On Monday, April 30,2018, EPA proposed to regulate itself! The new policy would direct "EPA to ensure that the regulatory science underlying its actions is publicly available in a manner sufficient for independent validation." EPA cited the work of Randy Lutter (Frank Batten School of Leadership and Public Policy, University of Virginia) and our own David Zorn, who called for all federal regulatory agencies to do this. (See On the Benefits and Costs of Public Access to Data Used to Support Federal Policy Making, 2016) Most citizens probably are not aware how often their government imposes millions and billions of dollars of requirements on the economy without providing the evidence that the requirements are needed. Transparency is the hallmark of good science and good public policy. Hopefully, all other regulatory agencies will follow suit. Just post the data!
The Northern Virginia Technology Council (NVTC) today released our research report that shows that the data center industry strengthens and diversifies the economy and drives innovation in Virginia. The Economic and Fiscal Contribution that Data Centers Make to Virginia 2018 updates our original research published in January 2016. We are honored to work with the report's lead sponsors, including AWS, CloudHQ, Dominion Energy, Microsoft, Mid-Atlantic Broadband Communities Corp., and NxtVn. Supporting sponsors include Equinix; Facebook; Loudoun, VA Economic Development; Sabey Data Centers; and Visa.
The data center industry in 2016 for Virginia accounts for 43,000 jobs, $3.2 billion in labor income, and $10.2 billion in economic output. While much of this impact is in Northern Virginia, the sector’s impact is increasingly spreading to other regions of the state and this economic activity will likely be accelerated by new subsea cables linking Virginia Beach to Europe and South America.
The industry is very sensitive to state tax policies. Virginia currently offers a sales tax exemption on equipment purchases to qualifying data centers through 2035.
Other major findings:
- Data centers pay wages more than twice the statewide, private-sector average.
- Over the last five years, data centers have experienced employment and wage growth that is four times the statewide, private-sector average.
- Additionally, the high wages in the industry have a disproportionate impact on state income tax revenue, by far the largest source of revenue for Virginia state government.
- The pool of highly skilled workers the data center industry employs also feeds the talent pipeline for other fast growing, high wage industries.
- In 2016, data centers made $2.6 billion in capital investments in Virginia and that investment was responsible for supporting 4,600 jobs, $254 million in labor income and $670 million in economic output in the state’s construction industry.
- Data centers generate significant tax revenue for local governments. In Loudoun and Prince William Counties, for example, for every dollar spent in county expenditures related to the industry, it provided more than $8 in tax revenue. Data centers in Loudoun County and Prince William County allow those localities to draw $13.4 million less from the state general fund for school budgets.
- Tax incentives are critical in the competition between states to attract data center investment.
- Data centers have emerged as one of the driving forces in the development of renewable energy resources in Virginia.
Existing home sales increased by 0.2 percent to an annualized rate of 5.480 million in the month of October 2017, marking the largest increase in the previous 7 months.
The increase was concentrated in the Northeast, where sales increased by 4.2 percent following a surprise burst in the previous month of September. Sales in the South increased by 1.9 percent, showing that the region has begun to rebound after the destruction caused by Hurricane season. Sales in the West also increased, rising by 2.4 percent.
However, despite the increase in sales, the chronic shortage of houses is continuing to push prices up, beyond the reach of many first-time buyers and the annual rate for total exiting home sales was measured at negative 0.9 percent.
Hampton Roads television station, WTKR, picked up on some of the information in our quarterly report for the Virginia Chamber of Commerce. Hampton Roads lost almost 10,000 jobs in the 12 months ending September 2017. That stands out because over the same period Virginia as a whole added 34,000 jobs. The Hampton Roads industries losing jobs were primarily tourism-related -- retail and lodging. If it was just a bad year for tourism because of weather concerns, then next year might be different. But if this is related to the increasing number of Virginia school districts opening before Labor Day, then the tourism jobs may not bounce back anytime soon. Regardless, it draws attention to the importance of having a diverse economy.
U.S. crude oil inventories fell more than anticipated according to the latest EIA report, with oil refinery inputs averaging just over 16.0 million barrels per day during the week ending on the 29th of September. This marked a decrease of 145,000 barrels per day compared with the previous weeks average, with a substantial part of the decline attributed to the residual destructive effects of the recent Hurricane Harvey.
Refineries operated at 88.1% of their operational capacity, gasoline production increased by 1.6 million barrels to 218.9 million and distillate stores fell 2.6 million barrels to 135.4 million.
U.S. crude oil imports decreased by 213,000 barrels per day to an average of 7.2 million barrels, with the 4-week average calculated at 7.1 million barrels per day.
Demand remained level, with total products supplied over the last four weeks averaging 20.2 million barrels per day. Motor gasoline product supplied averaged 9.5 million barrels per day (a 1.3% yearly increase) while distillate fuel product supplied averaged over 4.0 million barrels per day (a 12% yearly increase). Jet fuel product supplied fell by 0.6% compared to the same period in the previous year.
