September 29, 2006
Are mothers working less?
The movement of mothers into the paid workforce has been one of the biggest changes we've seen over the last 50 years. But N.C. State University economist Mike Walden says the trend is changing.
"Just to give you some history and perspective, the percentage of married mothers in the paid labor force rose from only 39% in 1970 up to 71% in the year 2000, but since then there's been a slight decline," he says. "First time in almost 30 years, the rate of mothers being in the paid labor force has gone down from 71% in 2000 down to 68% in 2004.
"Now a lot of questions about why, and there are many possible reasons: One may be related to delayed childbirth. One may be related to women perhaps re-evaluating their role, whether they can balance career and raising children," he adds.
"But regardless we have seen a reversal of this trend for the first time in over 30 years."
September 28, 2006
What's happened to family farms
There's a perception that the family farm is going the way of the horse and buggy. But N.C. State University economist Mike Walden says federal statistics show they are still a prominent part of the agricultural economy.
"They are declining in some areas, but they are still a very prominent part of the agricultural scene," says Dr. Walden, a professor in the Department of Agricultural and Resource Economics. "Now part of it depends on how you define family farm. But if you simply ask who owns a farm -- is it a corporation, or is it an individual family? -- what we find according to the federal government is that 98 percent are still family owned.
"Now, many of them are not run for profit. Some are run as a hobby. Many of them don't rely just on farm income; they rely on family members perhaps having other jobs -- non-farm income," Walden adds. "But they are still a very prominent part of the agricultural scene.
"Even among large farms, they are overwhelmingly family farms. Farms that sell over $1 million in output. Eighty-eight percent of them are still family-run operations."
September 27, 2006
Are housing prices still rising?
People in the housing market, particularly those trying to sell houses, are on the edge of their seats. They've heard many stories about prices actually falling. N.C. State University economist Mike Walden takes a look at what the statistics show about today's housing market.
"The statistics show ... nationwide, on average, housing prices are still rising, but they are rising at a slower rate," says Dr. Walden, a specialist with the North Carolina Cooperative Extension Service.
"For example, in the second quarter of this year, prices were up actually in every state. And they were up 9 percent on an annualized basis," he adds. "In North Carolina, they were right at that average of 9 percent.
"Of course this doesn't mean everyone's house price is up. These are averages, and of course an average means some have more appreciation, others have less.
"What does seem to have definitely changed for just about everyone is the time that it takes to sell a house," Walden says. "Housing market activity has slowed down so it takes people more time to sell a house. And there's a tradeoff there between how long you are willing to wait to sell and perhaps what you do with the price.
"For example, on the coast where the housing market had been very, very rapid, it's very much slowed down, and the time it takes to sell a house has gone up almost 50 percent."
September 26, 2006
Is now the time to buy a house?
Data show the housing market is slowing down. Sales aren't as brisk, and houses for sale are staying on the market a lot longer. While this may be bad for sellers, it can also be good for buyers. N.C. State University economist Mike Walden considers whether now is the best time for a buyer to get a good deal on a home.
"In terms of the price, yes. Certainly sellers are more willing to bargain on price," he says. "We've seen many markets in North Carolina where the prices of new homes for sale go down. Some of our coastal counties' prices have gone down a lot -- touble digits. Other counties, not so much.
"Certainly when you have a slow market the buyer is in the driver seat. Now the problem is that compared to say a year or two ago financing the sale of a new house is more expensive because interest rates are higher.," he adds. "Interest rates are up about a percentage and a half since one and a half years ago, so you really do need a lower price to compensate for those higher financing costs.
"On average you need that price of the house to be about 15 percent lower today than a year and a half ago in order for that to be breakeven, between that and the fact that you have to buy and finance at a higher rate," Walden says.
September 25, 2006
Spending and impact
When trying to gauge an industry’s economic importance, people often look at spending by consumers on the industry’s products. But N.C. State University economist Mike Walden says that’s not always the best way to judge an industry’s impact of an economic region.
“Let’s take the example of car purchases,” says Dr. Walden, a professor of agricultural and resource economics. “If you gauge the importance of the auto sales industry -- where people go to buy cars in North Carolina -- by the dollar value of the cars that are bought by North Carolinians you’d get, I think, a deceptive view of how important that industry is because, and I think most people know this, we don’t manufacture cars in North Carolina.
“So that dealer is, in essence, buying the car from out of state and bringing it here.
Yes, he’s selling it, or she, for that full price, but only a little bit of that price stays with the dealer because the dealer is going to take most of what the consumer spends and send it back to whomever he bought the car from,” Walden continues.
