Author: Bill Conerly
Dr. Bill Conerly is the principal of Conerly Consulting LLC, which helps business leaders make more profitable decisions through a better understanding of the economy. He holds a Ph.D. in economics from Duke University. He was previously Senior Vice President at First Interstate Bank. Dr. Conerly is the author of Businomics, published by Platinum Press in 2007. He is also co-author of Thinking Economics, a high school textbook used in 24 states. Two of his articles are required reading in graduate courses at MIT and Wharton. Dr. Conerly is chairman of the board of Cascade Policy Institute, a member of Oregon Governor Ted Kulongoski’s Council of Economic Advisors, and a Senior Fellow at the National Center for Policy Analysis.
Posts by Bill Conerly:
Posted on 19. Aug, 2012 by Bill Conerly.
Longevity: How Long You’ll Live and What Will Kill You
Fortune Magazine published this great chart. You can read the commentary, but like all great charts, this one speaks for itself.
Posted on 13. Nov, 2011 by Bill Conerly.
The European Financial Crisis and U.S. Financing Opportunities
The European financial crisis has sent jitters around the world. For corporate financial managers in the United States the crisis raises questions about the availability of credit for mergers and acquisitions, operating lines and other purposes. So far it appears that credit availability is good for firms with strong financials, though companies with marginal strength are still having difficulties securing loans.
Some signs of financial stress have been pushed upward, but by a surprisingly small magnitude. To gauge this, the following table shows various indicators of financial stress. The first column numbers are the average prior to the worst of the financial crisis, in the fall of 2008. The second column shows the worst of the crisis, the third column the post-crisis low, and the final column the latest available.
Posted on 08. Nov, 2011 by Bill Conerly.
Banks More Willing to Lend
The latest data from the Federal Reserve Survey of Senior Loan Officers show that banks continue to loosen their credit standards and narrow their interest rate spreads on commercial and industrial loans.
The chart shows the percentage of banks that say they are tightening minus the percentage that say they are easing credit standards. Thus the negative numbers we’ve seen lately indicate more easing than tightening. There is no way to gauge the magnitude of the tightening/easing actions, just the number making a change in a given direction.
Posted on 01. Oct, 2011 by Bill Conerly.
How Are Consumers Able to Keep Spending?
Yep, consumers continue not only to spend, but to increase their spending in most months. Here’s the latest data:
Over the past 12 months, total consumer spending has increased 4.5 percent. I hear people say that consumers are maxed out on credit, no longer can dip into housing equity, and don’t have jobs. So how can they spend?
Keep in mind, first of all, that our 9.1 percent unemployment rate works out to a 90.1 percent employment rate. Double check my math if you like.
Posted on 31. Jul, 2011 by Bill Conerly.
The economy is certainly weak. The latest report on GDP showed sub-par growth in the second quarter. Revisions to past data, which occur every summer, showed that the first quarter was even worse than we previously thought. Here’s a comparison of GDP growth rates, with “old” indicating the official data as released prior to today, and “revised” indicating the new view. I’ve highlighted the significant differences.
Looking at past history, the recession was worse than we previously thought–not a surprise, really, when you think about the sharp decline in employment at the time.
The bigger surprise is the downward revision of first quarter 2011, as well as fourth quarter 2010. The latest monthly numbers show us slumping, and this data release confirms it.
Where are we going from here? I continue to think that the time lags on monetary policy are long, and thus the benefits of the Federal Reserve’s quantitative easing will be felt in the second half of the year.
Note on the statistics: the government revises official statistics periodically because … it really does not know everything. Early announcements are based on surveys of a sample of companies and people, plus educated guess-work. Over time, more tax returns are files, informational returns are filed.%
Posted on 26. May, 2011 by Bill Conerly.
Seth Godin has a stunningly useful commentary on books, libraries and librarians.
“The librarian isn’t a clerk who happens to work at a library. A librarian is a data hound, a guide, a sherpa and a teacher. The librarian is the interface between reams of data and the untrained but motivated user.”
I learned this truth too late in life. The librarian is not the keeper of the book warehouse, but is a knowledge guide. Let me take it one step further and apply Seth’s concept to education.
In the medieval university, books were scarce and expensive, far too scarce to expect every student to buy a half dozen textbooks. So professors lectured. It was a cost-effective way to transmit information.
Today, most professors still lecture. Not just in seminars covering rare information, but in basic courses taught in every college in the world: introduction to economics, first year chemistry, Calculus I, etc. Think about that. There are books covering everything said in the lectures. There are videos of great professors lecturing on the common topics. It’s a colossal waste of time for every professor to lecture.
Most anything can be learned by a dedicated person studying on his own. However, most of us do better with some structure, and efficiency calls for a guide to the material and a person to answer questions when we get stuck. That should be the role of the modern professor. Design the body of material to be studied for a particular course. Recommend reading, videos, exercises, problems and projects that will help students. Be available to help students who get stuck. Ask stimulating questions. Promote discussion. Evaluate student performance, and advise on how much progress is being made. The teacher becomes a consultant.
One great teacher, Soo Bong Chae, opened a class I was in with these words: “I am a teacher, but I do not teach. You learn.”
It’s time for education to step out of the medieval era and heed Seth Godin’s words.
By Bill Conerly
Posted on 17. May, 2011 by Bill Conerly.
Economic uncertainty is only one significant issue facing the telecom industry now, but it intertwines with the technological changes and social changes that are causing so much turmoil in the industry. Once the path for consumer and business spending is defined, the other changes affecting the industry will fall into clearer focus.
Consumer spending is reviving and now exceeds its pre-recession peak. Consumers were slow to get going after the financial crisis and even now are being conservative. Key to the growth is the increase in consumer incomes. That’s surprising to many given the weak employment numbers, but there is solid explanation for rising incomes. First, hours worked per employee has risen since the depths of the recession. Second, those with jobs have earned pay raises averaging about two percent per year. Third, taxes as a share of consumer income have fallen in the past two years, partly for stimulus policy and partly because lower incomes are subject to lower tax rates. Finally, we’ve actually enjoyed job growth in recent months, with the employment count about one percent higher than a year ago. So consumers have more money than they used to.
Consumers are being prudent with their extra income. About 88 cents out of every additional dollar of take home pay is being spent, with 12 cents going into savings and paying down debt. The average savings rate is about six percent now, so the practice of saving 12 percent of additional earnings will raise the average savings rate over time. This is sound financial practice for most households. Although more money is going into savings, more money is also going into spending. That ensures that the current economic strength will continue.