July 30, 2009
Today as I write this at 1:08 pm the S and P is up by 18 points and the Dow by 163 points in New York . This after two previous days of sharp falls where the bears were on the prowl. So for the foreseeable future the market may well rise provided the data and earnings announcements are positive and beat expectations or it may well fall if the reverse is true. Not a place for those who don't like risk and stomach churning sharp turns and twists. If the GDP data in Canada and the U.S. to be released tomorrow is on the positive sides expect the markets to rise sharply. If, on the other hand the data is disappointing except a sharp fall. In other words a discontinuous function with a sharp rise or fall in response to the information shock. On the other hand if the news is mixed the reaction will be moderated.On the whole if I were to guess, and it is a guess I would bet on the news being positive in the U.S. and hence a rising market. But we shall see.
The Wall Street Journal today contained some fascinating stories on the Obama stimulus by Louise Radnofsky and Christopher Conkey eg. "State aid is said to be moving faster"and problems the government is having with spending the money quickly enough to have its desired effect. This is very important because we already see states like California and Connecticut and others announcing budget cuts and tax increases-the worst possible policies in a deep slump. President Obama has apparently been urging that government departments cut red tape and needless delays to expedite the expenditure of the money. That is good but clearly more needs to be done.
According to the Journal as of this month of the 787 billion allocated to the stimulus 288 billion has already been spent on various tax cuts though possibly not all yet distributed but only 60 billion of the remaining 499 billion has been spent on programs including infrastructure. The U.S. Federal government intends that by the fall of 2010, 70 % of the funds will have been spent and distributed, including 8.8 billion in unrestricted transfers to states to help them with their general revenues along side some 50 billion targeted and tied to education expenditures.
Anything that can be done to expedite expenditures and get the money circulating in the economy should be done as soon as possible.The Journal also has on its site a table which breaks down the stimulus by state and also gives the unemployment rate for each state.
This shows that a number of states with highest unemployment rates are receiving smaller per capita stimulus injections than a number with much lower rates.
Without further analysis it is difficult to tell why that is so. Part of the explanation may be because some of the funds have been allocated on a non per capita per state or per program basis and small states in terms of population benefit from that; other plausible explanations include the time honoured one of politics and lobbying. Whatever the explanation the data is very interesting and desrves further rank order correlation study to see if the differences in ranks are statistically significant.
The most glaring anomalies appear to be South Carolina which is receiving along with South Dakota (the highest being Alaska at $1545, unemployment 8.4 %) the second highest per capita stimulus $1087. South Carolina has a very high rate of unemployment 12.1 % whereas South Dakota a much lower one 5.0 %.The state with the highest rate of unemployment Michigan at 14.1 % is only receiving $609 per capita.
Among the 13 states with unemployment rates above 10 % the per capita expenditures range (except for two , Rhode Island at $989 and South Carolina at $1087) from a low of $505 for Florida to a high of $690 for Tennessee. Other anomalies include North Dakota with 4.4 % unemployment receiving $1129 per capita and Wyoming with 5.0 % unemployment receiving $1074 per capita. Here I suspect specific infrastructure programs with an irrigation, water control or agricultural dimension and small population play a role.
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