“So this is the difference between using the sales value of, for example, cars as a measure of economic output or using something else where we try to measure what stays in North Carolina. Economists call that value-added.
“And usually value-added is going to be somewhere between 40 and 80 percent of the sales value. And we economists think that value-added is the best measure of the impact of an industry on a particular region.”
September 22, 2006
Can employment and unemployment both increase
Recent economic data from North Carolina revealed a puzzling situation. Both the number of people employed and the number of people unemployed increased during the same month. The same situation was observed in several counties. N.C. State University economist Mike Walden explains how this occurred.
"Well, we are having in North Carolina a situation where jobs are increasing. We’ve seen a fairly good job market … over the last year or two years," Dr. Walden says. "And this is I think causing two things to happen: One it’s causing people to move here. And it’s causing people perhaps to move here who don’t yet have jobs.
"And so when they get here and they are still looking for a job, they can be counted as unemployed. And that can raise the number of people listed as unemployed," he explains. "The other thing that increased numbers of jobs can do is it can cause people who got discouraged three or four years ago when there weren’t jobs, they dropped out of labor market and now the job market is better so they are coming back. And again until they get a job, they will be listed as unemployed.
"So it’s actually very easy when you have an economy that is growing, that is adding jobs," he concludes, "it’s very easy for you to have a situation where in the same month you have the number of jobs go up as well as the number of unemployed folks go up."
September 21, 2006
The economic problem
With the fall teaching semester in full swing, N.C. State University economics professor Mike Walden discusses his view on what he calls "the essential economic problem."
"And most students who come into a beginning economics class, for example my undergraduates, when they think about economics they think, 'Oh, I don’t know, about the stock market, they think about jobs, they think about profits and businesses. And of course those are all elements of economics," Dr. Walden says.
"But I tell them that there is one major essential issue that really economics was created to address, and that is collectively we only have so many resources at any point in time and yet collectively we want to use more of those resources. We want more than what those resources can provide. So the essential economic problem is how to take a small amount of resources and satisfy at least at meet some of those needs.
"So economics fundamentally is about choice.And so we apply those ideas about choice to many areas: choice about jobs, choice about investment, choice about buying," he adds.
"But it’s really, again, about choice."
September 20, 2006
A soft landing
The term ‘soft landing’ is being used a lot in discussions about the economy. N.C. State University economist Mike Walden explains what it means and why economists are using it a lot these days.
“It means for the economy and the economic growth rate … to slow down but without it slowing down so much that we crash into a recession,” he says. “So … think of an airplane coming in for a landing. You want that airplane to land smoothly on the runway; you don’t (obviously) want it to crash.
“Of course, the reason the Fed is trying to slow the economy down is that’s the way they think they can constrain inflation. And inflation has been a problem over the last couple of years, at least in the Fed’s eyes,” Dr. Walden adds.
“So as we know the Fed has been increasing interest rates for the past couple of years. The problem, of course, is they never know the total impact that their interest rate hikes may bring about. It may be enough just to slow down the economy. It may be, on the other hand, too much and we have an economic crash.
“What they want to have happen is a soft landing like we had 10 years ago. In 1996, the Fed did the same thing. We had a soft landing and did not have a recession,” he concludes. “On the other hand, they do not want to repeat 2001, when we did crash into a recession.”
September 19, 2006
The value of tourism
Tourism is big business in North Carolina, says N.C. State University economist Mike Walden, with the latest estimates showing that visitors spend an estimated $14 billion each year here.
“And the tourist industry, when you include all tourist-related activities -- like lodging, food service, transportation, all those things -- tourism employs about 180,000 North Carolinians,” says Dr. Walden, a professor in the College of Agriculture and Life Sciences.
“Now of that $14 billion, of course, all of that doesn’t go to North Carolina folks. For example, if you buy a shirt at the beach that has maybe ‘Topsail Beach’ across it, that shirt may have been manufactured off shore in another country, and so the North Carolina retailer is only getting a small part of that,” he adds.
“So economists who have tried to dissect that $14 billion and say what part of that stays in North Carolina estimate it’s about $8 billion a year -- still a very, very significant contribution to the economy.”
September 18, 2006
Will retailers become bankers?
It’s known that some of the large discounters would like to get into the banking business. Economist Mike Walden discusses why it hasn’t happened yet.
“Of course what we are talking about here is those large big-box discounters who have just about everything -- you can buy anything in their stores. What they don’t have is a bank, at least a bank they own,” says Dr. Walden, a professor at North Carolina State University.
