Colorado in top ten of states in well being index

Every year, Gallup releases its "Well Being Index" which measures the following: 

• Purpose: liking what you do each day and being motivated to achieve your goals
• Social: having supportive relationships and love in your life
• Financial: managing your economic life to reduce stress and increase security
• Community: liking where you live, feeling safe and having pride in your community
• Physical: having good health and enough energy to get things done daily

Out of all US states, Colorado comes in fourth, behind first place Hawaii, then Alaska and Montana. Wyoming rounds out the top five for fifth place. 

Colorado is in the top ten list, yet again. In fact, according to Gallup, "Hawaii and Colorado are the only two states that have made the list of the 10 highest well-being states each year since 2008."

The Western US in general is notable for having high well being scores: 

Why does the West do so well? Well, the stereotypes about Colorado and west are often true. There is a lot of entrepreneurship, physical fitness activity, and community involvement among Westerners. Moreover, homicide rates are low in Colorado (and also in Wyoming, Utah, and Montana) adding to the "community" measure contained within the index for those states.

Climate may be a factor as well. For example, New Mexico, in terms of statistical data, is nearly as unhealthy and low-income as Mississippi. So why does New Mexico rank so much higher by this measure? It may have something to do with perceptions of how much control one  has over one's economic life and physical well being. 

See here for more on this from Gallup.

How important is Cattle Ranching in the West?

As I am smart enough to not express any opinion here about the current protests being staged by cattle ranchers in Oregon, I thought it might nevertheless be helpful, or at least interesting, to look at how much of the cattle industry is located in Western states (including Colorado) and how central it is to the local economies. 

After a little examination, it seems that beef cattle are really a quite small part of the Colorado economy, and the Rocky Mountain economy overall. In Colorado, for example, agriculture overall "comprises only 1 percent of production and less than 2 percent of jobs." Of that one percent, ranching comprises around 60 percent. This means that cattle ranching is well under one percent of Colorado's economy. Ranching could completely disappear from Colorado and our economy would certainly not collapse. Among Western states, Montana, by far, has the largest agriculture sector at 5.7 percent of GDP, according to the Bureau of Economic Analysis. All other Western states come in around 2 percent or less. Contrary to the mythology, the economy of the American West is centered on the cities. 

Also notable, however, is the fact that, in spite of the stories we're told of how "the West" is the home of the cowboy, there are relatively few beef cattle West of Kansas.

If we include states like Texas, Nebraska, and Kansas in our definition of "the West," though, yes, there are a lot of beef cattle in the West. But, if we limit our view of the West to the West Coast and the Rocky Mountain region, things are rather different.

This distinction is also important due to the debate over the use of federal lands. Only the states west of Kansas have large amounts of federal land:

This map, provided by cattlerange.com, gives us a sense of the where the cows are in the United States:

This map, however, somewhat misses the mark for what we want. It includes all cattle and calves. We want to know about beef cattle, which excludes dairy cows that do not forage the way beef cows do. If we take the data from the 2012 USDA Census and look only at beef cattle, here are the states ranked by totals:

Among the top states, only Montana makes it into the top ten, and that is largely a function of Montana's immense size — it's the fourth largest state by area. 

But, the cattle ranching heartland is most certainly not in the states with large amounts of federal land. The industry is centered around Texas, Nebraska, and Oklahoma. In fact, those three states alone contain 26 percent of all beef cows in the US. Texas alone contains 15 percent of all beef cattle. 

If we look at the number of beef cows per square mile, we see that the West is even less important. Here, I've looked at total beef cows per state compared to total land area: 

In this case, Montana comes in at 19th, well behind numerous prairie states, and even some southern states. In fact, if you want to see a cowboy rounding up cows, you'd be better off visiting Kentucky, Missouri or Iowa, than Colorado or Oregon. 

The vast majority of beef cattle production (i.e., 80 percent) in the United States occurs nowhere near federal grazing lands, and even the beef production that does occur in those states is not necessarily dependent on federal grazing. 

Now, if we think about it, this distribution should not surprise us at all. Cows are not well suited to the high-altitude and arid lands of the West, and it makes more sense to raise beef in areas where water and pasture are more readily available. 

