It’s no secret that spending cuts (and tax hikes) have retarded America’s growth for the past four years. But data from the Bureau of Economic Analysis suggests that the era of austerity may finally have ended.
The following chart shows the contribution of government and private spending to annual GDP growth, since the start of 2005:
Americans bought 5.4 per cent more light vehicles in the first nine months of the year than in the same period in 2013.
What’s striking is a whopping 92 per cent of this increase is due to higher purchases of sport utility vehicles, crossovers, pickup trucks, and vans. Traditional cars contributed a measly 8 per cent to the total increase in units sold. Here’s a full breakdown, courtesy of CreditSights: Read more
The Federal Reserve’s latest flow of funds data shows that US households have rediscovered their credit cards, and lenders are eager to oblige them. Just look at this:
The US Census Bureau has just released its latest data on median incomes by state, which can be found here in table H-8. We looked at these data and would like to share a few interesting charts.
First, look at the gap between the states with the highest and lowest median incomes. Read more
Everyone knows that Americans spend more on healthcare than many other rich nations yet often end up with worse outcomes. The interesting question is why.
There are certainly big inefficiencies in the way health care is provided and how it is paid for. Consider the following chart (via Harvard’s Amitabh Chandra):
The latest Canadian jobs data certainly make it seem so. Perhaps the better question is: has the Canadian economy already hit its peak for this cycle?
Some highlights we dug out from the guts of the report: Read more
The Federal Reserve has just released its Survey of Consumer Finances for the year 2013.
These surveys occur every three years, so this is the first comprehensive update we have gotten about the distribution of income and wealth in the US since the economy hit bottom four years ago.
The most striking finding is that the median American family earned 5 per cent less in 2013 than in 2010 after inflation even though the average American family took home 4 per cent more.
An observation from Credit Suisse economists about wages, emphasis ours:
The 2008 negative shock on prices was so large and, more importantly, so unexpected that sticky nominal wages were unable to react timely to deflation, causing real labor costs to rise sharply. Read more
Excessive US household borrowing of the 2000s was not evenly distributed.
During the peak of the bubble, the average Nevadan carried about two-and-a-half times as much mortgage and consumer debt as the average Texan, according to the Federal Reserve Bank of New York:
What’s striking to us, from a new research note published by the Federal Reserve Bank of Cleveland, is that the amount of variation within metro areas was often as big as, if not greater than, the variation between them. Read more
As a brief follow-up to yesterday’s post on the impact of US trade with China on US employment and incomes, we thought it would be useful to visualize a few interesting facts about the evolution of the bilateral trade balance over time.
First, look at how the deficit in the trade of goods swamps the modest surplus in the trade of services. Whilst the data on services are annual and stop in 2012, the general picture would probably not look much different even if it were more up to date: Read more
Polled in March 2012, top academic economists overwhelmingly agreed that “freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment.”
This academic consensus has penetrated popular opinion to the extent that some people believe increasing cross-border trade flows is unambiguously good for everyone. Likewise, there is a relatively common — and wrong — belief that the Hawley-Smoot tariffs were a significant factor in the severity of the Great Depression.
We don’t want to suggest that trade is bad, but it is worth highlighting that the actual views of the experts who study these issues are much more nuanced than what the “pop internationalists” often spew out.
For example, a new paper by Daron Acemoglu, David Autor, David Dorn, Gordon H Hanson, and Brendan Price estimates that the sharp increase in bilateral trade between China and the US cost somewhere between 2 and 2.4 million jobs between 1999 and 2011 — about 1 percent of the entire civilian population in 2011. Less than half of those jobs were in manufacturing sectors that directly competed with Chinese businesses. Read more
Janet Yellen’s thoughtful speech on labor markets last week has already received a lot of attention. One passage, which highlighted some recent research from her former colleagues at the Federal Reserve Bank of San Francisco, was particularly noteworthy, in part for its implications about the path of future wage growth:
The sluggish pace of nominal and real wage growth in recent years may reflect the phenomenon of “pent-up wage deflation.” The evidence suggests that many firms faced significant constraints in lowering compensation during the recession and the earlier part of the recovery because of “downward nominal wage rigidity”– namely, an inability or unwillingness on the part of firms to cut nominal wages.
