Friday, September 30, 2011

More data on economic recovery in the 2 Californias

Although the data lags 6 months, the BLS County Employment and Wages report is one of my favorites because it is real, full population level data from tax records, as opposed to sample based estimates like in the monthly job reports that can be volatile and unreliable for counties and smaller geographies.

The latest release of data from March 2011 detailing tax filings from the 322 largest counties in the U.S., the release states,
Employment declined in 53 of the large counties from March 2010 to
March 2011. Sacramento, Calif., had the largest over-the-year
percentage decrease in employment (-1.6 percent)... Montgomery, Ala., and
Atlantic, N.J., tied for the second largest employment decrease,
followed by San Joaquin, Calif.,
On the other end of the spectrum, Santa Clara County (Silicon Valley) has been posting double digit gains in average wages for the past year.  In this report, Santa Clara had the 2nd highest wage growth of 322 counties at 12.4% (the past few reports they have been number 1, so I guess they are slacking off).

Overall, job growth in Silicon Valley has been strong but not growing anything like the income/wage data, and local unemployment is still above the national average.  There is an enormous boom going on in technology and information, but so far it doesn't seem to be spilling over much into hospitality, construction, retail, and the lower paying, lower skilled service areas - even in the hottest local economy in the state.

Wednesday, September 28, 2011

Does Water Efficiency Create More Jobs Than Conveyance?

From Tranforming Water: Water Efficiency as Stimulus and Long-Term Investment, a report done by David Mitchell at M.Cubed (with co-authors) who has done consulting work with David Sunding and the water contractors in the past.
Our consultant team modeled a wide range of water/energy efficiency program possibilities, across all water‐using sectors and involving indoor, outdoor, and water system efficiencies. This modeling clearly confirms that economic stimulus benefits could be broadly distributed throughout the national economy:

1. The economic output benefits range between $2.5 and $2.8 million per million dollars of direct investment.

2. GDP benefits range between $1.3 and $1.5 million per million dollars of direct investment.

3. Employment potential ranges between 15 and 22 jobs per million dollars of direct investment.

Thus, direct investment on the order of $10 billion in water/energy efficiency programs can boost U.S. GDP by $13 to $15 billion and employment by 150,000 to 220,000 jobs and could save between 6.5 and 10 trillion gallons of water, with resulting energy reductions as well.
Yesterday, David Sunding presented the employment effects of conveyance, about 10 jobs per $1 million invested, and estimated operations and maintenance of conveyance would create about 7 jobs per million spent.

Comparing 15-22 jobs per million dollars from efficiency investments to 7-10 jobs per million invested in conveyance, it looks like efficiency delivers double the job stimulus bang per buck as new conveyance.  

Whether it is building canals, low flow shower heads, schools, stadiums or anything; the problem with the one-sided job creation stimulus studies is that there is always an alternative use of the dollar, a cost to getting the dollar from someone else's pocket, and they are almost always presented without proper context.  It is something of an occupational hazard as an applied economist, we are all guilty of it to various extents.

On a positive, somewhat tangential note, I was very pleased to hear Jerry Meral announce at yesterday's BDCP meeting (in response to questions) that David Sunding is going to be working on more comprehensive analysis of BDCP effects.  Previously, I had heard that the contractors weren't interested in any real economics, so this is an interesting development and we will see if we get the real cost-benefit analysis that is desperately needed. 

Hopefully, he is allowed to properly define the alternative scenarios, rather than letting the water contractors frame the questions.  Nobody knows all the aspects of California water economics better than David, and he is generally pretty careful with the numbers even when the contractors are paying the bills.  To improve and create trust in the final product, Dr. Meral ought to form an advisory group (or another workgroup) to help ensure that David can frame the analysis correctly, define the alternatives fairly, and that the results are released no matter how it turns out.

BDCP Planning Creates 3,550 jobs in California

Understandably, lot's of people asked me what I thought of David Sunding's surprise (to me) presentation at yesterday's BDCP meeting on the employment impacts of building conveyance.

Obviously, I thought he was overly conservative.  He should also count the $250 million the water contractors will have spent on consultants and planning.  I pumped this spending through the IMPLAN model today, and it calculated the creation of 3,550 mostly high-paying jobs in California.  (I should say job-years, since the new way of reporting results in these booster studies is to report a single job that lasts 5 years as 5 jobs.  High-speed rail is especially bad about this.)  And that isn't even counting all the millions spent on lawsuits that will be on the way creating even more jobs.  Even if BDCP fails to build anything, it has been a consulting jobs bonanza for the Sacramento area.  More plans, more lawsuits, more jobs! 