It's Not Only a Supply Issue: Oil Price Falls to 35 Dollars per Barrel

According to the LA Times, the US crude slumped to $35 per barrel this week, "the lowest price since early 2009."

Up through last week, the West Texas Intermediate Crude price had fallen to 40 dollars per barrel, putting it close to the sorts of prices we saw during the dark days of the last recession. If this week's trends keep up, we'll be headed back to ten-year lows in oil prices:

Source: US Energy Information Administration

A year ago, the oil price was more than 30 dollars per barrel higher, and came in around 70 dollars, although by that point, the price had already tumbled from a price of 105 dollars that had been reached during mid-2014.

The 2014 prices were not as high as they seemed, given the effects of price inflation. If we make a  mild adjustment based on the official CPI data, we find that 2014's peak levels had really only been matching the prices we saw during the early 80s. Those prices are indeed near historical highs, but the decline since then has not taken us down to historically cheap gas in real terms (in 2015 dollars):

Source: US energy Information Administration and Bureau of Labor Statistics
Even with today's relatively cheap gas, we're still looking at real prices that are above the good ol' days of the 1990s.

Nevertheless, prices are no longer what they need to be to sustain much of the shale oil industry. As Retuers reported yesterday:

Drained by a 17-month crude rout, some U.S. shale oil companies are merely hanging on for life as oil prices lurch further away from levels that allow them to profitably drill new wells and bring in enough cash to keep them in business. 

The slump has created dozens of oil and gas "zombies," a term lawyers and restructuring advisers use to describe companies that have just enough money to pay interest on mountains of debt, but not enough to drill enough new wells to replace older ones that are drying out.

Meanwhile, CNBC reports that the energy sector became the biggest "job cutter of 2015." It was only 18 months ago that we were still hearing about how oil jobs — and especially shale oil jobs — were going to save us from any serious downturn in jobs.

Moreover, much of the nation's economic growth was coming from a handful of oil-rich states, including Texas, Oklahoma, and Colorado, among other places. It's not a coincidence that the BEA reports the highest GDP growth in 2014 in California, Texas, Oklahoma, North Dakota, and a few other Western States.

Those areas may now be in trouble, and national GDP will suffer the more oil rigs go dark. Texas has been the salvation of the nation's overall jobs-gains totals in recent years, as Texas's size and oil-based wealth has made the national numbers look much better than they would have without Texas. But the statisticians at the BEA and BLS may not be able to rely on Texas much longer. The Arkansas Democrat-Gazette reports:

Unemployment in Texas may surpass the national rate in the next year for the first time since 2006, according to Prestige Economics, JPMorgan Chase and ING Bank. Texas is already experiencing a "rapid deceleration" in job growth to just a third of what it was last year following a slump in oil prices, said the Wood Mackenzie consultancy group.

Perhaps in an attempt to put a silver lining on the matter, many continue to cling to the belief that the collapse in oil prices is driven almost entirely by excess supply. In other words, we're being told that there's still plenty of good hearty demand out there, it's just that we extracted too much oil.

If it's just a problem of too much oil supply, the thinking goes, then there's not all that much to worry about because people will take all the money they saved on gasoline or fuel and spend it somewhere else right away.

However, The Wall Street Journal admitted yesterday that this doesn't seem to be happening. The subtitle reads: "Experts expected the drop in gasoline and oil prices would jolt spending by U.S. consumers and businesses. It hasn’t turned out that way."
It hasn't worked out that way because demand is much weaker than the "experts" are willing to admit. As I noted here earlier today, median income and wages are lackluster at best, and there's little reason to believe that consumers are just itching at the chance to spend away any money they might save at the gas pump.

Like the owners of oil rigs, consumers have plenty of debt to deal with. Or they may be realizing that their incomes aren't going to go up as much as they hoped. Or they may just be uncomfortable enough about the future that they're saving a little more than usual.

In other words, some individual households may be doing the right thing. By saving and cutting back on spending, they're imposing a temporary "recession" and temporary drop in their standard of living on themselves at the household level to make up for some past malinvestments. This would especially be true of people employed in energy-related fields or other bubble industries. They made a mistake by investing their time, labor, and energy into an industry that was really based on malinvestments stemming from what David Stockman calls the Fed-money-fueled Wall Street Casino. When enough households do this, the overall economy will go into recession which — if left alone — would repair the economy.  The Fed, however, will do everything in its power to keep that from happening. If the energy sector will no longer do the trick, the Fed will find some other sector to flood with money, just as the housing bubble replaced the dot-com bubble beginning in 2002.

