Saturday, February 28, 2015

The Law of Comparative Advantage

By Murray Rothbard

Even the most hostile critics of the Ricardian system have granted that at least David Ricardo made one vital contribution to economic thought and to the case for freedom of trade: the law of comparative advantage. In emphasizing the great importance of the voluntary interplay of the international division of labor, free traders of the 18th century, including Adam Smith, based their doctrines on the law of "absolute advantage." That is, countries should specialize in what they are best or most efficient at, and then exchange these products, for in that case the people of both countries will be better off. This is a relatively easy case to argue. It takes little persuasion to realize that the United States should not bother to grow bananas (or, rather, to put it in basic micro terms, that individuals and firms in the United States should not bother to do so), but rather produce something else (e.g., wheat, manufactured goods) and exchange them for bananas grown in Honduras. There are, after all, precious few banana growers in the US demanding a protective tariff. But what if the case is not that clear-cut, and American steel or semi-conductor firms are demanding such protection?

The law of comparative advantage tackles such hard cases, and is therefore indispensable to the case for free trade. It shows that even if, for example, Country A is more efficient than Country B at producing both commodities X and Y, it will pay the citizens of Country A to specialize in producing X, which it is most best at producing, and buy all of commodity Y from Country B, which it is better at producing but does not have as great a comparative advantage as in making commodity X. In other words, each country should produce not just what it has an absolute advantage in making, but what it is most best at, or even least worst at, i.e. what it has a comparative advantage in producing.

If, then, the government of Country A imposes a protective tariff on imports of commodity Y, and it forcibly maintains an industry producing that commodity, this special privilege will injure the consumers in Country A as well as obviously injuring the people in Country B. For Country A, as well as the rest of the world, loses the advantage of specializing in the production of what it is most best at, since many of its scarce resources are compulsorily and inefficiently tied up in the production of commodity Y. The law of comparative advantage highlights the important fact that a protective tariff in Country A wreaks injury on the efficient industries in that country, and the consumers in that country, as well as on Country B and the rest of the world.

Another implication of the law of comparative advantage is that no country or region of the earth is going to be left out of the international division of labor under free trade. For the law means that even if a country is in such poor shape that it has no absolute advantage in producing anything, it still pays for its trading partners, the people of other countries, to allow it to produce what it is least worst at.

In this way, the citizens of every country benefit from international trade. No country is too poor or inefficient to be left out of international trade, and everyone benefits from countries specializing in what they are most best or least bad at — in other words, in whatever they have a comparative advantage.

Until recently, it has been universally believed by historians of economic thought that David Ricardo first set forth the law of comparative advantage in his Principles of Political Economy in 1817. Recent researches by Professor Thweatt, however, have demonstrated, not only that Ricardo did not originate this law, but that he did not understand and had little interest in the law, and that it played virtually no part in his system. Ricardo devoted only a few paragraphs to the law in his Principles, the discussion was meager, and it was unrelated to the rest of his work and to the rest of his discussion of international trade.

The discovery of the law of comparative advantage came considerably earlier. The problem of international trade sprang into public consciousness in Britain when Napoleon imposed his Berlin decrees in 1806, ordering the blockade of his enemy England from all trade with the continent of Europe. Immediately, young William Spence (1783–1860), an English Physiocrat and underconsumptionist who detested industry, published his Britain Independent of Commerce in 1807, advising Englishmen not to worry about the blockade, since only agriculture was economically important; and if English landlords would only spend all their incomes on consumption all would be well.

Spence's tract caused a storm of controversy, stimulating early works by two noteworthy British economists. One was James Mill, who critically reviewed Spence's work in the Eclectic Review for December 1807, and then expanded the article into his book, Commerce Defended, the following year. It was in rebuttal of Spence that Mill attacked underconsumptionist fallacies by bringing Say's law to England. The other work was the first book of young Robert Torrens (1780–1864), an Anglo-Irish officer in the Royal Marines, in his The Economists Refuted (1808).[1]

It has long been held that Torrens first enunciated the law of comparative advantage, and that then, as Schumpeter phrased it, while Torrens "baptized the theorem," Ricardo "elaborated it and fought for it victoriously."[2]