“And the reason they can’t have banks is there’s a federal law right now that says that you can’t mix banking and retailing -– banking and commerce. Now, those large retailers that will go unnamed, however, are lobbying to get that law changed, and what they want to do, I think, is simply expand or complement whatever else they have.
“Plus they know that a large percentage of their customers do not use banks, so they see a market here that they could tap, because if they have a bank right there in the store perhaps they can get those customers to use banking services,” he adds.
“Obviously, such a change in the law that would allow retailing and banking to mix would be opposed by many banks, but some experts think that eventually it will happen.”
September 14, 2006
Will the pause continue?
At its last meeting the Federal Reserve decided not to raise short-term interest rates for the first time in over two years. N.C. State University economist Mike Walden looks at the factors that will determine how long the pause will last.
“Crucially it will depend on how the Fed reads the future economic tea leaves,” says Dr. Walden, a specialist with the North Carolina Cooperative Extension Service. “Now if they believe that the economy is slowing and will continue to slow, I think the pause will last.
“Some even think that if the slowdown is very strong –- that is, if there is a danger we may move into a recession -- we may see the Fed lower interest rates later this year.
“On the other hand, if the economy picks up strength -– and, for example, the last two months consumer income and consumer spending have gone up very strongly –- … then we may see more rate hikes down the road,” he adds.
“I think the betting among economists right now, though, is that this pause will continue.”
September 13, 2006
Has the middle class vanished?
There’s a feeling today that our society has developed into two segments -– the rich and the poor -- with not much of a middle class in between. N.C. State University economist Mike Walden examines whether this perception is true.
“Well, there’s always a problem here,” says Dr. Walden, with “how you define middle class. But if you take all of the income ranges and divide it into three slices – low, medium and high -- what we see over the last roughly 40 years is the percentage of households in the middle-income ranges has, indeed, fallen.
“Now also the percentage of households in the lower-income ranges, they’ve also fallen, too,” he adds. “And obviously what’s left over is the percentage of households in the upper-income ranges. That’s actually jumped quite a bit. For example, the percentage of households earning a real income over $100,000 rose from 3 percent -- only 3 percent -- in the 1960s: they now comprise 15 percent of all households.
“So what has happened is the income distribution has shifted upward, but what has meant is that there is less what some call ‘middle-class glue’ in the middle, holding the two ends.”
September 12, 2006
Is the market responding?
Economists argue that when financial opportunities arise businesses will step up to take advantage of them. Mike Walden says this is exactly the case today with the growing demand for alternative energy sources.
"There’s an old saying that to know where the businesses are you should simply follow the money, and clearly many people today are interested in using environmentally clean, non-oil energy sources," says Dr. Walden, an economics professor at N.C. State University.
"And so a lot of money is actually being invested in those nontraditional energy sources. For example, just last year the investments in these sources increased 62% from $30 billion to $49 billion.
"And a lot of smart business investors –- people like Warren Buffett, Bill Gates and Richard Branson -- are now investing in these new sources and technologies.
"This is again how the market works: When the price of oil has gone up and become very expensive, people and business investors look for alternatives."
September 11, 2006
Cash balance pensions
Many companies are switching to a new type of pension plan called a cash balance pension. Economist Mike Walden explains what these funds are and what they mean for employees.
"It’s a fairly simple idea. It’s where you have a pension fund that is a certain percentage of your annual salary, and so that fund will grow with your salary over time, plus you will have interest added each year," explains Dr. Walden, a professor at N.C. State University.
"It’s also a portable pension fund, meaning that you can move it from job to job, so it’s not tied to any particular job. Then when you retire, what you receive in an annual pension is going to be based on how much money you built up in that cash balance fund.
"So it’s different than a traditional pension, where the company promises to pay you a certain amount for life," he adds. "Instead, the cash balance pension is going to be based on your salary and years of service because those two will determine how much money you will ultimately have."
September 08, 2006
Transportation parts in North Carolina
Recently two companies that manufacture transportation parts announced that they were creating some jobs in North Carolina. N.C. State University economist Mike Walden said such announcements aren't unusual.
"I think it is a sort of unknown secret here, if I can use that term, that transportation parts manufacturing is really a leading industry in North Carolina," says Walden, a specialist with the North Carolina Cooperative Extension Service. "It is a multibillion-dollar industry in the state.
"And I think the reason is we have access to good roads, we have good labor. We also have access to vehicle assembly plants, many of them in South Carolina," he adds.
"Indeed this whole industry has been moving south over the last 25 years. It used to be that all the transportation parts manufacturers were in the Midwest. Well, they have slowly been moving south over the last quarter century.
