Week 45

The progress on the Temple is phenomenal.  I wasn't able to take pictures during working hours on Friday, so I didn't see the Big-D employees laboring on the construction, but it was evident on the outside.

The exterior panels are being installed and the underground parking structure is progressing, with the South Parking farther ahead than the North Parking structure.

A fireside is being held on the 26th of June in the Tabernacle, where the man that builds(?) the Moroni statues will speak.  Word has it that Moroni will be installed on the week of the 4th of July.

The red cables will be used to compress the concrete beams that hold up the roof of the parking structure.

The red cables will be inserted in the holes you see here.

The concrete beam will run North and South where you see the green colored rebar.  The red cables will be stretched to hold the concrete in compression.

Top rungs of the ladder that will be inside the West tower.

The yellow columns are the temporary support for the roof of the parking structure.  There will be parking inside (underneath) and on top.

This is the new pole that will connect the temple to the electric grid at 300 S and 100 W.  The power connection will come down the pole and under the street.

This machine drilled the hole under 300 South for the electrical connection.

Close up of the drill bit.

This is the electrical conduit that goes under 300 South.

Is the U.S. economy above or below the long term growth trend?

The 2008/2009 recession in the U.S. is perceived as a deep and painful fall in real GDP.  It is now a common place to show the current estimate of real GDP far below the long term growth trend. Many experts consider the point of complete recovery of the U.S. economy as the intercept with this trend somewhere in the future. This is a wrong assumption. One should exclude the extensive factor of total population growth from real GDP since the total population does not grow at the same rate as before. One confuses real economic growth with demographic fluctuations.  Here we present the history of economic growth in terms of real GDP per capita.

Previously in this blog, we found that real GDP per capita in developed countries grows as a linear function of time. Similarly to classical mechanics, we interpret this linear growth as “inertial” growth. When the population pyramid does not change over time one can write the following relationship for real GDP per capita, G(t):

G(t) = At + C           (1)

Relationship (1) defines the linear trajectory of the GDP per capita, where C=G_i(t₀)=G(t₀) and t₀ is the starting time. In the regime of inertial growth, the real GDP per capita increases by the constant value A per time unit. Figure 1   shows that the annual increment A in the U.S. is practically constant between 1950 and 2010. (All data are borrowed from the Bureau of Economic Analysis.) This plot validates our empirical finding. Overall, 19 biggest developed countries demonstrate the same behavior between 1950 and 2010.

It is time to compare the trends in real GDP and GDP per capita. Figure 2 depicts the evolution of both variables between 1950 and 2010 and also presents the relevant trends. The real GDP curve has an exponential shape as related to the growth in total population. One can easily observe the current deviation from the exponential trend and blame poor economic conditions after 2007.

The real GDP per capita evolves along a straight line. There is no significant deviation from the linear trend in the past 4 years. Moreover, during these years the observed curve returned to the long-term trend.  In this sense, the current downward correction is a natural consequence of the fundamental law of inertial economic growth. One should not confuse economy with demography.  The latter is responsible for 200 per growth in real GDP from 1950 to 2010, i.e. the total population has increased by a factor of 2 since 1950.

Figure 1. Annual increment of real GDP per capita in the U.S. between 1950 and 2010.

Figure 2. The evolution of real GDP and real GDP per capita between 1950 and 2010.

Forecasting S&P 500 returns. Quarterly update

Three months ago we revisited our prediction of the S&P 500 return including the estimate of real GDP for the fourth quarter of 2010. Here, we update our model and include the GDP estimate for the first quarter of 2011 and the monthly closing prices through May 2011. As discussed in our working paper on S&P 500, there exists a trade-off between the growth rate of real GDP, G(t),  and the S&P 500 returns, R(t). The predicted returns, R_p(t), can be obtained from the following relationship: 

R_p(t) = 0.0064dlnG(t) - 0.03   (1) 

where G(t) is represented by the Q/Q (annualized) growth rate, because only quarterly readings of real GDP are published by the BEA. 

Figure 2 displays the observed S&P 500 returns and those obtained using real GDP. As before, the observed returns are MA(12) of the monthly returns. The period after 2003 is relatively well predicted. Therefore, it is reasonable to assume that G(t) can be used for modeling of the S&P 500 index and returns. Reciprocally, current S&P 500 may be used for the estimation of real GDP. The predicted return is lower than that observed in April and May 2011. We can assume that the level of S&P 500 should be corrected downwards or the preliminary estimate of GDP should be revised up.

Figure 1. Observed S&P 500 return and that predicted from real GDP. For a given quarter, all monthly values of the growth rate relative to the previous quarter are equal.  

Provo City Council Raises Garbage Fees 57%, Forces Opt-Out Tax

Congratulations, Provo, your taxes went up again.  And it's worse than you think.

Last month the city council voted 4-2 (5/3 Minutes, Item #7) to raise the fees on garbage collection from $11.00 a month to $14.50 for a single black can.  Councils Turley and Healey were the two who voted against the proposal.

Wayne Parker, Provo's CAO, claimed that the fee needed to be raised to $12.50 to cover costs.  But the liberals and environmentalists on the council then took the opportunity to pursue their own progressive agenda and voted to further hike the cost of black can collection by $2 more to penalize those residents who would not sign up for curbside recycling.  In other words, more than half the increase in cost of black can recycling will go to subsidize the curbside recycling.  Congratulations, Provo, you are now subsiding curbside recycling with tax dollars!