It turns out, however, that this standard viewpoint is wrong in both its crucial parts, i.e., Torrens did not baptize the law, and Ricardo scarcely elaborated or fought for it. For, first, James Mill had a far better presentation of the law — though scarcely a complete one — in his Commerce Defended than did Torrens later the same year. Moreover, in his treatment, Torrens, and not Mill, committed several egregious errors. First, he claimed that trade yields greater benefits to a nation that imports durable goods and necessities as against perishables or luxuries. Second, he claimed also that advantages of home trade are more permanent than those of foreign trade, and also that all advantages of domestic trade remain at home, whereas part of the advantages of foreign trade are siphoned off for the benefit of foreigners. And finally, following Smith, and anticipating Marx and Lenin, Torrens asserted that foreign trade, by extending the division of labor, creates a surplus over domestic requirements that must then be "vented" in foreign exports.

Six years later, James Mill led Robert Torrens again in presenting the rudiments of the law of comparative advantage. In the July 1814 issue of the Eclectic Review, Mill defended free trade against Malthus's support for the Corn Laws in his Observations. Mill pointed out that labor at home will, by engaging in foreign trade, procure more by buying imports than by producing all goods themselves. Mill's discussion was largely repeated by Torrens in his Essay on the External Corn Trade, published in February of the following year. Furthermore, in this work, Torrens explicitly hailed Mill's essay.

Meanwhile, at the very time when this comparative cost ferment was taking place among his friends and colleagues, David Ricardo displayed no interest whatever in this important line of thought. To be sure, Ricardo weighed in to second his mentor Mill's attack on Malthus's support for the Corn Laws, in his Essay on … Profits, published in February 1815. But Ricardo's line of argument was exclusively "Ricardian," that is, based solely on the distinctive Ricardian system. In fact, Ricardo displayed no interest in free trade in general, or in the arguments for it; his reasoning was solely devoted to the importance of lowering or abolishing the tariff on corn.

This conclusion, as we have noted, was deduced from the distinctive Ricardian system, which was to be fully set forth two years later in his Principles. For Ricardo the key to the stifling of economic growth in any country, and especially in developed Britain, was the "land shortage," the contention that poorer and poorer lands were necessarily being pressed into use in Britain. In consequence, the cost of subsistence kept increasing, and hence the prevailing (which must be the subsistence) money wage kept increasing as well. But this inevitable secular increase of wages must lower profits in agriculture, which in turn brings down all profits. In that way, capital accumulation is increasingly dampened, finally to disappear altogether. Lowering or abolishing the tariff on corn (or other food) was, for Ricardo, an ideal way of postponing the inevitable doom. By importing corn from abroad, diminishing fertility from corn land is deferred. The cost of corn, and therefore of subsistence, will fall sharply, and therefore money wage rates will fall pari passu, thereby raising profits and stimulating capital investment and economic growth. There is no hint in any of this discussion of the doctrine of comparative cost or anything like it.

But how about the mature Ricardo, the Ricardo of the Principles! Once again, except for the three paragraphs on comparative advantage, Ricardo displays no interest in it, and he instead repeats the Ricardian system argument for repeal of the Corn Laws. Indeed, his discussion in the rest of the chapter on international trade is couched in terms of the Smithian theory of absolute advantage rather than of the comparative advantage found in Torrens and especially in Mill.

The three paragraphs on comparative advantage, furthermore, were not only carelessly worded and confused; they were the only account, brief as they were, that Ricardo would ever write on comparative advantage. Indeed, this was his only mention at any time of this doctrine. Even Ricardo's sudden reference to Portugal and his absurd hypothesis that the Portuguese had an absolute advantage over Britain in the production of cloth, seem to indicate his lack of serious interest in the theory of comparative cost.

Furthermore, Ricardo's views on foreign trade in the Principles received almost no comment at that time; writers concentrated on his labor theory of value, and his view that wage rates and profits always move inversely, with the former determining the latter.

If Ricardo had no interest in the theory of comparative advantage, and never wrote about it except in this single passage in the Principles, what was it doing in the Principles at all? Professor Thweatt's convincing hypothesis is that the law was injected into the Principles by Ricardo's mentor James Mill, whom we know wrote the original draft, as well as the revisions, for many parts of Ricardo's magnum opus. We know also that Mill prodded Ricardo on including a discussion of comparative cost ratios. As we have seen, Mill originated the doctrine of comparative cost, and led in developing it eight years later. Not only that: while Ricardo dropped the theory as soon as he enunciated it in the Principles, Mill fully developed the analysis of comparative advantage further, first in his article on "Colonies" for the Encyclopedia Britannica (1818), and then in his textbook, The Elements of Political Economy (1821). Once again, Robert Torrens tailed after Mill, repeating his discussion with no additional insights in 1827, in the fourth edition of his 1815 Essay on the External Corn Trade.[3]

Meanwhile, George Grote, a devoted Millian disciple, wrote in 1819 an important, unpublished essay setting forth the Millian view on comparative advantage.