Despite the sarcasm, I don't actually have a problem with the content of this presentation.  The "conveyance will create thousands of jobs" study was inevitable, and I would rather see it from him than another source that would blow it out of proportion and not properly point out the limitations and caveats.

I suppose I need to get busy calculating all the jobs created from building levees now...

Wednesday, September 14, 2011

Which of the PPIC Delta alternatives is most like the Economic Sustainability Plan?

Critics are calling the Economic Sustainability Plan a status quo plan.  That isn't right, but I understand how it can be misperceived since it is starting with the Delta economy and it's goal is to determine the best future for the Delta (that is consistent with the state's "co-equal goals" of water supply reliability and ecosystem restoration).

For California water wonks, it might be easier to see the ESP's recommendation through the familiar framework developed by the PPIC.  I recommend everyone go back and read chapter 8, Evaluating Delta Alternatives, of the 2007 Envisioning Futures PPIC report on the Delta.  Before reading further in this post, open up chapter 8 in another window, and go to Table 8-2, pages 166-167.

Make 2 adjustments to Table 8-2 for things that have changed since 2007.  First, go to alternatives 4 and 5, cross out costs of $2-3 billion and replace it with $12-15 billion since the estimated costs of isolated conveyance alternatives has gone way up since 2007.  Second, due to the co-equal goals being state law, you can rule out alternatives 7 and 8, because the water supply is way too unreliable for current law.

With those 2 adjustments, any reasonable person viewing the Delta problem and accepting this framework has to go back and take a much harder look at alternative 2: Fortress Delta (Dutch Standard), as well as alternative 6.

The recommendation in the ESP is not status quo (that is alternative 1).  It is most similar to alternative 2 with some significant environmental enhancements that should total less than an additional $1b (think BDCP with less tidal marsh and some compromise solutions on flood/fish bypasses). 

When you go to Table 8-3, you see alternative 2 was primarily rejected due to "great expense."  We are arguing that you could get an environmentally improved version of alternative 2 for an economically feasible $5b or less, as opposed to the current focus on an infeasible $15b isolated conveyance plan with really risky outcomes for both the Delta and the environment.

You could also argue that the 2009 Delta Reform Act also requires you to add a column to the PPIC framework for the Delta as a place/economy.  That additional adjustment further strengthens our case.

Tuesday, September 13, 2011

No Bananas in the Delta? MC Hammer shows DWR experts are wrong

MC Hammer, the rap-pop icon, is among the biggest celebrities of the over half million people that live in the Delta.  He lives on a few acres near Tracy, and he sometimes blogs and tweets about his beloved banana plants.  On the A&E reality show "Hammer Time", you can see his bananas, and he also takes his dad and kids fishing in the Delta.

I mention this because I have been working my way through lots of correspondence on the DPC Economic Sustainability Plan.  The Department of Water Resources wins the detail prize with 58 pages of single spaced comments.

In one surprisingly lengthy section of comments, DWR staff makes a very big deal out of the fact that we have included bananas in our appendix list of the 80 different crops in the Delta recorded in our database in an apparant attempt to discredit us and make us look silly.  They are unaware of bananas in the Delta and say they have been studying the area for years.  So, I had our analyst track down and confirm our less than 1 acre "crop" of bananas, and he tracked it to a location off 205 near Tracy.  It isn't MC Hammer, but apparantly we have some very small scale commercial growing of banana plants, perhaps to serve hobbyists like MC Hammer, or perhaps someone is trying to appeal to the growing number of locavores who crave tropical fruit.  All we know is someone is making pesticide filings for very small amounts of bananas, that it has no bearing on our results at all, and our crop data is more detailed than DWR.

But thanks to DWR picking through all the fine print, I now have learned some new Delta trivia and have the opportunity to be inspired to write this post by MC Hammer's own banana blogging (hat tip to VQ).
I love these trees (plants)...they multiply themselves continously. Each of these groups started off as one plant. The more you cut them back, the taller and stronger they grow....

In life, it is the moments that we are cut back, that we should look forward to new growth in our lives. Bigger, better, stronger and multiplying ourselves by sharing what we have learned with others....