But it gets worse.  After raising the fee by 33% the council also decided to force its citizenry into "purchasing" a product:  no longer will trash collection be opt-in, it's now going to be opt out.  That means you have to submit the form available online at BY AUGUST 7, 2011 or call 801-852-6000 to not have to pay for the curbside can.  Otherwise you're stuck paying for an ugly blue recycling can in addition to your black one.  As Chair Healey pointed out, if you don't opt out, you will end up paying $17.50 for the two cans--an increase of 57% over the $11.00 you were paying!  Sounds to me like a redo of the Obamacare health insurance mandate.

While many longer term residents who are aware of the change and will read through the form mailed to them in with their monthly bill, many students preoccupied with studies will not.  When those not fortunate enough to catch the opt-out tax will be stuck (literally) in the cold with a huge surprise November bill.

The perpetrators of this curbside tax know that they can get unwatchful Provoans to pay the tax.  Currently only 24% of residents have the blue recycling can in addition to their black one.  With the opt-out the city expects to draft 65% of residents into recycling.  They further plan to use the revenues from recycling to propagandize the program (excuse me, "market" they termed it) the program instead of using the funds to subsidize the cost of the curbside recycling.  Just what we need: a government-subsidized "Re-use It Man".

In all, the liberal, environmentalist ambitions of the council were summed by the big-government phrase coined by Council Sterling Beck: "We need to incentivize people to recycle."

Rephrasing Beck's ideology: "Government needs tax its citizens and then use those funds to incentivize people to behave in a manner the government wants them to."  This ideology is nothing but pure socialism and breaks the trust put forth in the Declaration of Independence which gives citizens the right to pursue "life, liberty, and happiness [determination of one's own property]."

Mayor Curtis who as a candidate talked favorably about privatizing garbage pickup, has flip-flopped and now seems more interested in spreading falsehoods and spin about the program on his blog.

Consider the following by Curtis:

• "No one is required to participate." (False.  I am required to take action or else on August 7th I am forced into participation.) 
• "No sorting is required"  (False.  You need to review the Recycling Do's and Don'ts on our city's website.)
• "You'll find you have much more room in your trash can for trash since so much goes into the recycling can." (Pure opinion.  When I had the blue can, it was nearly empty each week.  It probably cost more in labor for the refuse worker to empty the can than in the materials I recycled each week.)

Any entrepreneur who wants to pick up my trash for less than $14.50 a month, please contact me at:  themostsearched@gmail.com to get my business.  If I can't get a taker, maybe I'll just completely opt-out and take the trash myself to the dump:  at SUVSWD it's $4 per covered truckload.

Binary update

If you've been using the iOS port, you'll find that it freezes when changing apps or after receiving notifications.

I'm just posting a quick update to let you know that I've implemented a workaround for that. Download the binary update found here and use that. Also, be sure to import mod_wm so that the workaround is effectively triggered.

As I said, I'll post about the improvements ASAP.

The rate of unemployment in the U.S. may fall to 6% by the end of 2011

As in the previouspost, we refer to our model which links the rate of participation in laborforce, LFP, to the change in real GDP per capita. For short time intervals, one replaced labor force with employment, E, and GDP per capita with GDP. Now we use the rate of unemployment, UE, instead of the employment-population ratio, E/P. Unlike the E/P, unemployment negatively depends on real economic growth, i.e. should fall when dGDP/GDP is large. Thus, we scale the UE in the following way: dGDP/GDPdt = 1.1(8.0-UE), where coefficients 1.1 and 8.0 were estimated empirically.   Figure 1 shows the evolution of dGDP/GDPdt and UE) in the U.S. after 1990. The latter variable is shifted 12 months back in order to fit the peaks and troughs in the dGPG/GDP between 1990 and 2010.

 The overall agreement between the curves is excellent and allows forecasting the UE since the dGDP/GDPdt curve leads by 12 months. Then, the current UE (9.1%) value corresponds to May 2010 in the DGDP/GDP curve. Therefore, the rate of unemployment should fall to the level of 5% to 6% by the end of 2011.

Figure 1. The annual change rate of real GDP, dGDP/GDP, and the scaled rate of unemployment, UE.

The employment/population ratio may rise to 63% by the end of 2011

Our model links the rate of participation in labor force, LFP, to the change in real GDP per capita. The latter leads by two years, and we have successfully predicted the fall in LFP in 2009. For short time intervals, one can replace labor force with employment, E, and GDP per capita with GDP. Figure 1 shows the evolution of dGDP/GDPdt and E/P (employment population ratio) in the U.S. after 1990. The latter variable is reduced by 60% and shifted 12 months back in order to fit the level of dGPG/GDP between 1990 and 2010.

The overall agreement between the curves is excellent and allows forecasting the E/P, the dGDP/GDPdt curve leads by 12 months. Then, the current E/P value corresponds to May 2010. Therefore, the E/P should jump to the level of 63% by the end of 2011.

Figure 1. Annual change rate of real GDP, dGDP/GDP, and the monthly estimated ratio of employment and working age population, E/P.