TPT November 2016

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60 NOVEMBER 2016
G LOBA L MARKE T P L AC E
technology whereby the machines automatically detect and
avoid buildings and other aircraft; and whether a single
operator can safely command multiple drones at once.
As first described in December 2013 by Amazon’s chief
executive, Jeff Bezos, the plan by the e-commerce company
to use drone delivery will rely on those functions. Mr Bezos
has since pointed to regulation as the biggest obstacle to
realising his vision, and Seattle-based Amazon has moved
much of its drone research and development to Britain,
Canada and the Netherlands.
But the company views its partnership with Britain as its
most important. The Civil Aviation Authority – the British
equivalent of the FAA – has said it may also enter into similar
partnerships with other commercial drone makers.
The US economy
With the American consumer ‘in decent
shape’ in an improved labour market,
sales of new homes are soaring
Averaging roughly 3 to 5 per cent of gross domestic product
(GDP), residential housing construction makes an important
contribution to the US economy. If spending on related
services (eg rents and utilities paid by lessors) is considered,
that contribution is much higher, averaging roughly 12 to 13
per cent of GDP. By either calculation, a steep rise in sales of
new homes is very good news, and that is precisely what the
Commerce Department delivered on 23 August in Washington.
According to the Commerce data, purchases of new homes
in the US unexpectedly jumped in July to the highest level in
almost nine years, led by soaring demand in the nation’s south
and adding to signs of persistent housing-market strength.
Sales increased 12.4 per cent to a 654,000 annualised pace,
the fastest since October 2007.
As noted by Michelle Jamrisko of Bloomberg News, that
exceeded the most optimistic forecast in a Bloomberg survey.
(The median forecast of 72 economists called for the pace
of sales to decelerate to 580,000. Estimates ranged from
540,000 to 610,000.) Purchases in the south were the
strongest since before the start of the last recession. (“US
New-Home Sales Unexpectedly Surge to Almost Nine-Year
High,” 23 August)
To Ms Jamrisko, that suggests that employment gains and
historically low borrowing costs are providing firm support for
housing demand, helping to reduce inventory and probably
keeping new construction elevated. The Commerce report
showed an increase in the percentage of homes sold for less
than $300,000, indicating builders are turning their sights to
entry-level buyers.
The increase “makes perfect sense when interest rates are
low, credit continues to ease, and the consumer is in decent
shape given the jobs market,” Brett Ryan, US economist at
Deutsche Bank Securities Inc in New York, told Bloomberg.
“You’re seeing finally that builders are responding with more
supply, and that’s been one of the big problems in the current
cycle.”
› The median sales price of a new house in the US was
$294,600 in July, the Commerce report showed. The
average rate on a 30-year fixed mortgage was 3.43 per cent
in the week ended 18 August, close to the record-low 3.31 per
cent reached in 2012, according to figures from Freddie Mac
(the federal home loan mortgage corporation) dating to 1971.
Hard times have this good effect at least:
they keep bad drivers out from behind
the wheel
“Who says recessions are all bad? About 5,000 fewer
people die every year in auto accidents [in the US] for each
one percentage point increase in unemployment, because
downturns keep dangerous drivers off the road.”
The question posed by Peter Coy, economics editor of
Bloomberg Businessweek , has respectable support. In a
forthcoming study in the Journal of Risk and Uncertainty,
researchers claim to have documented “an instance of a
natural economic force [ie unemployment] that impels riskier
drivers to drive less while not discouraging safer drivers.”
Mr Coy noted that previous research had shown that people
generally drive less during economic contractions, which
naturally contributes to a reduction in fatalities. The innovation
by Clifford Winston, a senior fellow at Brookings Institution,
a Washington-based think tank, and Vikram Maheshri, an
economist at the University of Houston, was to show that
the biggest decline is in driving by the worst drivers. (“When
Unemployment Falls, Thousands of Americans Die,” 25
August)
Those who took to the road less often as unemployment
rose included drivers who nevertheless had accidents during
the course of the study. It also included drivers who have
older cars, who are over the age of 60, and those living by
themselves or with only one other person (who tend to have
higher accident rates than family heads).
Professors Winston and Maheshri do not present strong
evidence as to why these particular groups did less driving.
They do theorise that people with lower incomes might be
more likely to lose their jobs and thus not need to commute
to work. These drivers might also be likelier to have older
cars and to live alone. According to Mr Winston, though, this
cannot be the whole story since commuting accounts for only
about 20 per cent of time behind the wheel.
The research, which was supported by the AAA Foundation
for Traffic Safety, found that auto fatalities in Ohio were 14
per cent lower when the jobless rate was one percentage
point higher. With reference to a nationwide auto fatality
toll of around 33,000 a year, the study arrived at a figure of
roughly 5,000 saved lives. “In all fairness, this is by no means
definitive,” Dr Winston acknowledged in the Bloomberg
interview. “This is clearly a first cut.”