4 posts from January 2012

Driver’s seat: District car owners pay less for insurance

Nobody likes paying for things that might not get used, which is one of the reasons auto insurance doesn’t rank real high on people’s most-loved purchases. But drivers in the Ninth District pay a lot less for the comfort of knowing they are protected when the inevitable fender-bender occurs.

The National Association of Insurance Commissioners released a report this month outlining average premium costs for drivers across the country. It shows that average annual premiums in the district (for 2009, the most recent data available) are considerably lower than the national average (see chart). In fact, North Dakota, South Dakota and Wisconsin rank two-three-four in the country for cheapest car insurance (Iowa ranked first, by margin of $20).

The exception is Michigan, where insurance premiums are easily the highest of any district state, and 14 percent above even the national average. It’s possible that drivers in the Upper Peninsula (who live in the Ninth District) pay lower rates than peers in lower Michigan (technically outside the district) given different underwriting factors like population density, which push premiums higher. But NAIC’s report does not split out such in-state differences.

A NAIC source also pointed out that state insurance regulations—like required coverage and coverage levels—play a big role in average premiums, which might also explain why Minnesota drivers pay more than Wisconsin drivers, and Montana drivers pay significantly more than drivers in the Dakotas.

One other notable trend is that average auto insurance premiums—including liability, collision and comprehensive coverage—are getting cheaper (see box within chart). Since 2005, every district state has seen average premiums decline, led by Minnesota and the Dakotas, all of which saw a price drop of at least 10 percent.

Auto insurance -- 1-23-12

USDA proposes office closures across nation, district

The U.S. Department of Agriculture announced this month that it would close 259 offices across the country with the expectation of saving $145 million annually in operational efficiencies.

In the Ninth District, a total of 17 offices are slated for closure (see map). Minnesota has the highest tally with seven offices on the list, followed by South Dakota with five. Montana and North Dakota each have two closures. Michigan has three, but only one is in the Upper Peninsula portion located in the district (in Marquette). Wisconsin has two offices on the list, but neither is in the northwestern portion of the state that is part of the Ninth District.

The USDA has four types of field offices being affected. Farm Service Agency offices are the most numerous and make up half of all closures nationwide, and 10 of the 17 district closures. Many of the recommended closures are in offices that have two or fewer employees, or are within 20 miles of another office. The remainder is mixed between six additional departments within the USDA. In district states, closures are in Food and Nutrition Services (4), Food Safety and Inspection Service (1) and Natural Resource Conservation Service (2).

USDA closures map -- 1-18-12

The move is a smaller-scale version of recent proposals from the U.S. Postal Service, which is considering closing thousands of post offices, including almost 400 in the Ninth District. But unlike the post office proposal, where almost 11 percent of closures were in Ninth District states, fewer than 7 percent of USDA office closures will be in the district.

The missing unemployment link: Labor force participation rates

In today’s economy, many common economic relationships are feigning cognitive dissonance. For example, since peaking at over 10 percent in 2009, the nation’s unemployment rate has dropped by 1.5 percentage points. Despite this apparent improvement, the total number of employed workers has changed little.

The unemployment rate is calculated by the number of unemployed people divided by the labor force. The November unemployment rate was 8.6 percent, down from a high of 10.1 in October of 2009. Over this period, the number of unemployed fell almost 15 percent (2.3 million workers), to 13.3 million. Over the same period, the number of employed people grew by less than 2 percent (also 2.3 million) to 140.6 million (see Chart 1).

LFP Ch. 1 -- 1-9-12

The missing piece of this employment puzzle is those workers who have left the workforce altogether. A person is considered out of the labor force if he or she hasn’t searched for work over the past four weeks, even if he or she wants a job. From October 2009 to November 2011, the civilian population age 16 and over that was not in the labor force rose by almost 4 million, to 86.6 million.

That’s why economists are looking to labor force participation (LFP) rates—the percentage of people 16 and older who are working or looking for work—for more clues to the employment market and the overall health of the economy. Chart 2 shows that the LFP rate since the end of the recession has trended consistently downward, while the unemployment rate has seen steady improvement.

The unemployment rate would be much higher if people who left the labor force had instead continued searching for a job. For example, if labor force participation rates had held steady at recession-ending levels (instead of decreasing subsequent to the recession), unemployment would be about 11 percent (see Chart 3).

LFP Ch. 2-3 -- 1-9-12

Reasons behind the recent decline in labor force participation remain murky. Three factors that have contributed to the decline are an aging baby-boomer population reaching retirement age, people leaving the labor force to return to school, and an increase in discouraged workers no longer actively searching for a job. But these factors appear to account for only part of the recent decline; what accounts for the rest of the drop remains the subject of ongoing research.

However these factors stack up, the improvement in unemployment is largely the work of declining LFP rates and (unfortunately) not job growth.

This post was updated on Feb. 6, 2012

Long-term care costs: Separate and unequal

A lot of attention is paid today to rising health care costs, especially for entitlement programs like Medicare and Medicaid, which cover much of the health care bills of the elderly and poor, respectively. But blanket statements about rising costs cover up a wide disparity of costs for seemingly similar services in different locations.

Long-term care costs for things like assisted living facilities and nursing homes across the Ninth District can vary by more than 40 percent within a state, according to the Genworth Cost of Care Survey, a six-year-old survey that is reportedly the first to publish costs for these health care services for all 384 U.S. metropolitan statistical areas (MSAs). Genworth Financial is a Fortune 500 financial services company and a major underwriter of long-term care insurance policies.

For example, the median annual cost of assisted living runs about $43,000 (give or take) in Minneapolis and Duluth, according to the survey. That compares with $29,500 in St. Cloud, which lies only about an hour from the Twin Cities (see Chart 1).

But that wasn’t an anomaly. Every district state had a significant gap between the highest and lowest median cost for either assisted living or semi-private nursing home care. Most had disparities for both types of long-term care services. In North Dakota, the biggest disparity is at nursing homes, where median annual costs ranged from $62,000 in Fargo to $82,000 in Bismarck (see Chart 2).

The report’s results are based on completed surveys from 6,300 assisted living facilities and 3,900 nursing homes nationwide. The survey did not reveal how many facilities were surveyed in each MSA, including those in the Ninth District. The report also has no ability to benchmark or otherwise measure the quality of service in relation to annual costs.

Long-term care costs -- 12-29-11