And so, once again, James Mill, by the force of his mind as well as his personal charisma, was able to foist an original analysis of his own on to the "Ricardian system."[4]

It is true that Mill was every bit a fan of the Ricardian system as Ricardo himself; but Mill was a man of far broader scope and erudition than his friend, and was interested in far more aspects of the disciplines of human action. It seems possible that Mill, the inveterate disciple and Number 2 man, was Number 1 man far more often than anyone has suspected.

[1] Torrens served in the Royal Marines from 1797 to 1834.

[2] Schumpeter, op. cit., note 3, p. 607.

[3] Torrens, furthermore, was scarcely in a position to take the leadership of the free trade forces, since he had abandoned his previously radical defense of unilateral free trade on behalf of reciprocal trade agreements between countries. As for Mill's fellow leading Ricardian and Scotsman, John Ramsey McCulloch, he stuck to the Smithian line, and publicly repudiated the doctrine of comparative cost.

[4] See William O. Thweatt, "James Mill and the Early Development of Comparative Advantage," History of Political Economy, 8 (Summer 1976), pp. 207–34.

The above originally appeared in An Austrian Perspective on the History of Economic Thought Book 2 by Murray Rothebard

Monday, February 23, 2015

State Street Investor Confidence Index

The State Street Investor Confidence Index measures confidence by looking at actual levels of risk in investment portfolios. This is not an attitude survey. The State Street Investor Confidence Index measures confidence directly by assessing the changes in investor holdings of equities. The more of their portfolio that institutional investors are willing to invest in equities, the greater their confidence. The report's main index is global and is based on activity in 45 countries. The report tracks more than 22 million transactions annually. There are three published components: North America, Europe and Asia-Pacific. The separate weightings of the three components vary month to month based on investment activity and are not published. Also included in the global index, but also not published, is activity in South America and the Middle East.

Friday, February 20, 2015

What Scott Walker Actually Said

By Larry Kudlow

Yes, believe it or not, Wisconsin governor Scott Walker actually spoke at some length at the dinner this past week where Rudy Giuliani charged that President Obama doesn't love America. All the hullabaloo went to Giuliani, but in terms of the Republican presidential race, a number of Scott Walker's pointed comments about policy and politicians are not to be missed.

First a word about the dinner itself, which was generously backed by John Catsimatidis. It was the second event sponsored by the Committee to Unleash American Prosperity, a new group founded by Arthur Laffer, Steve Moore, Steve Forbes and myself. Just as the Committee on the Present Danger — formed by Midge Decter, Norman Podhoretz, and Irving Kristol — worried about the decline in American foreign policy in the late 1970s, we are worried about the decline in American economic growth over the past 15 years.

Our view is simple: To maximize growth, jobs, opportunity and upward mobility, the U.S. must recapture the first principles of economic growth that were so successful in the 1960s, '80s and '90s. Namely, pro-growth policies should seek a low-rate, broad-based flat tax, limited government spending, the lightest possible economic regulations, sound money and free trade.

Since 2000, the U.S. economy has barely reached 2 percent growth per year. Over the prior 100 years, American growth averaged 3.4 percent annually. To get back to the long-run trend — which epitomizes the most powerful engine of free-market capitalist prosperity in the history of history — future growth over the next decade will have to average 4 percent annually.

To advance our policy goals, our committee (still in formation) will be interviewing all the Republican presidential candidates in the months ahead. A few weeks ago we had dinner with Texas governor Rick Perry. This week we welcomed Scott Walker.

In his opening, Governor Walker stressed growth, reform, and safety. During the question-and-answer period, he emphasized sweeping Reagan-like tax cuts. And he frequently referred to his successful efforts in Wisconsin to curb public-union power as a means of lowering tax burdens, increasing economic growth and reducing unemployment.

