college graduates are in jobs that require less than a four-year college education.

Researchers are seeing this trend because as the number of college-graduates continues to grow year after year, the number of jobs available in the labor market has remained relatively the same.

Richard Vedder, who directs the Center for College Affordability and Productivity, argues that "a growing disconnect has evolved between employer needs and the volume and nature of college training of students."

The study looked more specifically at an example of taxi drivers and firefighters and reported that in 1970, less than one percent of taxi drivers had college degrees and fewer than two percent of firefighters. Now, more than 15 percent do in both jobs.

So what do all these statistics mean for us college graduating seniors still on the hunt for a job? It is not going to be easy. But as the saying goes, it will be worth it.

We have thankfully been granted the amazing opportunity to graduate from such an esteemed institution that holds a high reputation for many employers.

The percentage of graduates employed after 6 months out of Washington and Lee (classes 2004-2009) is 61 percent, while 27 percent were doing graduate studies or fellowships. So the future does not seem as bleak as once was.

So although the number of jobs continues to dwindle, the diploma of Washington and Lee will hopefully give us a head start in front of the competition.

Eventually, we all find the path we are supposed to take for our futures and while some of us may make millions on Wall Street, discover the cure for cancer, or go on to start new businesses. Others of us may find that perfect happiness in making lattes.

-Katie Ackell

Sources:
Washington and Lee University, Career Development Center
Center for College Affordability and Productivity