The latest Personal Income and Outlays report from the U.S. Department of Commerce spelled out some bad news for third quarter GDP estimates as, while the impact of the recent storm Hurricane Harvey could not be qualified in the report, it’s impact was clearly significant.
According to the report, personal income increased by an expected 0.2 percent in the month of August 2017, with upward boosts from proprietor income, transfer receipts, and rent. Wages and salaries, meanwhile, were unchanged based on a decline in hours.
Disposable personal income (DPI) however, increased at a mere 0.1 percent. A likely result of the destruction caused by Hurricane Harvey, coupled with a decline in auto sales, spending on durables experienced the steepest decline, falling by 1.1 percent compared with a 0.3 percent increase in spending on nondurables and a 0.3 percent increase in spending on services.
Excluding food and energy, the PCE price index increased by only 0.1 percent, with the year-on-year rate falling to 1.3 percent, the weakest reading since November of 2015.
According to the latest data from the UK’s Office of National Statistics, unemployment in the country has hit a record low, however the squeeze on real wages continues.
In the period spanning May to July 2017, unemployment fell to 4.3%, down from 4.9% a year earlier and the lowest rate on record since 1975.
Wage growth, however, stalled. It was estimated that average weekly earnings for employees in Great Britain in real terms fell by 0.4% compared with a year earlier showing that the increase in consumer prices is outpacing wage growth.
The report follows a government announcement that it would relax a 1% cap on wage increases for workers in the public sector. However, inflation was also measured at record high levels for the month of August, which will intensify the squeeze on household incomes.
Data from the latest US Federal Reserve industrial production report puts an end to the recent run of strong economic data and calls into question the upward trend previously seen in the factory sector.
Industrial production rose by just 0.2 percent, less than the 0.3 percent economists had anticipated. Manufacturing output contracted by 0.1 percent while capacity utilization was recorded at 76.6%, in line with expectations.
Manufacturing output was dragged down by a continuous decline in motor vehicles, falling by 3.6 percent in the month of July.
Business equipment fell by 0.5 percent and construction supplies fell by o.4 percent. These decreases were partially offset by gains in consumer goods,
Modern Restaurant Management picked up on our analysis of FDA's menu labeling rule.
Lyle Beckwith, NACS senior vice president for government relations, stated, “This comprehensive study confirms what NACS and our members have asserted all along: the final FDA menu labeling rule will hit the industry, including small businesses, with huge costs, and in the end they will still have to pay fines because they just won’t be able to comply.”
Continued Mr. Beckwith, “We appreciate the action taken by the FDA to delay and re-evaluate the rule. We hope that these new findings will prove useful to the FDA in guiding the agency re-write the rule to recognize the practical problems that businesses face.”
The National Association of Convenience Stores (NACS) has released our analysis of the cost of FDA’s menu labeling rule. From Convenience Store News:
“The way the FDA rule is written makes it virtually impossible for businesses to comply with the regulations even though they will spend billions over the next several years trying to do so,” said economist David Zorn of Mangum Economics, who developed the analysis for NACS. While the FDA rules for calorie disclosures on packaged foods recognize that actual calorie counts vary unavoidably from one package to another, the menu labeling rule makes "no allowance for normal variation from one serving of food to the next in the number of calories and nutrition content." Because of this, enforcement costs of the final rule, which include fines, legal fees and negative publicity, are likely to vastly exceed the $84.5 million total cost that the FDA estimated for all covered industries, NACS said.
FDA allows only a 5-calorie deviation (for foods with over 50 calories) for unit-to-unit variability of the same product. That means that a slice of cheese pizza declared at 270 calories is violative if it has less than 265 calories or more than 274 calories. So, a difference of just 0.07 ounces of cheese on a typical slice of pizza makes it illegal.
Our analysis was part of NACS’ public comment in response to FDA’s interest in reducing the regulatory burden of the rule or increasing compliance flexibility.
Our key findings were:
- Actual costs of compliance and enforcement of the FDA Final Rule for all covered industries are estimated to be more than 3.6 times FDA’s estimates and for the convenience store industry 7 times FDA’s estimates;
- Annual costs of compliance and enforcement of the FDA Final Rule are estimated to exceed $306 million;
- Actual costs of compliance and enforcement of the FDA Final Rule to the convenience store industry alone are almost equal to the total cost that FDA estimated for all covered industries;
- Because the Final Rule makes no allowances for normal calorie and nutrition variations in foods, more than 93% of foods subject to the rule are likely to be in violation of the Final Rule no matter how much businesses spend attempting to comply; and
- Enforcement costs (including fines, legal fees, and negative publicity) alone of the Final Rule are likely to vastly exceed FDA’s total estimate of the compliance costs of the Final Rule.