Noteworthy, Walker argued that when Reagan fired the PATCO air-traffic controllers over their illegal strike, he was sending a message of toughness to Democrats and unions at home as well as our Soviet enemies abroad. Similarly, Walker believes his stance against unions in Wisconsin would be a signal of toughness to Islamic jihadists and Russia's Vladimir Putin.

Walker was also highly critical of President Obama's conduct in the war against radical Islamism, and said the U.S. must wage a stronger battle in the air and on the ground against ISIS.

He stressed the need for a positive Republican message in 2016, and bluntly criticized Mitt Romney for spending too much time on the pessimistic economic negatives emanating from Obama's policy failures.

And in an unmistakable rip at both Jeb Bush and Hillary Clinton, he called for a new generation and fresh faces to turn America back in the right direction.

More specifics: When asked about a sound-money policy, Walker said he was willing to sit down and learn. And on free trade, he needs a much clearer message. But in response to a question about solving middle-class income declines, he insisted that sweeping economic-growth policies aimed at all groups and categories, not just the so-called middle class, is the answer. He also aggressively defended his controversial University of Wisconsin budget cuts, arguing that they would slow tuition hikes and force professors to teach more.

Why did he leave Marquette before graduation? He saw a more attractive position at the Red Cross and wanted to start a political career. Yes, he nearly flunked French. But many folks think that's a political plus. And as National Review editor Rich Lowry has written, 68 percent of Americans do not have a college degree. And many of us believe the time has come for a president without Ivy League credentials.

Can Walker win? Arthur Laffer has known him for years and says he has matured enormously from his days as Milwaukee county executive. Others say he is the only Republican candidate with a record of winning many different elections, from local office, to state assemblyman, to three gubernatorial races in four years.

Walker is a superb retail politician, a trait that will serve him well in the early primaries. He has an uncanny knack of maintaining direct eye contact. At the dinner, rather than rushing out for an early-morning TV call, he insisted on talking to every person in the large crowd surrounding him.

The question now is whether he can develop from a tough state-union buster to a national politician who can modernize Reagan's policies while maintaining the Gipper's upbeat message of optimism and growth.

Thursday, February 19, 2015

Trimmed Mean

A method of averaging that removes a small percentage of the largest and smallest values before calculating the mean. After removing the specified observations, the trimmed mean is found using an arithmetic averaging formula.

That is A method of averaging that removes a small percentage of the largest and smallest values before calculating the mean. After removing the specified observations, the trimmed mean is found using an arithmetic averaging formula.

(Via Investopedia)

Tuesday, February 17, 2015

NAHB/Wells Fargo Housing Market Index

The National Association of Home Builders produces a housing market index based on a survey in which respondents from this organization are asked to rate the general economy and housing market conditions. The housing market index is a weighted average of separate diffusion indexes: present sales of new homes, sale of new homes expected in the next six months, and traffic of prospective buyers in new homes.

Empire State Manufacturing Survey

The New York Fed conducts this monthly survey of manufacturers in New York State. Participants from across the state represent a variety of industries. On the first of each month, the same pool of roughly 175 manufacturing executives (usually the CEO or the president) is sent a questionnaire to report the change in an assortment of indicators from the previous month. Respondents also give their views about the likely direction of these same indicators six months ahead.

Friday, February 13, 2015

University of Michigan's Consumer Sentiment Index

The University of Michigan's Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending.

Wednesday, February 11, 2015

Baltic Dry Index

The Baltic Dry Index  is a number (in USD) issued daily by the London-based Baltic Exchange. Not restricted to Baltic Sea countries, the index provides "an assessment of the price of moving the major raw materials by sea. Taking in 23 shipping routes measured on a timecharter basis, the index covers Handysize, Supramax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain.

(via Baltic Exchange)

Monday, February 9, 2015

Dallas Federal Reserve Bank President Richard Fisher speech on on 10 years at the Fed, in San Antonio.

Import and Export Prices Report

Import price indexes are compiled for the prices of goods that are bought in the United States but produced abroad and export price indexes are developed for the prices of goods sold abroad but produced domestically. These prices indicate inflationary trends in internationally traded products

Business Inventories Report

Business inventories are the dollar amount of inventories held by manufacturers, wholesalers, and retailers. The level of inventories in relation to sales is an important indicator of the near-term direction of production activity.