"So this is an industry where the outlook for the state is very good."
September 07, 2006
Being a small business today
Small businesses still employ most people in the country, and many say small businesses are the backbone of the economy. Economist Mike Walden considers whether today it's easier or harder to be a small business.
"Well, it’s both … and I know that’s sort of a cop-out answer. But let me look at both sides of that," says Dr. Walden, an economics professor at N.C. State University.
"It’s easier on one hand because of technology. Technology is making the management and marketing for small businesses much easier," he explains. "Small businesses now have access to computer programs and Internet programs that allow them to do things that only a few years ago just the big companies could do.
"Also I think in today’s fast-paced world a lot of small businesses can often take advantage of market opportunities easier and better than big companies can because those small businesses can move more rapidly," he adds. "On the other hand, it’s harder because I think competition is harder today, and margins for businesses -– that is, the profit rates -- are much smaller. And oftentimes those big companies can out-compete small companies with lower margins.
"It’s still a tough road for small businesses," he concludes, "but I think there are more opportunities."
September 06, 2006
Who owns the oil?
When people heard about the big profits made recently by large companies like Exxon many envied those companies with their large oil reserves. But N.C. State University economist Mike Walden says private oil companies aren't the biggest beneficiaries of high oil prices.
"Certainly they benefit, but they don’t nearly benefit as much … as other owners –- and we are talking about countries that own the oil," says Dr. Walden, a professor in the College of Agriculture and Life Sciences.
"In fact, country-owned oil companies account for 90 percent of the ownership of the known oil and gas reserves. And we have examples like the countries of Saudi Arabia, Iran, Kuwait, Venezuela and Russia.
"These are countries that actually own the oil companies in their countries. So they are obviously getting rich.
"In fact, Exxon -- which is one of the biggest private owned oil companies -- they ranked only 14th in the world in the value of oil companies," Walden adds. "So when we see the price of oil rising, it’s really those nationalized companies and countries where there are big oil reserves –- they’re the ones that really benefit the most."
September 05, 2006
How the pause in interest rates will help you
Recently the Federal Reserve decided at least to pause in its increase of interest rates. N.C. State University economist Mike Walden considers how this will this impact consumers.
"One big group it will help … will be those people with adjustable rate mortgages -- ARMs, so called," says Dr. Walden, a specialist with the North Carolina Cooperative Extension Service, "because this will mean the rates on those mortgages will stop rising, at least for now. That will be very helpful.
"Another group that might want to look into this is investors, who may want to go ahead and lock in interest rates on things like CDs [certificates of deposit]. The expectation may be that we could see a decline in interest rates later this year," he adds.
"Now many credit card rates are tied to the prime lending rate, so those will stop rising because the prime rate tends to go up when the Fed raises its interest rates," Walden says.
"Probably car buyers aren’t going to be helped because the rates there are already tied to incentives, but it could make those incentives more generous."
September 04, 2006
Teachers and pay
School districts and states all around the country are trying to attract and keep good teachers. Many say that good salaries play a big role in getting good students to go into the field of teaching, and N.C. State University economist Mike Walden says that there's evidence to support the claim.
"We have a new study that looked at the qualifications of students going into teaching between the years of 1989 and 2003, and what it found was that an increase in the starting pay of teachers was positively related to the aptitude of students going into the teaching field," says Dr. Walden, a professor of agricultural and resource economics. "That’s one reason why I think in North Carolina there’s been so much focus on the beginning pay of teachers."
"But -- big 'but' here -- the study also found that the possibility of higher pay in other fields outside of teaching worked to reduce the quality of students going into teaching," he adds. "So those in the teaching profession not only watch their pay, they watch the pay of others."
September 01, 2006
Why high energy prices haven’t killed the economy
The price of oil has more than doubled from $30 a barrel to $75 in the last three years, and yet the economy is still on its feet. N.C. State University economist Mike Walden explains why the economy crashed as it did in those previous years when the price of oil spiked.
"Those years were 1974, 1979 and 1990 … when the price of oil also jumped and yet we had a recession that followed. The reason we haven’t had a recession, at least yet today, apparently is a difference in timing.
"In those previous episodes, the hike in oil prices was very sudden -– occurred over only a couple of months. This time it’s taken much longer.
"We’ve had a steady rise in oil prices over three years. Now with more time, the economy has been able to adjust and look for at least partial ways around the high price of oil.
"This doesn’t mean we are out of the woods. If something dramatic happened -- for example, in the Middle East or North Korea -- and we had a very rapid run up in oil prices over a short period of time clearly that could send us into a recession."