Credit Suisse’s global demographics research team came out with a new note on Friday featuring some enlightening charts about the US economy. It provides a handy way of evaluating the country’s lackluster performance since 2000, as well as a few longer-term trends.
As the CS team notes, GDP growth can be decomposed into three distinct forces: growth in the population of working-age people, growth in the number of hours worked by each working-aged person, and productivity growth. Read more
Does the secular deflation of computers and related equipment skew the macroeconomic data on investment in the direction of irrelevance? Read more
The Federal Reserve has just released its first “Report on the Economic Well-Being of U.S. Households“. It provides some useful context for the ongoing debates about the income distribution and excess savings.
A few particularly dispiriting highlights: Read more
This morning’s Employment Situation report coincided with the release of the latest Personal Income & Outlays report, bringing to a close this busy week of economic indicators and activity.
What did we learn? Here’s a brief roundup: Read more
Much is being made of China being about to pass the US as the world’s biggest economy — and of China’s fight to massage down the figures.
We hate to side with Chinese statisticians, but at the very least Beijing may well be right to play down the comparison in its local media.
Here are a couple of surprises which come out from using similar adjustments to the PPP calculations used to show China’s economy is bigger (using the IMF’s World Economic Outlook database)…
- In 1980, Greece and Gabon (which was in default on its debt from 1999 to 2005, but has lots of oil) were ranked above the UK for PPP-adjusted GDP per person. Before adjustment they were about a third poorer.
- East Timor, on the IMF’s 2014 estimates, is ranked as richer on PPP-adjusted GDP per capita than Poland, Estonia or Hungary – and is ranked only 1.4 per cent poorer per person than Portugal, its former colonial master. It has discovered oil, boosting GDP. But before the PPP adjustment, GDP per capita is put by the IMF this year at $4,669 vs $14,166 a head for Portugal.
Like other parts of the US economic recovery — housing, the labour market — capital expenditures by companies have been a letdown recently, even accounting for the weather.
The latest example came in Wednesday’s durable goods report, in which the “nondefense capital goods orders excluding aircraft” component fell. (That figure is a proxy and obviously doesn’t capture everything that normally counts as capex, which also includes investment in property and structures, imported capital goods, and certain intangible assets. Capex is often poorly or loosely defined in discussions about it.) Read more
A chart from Credit Suisse (click to enlarge for a clearer picture):
The strategists add:
Later on Friday comes the US employment situation report, the first major economic indicator to give a sense of how strongly the American economy finished 2013.
Before obsessing over its details, we wanted to first set down our broader thoughts on what happened last year, and what we’ll be paying attention to this year. Read more
BUY (The shutdown didn’t wreck everything, the jobless rate’s still weak)
NO, SELL (Tapering sooner) Read more
Two charts to nurture some hope this morning.
First, a reminder that when long established trends turn, they can do so very quickly. And second, if there is a real turn in the US, there is plenty of scope for activity to pick up. Read more
From Steven Englander of Citi, a list of US data releases possibly now subject to delay because of the shutdown:
And those unlikely to be delayed:
You’ve seen those who were (ahem) surprised by the US central bank’s decision not to start tapering this month… now read the words of one who got it right: BNP Paribas’ Julia Coronado, the bank’s chief North America economist and ex-forecaster at the Fed.
And interestingly, BNP think even December is in doubt: Read more
Oped pages in recent months have been regular hosts to pieces extolling some of the unsung benefits of the US shale-gas revolution. Some of these have gone so far as to proclaim that shale gas is, or will be, a significant benefit for the country’s entire economy.
Lately, though, the narrative is beginning to sound hollow. Read more
Self-explanatory, and they come via RBC Capital Markets:
From a note Wednesday morning by ConvergEx (emphasis ours): Read more
Welcome to see such punchy prose from an executive, surely.
“Have you ever had one of those weeks where your best- prepared plans weren’t good enough to accomplish everything you set out to do?” Geiger asked in a Feb. 1 e-mail to executives. “Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where’s their money?” Read more
A h/t to Mark Dow for the spot. That’s Citi’s US Economic Surprise Index threatening to turn negative after a decent run in positive territory.
As the festive season draws nearer, Albert Edwards brings us good cheer:
Expect the New Year to bring nothing but disappointment.
Yes, our favourite bear argues that even though we’re getting relatively decent US economic data, it’s falling corporate profits to come we should be concerned about. In short, he argues the US is already entering another recession. Read more