Yes, all things being equal, falling oil prices would free up funds for other types of spending. But when there are larger economic headwinds at work, a little freed-up cash in one place may not be enough to overcome the global malaise. The WSJ article gives a perfect example of the complexity of markets right now:

Beef ‘O’ Brady’s, a restaurant chain based in Tampa, Fla., saw sales rise late last year thanks to cheaper gas, said Chief Executive Chris Elliott. But the momentum waned, especially in the factory-heavy Midwest. “The restaurant industry seems to be slowing,” he said, though lower prices for beef and other ingredients have “helped firm up” profit margins.

It may be too little too late.

As Mark Thornton noted a year ago, large drops in the oil price tend to accompany economic downturns. They don't cause the downturns of course, but there's good reason to be extra cautious before declaring that a dropping oil price is going to be followed by a boon to new consumer spending. It rarely happens that way. In fact, a big drop in the oil price is often followed by some very bad economic news. 

Image source. 

How Aggressive Foreign Policy Subsidizes American Nut Farmers

A friend cheekily reminds me that today is National Pecan Day and innocently suggests that I might want to "discuss the connection between pecans and the California drought." True, enough, there's a connection. But water is just one factor — albeit a large one — propping up the lucrative nature of farming in the California desert. International trade policy is a major subsidy for many growers as well.

Although pecans are native to the American South, it could be that they might be even more productive somewhere else in the world. Maize, for example, grows amazingly well in Iowa, even though it's native to Mexico. But if pecans could be grown more productively elsewhere, it's unlikely we'll ever know. Experience tells us that American trade barriers would likely be erected to hobble any entrepreneurs who attempted to compete with domestic growers.

Much has been made of tree-nut growing in California during the current debate over the drought. Almonds have been especially targeted, but pistachios are an important crop as well, and while domestic almonds and other tree nuts certainly benefit from tariff policy — here's a tariff schedule for those who are interested — pistachio growers in the US have the added benefit of bellicose American foreign policy.

In a 2013 article at Mondoweiss, Yash Levine examined the effect of the US embargo against Iran on the pistachio industry, through the experience of one particularly wealthy farming couple, Lynda and Stewart Resnick:

For as long as anyone can remember, Iran had been the world’s main supplier of pistachios. But Carter’s 1979 embargo on the country effectively cut off Iranian pistachio growers from the American market and created a need for alternative pistachio production, which was virtually nonexistent in the United States. 

Seeing a massive opportunity, the Resnicks began to snap up thousands of acres from Mobil Oil and Texaco in order to create pistachio and almond orchards. They steadily bought up more and more acreage all through the 1980s for rock-bottom prices because of a long period of drought. By the end of the decade, the Resnicks had amassed enough farmland to rival Oligarch Valley’s biggest and oldest billionaire farmer clans: 100,000 acres—nearly 160 square miles—growing cotton, pistachios, almonds, oranges, lemons and grapefruit. 

They didn’t just grow the crops, but packaged, processed and distributed them as well. Economic sanctions against Iran were renewed and intensified under every single president after Carter, and all the while America’s domestic pistachio farming exploded. In the past thirty years it has grown from a couple of hobby farmers to an industry generating close to $1 billion...

Economic sanctions are what have allowed the Resnicks to create their pistachio empire, which would suffer a severe blow if relations with Iran were ever normalized. Iran’s pistachios are considered to be superior to America’s, so much so that Israelis still buy Iranian pistachios shipped in through Turkey. Surely the Resnicks would never be able to compete with Iran on the pistachio free market. And so the Resnicks did what any smart and ruthless American would do: they made common cause with oil companies, Islamophobes, neocons and Likudniks, and began funneling money to think tanks and political advocacy groups that take a hardline approach with Iran. Economic sanctions, sabotage, vilification—all these things worked in the Resnicks’ interest. Bombing some of Iran’s pistachio fields wouldn’t be so bad, either…