Retail Sales Report

Retail sales measure the total receipts at stores that sell merchandise and related services to final consumers. Sales are by retail and food services stores. Data are collected from the Monthly Retail Trade Survey conducted by the U.S. Bureau of the Census. Essentially, retail sales cover the durables and nondurables portions of consumer spending.

Treasury Budget Release

The U.S. Treasury releases a monthly account of the surplus or deficit of the federal government. Changes in the budget balance of the annual fiscal year (which begins in October) are followed as an indicator of budgetary trends and the thrust of fiscal policy
Dallas Federal Reserve Bank President Richard Fisher speech on monetary policy, in New York.


The JOLTS report is the Labor Department’s Job Openings and Labor Turnover Survey. The headline number is job openings.

The JOLTS report defines Job Openings as all positions that are open (not filled) on the last business day of the month. A job is "open" only if it meets all three of the following conditions:
* A specific position exists and there is work available for that position. The position can be full-time or part-time, and it can be permanent, short-term, or seasonal, and
* The job could start within 30 days, whether or not the establishment finds a suitable candidate during that time, and
* There is active recruiting for workers from outside the establishment location that has the opening.

Active recruiting means the establishment is taking steps to fill a position. It may include advertising in newspapers, on television, or on radio; posting Internet notices; posting "help wanted" signs; networking with colleagues or making "word of mouth" announcements; accepting applications; interviewing candidates; contacting employment agencies; or soliciting employees at job fairs, state or local employment offices, or similar sources.

Job Openings does not include:
* Positions open only to internal transfers, promotions or demotions, or recall from layoffs
* Openings for positions with start dates more than 30 days in the future
* Positions for which employees have been hired, but the employees have not yet reported for work
* Positions to be filled by employees of temporary help agencies, employee leasing companies, outside contractors, or consultants. A separate form is used to collect information from temporary help/employee leasing firms for these employees.

JOLTS defines hires as all additions to the payroll during the month. JOLTS defines separations as all employees separated from the payroll during the calendar month.

(via Econoday)

NFIB Small Business Optimism Index

The small business optimism index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members. The index is a composite of ten seasonally adjusted components based on questions on the following: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.
Richmond Federal Reserve Bank President Jeffrey Lacker speech on education and economic growth, in Raleigh, North Carolina.
Federal Reserve Gov. Jerome Powell speech on auditing the Fed, at Catholic University, in Washington.

Labor Market Conditions Index

The U.S. labor market is large and multifaceted. Often-cited indicators such as the unemployment rate or payroll employment, measure a particular dimension of labor market activity. It is not uncommon for different indicators to send conflicting signals about labor market conditions. The Fed’s research department has created a labor market conditions index (LMCI) based on 19 labor market indicators.

(via Econoday)

Thursday, February 5, 2015


An interesting map from MoveHub reveals living costs around the world.

Global Living Costs Map

Wednesday, February 4, 2015

Tuesday, February 3, 2015

Robert Wenzel Contact Info

Robert Wenzel
LikedIn Profile
Blogger Profile
Amazon Books

The Plunge Protection Team

The "Plunge Protection Team" was the nickname given, by  The Washington Post in 1997, to Executive Order 12631, signed by Ronald Reagan. It is also known as  The President's Working Group on Financial Markets. The  The group was created in response to the 1987 market crash.

The group consists of the Secretary of the Treasury, the Chairman of the Board of Governors of the Federal Reserve, the Chairman of the SEC and the Chairman of the Commodity Futures Trading Commission.

Some observers believe the Working Group is in charge of secret manipulations of markets, such as the US stock markets and the gold market, especially during times of panic and high volatility.


Monday, February 2, 2015

Consumer Credit

The dollar value of consumer installment credit outstanding
Atlanta Federal Reserve Bank President Dennis Lockhart speech on monetary policy and the economic outlook, in Naples, Florida.

Employment Situation

The employment situation is a set of labor market indicators based on two separate surveys in this one report. The unemployment rate equals the number of unemployed persons divided by the total number of persons in the labor force, which comes from a survey of 60,000 households (this is called the household survey). Workers are only counted once, no matter how many jobs they have, or whether they are only working part-time. In order to be counted as unemployed, one must be actively looking for work. Other commonly known figures from the Household Survey include the labor supply and discouraged workers

International Trade

International trade is composed of merchandise (tangible goods) and services. It is available nationally by export, import and trade balance. Merchandise trade is available by export, import and trade balance for six principal end-use commodity categories and for more than one hundred principal Standard International Trade Classification (SITC) system commodity groupings. Data are also available for 36 countries and geographic regions. Detailed information is reported on oil and motor vehicle imports. Services trade is available by export, import and trade balance for seven principal end-use categories.

Gallup US Payroll to Population

Gallup tracks daily the employment status of the U.S. population and the workforce using a set of questions designed to measure U.S. employment accurately, in accordance with International Conference of Labour Statisticians standards. Based on an individual's responses to the question series (some of which are asked of only a subset of respondents), Gallup classifies respondents into one of six employment categories: employed full time for an employer; employed full time for self; employed part time, but do not want to work full time; employed part time, but want to work full time; unemployed; and out of the workforce.

Payroll to Population is a measure of those who are employed by an employer for at least 30 hours per week, and is calculated as a percentage of the total population.

Underemployed respondents are employed part time, but want to work full time, or are unemployed. Unemployed respondents are those within the underemployed group who are not employed, even for one hour a week, but are available and looking for work. Unemployment and underemployment are calculated as a percentage of the workforce.

Because results are not seasonally adjusted and there are methodological differences in data collection, they are not directly comparable to BLS numbers. However, the two measures are correlated, and Gallup's employment metrics follow the general BLS trend. Gallup reports P2P and underemployment at the state level on a semiannual basis

Challenger Job-Cut Report

This monthly report counts and categorizes announcements of corporate layoffs based on mass layoff data from state departments of labor. The job-cut report must be analyzed with caution. It doesn't distinguish between layoffs scheduled for the short-term or the long term, or whether job cuts are handled through attrition or actual layoffs. Also, the job-cut report does not include jobs eliminated in small batches over a longer time period. Unlike most economic data, this series is not adjusted for seasonal variation.
Boston Federal Reserve Bank President Eric Rosengren speech on the U.S. experience with QE, in Frankfurt.

Chain Store Sales

Monthly sales volumes from individual department, discount, apparel, and drugstore chains are usually reported on the first Thursday of each month. Chain store sales correspond with roughly 10 percent of retail sales. Chain store sales are an indicator of retail sales and consumer spending trends. There is no official composite number for each month's sales, merely sales figures for individual chains. Also, which chains release monthly numbers varies over time as corporate policies sometimes change in regard to providing monthly numbers to the public in addition to quarterly data
Cleveland Federal Reserve Bank President Loretta Mester speech to Ohio Bankers League economic summit in Columbus, Ohio.

ISM Non-Mfg Index

The non-manufacturing ISM surveys more than 375 firms from numerous sectors across the United States. This index covers services, construction, mining, agriculture, forestry, and fishing and hunting. The non-manufacturing composite index has four equally weighted components: business activity (closely related to a production index), new orders, employment, and supplier deliveries (also known as vendor performance). The first three components are seasonally adjusted but the supplier deliveries index does not have statistically significant seasonality and is not adjusted. For the composite index, a reading above 50 percent indicates that the non-manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. The supplier deliveries component index requires extra explanation. A reading above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries. However, slower deliveries are a plus for the economy—indicating demand is up and vendors are not able to fill orders as quickly
Federal Reserve Gov. Jerome Powell opening remarks at Dallas Fed conference on growth and regulatory paperwork reduction, in Dallas

PMI Services Index

US Services Purchasing Managers' Index (PMI) is based on monthly questionnaire surveys collected from over 400 U.S. companies which provide a leading indication of what is happening in the private sector services economy. It is seasonally adjusted and is calculated from seven components, including New Business, Employment and Business Expectation

Gallup U.S. Job Creation Index

Gallup's Job Creation Index is based on a question that Gallup tracks daily, asking a nationally representative sample of 500 to 600 working adults, aged 18 and older, and reports monthly based on approximately 14,000 interviews. Gallup asks its sample of employed Americans each day whether their companies are hiring new people and expanding the size of their workforces, not changing the size of their workforces, or letting people go and reducing the size of their workforces. The resulting index -- computed on a daily and a weekly basis by subtracting the percentage of employers letting people go from the percentage hiring -- is a real-time indicator of the nation's employment picture across all industry and business sectors. The survey is conducted with respondents contacted on landlines and cellpho

ADP Employment Report

The ADP national employment report is computed from a subset of ADP records that represent approximately 400,000 U.S. business clients and approximately 23 million U.S. employees working in all private industrial sectors. ADP contracted with Moody’s Analytics to compute a monthly report that would ultimately help to predict monthly nonfarm payrolls from the Bureau of Labor Statistic's employment situation. The ADP report only covers private (excluding government) payrolls.

MBA Purchase Applications

The Mortgage Bankers' Association compiles various mortgage loan indexes. The purchase applications index measures applications at mortgage lenders. This is a leading indicator for single-family home sales and housing construction.
Minneapolis Federal Reserve Bank President Narayana Kocherlakota speech on goal-based monetary policy in St. Paul.

Factory Orders

Factory orders represent the dollar level of new orders for both durable and nondurable goods. This report gives more complete information than the advance durable goods report which is released one or two weeks earlier in the month.
St. Louis Federal Reserve Bank President James Bullard speech and panel discussion on monetary policy, in Newark, Delaware.


A weekly measure of comparable store sales at chain stores, discounters, and department stores. It is a less consistent indicator of retail sales than the weekly ICSC-Goldman index. It is also calculated differently than other indicators. For instance, figures for the first week of the month are compared with the average for the entire previous month. When two weeks are available, then these are compared with the average for the previous month, and so on through the month. It might be more useful to compare year-over-year figures since these are indeed compared to the comparable week a year ago. This index is correlated with the general merchandise portion of retail sales covering about 10 percent of total retail sales.

Gallup US ECI

Gallup's Economic Confidence Index is a composite of two questions that Gallup asks daily of a nationally representative sample of 500 adults, aged 18 and older, and reports weekly based on approximately 3,500 interviews. One question asks Americans to evaluate current economic conditions; the other measures their perceptions of whether the economy is getting better or getting worse. The two questions have equal weight in the index, and are reported without revisions or seasonal adjustments. They can also be analyzed separately, providing insight into changes in the overall index. The survey is conducted with respondents contacted on landlines and cellphones

In today's fast-moving, information-loaded environment, consumer attitudes can, and often do, change multiple times between the beginning and the middle or end of a month, and the Gallup index keeps up with these fluctuations. Followers of the metric therefore develop a keen understanding of the degree to which various economic and political events -- including monthly BLS jobs reports, major changes in the stock market, and significant congressional budget actions -- affect consumer attitudes.

Motor Vehicle Sales

Unit sales of motor vehicles include domestic sales and foreign sales, otherwise referred to as imports. Domestics are sales of autos produced in the U.S., Canada, and Mexico. Imports are U.S. sales of vehicles produced elsewhere. These are for light vehicles which include all passenger cars and light trucks up to 14,000 pounds gross weight (including minivans and sport utility vehicles). Individual manufacturers usually report sales on the first business day of the month. One of the first tabulators of the data is Autodata Corporation. Manufacturers do not break out vehicle sales to businesses, which are a smaller but still significant percentage of the monthly total.

Construction Spending

The dollar value of new construction activity on residential, non-residential, and public projects. Data are available in nominal and real (inflation-adjusted) dollars.

ISM Mfg Index

The ISM manufacturing composite index is a diffusion index calculated from five of the eleven sub-components of a monthly survey of purchasing managers at roughly 300 manufacturing firms nationwide. The survey queries purchasing managers about the general direction of production, new orders, order backlogs, their own inventories, customer inventories, employment, supplier deliveries, exports, imports, and prices. The five components of the composite index are new orders, production, employment, supplier deliveries, and inventories (their own, not customer inventories). The five components are equally weighted. The questions are qualitative rather than quantitative; that is, they ask about the general direction rather than the specific level of activity. Each question is transformed into a diffusion index which is calculated by adding the percentage of positive responses to one-half of the unchanged responses

Personal Income and Outlays

Personal income is the dollar value of income received from all sources by individuals. Personal outlays include consumer purchases of durable and nondurable goods, and services.

Gallup US Consumer Spending Measure

Gallup's self-reported Consumer Spending measure is based on a question that Gallup tracks daily, asking a nationally representative sample of about 500 adults, aged 18 and older, and reports monthly based on approximately 14,000 interviews. Gallup asks Americans each day to estimate the amount of money they spent "yesterday," excluding the purchase of a home, an automobile or normal household bills. The survey is conducted with respondents contacted on landlines and cellphones.